Order Code RL33753
Coast Guard Deepwater Program: Background,
Oversight Issues, and Options for Congress
Updated June 22, 2007
Ronald O’Rourke
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division
Coast Guard Deepwater Program: Background,
Oversight Issues, and Options for Congress
Summary
The Integrated Deepwater Systems ( IDS) program, or Deepwater program for
short, is a $ 24- billion, 25- year project to replace and modernize the Coast Guard’s
aging fleet of deepwater- capable ships and aircraft. It is the largest and most
complex acquisition effort in Coast Guard history, encompassing 91 new cutters, 124
new small surface craft, and 244 new or converted airplanes, helicopters, and
unmanned aerial vehicles ( UAVs). The Deepwater program has received a total of
about $ 4.4 billion through FY2007, including about $ 1.14 billion in FY2007. For
FY2008, the Coast Guard is requesting $ 836.9 million in new appropriations and the
rescission of $ 48.8 million in prior- year appropriations for the program, for a net total
request of $ 788.1 million.
The management and execution of the Deepwater program has been strongly
criticized in recent months by the Department of Homeland Security Inspector
General ( DHS IG), the Government Accountability Office ( GAO), the Defense
Acquisition University ( DAU), several Members of Congress from committees and
subcommittees that oversee the Coast Guard, and other observers. House and Senate
committees and subcommittees have conducted several oversight hearings this year
devoted partly or entirely to problems and concerns regarding the management and
execution of the program.
On April 17, 2007, the Coast Guard announced a series of actions to reform the
management of the Deepwater program. Among other things, the Coast Guard
announced it will assume the role of lead system integrator ( LSI) for the program.
Since 2002, the LSI role had been performed by Integrated Coast Guard Systems
( ICGS) — an industry team led by Lockheed Martin and Northrop Grumman Ship
Systems ( NGSS). On April 18, 2007, it was reported that the Justice Department is
conducting an investigation of the Deepwater program.
Legislation that would appropriate funds for the Deepwater program,
significantly restructure the program ( and Coast Guard contracting in general), and
place various new requirements and conditions on the Deepwater program, includes
the following:
! H. R. 2638/ S. 1644, the FY2008 Department of Homeland Security
appropriations act;
! H. R. 2206/ P. L. 110- 28, the FY2007 emergency supplemental
appropriations act;
! H. R. 2722, the Integrated Deepwater Program Reform Act;
! S. 889, the Deepwater Accountability Act; and
! S. 924, the Integrated Deepwater Program Reform Act.
H. R. 2638 recommends $ 698.4 million in new appropriations and the rescission
of $ 107.4 million in prior- year appropriations for the program, for a net total of
$ 590.9 million. S. 1644 recommends $ 826.9 million in new appropriations and the
rescission of $ 58.7 million in prior- year appropriations for the program, for a net total
of $ 770.1 million. This report will be updated as events warrant.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Coast Guard Deepwater Missions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Legacy Deepwater- Capable Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
System- of- Systems ( SOS) Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Lead Systems Integrator ( LSI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Performance- Based Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ICGS Contract Award and Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Revised Implementation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Systems to Be Procured or Converted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Program Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Prior- Year Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FY2008 Funding Request And Congressional Action . . . . . . . . . . . . . . 6
Earlier Interest in Potential for Program Acceleration . . . . . . . . . . . . . . . . . . 7
Congressional Oversight Hearings in 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Problems in Program Management and Execution . . . . . . . . . . . . . . . . . . . . 9
Problems in Cutter Acquisition Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 9
Overall Management of the Program . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Coast Guard Management Reforms Announced April 17, 2007 . . . . . . . . . 14
Other Announced Coast Guard Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Justice Department Investigation of Program . . . . . . . . . . . . . . . . . . . . . . . 18
Oversight Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Coast Guard’s Announced Management Reforms . . . . . . . . . . . . . . . . . . . . 18
Execution of FY2007 Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Revolving Door and Potential for Conflicts of Interest . . . . . . . . . . . . . . . . 19
Potential Options for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Legislative Activity in 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
FY2008 Department of Homeland Security Appropriations Act
( H. R. 2638/ S. 1644) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Funding Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Senate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
FY2007 Emergency Supplemental Appropriations Act
( H. R. 2206/ P. L. 110- 28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
As Agreed to or Passed by House and Senate . . . . . . . . . . . . . . . . . . . 33
FY2007 Emergency Supplemental Appropriations Act
( H. R. 1591) ( vetoed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Senate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Integrated Deepwater Program Reform Act ( H. R. 2722) . . . . . . . . . . . . . . 44
Deepwater Accountability Act ( S. 889) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Integrated Deepwater Program Reform Act ( S. 924) . . . . . . . . . . . . . . . . . . 54
Appendix A. DHS IG Testimony and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
June 12, 2007, Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
January 2007 Report on NSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
February 2007 Report on 110- Foot Modernization . . . . . . . . . . . . . . . . . . . 71
December 2006 Report on DHS Management Challenges . . . . . . . . . . . . . 73
August 2006 Report on Deepwater IT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Appendix B. GAO Report and Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
June 2007 Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
March 8, 2007, and February 14, 2007, Testimony . . . . . . . . . . . . . . . . . . . 76
Appendix C. DAU Quick Look Study, February 2007 . . . . . . . . . . . . . . . . . . . . 86
Appendix D. Coast Guard Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
June 12, 2007, Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
May 17, 2007, Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Appendix E. NGSS Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
May 17, 2007, Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Appendix F. Lockheed Martin Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
May 17, 2007, Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
List of Tables
Table 1. Deepwater Program Funding History . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Table 2. FY2008 Deepwater Funding Request and Congressional Action . . . . . 7
Coast Guard Deepwater Program:
Background, Oversight Issues, and Options
for Congress
Introduction
The Integrated Deepwater Systems ( IDS) program, or Deepwater program for
short, is a $ 24- billion, 25- year project to replace and modernize the Coast Guard’s
aging fleet of deepwater- capable ships and aircraft. It is the largest and most
complex acquisition effort in Coast Guard history, encompassing 91 new cutters, 124
new small surface craft, and 244 new or converted airplanes, helicopters, and
unmanned aerial vehicles ( UAVs).
The Deepwater program has received a total of about $ 4.4 billion through
FY2007, including about $ 1.14 billion in FY2007. For FY2008, the Coast Guard is
requesting $ 836.9 million in new appropriations and the rescission of $ 48.8 million
in prior- year appropriations for the program, for a net total request of $ 788.1 million.
The management and execution of the Deepwater program has been strongly
criticized in recent months by the Department of Homeland Security Inspector
General ( DHS IG), the Defense Acquisition University ( DAU), the Government
Accountability Office ( GAO), several Members of Congress from committees and
subcommittees that oversee the Coast Guard, and other observers. House and Senate
committees and subcommittees have conducted several oversight hearings this year
devoted partly or entirely to problems and concerns regarding the management and
execution of the program.
On April 17, 2007, the Coast Guard announced a series of actions to reform the
management of the Deepwater program. Among other things, the Coast Guard
announced it will assume the role of lead system integrator ( LSI) for the program.
Since 2002, the LSI role had been performed by Integrated Coast Guard Systems
( ICGS) — an industry team led by Lockheed Martin and Northrop Grumman Ship
Systems ( NGSS).
On April 18, 2007, it was reported that the Justice Department is conducting an
investigation of the Deepwater program. Justice reportedly notified Lockheed,
Northrop, and certain other firms involved in the Deepwater program of the
investigation on December 13, 2006, and directed the firms to preserve all documents
relating to the program.
Congress has several potential options it may consider for improving
management and execution of the Deepwater program. Congress’s decisions
CRS- 2
1 For additional background information on the Deepwater program on the internet, log onto
[ http:// www. uscg. mil/ deepwater/] and [ http:// www. teamdeepwater. com].
2 C4I stands for command, control, communications, computers, intelligence, surveillance,
and reconnaissance.
regarding the Deepwater program could significantly affect Coast Guard capabilities,
Coast Guard funding requirements, and federal acquisition practices.
Background1
Coast Guard Deepwater Missions
The Coast Guard performs a variety of missions in the deepwater environment,
which generally means waters more than 50 miles from shore. These mission include
drug interdiction, alien migrant interdiction, fisheries enforcement, search and rescue,
the International Ice Patrol in northern waters; overseas maritime intercept
( sanctions- enforcement) operations, overseas port security and defense, overseas
peacetime military engagement; general defense operations in conjunction with the
Navy; marine pollution law enforcement, enforcement of lightering ( i. e., at- sea
cargo- transfer) zones, and overseas inspection of foreign vessels entering U. S. ports.
Deepwater- capable assets are also used closer to shore for various operations.
Legacy Deepwater- Capable Assets
When the Deepwater program began in the late 1990s, the Coast Guard’s
existing ( i. e., “ legacy”) assets for performing deepwater missions included 93 aging
cutters and patrol boats and 207 aging aircraft. Many of these ships and aircraft are
expensive to operate ( in part because the cutters require large crews), increasingly
expensive to maintain, technologically obsolete, and in some cases poorly suited for
performing today’s deepwater missions.
System- of- Systems ( SOS) Acquisition
Rather than replacing its various deepwater- capable cutters, patrol boats, and
aircraft through a series of individual procurement programs, the Coast Guard
decided to pursue the Deepwater program as a system- of- systems ( SOS) acquisition,
under which a combination of new and modernized cutters, patrol boats, aircraft,
along with associated C4ISR systems2 and logistics support, would be procured as
a single, integrated package. The Coast Guard believes that a system- of- systems
approach permits the Deepwater project to be optimized ( i. e., made cost effective)
at the overall, system- of- systems level, rather than suboptimized at the level of
individual platforms and systems.
Lead Systems Integrator ( LSI)
To execute this system- of- systems acquisition approach, the Coast Guard
initially decided to use a private- sector lead system integrator ( LSI) — an industry
CRS- 3
3 For more on the FCS program, see CRS Report RL32888, The Army’s Future Combat
System ( FCS): Background and Issues for Congress, by Andrew Feickert. For more on LSIs
in general, see CRS Report RS22631, Defense Acquisition: Use of Lead System Integrators
( LSIs) — Background, Oversight Issues, and Options for Congress, by Valerie Bailey
Grasso.
entity responsible for designing, building, and integrating the various elements of the
package so that it meets the Coast Guard’s projected deepwater operational
requirements at the lowest possible cost. The Coast Guard initially decided to use
a private- sector LSI to execute the Deepwater program in part because the size and
complexity of the project was thought to be beyond the system- integration
capabilities of the Coast Guard’s relatively small in- house acquisition work force.
Another major acquisition effort being pursued as a system- of- systems acquisition
with an LSI is the Army’s Future Combat System ( FCS). 3
Performance- Based Acquisition
The Coast Guard also decided to pursue the Deepwater program as a
performance- based acquisition, meaning that it would set performance requirements
for the program and permit the Deepwater LSI some latitude in determining how the
Deepwater system would meet those requirements.
ICGS Contract Award and Extension
The Coast Guard ran a competition for the Deepwater LSI role. Three industry
teams competed, and on June 25, 2002, the Coast Guard awarded the role to
Integrated Coast Guard Systems ( ICGS) — an industry team led by Lockheed Martin
and Northrop Grumman Ship Systems ( NGSS). ICGS was awarded an indefinite
delivery, indefinite quantity ( ID/ IQ) contract for the Deepwater program that includes
a five- year baseline term ending in June 2007, and five potential additional award
terms of up to five years ( 60 months) each. On May 19, 2006, the Coast Guard
announced that it was awarding ICGS a 43- month first additional award term,
reflecting good but not excellent performance by ICGS. With this additional award
term, the contract would extend to January 2011.
Revised Implementation Plan
The original ( 1998) Deepwater implementation plan reflected a pre- 9/ 11
analysis of Coast Guard mission demands. On March 25, 2005, the Coast Guard
submitted to Congress a revised Deepwater implementation plan reflecting an
analysis of the Coast Guard’s expanded post- 9/ 11 missions. The revised
implementation plan increased the capabilities to be acquired under the Deepwater
program. Primarily because of the increase in capabilities to be acquired, the
Deepwater program’s estimated acquisition cost increased from $ 17 billion to $ 24
billion, and the program’s acquisition period increased from about 20 years to 25
years.
CRS- 4
4 Government Accountability Office: Coast Guard[:] Changes to Deepwater Plan Appear
Sound, and Program Management Has Improved, but Continued Monitoring Is Warranted,
GAO- 06- 546, June 2006.
5 John Birkler, et al., The U. S. Coast Guard’s Deepwater Force Modernization Plan: Can
It Be Accelerated? Will It Meet Changing Security Needs? RAND, National Security
Research Division, MG- 114, 2004.
Some observers have expressed concern that the Deepwater program’s estimated
total acquisition cost has increased from $ 17 billion to $ 24 billion. An April 2006
Government Accountability Office ( GAO) report stated the following:
The revised Deepwater implementation plans change the balance between
new and legacy assets, alter the delivery schedule for some assets, lengthen the
overall acquisition schedule by 5 years, and increase the projected program cost
from $ 17 billion to $ 24 billion. The higher cost generally relates to upgrading
assets to reflect added homeland security mission requirements. Upgrades to
vessels account for the single largest area of increase; with upgrades to the
command, control, communications and other capabilities being second highest.
In contrast, because the revised plans upgrade rather than replace most legacy
aircraft and reduce the number of unmanned aircraft, the cost for Deepwater
aircraft drops. The revised plans, like the original plan, are heavily dependent
on receiving full funding each year. Coast Guard officials state that a shortfall
in funding in any year could substantially increase total costs. 4
Some observers expected the revised Deepwater implementation plan to include
more ships and aircraft than the original ( 1998) Deepwater plan. A 2004 RAND
Corporation report recommended substantially increasing the numbers of cutters and
aircraft to be acquired under the original plan. 5 The revised implementation plan,
however, did not substantially increase ship and aircraft numbers. The Coast Guard
says the revised force would have considerably more capability than the 1998-
planned force because the ships and aircraft would be individually more capable than
under the 1998 plan. Coast Guard officials have also acknowledged, however, that
the revised force would not have enough capacity to meet long- term ( FY2005-
FY2009) Government Performance and Review Act ( GPRA) goals. An April 2006
GAO report concluded that
The Coast Guard’s analytical methods were appropriate for determining if
the revised asset mix would provide greater mission performance and whether
the mix is appropriate for meeting Deepwater missions. GAO and other
independent experts found the Coast Guard’s methods were reliable for assessing
CRS- 5
6 Government Accountability Office: Coast Guard[:] Changes to Deepwater Plan Appear
Sound, and Program Management Has Improved, but Continued Monitoring Is Warranted,
GAO- 06- 546, June 2006.
For further discussion regarding the adequacy of proposed Deepwater assets, see Statement
of Ronald O’Rourke, Specialist in National Defense, Congressional Research Service,
Before the Senate Commerce, Science, and Transportation Committee Subcommittee on
Fisheries and the Coast Guard Hearing on the Coast Guard’s Revised Deepwater
Implementation Plan, June 21, 2005, pp. 1- 5.
the effects of changing the asset mix and a Department of Defense review board
facilitated accreditation of the Coast Guard’s approach.” 6
Systems to Be Procured or Converted
The revised Deepwater implementation plan includes the acquisition of the
following:
Ships, boats, and surface craft:
! 8 new National Security Cutters, or NSCs, displacing about 4,000
tons each ( i. e., ships analogous to today’s high- endurance cutters);
! 25 new Offshore Patrol Cutters, or OPCs, displacing about 3,200
tons each ( i. e., ships analogous to today’s medium- endurance
cutters);
! 58 new Fast Response Cutters ( FRCs) displacing 200 tons each, to
replace the Coast Guard’s existing 110- foot Island- class patrol boats;
! 33 new Long Range Interceptor ( LRI) craft displacing 15 tons each;
and
! 91 new Short Range Prosecutor ( SRP) craft displacing 9 tons each.
Aircraft:
! 6 missionized HC- 130J and 16 converted HC- 130H Long Range
Search ( LRS) aircraft;
! 36 new HC- 144A Medium Range Maritime Patrol Aircraft ( MPA)
based on the European Aeronautic Defence and Space Company
( EADS) CASA HC- 235 Persuader MPA aircraft design;
! 42 converted HH- 60J Medium Range Recovery ( MRR) helicopters;
! 95 converted HH- 65C Multi- Mission Cutter Helicopters ( MCHs);
! 45 new HV- 911 Eagle Eye VTOL ( vertical take- off or landing)
Unmanned Aerial Vehicles ( VUAVs); and
! 4 leased RQ- 4A Global Hawk High Altitude Endurance UAVs
( HAEUAVs).
In addition to the above items, the Deepwater program encompasses other work,
including, originally, the conversion of the Coast Guard’s existing 49 Island- class
110- foot patrol boats into modernized, 123- foot patrol boats, so that these boats
could remain in service until the delivery of replacement FRCs.
CRS- 6
Program Funding
Prior- Year Funding. Table 1 below shows prior- year funding for the
Deepwater program. As can be seen in the table, the program has received a total of
about $ 4.4 billion through FY2007, including $ 1,144.6 million in FY2007.
Table 1. Deepwater Program Funding History
( in millions of dollars, rounded to nearest tenth)
Priora FY02 FY03 FY04 FY05 FY06 FY07 FY08
Request n/ a 320.2 500.0 500.0 678 966.0 934.4 836.9*
Appropriation n/ a 320.2 478.0 668.2 724.0 933.1 1,065.9
Rescissions n/ a 3.1 57.6 38.9 98.7 48.8*
Transfers n/ a 49.7 77.8 78.7
Supplemental approps n/ a 124.2
Totalc 117.0 320.2 474.9 610.6 734.8 1,036.4 1,144.6
Cumulative totalc 117.0 437.2 912.1 1,522.7 2,257.5 3,293.9 4,438.5
Source: Prepared by CRS using Coast Guard data provided on January 29, 2007, and proposed Coast
Guard FY2008 budget.
n/ a = not available
a. Pre- award funding prior to 2002.
b. For FY2008, the Coast Guard is requesting $ 836.9 million in new appropriations and the rescission
of $ 48.8 million in prior- year appropriations, for a net total request of $ 788.1 million.
c. Excludes HC- 130J funding prior and airborne use- of- force funding prior to FY2007.
FY2008 Funding Request And Congressional Action. As shown in
Table 2, the Coast Guard for FY2008 requested $ 836.9 million in new
appropriations and the rescission of $ 48.8 million in prior- year appropriations, for
a net total request of $ 788.1 million. As shown in the table, the House version of the
FY2008 DHS appropriations bill ( H. R. 2638) recommends $ 698.4 million in new
appropriations and the rescission of $ 107.4 million in prior- year appropriations for
the program, for a net total of $ 590.9 million, while the Senate version ( S. 1644)
recommends $ 826.9 million in new appropriations and the rescission of $ 58.7
million in prior- year appropriations for the program, for a net total of $ 770.1 million.
CRS- 7
Table 2. FY2008 Deepwater Funding Request and
Congressional Action
( in millions of dollars, rounded to nearest tenth)
Request
House
( H. R.
2638)
House
change
from
request
Senate
( S. 1644)
Senate
change
from
request
Confer-ence
Confer-ence
change
from
request
Aircraft
Maritime patrol aircraft 170.0 100.0 - 70.0 170.0 0
HH- 60 conversion 57.3 57.3 0 52.3 - 5.0
HC- 130H conversion 18.9 18.9 0 13.9 - 5.0
HH- 65 conversion 50.8 50.8 0 50.8 0
Armed helo equipment 24.6 24.6 0 24.6 0
C- 130J 5.8 5.8 0 5.8 0
Subtotal aircraft 327.4 257.4 - 70.0 317.4 - 10.0
Surface ships
NSC 165.7 105.8 - 59.9 165.7 0
FRC- B 53.6 0 - 53.6 53.6 0
Small boats 2.7 2.7 0 2.7 0
Patrol boats sustainment 40.5 61.0 20.5 40.5 0
Medium- endurance cutter
sustainment
34.5 50.0 15.5 34.5 0
Subtotal surface ships 297.0 219.5 - 77.5 297.0 0
Technology obsolescence
prevention
0.7 0.7 0 0.7 0
C4ISR 89.6 89.6 0 89.6 0
Logistics 36.5 36.5 0 36.5 0
Systems engineering and
integration
35.1 35.1 0 35.1 0
Govt. program mgt. 50.5 59.5 9.0 50.5 0
TOTAL FY2008 836.9 698.4 - 138.5 826.9 - 10.0
Rescissions
OPC 48.8 68.8 20.1 48.8 0
VUAV 0 38.6 38.6 0 0
FRC- B 0 0 0 8.0 8
Subtotal rescissions 48.8 107.4 58.7 56.8 8
NET TOTAL 788.1 590.9 - 197.2 770.1 - 18.0
Source: House and Senate reports on H. R. 2638 and S. 1644, respectively. Totals may not add due
to rounding.
Earlier Interest in Potential for Program Acceleration
Prior to recent strong criticisms regarding management and execution of the
Deepwater program, some Members of Congress expressed interest in accelerating
procurement of Deepwater assets and thereby compressing the Deepwater acquisition
CRS- 8
7 Section 888( I) of H. R. 5005/ P. L. 107- 296 directed DHS to report to Congress on the idea
of compressing the Deepwater program from 20 years to 10 years. On March 12, 2003, the
Coast Guard submitted the report, which concluded that compressing the Deepwater
acquisition period to 10 years was feasible, that it would increase Deepwater acquisition
costs over the period FY2005- FY2011 by about $ 7.4 billion in then- year dollars, but reduce
total Deepwater acquisition costs over the long run from $ 16.022 billion in then- year dollars
to $ 11.473 billion in then- year dollars. ( U. S. Coast Guard, Report to Congress on the
Feasibility of Accelerating the Integrated Deepwater System, 2003.)
8 John Birkler, et al., The U. S. Coast Guard’s Deepwater Force Modernization Plan: Can
It Be Accelerated? Will It Meet Changing Security Needs? RAND, National Security
Research Division, MG- 114, 2004.
period from 25 years to 15 or 10 years, so as to reduce total Deepwater acquisition
costs and more quickly replace legacy assets. Some of these Members expressed
disappointment that the Coast Guard’s revised implementation plan lengthened the
program’s acquisition period from about 20 years to 25 years. Compressing the
Deepwater program’s acquisition period to 15 or 10 years could reduce total
Deepwater acquisition costs but would require substantially increasing annual
Deepwater acquisition funding levels. 7
A 2004 RAND Corporation report, using the original ( pre- 2005) Deepwater
implementation plan, concluded that “ the shipbuilding and air vehicle industrial
bases could produce the USCG’s Deepwater assets on either the 15- year or the
10- year schedule. Manufacturers would require no major facility upgrades to
accommodate acceleration.” 8 GAO has cautioned that accelerating the Deepwater
program could increase program- management risks, but has also acknowledged that
accelerating selected parts of the program might be more feasible.
Congressional Oversight Hearings in 2007
House and Senate committees and subcommittees have conducted several
oversight hearings in 2007 devoted entirely or partly to problems and concerns
regarding the management and execution of the program. Examples of such hearings
include:
! January 30, March 8, and June 12, 2007, hearings before the Coast
Guard and Maritime Transportation subcommittee of the House
Transportation and Infrastructure Committee;
! February 6 and 15, 2007, hearings before the Homeland Security
subcommittee of the House Appropriations Committee
! a February 8, 2007, hearing before the House Committee on
Oversight and Government Affairs;
! a February 14, 2007, hearing before the Oceans, Atmosphere,
Fisheries, and Coast Guard subcommittee of the Senate Commerce,
Science and Transportation Committee;
CRS- 9
9 Department of Homeland Security, Office of Inspector General, Acquisition of the National
Security Cutter, OIG - 07- 23, January 2007. The report is available online at
[ http:// www. dhs. gov/ xoig/ assets/ mgmtrpts/ OIG_ 07- 23_ Jan07. pdf].
! an April 18, 2007, hearing before the full House Transportation and
Infrastructure Committee;
! an April 18, 2007, hearing before the Oceans, Atmosphere,
Fisheries, and Coast Guard subcommittee of the Senate Commerce,
Science, and Transportation Committee; and
! a May 17, 2007, joint hearing before the Border, Maritime, and
Global Counterterrorism subcommittee and the Management,
Investigations, and Oversight subcommittee of the House Homeland
Security Committee.
Problems in Program Management and Execution
The management and execution of the Deepwater program has been strongly
criticized in recent months by the Department of Homeland Security Inspector
General ( DHS IG), the Government Accountability Office ( GAO), the Defense
Acquisition University ( DAU), several Members of Congress from committees and
subcommittees that oversee the Coast Guard, and other observers.
Criticism of the management and execution of the program has focused to a
large degree on problems in three cutter acquisition efforts, and on overall
management of the program. Each of these is discussed below. Problems with other
parts of the Deepwater program, such as the VUAV, have also attracted oversight
attention. For more detail on the issues discussed below, plus other issues such as
the VUAV, see the reports and testimony reprinted in the appendices to this report.
Problems in Cutter Acquisition Efforts. The Deepwater cutter acquisition
efforts that have experienced problems are the new National Security Cutter ( NSC),
the 110- foot patrol boat modernization effort, and the new Fast Response Cutter
( FRC).
National Security Cutter ( NSC). A DHS IG report released in January 2007
strongly criticized the NSC program, citing design flaws in the ship and the Coast
Guard’s decision to start construction of NSCs in spite of early internal notifications
about these flaws. The DHS IG report also noted considerable growth in the cost to
build the first two NSCs, and other issues. 9
110- Foot Patrol Boat Modernization. As mentioned earlier, as part of the
Deepwater program, the Coast Guard originally planned to modernize its 49 existing
Island- class 110- foot patrol boats so as to improve their capabilities and extend their
lives until their planned eventual replacement with new Deepwater Fast Response
Cutters ( FRCs) starting in 2018. Among other things, the modernization lengthened
the boats to 123 feet. The program consequently is referred to as the 110- foot or 123-
foot modernization program.
CRS- 10
10 Patricia Kime, “ Video Alleges Security Problems With Converted U. S. Coast Guard
Cutters,” DefenseNews. com, August 7, 2006. See also Griff Witte, “ On YouTube, Charges
Of Security Flaws,” Washington Post, August 29, 2006. The video is posted on the Internet
at [ http:// www. youtube. com/ watch? v= qd3VV8Za04g].
11 Department of Homeland Security, Office of Inspector General, 110’/ 123’ Maritime
Patrol Boat Modernization Project, OIG - 07- 27, January 2007. The report is available
online at
[ http:// www. dhs. gov/ xoig/ assets/ mgmtrpts/ OIG_ 07- 27_ Feb07. pdf].
12 “ Coast Guard Statement on Suspension of Converted Patrol Boat Operations,”
InsideDefense. com, November 30, 2006; Patricia Kime, “ U. S. Coast Guard Pulls 123s Out
of Service,” DefenseNews. com, November 30, 2006; Calvin Biesecker, “ Coast Guard
Suspends 123- Foot Patrol Boat Operations,” DefenseDaily, December 1, 2006; Robert
Block, “ Coast Guard Fleet Cuts Could Hurt Border Patrols,” Wall Street Journal, December
1, 2006; Renae Merle, “ Coast Guard Finds Flaws In Converted Patrol Boats,” Washington
Post, December 2, 2006; Renae Merle and Spencer S. Hsu, “ Costly Fleet Update Falters,”
Washington Post, December 8, 2006.
13 Geoff Fein, “ Coast Guard Nixes 123- Foot Patrol Boat, Assumes Lead of Deepwater
Effort,” Defense Daily, April 18, 2007; Patricia Kime, “ Coast Guard To Decommission
Troubled 123s,” NavyTimes. com, April 18, 2007.
Eight of the boats were modernized at a total cost of $ 87 million to $ 100 million
( sources quote different figures). The first was delivered in March 2004. Structural
problems were soon discovered in them. In June 2005, the Coast Guard stopped the
modernization effort at eight boats after determining that they lacked capabilities
needed for meeting post- 9/ 11 Coast Guard operational requirements.
In August 2006, a former Lockheed engineer posted on the Internet a video
alleging four other problems with the 110- foot patrol boat modernization effort. 10
The engineer had previously presented these problems to the DHS IG, and a February
2007 report from the DHS IG confirmed two of the four problems. 11
On November 30, 2006, the Coast Guard announced that it was suspending
operations of the eight modernized 123- foot patrol boats ( which were assigned to
Coast Guard Sector Key West, FL) due to the discovery of additional structural
damage to their hulls. The suspension prompted expressions of concern that the
action could reduce the Coast Guard’s border- enforcement capabilities in the
Caribbean. The Coast Guard said it was exploring options for addressing operational
gaps resulting from the decision. 12
On April 17, 2007, the Coast Guard announced that it would permanently
decommission the eight converted boats and strip them of equipment and
components that might be reused on other Coast Guard platforms. 13 In announcing
the decision, the Admiral Thad Allen, the Commandant of the Coast Guard, stated:
A significant step in changing the course of Deepwater is resolving
outstanding issues within the program, so let me begin this morning by
announcing my decision to permanently decommission the eight 123’ patrol
boats converted under the Deepwater program.
CRS- 11
14 Coast Guard Press Release dated April 17, 2007, entitled “ Statement by Adm. Thad Allen
on the Converted 123- Foot Patrol Boats and Changes to the Deepwater Acquisition
Program.”
15 Dan Caterinicchia, “ Coast Guard Wants Refund For Ships,” Associated Press, May 17,
2007; Renae Merle, “ Coast Guard Seeks Deepwater Refund,” Washington Post, May 18,
2007: D3.
Multiple extensive studies and analyses by both Coast Guard engineers and
third- party naval architects and marine engineers over many months have
described the failures in these vessels. They have been unable to determine a
single definitive root cause for the 123- foot patrol boat structural problems.
We believe the design of the 123- foot patrol boat reduced the structural
cross section necessary to support the added weight distribution following the
conversion. Our analysis has been complicated, however, by the fact that we’ve
observed permanent deformations of each hull in slightly different ways.
Based on this analysis, any strategy to permanently repair these cutters and
return them to service would require an iterative, phased approach over a long
period of time with uncertain costs and outcome. Initial estimates indicate it
could cost well over $ 50 million.
The excessive cost and time associated with continuing to pursue an
uncertain resolution to these structural problems has convinced me, with the
recommendation of my chief engineer, that permanently removing these cutters
from service while recouping any residual value and redirecting funds to other
programs is in the best interest of the government.
We will continue to mitigate the loss of these patrol boat hours through our
ongoing efforts and strategies ( such as multi- crewing 110- foot patrol boats and
an extension of the memorandum of understanding for three Navy 179- foot patrol
craft) while we work toward acquiring a new platform as soon as we can to
replace our entire fleet of 110- foot patrol boats.
We will pursue all viably available contractual, legal or other options for
recouping any funds that might be owed the government as a result of the loss of
these hulls. 14
On May 17, 2007, the Coast Guard issued a letter to ICGS revoking its previous
acceptance of the eight converted boats — an action intended to facilitate Coast
Guard attempts to recover from ICGS funds that were spent on the eight converted
boats. 15
Fast Response Cutter ( FRC). As a result of the problems in the 110- foot
patrol boat modernization project, the Coast Guard accelerated the FRC design and
construction effort by 10 years. Problems, however, were discovered in the FRC
design, and the Coast Guard in February 2006 suspended work on the design.
The Coast Guard has now divided the 58- ship FRC effort into two classes —
FRC- Bs, which are to be procured as a near- term stop- gap measure and which are to
be based on an existing patrol boat design ( which the Coast Guard calls a “ parent
CRS- 12
16 Coast Guard press release, “ Coast Guard Reassigns Deepwater Replacement Patrol Boast
Acquisition Project,” March 14, 2007; Calvin Biesecker, “ Coast Guard Strips FRC- B Patrol
Boat Acquisition From ICGS,” Defense Daily, March 15, 2007; Renae Merle, “ Coast Guard
Cancels Contract,” Washington Post, March 15, 2007; and David Stout, “ Coast Guard
Cancels Contract For Vessel,” New York Times, March 15, 2007.
17 Defense Acquisition University, Quick Look Study, United States Coast Guard Deepwater
Program, February 2007.
18 For additional discussion about LSIs in general, see CRS Report RS22631, Defense
Acquisition: Use of Lead System Integrators ( LSIs) — Background, Oversight Issues, and
Options for Congress, by Valerie Bailey Grasso.
craft” design), and subsequent FRC- As, which are to be based on a fixed version of
the new FRC design. Of the 58 FRCs, at least 12 are to be FRC- Bs.
In December 2006, the Coast Guard issued a Request for Proposals ( RFP) to
ICGS for the FRC- B. On March 14, 2007, the Coast Guard announced that it intends
to procure the 12 FRC- B cutters directly from the manufacturer, rather than through
ICGS. 16
Overall Management of the Program. Some observers believe the
problems experienced in the three cutter acquisition efforts are the product of broader
problems in the Coast Guard’s overall management of the Deepwater program.
Reports and testimony from the DHS IG and GAO, as well as a February 2007 DAU
“ quick look study,” 17 have expressed serious concerns about the Coast Guard’s
overall management of the Deepwater program. These reports and testimony, as well
as Members of Congress and other observers, have raised concerns about a number
of actual or alleged problems.
Some observers have expressed the view that using an LSI to implement the
Deepwater program made a complex program more complex, and set the stage for
waste, fraud, and abuse by effectively outsourcing oversight of the program to the
private sector and by creating a conflict of interest for the private sector in executing
the program.
Other observers, including GAO and the DAU, have expressed the view that the
LSI approach is basically valid, but that the contract the Coast guard used to
implement the LSI approach for the Deepwater program was flawed in various ways,
undermining the Coast Guard’s ability to assess contractor performance, control
costs, ensure accountability, and conduct general oversight of the program. 18
Observers have raised various issues about the Deepwater contract. Among
other things, they have expressed concern that the contract is an indefinite delivery,
indefinite quantity ( ID/ IQ) contract, which, they say, can be an inappropriate kind of
contract for a program like the Deepwater program. Observers have also expressed
concern that the contract:
! transferred too much authority to the LSI for defining performance
specifications, for subsequently modifying them, and for making
technical judgements;
CRS- 13
! permitted the LSI to certify that certain performance goals had been
met — so- called self- certification, which, critics argue, can equate
to no meaningful certification;
! provided the Coast Guard with insufficient authority over the LSI for
resolving technical disputes between the Coast Guard and the LSI;
! was vaguely worded with regard to certain operational requirements
and technical specifications, reducing the Coast Guard’s ability to
assess performance and ensure that the program would achieve
Coast Guard goals;
! permitted the firms making up the LSI to make little use of
competition between suppliers in selecting products to be used in the
Deepwater program, to tailor requirements to fit their own products,
and consequently to rely too much on their own products, as
opposed to products available from other manufacturers;
! permitted the LSI’s performance during the first five- year period to
be scored in a way that did not sufficiently take into account recent
problems in the cutter acquisition efforts;
! permitted award fees and incentive fees ( i. e., bonuses) to be paid to
the LSI on the basis of “ attitude and effort” rather than successful
outcomes; and
! lacked sufficient penalties and exit clauses.
Observers have also expressed concern that the Coast Guard does not have
enough in- house staff and in- house expertise in areas such as program management,
financial management, and system integration, to properly oversee and manage an
acquisition effort as large and complex as the Deepwater program, and that the Coast
Guard did not make sufficient use of the Navy or other third- party, independent
sources of technical expertise, advice, and assessments. They also have expressed
concern that the Coast Guard, in implementing the Deepwater program, has placed
a higher priority on meeting a schedule as opposed to ensuring performance.
In addition, observers have stated that the Coast Guard proceeded with
construction of the first NSCs in spite of early internal warnings about flaws in the
NSC design, failed to report problems about the NSC effort to Congress on a timely
basis, resisted efforts by the DHS IG to investigate the NSC effort, and appears to
have altered briefing slides on the NSC effort so as to downplay the design flaws to
certain audiences. On May 17, 2007, the DHS IG testified that the Coast Guard’s
cooperation with the DHS IG had substantially improved ( though some issues
remained), but that Deepwater contractors had establishing unacceptable conditions
for DHS IG to interview contractor personnel about the program.
For additional information on the issues discussed above, see the reprinted
portions of reports and testimony in the appendices to this report.
CRS- 14
Coast Guard Management Reforms Announced April 17, 2007
On April 17, 2007, the Coast Guard announced a series of actions to reform the
management of the Deepwater program. Among other things, the Coast Guard
announced it would assume the role of lead system integrator ( LSI) for the program.
Since 2002, the LSI role had been performed by Integrated Coast Guard Systems
( ICGS) — an industry team led by Lockheed Martin and Northrop Grumman Ship
Systems ( NGSS). In announcing the actions, Admiral Thad Allen, the Commandant
of the Coast Guard, stated in part:
As many of you know, I met with the Lockheed Martin CEO Robert
Stevens and Northrop Grumman CEO Ronald Sugar in January to determine near
and long- term objectives and goals for the Deepwater program. Since then we’ve
spoken frequently, as both the Coast Guard and our industry partners have taken
a number of steps to improve the management, oversight and performance of the
Deepwater program. More recently, we reached agreement on six fundamental
principles that we have begun implementing to ensure that the government’s
interests are fully and fairly achieved in acquiring and fielding assets and
capabilities being developed and produced under the Integrated Deepwater
System.
These principles will guide us as we seek to obtain the best value for the
government through robust competition and vigilant contract oversight and
management.
Working together with industry, the Coast Guard will make the following
six fundamental changes in the management of our Deepwater program:
The Coast Guard will assume the lead role as systems integrator for all
Coast Guard Deepwater assets, as well as other major acquisitions as appropriate.
I have already begun building my organic staff in the fiscal year 2008 budget
request, and will combine that with other government assets as we transition to
this new role.
The Coast Guard will take full responsibility for leading the management
of all life cycle logistics functions within the Deepwater program under a an
improved logistics architecture established with the new mission support
organization.
The Coast Guard will expand the role of the American Bureau of Shipping,
or other third- parties as appropriate, for Deepwater vessels to increase assurances
that Deepwater assets are properly designed and constructed in accordance with
established standards.
The Coast Guard will work collaboratively with Integrated Coast Guard
Systems to identify and implement an expeditious resolution to all outstanding
issues regarding the national security cutters.
The Coast Guard will consider placing contract responsibilities for
continued production of an asset class on a case- by- case basis directly with the
prime vendor consistent with competition requirements if: ( 1) deemed to be in
the best interest of the government and ( 2) only after we verify lead asset
performance with established mission requirements.
CRS- 15
Finally, I will meet no less than quarterly with my counterparts from
industry until any and all Deepwater program issues are fully adjudicated and
resolved. Our next meeting is to be scheduled within a month.
These improvements in program management and oversight going forward
will change the course of Deepwater.
By redefining our roles and responsibilities, redefining our relationships
with our industry partners, and redefining how we assess the success of
government and industry management and performance, the Deepwater program
of tomorrow will be fundamentally better than the Deepwater program of
today....
As many of you know, I have directed a number of significant organizational
changes [ to the Coast Guard], embedded within direction and orders, to better
prepare the Coast Guard to meet and sustain mission performance long into the
future as we confront a broad range of converging threats and challenges to the
safety, security and stewardship of America’s vital maritime interests.
What’s important to understand here is that these proposed changes in
organizational structure, alignment and business processes, intended to make the
Coast Guard more adaptive, responsive and accountable, are not separate and
distinct from what we have been doing over the past year to improve Deepwater.
In fact, many of these initiatives can be traced directly to challenges we’ve
faced, in part, in our Deepwater program. Consequently, we will be better
organized, better trained, and better equipped to manage large, complex
acquisitions like Deepwater in the coming days, weeks, months and years as we
complete these service- wide enhancements to our mission support systems,
specifically our acquisition, financial and logistics functions. That is the future
of the Coast Guard, and that is the future of Deepwater.
To be frank, I am tired of looking in the rearview mirror - conducting what
has been the equivalent of an archaeological dig into Deepwater. We already
understand all too well what has been ailing us within Deepwater in the past five
years:
We’ve relied too much on contractors to do the work of government as a
result of tightening AC& I budgets, a dearth of contracting personnel in the
federal government, and a loss of focus on critical governmental roles and
responsibilities in the management and oversight of the program.
We struggle with balancing the benefits of innovation and technology
offered through the private sector against the government’s fundamental reliance
on robust competition.
Both industry and government have failed to fully understand each other’s
needs and requirements, all too often resulting in both organizations operating
at counter- odds to one another that have benefited neither industry nor
government.
And both industry and government have failed to accurately predict and
control costs.
CRS- 16
19 Coast Guard Press Release dated April 17, 2007, entitled “ Statement by Adm. Thad Allen
on the Converted 123- Foot Patrol Boats and Changes to the Deepwater Acquisition
Program.”
20 See, for example, the spoken testimony of Admiral Thad Allen, Commandant of the Coast
Guard, before the Oceans, Atmosphere, Fisheries, and Coast Guard subcommittee of the
( continued...)
While we can — and are — certainly learning from the past, we ought to
be about the business of looking forward — with binoculars even — as we seek
to see what is out over the horizon so we can better prepare to anticipate
challenges and develop solutions with full transparency and accountability.
That is the business of government. And it’s the same principle that needs to
govern business as well.
And it’s precisely what I intend to do: with the changes in management and
oversight I outlined for you here today, with the changes we are making in the
terms and conditions of the Deepwater contract, and with the changes we will
make in our acquisition and logistics support systems throughout the Coast
Guard. If we do, I have no doubt in my mind that we will exceed all expectations
for Deepwater....
The Deepwater program of tomorrow will be fundamentally better than the
Deepwater program of today.
The Coast Guard has a long history of demonstrating exceptional
stewardship and care of the ships, aircraft and resources provided it by the
public, routinely extending the life of our assets far beyond original design
specifications to meet the vital maritime safety, security and stewardship needs
of the nation....
Knowing that to be the case, I am personally committed to ensuring that our
newest ships, aircraft and systems acquired through the Coast Guard’s Integrated
Deepwater System are capable of meeting our mission requirements from the
moment they enter service until they are taken out of service many, many years
into the future....
As I’ve said many times in the past, the safety and security of all Americans
depends on a ready and capable Coast Guard, and the Coast Guard depends on
our Deepwater program to keep us ready long into the future.
The changes to Deepwater management and oversight I outlined here for
you today reflect a significant change in the course of Deepwater. I will
vigorously implement these and other changes that may be necessary to ensure
that our Coast Guard men and women have the most capable fleet of ships,
aircraft and systems they need to do the job I ask them to do each and every day
on behalf of the American people. 19
Coast Guard officials state that the Coast Guard intends to proceed with the 43-
month award term with ICGS and use the contract to complete Deepwater acquisition
efforts that are already underway. Coast Guard official state that task orders that the
Coast Guard issues under the 43- month award term will be for performance periods
of 18 months, with the aim of closing out efforts already underway. 20
CRS- 17
20 (... continued)
Senate Commerce, Science, and Transportation Committee on April 18, 2007, and before
the Coast Guard and Maritime Transportation subcommittee of the House Transportation
and Infrastructure Committee on June 12, 2007.
Other Announced Coast Guard Actions
In addition to the April 17 Coast Guard announcement about Deepwater
management reforms and the March 14 Coast Guard announcement concerning the
FRC- Bs, the Coast Guard in recent weeks has done the following:
! announced a reorganization of certain Coast Guard commands —
including the creation of a unified Coast Guard acquisition office —
that is intended in part to strengthen the Coast Guard’s ability to
manage acquisition projects, including the Deepwater program;
! stated that it is making additional internal changes specifically
targeted at improving its ability to manage the Deepwater program;
! stated that it plans to alter the terms of the Deepwater contract for
the 43- month award term that commences in June 2007 so as to
address concerns raised about the current Deepwater contract;
! stated that it is hiring additional people with acquisition experience,
so as to strengthen its in- house capability for managing the
Deepwater program and other Coast Guard acquisition efforts;
! acted to resolve differences between the Coast Guard and ICGS
regarding the fatigue life of the NSC;
! stated that it concurs with many of the recommendations made in the
DHS IG reports, and is moving to implement them;
! stated that it is weighing the recommendations of the DAU quick
look study; and
! stated that it has also implemented many recommendations
regarding Deepwater program management that have been made by
GAO.
On May 17, 2007, the Coast Guard testified that its Deepwater acquisition staff
had increased from about 250 to about 450, and that it would continue to grow about
10% per year. The Coast Guard testified that it would be generally capable of acting
as the LSI for the Deepwater program within about 12 to 18 months, that the area of
in- house acquisition expertise that is most in need of improvement during this period
is C4ISR, and that the increase in acquisition- related staffing would not impact other
Coast Guard activities because of the service’s increasing end strength. The Coast
Guard testified that it will continue to use the services of independent, third- party
CRS- 18
21 Spoken testimony of Rear Admiral Gary Blore at May 17, 2007, joint hearing before the
Border, Maritime, and Global Counterterrorism subcommittee and the Management,
Investigations, and Oversight subcommittee of the House Homeland Security Committee.
22 Ana Radelat, “ Justice Investigating Deepwater Contractors,” NavyTimes. com, April 18,
2007; Chris Strohm, “ Deepwater Contractors Face Justice Probe” GovExec. com, April 19,
2007; Patricia Kime, “ Justice Investigating Deepwater Contract,” NavyTimes. com, April 20,
2007.
sources of support, such as the Carderock division of the Naval Surface Warfare
Center ( NSWC), the Navy’s center of excellence for ships and ship systems. 21
Justice Department Investigation of Program
On April 18, 2007, it was reported that the Justice Department is conducting an
investigation of the Deepwater program. The investigation reportedly centers on
communications systems, the conversion of the Coast Guard’s 110- foot patrol boats,
and the National Security Cutter ( NSC). Justice reportedly notified Lockheed,
Northrop, and certain other firms involved in the Deepwater program of the
investigation on December 13, 2006, and directed the firms to preserve all documents
relating to the program. 22
Oversight Issues for Congress
Coast Guard’s Announced Management Reforms
In light of the Deepwater management reforms announced by the Coast Guard
on April 17, 2007, potential oversight questions for Congress regarding management
and execution of the Deepwater program include the following:
! Are the Coast Guard’s announced reforms appropriate? Are they
insufficient, excessive, or about right? Do they properly address all
concerns regarding the management and execution of the Deepwater
program?
! Has the Coast Guard developed a detailed plan for transferring the
Deepwater LSI role from ICGS to the Coast Guard? Is the plan
realistic in terms of the schedule and manner in which various
system- integration functions are to be transferred from ICGS to the
Coast Guard? Which specific system- integration responsibilities
will continue to be performed by ICGS, and for how long?
! When will the Coast Guard have enough in- house technical and
program- management expertise to take on various aspects of the role
of Deepwater LSI? Does the Coast Guard have a detailed plan for
expanding its in- house technical and program- management staff?
Is this plan adequate? Does the Coast Guard have a career path for
CRS- 19
23 For more on LSIs in general, see CRS Report RS22631, Defense Acquisition: Use of Lead
System Integrators ( LSIs) — Background, Oversight Issues, and Options for Congress, by
Valerie Bailey Grasso.
24 Patricia Kime, “ Unspent Funds Are Bulk of Deepwater Budget,” DefenseNews. com,
March 12, 2007.
acquisition personnel similar to that in Department of Defense
agencies?
! To what degree will the Coast Guard need to obtain technical and
program- management support from the Navy or other third parties?
Does the Coast Guard have an adequate strategy for seeking out
third- party help?
! Has the Coast Guard established milestones that Congress can use
to assess the success of the Coast Guard’s announced management
reforms? If so, what are the milestones, and how were they
determined? If not, does the Coast Guard plan to develop such
milestones?
! What implications, if any, does the Coast Guard’s decision to
perform the Deepwater LSI role have for the concept of using
private- sector LSIs on other federal acquisition programs? 23
Execution of FY2007 Funds
The pace at which prior- year funding for a program is obligated and expended
is one measure by which Congress assesses the readiness of the program to receive
additional funding in future fiscal years. On March 12, 2007, it was reported that a
large percentage of FY2007 funding for the Deepwater program had not yet been
obligated. 24
Revolving Door and Potential for Conflicts of Interest
The so- called revolving door, which refers to the movement of officials between
positions in government and industry, can create benefits for government and
industry in terms of allowing each side to understand the other’s needs and concerns,
and in terms of spreading best practices from one sector to the other. At the same
time, some observers have long been concerned that the revolving door might create
conflicts of interest for officials carrying out their duties while in government
positions. A March 25, 2007, news article stated in part:
Four of the seven top U. S. Coast Guard officers who retired since 1998
took positions with private firms involved in the Coast Guard’s troubled $ 24
billion fleet replacement program, an effort that government investigators have
criticized for putting contractors’ interests ahead of taxpayers’.
They weren’t the only officials to oversee one of the federal government’s
most complex experiments at privatization, known as Deepwater, who had past
CRS- 20
25 A 2002 CRS report on shipyard mergers stated in part:
Movement of senior- level employees between DoD and the defense
industry is common and can be beneficial in terms of improving DoD
understanding of industry concerns, importing efficient industry business
practices into DoD, and improving industry understanding of DoD goals,
procedures, and concerns. It also, however, has the potential to create questions
regarding potential conflicts of interest for senior DoD officials involved in
making decisions about major weapon acquisition programs or regulatory issues
that affect the defense industry, particularly if those officials are potential
candidates for post- DoD employment with a defense firm.
Shipyard mergers since 1995 have contributed to the general consolidation
of defense firms and have reduced in particular the number of major defense
firms that might hire a former DoD or Navy official specifically on account of
that person’s background in Navy shipbuilding programs. Until 1995, for
example, a DoD or Navy official with such a background who was anticipating
or hoping for a post- DoD/ Navy career in the private sector knew there were 6
major naval shipbuilding firms ( plus several other major contractors involved in
shipbuilding programs) available as potential employers. Now, in contrast, there
are only two firms that own shipyards that build major ships for the Navy ( GD
and NOC) and a smaller number of other major defense contractors involved in
shipbuilding programs ( e. g., Lockheed Martin and Raytheon).
A potential issue for Congress is whether and how shipyard mergers since 1995, by
reducing the number of potential post- DoD/ Navy employers for persons with shipbuilding
backgrounds, might affect decisions made by current senior DoD and Navy officials with
responsibility for Navy shipbuilding programs or regulatory issues affecting the shipyards.
With fewer firms available as potential post- DoD/ Navy employers, will DoD/ Navy officials
involved in shipbuilding programs be willing to make decisions that might strongly
disappoint one or more of those firms?
( continued...)
or subsequent business ties to the contract consortium led by industry giants
Northrop Grumman and Lockheed Martin.
The secretary of transportation, Norman Y. Mineta, whose department
included the Coast Guard when the contract was awarded in 2002, was a former
Lockheed executive. Two deputy secretaries of the Department of Homeland
Security, which the Coast Guard became part of in 2003, were former Lockheed
executives, and a third later served on its board.
Washington’s revolving- door laws have long allowed officials from
industry giants such as Lockheed, the nation’s largest defense contractor, to
spend parts of their careers working for U. S. security agencies that make huge
purchases from those companies, though there are limits.
But Deepwater dramatizes a new concern, current and former U. S. officials
said: how dwindling competition in the private sector, mushrooming federal
defense spending and the government’s diminished contract management skills
raise the stakes for potential conflicts of interest. 25
CRS- 21
25 (... continued)
( CRS Report RL31400, Navy Shipbuilding: Recent Shipyard
Mergers — Background and Issues for Congress, by Ronald
O’Rourke.)
26 Spencer S. Hsu and Renae Merle, “ Coast Guard’s Purchasing Raises Conflict- Of- Interest
Flags,” Washington Post, March 25, 2007.
Deepwater also illustrates how federal ethics rules carve out loopholes for
senior policymakers to oversee decisions that may benefit former or prospective
employers. These include outsourcing strategies under which taxpayers bear
most of the risks for failure, analysts said.
There is no sign that any of the retired admirals or former Lockheed
officials did anything illegal.
But the connections between the agencies and the contractors have drawn
the attention of the DHS inspector general, Richard L. Skinner. “ That is on our
radar screen,” he said. “ It’s something we are very sensitive to.” 26
Potential Options for Congress
Potential options for Congress regarding the Deepwater program — some of
which might have the effect of legislatively mandating reforms that the Coast Guard
announced on April 17, 2007 — include but are not limited to the following:
! track and assess the changes that the Coast Guard has stated it will
implement regarding management and execution of the Deepwater
program;
! institute additional or stricter reporting requirements for the
Deepwater program;
! encourage or require the Coast Guard to implement
recommendations for the Deepwater program made by the DHS IG,
GAO, and the DAU that the Coast Guard has not already agreed to
implement;
! encourage or require the Coast Guard to make greater use of the
Navy or other third- party, independent sources of expertise to help
the Coast Guard manage the program;
! encourage or require the Coast Guard to cancel its 43- month award
period to the current LSI and to hold a new competition, open to all
bidders, for the LSI role;
! encourage or require the Coast Guard to reduce the role of the LSI
to that of a coordinator of Deepwater program efforts managed and
CRS- 22
27 Dollar figures in this section are rounded to the nearest tenth of a million. Figures may
not add due to rounding.
executed by various firms acting as prime contractors for their
various efforts;
! encourage or require the Coast Guard to end the use of a private-sector
LSI in favor of direct Coast Guard management and
integration of the program;
! encourage or require the Coast Guard to replace the Deepwater
program with a series of separate procurement programs for
replacing individual classes of cutters, boats, and aircraft; and
! prohibit the obligation or expenditure of some or all FY2008
funding for the Deepwater program until the Coast Guard or DHS
takes certain actions or makes certain certifications regarding the
Deepwater program.
Legislative Activity in 200727
FY2008 Department of Homeland Security Appropriations Act
( H. R. 2638/ S. 1644)
Funding Summary. As shown earlier in the report in Table 2, the Coast
Guard for FY2008 requested $ 836.9 million in new appropriations and the rescission
of $ 48.8 million in prior- year appropriations for the Deepwater program, for a net
total request of $ 788.1 million.
As also shown in Table 2, the House version of the FY2008 DHS
appropriations bill ( H. R. 2638) recommends $ 698.4 million in new appropriations
and the rescission of $ 107.4 million in prior- year appropriations for the program, for
a net total of $ 590.9 million, while the Senate version ( S. 1644) recommends $ 826.9
million in new appropriations and the rescission of $ 58.7 million in prior- year
appropriations for the program, for a net total of $ 770.1 million.
House. The House- passed version of H. R. 2638 appropriates $ 698.35 million
in new appropriations for the Deepwater program,
Provided, That of the funds made available for the Integrated Deepwater Systems
program, $ 257,400,000 is for aircraft and $ 219,500,000 is for surface ships:
Provided further, That $ 400,000,000 of the funds provided for the Integrated
Deepwater Systems program may not be obligated until the Committees on
Appropriations of the Senate and the House of Representatives receive and
approve a plan for expenditure directly from the Coast Guard that —
( 1) defines activities, milestones, yearly costs, and lifecycle costs for each
procurement of a major asset, including an independent cost estimate for each;
CRS- 23
( 2) identifies lifecycle staffing and training needs of Coast Guard project
managers and of procurement and contract staff;
( 3) identifies competition to be conducted in each procurement;
( 4) describes procurement plans that do not rely on a single industry entity or
contract;
( 5) contains very limited indefinite delivery/ indefinite quantity contracts and
explains the need for any indefinite delivery/ indefinite quantity contracts;
( 6) complies with all applicable acquisition rules, requirements, and guidelines,
and incorporates the best systems acquisition management practices of the
Federal Government;
( 7) complies with the capital planning and investment control requirements
established by the Office of Management and Budget, including circular A- 11,
part 7;
( 8) includes a certification by the Head of Contracting Activity for the Coast
Guard and the Chief Procurement Officer of the Department of Homeland
Security that the Coast Guard has established sufficient controls and procedures
and has sufficient staffing to comply with all contracting requirements and that
any apparent conflicts of interest have been sufficiently addressed;
( 9) includes a description of the process used to act upon deviations from the
contractually specified performance requirements and clearly explains the
actions taken on such deviations;
( 10) includes a certification that the Assistant Commandant of the Coast Guard
for Engineering and Logistics is designated as the technical authority for all
engineering, design, and logistics decisions pertaining to the Integrated
Deepwater Systems program;
( 11) identifies use of the Defense Contract Auditing Agency; and
( 12) is reviewed by the Government Accountability Office....
Provided further, That of amounts made available under this heading in Public
Law 109- 90 for the Offshore Patrol Cutter, $ 68,841,000 is rescinded: Provided
further, That of amounts made available under this heading in Public Law 109- 90
and Public Law 109- 295 for unmanned aerial vehicles, $ 38,608,000 is rescinded:
Provided further, That the Secretary of Homeland Security shall submit to the
Committees on Appropriations of the Senate and the House of Representatives,
in conjunction with the President’s fiscal year 2009 budget, a review of the
Revised Deepwater Implementation Plan that identifies any changes to the plan
for the fiscal year; an annual performance comparison of Deepwater assets to
pre- Deepwater legacy assets; a status report of legacy assets; a detailed
explanation of how the costs of legacy assets are being accounted for within the
Deepwater program; and the earned value management system gold card data for
each Deepwater asset: Provided further, That the Secretary shall submit to the
Committees on Appropriations of the Senate and the House of Representatives
a comprehensive review of the Revised Deepwater Implementation Plan every
five years, beginning in fiscal year 2011, that includes a complete projection of
CRS- 24
the acquisition costs and schedule for the duration of the plan through fiscal year
2027....
Section 530 of the bill states:
SEC. 530. ( a) IN GENERAL- Any contract, subcontract, task or delivery order
described in subsection ( b) shall contain the following:
( 1) A requirement for a technical review of all designs, design changes, and
engineering change proposals, and a requirement to specifically address all
engineering concerns identified in the review before the obligation of further
funds may occur.
( 2) A requirement that the Coast Guard maintain technical warrant holder
authority, or the equivalent, for major assets.
( 3) A requirement that no procurement subject to subsection ( b) for lead asset
production or the implementation of a major design change shall be entered into
unless an independent third party with no financial interest in the development,
construction, or modification of any component of the asset, selected by the
Commandant of the Coast Guard, determines that such action is advisable.
( 4) A requirement for independent life- cycle cost estimates of lead assets and
major design and engineering changes.
( 5) A requirement for the measurement of contractor and subcontractor
performance based on the status of all work performed. For contracts under the
Integrated Deepwater Systems program, such requirement shall include a
provision that links award fees to successful acquisition outcomes ( which shall
be defined in terms of cost, schedule, and performance).
( 6) A requirement that the Commandant of the Coast Guard assign an appropriate
officer or employee of the Coast Guard to act as chair of each integrated product
team and higher- level team assigned to the oversight of each integrated product
team.
( 7) A requirement that the Commandant of the Coast Guard may not award or
issue any contract, task or delivery order, letter contract modification thereof, or
other similar contract, for the acquisition or modification of an asset under a
procurement subject to subsection ( b) unless the Coast Guard and the contractor
concerned have formally agreed to all terms and conditions or the head of
contracting activity of the Coast Guard determines that a compelling need exists
for the award or issue of such instrument.
( b) CONTRACTS, SUBCONTRACTS, TASK AND DELIVERY ORDERS
COVERED- Subsection ( a) applies to —
( 1) any major procurement contract, first- tier subcontract, delivery or task order
entered into by the Coast Guard;
( 2) any first- tier subcontract entered into under such a contract; and
( 3) any task or delivery order issued pursuant to such a contract or subcontract.
CRS- 25
( c) REPORTS- Not later than 30 days after the date of enactment of this Act, the
Commandant of the Coast Guard shall submit to the Committees on
Appropriations of the Senate and the House of Representatives, the Committee
on Commerce, Science, and Transportation of the Senate, and the Committee on
Transportation and Infrastructure of the House of Representatives: ( 1) a report
on the resources ( including training, staff, and expertise) required by the Coast
Guard to provide appropriate management and oversight of the Integrated
Deepwater Systems program; and ( 2) a report on how the Coast Guard will
utilize full and open competition for any contract entered into after the date of
enactment of the Act that provides for the acquisition or modification of assets
under, or in support of, the Integrated Deepwater Systems program.
The House Appropriations Committee’s report on H. R. 2638 ( H. Rept. 110- 181
of June 8, 2007) shows recommended funding levels for individual Deepwater
program line items on page 70.
The report states:
The Department [ of Homeland Security] leaves itself vulnerable to cost
increases if its programs are defined at the same time they are being
implemented. In general, the Committee has not funded initiatives for which the
Department can provide no detailed plan, and has withheld from obligation a
total of $ 1.9 billion in partial funding for nine programs until detailed plans are
provided to the Congress. For example, $ 400,000,000 is withheld from obligation
until the Coast Guard submits a Deepwater expenditure plan that lays out key
management items... ( Page 7)
The report also states:
DEEPWATER PROGRAM ACQUISITION MANAGEMENT
The Committee agrees that the Commandants’ recent announcement
outlining six management changes to the Deepwater acquisition program appears
to help put Coast Guard on a more successful acquisition path. Nevertheless, the
proof will be whether Coast Guard maintains a firm hand in steadying its
acquisition program. The Committee remains concerned about Coast Guard’s
ability to manage complex, large- scale contracts. Of particular concern are
frequent changes to estimates of the acquisition funding Coast Guard plans to
obligate over the next two years. For example, within approximately a one month
time period, the Committee received three different estimates of the amount of
Deepwater funding Coast Guard planned to carry forward into fiscal year 2008:
$ 248,120,000; $ 445,602,996; and $ 740,710,000. These changing estimates reveal
poor planning and management.
Therefore, the Committee includes new bill language requiring Coast Guard
to submit a detailed expenditure plan, which shall be reviewed by GAO and
approved by the Committees on Appropriations, prior to the obligation of
$ 400,000,000 of Deepwater funding. The expenditure plan must:
( 1) define activities, milestones, yearly costs, and lifecycle costs for each
procurement of a major asset, including an independent cost estimate for each;
( 2) identify lifecycle staffing and training needs of Coast Guard project
managers and of procurement and contract staff;
( 3) identify competition to be conducted in each procurement;
CRS- 26
( 4) describe procurement plans that do not rely on a single industry entity
or contract;
( 5) contain very limited indefinite delivery/ indefinite quantity contracts and
explain the need for any indefinite delivery/ indefinite quantity contracts;
( 6) comply with all applicable acquisition rules, requirements, and
guidelines, and incorporate the best systems acquisition management practices
of the Federal Government;
( 7) comply with the capital planning and investment control requirements
established by the Office of Management and Budget, including circular A — 11,
part 7;
( 8) include a certification by the head of contracting activity for Coast
Guard and the Chief Procurement Officer of the Department of Homeland
Security that Coast Guard has established sufficient controls and procedures and
has sufficient staffing to comply with all contracting requirements, and that any
apparent conflicts of interest have been sufficiently addressed;
( 9) include a description of the process used to act upon deviations from the
contractually specified performance requirements and that clearly explains the
actions taken on such deviations;
( 10) include a certification that the Assistant Commandant of the Coast
Guard for Engineering and Logistics is designated as the technical authority for
all engineering, design, and logistics decisions pertaining to the Integrated
Deepwater System program; and
( 11) identify use of the Defense Contract Auditing Agency.
The Committee also includes a provision ( Sec. 530) mandating specific
Coast Guard contracting reforms. The Committee recommends $ 59,475,000 for
Deepwater government program management, $ 9,000,000 above the amount
requested. Additional funding is provided to enable Coast Guard to colocate all
acquisition staff.
DEEPWATER
The Committee recommends $ 698,350,000 for Deepwater, $ 138,516,000
below the amount requested and $ 367,522,000 below the amount provided for
fiscal year 2007. Specific changes to the President’s request are discussed below.
MARITIME PATROL AIRCRAFT ( MPA)
The Committee recommends $ 100,000,000 for the MPA, $ 70,016,000
below the amount requested. Funding is reduced because the lead aircraft is at
least one year behind schedule. At this time, it has not yet entered the
Development Test and Evaluation phase.
In April 2003, Coast Guard informed the Committee that the requirements
for the MPA were as follows: ( 1) ability to arrive on the scene of 90 percent of
search and rescue emergencies within two hours of initial notification; and ( 2)
ability to travel 300 nautical miles in 90 minutes ( 212 knot ground speed, with
time to climb factored in), stay on scene for approximately four hours, and return
over 300 nautical miles with required fuel reserves.
The first MPA was conditionally accepted by Coast Guard, with the
exception that it did not have the mission pallet integrated and tested. The
aircraft is currently at the Coast Guard Aircraft Repair and Supply Center
undergoing integration of the mission systems pallet. As the aircraft has not yet
CRS- 27
entered Developmental Test and Evaluation or subsequent Operational Test and
Evaluation, Coast Guard currently is unable to verify that the aircraft will meet
listed requirements.
NATIONAL SECURITY CUTTER ( NSC)
The Committee recommends $ 105,800,000 for the NSC, $ 59,900,000
below the amount requested. The request includes $ 67,000,000 for long lead
material for the fifth NSC as well as $ 98,700,000 for engineering change
proposals for the first four NSCs. The additional funds requested for the first
four NSCs are a result of economic and customer changes. The customer changes
are the result of additional requirements added to the NSC as part of the
post- 9/ 11 revised mission needs; costs due to delay and disruption in production
schedules that were required to implement the changes; and structural
enhancement to increase the fatigue life of the NSC hull. The economic changes
are the result of cost overruns incurred due to long- term Gulf Coast regional
economic inflation resulting from Hurricane Katrina. The first NSC is currently
77 percent complete and is scheduled to be operational in fiscal year 2008. The
second NSC is currently 26 percent complete, with all units under construction.
Due to a recent strike in the shipyard, the schedule of both the first and second
cutters will likely be delayed, at least by one month. Because long lead materials
for NSC 3 were only recently put under contract, that cutter is not expected to be
under contract until the summer of 2007.
The Committee has reduced funding for long lead material because Coast
Guard has informed the Committee that long lead material items are put under
contract three to six months before the cutter is put under contract. Because the
NSC 4 long lead materials and contract will be negotiated before NSC 5, the
Committee would be surprised if NSC 5 long lead materials need to be purchased
in fiscal year 2008.
FAST RESPONSE CUTTER ( FRC)/ REPLACEMENT PATROL BOAT
The Committee does not provide the requested amount of $ 53,600,000 for
the FRC- B/ Replacement Patrol Boat. No funding is recommended the Coast
Guard currently projects that previously appropriated funds of $ 101,889,000 for
the FRC- B and $ 41,500,000 for the FRC- A, the original composite patrol boat,
will be carried forward into fiscal year 2008. Since previous appropriation Acts
allowed this $ 143,389,000 to be used for the FRC- B and for sustainment of the
110’ cutters, Coast Guard does not require an additional appropriation in 2008.
If funding beyond this is needed, the Committee directs the Coast Guard to
submit a reprogramming of unobligated Offshore Patrol Boat funding.
On March 14, 2007, the Commandant reassigned the FRC- B project to the
Coast Guard Office of Acquisition. Coast Guard’s goal, which the Committee
supports, is to deliver an operating patrol boat in the shortest time possible to
help reduce Coast Guard’s patrol boat mission hour gap. Coast Guard is currently
operating 25,000 hours, or twenty- five percent, short of its needed patrol boat
mission hours. This “ gap” means that undocumented migrants, drugs, and other
unlawful persons and activities are less likely to be intercepted by Coast Guard.
Procuring new patrol boats and completing service life extensions is even more
critical now that the Navy has informed Coast Guard that it plans to extend the
current Memorandum of Agreement for continued use of only three of the
Navy’s five 179- foot patrol boats beyond 2008. This decision to eliminate the use
CRS- 28
of two 179- foot patrol boats after 2008 means that Coast Guard will reduce
patrol hours by an additional 5,000 per year, further exacerbating the patrol boat
mission hour deficit.
Coast Guard does not expect to award a contract for the lead FRC- B
replacement patrol boat until the second quarter of fiscal year 2008. The lead
cutter is expected to be delivered two years later, in the second quarter of fiscal
year 2010. The Committee understands Coast Guard is currently determining the
best structure for this contract and may decide to quickly procure two cutters
instead of one, a strategy that would have procurement risks. Coast Guard is
directed to continue to brief the Committees on Appropriations monthly on the
status of all patrol boat operations and procurement plans.
PATROL BOAT SUSTAINMENT
The Committee recommends $ 61,000,000 for sustainment of existing 110’
patrol boats, $ 20,500,000 above the amount requested. The Committee has been
told repeatedly how the 110’ patrol boats operating in Iraq are able to operate at
a significantly higher mission tempo than those in the United States because they
are under a more aggressive maintenance regime. In order to further mitigate the
patrol boat mission hour gap discussed above, the Committee has included
additional funding to institute an intensive maintenance and sustainment regime
for the 110’ patrol boats operating stateside similar to that used for 110’ boats
operating in Iraq. The Committee directs Coast Guard to report within 30 days
after enactment of this Act on its plan to utilize this additional funding and
increase patrol boat operating hours.
OFFSHORE PATROL CUTTER ( OPC)
The Committee rescinds $ 68,841,000 of OPC unobligated funding,
$ 20,054,000 more than the amount requested. Currently, $ 104,000,000 in OPC
funding is unobligated. The OPC is the replacement cutter for the current 210’
and 270’ Medium Endurance cutters. In March 2006, Coast Guard suspended
OPC design efforts due to cost concerns. While a revised schedule indicated that
Coast Guard would restart the OPC design process in 2007, it now appears that
OPC design will be postponed until 2009, at the earliest, with production to
follow. The lead OPC is tentatively planned for delivery in 2015.
MEDIUM ENDURANCE CUTTER SUSTAINMENT
With the delays discussed above related to the OPC, robust sustainment of
the Medium Endurance cutters is even more critical. The Committee
recommends $ 50,000,0000, $ 15,500,000 above the amount requested, to sustain
the 25 year- old plus Medium Endurance cutters. Recently the Committee saw
first- hand the increasing difficulty of maintaining old cutters and how a lack of
maintenance negatively impacts unit readiness, sanitary conditions, and crew
morale. Coast Guard has invested little in sustaining these cutters because they
were due to be replaced. With replacement postponed, rigorous and robust
sustainment has become more important. The Committee directs Coast Guard to
report within 30 days after enactment of this Act on its plan to utilize this
additional funding.
CRS- 29
UNMANNED AERIAL VEHICLES
The Committee rescinds $ 38,608,000 for the vertical takeoff and landing
unmanned aerial vehicle ( VUAV). The VUAV was originally conceived to be
launched off of the NSC, enhancing the NSC’s operational effectiveness by
extending its surveillance range to approximately 100 nautical miles for up to
twelve hours per day. In fact, the number of planned NSCs was reduced from 12
to 8 in part due to this anticipated extension of operational effectiveness.
Unfortunately, the VUAV has not worked as planned. Coast Guard recently
chartered a research study to investigate the viability of the VUAV and explore
alternatives to fill the VUAV “ gap” if the project is not continued. The study
concluded that additional research is needed and that the original solutions
contemplated by Coast Guard were not cost effective. Based on the current plan,
it is clear that the first, second, and third NSCs will likely be launched without
a VUAV, thereby reducing their surveillance range. The Committee has included
funding within Coast Guard’s Research, Development, Test and Evaluation
account to accelerate the further research needed in this area. ( Pages 71- 75)
The report also states:
The Committee is concerned with the limited quality of Coast Guard’s
quarterly acquisition reports and notes that the Deepwater project was recently
rated by Coast Guard as being “ moderate” on cost risk, “ moderate” on schedule
risk, and “ low” on technical risk. This is despite the fact that the 123’ cutters
procured by Deepwater have structural failures and have been decommissioned,
that Coast Guard currently lacks a plan for the Offshore Patrol Cutter or the
Vertical Unmanned Aerial Vehicle, and that the National Security Cutter is 20
percent above post- 9/ 11 cost estimates. In addition, no outyear funding estimates
are included in this report. The Committee directs Coast Guard to develop robust
metrics for cost, schedule, and technical risk and to relay those to the Committee.
In addition, the Committee directs that outyear funding estimates, by asset, be
included in the quarterly report. ( Pages 70- 71)
The report also states:
Coast Guard plans to increase its use of multi- crewing with some of the
new cutters that will be fielded by the Deepwater program. In addition, Coast
Guard will begin multi- crewing eight 110’ patrol boats to help mitigate the
reduction in patrol boat hours created by the decommissioning of the 123’
cutters. The Committee expects Coast Guard to utilize lessons learned from the
110’ multi- crewing endeavor, and to report quarterly to the Committee on the
following multi- crewing metrics: ( 1) actual support expense compared to the
standard support level; ( 2) percent availability, as defined by the time each cutter
is not in pier side maintenance status, compared with the goal of more than 70
percent availability; ( 3) percent of time the cutter is fully mission capable, or has
no category three or category four casualty reports compared with the goal of 95
percent mission capable; and ( 4) average number of casualty reports per
operational day compared with the goal of 0.3 or less. ( Page 67)
The report also presents additional views of Representatives Jerry Lewis and
Harold Rogers, which include the following:
CRS- 30
COAST GUARD
The bill continues the Committee’s aggressive oversight of the Coast
Guard’s troubled Deepwater program. However, the bill also makes substantial
cuts of almost $ 200 million to Deepwater that will, in effect, slow down the
program’s acquisition schedule and delay the much needed modernization of the
Coast Guard’s ships and aircraft. After what has been considerable oversight by
the Congress, we are confident the Coast Guard is putting in place the right
managerial controls and organizational improvements to get Deepwater heading
in the right direction. We firmly believe that too much of our national security
is at stake to fund Deepwater at a level that may unnecessarily prolong the
operation of antiquated systems — some dating back to World War II. ( Page
197)
Senate. The Senate- reported version of S. 1644 appropriates a net total ( i. e.,
new appropriations less rescissions of prior- year appropriations of $ 770.079 million
for the Deepwater program,
Provided further, That of amounts made available under this heading in Public
Law 109- 90, $ 48,787,000 for the Offshore Patrol Cutter are rescinded: Provided
further, That of the amounts made available under this heading in Public Law
109- 295, $ 8,000,000 for the Fast Response Cutter ( FRC- A) are rescinded:
Provided further, That the Secretary shall submit an expenditure plan to the
Committees on Appropriations of the Senate and the House of Representatives
within 60 days after the date of enactment of this Act for funds made available
for the Integrated Deepwater Program, that: ( 1) defines activities, milestones,
yearly costs, and life- cycle costs for each procurement of a major asset; ( 2)
identifies life- cycle staffing and training needs of Coast Guard project managers
and of procurement and contract staff; ( 3) includes a certification by the Chief
Human Capital Officer of the Department that current human capital capabilities
are sufficient to execute the plans discussed in the report; ( 4) identifies
individual project balances by fiscal year, including planned carryover into fiscal
year 2009 by project; ( 5) identifies operational gaps for all Deepwater assets and
an explanation of how funds provided in this Act address the shortfalls between
current operational capabilities and requirements; ( 6) includes a listing of all
open Government Accountability Office and Office of Inspector General
recommendations related to the program and the status of Coast Guard actions
to address the recommendations, including milestones for fully addressing them;
( 7) includes a certification by the Chief Financial Officer of the Department that
the program has been reviewed and approved in accordance with the investment
management process of the Department, and that the process fulfills all capital
planning and investment control requirements and reviews established by the
Office of Management and Budget, including Circular A- 11, part 7; ( 8) identifies
competition to be conducted in each procurement; ( 9) includes a certification by
the head of contracting activity for the Coast Guard and the Chief Procurement
Officer of the Department that the plans for the program comply with the Federal
acquisition rules, requirements, guidelines, and practices, and a description of the
actions being taken to address areas of non- compliance, the risks associated with
them along with plans for addressing these risks and the status of their
implementation; ( 10) identifies the use of independent validation and
verification; and ( 11) is reviewed by the Government Accountability Office:
Provided further, That the Secretary of Homeland Security shall submit to the
Committees on Appropriations of the Senate and the House of Representatives,
in conjunction with the President’s fiscal year 2009 budget, a review of the
CRS- 31
Revised Deepwater Implementation Plan that identifies any changes to the plan
for the fiscal year; an annual performance comparison of Deepwater assets to
pre- Deepwater legacy assets; a status report of legacy assets; a detailed
explanation of how the costs of legacy assets are being accounted for within the
Deepwater program; and the earned value management system gold card data for
each Deepwater asset: Provided further, That the Secretary shall submit to the
Committees on Appropriations of the Senate and the House of Representatives
a comprehensive review of the Revised Deepwater Implementation Plan every
five years, beginning in fiscal year 2011, that includes a complete projection of
the acquisition costs and schedule for the duration of the plan through fiscal year
2027....
Section 523 of the bill states:
SEC. 523. Any funds appropriated to United States Coast Guard, ‘ Acquisition,
Construction, and Improvements’ in fiscal years 2002, 2003, 2004, 2005, and
2006 for the 110- 123 foot patrol boat conversion that are recovered, collected,
or otherwise received as the result of negotiation, mediation, or litigation, shall
be available until expended for the Replacement Patrol Boat ( FRC- B) program.
The Senate Appropriations Committee’s report on S. 1644 ( S. Rept. 110- 84 of
June 18, 2007) shows recommended funding levels for individual Deepwater
program line items on pages 73- 74 ( see also pages 142- 143).
The report states:
The recommendation includes $ 770,079,000 for the Integrated Deepwater
Systems program, $ 18,000,000 below the request and $ 275,793,000 below the
fiscal year 2007 level. Consistent with the request, the recommendation includes
a rescission of $ 48,787,000 from prior year balances for the Offshore Patrol
Cutter. In addition, the Committee rescinds $ 8,000,000 from prior year balances
for the Fast Response Cutter- A, due to delays in the development of a composite
hull. The Committee reduces $ 5,000,000 from the request for the HC- 130H
conversion and sustainment program, and $ 5,000,000 from the HH- 60 conversion
program, due to unobligated balances projected to be carried forward into fiscal
year 2009. ( Pages 72- 73)
The report also states:
DEEPWATER ACQUISITION PROGRAM
The Committee includes a requirement for the Secretary to submit, within
60 days after the date of enactment of this act, an expenditure plan to the
Committee for the Integrated Deepwater Systems Program, as specified in bill
language. The Committee directs the Government Accountability Office [ GAO]
to continue its oversight of the Integrated Deepwater Systems program. GAO’s
review should focus on: ( 1) the expenditure plan requirements detailed in the
bill; ( 2) the status of development and delivery of the major aviation and
maritime assets of the program; and ( 3) the management and oversight of the
program, specifically the Coast Guard’s transition to the role of lead systems
integrator.
CRS- 32
VERTICAL UNMANNED AERIAL VEHICLE
The Committee is concerned that no funding is requested for the vertical
unmanned aerial vehicle [ VUAV] in the President’s fiscal year 2008 budget
request for the Coast Guard. The VUAV is intended to be an integral part of the
enhanced capability provided by the National Security Cutter [ NSC], the first of
which is scheduled to be commissioned in fiscal year 2008. Launching from the
NSC, the VUAV will greatly expand the surveillance coverage for the cutter.
( Page 75)
The report also states:
Consistent with the budget request and the need for both increased
oversight and increased ability to manage multiple major acquisition projects, the
Committee includes budget authority for Acquisition, Construction, and
Improvements [ AC& I] personnel compensation, benefits and related support
within the “ Operating Expenses” [ OE] appropriation to address acquisition
personnel shortfalls and ensure good stewardship of major systems acquisition,
such as the Integrated Deepwater Systems Program. By transferring AC& I
funding to the OE appropriation, personnel can be surged to and from AC& I
projects where needed and provide the flexibility to match competencies to core
requirements. The Committee is also aware of an effort by the Coast Guard to
conduct an independent workforce assessment of current competencies and
staffing levels, including the need for future staffing requirements. The Coast
Guard is directed to brief the Committee on the results of this assessment no later
than 45 days after the date of enactment of this act. ( Page 69)
The report states:
The Committee notes the Department remains nearly 50 percent below its
desired number of contract specialists. The DHS procurement budget is currently
the third largest of all Federal departments. The Government Accountability
Office [ GAO] has concluded that DHS agencies have experienced ongoing cost,
schedule, and performance problems with major acquisitions, such as the Coast
Guard’s Integrated Deepwater Systems Program. Without adequate staffing and
rigorous oversight — waste, fraud, and abuse of taxpayer dollars will continue.
The Committee includes funding to annualize acquisition positions funded in
fiscal year 2007 and create an acquisition workforce intern program. ( Page 17)
In discussing the DHS Secure Border Initiative ( SBI) program, the report states
that:
the failures in the Coast Guard’s Integrated Deepwater Systems Program have
raised many red flags and require the Congress to approach similarly large
programs with an extra degree of caution. It is imperative that a Government
program of this magnitude be managed and overseen by qualified Federal
Government employees, not contractors out to make a buck off the American
taxpayer. ( Page 37)
CRS- 33
FY2007 Emergency Supplemental Appropriations Act ( H. R.
2206/ P. L. 110- 28)
As Agreed to or Passed by House and Senate. H. R. 2206 was
introduced in the House on May 8, 2007, passed by the House and Senate on May 10
and May 17, 2007, respectively, and signed into law by the President on May 25,
2007, as P. L. 110- 28.
H. R. 2206/ P. L. 110- 28 is effectively the successor to H. R. 1591 ( see below),
which was vetoed by the President. As there was no report accompanying H. R. 2206,
report language accompanying H. R. 1591 that is reprinted below can be viewed as
applying to analogous provisions of H. R. 2206.
Section 6402. Section 6402 of H. R. 2206 states:
SEC. 6402. ( a) IN GENERAL- Any contract, subcontract, task or delivery order
described in subsection ( b) shall contain the following:
( 1) A requirement for a technical review of all designs, design changes, and
engineering change proposals, and a requirement to specifically address all
engineering concerns identified in the review before the obligation of further
funds may occur.
( 2) A requirement that the Coast Guard maintain technical warrant holder
authority, or the equivalent, for major assets.
( 3) A requirement that no procurement subject to subsection ( b) for lead asset
production or the implementation of a major design change shall be entered into
unless an independent third party with no financial interest in the development,
construction, or modification of any component of the asset, selected by the
Commandant, determines that such action is advisable.
( 4) A requirement for independent life- cycle cost estimates of lead assets and
major design and engineering changes.
( 5) A requirement for the measurement of contractor and subcontractor
performance based on the status of all work performed. For contracts under the
Integrated Deepwater Systems program, such requirement shall include a
provision that links award fees to successful acquisition outcomes ( which shall
be defined in terms of cost, schedule, and performance).
( 6) A requirement that the Commandant of the Coast Guard assign an appropriate
officer or employee of the Coast Guard to act as chair of each integrated product
team and higher- level team assigned to the oversight of each integrated product
team.
( 7) A requirement that the Commandant of the Coast Guard may not award or
issue any contract, task or delivery order, letter contract modification thereof, or
other similar contract, for the acquisition or modification of an asset under a
procurement subject to subsection ( b) unless the Coast Guard and the contractor
concerned have formally agreed to all terms and conditions or the head of
CRS- 34
contracting activity for the Coast Guard determines that a compelling need exists
for the award or issue of such instrument.
( b) CONTRACTS, SUBCONTRACTS, TASK AND DELIVERY ORDERS
COVERED- Subsection ( a) applies to —
( 1) any major procurement contract, first- tier subcontract, delivery or task order
entered into by the Coast Guard;
( 2) any first- tier subcontract entered into under such a contract; and
( 3) any task or delivery order issued pursuant to such a contract or subcontract.
( c) EXPENDITURE OF DEEPWATER FUNDS- Of the funds available for the
Integrated Deepwater Systems program, $ 650,000,000 may not be obligated until
the Committees on Appropriations of the Senate and the House of
Representatives receive an expenditure plan directly from the Coast Guard that
—
( 1) defines activities, milestones, yearly costs, and life- cycle costs for each
procurement of a major asset;
( 2) identifies life- cycle staffing and training needs of Coast Guard project
managers and of procurement and contract staff;
( 3) identifies competition to be conducted in each procurement;
( 4) describes procurement plans that do not rely on a single industry entity or
contract;
( 5) contains very limited indefinite delivery/ indefinite quantity contracts and
explains the need for any indefinite delivery/ indefinite quantity contracts;
( 6) complies with all applicable acquisition rules, requirements, and guidelines,
and incorporates the best systems acquisition management practices of the
Federal Government;
( 7) complies with the capital planning and investment control requirements
established by the Office of Management and Budget, including circular A- 11,
part 7;
( 8) includes a certification by the head of contracting activity for the Coast Guard
and the Chief Procurement Officer of the Department of Homeland Security that
the Coast Guard has established sufficient controls and procedures and has
sufficient staffing to comply with all contracting requirements, and that any
conflicts of interest have been sufficiently addressed;
( 9) includes a description of the process used to act upon deviations from the
contractually specified performance requirements and clearly explains the
actions taken on such deviations;
( 10) includes a certification that the Assistant Commandant of the Coast Guard
for Engineering and Logistics is designated as the technical authority for all
CRS- 35
engineering, design, and logistics decisions pertaining to the Integrated
Deepwater Systems program; and
( 11) identifies progress in complying with the requirements of subsection ( a).
( d) REPORTS- ( 1) Not later than 30 days after the date of enactment of this Act,
the Commandant of the Coast Guard shall submit to the Committees on
Appropriations of the Senate and the House of Representatives; the Committee
on Commerce, Science and Transportation of the Senate; and the Committee on
Transportation and Infrastructure of the House of Representatives: ( i) a report on
the resources ( including training, staff, and expertise) required by the Coast
Guard to provide appropriate management and oversight of the Integrated
Deepwater Systems program; and ( ii) a report on how the Coast Guard will
utilize full and open competition for any contract that provides for the acquisition
or modification of assets under, or in support of, the Integrated Deepwater
Systems program, entered into after the date of enactment of this Act.
( 2) Within 30 days following the submission of the expenditure plan required
under subsection ( c), the Government Accountability Office shall review the plan
and brief the Committees on Appropriations of the Senate and the House of
Representatives on its findings.
Section 6404( b)( 1). Section 6404( b)( 1) appropriates $ 30 million in
additional appropriations to mitigate the Coast Guard’s patrol boat operational gap.
Section 6405. Section 6405 states:
SEC. 6405. ( a) IN GENERAL- With respect to contracts entered into after July
1, 2007, and except as provided in subsection ( b), no entity performing lead
system integrator functions in the acquisition of a major system by the
Department of Homeland Security may have any direct financial interest in the
development or construction of any individual system or element of any system
of systems.
( b) EXCEPTION- An entity described in subsection ( a) may have a direct
financial interest in the development or construction of an individual system or
element of a system of systems if —
( 1) the Secretary of Homeland Security certifies to the Committees on
Appropriations of the Senate and the House of Representatives, the Committee
on Homeland Security of the House of Representatives, the Committee on
Transportation and Infrastructure of the House of Representatives, the
Committee on Homeland Security and Governmental Affairs of the Senate, and
the Committee on Commerce, Science and Transportation of the Senate that —
( A) the entity was selected by the Department of Homeland Security as a
contractor to develop or construct the system or element concerned through the
use of competitive procedures; and
( B) the Department took appropriate steps to prevent any organizational conflict
of interest in the selection process; or
CRS- 36
( 2) the entity was selected by a subcontractor to serve as a lower- tier
subcontractor, through a process over which the entity exercised no control.
( c) CONSTRUCTION- Nothing in this section shall be construed to preclude an
entity described in subsection ( a) from performing work necessary to integrate
two or more individual systems or elements of a system of systems with each
other.
( d) REGULATIONS UPDATE- Not later than July 1, 2007, the Secretary of
Homeland Security shall update the acquisition regulations of the Department of
Homeland Security in order to specify fully in such regulations the matters with
respect to lead system integrators set forth in this section. Included in such
regulations shall be: ( 1) a precise and comprehensive definition of the term ‘ lead
system integrator’, modeled after that used by the Department of Defense; and
( 2) a specification of various types of contracts and fee structures that are
appropriate for use by lead system integrators in the production, fielding, and
sustainment of complex systems.
FY2007 Emergency Supplemental Appropriations Act ( H. R.
1591) ( vetoed)
H. R. 1591 was vetoed by the President on May 1, 2007 and failed of passage in
House over the veto on May 2, 2007. H. R. 2206 ( see above) is effectively the
successor to H. R. 1591.
House. Sections 4403 and 4404 of the House- passed version of H. R. 1591
state:
SEC. 4403. ( a) IN GENERAL- Any contract, subcontract, or task order described
in subsection ( b) shall contain the following:
( 1) A requirement for a technical review of all designs, design changes, and
engineering change proposals, and a requirement to specifically address all
engineering concerns identified in the review before the obligation of further
funds may occur.
( 2) A requirement that the Coast Guard maintain technical warrant holder
authority, or the equivalent, for major assets.
( 3) A requirement for independent cost estimates of major changes.
( 4) A requirement for measurement of contractor and subcontractor performance
based on the status of all work performed.
( b) CONTRACTS, SUBCONTRACTS, AND TASK ORDERS COVERED-Subsection
( a) applies to —
( 1) any major procurement contract entered into by the Coast Guard;
( 2) any subcontract entered into under such a contract; and
( 3) any task order issued pursuant to such a contract or subcontract.
CRS- 37
( c) PLAN FOR EXPENDITURE OF DEEPWATER FUNDS- The funds
appropriated in Public Law 109- 295 for the Integrated Deepwater Systems
program may not be obligated until the Committees on Appropriations of the
Senate and the House of Representatives receive and approve a plan for
expenditure that —
( 1) defines activities, milestones, yearly costs, and lifecycle costs for each
procurement of a major asset, including an independent cost estimate for each;
( 2) identifies lifecycle staffing and training needs of Coast Guard project
managers and of procurement and contract staff;
( 3) identifies all Integrated Product Teams that are not chaired by Coast Guard
personnel and explains why the Coast Guard does not chair;
( 4) identifies competition to be conducted in each procurement;
( 5) does not rely on a single industry entity or contract;
( 6) contains very limited indefinite delivery/ indefinite quantity contracts and
explains the need for any indefinite delivery/ indefinite quantity contracts;
( 7) complies with all applicable acquisition rules, requirements, and guidelines,
and incorporates the best systems acquisition management practices of the
Federal Government;
( 8) complies with the capital planning and investment control requirements
established by the Office of Management and Budget, including circular A- 11,
part 7;
( 9) includes a certification by the Chief Procurement Officer of the Department
of Homeland Security that the Coast Guard has established sufficient controls
and procedures to comply with all contracting requirements and that any apparent
conflicts of interest have been sufficiently addressed;
( 10) includes a description of the process used to act upon deviations from the
contractually specified performance requirements and clearly explains the
actions taken on such deviations; and
( 11) is reviewed by the Government Accountability Office.
SEC. 4404. ( a) IN GENERAL- With respect to contracts entered into after May
1, 2007, and except as provided in subsection ( b), no entity performing lead
system integrator functions in the acquisition of a major system by the
Department of Homeland Security may have any direct financial interest in the
development or construction of any individual system or element of any system
of systems.
( b) EXCEPTION- An entity described in subsection ( a) may have a direct
financial interest in the development or construction of an individual system or
element of a system of systems if —
CRS- 38
( 1) the Secretary of Homeland Security certifies to the Committees on
Appropriations of the Senate and the House of Representatives and the House
Committee on Homeland Security that —
( A) the entity was selected by the Department of Homeland Security as a
contractor to develop or construct the system or element concerned through the
use of competitive procedures; and
( B) the Department took appropriate steps to prevent any organizational conflict
of interest in the selection process; or
( 2) the entity was selected by a subcontractor to serve as a lower- tier
subcontractor, through a process over which the entity exercised no control.
( c) CONSTRUCTION- Nothing in this section shall be construed to preclude an
entity described in subsection ( a) from performing work necessary to integrate
two or more individual systems or elements of a system of systems with each
other.
( d) REGULATIONS UPDATE- Not later than May 1, 2007, the Secretary of
Homeland Security shall update the acquisition regulations of the Department of
Homeland Security in order to specify fully in such regulations the matters with
respect to lead system integrators set forth in this section. Included in such
regulations shall be ( 1) a precise and comprehensive definition of the term ‘ lead
system integrator’, modeled after that used by the Department of Defense, and
( 2) a specification of various types of contracts and fee structures that are
appropriate for use by lead system integrators in the production, fielding, and
sustainment of complex systems.
With regard to these two sections, the House report on the bill ( H. Rept. 110- 060
of March 20, 2007) states:
The Committee includes a provision [ Section 4403] tightening Coast Guard
procurement practices. Numerous studies, including one by the Defense
Acquisition University, have recommended changes to Coast Guard procurement
procedures and contracting practices in order to control costs and procure
equipment that works. The most recent failure in procurement resulted in eight
Coast Guard cutters that are currently grounded due to hull buckling problems.
In order to ensure that Coast Guard quickly reforms its major procurement
systems, the Committee has included bill language mandating: technical reviews
of design and design changes; independent cost estimates of major changes; and
Coast Guard maintaining technical warrant holder equivalent authority and
measuring contractor performance on all work performed. In addition, the
provision requires a robust expenditure plan that is reviewed by the Government
Accountability Office for Coast Guard’s Deepwater program before any 2007
Deepwater funding is obligated.
The Committee includes a provision [ Section 4404] limiting the use of lead
system integrator contracts, similar to requirements in law for the Department of
Defense.
Senate. Section 3402 of the Senate- passed version of H. R. 1591 states:
CRS- 39
SEC. 3402. INTEGRATED DEEPWATER SYSTEM. ( a) COMPETITION FOR
ACQUISITION AND MODIFICATION OF ASSETS-
( 1) IN GENERAL- The Commandant of the Coast Guard shall utilize full and
open competition for any contract entered into after the date of enactment of this
Act that provides for the acquisition or modification of assets under, or in
support of, the Integrated Deepwater System Program of the Coast Guard.
( 2) EXCEPTIONS- Paragraph ( 1) shall not apply to the following:
( A) The acquisition or modification of the following asset classes for which
assets of the class and related systems and components under the Integrated
Deepwater System are under a contract for production:
( i) National Security Cutter;
( ii) Maritime Patrol Aircraft;
( iii) Deepwater Command, Control, Communications, Computer, Intelligence,
Surveillance, and Reconnaissance ( C4ISR) System; and
( iv) HC- 130J Fleet Introduction.
( B) The modification of any legacy asset class under the Integrated Deepwater
System Program being performed by a Coast Guard entity.
( b) CHAIR OF PRODUCT AND OVERSIGHT TEAMS- The Commandant of
the Coast Guard shall assign an appropriate officer or employee of the Coast
Guard to act as chair of each of the following:
( 1) Each integrated product team under the Integrated Deepwater System
Program.
( 2) Each higher- level team assigned to the oversight of a product team referred
to in paragraph ( 1).
( c) LIFE- CYCLE COST ESTIMATE- The Commandant of the Coast Guard may
not enter into a contract for lead asset production under the Integrated Deepwater
System Program until the Commandant obtains an independent estimate of
life- cycle costs of the asset concerned.
( d) REVIEW OF ACQUISITIONS AND MAJOR DESIGN CHANGES-
( 1) IN GENERAL- With the exception of assets covered under ( a)( 2) of this
section, the Commandant of the Coast Guard may not carry out an action
described in paragraph ( 2) unless an independent third party with no financial
interest in the development, construction, or modification of any component of
the Integrated Deepwater System Program, selected by the Commandant for
purposes of the subsection, determines that such action is advisable.
( 2) COVERED ACTIONS- The actions described in the paragraph are as
follows:
CRS- 40
( A) The acquisition or modification of an asset under the Integrated Deepwater
System Program.
( B) The implementation of a major design change for an asset under the
Integrated Deepwater System Program.
( e) LINKING OF AWARD FEES TO SUCCESSFUL ACQUISITION
OUTCOMES- The Commandant of the Coast Guard shall require that all
contracts under the Integrated Deepwater System Program that provide award
fees link such fees to successful acquisition outcomes ( which shall be defined in
terms of cost, schedule, and performance).
( f) CONTRACTUAL AGREEMENTS-
( 1) IN GENERAL- The Commandant of the Coast Guard may not award or issue
any contract, task or delivery order, letter contract modification thereof, or other
similar contract, for the acquisition or modification of an asset under the
Integrated Deepwater System Program unless the Coast Guard and the contractor
concerned have formally agreed to all terms and conditions.
( 2) EXCEPTION- A contract, task or delivery order, letter contract, modification
thereof, or other similar contract described in paragraph ( 1) may be awarded or
issued if the head of contracting activity of the Coast Guard determines that a
compelling need exists for the award or issue of such instrument.
( g) DESIGNATION OF TECHNICAL AUTHORITY- The Commandant of the
Coast Guard shall designate the Assistant Commandant of the Coast Guard for
Engineering and Logistics as the technical authority for all engineering, design,
and logistics decisions pertaining to the Integrated Deepwater System Program.
( h) REPORT ON PERSONNEL REQUIRED FOR ACQUISITION
MANAGEMENT- Not later than 30 days after the date of the enactment of this
Act, the Commandant of the Coast Guard shall submit to the Committees on
Appropriations of the Senate and the House of Representatives; the Committee
on Commerce, Science and Transportation of the Senate; and the Committee on
Transportation and Infrastructure of the House of Representatives a report on the
resources ( including training, staff, and expertise) required by the Coast Guard
to provide appropriate management and oversight of the Integrated Deepwater
System Program.
( i) COMPTROLLER GENERAL REPORT ON PROGRESS- Not later than 60
days after the date of enactment of this Act, the Comptroller General of the
United States shall submit to the Committees on Appropriations of the Senate
and the House of Representatives; the Committee on Commerce, Science and
Transportation of the Senate; and the Committee on Transportation and
Infrastructure of the House of Representatives a report describing and assessing
the progress of the Coast Guard in complying with the requirements of this
section.
Conference. The conference report ( H. Rept. 110- 107) on H. R. 1591 was
submitted on April 24, 2007.
CRS- 41
Section 4402. Section 4402 of the conference report states:
SEC. 4402. ( a) IN GENERAL. — Any contract, subcontract, task or delivery
order described in subsection ( b) shall contain the following:
( 1) A requirement for a technical review of all designs, design changes, and
engineering change proposals, and a requirement to specifically address all
engineering concerns identified in the review before the obligation of further
funds may occur.
( 2) A requirement that the Coast Guard maintain technical warrant holder
authority, or the equivalent, for major assets.
( 3) A requirement that no procurement subject to subsection ( b) for lead asset
production or the implementation of a major design change shall be entered into
unless an independent third party with no financial interest in the development,
construction, or modification of any component of the asset, selected by the
Commandant, determines that such action is advisable.
( 4) A requirement for independent life- cycle cost estimates of lead assets and
major design and engineering changes.
( 5) A requirement for the measurement of contractor and subcontractor
performance based on the status of all work performed. For contracts under the
Integrated Deepwater Systems program, such requirement shall include a
provision that links award fees to successful acquisition outcomes ( which shall
be defined in terms of cost, schedule, and performance).
( 6) A requirement that the Commandant of the Coast Guard assign an appropriate
officer or employee of the Coast Guard to act as chair of each integrated product
team and higher- level team assigned to the oversight of each integrated product
team.
( 7) A requirement that the Commandant of the Coast Guard may not award or
issue any contract, task or delivery order, letter contract modification thereof, or
other similar contract, for the acquisition or modification of an asset under a
procurement subject to subsection ( b) unless the Coast Guard and the contractor
concerned have formally agreed to all terms and conditions or the head of
contracting activity for the Coast Guard determines that a compelling need exists
for the award or issue of such instrument.
( b) CONTRACTS, SUBCONTRACTS, TASK AND DELIVERY ORDERS
COVERED. — Subsection ( a) applies to —
( 1) any major procurement contract, first- tier subcontract, delivery or task order
entered into by the Coast Guard;
( 2) any first- tier subcontract entered into under such a contract;
( 3) any task or delivery order issued pursuant to such a contract or subcontract.
( c) EXPENDITURE OF DEEPWATER FUNDS. — Of the funds available for
the Integrated Deepwater Systems program, $ 650,000,000 may not be obligated
CRS- 42
until the Committees on Appropriations of the Senate and the House of
Representatives receive an expenditure plan directly from the Coast Guard that
—
( 1) defines activities, milestones, yearly costs, and life- cycle costs for each
procurement of a major asset, including an independent cost estimate for each;
( 2) identifies life- cycle staffing and training needs of Coast Guard project
managers and of procurement and contract staff;
( 3) identifies competition to be conducted in each procurement;
( 4) describes procurement plans that do not rely on a single industry entity or
contract;
( 5) contains very limited indefinite delivery/ indefinite quantity contracts and
explains the need for any indefinite delivery/ indefinite quantity contracts;
( 6) complies with all applicable acquisition rules, requirements, and guidelines,
and incorporates the best systems acquisition management practices of the
Federal Government;
( 7) complies with the capital planning and investment control requirements
established by the Office of Management and Budget, including circular A — 11,
part 7;
( 8) includes a certification by the head of contracting activity for the Coast Guard
and the Chief Procurement Officer of the Department of Homeland Security that
the Coast Guard has established sufficient controls and procedures and has
sufficient staffing to comply with all contracting requirements, and that any
conflicts of interest have been sufficiently addressed;
( 9) includes a description of the process used to act upon deviations from the
contractually specified performance requirements and clearly explains the
actions taken on such deviations;
( 10) includes a certification that the Assistant Commandant of the Coast Guard
for Engineering and Logistics is designated as the technical authority for all
engineering, design, and logistics decisions pertaining to the Integrated
Deepwater Systems program; and
( 11) identifies progress in complying with the requirements of subsection ( a).
( d) REPORTS. — ( 1) Not later than 30 days after the date of enactment of this
Act, the Commandant of the Coast Guard shall submit to the Committees on
Appropriations of the Senate and the House of Representatives; the Committee
on Commerce, Science and Transportation of the Senate; and the Committee on
Transportation and Infrastructure of the House of Representatives: ( i) a report
on the resources ( including training, staff, and e