This is the accessible text file for GAO report number GAO-08-270R 
entitled 'Status of Selected Aspects of the Coast Guard's Deepwater 
Program' which was released on March 11, 2008.

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March 11, 2008: 

The Honorable Maria Cantwell:
Chair:
Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard: 
Committee on Commerce, Science and Transportation: 
United States Senate: 

The Honorable Olympia J. Snowe:
Ranking Member:
Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard: 
Committee on Commerce, Science and Transportation: 
United States Senate: 

Subject: Status of Selected Aspects of the Coast Guard's Deepwater 
Program: 

The Coast Guard is in the midst of the largest acquisition program in 
its history--one that has experienced serious performance and 
management problems. The Deepwater program is intended to replace or 
modernize the Coast Guard's fleet of vessels, aircraft, and information 
management capabilities in order to carry out its missions along our 
coastlines and farther out at sea. Deepwater incorporates acquisition 
of 15 major classes of new or upgraded assets--5 major classes each of 
vessels and aircraft, and 5 other projects, including command, control, 
communications, computers, intelligence, surveillance, and 
reconnaissance (C4ISR) systems. To carry out this acquisition, the 
Coast Guard contracted with a system integrator, Integrated Coast Guard 
Systems (ICGS). 

Since 2001, we have reviewed the Deepwater program and have informed 
Congress, the Department of Homeland Security (DHS), and the Coast 
Guard of the risks and uncertainties inherent with such a large 
acquisition. In March 2004, we made recommendations to the Coast Guard 
to address three broad areas of concern: improving program management, 
strengthening contractor accountability, and promoting cost control 
through greater competition among potential subcontractors.[Footnote 1] 
In April 2006 and June 2007, we issued follow-on reports describing 
efforts the Coast Guard had taken to address the recommendations. 

You asked us to determine (1) how decisions are made regarding whether 
to purchase assets under the contract with ICGS or directly with 
another vendor; (2) the costs and performance trade-offs, if any, 
associated with the Coast Guard's acquisition strategy for the Fast 
Response Cutter (FRC); (3) cost, schedule, and performance issues 
associated with changes to the National Security Cutter (NSC); and (4) 
actions the Coast Guard has taken to address the open recommendations 
from our March 2004 report. 

To assess these aspects of the Deepwater program, we reviewed and 
analyzed key Coast Guard documents, including the Deepwater Expenditure 
Plan and the Acquisition Program Baseline. We reviewed Deepwater 
contract files, plans, and reports, and reviewed cost estimates for the 
FRC and NSC. We also conducted interviews with Coast Guard officials, 
including program managers, contracting officials, and subject matter 
experts--such as staff at the Engineering Logistics Center--to discuss 
acquisition planning efforts and actions being taken by the Coast Guard 
and to obtain information on shipbuilding. We compared the updated 
status of open recommendations from our June 2007 report against 
current information obtained from Deepwater documentation and 
interviews with Coast Guard officials. 

We visited the shipyard in Pascagoula, Mississippi, where we toured the 
NSCs that were under construction and interviewed officials overseeing 
construction. We also met with contractor representatives and 
interviewed the officials in the Pacific Area that will receive the NSC 
upon completion. Finally, we interviewed representatives from the 
American Bureau of Shipping to discuss shipbuilding certification 
standards. 

We conducted this performance audit from September 2007 to March 2008 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

In summary, we found: 

* The Coast Guard has changed how decisions are made about purchasing 
Deepwater assets. It is moving from a "system-of-systems" acquisition 
model--with the contractor, ICGS, as the system integrator--to a more 
traditional acquisition strategy in which the Coast Guard will take a 
more direct role and manage the acquisition of each asset separately. 

* The Coast Guard obligated approximately $35 million on the ICGS 
design for the FRC, but concerns prompted officials to put the 
acquisition on hold. To fill its urgent need for patrol boats, the 
Coast Guard plans to award a contract for a commercially available 
design of the FRC. Coast Guard officials said this approach will help 
ensure competition and meet their tight time frames. The new 
requirements for this design of the FRC have some differences. These 
include a top speed that is 2 knots slower--28 instead of 30 knots--and 
allowance of a manual small-boat launch and recovery system that Coast 
Guard officials said is not as safe and requires more crew to operate 
than the preferred stern ramp system. 

* Changes to the NSC have had cost, schedule, and performance 
ramifications. 

* The estimated costs for the first three ships have generally doubled 
from the initial projected costs due to a number of contributing 
factors, including requirements changes as a result of September 11, 
Hurricane Katrina damages, and some program management actions by the 
Coast Guard. 

* Delivery of the ship could be delayed. An aggressive trial schedule 
leaves little time for dealing with the unexpected, and most 
certifications have yet to be completed. 

* Coast Guard officials expect the ship to meet all performance 
parameters, but will not know for certain until the ship undergoes 
trials. Further, Coast Guard engineers have concerns that most of the 
ship's available weight margin has been consumed during construction, 
meaning that subsequent changes to the ship will require additional 
redesign and engineering to offset the additional weight. 

We have closed two of the five open recommendations from our previous 
report, pertaining to the Coast Guard's use of models and metrics to 
measure the contractor's progress toward improving operational 
effectiveness and establishing criteria for when to adjust the total 
ownership cost baseline. The Coast Guard has taken actions on the three 
recommendations that remain open, such as designating Coast Guard 
officials as the lead on integrated product teams, developing a draft 
maintenance and logistics plan for the Deepwater assets, and 
potentially eliminating the award term provision from the ICGS 
contract. However, at this time, the actions are not sufficient to 
allow us to close them. 

We briefed your staff on the general status of these topics in November 
2007. As agreed at that time, we are following up with additional 
information, which provides more detail on the topics covered in the 
briefing. 

We provided a draft of this report to DHS and the Coast Guard for 
review and comment. The Coast Guard agreed with our findings and DHS 
also concurred. Regarding our discussion under objective one of the 
enclosure, about the Coast Guard's move away from the ICGS contract and 
the system-of-systems model, the Coast Guard stated that its approach 
to the Deepwater Program "has not changed." It stated that it still 
uses a systems approach to determine solutions to meet Surveillance, 
Detection, Classification, Identification, and Prosecution. In a 
subsequent discussion, Coast Guard officials clarified their point, 
saying that, while they are moving to a more traditional, asset-by- 
asset acquisition strategy, they will continue to place emphasis on 
ensuring a common operating picture among the individual assets. The 
Coast Guard also provided some additional information on various 
aspects of the Deepwater Program. The written comments are reproduced 
in appendix I. 

We are providing copies of this correspondence and attachment to 
interested congressional committees, the Secretary of Homeland 
Security, and the Commandant of the Coast Guard. We will also make 
copies available to others upon request. In addition, this report will 
be available on the GAO Web site at [hyperlink, http://www.gao.gov]. 
Should you or your staff have any questions, please contact me at (202) 
512-4841 or by e-mail at huttonj@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Key contributors to this report were 
Michele Mackin, Assistant Director; Tatiana Winger; Martin G. Campbell; 
Maura Hardy; Melissa Jaynes; Heddi Nieuwsma; Scott Purdy; Raffaele 
Roffo; and Sylvia Schatz. 

Signed by: 

John P. Hutton, Director:
Acquisition and Sourcing Management: 

[End of correspondence] 

Enclosure: 

Status of Selected Aspects of the Deepwater Program: 

Background: 

Program Overview: 

The Coast Guard Deepwater program is intended to replace or modernize 
vessels, aircraft, and information management capabilities such as 
command, control, communications, computers, intelligence, 
surveillance, and reconnaissance (C4ISR) systems. The events of 
September 11, 2001, prompted a revision of the planned asset mix,
capabilities, and schedule. 

Key Terminology: 

Indefinite delivery, indefinite quantity (IDIQ) contracts provide for 
an indefinite quantity, within stated limits, of supplies or services 
during a fixed period. The contract must specify the total minimum and 
maximum quantity of supplies or services the government will acquire 
and must include a statement of work or other description of the work to
be performed. The Coast Guard places orders (termed delivery/task 
orders [DTO] under the Deepwater contract) for individual requirements. 

Award term and award fee: Based on the government’s assessment of its 
performance, the contractor could earn one or more extensions of the 
contract period (award term) and/or additional money (award fee). 

The Acquisition Program Baseline establishes key cost, schedule, and 
performance parameters. Rebaselining involves changing the parameters
to reflect a program’s current status when program goals change. 

Deepwater Program’s Acquisition Approach: 

The Deepwater program has been in development since the mid-1990s, when 
the Coast Guard began planning a recapitalization program to replace or 
modernize aging or technologically obsolete "deepwater" assets--those 
used for missions that generally occur beyond 50 miles from shore. 
Rather than using a traditional acquisition approach of replacing 
individual classes of assets, the Coast Guard chose a system-of-systems 
strategy, managing the program as a single integrated package. To 
execute this acquisition approach, the Coast Guard decided to use a 
system integrator--a private sector contractor responsible for 
designing, building, and integrating the various assets to meet 
projected deepwater operational requirements at the lowest possible 
cost, either directly or through subcontractors. Furthermore, the Coast 
Guard pursued a performance-based acquisition--setting broad 
performance requirements for the program but allowing the system 
integrator some latitude in meeting the requirements. The Coast Guard's 
three main goals for its Deepwater program were to improve operational 
effectiveness, reduce total ownership costs, and satisfy the customers, 
i.e., the users. 

Between 1998 and 2001, three industry teams [Footnote 2] competed to 
identify and provide the assets needed--including cutters, aircraft, 
helicopters, logistics, and C4ISR--to meet Coast Guard requirements. 
Each team was made up of shipbuilders; aircraft manufacturers; and 
manufacturers of electronic, communication, and other equipment needed 
for the deepwater system. The competition for the Deepwater base 
contract was nearing completion when the September 11 terrorist attacks 
occurred. Nevertheless, Coast Guard officials decided to move forward 
with the contract award to avoid delaying replacement of deteriorating 
assets, although they knew at the time that there would be changes to 
their mission. In June 2002, the Coast Guard awarded a system 
integrator contract to Integrated Coast Guard Systems (ICGS)--a 
business entity led and jointly owned by Lockheed Martin and Northrop 
Grumman Ship Systems. The award was an IDIQ contract with a 5-year base 
period and five potential additional award terms of up to 5 years each. 

From 2005 to 2006, the Coast Guard worked to rebaseline the Deepwater 
program to reflect its post-9/11 mission. The Deepwater Acquisition 
Program Baseline, approved by the Department of Homeland Security (DHS) 
in May 2007, reflects the changes. In June 2007, the Coast Guard 
awarded ICGS its first award term extension, 43 months of the potential 
60 months, based on the government's assessment of the contractor's 
performance. 

Objective #1: Decisions to Purchase from ICGS versus Other Vendors: 

Background: 

When the Coast Guard awarded the Deepwater contract to ICGS, the 
contractor was to be a system integrator. ICGS proposed a solution, or 
mix of assets, to meet Coast Guard requirements and was then 
responsible for designing, developing, delivering, integrating, and 
supporting the assets. The acquisition structure of the Deepwater 
program allowed the two first-tier subcontractors, Lockheed Martin and 
Northrop Grumman--the companies that formed ICGS and that developed the 
Deepwater solution--to have sole responsibility for determining how 
assets would be acquired. 

Changing Approach to Deepwater Acquisition: 

The Coast Guard is moving away from the ICGS contract and the system-
of-systems model, with the contractor as system integrator, to a more 
traditional acquisition strategy, where the Coast Guard will manage the 
acquisition of each asset separately. In a series of reports since 
2001, we have noted the risks inherent in the systems integrator 
approach to the Deepwater program and have made a number of 
recommendations intended to improve the Coast Guard's management and 
oversight. We specifically focused on the need to improve program 
management, contractor accountability, and cost control. We, as well as 
the DHS Inspector General and others, have also noted problems in 
specific acquisition efforts, notably the National Security Cutter 
(NSC) and the 110-Foot Patrol Boat Modernization, which was permanently 
halted due to operational and safety concerns. 

The Coast Guard has recognized that it needs to increase government 
oversight and has begun to transfer system integration and program 
management responsibilities back to the Coast Guard. It has begun 
taking formal steps to reclaim authority over decision making and to 
more closely monitor program outcomes. 

The Coast Guard has also: 

* begun to competitively purchase one asset (the Fast Response Cutter-
B) and plans to competitively purchase other assets outside of the ICGS 
contract; 

* expanded the role of third parties, including the U.S. Navy, to 
perform independent cost assessments and program technical analyses; 
and: 

* reorganized and consolidated the acquisition function to strengthen 
its ability to manage projects. 

Additionally, because the IDIQ contract minimum was met during the 5-
year base term, the government is under no further obligation to use 
the contract. Coast Guard officials said that they are currently 
evaluating whether to continue to use the ICGS contract for efforts 
that are already under way, such as the NSC, versus contracting 
directly with the subcontractors. Further, they may continue to use the 
ICGS contract for certain efforts, such as logistics. 

Objective #2: Status of the Fast Response Cutter’s (FRC) Cost, 
Schedule, and Performance: 

Background: 

The FRC was conceived as a patrol boat with high readiness, speed, 
adaptability, and endurance. ICGS proposed a fleet of 58 FRCs 
constructed of composite materials (later termed FRC-As). Although 
estimates of the initial acquisition cost for these composite materials 
were high, they were chosen for their perceived advantages over other
materials (e.g., steel), such as lower maintenance and life-cycle 
costs, longer service life, and lower weight. 

In 2005, the Coast Guard accelerated the delivery date of the lead FRC-
A from 2018 to 2007 because of problems with modifications to the 110-
foot patrol boat fleet. However, in February 2006 the Coast Guard 
suspended FRC-A design work in order to assess and mitigate technical 
risks. 

To fulfill its urgent need for patrol boats, the Coast Guard decided in
early 2006 to pursue a dual-path acquisition approach. The Coast Guard 
planned to purchase 12 modified commercially available patrol boats 
(termed FRC-Bs) through ICGS. Concurrently, it continued to assess the 
possible use of composite materials for the hull of the FRC-A. 

In March 2007, the Coast Guard terminated the ICGS FRC-B acquisition 
effort and reassigned it to the Coast Guard Acquisition Directorate. 
The Coast Guard believed that by issuing the request for proposals 
(RFP) itself, it could better ensure full and open competition while
controlling costs and acquiring the patrol boats in the shortest amount 
of time. 

FRC-A Design Efforts Remain Suspended: 

Since the FRC-A acquisition effort began, the Coast Guard obligated 
approximately $35 million to ICGS for the design of this asset, but a 
viable design has not been produced. Coast Guard officials told us that 
at this time design efforts remain suspended; they do not expect to 
incur any additional costs related to the FRC-A. The original estimate 
for the fleet of 58 FRC-As was approximately $3.2 billion. 

Due to high risk and uncertain cost savings, Coast Guard officials 
recommended to the Commandant that the Coast Guard not pursue 
acquisition of an FRC-A design that includes unproven composite hull 
technology. The officials told us this recommendation was largely based 
on a third-party analysis that found the composite technology unlikely 
to meet the desired 35-year service life under the Coast Guard's 
operational conditions. Therefore, officials believe that the use of 
the proposed composite materials would not offset high initial 
acquisition costs, as ICGS had initially proposed. 

Cost, Schedule, and Performance of FRC-B: 

In June 2007, the Coast Guard issued an RFP for the design, 
construction, and delivery of a modified commercially available patrol 
boat for the FRC-B. The Coast Guard estimated, in late 2006, that the 
total acquisition cost for 12 FRC-Bs would be $593 million. Coast Guard 
officials do not plan to update cost estimates for the FRC-B until 
after the contract is awarded. The Coast Guard is currently evaluating 
proposals and expects to award the FRC-B contract in the third quarter 
of fiscal year 2008, with the lead cutter to be delivered in 2010. 
Coast Guard officials stated that their goal is still to acquire 12 
FRC-Bs by 2012. The contract will include a 2-year base period for the 
design and production of the lead cutter and six 1-year option periods. 
The first option period includes 3 low-rate initial production cutters, 
and the subsequent five option periods include an option of 4 or 6 
cutters each. The Coast Guard intends to award a fixed price contract 
for design and construction of the FRC-B, with the potential to acquire 
a total of 34 cutters. 

Regarding performance, there are some key differences in the FRC-B, as 
outlined in the RFP, compared with the requirements for the FRC-A. One 
difference is speed--the Coast Guard lowered the minimum requirement 
for sprint speed from 30 knots for the FRC-A to 28 for the FRC-B. 
Another pertains to onboard small boat launch-and-recovery mechanisms: 
the initial design for the FRC-A included a stern ramp launch. This 
capability is not required on the FRC-B. However, Coast Guard officials 
expressed a preference for the stern ramp launch-and-recovery system 
because it would be safer and require fewer crew to operate than a 
manual alternative. Coast Guard officials said that eliminating these 
design requirements would ensure more competition on the open market 
and meet their urgent need for patrol boats. 

Objective #3: Status of National Security Cutter (NSC): Cost: 

Background: 

The NSC is intended to be the flagship of the Coast Guard’s fleet, with 
an extended on-scene presence, long transits, and forward deployment. 
The cutter and its aircraft and boat assets are to operate worldwide. 

In November 2005, ICGS submitted a request for equitable adjustment 
(REA) of $300 million, contending that the Coast Guard had deviated 
from a very detailed contractor implementation plan on which pricing 
was based. This matter was not resolved until August 2007, when the 
Coast Guard and ICGS completed negotiations of a consolidated contract 
action that encompasses the first three ships (NSC 1, 2, and 3). This 
negotiation also converted NSC 2 from a fixed price to a cost-plus 
incentive fee contract type and eliminated the contract clause 
referencing the implementation plan. 

Additionally, the Coast Guard and ICGS disagreed over the ship's 
expected 30-year fatigue life. Fatigue is physical weakening due to 
age, stress, or vibration. A U.S. Navy analysis done for the Coast 
Guard determined that the ship's design was unlikely to meet fatigue 
life expectations. The Coast Guard decided to correct the structural 
deficiencies for the first two NSCs at scheduled drydocks to avoid 
stopping the production lines and to incorporate structural 
enhancements into the design and production for future ships. The 
structural enhancements were included as part of the consolidated 
contract action. 

NSC Cost Growth Driven by Various Factors: 

The NSC’s projected costs have increased compared to the initial 
baseline, as shown in table 1. 

Table 1: Cost Growth for NSC 1-3 (Dollars in millions): 

Design: 
NSC 1: $67.7; 
NSC 2: [Empty]; 
NSC 3: [Empty]. 

Build: 
NSC 1: $264.4; 
NSC 2: $200.7; 
NSC 3: $189.2. 

Govt. furnished equipment (GFE): 
NSC 1: $52.8; 
NSC 2: $50.0; 
NSC 3: $40.0. 

Initial projected costs (2002): 
NSC 1: $384.9; 
NSC 2: $250.7; 
NSC 3: $229.2. 

Requirements changes: 
NSC 1: $75.9; 
NSC 2: $60.0; 
NSC 3: $60.0. 

Hurricane Katrina; 
NSC 1: $40.0; 
NSC 2: $44.4; 
NSC 3: $38.7. 

Economic changes: 
NSC 1: $58.3; 
NSC 2: $69.9; 
NSC 3: $86.8. 

Structural enhancements: 
NSC 1: $40.0; 
NSC 2: $30.0; 
NSC 3: $16.0. 

Other GFE: 
NSC 1: $41.5; 
NSC 2: $40.7; 
NSC 3: $73.9. 

Current projected costs (2008): 
NSC 1: $640.7; 
NSC 2: $495.7; 
NSC 3: $504.6. 

Source: Coast Guard. 

Note: Economic changes include, for example, escalation of material/
labor and some costs associated with settling the REA. Other GFE 
includes certifications, tests, and training. For NSC 3, other GFE also 
includes additional government oversight. 

[End of table] 

Requirements changes to address post-9/11 needs are one of the main 
reasons for the cost increases. The new requirements include: 

* expanded interoperability with the Department of Defense, DHS, and 
local first responders; 

* increased self-defense and survivability, including chemical, 
biological, and radiological measures; 

* increased flight capability via longer and enhanced flight deck; 

* upgraded weapon systems; and: 

* improved classified communication capabilities. 

Another contributing factor was Hurricane Katrina, which not only 
caused considerable damage to the shipyard, including tooling, 
equipment, shops, and other facilities, but also caused an exodus of 
the experienced workforce. The overall number of shipworkers declined 
significantly, causing the contractor to use more overtime hours. The 
loss of workers, in turn, considerably disrupted the ship's learning 
curve, which normally results in greater efficiencies in production of 
subsequent ships. 

However, some of the increase can be attributed to Coast Guard actions. 
For example, the contractor used the Coast Guard's failure to precisely 
execute the contract according to the implementation plan as basis for 
requesting an equitable adjustment. Furthermore, even though the Coast 
Guard's own technical staff raised fatigue life concerns--later 
confirmed by a U.S. Navy study--during the design phase, the decision 
was made to proceed with production of the first two NSCs and enhance 
the structure later. 

Objective #3: NSC 1 Delivery Schedule May Be Delayed: 

Background: 

Key Terminology: 

Ship trials: Before the NSC 1 is delivered to the Coast Guard, it will 
undergo three sets of trials. Machinery trials and builder's trials are 
the contractor's demonstrations to the Coast Guard of machinery and 
ship capabilities, respectively. Acceptance trials, conducted by the 
U.S. Navy Board of Inspection and Survey (INSURV), determine compliance 
with contract requirements and test system capabilities. 

Ship certification process: The certification process for the NSC 
includes verification of all standards by either a third-party agency 
such as the American Bureau of Shipping (ABS) or by the Coast Guard 
Technical Authority independent of the Deepwater program office. There 
are 987 certification standards in total for the NSC 1. 

TEMPEST inspection: An inspection of a ship's ability to ensure that 
data-related or intelligence-bearing signals will not be 
unintentionally radiated from equipment and the ship's structure is 
known as a TEMPEST (Telecommunications Electromagnetic Performance and 
Emission Standards) inspection. TEMPEST inspections are intended to 
identify the potential for such an occurrence through communications 
systems or any equipment or system that processes classified 
information in an electrical form. Inspectors may conduct visual and 
instrumented inspections. 

Status of NSC: Delivery Schedule: 

The first NSC was initially projected for delivery in 2006, but slipped 
to August 2007 after the 9/11 requirements changes. However, delivery 
was again delayed until April 2008. It is uncertain at this time 
whether the new delivery date will be met due to several factors 
involving testing, certifications, and other areas of technical risk. 
Page 5 The NSC's projected costs have increased compared to the initial 
baseline, as shown in table 1. The NSC is intended to be the flagship 
of the Coast Guard's fleet, with an extended on-scene presence, long 
transits, and forward deployment. The cutter and its aircraft and boat 
assets are to operate worldwide. Page 3 FRC-A Design Efforts Remain 
Suspended Status of the Fast Response Cutter's (FRC) Cost, Schedule, 
and Performance The FRC was conceived as a patrol boat with high 
readiness, speed, adaptability, and endurance. ICGS proposed a fleet of 
58 FRCs constructed of composite materials (later termed FRC-As). 
Although estimates of the initial acquisition cost for these composite 
materials were high, they were chosen for their perceived advantages 
over other materials (e.g., steel), such as lower maintenance and life-
cycle costs, longer service life, and lower weight. Cost, Schedule, and 
Performance of FRC-B Page 2 Background: 

Machinery trials occurred in early December and builder's trials 
occurred February 8-11, 2008. The current schedule leaves little 
margin for delay. Acceptance trials are scheduled to begin April 7, 
2008. The contract requires 30 days between acceptance trials and ship 
delivery, but the scheduled dates for these events are about 3 weeks 
apart. The Coast Guard and the contractor are aware of the discrepancy; 
however, no decision has been made on how to resolve this issue. The 
Coast Guard will have to either extend the delivery date of the ship to 
meet the requirement or waive it. Our prior work has shown that event-
driven rather than schedule-driven decisions are preferable, thus it 
may be in the best interest of the Coast Guard to delay acceptance of 
the first NSC until a number of these issues are resolved. 

Of the 987 certification standards, ICGS was to submit documentation on 
892 for review and acceptance by the Coast Guard Technical Authority. 
Almost all remain outstanding. In addition, the Coast Guard and 
contractor differed in their understanding of the number of 
certifications for which ABS was responsible. Northrop Grumman had 
contracted with ABS to certify 60 standards; however, the Coast Guard 
believed ABS was responsible for 84. According to Coast Guard 
officials, the issue has been resolved and ABS will now be responsible 
for 86 certifications. Further, for NSC 3 and later ships, ABS will be 
responsible for about 200 certifications. Other third parties will 
certify 11 of the standards. 

The Coast Guard has identified 13 issues pertaining to C4ISR and Hull, 
Mechanical, and Electrical as risk areas, 8 of which have moderate to 
high risk of occurrence or impact if not resolved. One of these relates 
to the results of the July 2007 visual TEMPEST inspection, conducted by 
a team of Coast Guard officials. The team reported hundreds of 
discrepancies, over 40 percent of which pertain to cable grounding and 
separation, such as cables intended for classified information not 
being adequately separated from those intended for nonclassified 
information. Coast Guard officials told us that they requested the test 
be done earlier than usual so that issues could be identified and 
corrected sooner. 

Coast Guard and Navy personnel noted that having open issues with a 
ship--particularly for the first in class--at the time of delivery is 
normal. After acceptance, the Coast Guard plans to conduct operational 
testing at sea for approximately 2 years, during which time open issues 
can be resolved. The ship will officially become operational 
thereafter, which, based on the current schedule, will be March 2010. 

Objective #3: Status of NSC: Performance: 

Key Terminology: 

Key performance parameters (KPP) are the acceptable standards of 
performance for a system. The number of KPPs should be the minimum 
needed to characterize operational and technical performance, but should
include all parameters considered mission critical. 

KPPs include threshold and objective values. A performance parameter 
threshold is the minimum value necessary to satisfy a requirement. A
parameter’s objective is a measurable, cost-effective value greater 
than the threshold. In some cases, the threshold and objective are the 
same. 

NCS Performance: 

Key performance parameters for the NSC were first defined in the
Acquisition Program Baseline submitted for DHS approval in November
2006. Coast Guard officials explained that the key performance 
parameters were derived from performance specification requirements 
that had been in place before contract award. 

The key performance parameters for the NSC are shown below: 

Parameter: Sprint speed (knots); 
Threshold: 28; 
Objective: 31. 

Parameter: Patrol speed (knots); 
Threshold/Objective: 15. 

Parameter: Operating range–nautical miles (NM); 
Threshold/Objective: 12,000. 

Parameter: Detection range–NM; 
Threshold/Objective: 11.7. 

Parameter: Continuous efficient operations (sea state); 
Threshold: Mid 5; 
Objective: Through 6. 

Parameter: Operational availability; 
Threshold: 0.80; 
Objective: 0.90. 

Source: Coast Guard. 

[End of table] 

The key performance parameters have not been changed due to post-9/11
mission requirements. Coast Guard officials expect the NSC to meet the
current threshold parameters, but they will not know for certain until 
the ship undergoes sea trials. 

However, the Coast Guard’s Engineering Logistics Center officials
expressed concern about the ship’s weight margin. Ship designs typically
include a margin for additional weight to accommodate service
enhancements during the ship’s service life. The officials noted that 
most of the available weight margin has already been consumed during
construction—not including the fatigue life structural enhancements. The
officials further noted that subsequent changes to the ship will cost 
more than they would have otherwise due to additional redesign and 
engineering that may be necessary to offset the additional weight. 
Coast Guard officials noted, however, that a mitigation strategy is in 
place and adjustments are being made that will increase the service 
life weight margin. 

Objective #4: Status of Prior GAO Recommendations: 

Background: 

Our March 2004 report, Contract Management: Coast Guard’s Deepwater 
Program Needs Increased Attention to Management and Contractor 
Oversight (GAO-04-380) contained a number of recommendations to DHS and 
the Coast Guard. As of June 2007, five remained open. 

We have provided status updates on the 2004 recommendations in the 
following GAO reports and testimonies: 

* Coast Guard: Changes to Deepwater Plan Appear Sound, and Program 
Management Has Improved, but Continued Monitoring Is Warranted (GAO-06-
546), April 2006. 

* Coast Guard: Preliminary Observations on Deepwater Program Assets and
Management Challenges (GAO-07-446-T), February 15, 2007. 

* Coast Guard: Status of Efforts to Improve Deepwater Program 
Management and Address Operational Challenges (GAO-07-575T), March 8, 
2007. 

* Coast Guard: Challenges Affecting Deepwater Asset Deployment and 
Management and Efforts to Address Them (GAO-07-874), June 2007. 

Table 2: Recommendation Status: 

GAO’s 2004 recommendation: Program management: 
A) In collaboration with the system integrator, take the necessary 
steps to make Integrated Product Teams (IPT) effective including: (1) 
training IPT members in a timely manner, (2) chartering the sub-IPTs, 
and (3) making improvements to the electronic information system that 
would result in better information sharing among IPT members 
(government and ICGS) who are geographically dispersed; 
Status we reported in June 2007: Partially implemented: The Coast Guard 
had taken over IPT leadership and planned to update the program 
management plan to reflect changing roles and responsibilities between 
the Coast Guard and ICGS; 
Status as of December 2007 (following pages contain additional detail): 
Partially implemented: The Coast Guard is in the process of 
restructuring IPTs and chartering new ones. With decreased reliance on 
ICGS, chartering sub-IPTs and improving the current electronic 
information system may become less of an issue. 

GAO’s 2004 recommendation: Program management: 
B) As Deepwater assets begin to be delivered to operational units, 
ensure that field operators and maintenance personnel are provided with 
timely information and training on how the transition will occur and how
maintenance responsibilities are to be divided between system 
integrator and Coast Guard personnel; 
Status we reported in June 2007: Partially implemented: The Coast Guard 
was reaffirming its role as technical authority and became the default 
provider of maintenance and logistics; 
Status as of December 2007 (following pages contain additional detail): 
Partially implemented: The Coast Guard has taken over maintenance and 
logistics responsibilities for the assets and plans to use contractor 
support on an as needed basis. However, the Commandant instruction
formalizing this decision has not yet been issued. 

GAO’s 2004 recommendation: Contractor accountability: 
C) Based on the current schedule for delivery of Deepwater assets, 
establish a time frame for when the models and metrics will be in place 
with the appropriate degree of fidelity to be able to measure the 
contractor’s progress toward improving operational effectiveness; 
Status we reported in June 2007: Partially implemented: Key performance
parameters were added to criteria for measuring operational 
effectiveness; however, the models still lacked the fidelity to 
attribute improvements to the contractor or the Coast Guard; 
Status as of December 2007 (following pages contain additional detail): 
Closed: overcome by events. The Coast Guard is no longer using 
operational effectiveness to measure contractor performance. 

GAO’s 2004 recommendation: Contractor accountability: 
D) Establish criteria to determine when the total ownership cost (TOC) 
baseline should be adjusted and ensure that the reasons for any changes 
are documented; 
Status we reported in June 2007: Partially implemented: DHS had not
approved the Coast Guard’s most recent baseline update (Nov. 2006); 
Status as of December 2007 (following pages contain additional detail): 
Closed: implemented. DHS approved the Coast Guard’s Acquisition Program 
Baseline for Deepwater, which includes criteria for TOC adjustments, in 
May 2007. 

GAO’s 2004 recommendation: Cost control through competition: 
E) Develop a comprehensive plan for holding the system integrator 
accountable for ensuring an adequate degree of competition among second-
tier suppliers in future program years. This plan should include 
metrics to measure outcomes and consideration of how these outcomes 
will be taken into account in future award fee decisions; 
Status we reported in June 2007: Partially implemented: The Coast Guard 
did not have information from ICGS to determine the level of 
competition achieved and planned to perform additional analyses to gain
insight on the level of competition; 
Status as of December 2007 (following pages contain additional detail): 
Partially implemented. The Coast Guard has decreased its reliance on 
ICGS, moving toward full and open competition, and intends to eliminate 
award term evaluation criteria from the current contract with ICGS. The 
ICGS contract no longer contains award fee provisions. 

[End of table] 

Objective #4: Take Steps to Make Integrated Product Teams Effective: 

Background: 

We reported in 2004 that Integrated Product Teams (IPT)—composed of 
Coast Guard, ICGS, and subcontractor employees (Lockheed Martin and 
Northrop Grumman)—were the Coast Guard’s primary tool for managing the 
program and overseeing the contractor. IPT responsibilities included 
such things as guiding development, allocating resources and budgets, 
measuring performance, performing product level design/performance cost
trade-offs, and delivering and fielding tangible products and processes 
in accordance with the overall Deepwater program. The IPTs were chaired 
by contractor personnel. 

We recommended that the Coast Guard, in collaboration with the system 
integrator, take the necessary steps to improve the effectiveness of 
IPTs, including (1) training IPT members in a timely manner, (2) 
chartering sub-IPTs, and (3) making improvements to the electronic
information system that would result in better information sharing 
among geographically dispersed IPT members. We reported in July 2005 
that the training portion of this recommendation had been addressed. 

Current Status: Partially Implemented: 

The Coast Guard is in the process of restructuring the IPTs, which 
remain a key program management tool. Coast Guard program managers, 
rather than ICGS representatives, now chair the IPTs. The IPTs’ current 
role is to discuss options for problem solving related to cost, 
schedule, and performance objectives, but the program manager is 
ultimately responsible for making decisions. In addition to evaluating 
and rechartering some existing IPTs, the Coast Guard has organized two 
new ones and is in the process of establishing several others. 

Since the Coast Guard will now chair IPTs, the chartering of sub-IPTs to
clarify roles and responsibilities is no longer an issue. Coast Guard 
officials plan to use working groups established under the authority of 
the IPTs to address specific issues. Working groups are more informal 
and can come together and disband on an as-needed basis. 

Finally, the electronic information system, built and managed by ICGS, 
is still used as a tool used to share information among geographically
dispersed IPT members—specifically, ICGS and the Coast Guard. However, 
with the decreasing reliance on ICGS as the system integrator, this 
particular contractor-led electronic information-sharing system may 
become less integral to effective management of the Deepwater program. 

Due to the ongoing chartering, restructuring, and re-evaluation of the 
roles and responsibilities of the IPTs within the new construct of the 
Deepwater program, this recommendation remains open as partially 
implemented. 

Objective #4: Provide Information on Maintenance and Logistics 
Responsibilities: 

Background: 

In 2004, we reported that the Coast Guard had not adequately 
communicated with operational units, field operators, and maintenance 
personnel regarding how maintenance and logistics responsibilities 
would be handled when Deepwater assets were delivered. We recommended 
that these personnel be provided with timely information and training on
how the transition will occur and how maintenance responsibilities are 
to be divided between the system integrator and Coast Guard personnel. 

Current Status: Partially Implemented: 

In June 2007, we reported that the Coast Guard announced it was
assuming the role of the default provider of maintenance and logistics,
supplemented by contractors as necessary. The Coast Guard is still
formalizing its assumption of maintenance and logistics 
responsibilities. The Coast Guard technical authority is developing a 
commandant instruction that outlines policies, processes, roles, and 
responsibilities for maintenance and logistics support for Deepwater 
assets. The Coast Guard plans for Deepwater assets to follow the same 
maintenance program—already familiar to Coast Guard maintenance 
personnel---as its other assets. However, the Coast Guard expects that 
some areas, such as command, control, communications, and computer 
electronics, will require contractor support until Coast Guard 
personnel can be trained or new personnel can be hired to fill these 
roles. 

Because the Coast Guard has not yet issued the final commandant
instruction that assigns maintenance and logistics responsibilities to 
Coast Guard personnel instead of ICGS, we are leaving this 
recommendation open as partially implemented. Once the instruction that 
addresses our recommendation is issued, we plan to close this 
recommendation as implemented. 

Objective #4: Establish Time Frame for Measuring Operational 
Effectiveness: 

Background: 

In 2004, we reported that that the Coast Guard planned to use 
operational effectiveness as one of the criteria for evaluating the 
contractor’s performance. “Operational effectiveness” was measured by 
the number of missions, such as search and rescue or drug interdiction,
carried out by current assets; however, because Deepwater assets had 
not been delivered, their contribution to operational effectiveness was 
difficult to determine. In 2007, we noted that because assets were not 
available at the time of the evaluation, the model used to measure the
contractor’s performance credited the contractor for planned, not 
actual, capabilities. 

We recommended that the Coast Guard establish a time frame, based on 
its current schedule for delivery of Deepwater assets, for when models 
and metrics would be in place with the appropriate degree of fidelity 
in order to measure the contractor’s progress toward improving 
operational effectiveness. 

Current Status: Closed as Overcome by Events: 

The Coast Guard has drafted revised award term criteria and no longer
plans to measure operational effectiveness. Instead, the Coast Guard is
considering criteria—primarily subjective and objective measures of 
cost, schedule, and performance—that would measure past performance for
work on Deepwater assets. The model will no longer be used to measure
contractor performance. In fact, in June 2007, the Coast Guard 
transferred possession of the model to the research and development 
group for use in business case and force structure analyses. 

Because the Coast Guard is no longer using operational effectiveness as 
a measure of contractor performance, this recommendation has been
overcome by events and we consider it closed. 

Objective #4: Establish Criteria for Changing Total Ownership Cost 
Baseline: 

Background: 

We reported in 2004 that proposed changes to the Deepwater total 
ownership cost (TOC) baseline, due to variables such as fuel costs, 
would be approved by the program executive officer on a case-by-case 
basis. The Coast Guard had no criteria in place for potential upward or 
downward adjustments to the baseline. We recommended that the Coast
Guard establish criteria to determine when the TOC baseline should be 
adjusted and ensure that the reasons for any changes were documented. 

Current Status: Closed as Implemented: 

We previously reported that in November 2005, the Coast Guard had
increased the total ownership cost baseline to $304 billion. [Footnote 
3] We noted, however, that although the Coast Guard was required to 
provide information to DHS for a baseline cost breach of 8 percent or 
more, the 8 percent threshold had not been breached because the 
threshold was measured against total program costs and not on an asset 
basis. At the time, Coast Guard officials acknowledged that only a 
catastrophic event would trigger such a breach. 

In November 2006, the Coast Guard submitted a revised Acquisition 
Program Baseline (APB) to DHS that set forth criteria for baseline
adjustments. DHS approved the document in May 2007. The APB includes
criteria for baseline adjustments to cost, schedule and performance for 
the total system or individual asset classes and states that breaches 
will be reported in accordance with DHS policy. See table 3. 

Table 3: Criteria for Baseline Adjustments: 

Key parameter: Cost; 
Threshold for adjustment: Total system or asset class acquisition, 
construction, and improvement cost increases exceeding 8 percent. 

Key parameter: Performance; 
Threshold for adjustment: Any mission, system or asset class 
performance parameters not met or are anticipated to fail to meet the 
threshold key performance parameter. 

Key parameter: Schedule; 
Threshold for adjustment: Any system schedule baseline or asset class 
key schedule parameter slip by more than 180 days. 

Source: Coast Guard documentation. 

[End of table] 

Since then, the Coast Guard has reported two cost breaches to DHS: one
for the NSC and another for an aviation asset, the C-130J Missionization
Project. For the NSC, the breach was reported upon submission of the
individual APB for the NSC in September 2007. [Footnote 4] The total 
acquisition cost increased from $3.45 billion to $3.97 billion, which 
was attributed to the structural/fatigue enhancements to the ship, the 
impact of the shipyard strike, and C4ISR cost growth. With respect to 
the C-130J missionization project, a November 2007 notification 
memorandum provides that the estimate at completion is now projected to 
be 10 to 20 percent over the original contract price of $117.95 million 
because of parallel design and installation activities resulting in 
rework, among other things. The Coast Guard committed to providing a 
revised APB and remediation plan within 30 days of the notification 
that will include a root cause analysis, identification of corrective 
actions, and a plan for monitoring future progress. At this time, the 
revised APB and remediation plan have not been finalized. 

Given the fact that criteria for adjusting the baseline have been
incorporated in the Deepwater ABP and approved by DHS, we are closing
this recommendation as implemented. 

Objective #4: Hold System Integrator Accountable for Competition among 
Subcontractors (Make-or-Buy Decisions): 

Background: 

In 2004, we reported that although competition is a key method for 
controlling costs, the Coast Guard had no insight into the extent of 
competition among the suppliers of Deepwater assets. Lockheed Martin 
and Northrop Grumman, the first-tier subcontractors, had sole 
responsibility for determining whether to compete assets among lower-
tier subcontractors or provide the assets themselves. We reported that 
ICGS did not leverage competition to deliver the best value for certain
Deepwater assets. 

We recommended that the Coast Guard develop a comprehensive plan for 
holding the system integrator accountable for ensuring an adequate 
degree of competition among second-tier suppliers in future program 
years. We also recommended that the plan include metrics to measure
outcomes and consider how these outcomes will be taken into account in 
future award fee decision. 

Key Terminology: 

Make-or-buy: In performing a contract, the contractor may decide to 
make or buy an item. To make means that the contractor, its affiliates,
subsidiaries, or divisions will produce an item or perform a work 
effort. To buy suggests that the contractor will subcontract for an 
item or work effort. 

Cost-plus-incentive-fee contracts reward the contractor for cost-
effectiveness or performance. Incentive fees are determined by a 
formula, while award fees are based on the government’s judgmental
evaluation of the contractor’s overall performance. 

Current Status: Partially Implemented: 

The Coast Guard has taken steps to increase its insight into make-or-buy
decisions for Deepwater assets under the ICGS contract. In 2005, the
Coast Guard asked ICGS to notify the government of make-or-buy 
decisions of $10 million or more. However, in December 2006, the Coast
Guard reported that contractor data were inadequate to determine the
level of competition achieved. Subsequently, the June 2007 award term
modification incorporated a formal requirement for reporting make-or-buy
decisions. ICGS must submit a make-or-buy plan that outlines rationale
and justification for each DTO proposal that contains work items or work
efforts priced at more than $5 million and/or that would typically 
require company management review because of complexity, cost, need for 
large quantities, or requirement for additional production facilities. 
The rationale should consider overall benefit to the government, 
including: 

(1) long-term and/or near-term cost benefit; 

(2) adequacy of considerations made in the make-or-buy determination; 

(3) impacts on product performance; 

(4) present and future supportability, maintenance and/or upgrade 
potential; and; 

(5) proprietary data or other restrictions that could limit pursuit of
future cost-effective alternatives. 

The Coast Guard is putting less emphasis on the subcontractor 
competition issue due to the move away from using the ICGS contract and
more toward full and open competition. In fact, Coast Guard officials 
told us that because of potential legislation that would prohibit them 
from using ICGS as the system integrator, they are considering 
eliminating award term provisions from the contract. 

In addition, the Coast Guard no longer uses award fees under the ICGS
contract. However, it has incorporated an incentive fee for the NSC. 

We are leaving this recommendation open as partially implemented 
pending Coast Guard documentation regarding the award term provision. 

Related GAO Products: 

Coast Guard: Challenges Affecting Deepwater Asset Deployment and
Management and Efforts to Address Them, GAO-07-874 (Washington, D.C.: 
June 18, 2007). 

Coast Guard: Status of Efforts to Improve Deepwater Program Management
and Address Operational Challenges, GAO-07-575T (Washington, D.C.: Mar. 
8, 2007). 

Coast Guard: Preliminary Observations on Deepwater Program Assets and
Management Challenges, GAO-07-446-T (Washington, D.C.: Feb. 15, 2007). 

Coast Guard: Changes to Deepwater Plan Appear Sound, and Program 
Management Has Improved, but Continued Monitoring Is Warranted, GAO-06-
546 (Washington, D.C.: Apr. 28, 2006). 

Coast Guard: Progress Being Made on Addressing Deepwater Legacy Asset
Condition Issues and Program Management, but Acquisition Challenges
Remain, GAO-05-757 (Washington, D.C.: July 22, 2005). 

Contract Management: Coast Guard’s Deepwater Program Needs Increased
Attention to Management and Contractor Oversight, GAO-04-380 
(Washington, D.C.: Mar. 9, 2004). 

Coast Guard: Progress Being Made on Deepwater Project, but Risks Remain,
GAO-01-564 (Washington, D.C.: May 2, 2001). 

[End of enclosure] 

Assistant Commandant for Acquisition (CG-9): 
Chief Acquisition Officer (CAO): 
United States Coast Guard: 
Washington, D.C. 20593-0001: 

February 20, 2008: 

John P. Hutton: 
US Government Accountability Office: 
Washington, DC 20548: 

Subject: Draft Report titled "Status of Selected Aspects of the Coast 
Guard's Deepwater Program." 

This letter provides the United States Coast Guard's comments on the 
Government Accountability Office's (GAO) draft report titled "Status of 
Selected Aspects of the Coast Guard's Deepwater Program." 

The Coast Guard remains grateful for all that the GAO has done to bring 
attention to issues with our Deepwater program's challenges and concurs 
in the findings of this report. We appreciate the commitment the GAO 
has towards making the Deepwater program successful and value the 
opinions of the GAO. We benefit from the oversight and are prudently 
implementing the recommendations to ensure improvement to our 
acquisition program in the future. 

We thank you for considering our comments on these very important 
issues. We look forward to working with the GAO on future issues to aid 
in strengthening the Coast Guard. 

Sincerely, 

Signed by: 

Gary T. Blore, RADM:
Chief Acquisition Officer: 
U.S. Coast Guard: 

Enclosure: USCG Comments to Draft GAO Report titled Status of Selected 
Aspects of the Coast Guard's Deepwater Program: 

Copy: 
CG-91: 
CG-93: 
CG-4: 
CG-8: 

[End of letter] 

Enclosure: USCG comments on the GAO draft report titled "Status of 
Selected Aspects of the Coast Guard's Deepwater Program." 

Acquisition Directorate: 
CG-9: 
USCG comments on GAO draft report titled "Status of Selected Aspects of 
the Coast Guard's Deepwater Program" 
RADM Gary T. Blore: 
20 February 2008: 

Purpose: 

The purpose of this document is to serve as supplemental information to 
the GAO's findings addressed in the draft report titled "Status of 
Selected Aspects of the Coast Guard's Deepwater Program". Each point 
outlined below serves as a clarification to the findings represented in 
GAO's draft report. Overall, the Coast Guard supports the findings as 
written in this draft report. 

USCG Comments: 

1. FRC-B Stem Ramp Requirement: To clarify the statements discussed in 
the letter to Senator Cantwell and Senator Snowe as well as in the 
draft report, the Coast Guard does not intend to allow a less-safe 
requirement for the cutter boat launch and recovery system in the FRC-
B. The companies bidding on the FRC-B have the option as to whether 
they want to include a stern ramp or other cutter boat launch and 
recovery system as long as it follows the specific guidelines outlined 
in the Circular of Requirements (COR) for the FRC-B. The Circular of 
Requirements provides general guidelines the proposal has to meet (e.g. 
No more than three crew members are required to operate the system 
regardless of the system proposed) as well as specific guidelines if 
the company chooses to bid a stern ramp or davit launch and recovery 
system. There is also technical evaluation criteria which specifically 
addresses the safety element of the cutter boat stern launch and 
recovery system and ensures compliance with the specific requirements 
outlined in the COR. A stern launch is one alternative to potentially 
meet this requirement. 

2. NSC's Available Weight Margin: To clarify the statements discussed 
in the letter to Senator Cantwell and Senator Snowe as well as in the 
draft report, the Coast Guard acknowledges that there is a reduced 
weight margin after the structural enhancements are installed on NSC #1 
and #2, but according to the USCG Technical Authority for Engineering 
and Logistics (CG-4), the overall displacement can be increased without 
detriment to any of the NSC's other requirements. CG-4 is currently 
engaged in a detailed analysis prior to making a recommendation to 
increase the displacement from 4300LT to 4500LT (which includes more 
weight margin than before the structural enhancements). We anticipated 
the cost for accomplishing this and already included it in the cost for 
NSC 1 and 2. 

3. Background of Deepwater Contract: To clarify that the background 
section of Objective #1, "Decisions to Purchase From ICGS Versus Other 
Vendors," although the Integrated Coast Guard Systems (ICGS) had 
proposed a solution to meet Coast Guard requirements as well as how 
those assets would be acquired, the Coast Guard did have final approval 
authority for all decisions made concerning the Deepwater program. The 
Coast Guard approved contract awards and obligated funding against 
those contracts — this is the essence of final authority. 

4. Changing Approach to Deepwater Acquisition: The approach has not 
changed. The Coast Guard uses a systems approach in determining the 
community of capabilities needed to meet Surveillance, Detection, 
Classification, Identification, and Prosecution (SDCIP), and models 
this in DMOES. A systems approach does not preclude an asset by asset 
execution of the acquisition strategy. A systems approach is a means by 
which to determine solutions — not necessarily a tactical acquisition 
strategy. 

5. The use of the US Navy Board of Inspection and Survey (INSURV): As 
discussed in the "Key Terminology" in Objective #3 " Status of NSC: 
Delivery Scheduled," the GAO auditors point out the Coast Guard's use 
of INSURV during Acceptance Trials to determine compliance with 
contract requirements and test system capabilities. The Coast Guard has 
taken many steps to include third party assessments to assist and serve 
as subject matter experts to ensure asset compliance with the Coast 
Guard's requirements. It was the Coast Guard's decision to use INSURV 
to serve as its inspection agent during Acceptance Trials due to its 
long standing and approved acceptance standards that have been used and 
proven throughout the U.S. Navy. 

6. The NSC KPP for speed: As discussed in Objective #3 "Status of NSC: 
Performance," the Coast Guard was able to demonstrate and meet the key 
performance parameter threshold for speed during both the Machinery 
Trials in December 2007 and Builders Trials in February 2008. 

[End of enclosure] 

Footnotes: 

[1] GAO, Contract Management: Coast Guard's Deepwater Program Needs 
Increased Attention to Management and Contractor Oversight, GAO-04-380 
(Washington, D.C.: Mar. 9, 2004) 

[2] The industry teams were led by Litton/Avondale Industries, Lockheed 
Martin Naval Electronics and Surveillance Systems, and Science 
Applications International Corporation. 

[3] GAO, Coast Guard: Status of Efforts to Improve Deepwater Program 
Management and Address Operational Challenges, GAO-07-575T (Washington, 
D.C.: Mar. 8, 2007). 

[2] The Coast Guard is planning to develop individual APBs for each 
asset. 

[End of section] 

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