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entitled 'Coast Guard: As Deepwater Systems Integrator, Coast Guard Is 
Reassessing Costs and Capabilities but Lags in Applying Its Disciplined 
Acquisition Approach' which was released on July 14, 2009. 

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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

July 2009: 

Coast Guard: 

As Deepwater Systems Integrator, Coast Guard Is Reassessing Costs and 
Capabilities but Lags in Applying Its Disciplined Acquisition Approach: 

GAO-09-682: 

GAO Highlights: 

Highlights of GAO-09-682, a report to congressional committees. 

Why GAO Did This Study: 

The Deepwater Program includes efforts to build or modernize ships and 
aircraft and to procure other capabilities. In 2002, the Coast Guard 
contracted with Integrated Coast Guard Systems (ICGS) to manage the 
acquisition as systems integrator. After a series of project failures, 
the Coast Guard announced in April 2007 that it would take over the 
lead role, with future work on individual assets bid competitively, and 
a program baseline of $24.2 billion was set. In June 2008, GAO reported 
on the Coast Guard’s progress and made several recommendations, which 
the Coast Guard and the Department of Homeland Security (DHS) have 
addressed. In response to a Senate report accompanying the DHS 
Appropriations Bill, 2009, GAO addressed (1) efforts to manage 
Deepwater, (2) changes in cost and schedule of the assets, and (3) 
efforts to build an acquisition workforce. GAO reviewed Coast Guard and 
DHS documents and interviewed officials. 

What GAO Found: 

The Coast Guard has assumed the role of systems integrator for the 
overall Deepwater Program by reducing the scope of the work on contract 
with ICGS and assigning these functions to Coast Guard stakeholders. As 
part of its systems integration responsibilities, the Coast Guard has 
undertaken a fundamental reassessment of the capabilities, number, and 
mix of assets it needs and expects to complete this analysis by the 
summer of 2009. At the individual Deepwater asset level, the Coast 
Guard has improved and begun to apply the disciplined management 
process contained in its Major Systems Acquisition Manual (MSAM), but 
did not meet its goal of complete adherence to this process for all 
Deepwater assets by the end of March 2009. For example, key acquisition 
management activities—such as operational requirements documents and 
test plans—are not in place for assets with contracts or orders 
recently awarded (such as the Fast Response Cutter and C4ISR) or in 
production, placing the Coast Guard at risk of cost growth or schedule 
slips. In addition, the MSAM does not appear to be consistent with 
recent DHS policy that requires entities responsible for operational 
testing to be independent of the system’s users. 

Due in part to the Coast Guard’s increased insight into what it is 
buying, the anticipated cost, schedules, and capabilities of many 
Deepwater assets have changed since the $24.2 billion baseline was 
established in 2007. Coast Guard officials have stated that this 
baseline reflected not a traditional cost estimate, but rather the 
anticipated contract costs as determined by ICGS. As the Coast Guard 
has developed its own cost baselines for some assets, it has become 
apparent that some of these assets it is procuring will likely cost 
more than anticipated—up to $2.7 billion more based on information to 
date. This represents approximately 39 percent cost growth for the 
assets with revised cost estimates. As more cost baselines are 
developed and approved, further cost growth is likely. Updated 
baselines also indicate that schedules have slipped for several of the 
assets. In addition, the current structure of the Coast Guard’s budget 
submission to Congress does not include details at the asset level, 
such as estimates of total costs and total numbers to be procured, as 
do those of the Department of Defense, which acquires similar systems. 

One reason the Coast Guard hired a contractor as a systems integrator 
was because it recognized that it lacked the experience and depth in 
workforce to manage the acquisition internally. The Coast Guard 
acknowledges that it still faces challenges in hiring and retaining 
qualified acquisition personnel and that this situation poses a risk to 
the successful execution of its acquisition programs. According to 
human capital officials in the acquisition directorate, as of April 
2009, the acquisition branch had 16 percent of positions unfilled, 
including key jobs such as contracting officers and systems engineers. 
Even as it attempts to fill its current vacancies, the Coast Guard 
plans to increase the size of its acquisition workforce significantly; 
the fiscal year 2010 budget request includes funding for 100 new 
acquisition workforce positions. In the meantime, the Coast Guard has 
been increasing its use of support contractors. 

What GAO Recommends: 

GAO recommends that the Coast Guard bring certain assets into 
compliance with its acquisition processes before exercising additional 
contract options, consult with DHS regarding an apparent inconsistency 
between their acquisition policies, and better present asset costs to 
Congress in its budget submissions. In written comments, the Coast 
Guard agreed with the first two items; DHS stated that it will take the 
third under advisement. 

View [hyperlink, http://www.gao.gov/products/GAO-09-682] or key 
components. For more information, contact John Hutton at (202) 512-4841 
or huttonj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Coast Guard Has Assumed the Role of Systems Integrator but Lags in 
Applying Disciplined Asset-Level Processes as It Continues with 
Procurements: 

Coast Guard Developing Better-Informed Cost and Schedule Estimates for 
Deepwater Assets, but Reporting May Not Keep Congress Fully Informed: 

Coast Guard Having Difficulty Staffing Government Acquisition Positions 
but Working to Improve Processes: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Homeland Security: 

Appendix III: GAO Contact and Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Information on Deepwater Assets: 

Table 2: Ongoing Work with ICGS (Then-year dollars in millions): 

Table 3: Changes in Asset Costs from 2007 Baseline as of June 2009: 

Table 4: Changes in Initial Operational Capability and Final Asset 
Delivery from 2007 Baseline for Selected Deepwater Assets: 

Table 5: Comparison of Budget Justification Elements: 

Figures: 

Figure 1: Percent of Total Deepwater Costs Appropriated through Fiscal 
Year 2009 and Breakout of Those Appropriations [then year dollars in 
millions] 

Figure 2: Directorate Relationships: 

Figure 3: Major Systems Acquisition Manual (MSAM) Phases and 
Acquisition Decision Events: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

July 14, 2009: 

The Honorable Robert C. Byrd: 
Chair: 
The Honorable George Voinovich: 
Ranking Member: 
Subcommittee on Homeland Security: 
Committee on Appropriations: 
United States Senate: 

The Honorable David E. Price: 
Chair: 
The Honorable Harold Rogers: 
Ranking Member: 
Subcommittee on Homeland Security: 
Committee on Appropriations: 
House of Representatives: 

The Deepwater Program--the largest acquisition program in the Coast 
Guard's history--began in the late 1990s as an effort to recapitalize 
the Coast Guard's operational fleet. The program now includes projects 
to build or modernize five classes each of ships and aircraft, and 
procurement of other capabilities such as improved command, control, 
communications, computers, intelligence, surveillance, and 
reconnaissance (C4ISR) and unmanned aircraft. Recognizing that it did 
not have in place a workforce with the experience and depth to manage 
the acquisition, the Coast Guard contracted with Integrated Coast Guard 
Systems (ICGS) in June 2002 as a systems integrator for Deepwater. 
[Footnote 1] After a series of programmatic failures, the Commandant 
acknowledged in April 2007 that the Coast Guard had relied too heavily 
on contractors to do the work of the government and that government and 
industry had failed to control costs. He announced several major 
changes to the acquisition approach for Deepwater, the key one being 
that the Coast Guard would take over the role of systems integrator 
from ICGS, with future work on individual assets to be potentially bid 
competitively outside of the existing contract. In May 2007, soon after 
this announcement, the Department of Homeland Security (DHS) approved 
an acquisition program baseline of $24.2 billion for the Deepwater 
Program.[Footnote 2] 

In response to a direction in the Senate report accompanying the 
Department of Homeland Security Appropriations Bill, 2009, and 
discussions with your staff, we (1) evaluated Coast Guard efforts to 
manage the Deepwater Program at both the overall system and asset 
levels; (2) assessed changes in cost, schedules, and capabilities from 
the 2007 baseline; and (3) identified Coast Guard efforts to build its 
acquisition workforce to manage this multibillion dollar program. This 
report updates information contained in our April 2009 testimony to the 
Homeland Security Subcommittee of the House Appropriations Committee. 
[Footnote 3] 

To conduct our work, we reviewed key Coast Guard documentation such as 
the Major Systems Acquisition Manual (MSAM), Blueprint for Acquisition 
Reform, original and recently approved acquisition program baselines, 
and human capital plans. We interviewed Coast Guard acquisition 
directorate officials, including program managers and contracting 
officers, and officials from other Coast Guard directorates such as 
those responsible for human capital issues and for assessing and 
developing operational requirements for Deepwater assets. We also 
interviewed officials from ICGS and its first-tier subcontractors 
Lockheed Martin and Northrop Grumman Shipbuilding. In addition, we 
relied in part on our past work on the Deepwater Program. Appendix I 
contains more information regarding our scope and methodology. We 
conducted this performance audit between September 2008 and July 2009 
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. 

Background: 

The Coast Guard is a multimission, maritime military service within 
DHS. The Coast Guard's responsibilities fall into two general 
categories--those related to homeland security missions, such as port 
security and vessel escorts, and those related to the Coast Guard's 
traditional missions, such as search and rescue and polar ice 
operations. To carry out these responsibilities, the Coast Guard 
operates a number of vessels and aircraft and, through its Deepwater 
Program, is currently modernizing or replacing a number of those 
assets. Since 2001, we have reviewed the Deepwater Program and have 
informed Congress, DHS, and the Coast Guard of the risks and 
uncertainties inherent in the acquisition. In June 2008, we reported on 
our assessment of the preliminary steps the Coast Guard had taken to 
revise its acquisition approach. For example, we found that the Coast 
Guard had increased accountability by bringing Deepwater under a 
restructured acquisition function and investing its government project 
managers with management and oversight responsibilities formerly held 
by ICGS. In addition, the Coast Guard had begun to manage Deepwater 
under an asset-based approach, resulting in increased government 
control and visibility over acquisitions. We concluded that while these 
steps were beneficial, continued oversight and improvement were 
necessary to further mitigate risks and made several recommendations, 
which the Coast Guard and DHS have taken actions to address.[Footnote 
4] 

At the start of the Deepwater Program in the late 1990s, the Coast 
Guard chose to use a system-of-systems acquisition strategy. A system- 
of-systems is defined as the set or arrangement of assets that results 
when independent assets are integrated into a larger system that 
delivers unique capabilities. As the systems integrator, ICGS was 
responsible for designing, constructing, deploying, supporting, and 
integrating the Deepwater assets into a system-of-systems. Under this 
approach, the Coast Guard provided the contractor with broad, overall 
performance specifications--such as the ability to interdict illegal 
immigrants--and ICGS determined the assets needed and their 
specifications. According to Coast Guard officials, the ICGS proposal 
was submitted and priced as a package; that is, the Coast Guard bought 
the entire solution and could not reject any individual component. In 
November 2006, the Coast Guard submitted a cost, schedule, and 
performance baseline to DHS that established the total acquisition cost 
of the ICGS solution at $24.2 billion and projected that the 
acquisition would be completed in 2027. In May 2007, shortly after the 
Coast Guard had announced its intention to take over the role of 
systems integrator, DHS approved the baseline. 

From fiscal year 2002 to fiscal year 2009, over $6 billion has been 
appropriated for the Deepwater Program, about 25 percent of the total 
anticipated costs of $24.2 billion. Figure 1 depicts a breakdown of how 
these appropriations have been allocated as of fiscal year 2009, 
including for integration and oversight functions; ongoing Deepwater 
assets; and assets that the Coast Guard has canceled or restructured. 

Figure 1: Percent of Total Deepwater Costs Appropriated through Fiscal 
Year 2009 and Breakout of Those Appropriations (Then-year dollars in 
millions): 

[Refer to PDF for image: illustration] 

Deepwater acquisition cost: ($24,230): 
Remaining cost: 75% ($18,218); 
Appropriations through fiscal year 2009: 25% ($6,012). 

Breakout of appropriations through fiscal year 2009: 
On-going assets: 81% ($4,849); 
Integration and oversight: 15% ($876); 
Canceled/restructured assets: 5% ($288). 

Source: GAO analysis of Coast Guard data. 

Note: Percentages may not add due to rounding. 

[End of figure] 

Regarding the breakout of appropriations through fiscal year 2009, the 
$876 million appropriated for integration and oversight has been 
allocated for activities such as planning for Deepwater logistics, 
obsolescence prevention, government program management, and systems 
engineering and integration. Of the $288 million allocated for canceled 
or restructured assets, the Coast Guard allocated about $134 million to 
ICGS for two projects that were subsequently canceled: an estimated $95 
million to extend the Coast Guard's 110-foot patrol boats by an 
additional 13 feet (known as the 123-foot patrol boat conversions) and 
approximately $39 million for the initial design of the Fast Response 
Cutter (known as FRC-A). The Coast Guard terminated the design efforts 
for the FRC-A in February 2008. In addition, three projects received 
significant funding before being restructured or redesigned. The Coast 
Guard allocated approximately $119 million to ICGS for the Vertical 
Unmanned Aerial Vehicle before stopping work on the design in 2007 due 
to developmental and cost concerns. Over $27 million was allocated for 
the Offshore Patrol Cutter (OPC) before design work was stopped in 
2006, and over $8 million was allocated for cutter small boats before a 
decision was made in 2008 to take a different acquisition approach for 
those assets. The Coast Guard is now considering alternative designs 
for all three of these assets. 

Table 1 describes in more detail the assets the Coast Guard is planning 
to procure or upgrade under the Deepwater Program according to approved 
acquisition baselines. 

Table 1: Information on Deepwater Assets: 

Asset: National Security Cutter (NSC); 
Quantity: 8 ships; 
Description: 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. 

Asset: Offshore Patrol Cutter (OPC); 
Quantity: 25 ships; 
Description: The OPC is intended to conduct patrols for homeland 
security functions, law enforcement, and search and rescue operations. 
It will be designed for long-distance transit, extended on-scene 
presence, and operations with multiple aircraft and boats. 

Asset: Fast Response Cutter (FRC); 
Quantity: 58 ships; 
Description: The FRC is conceived as a patrol boat with high readiness, 
speed, adaptability, and endurance to perform a wide range of missions. 
After terminating FRC-A design efforts, the Coast Guard pursued 
acquisition of a modified commercially available patrol boat. 

Asset: Medium Endurance Cutter Sustainment; 
Quantity: 27 ships; 
Description: The cutter sustainment project is intended to improve the 
cutters' operating and cost performance by replacing obsolete, 
unsupportable, or maintenance-intensive equipment. 

Asset: Patrol Boat Sustainment (110' patrol boats); 
Quantity: 20 boats; 
Description: The patrol boat sustainment project is intended to improve 
the boats' operating and cost performance by replacing obsolete, 
unsupportable, or maintenance-intensive equipment. 

Asset: Cutter Small Boats; 
Quantity: 124 boats; 
Description: Cutter small boats are an integral component of the 
planned capabilities for the larger cutters and patrol boats and are 
critical to achieving success in all operational missions. The Coast 
Guard is currently restructuring its cutter small boat programs. 

Asset: Maritime Patrol Aircraft (MPA); 
Quantity: 36 aircraft; 
Description: The MPA is intended to be a transport and surveillance, 
fixed-wing aircraft used to perform search and rescue missions, enforce 
laws and treaties, and transport cargo and personnel. 

Asset: HC-130J Long-Range Surveillance Aircraft; 
Quantity: 6 aircraft; 
Description: The HC-130J is a four-engine turbo-prop aircraft which the 
Coast Guard intends to deploy with improved interoperability, C4ISR, 
and sensors to enhance surveillance, detection, classification, 
identification, and prosecution. 

Asset: HC-130H Long-Range Surveillance Aircraft; 
Quantity: 16 aircraft; 
Description: The HC-130H is the legacy Coast Guard long-range 
surveillance aircraft which the Coast Guard intends to update with 
structural sustainability, improved interoperability, C4ISR, and 
sensors to enhance surveillance, detection, classification, 
identification, and prosecution. 

Asset: HH-65 Multimission Cutter Helicopter; 
Quantity: 102 aircraft; 
Description: The HH-65 Dolphin is the Coast Guard's short-range 
recovery helicopter. It is being upgraded in phases to improve its 
engines, communications equipment, avionics, and other capabilities. 

Asset: HH-60 Medium Range Recovery Helicopter; 
Quantity: 42 aircraft; 
Description: The HH-60J is a medium-range recovery helicopter designed 
to perform search and rescue missions offshore in all weather 
conditions. The Coast Guard intends to upgrade the helicopter's 
avionics, C4ISR, and other systems. 

Asset: Unmanned Aerial System; 
Quantity: To be determined; 
Description: The Coast Guard has deferred acquisition of this asset 
because of challenges in technology maturation of the ICGS proposed 
design. The Coast Guard continues its analysis of needs and 
alternatives, with an acquisition plan for this asset in development. 

Asset: Command, Control, Communications, Computers, Intelligence, 
Surveillance, Reconnaissance (C4ISR); 
Quantity: n.a.; 
Description: The Coast Guard is incrementally acquiring C4ISR 
capabilities including upgrades to existing cutters and shore 
installations, acquisitions of new assets, and development of a common 
operating picture to provide operationally relevant information and 
knowledge across the full range of Coast Guard operations. 

Source: GAO analysis of Coast Guard data. 

[End of table] 

Coast Guard Has Assumed the Role of Systems Integrator but Lags in 
Applying Disciplined Asset-Level Processes as It Continues with 
Procurements: 

The Coast Guard has assumed the role of systems integrator for 
Deepwater, concurrently downsizing the scope of systems engineering and 
integration work under contract with ICGS. In conjunction with its role 
as systems integrator, the Coast Guard has undertaken a fundamental 
reassessment of the capabilities and mix of assets it needs to meet its 
Deepwater missions. In addition, DHS and the Coast Guard have made 
improvements in oversight and management of Deepwater; for example, the 
Coast Guard has made progress in applying the MSAM acquisition process 
to individual Deepwater assets and made improvements to the process as 
a whole. However, the Coast Guard did not meet its goal of having all 
assets fully compliant with the MSAM by the end of March 2009. Hence, 
acquisition decisions for certain assets are being made without having 
completed some key acquisition documentation in light of what the Coast 
Guard views as pressing operational needs. 

Coast Guard Has Assumed Key Systems Integrator Roles and 
Responsibilities from ICGS and Reduced Contractor's Scope of Work: 

The role of systems integrator involves determining the mix of assets 
needed to fulfill mission needs, as well as designing, procuring, and 
integrating those assets into a system-of-systems capability greater 
than the sum of the individual parts. ICGS's role as systems integrator 
for the Deepwater Program included managing requirements, determining 
how assets would be acquired, defining how assets would be employed by 
Coast Guard users in an operational setting, and exercising technical 
authority over all asset design and configuration. In 2008, the Coast 
Guard acknowledged that in order to assume the role of systems 
integrator, it needed to define systems integrator functions and assign 
them to Coast Guard stakeholders. As a result, the Coast Guard has 
established new relationships among its directorates to assume control 
of key systems integrator roles previously carried out by the 
contractor. Through a series of policy changes and memoranda, the Coast 
Guard formally designated certain directorates as technical authorities 
responsible for establishing, monitoring, and approving technical 
standards for Deepwater assets related to design, construction, 
maintenance, logistics, C4ISR, and life-cycle staffing and training. 
Furthermore, the Coast Guard's capabilities directorate is now 
responsible for determining operational requirements and the asset mix 
to satisfy those requirements. This directorate is expected to 
collaborate with the technical authorities to ensure that the Coast 
Guard's technical standards are incorporated during the requirements 
development process. Finally, the acquisition directorate's program and 
project managers are responsible for procuring the assets and are to be 
held accountable for ensuring that they fulfill the operational 
requirements and the technical authority standards established by the 
other directorates. 

The collaborative relationships among the Coast Guard directorates 
discussed above are depicted in figure 2. 

Figure 2: Directorate Relationships: 

[Refer to PDF for image: illustration] 

Technical authorities: 
* Human Resources (CG-1); 
* Engineering and Logistics (CG-4); 
* Command, Control, Communications, Computers and Information 
Technology (CG-6). 

Requirements: 
* Assistant Commandant for Capability (CG-7); 
- Direct relationship with Human Resources; 
- Direct relationship with Acquisitions. 

Acquisitions: 
* Assistant Commandant for Acquisitions (CG-9); 
- Direct relationships with Command, Control, Communications, Computers 
and Information Technology (CG-6); 
- Direct relationship with Requirements. 

Source: GAO analysis of Coast Guard data. 

[End of figure] 

When it contracted with ICGS in 2002, the Coast Guard lacked insight 
into how the contractor's proposed solution for Deepwater would meet 
overall mission needs. This situation limited the Coast Guard's ability 
to make informed decisions about possible trade-offs between cost and 
capability. As a way of improving its insight, the capabilities 
directorate has initiated a fundamental reassessment of the 
capabilities and mix of assets the Coast Guard needs to fulfill its 
Deepwater missions. The goals of this fleet mix analysis include 
validating mission performance requirements and revisiting the number 
and mix of all assets that are part of the Deepwater Program. A 
specific part of the study will also analyze alternatives and 
quantities for the OPC, which currently accounts for a projected $8 
billion--about 33 percent--of total Deepwater costs. Coast Guard 
leadership intends to base future procurement decisions on the results 
of this analysis, which is expected to be completed in the summer of 
2009. According to a senior official in the capabilities directorate, 
the directorate has recommended that this type of analysis be repeated 
every 4 years, or once during each commandant's tenure. 

In conjunction with assuming the role of systems integrator, the Coast 
Guard has reduced the scope and volume of ICGS's systems engineering 
and integration functions. For example, the most recent systems 
engineering and integration task order, issued to ICGS in March 2009, 
is limited to support services such as data management and quality 
assurance for the assets currently on contract with ICGS, such as the 
Maritime Patrol Aircraft (MPA), the National Security Cutter (NSC), and 
C4ISR. By contrast, under the prior systems engineering and integration 
task order, ICGS was responsible for systems integrator functions such 
as developing the mix of assets to meet Coast Guard missions, the 
development of operational concepts, requirements management, test and 
evaluation management, and a number of other program management and 
system-of-systems level functions. 

While the Coast Guard does not intend to cancel ongoing orders with 
ICGS for services or assets, it does not plan to acquire future assets 
from ICGS. A step in this direction was the September 2008 competitive 
award of the Fast Response Cutter to Bollinger Shipyards, Inc.[Footnote 
5] Further, while ICGS will continue to be responsible for the 
construction and delivery of the first three NSCs, the Coast Guard 
intends to award contracts for construction and long-lead-time 
materials for future NSCs directly to ICGS subcontractor Northrop 
Grumman Shipbuilding. The Coast Guard's decision was formalized in a 
March 2009 contract modification with ICGS stating that it will not 
award future work to ICGS after the current award term ends in January 
2011.[Footnote 6] 

Table 2 shows that, as of May 2009, the Coast Guard has about $2.3 
billion under contract with ICGS in ongoing work. The table does not 
include the total potential value of options and modifications that 
could be exercised before the current award term expires. 

Table 2: Ongoing Work with ICGS (Then-year dollars in millions): 

Items under contract: National Security Cutter; 
Obligations as of May 2009: 1,354.8. 

Items under contract: National Security Cutter 1 (Production and long 
lead materials); 
Obligations as of May 2009: $511.0 million. 

Items under contract: National Security Cutter 2 (Production); 
Obligations as of May 2009: $331.6 million. 

Items under contract: National Security Cutter 3 (Long lead materials); 
Obligations as of May 2009: $75.5 million. 

Items under contract: National Security Cutter 3 (Production); 
Obligations as of May 2009: $337.5 million. 

Items under contract: National Security Cutter 4 (Long lead materials); 
Obligations as of May 2009: $99.2 million. 

Items under contract: HC-130J Long-Range Surveillance Aircraft; 
Obligations as of May 2009: $141.7 million. 

Items under contract: Maritime Patrol Aircraft; 
Obligations as of May 2009: $508.2 million. 

Items under contract: Aircraft 1 to 3 and Mission Equipment for 1 to 3; 
Obligations as of May 2009: $171.4 million. 

Items under contract: Aircraft 4 to 8; 
Obligations as of May 2009: $171.8v. 

Items under contract: Aircraft 9 to 11 and Mission Equipment for 4 to 
12; 
Obligations as of May 2009: $165.0 million. 

Items under contract: C4ISR; 
Obligations as of May 2009: $285.1 million. 

Items under contract: Increment 1 (Concept and Preliminary Design); 
Obligations as of May 2009: $73.8 million. 

Items under contract: Increment 1 (Detail Design and Development); 
Obligations as of May 2009: $141.3 million. 

Items under contract: Increment 2 (Concept and Preliminary Design); 
Obligations as of May 2009: $16.2 million. 

Items under contract: Increment 2 (Detail Design and Development); 
Obligations as of May 2009: $32.5v. 

Items under contract: Test Center; 
Obligations as of May 2009: $5.3 million. 

Items under contract: Software Engineering; 
Obligations as of May 2009: $16.0 million. 

Items under contract: Systems Engineering and Integration; 
Obligations as of May 2009: $56.9 million. 

Items under contract: Total; 
Obligations as of May 2009: $2,346,700,000. 

Source: GAO analysis of Coast Guard data. 

[End of table] 

Coast Guard and DHS Have Improved Oversight of the Deepwater Program 
but Gaps in Knowledge Remain Even as Production and Award of New 
Contracts Proceed: 

Since our June 2008 report on the Deepwater Program, and taking into 
account our recommendations, the Coast Guard and DHS have taken steps 
to improve management and oversight of Deepwater.[Footnote 7] We 
reported, for example, that the Coast Guard had transitioned from a 
system-of-systems acquisition approach to an asset-based approach that 
reflects the disciplined and formalized process outlined in its MSAM. 
While the introduction of this process was a significant improvement, 
we found that the absence of a key milestone decision point before low- 
rate initial production begins was problematic and put program outcomes 
at risk. In response to our recommendation, the Coast Guard revised its 
MSAM to require a formal design review, termed "acquisition decision 
event 2B," to ensure that risks are appropriately addressed before low- 
rate initial production is authorized. The MSAM phases and acquisition 
decision events are shown in figure 3. 

Figure 3: Major Systems Acquisition Manual (MSAM) Phases and 
Acquisition Decision Events: 

[Refer to PDF for image: illustration] 

Project Identification: 
Need: 
* 0: Acquisition decision event; 
Analyze/Select: 
* 1: Acquisition decision event; 
* Begin acquisition: 
Obtain; 
* 2A: Acquisition decision event; 
* 2B: Acquisition decision event; 
* Approve low-rate initial production: 
Produce/Deploy/Support: 
* 3: Acquisition decision event; 
* Approve full-rate production; 

Source: Coast Guard’s major systems acquisition manual. 

[End of figure] 

The Coast Guard has made other improvements to its MSAM process. For 
example, the MSAM now includes standardized cost-estimating procedures 
to provide an accounting of all resources required to develop, produce, 
deploy, and sustain a program. Before, there was minimal guidance in 
the manual about the cost-estimating process; it now includes a full 
description of the process and a cost-estimating template for project 
managers. The MSAM process was also revised to require acquisition 
planning and an early affordability assessment prior to acquisition 
decision event 1 (the "analyze/select" phase), to help inform the 
budget and planning processes. 

DHS has also improved its oversight and management of the Deepwater 
Program by reviewing the program under its own acquisition processes. 
In June 2008, we reported that DHS approval of Deepwater acquisition 
decisions at key points in the program was not required, as the 
department had deferred decisions on specific assets to the Coast Guard 
in 2003. We recommended that DHS rescind the delegation of Deepwater 
acquisition authority, and, in September 2008, the Under Secretary did 
so. As a result, DHS officials are now formally involved in reviewing 
and approving acquisition decisions for Deepwater assets at key points 
in the program's life cycle. In November 2008, DHS issued a new interim 
management directive that, if implemented as intended, should help 
ensure that the department's largest acquisitions, including Deepwater, 
are more effectively overseen and managed.[Footnote 8] 

Because the Coast Guard had previously exempted Deepwater from its MSAM 
process, assets were procured without following a disciplined program 
management approach. Recognizing the importance of ensuring that each 
acquisition project is managed through a sustainable and repeatable 
process and wanting to adhere to proven acquisition procedures, in July 
2008 the Coast Guard set a goal of completing the MSAM acquisition 
management activities for all Deepwater assets by the end of March 
2009. However, of the 13 Deepwater assets, 9 were behind schedule in 
terms of MSAM compliance as of May 2009, as not all required documents 
and processes had been completed. Not complying with the MSAM process 
puts the Coast Guard at risk of buying assets that do not fully meet 
its needs and that may experience cost growth and schedule slips. 

Offshore Patrol Cutter and Unmanned Aerial System: 

Assets that are early in the development cycle, such as the Offshore 
Patrol Cutter (OPC) and the Unmanned Aerial System, are at present 
compliant with the MSAM process. For example, the MSAM directs the 
capabilities directorate to charter an integrated product team to 
develop operational requirements for Coast Guard assets. This approach 
is currently being applied to the OPC, which is in the "analyze/select" 
phase of the MSAM process. In accordance with MSAM guidelines, the OPC 
requirements team includes representatives from the Coast Guard's 
technical authorities, acquisition project managers, test and 
evaluation officials, and research and development officials. The goal 
of this process is to develop operational requirements that are 
specific, testable, prioritized, and defendable in order to adequately 
support the acquisition process and satisfy users' needs. The Coast 
Guard plans to continue to follow the MSAM process, under which the 
operational requirements document and other key acquisition documents 
will be approved by the Coast Guard and DHS prior to the OPC entering 
the "obtain" phase, when capabilities are developed and demonstrated. 
For the Unmanned Aerial System, currently in the "need" phase of the 
acquisition process, the Coast Guard's Office of Research, Development, 
Test and Evaluation is currently conducting preacquisition studies and 
tests to identify alternative approaches to fulfilling mission 
requirements for maritime surveillance and inform early cost estimates. 
Through these activities, the Coast Guard intends to mitigate risks by 
identifying approaches with high levels of technical and production 
maturity and leveraging development efforts underway by the Department 
of Defense and DHS. 

Maritime Patrol Aircraft and National Security Cutter: 

For assets well into production, such as the MPA and the NSC, the Coast 
Guard has made some progress in the past year in retroactively 
developing acquisition documentation with the intent of providing the 
traceability from mission needs to operational performance that was 
previously lacking. For example, the Coast Guard approved an 
operational requirements document for the MPA in October 2008, to 
establish a formal performance baseline and identify attributes for 
testing. Through this process, the Coast Guard discovered that ICGS's 
requirement for operational availability (the amount of time that an 
aircraft is available to perform missions) was excessive compared to 
the Coast Guard's own standards. According to a senior Coast Guard 
official responsible for managing aviation assets, the ICGS requirement 
would have needlessly increased costs to maintain and operate the 
aircraft. 

In addition to revisiting its requirements for the MPA, the Coast Guard 
is also revising its plans to test and procure the asset. In February 
2009, the Coast Guard submitted an MPA test plan to DHS with the intent 
of obtaining approval for full-rate production based on the results of 
a November 2008 operational assessment conducted by the U.S. Navy's 
Commander Operational Test and Evaluation Force (COMOPTEVFOR).[Footnote 
9] In April 2009, the DHS Director, Operational Test and Evaluation, 
approved the plan for testing leading up to initial operational test 
and evaluation, but required the Coast Guard to update and resubmit the 
plan before operational testing begins. DHS and Coast Guard policy 
require operational testing to be conducted before full-rate production 
is approved. According to the senior official responsible for managing 
aviation assets, the Coast Guard now plans to obtain DHS approval to 
order further low-rate initial production aircraft at the next MPA 
acquisition decision event, scheduled for the end of fiscal year 2009. 
With 11 of 36 MPAs already delivered or on contract, the Coast Guard 
has already made a significant investment in this program before the 
testing that would demonstrate that what it is buying meets Coast Guard 
needs. 

DHS also required the Coast Guard to obtain concurrence with the test 
plan from an operational test authority before proceeding with 
operational testing of the MPA. According to DHS and Coast Guard 
policy, operational testing should be conducted with the approval and 
under the oversight of an independent operational test authority to 
ensure that tests are clearly linked to requirements and mission needs. 
However, the MSAM appears to be inconsistent with DHS policy regarding 
who this test authority should be. The DHS Acquisition Guidebook states 
that an operational test authority should be independent of both the 
acquirer and user, which allows the test authority to present objective 
and unbiased conclusions about an asset's operational effectiveness and 
suitability. Further, a DHS directive on test and evaluation issued in 
May 2009 distinguishes between the "sponsor" (or user of the system), 
who is responsible for defining the system's operational requirements, 
and the operational test agent, who plans, conducts, and reports 
independent operational test and evaluation results. The MSAM, on the 
other hand, assigns responsibility for planning and conducting 
operational testing to the sponsor--the Coast Guard's capabilities 
directorate--which represents the end user. While the Coast Guard has a 
memorandum of agreement with COMOPTEVFOR to leverage the Navy's 
experience and expertise in conducting operational testing for the MPA, 
the Coast Guard's position is that its capabilities directorate can 
function as the operational test authority, as it is independent of the 
acquisition program office. The Director, DHS Test & Evaluation and 
Standards said that, particularly given the recent change to the 
department's test and evaluation directive, the MSAM does not appear to 
be consistent with DHS policy regarding the operational test authority. 

The Coast Guard has also made a significant investment in the NSC 
program before completing operational testing to demonstrate that the 
capabilities it is buying meet Coast Guard needs. While some testing of 
the NSC has already taken place, the tests conducted to date do not 
substitute for the complete scope of operational testing that should be 
the basis for further investment. For example, COMOPTEVFOR completed an 
operational assessment of the NSC in 2007 to identify risks to the 
program's successful completion of operational testing. Before the 
first NSC was delivered, it also underwent acceptance trials, conducted 
by the U.S. Navy Board of Inspection and Survey, to determine 
compliance with contract requirements and to test system capabilities. 
Since delivery of the first NSC, the Coast Guard has also conducted 
flight deck and combat system certifications with the assistance of the 
Navy. While these demonstrations and certifications provide evidence 
that the first NSC functions as intended, they do not fully demonstrate 
the suitability and effectiveness of the ship for Coast Guard 
operations. According to officials, a test plan to demonstrate these 
capabilities is expected to be approved in July 2009, and COMOPTEVFOR 
may begin operational testing in March 2010. However, by the time full 
operational testing is scheduled to be completed in 2011, the Coast 
Guard plans to have six of eight NSCs either built or under contract. 

Fast Response Cutter and C4ISR: 

Based on its determination that the need for the capabilities to be 
provided by the Fast Response Cutter and C4ISR is pressing, the Coast 
Guard has contracted for these capabilities without having in place all 
acquisition documentation required by the MSAM. This situation puts the 
Coast Guard at risk for cost overruns and schedule slips if it turns 
out that what it is buying does not meet its requirements. For example, 
in September 2008, after conducting a full and open competition, the 
Coast Guard awarded an $88.2 million contract to Bollinger Shipyards, 
Inc. for the design and construction of a lead Fast Response Cutter. 
Prior to the award, however, the Coast Guard did not have an approved 
operational requirements document or test plan for this asset as 
required by the MSAM process. Recognizing the risks inherent in this 
approach, the Coast Guard developed a basic requirements document and 
an acquisition strategy based on procuring a proven design. These 
documents were reviewed and approved by the Coast Guard's capabilities 
directorate, the engineering and logistics directorate, and chief of 
staff before the procurement began. The Coast Guard's next acquisition 
decision event is scheduled for the first quarter of fiscal year 2010 
to obtain DHS approval for low-rate initial production. According to 
officials, the Coast Guard intends to submit an operational 
requirements document and test plan to DHS for this acquisition 
decision event. With plans to exercise contract options for hulls 2 
through 8 in fiscal year 2010, the Coast Guard's aggressive schedule 
leaves little room for unforeseen problems. Program risks are 
compounded by the fact that the Coast Guard plans to have at least 12 
cutters either delivered or under contract prior to the scheduled 
completion of operational testing in fiscal year 2012, before it has 
certainty that what it is buying meets Coast Guard needs. 

The Coast Guard has also continued its procurement of C4ISR 
capabilities without an approved operational requirements document as 
required by the MSAM. C4ISR encompasses the connections between 
surface, aircraft, and shore-based assets and is intended to provide 
operationally relevant information to Coast Guard field commanders. 
Design and development costs for the first increment of C4ISR have 
increased significantly, from $55.5 million to $141.3 million. 
According to Coast Guard officials, this increase was due in part to 
the structure of the ICGS contract, under which the Coast Guard lacked 
visibility into the contractor's software development processes and 
requirements. In addition, the ICGS C4ISR solution developed under the 
first increment contained Lockheed Martin-proprietary software, making 
the Coast Guard reliant on the contractor for maintenance and support. 

In February 2009, the Coast Guard issued a task order to ICGS, with a 
total potential value of $77.7 million, for a second increment of C4ISR 
design and development.[Footnote 10] It was not until May 2009, 
however, that the capabilities directorate reviewed and concurred with 
the capabilities identified in the acquisition plan. Coast Guard 
officials stated that the Coast Guard's technical authority for C4ISR 
reviewed the acquisition plan and statement of work to ensure 
conformance with Coast Guard technical standards, but the officials 
said there is no operational requirements document for this increment. 
The lack of operational requirements may put the program at continued 
risk of cost increases if the Coast Guard determines that what it is 
buying does not meet its needs. Through the award of the second C4ISR 
increment, the Coast Guard has acquired some of the data rights to the 
proprietary software developed under the first increment. The Coast 
Guard's goal is to gain greater visibility into the software in order 
to compete future increments. According to officials, future decisions 
about the C4ISR acquisition rest on the Coast Guard's ability to 
affordably maintain and support the C4ISR software and ensure 
interoperability between Deepwater assets and the Coast Guard as a 
whole; however, the Coast Guard has not yet determined how it will do 
so. According to officials, acquisition of the third C4ISR increment 
will adhere to the MSAM process, and documents critical to determining 
and testing requirements and capabilities will be completed and 
approved by DHS before the Coast Guard proceeds with a contract award 
in about 2 years. 

Coast Guard Developing Better-Informed Cost and Schedule Estimates for 
Deepwater Assets, but Reporting May Not Keep Congress Fully Informed: 

Due in part to the Coast Guard's increased insight into what it is 
buying, the anticipated cost, schedules, and capabilities of many of 
the Deepwater assets have changed since the establishment of the $24.2 
billion baseline in 2007. Coast Guard officials have stated that this 
baseline reflected not a traditional cost estimate, but rather the 
anticipated contract costs as determined by ICGS. As the Coast Guard 
has developed its own cost baselines, it has become apparent that some 
of the assets will likely cost more than anticipated. Information to 
date shows that the total cost of the program will likely grow by at 
least $2.7 billion. This represents growth of approximately 39 percent 
for those assets with revised cost estimates. Furthermore, assets may 
be ready for operational use later than anticipated in the 2007 
baseline and, at least initially, lack some of the capabilities 
envisioned. As the Coast Guard develops more baselines, further cost 
and schedule growth is likely to become apparent. While the Coast Guard 
plans to update its annual budget requests with this new information, 
the current structure of its budget submission to Congress does not 
include details at the asset level, such as estimates of total costs 
and total numbers to be procured. 

Better-Informed Baselines Suggest Deepwater Costs Could Exceed $24.2 
Billion: 

The $24.2 billion baseline for the Deepwater Program established cost, 
schedule, and operational requirements for the Deepwater system as a 
whole; these were then allocated to the major assets. Coast Guard 
officials have stated that this baseline reflected not a traditional 
cost estimate but ICGS's anticipated contract costs. Furthermore, the 
Coast Guard lacked insight into how ICGS arrived at some of the costs 
for Deepwater assets. As the Coast Guard has assumed greater 
responsibility for management of the Deepwater Program, it has begun to 
improve its understanding of costs by establishing new baselines for 
individual assets based on its own cost estimates. These baselines 
begin at the asset level and are developed by Coast Guard project 
managers, validated by a separate office conducting independent cost 
estimates within the acquisition branch and, in most cases, are 
reviewed and approved by DHS. The estimates use common cost-estimating 
procedures and assumptions and account for costs not previously 
captured. As of June 2009, the Coast Guard had prepared 10 revised 
asset baselines. Two were approved by the Coast Guard (for the 
sustainment projects for the medium endurance cutter and the patrol 
boats) and 8 had been submitted to DHS, which had approved 5 of them. 
These new baselines are formulated using various sources of 
information, depending on the acquisition phase of the asset. For 
example, the baseline for the NSC was updated using the actual costs of 
material, labor, and other considerations already in effect at the 
shipyards. The baselines for other assets, like the MPA, were updated 
using independent cost estimates. As the Coast Guard approaches major 
milestones on Deepwater assets, such as the decision to enter low-rate 
initial production or to begin system development, officials have 
stated that the cost estimates for all assets will be reassessed and 
revalidated. 

In developing its own asset baselines, the Coast Guard has found that 
some of the assets will likely cost more than anticipated. As of June 
2009, with 7 of the 10 baselines approved, the total cost of the 
program will likely exceed $24.2 billion, with potential cost growth of 
approximately $2.7 billion. For the assets with revised cost estimates, 
this represents cost growth of approximately 39 percent. As baselines 
for the additional assets are approved, further cost growth will likely 
become apparent. Table 3 provides the revised estimates of asset costs 
available as of June 2009. It does not reflect the roughly $3.6 billion 
in other Deepwater costs, such as program management, that the Coast 
Guard states do not require a new baseline. 

Table 3: Changes in Asset Costs from 2007 Baseline as of June 2009 
(Dollars in millions): 

Asset: National Security Cutter; 
2007 Baseline: $3,450; 
Current estimate: $4,749; 
Change: $1,299. 

Asset: Offshore Patrol Cutter; 
2007 Baseline: $8,098; 
Current estimate: Baseline in development, due November 2009. 

Asset: Fast Response Cutter[A]; 
2007 Baseline: $3,206; 
Current estimate: Baseline submitted to DHS February 2009. 

Asset: Medium Endurance Cutter Sustainment; 
2007 Baseline: $317; 
Current estimate: $321[B]; 
Change: $4. 

Asset: Patrol Boat Sustainment (110' patrol boats); 
2007 Baseline: $117; 
Current estimate: $194[B]; 
Change: $77. 

Asset: Maritime Patrol Aircraft; 
2007 Baseline: $1,706; 
Current estimate: $2,400; 
Change: $694. 

Asset: HC-130J Long-Range Surveillance Aircraft; 
2007 Baseline: $11; 
Current estimate: $176; 
Change: $165. 

Asset: HC-130H Long-Range Surveillance Aircraft; 
2007 Baseline: $610; 
Current estimate: $745; 
Change: $135. 

Asset: HH-65 Multimission Cutter Helicopter; 
2007 Baseline: $741; 
Current estimate: $1,041[C]; 
Change: $300. 

Asset: HH-60 Medium Range Recovery Helicopter; 
2007 Baseline: $451; 
Current estimate: Baseline submitted to DHS December 2008. 

Asset: Cutter Small Boats; 2007 
Baseline: $110; 
Current estimate: Baseline in development, due June 2009. 

Asset: Unmanned Aerial System; 
2007 Baseline: $503; 
Current estimate: Baseline in development. 

Asset: C4ISR; 2007 
Baseline: $1,353; 
Current estimate: Baseline submitted to DHS January 2009. 

Source: GAO analysis of Coast Guard data. 

Note: If the approved baselines present both threshold and objective 
costs, threshold costs (which are the maximum allowable costs) are 
used. 

[A] In the 2007 baseline, costs for two variants of the Fast Response 
Cutter were presented. The new baseline will present the total costs 
for the recently awarded design. 

[B] The baselines for these assets were approved within the Coast 
Guard. 

[C] Reflects only the cost of upgrades planned under the 2007 Deepwater 
baseline and does not include certain other capabilities now included 
in the revised baseline. A detailed cost estimate for portions of the 
planned upgrades has not been completed, so additional revisions may 
occur in the future. 

[End of table] 

The Coast Guard's new baselines provide not only a better understanding 
of the costs of Deepwater assets, but also insight into the drivers of 
any cost growth. For example, the new NSC baseline attributes a $1.3 
billion rise in cost to a range of factors, from the additional costs 
to correct fatigue issues on the first three cutters--estimated by the 
Coast Guard to add an additional $86 million--to changes in economic 
factors such as labor and commodity prices that add an additional $434 
million to the cost of the first four ships. The $517 million rise in 
cost for the MPA is attributed primarily to items that were not 
previously accounted for, including $36 million for a training 
simulator, $30.6 million in facility improvements, and $124 million for 
sufficient spare parts. An additional $115.9 million is attributable to 
cost growth for the aircraft and engineering changes. 

The Coast Guard has structured some of the new baselines to indicate 
how cost growth could be controlled by making trade-offs in asset 
quantities and/or capabilities. For example, the new MPA baseline 
includes cost increments that show the acquisition may be able to 
remain within the $1.7 billion estimate established in the 2007 
baseline if 8 fewer aircraft than the planned 36 are acquired. Coast 
Guard officials have stated that other baselines currently under review 
by DHS present similar cost increments. This information, if combined 
with data from the fleet mix study to show the effect of quantity or 
capability reductions on the system-of-systems as a whole, offers an 
opportunity to the Coast Guard for serious discussions of cost and 
capability trade-offs. Given the approximately 39 percent cost growth 
for the Deepwater assets that have revised cost estimates, the trade- 
off assessment is critical--particularly with regard to the OPC, which 
currently represents a substantial portion of the planned Deepwater 
investment. 

The Coast Guard's reevaluation of baselines has also improved insight 
into the schedules for when assets will first be available for 
operations and when final assets will be delivered. For example, the 
initial operating capability of the first NSC has been delayed by a 
year as compared to the schedule in the 2007 baseline, and the MPA has 
been delayed by 21 months. Table 4 provides more information on initial 
operational capability and final asset delivery schedules for Deepwater 
assets that have had revised baselines approved. Other assets have 
baselines either with DHS for approval or are in development. 

Table 4: Changes in Initial Operational Capability and Final Asset 
Delivery from 2007 Baseline for Selected Deepwater Assets: 

Asset: National Security Cutter; 
Initial operational capability: 2007 Baseline: FY 2008; 
Initial operational capability: Current estimate: FY 2009; 
Initial operational capability: Change: 12 months; 
Final asset delivery: 2007 Baseline: FY 2014; 
Final asset delivery: Current estimate: FY 2016; 
Final asset delivery: Change: 24 months. 

Asset: Medium Endurance Cutter Sustainment; 
Initial operational capability: 2007 Baseline: FY 2006; 
Initial operational capability: Current estimate: FY 2006; 
Initial operational capability: Change: 0 months; 
Final asset delivery: 2007 Baseline: FY 2016; 
Final asset delivery: Current estimate: FY 2017; 
Final asset delivery: Change: 17 months. 

Asset: Patrol Boat Sustainment (110' patrol boats); 
Initial operational capability: 2007 Baseline: FY 2009; 
Initial operational capability: Current estimate: FY 2007; 
Initial operational capability: Change: (18 months); 
Final asset delivery: 2007 Baseline: FY 2013; 
Final asset delivery: Current estimate: FY 2014; 
Final asset delivery: Change: 17 months. 

Asset: Maritime Patrol Aircraft; 
Initial operational capability: 2007 Baseline: FY 2008; 
Initial operational capability: Current estimate: FY 2009; 
Initial operational capability: Change: 21 months; 
Final asset delivery: 2007 Baseline: FY 2016; 
Final asset delivery: Current estimate: FY 2020; 
Final asset delivery: Change: 57 months. 

Asset: HC-130J Long-Range Surveillance Aircraft; 
Initial operational capability: 2007 Baseline: FY 2008; 
Initial operational capability: Current estimate: FY 2009; 
Initial operational capability: Change: 3 months; 
Final asset delivery: 2007 Baseline: FY 2009; 
Final asset delivery: Current estimate: FY 2011; 
Final asset delivery: Change: 21 months. 

Asset: HC-130H Long-Range Surveillance Aircraft; 
Initial operational capability: 2007 Baseline: FY 2013; 
Initial operational capability: Current estimate: To be determined; 
Final asset delivery: 2007 Baseline: FY 2017; 
Final asset delivery: Current estimate: To be determined. 

Asset: HH-65 Multimission Cutter Helicopter; 
Initial operational capability: 2007 Baseline: FY 2009; 
Initial operational capability: Current estimate: To be determined; 
Final asset delivery: 2007 Baseline: FY 2013; 
Final asset delivery: Current estimate: To be determined. 

Source: GAO analysis of Coast Guard data. 

Note: If the approved baselines present both threshold and objective 
dates, threshold dates (which are the latest allowable dates) are used. 

[End of table] 

Since many Deepwater assets are intended to replace older Coast Guard 
assets, delays in their introduction and final deliveries could have an 
effect beyond the Deepwater Program. For example, the NSC--together 
with the OPC--is intended to replace older High Endurance and Medium 
Endurance Cutters, some of which have been in service for over 40 
years. According to Coast Guard officials, the longer these older 
cutters remain in service--due to a delay in the introduction of the 
NSC or the OPC to the fleet or delays in delivering all of the assets-
-the more funding will be required for maintenance of assets that are 
being replaced. According to a senior official in the Coast Guard's 
acquisition directorate, additional, unplanned funding will be required 
for a sustainment project to keep the High Endurance Cutters in service 
longer than anticipated. An acquisition strategy to achieve this 
project is currently in development. 

The Coast Guard's reevaluation of baselines has also changed its 
understanding of the capabilities of Deepwater assets. For example, 
Coast Guard officials stated that the restructuring of the unmanned 
aircraft and small boat projects has delayed the deployment of these 
assets with the first NSC and reduces the ship's anticipated 
capabilities in the near term. We plan to report this summer on the 
operational effect of these delays on the NSC. 

Current Budget Reporting Lacks Detail at Asset Level and Limits 
Congressional Insight: 

The Coast Guard's budget submission, as currently structured, limits 
Congress's understanding of details at the asset level in so far as it 
does not include key information such as assets' total acquisition 
costs or, for the majority of assets, the total quantities planned. For 
example, while the justification of the NSC request includes a detailed 
description of expected capabilities and how these capabilities link to 
the Coast Guard's missions and activities funded by past 
appropriations, it does not include estimates of total program cost, 
future award or delivery dates of remaining assets, or even the total 
number of assets to be procured. 

Our past work has emphasized that one key to a successful capital 
acquisition, such as the multibillion-dollar ships and aircraft the 
Coast Guard is procuring, is budget submissions that clearly 
communicate needs.[Footnote 11] An important part of this communication 
is to provide decision makers with information about cost estimates, 
risks, and the scope of a planned project before substantial resources 
are committed. Good budgeting also requires that the full costs of a 
project be considered upfront when decisions are made. Other federal 
agencies that acquire systems similar to those of the Coast Guard, such 
as the Department of Defense, capture these elements in justifications 
of their budget requests. To illustrate, table 5 provides a comparison 
of the information found in the NSC budget justification with that the 
Navy is required to use in the Department of Defense regulations for 
its shipbuilding programs. 

Table 5: Comparison of Budget Justification Elements: 

Coast Guard (NSC): 
Prior-year allocation: [Check]; 
Current request: [Check]; 
5-year outlook: [Check]; 
Future contract awards: [Empty]; 
Total acquisition cost: [Empty]; 
Total asset quantities: [Empty]. 

Navy: 
Prior-year allocation: [Check]; 
Current request: [Check]; 
5-year outlook: [Check]; 
Future contract awards: [Check]; 
Total acquisition cost: [Check]; 
Total asset quantities: [Check]. 

Source: GAO analysis. 

[End of table] 

While the Coast Guard's asset-level Quarterly Acquisition Reports to 
Congress and the annual Deepwater Program Expenditure Report include 
some information on total costs and quantities, these documents are 
provided only to the appropriations committees, and they contain 
selected information that is restricted due to acquisition sensitive 
material. The budget justification prepared by the Coast Guard is a 
tool that Congress uses in its budget and appropriations deliberations. 
Presentation of information on the full costs and quantities of 
Deepwater assets in the Coast Guard's budget submission can provide 
Congress greater insights in fulfilling its roles of providing funding 
and conducting oversight. 

Coast Guard Having Difficulty Staffing Government Acquisition Positions 
but Working to Improve Processes: 

The Coast Guard sought a systems integrator at the outset of the 
Deepwater Program in part because its workforce lacked the experience 
and depth to manage the acquisition internally. The Coast Guard 
acknowledges that it still faces challenges in hiring and retaining 
qualified acquisition personnel and that this situation poses a risk to 
the successful execution of its acquisition programs. According to 
human capital officials in the acquisition directorate, as of April 
2009 the acquisition branch had funding for 855 military and civilian 
personnel and had filled 717 of these positions--leaving 16 percent 
unfilled. The Coast Guard has identified some of these unfilled 
positions as core to the acquisition workforce, such as contracting 
officers and specialists, program management support staff, and 
engineering and technical specialists. Even as it attempts to fill its 
current vacancies, the Coast Guard plans to increase the size of its 
acquisition workforce significantly by the end of fiscal year 2011. For 
example, the Coast Guard's fiscal year 2010 budget request includes 
funding for 100 new acquisition workforce positions, and the Coast 
Guard anticipates requesting funding for additional positions in future 
budget requests. 

Coast Guard Has Expanded Collaboration with Independent Third Parties 
and Increased Use of Support Contractors to Assist with Acquisitions: 

To supplement and enhance its internal expertise, the Coast Guard has 
increased its use of third-party, independent experts from outside both 
the Coast Guard and existing Deepwater contractors. For example, a 
number of organizations within the Navy have provided views and 
expertise on a wide range of issues, including testing and safety. In 
addition, the Coast Guard plans to use the American Bureau of Shipping, 
an organization that establishes and applies standards for the design 
and construction of ship and other marine equipment, as an advisor and 
independent reviewer on the design and construction of the Fast 
Response Cutter. The Coast Guard has also begun a relationship with a 
university-affiliated research center to supplement its expertise as it 
executes its fleet-mix analysis. 

In addition to third-party experts, the Coast Guard has been increasing 
its use of support contractors. As of fiscal year 2009, approximately 
170 contractor employees supported the acquisition directorate, a 
number that has steadily increased in recent years. These contractors 
are performing a variety of services--some of which support functions 
the Coast Guard has identified as core to the government acquisition 
workforce--including project management support, engineering, contract 
administration, and business analysis and management. While support 
contractors can provide a variety of essential services, their use must 
be carefully overseen to ensure that they do not perform inherently 
governmental roles.[Footnote 12] The Coast Guard, acknowledging this 
risk, is monitoring its use of support contractors to properly identify 
the functions they perform and has developed a policy to define what is 
and what is not inherently governmental. 

Coast Guard Has Made Progress in Identifying and Mitigating Acquisition 
Workforce Challenges: 

While the Coast Guard may be hard-pressed to fill the government 
acquisition positions it has identified both now and in the future, it 
has made progress in identifying the broader challenges it faces and is 
working to mitigate them. The Coast Guard has updated two documents key 
to this effort, the Blueprint for Acquisition Reform, now in its third 
iteration, and the Acquisition Human Capital Strategic Plan, which is 
in its second iteration. Each document identifies challenges the Coast 
Guard faces in developing and managing its acquisition workforce and 
outlines initiatives and policies to meet these challenges. For 
example, the Acquisition Human Capital Strategic Plan sets forth three 
overall challenges and outlines over a dozen strategies for addressing 
them in building and maintaining an acquisition workforce. The 
discussion of strategies includes status indicators and milestones for 
monitoring progress, as well as supporting actions such as the 
formation of partnerships with the Defense Acquisition University and 
continually monitoring turnover in critical occupations. The Blueprint 
for Acquisition Reform supports many of these initiatives and provides 
deadlines for their completion. In fact, the Coast Guard has already 
completed a number of initiatives including: 

* achieving and maintaining Level III program manager certifications, 

* adopting a model to assess future workforce needs, 

* incorporating requests for additional staff into the budget cycle, 

* initiating tracking of workforce trends and metrics, 

* expanding use of merit-based rewards and recognitions, and: 

* initiating training on interactions and relationships with 
contractors. 

Conclusions: 

In assuming the role of systems integrator, the Coast Guard has made a 
major change in its management of the Deepwater Program, one that has 
increased its insight into the capabilities needed to fulfill Coast 
Guard missions, the costs and capabilities of what it is currently 
procuring, and what resources are needed to complete the acquisition. 
The continued application and improvement of the disciplined management 
processes inherent in the MSAM are also beneficial in helping to ensure 
that Deepwater assets are designed and delivered to meet mission needs. 
While these changes, as well as the additional oversight gained by 
DHS's participation in acquisition decisions, do not eliminate the 
risks associated with this multibillion-dollar acquisition, they do 
help ensure that program risks are more fully considered. However, the 
Coast Guard has not applied the disciplined acquisition process to the 
FRC and the second increment of C4ISR, recent contract actions that 
will involve additional investments of taxpayer dollars over time. 
Further, as operational testing proceeds for Deepwater assets, the MSAM 
appears to be inconsistent with DHS policy and the recent directive on 
test and evaluation, which require operational test authorities to be 
independent of the system's user. Finally, in light of the sheer size 
and scope of the Deepwater Program and Congress's role in providing 
funds, the Coast Guard's budget submissions do not provide a complete 
picture of the planned costs of Deepwater assets that would help inform 
the decision-making process. 

Recommendations for Executive Action: 

We recommend that the Commandant of the Coast Guard take the following 
three actions: 

* Do not exercise further options under the Fast Response Cutter 
contract and under the task order for the second increment of C4ISR 
until these projects are brought into full compliance with the MSAM and 
DHS acquisition directives. 

* Consult with the DHS Office of Test & Evaluation and Standards to 
determine whether the MSAM conflicts with DHS's directive regarding the 
entity named as the independent operational test authority and, if so, 
take steps to reconcile the inconsistency. 

* As the Coast Guard prepares future budget submissions for Deepwater, 
include the total acquisition costs for the assets and total quantities 
planned. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report, the Coast Guard 
concurred with our findings. The agency also stated that it concurred 
with our recommendation to not exercise further contract options on the 
Fast Response Cutter and the second increment of C4ISR until these 
projects are brought into full compliance with the MSAM and DHS 
acquisition directives, as well as our recommendation to consult with 
DHS on policies regarding the independent operational test authority. 
DHS intends to take our final recommendation, to provide total 
acquisition costs and quantities in future budget submissions, under 
advisement. DHS noted that the proposed changes could result in the 
Coast Guard failing to comply with DHS budget submission guidelines and 
that Congress currently receives long-term acquisition project 
information through the Quarterly Acquisition Report to Congress. While 
we agree that this report includes some information on total costs and 
quantities, as we state in the report, it is provided only to the 
appropriations committees and contains other information that is 
restricted and limits its distribution, and therefore its utility, to 
decision makers. Presentation of information on the full costs and 
quantities of Deepwater assets in the Coast Guard's budget submission 
can provide the information to a wider audience and better assist 
Congress in providing funding and conducting oversight. 

The comments from DHS are included in their entirety in appendix II. 
Technical comments were also provided and incorporated into the report 
as appropriate. 

We are sending copies of this report to interested congressional 
committees, the Secretary of Homeland Security, and the Commandant of 
the Coast Guard. This report will also be available at no charge on 
GAO's Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report or need 
additional information, please contact me at (202) 512-4841 or 
huttonj@gao.gov. 

Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. Staff 
acknowledgements are provided in appendix III. 

John P. Hutton Director Acquisition and Sourcing Management: 

[End of section] 

Appendix I: Scope and Methodology: 

Overall, in conducting this review, we relied in part on the 
information and analysis in our April 2009 testimony, Update on 
Deepwater Program Management, Cost, and Acquisition Workforce[Footnote 
13] and our June 2008 report, Change in Course Improves Deepwater 
Management and Oversight, but Outcome Still Uncertain.[Footnote 14] 
Additional scope and methodology information on each objective of this 
report follows. 

To assess the Coast Guard's efforts to manage the Deepwater Program at 
the overall system-of-systems level, we reviewed the Coast Guard's July 
2008 Blueprint for Acquisition Reform, work group charters, and plans 
and actions the Coast Guard has taken to assume the role of systems 
integrator. To understand how the Coast Guard defined and assigned 
systems integrator roles and responsibilities, we reviewed the Coast 
Guard's Major Systems Acquisition Manual (MSAM) and technical authority 
instructions. We also interviewed senior acquisition directorate 
officials, representatives of the Coast Guard's capabilities 
directorate, and representatives of Coast Guard's technical 
authorities. To analyze the scope and volume of work currently under 
contract with Integrated Coast Guard Systems (ICGS) and the Coast 
Guard's plans to end its contractual relationship with ICGS, we 
reviewed task orders, contract statements of work, and acquisition 
plans and interviewed senior acquisition directorate officials and 
contracting officials. To assess the Coast Guard's implementation of a 
disciplined, project management process for Deepwater acquisitions, we 
reviewed the most recent update to Coast Guard's MSAM and the 
Department of Homeland Security's (DHS) November 2008 Interim 
Acquisition Directive 102-01 as well as how individual assets were 
complying with both sets of guidance. We compared these policies with 
best practices reflected in previous GAO work on major acquisitions. 
[Footnote 15] We also interviewed acquisition directorate officials and 
program and project managers to discuss ongoing efforts to transition 
the acquisition of Deepwater assets to the MSAM process and spoke with 
DHS officials about the department's major acquisition review process 
and reporting requirements. We also interviewed Coast Guard officials 
and analyzed documentation for the fleet-mix analysis currently being 
conducted by the capabilities directorate. We conducted case studies of 
selected assets, representing some that are in production as well as 
some with recent contract awards. This analysis included reviews of 
acquisition program baselines, operational requirements documents, test 
plans, and other key acquisition documentation and interviews with 
program and project managers and independent test authority officials. 
In addition, we met with contractor and Coast Guard officials at 
Lockheed Martin's facilities in Moorestown, New Jersey and ICGS's 
offices in Arlington, Virginia to discuss the transition of systems 
integrator functions and current work on C4ISR capabilities. We also 
met with Coast Guard officials at the Aviation Logistics Center in 
Elizabeth City, North Carolina to discuss their role in upgrading and 
maintaining Deepwater assets, and the U.S. Navy's Commander Operational 
Test and Evaluation Force in Norfolk, Virginia to discuss their role in 
conducting operational testing. Finally we met with Coast Guard 
officials and toured facilities and ships, including the National 
Security Cutter Bertholf in Alameda, California. 

To assess how cost, schedules, and capabilities have changed from the 
2007 Deepwater Acquisition Program Baseline approved by DHS, we 
reviewed that baseline and compared it to the revised baselines for 
individual assets that have been approved to date. We also interviewed 
senior acquisition directorate officials and program and project 
managers to discuss how the Coast Guard is developing new acquisition 
program baselines for individual assets and how the process used 
differs from that in the 2007 baseline, such as the basis for cost 
estimates. We reviewed the Coast Guard's guidance and policy on cost 
estimating in the MSAM and compared it to GAO best practices, including 
our Cost Assessment Guide: Best Practices for Estimating and Managing 
Program Costs.[Footnote 16] We also reviewed operational requirements 
documents and project reports for selected assets in various stages of 
the development and production processes to understand the major 
drivers of cost growth, schedule delays, and capability changes. We 
interviewed acquisition directorate officials and program and project 
managers to discuss options for controlling cost growth by making trade-
offs in asset quantities and/or capabilities, as well as some of the 
potential implications of unplanned schedule delays. To assess how well 
costs are communicated to Congress, we reviewed the Office of 
Management and Budget's guidance on budget justifications, the Coast 
Guard's 2009 and 2010 budget justifications, the Coast Guard's 2008 
Deepwater Expenditure Plan, and the Coast Guard's Quarterly Acquisition 
Reports to Congress. We compared the Coast Guard's budget submissions 
to those prepared by the Navy. 

To assess the Coast Guard's efforts to manage and build its acquisition 
workforce, we reviewed Coast Guard organization charts for aviation, 
surface, and C4ISR components showing government, contractor, and 
vacant positions. We supplemented this analysis with interviews of 
acquisition directorate officials, including contracting and Office of 
Acquisition Workforce Management officials and program and project 
managers to discuss current vacancy rates--especially for key 
acquisition positions such as contracting officials and systems 
engineers--and the Coast Guard's plans to increase the size of the 
acquisition workforce. We also reviewed documentation and interviewed 
senior acquisition directorate officials about the Coast Guard's use of 
third parties and independent experts outside of the Coast Guard such 
as the U.S. Navy and the American Bureau of Shipping, as well as 
increased use of support contractors and oversight to prevent 
contractors from performing inherently governmental functions. We 
reviewed documentation such as the July 2008 Blueprint for Acquisition 
Reform and the updated Acquisition Human Capital Strategic Plan and 
discussed workforce initiatives, challenges, and obstacles to building 
an acquisition workforce, including recruitment and difficulty in 
filling key positions. 

We conducted this performance audit from September 2008 to July 2009 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. 

[End of section] 

Appendix II: Comments from the Department of Homeland Security: 

US. Department of Homeland Security: 
Washington, DC 20528: 

July 9 2009: 

Mr. John P. Hutton: 
Director: 
Acquisition and Souring Management: 
United States Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Button: 

Thank you for the opportunity to review and comment on the Government 
Accountability Office's (GAO's) Draft Report GAO-09-682 entitled, Coast 
Guard: As Deepwater Systems Integrator, Coast Guard Is Reassessing 
Costs and Capabilities but Lags in Applying Its Disciplined Acquisition 
Approach. 

The United States Coast Guard remains grateful for the work GAO has 
done to bring attention to issues within the Deepwater acquisition 
program and concurs with the findings of this report. The commitment 
the GAO has towards making the Deepwater program successful is 
appreciated and the Coast Guard values the opinion of the GAO. The 
Coast Guard benefits from this oversight and will use it to ensure 
improvement to our acquisition program in the future. Thank you for 
considering the Coast Guard's comments on these very important issues. 
While the Coast Guard concurs with recommendations 1 and 2, we 
recommend that DHS take recommendation 3 under advisement. 

"We recommend that the Commandant of the Coast Guard take the following 
three actions:" 

Recommendation 1: Do not exercise further options under the Fast 
Response Cutter contract and under the task order for the second 
increment of C41SR until these projects are brought into full 
compliance with the MSAM and DHS acquisition directives. 

Response: Concur. The USCG agrees with Recommendation 1 and is in the 
process of completing appropriate Major Systems Acquisition Manual 
(MSAM) documentation before each project's next Acquisition Decision 
Event that would authorize contract options. 

Recommendation 2: Consult with the DHS office of Test & Evaluation and 
Standards to determine whether the MSAM conflicts with DHS 's directive 
regarding the entity named as the independent operational test 
authority and, if so, take steps to reconcile the inconsistency. 

Response: Concur. The USCG agrees with Recommendation 2 and is in the 
process of updating the MSAM to comply with DHS's new Interim Policy on 
Testing and Evaluation standards. The last revision to the MSAM was on 
April 16, 2009, and this new policy was published by DHS on May 29, 
2009. The Coast Guard will incorporate these standards as part of the 
next revision to the MSAM to align with applicable DHS directives. 

Recommendation 3: As the Coast Guard prepares future budget submissions 
for Deepwater, include the total acquisition costs for the assets and 
total quantities planned. 

Response: DHS intends to take this Recommendation under advisement. The 
Coast Guard is currently in compliance with DBS Policy that governs 
budget submission format. These proposed changes to the Coast Guard's 
budget submission format could result with not complying with DBS 
submission guidelines. Congress currently receives long term 
acquisition project information such as total acquisition costs and 
total quantities planned through the Quarterly Acquisition Report to 
Congress. This information includes Future Contract Awards, Total 
Acquisition Cost, Total Asset Quantities, Lifecycle Cost Estimates 
Project Risks, and Project Scope. 

Thank you again for the opportunity to comment on this Draft Report and 
we look forward to working with you on future Homeland Security issues. 

Sincerely, 

Jerald E. Levine: 
Director: 
Departmental GAO/OIG Liaison Office: 

[End of section] 

Appendix III: GAO Contact and Acknowledgments: 

For further information about this report, please contact John P. 
Hutton, Director, Acquisition and Sourcing Management, at (202) 512- 
4841 or huttonj@gao.gov. Other individuals making key contributions to 
this report include Michele Mackin, Assistant Director; Greg Campbell; 
Carolynn Cavanaugh; J. Kristopher Keener; Angie Nichols-Friedman; and 
Sylvia Schatz. 

[End of section] 

Related GAO Products: 

Coast Guard: Update on Deepwater Program Management, Cost, and 
Acquisition Workforce. [hyperlink, 
http://www.gao.gov/products/GAO-09-620T]. Washington, D.C.: April 22, 
2009. 

Coast Guard: Change in Course Improves Deepwater Management and 
Oversight, but Outcome Still Uncertain. [hyperlink, 
http://www.gao.gov/products/GAO-08-745]. Washington, D.C.: June 24, 
2008. 

Coast Guard: Observations on Changes to Management and Oversight of the 
Deepwater Program. [hyperlink, 
http://www.gao.gov/products/GAO-09-462T]. Washington, D.C.: March 24, 
2009. 

Status of Selected Assets of the Coast Guard's Deepwater Program. 
[hyperlink, http://www.gao.gov/products/GAO-08-270R]. Washington, D.C.: 
March 11, 2008. 

Coast Guard: Deepwater Program Management Initiatives and Key Homeland 
Security Missions. [hyperlink, 
http://www.gao.gov/products/GAO-08-531T]. Washington, D.C.: March 5, 
2008. 

Coast Guard: Status of Efforts to Improve Deepwater Program Management 
and Address Operational Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-07-575T]. Washington, D.C.: March 8, 
2007. 

Coast Guard: Status of Deepwater Fast Response Cutter Design Efforts. 
[hyperlink, http://www.gao.gov/products/GAO-06-764]. Washington, D.C.: 
June 23, 2006. 

Coast Guard: Changes to Deepwater Plan Appear Sound, and Program 
Management Has Improved, but Continued Monitoring Is Warranted. 
[hyperlink, http://www.gao.gov/products/GAO-06-546]. Washington, D.C.: 
April 28, 2006. 

Coast Guard: Progress Being Made on Addressing Deepwater Legacy Asset 
Condition Issues and Program Management, but Acquisition Challenges 
Remain. [hyperlink, http://www.gao.gov/products/GAO-05-757]. 
Washington, D.C.: July 22, 2005. 

Coast Guard: Preliminary Observations on the Condition of Deepwater 
Legacy Assets and Acquisition Management Challenges. [hyperlink, 
http://www.gao.gov/products/GAO-05-651T]. Washington, D.C.: June 21, 
2005. 

Coast Guard: Deepwater Program Acquisition Schedule Update Needed. 
[hyperlink, http://www.gao.gov/products/GAO-04-695]. Washington, D.C.: 
June 14, 2004. 

Contract Management: Coast Guard's Deepwater Program Needs Increased 
Attention to Management and Contractor Oversight. [hyperlink, 
http://www.gao.gov/products/GAO-04-380]. Washington, D.C.: March 9, 
2004. 

Coast Guard: Actions Needed to Mitigate Deepwater Project Risks. 
[hyperlink, http://www.gao.gov/products/GAO-01-659T]. Washington, D.C.: 
May 3, 2001. 

[End of section] 

Footnotes: 

[1] ICGS is a business entity jointly owned by Northrop Grumman and 
Lockheed Martin. These companies are first-tier subcontractors to ICGS 
and under the ICGS contract provide Deepwater assets or award second- 
tier subcontracts. 

[2] The Deepwater Program originally had an estimated cost of $17 
billion. The May 2007 baseline of $24.2 billion reflects changes to the 
program to reflect the Coast Guard's post-September 11, 2001, missions. 

[3] GAO, Coast Guard: Update on Deepwater Program Management, Cost, and 
Acquisition Workforce, [hyperlink, 
http://www.gao.gov/products/GAO-09-620T] (Washington, D.C.: Apr. 22, 
2009). 

[4] GAO, Coast Guard: Change in Course Improves Deepwater Management 
and Oversight, but Outcome Still Uncertain, [hyperlink, 
http://www.gao.gov/products/GAO-08-745] (Washington, D.C.: June 24, 
2008). 

[5] This contract was for the design, construction, and delivery of a 
modified commercially available patrol boat. 

[6] In June 2002, the Coast Guard awarded the Deepwater contract to 
ICGS. The award was an indefinite delivery, indefinite quantity 
contract with a 5-year base period and five potential extensions of the 
contract (award terms) of up to 5 years each. Based on the Coast 
Guard's assessment of its performance, ICGS earned one award term of 43 
months. The contract's scope of work included not only the procurement 
of individual assets but also significant systems engineering, 
integration, and logistics functions. 

[7] [hyperlink, http://www.gao.gov/products/GAO-08-745]. 

[8] We recently reported on DHS's oversight of its major investments. 
See GAO, Department of Homeland Security: Billions Invested in Major 
Programs Lack Appropriate Oversight, [hyperlink, 
http://www.gao.gov/products/GAO-09-29] (Washington, D.C.: Nov. 18, 
2008). 

[9] An operational assessment focuses on significant trends noted in 
development efforts, programmatic voids, risk areas, adequacy of 
requirements, and the ability of the program to support operational 
testing. An operational assessment may be conducted at any time using 
technology demonstrators, prototypes, mock-ups, engineering development 
models, or simulations, but is not to substitute for initial 
operational testing and evaluation. COMOPTEVFOR's operational 
assessment report for the MPA highlighted several areas of risk that 
the Coast Guard plans to address as the program evolves. 

[10] The task order includes options that have not yet been exercised. 

[11] GAO, Executive Guide: Leading Practices in Capital Decision- 
Making, [hyperlink, http://www.gao.gov/products/GAO/AIMD-99-32] 
(Washington, D.C.: December 1998). 

[12] Federal acquisition policy requires enhanced oversight of 
contractors providing professional and management support services that 
can affect government decision making, support or influence policy 
development, or affect program management. Our past work at DHS found 
that the level of contractor oversight provided by DHS did not always 
ensure accountability for decisions or the ability to judge whether the 
contractor was performing as required. Failure to ensure appropriate 
oversight increases the potential for a loss of management control and 
ability to ensure that intended outcomes are achieved. GAO, Department 
of Homeland Security: Improved Assessment and Oversight Needed to 
Manage Risk of Contracting for Selected Services, [hyperlink, 
http://www.gao.gov/products/GAO-07-990] (Washington, D.C.: Sept. 17, 
2007). 

[13] GAO, Update on Deepwater Program Management, Cost, and Acquisition 
Workforce, [hyperlink, http://www.gao.gov/products/GAO-09-620T] 
(Washington, D.C.: Apr. 22, 2009). 

[14] GAO, Change in Course Improves Deepwater Management and Oversight, 
but Outcome Still Uncertain, [hyperlink, 
http://www.gao.gov/products/GAO-08-745] (Washington, D.C.: June 24, 
2008). 

[15] GAO, Defense Acquisitions: A Knowledge-Based Funding Approach 
Could Improve Major Weapon System Program Outcomes, [hyperlink, 
http://www.gao.gov/products/GAO-08-619] (Washington, D.C.: July 2008). 

[16] GAO, Cost Assessment Guide: Best Practices for Estimating and 
Managing Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-07-1134SP] (Washington, D.C.: July 
2007). 

[End of section] 

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