	Background

For about a decade, the Coast Guard has been developing an Integrated  Deepwater System (or Deepwater) acquisition program, a long-term plan  to replace or modernize is fleet of vessels and aircraft. Deepwater is the largest and most complex acquisition project in the  Coast Guard’s history. Then, in February 2006, the Coast Guard  again updated its Deepwater plan to align with its fiscal year 2007 budget  submissions. Coast Guard’s Acquisition Approach to Deepwater Program

In 2001, we described the Deepwater program as “risky” due to the unique,  untried acquisition strategy for a project of this magnitude within the  Coast Guard. System of Systems

Rather than using the traditional approach of replacing classes of ships or  aircraft through a series of individual acquisitions, the Coast Guard chose  to use a system-of-systems acquisition strategy that would replace its  deteriorating assets with a single, integrated package of aircraft, vessels,  and unmanned aerial vehicles, to be linked through systems that provide  C4ISR,  and supporting logistics. This type of business arrangement can give the contractor extensive  involvement in requirements development, design, and source selection of  major system and subsystem subcontractors. If performance-based  acquisitions are not appropriately planned and structured, there is an  increased risk that the government may receive products or services that  are over cost estimates, delivered late, and of unacceptable quality. We specifically made 11 recommendations to the Coast Guard,  which can found at Table 1 on page 12. Our reported concerns in 2004 and  in subsequent assessments in 2005 and 2006 have centered on three main  areas: program management, contractor accountability, and cost control  through competition. We have  ongoing work to monitor and evaluate the Coast Guard’s efforts. Program Management and the Importance of Integrated Product Teams

Our previous work and recommendations were based on concerns about  the Coast Guard’s program management. IPTs are the Coast Guard’s  primary tool for managing the Deepwater program and overseeing the  system integrator. We  reported in 2004 that the teams had struggled to effectively carry out their  missions. We will continue to review Deepwater implementation and contract  oversight. Performance and Design Problems Creating Operational Challenges for Coast Guard

In addition to overall management issues discussed above, there have  been problems with the performance and design of Deepwater patrol  boats that pose significant operational challenges to the Coast Guard. Performance Problems with the Converted 123-Foot Patrol Boats

The Deepwater program’s conversion of the legacy 110-foot patrol boats to  123-foot patrol boats has encountered performance problems. The Coast Guard is exploring options to address operational  gaps resulting from the suspension of the 123-foot patrol boat operations. Design Problems with the Fast Response Cutter

U.S. Coast Guard, Office of Public Affairs, Coast Guard Suspends Converted Patrol Boat  Operations, November 30, 2006,. weight and horsepower requirements. One operational challenge related to the FRC, is that the Coast Guard will  end up with two classes of FRCs.
Why GAO Did This Study

The Coast Guard's Deepwater program is a 25-year, $24 billion plan to replace or modernize its fleet of vessels and aircraft. While there is widespread acknowledgment that many of the Coast Guard's aging assets need replacement or renovation, concerns exist about the acquisition approach the Coast Guard adopted in launching the Deepwater program. From the outset, GAO has expressed concern about the risks involved with the Coast Guard's acquisition strategy, and continues to review Deepwater program management. This statement discusses (1) the Coast Guard's acquisition approach for the Deepwater program; (2) previous GAO recommendations to the Coast Guard on Deepwater, highlighting the importance of Integrated Product Teams; and (3) operational challenges the Coast Guard is facing because of performance and design problems with Deepwater patrol boats.

What GAO Found

In 2001, we described the Deepwater project as "risky" due to the unique, untried acquisition strategy for a project of this magnitude within the Coast Guard. The Coast Guard used a system-of-systems approach to replace deteriorating assets with a single, integrated package of aircraft, vessels, and unmanned aerial vehicles. The Coast Guard also used a system integrator--which can give the contractor extensive involvement in requirements development, design, and source selection of major system and subsystem subcontractors. The Deepwater program is also a performance-based acquisition, meaning that it is structured around the results to be achieved rather than the manner in which the work is performed. If performance-based acquisitions are not appropriately planned and structured, there is an increased risk that the government may receive products or services that are over cost estimates, delivered late, and of unacceptable quality. GAO's reported concerns and related recommendations in 2004 and in subsequent assessments in 2005 and 2006 have centered onthree main areas: program management, contractor accountability, and cost control through competition. In the area of program management, GAO's prior work has found that Integrated Product Teams--the Coast Guard's primary tool for managing the program and overseeing the contractor--have struggled to carry out their missions effectively. We have ongoing work reviewing Deepwater implementation and contract oversight and will continue to monitor the Coast Guard's implementation of our recommendations. In addition to these management issues, the Coast Guard is facing operational challenges because of performance and design problems with Deepwater patrol boats. Specifically, problems with the conversion of 110-foot patrol boats to 123-foot patrol boats ultimately led the Coast Guard to suspend all normal operations of its converted 123-foot patrol boats on November 30, 2006; the Coast Guard is now exploring options to address the resulting operational gaps. In February 2006, the Coast Guard suspended design work on the Fast Response Cutter (FRC)--which was intended to replace the patrol boats--due to design risks. In moving forward with the FRC acquisition, the Coast Guard will end up with two separate classes of FRCs--an outcome that has resulted in a slippage of the anticipated FRC delivery date.