	Challenges to Creating an Integrated Acquisition Function at DHS

We have reported in the past on acquisition management at several  components of DHS. We have also assessed the department’s overall  acquisition management efforts. A common theme in these reports is  DHS’s struggle, from the outset, to provide adequate procurement support  to its mission components and to provide departmentwide oversight of its  acquisition function. DHS has set forth a stated goal of integrating the acquisition function more  broadly across the department. However, the goal has not been  accomplished. Excluding certain components from  complying with management directives regarding the acquisition function  hampers efforts to integrate the acquisition organization. Adequate oversight of acquisition activities across  DHS is imperative, in light of the department’s mission and the problems  that have been reported by us and inspectors general for some of the large  components within the department. We have  found that investments that were not reviewed at the appropriate points  faced problems—such as redesign—that resulted in cost increases and  schedule delays. It is not clear how the Deepwater acquisition has been  influenced by the department’s investment review process. Deepwater Program Is Illustrative of Problems Stemming from Lack of Effective Program Management and Contractor Oversight

The Deepwater program is the Coast Guard’s major effort to replace or  modernize its aircraft and vessels. It has been in development for a  number of years. 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. ICGS—a business entity jointly  owned by Northrop Grumman and Lockheed Martin—is a system  integrator, responsible for designing, constructing, deploying, supporting,  and integrating the Deepwater assets to meet Coast Guard requirements. While we recognize  that the Coast Guard has taken steps to address our findings and  recommendations, aspects of the Deepwater program will require  continued attention, such as the risk involved in the system-of-systems  approach with the contractor acting as overall integrator. Program Management

In 2004, we reported that more than a year and a half into the Deepwater  contract, the key components needed to manage the program and oversee  the system integrator had not been effectively implemented. For example,  integrated product teams, comprised of government and contractor  employees, are the Coast Guard’s primary tool for managing the program  and overseeing the contractor. We found that the teams had not been  effective due to changing membership, understaffing, insufficient training,  lack of authority for decision making, and inadequate communication  among members. Despite documented problems in schedule,  performance, cost control, and contract administration throughout the  first year, the program executive officer awarded the contractor an overall  rating of 87 percent, which fell in the “very good” range. This rating  resulted in an award fee of $4.0 million of the maximum of $4.6 million. Performance and Design Problems

In addition to overall management issues discussed above, there have  been problems with the design and performance of specific Deepwater  assets. Additional Reviews Ongoing

Given the size of DHS and the scope of its acquisitions, we are continuing  to assess the department’s acquisition oversight process and procedures in  ongoing work. In  addition, the conference report to the Department of Homeland Security  Appropriations Act for Fiscal Year 2007 directed DHS’s Chief  Procurement Officer to develop a procurement oversight plan, identifying  necessary oversight resources and how improvements in the department’s  performance of its procurement functions will be achieved. We will also continue to review Deepwater implementation and contract  oversight. Our objectives are to review (1) the status of the  development and delivery of the major aviation and maritime assets that  comprise the Coast Guard’s Deepwater program; (2) the history of the  contract, design, fielding, and grounding of the converted 123-foot patrol  boats and operational adjustments the Coast Guard making to account for  the removal from service of the 123-foot patrol boats; and (3) the status of  the Coast Guard’s implementation of our 2004 recommendations on  Deepwater contract management for improving Deepwater program  management, holding the prime contractor accountable for meeting key  program goals, and facilitating cost control through competition.
Why GAO Did This Study

In January 2003, GAO designated the Department of Homeland Security's (DHS) implementation and transformation as high risk because of the size and complexity of the effort and the existing challenges faced by the components being merged into the department. The success of the effort to integrate numerous agencies and organizations into one cabinet-level department rests in large part on DHS's ability to effectively acquire the wide range of goods and services it needs to achieve its mission of protecting the nation from terrorism. DHS is undertaking a number of large, complex investments as the federal government increasingly relies on contractors for roles and missions previously performed by government employees. One of the department's largest investments--the Deepwater program, now estimated to cost $24 billion--is the Coast Guard's major effort to replace or modernize its aircraft and vessels. Rather than using a traditional acquisition approach, the Coast Guard is using a system integrator to design, construct, deploy, support, and integrate the Deepwater assets. In this testimony, the Comptroller General discussed (1) the overarching challenges DHS faces in establishing an effective acquisition organization, (2) GAO's prior work on Coast Guard and contractor management of the Deepwater program, and (3) the status of GAO's ongoing reviews.

What GAO Found

GAO has reported in the past on acquisition management at several components of DHS and has assessed the department's overall acquisition management and oversight efforts. A common theme in these reports is DHS's struggle, from the outset, to provide adequate support to its mission components in acquiring goods and services and to provide departmentwide oversight of its acquisition function. DHS has a stated goal of integrating the acquisition function more broadly across the department. GAO has reported that this goal has not yet been accomplished and has identified key impediments to achieving it. A management directive intended to integrate the acquisition line of business did not provide the Chief Procurement Officer with the enforcement authority needed in practice, and it does not pertain to all component agencies. Also, the procurement organizations within the department remained somewhat autonomous, and centralized acquisition oversight had not been implemented. While DHS's review process for major investments adopts some best practices, key decision-making reviews at certain points are not required. Investments that are not reviewed at the appropriate points can face a range of problems--such as redesign--resulting in significant cost increases and schedule delays. The Coast Guard's Deepwater program illustrates problems that can occur when effective program management and contractor oversight are not in place. In 2001, GAO described the Deepwater project as "risky" due to the unique, untried acquisition strategy for a project of this magnitude within the Coast Guard--a system-of-systems approach with the contractor as the integrator. In 2004, GAO reported that well into the contract's second year, key components needed to manage the program and oversee the system integrator's performance had not been effectively implemented. For example, integrated product teams, comprised of government and contractor employees, are the Coast Guard's primary tool for managing the program and overseeing the contractor. GAO found that the teams had not been effective due to changing membership, understaffing, insufficient training, lack of authority for decision-making, and inadequate communication among members. GAO also reported that, despite documented problems in schedule, performance, cost control, and contract administration throughout the first year of the Deepwater contract, the contractor had received a rating of 87 percent, which fell in the "very good" range and resulted in an award fee of $4.0 million. GAO's more recent work found that, while the Coast Guard had taken steps to address some of the problems, concerns remained about program management and contractor oversight. In addition to these overall management issues, there have been problems with the design and performance of specific Deepwater assets. Given the size of DHS and the scope of its acquisitions, GAO is continuing to assess the department's acquisition oversight process and procedures in ongoing work. GAO is also currently reviewing the status of the Deepwater program's implementation and contractor oversight.