DHS and Coast Guard Acquisition Policies and Processes Continue to Evolve, Further Establishing the Coast Guard as Systems Integrator

DHS has revised its approach to managing and overseeing Deepwater by  conforming the program to its recently finalized acquisition directive,  Acquisition Management Directive 102-01, which establishes a number  of review points for the department’s acquisitions to provide senior  acquisition officials insight into such key documents as baselines and test  reports. DHS has increased the number of reviews of individual Deepwater  assets and plans to review up to six assets in fiscal year 2010. For its part,  the Coast Guard’s MSAM is generally aligned with DHS directives although  operational testing policies are still being revised, and the Coast Guard has  developed additional guidance on completing key requirements  documents. The Coast Guard is also decreasing its dependence on ICGS  by planning for alternate vendors on some of the assets already in  production, as well as awarding and managing work outside of the ICGS  contract for those assets at earlier stages of the acquisition life cycle. However, Coast Guard and DHS approval of key documentation such as  program baselines can take months. The new asset-specific baselines that have been developed—and  approved by DHS for seven of nine assets—put the total cost of Deepwater  at roughly $28 billion, or $3.8 billion over the $24.2 billion baseline. The  revised baselines also present life-cycle costs, which encompass the  acquisition cost as well as costs for operations and maintenance  throughout the assets’ life cycle. While the revised baselines show a  significant decrease in life-cycle costs compared to the 2007 baseline, the  Coast Guard’s understanding of these costs continues to evolve as the  agency revisits its assumptions and produces new cost estimates. These  baselines also indicate that some schedules are expected to be delayed by  several years. Further,  as the Coast Guard develops more refined requirements, it has redefined  or eliminated key performance indicators for many individual assets, while  significant uncertainties surround other assets like C4ISR, the key to the  system-of-systems as initially envisioned and approved. In the meantime, the Coast Guard and DHS are  proceeding with acquisition decision events on individual assets. Further growth could  occur, as four Deepwater assets currently lack revised cost baselines. Among them is the largest cost driver in the program, the 25 cutters of the  Offshore Patrol Cutter class which, in the 2007 baseline, accounted for  over 33 percent of the $24.2 billion total acquisition cost. System-level Performance Baselines Unlikely to be Met

In addition to establishing cost and schedule baselines, the 2007  Deepwater acquisition program baseline also established a baseline for  system-of-systems level performance and the key performance parameters  at the asset level that contribute to this performance. Coast Guard Has Not Yet Revalidated the Quantities or Mix of Assets Required to Meet Needs

While the Coast Guard has made progress in revising baselines for the  cost, schedule, and capabilities of individual assets, it has not yet  revalidated the quantities of those assets needed to meet operational  needs—as it stated that it would in assuming the role of systems  integrator. The results of the analysis have not been released. As the Coast Guard  assumes the role of system integrator it is important that it understand its  needs and builds an acquisition workforce to manage the Deepwater  Program. This increase in number of positions has had an effect on the  Coast Guard’s current vacancy rate. Recommendation for Executive Action

To capitalize on the increase in knowledge gained by creating new  baselines for Deepwater assets, and to better manage acquisitions of  further assets and capabilities, we recommend that the Commandant of  the Coast Guard complete, and present to Congress, a comprehensive  review of the Deepwater Program that clarifies the overall cost, schedule,  quantities, and mix of assets that are needed to meet mission needs and  what trade-offs need to be made considering fiscal constraints, given that  the currently approved Deepwater baseline is no longer feasible. To assess the Coast Guard’s efforts to manage and build its acquisition  workforce, we reviewed Coast Guard information on government,  contractor, and vacant positions.
Why GAO Did This Study

The Deepwater Program includes efforts to build or modernize ships and aircraft and to procure other capabilities. After a series of project failures, the Coast Guard announced in 2007 that it was taking over the systems integrator role from Integrated Coast Guard Systems (ICGS). At the same time, a $24.2 billion program baseline was established which included schedule and performance parameters at an overall system level. GAO has previously reported on the Coast Guard's progress in establishing individual baselines for Deepwater assets and has made a number of recommendations, which have largely been addressed. In response to the conference report accompanying the Department of Homeland Security (DHS) Appropriations Act, 2010, GAO assessed (1) DHS and Coast Guard acquisition policies and approach to managing the program, (2) whether the program is meeting the 2007 baseline, and (3) Coast Guard efforts to manage and build its acquisition workforce. GAO reviewed Coast Guard and DHS policies and program documents, and interviewed officials.

What GAO Found

DHS has revised its approach to managing and overseeing Deepwater by making the program subject to its recently finalized acquisition directive, which establishes a number of review points to provide insight into such key documents as baselines and test reports. DHS has also increased the number of its reviews of individual Deepwater assets. The Coast Guard's own management policies are generally aligned with DHS directives, although operational testing policies are still being revised, and it has developed additional guidance on completion of key requirements documents. In taking on the systems integrator role, the Coast Guard is also decreasing its dependence on ICGS by planning for alternate vendors on some of the assets already in production, as well as awarding and managing work outside of the ICGS contract for other assets. Currently, the Deepwater Program exceeds the 2007 cost and schedule baselines, and given revisions to performance parameters for certain assets, it is unlikely to meet system-level performance baselines. The asset-specific baselines that have been approved to date, while providing greater insight into asset-level capabilities, place the total cost of Deepwater at roughly $28 billion, or $3.8 billion over the $24.2 billion 2007 baseline. The revised baselines also present life-cycle costs, which encompass the acquisition cost as well as costs for operations and maintenance. While the revised baselines show a significant decrease in life-cycle costs, due to changes to assumptions like shorter service lives for assets, the Coast Guard's understanding of them continues to evolve as the agency revisits its assumptions and produces new cost estimates. Costs could continue to grow as four assets currently lack revised cost baselines; among them is the largest cost driver in the Deepwater Program, the Offshore Patrol Cutter. The asset-level baselines also indicate that schedules for some assets are expected to be delayed by several years. Regarding system-level performance, the 2007 baseline may not be achievable, as the Coast Guard has redefined or eliminated key performance indicators for many individual assets, while significant uncertainties surround other assets. Further, a planned analysis to reassess the overall fleet mix for Deepwater was not completed as planned, and a new analysis will include surface assets only. In the meantime, the Coast Guard and DHS are proceeding with acquisition decisions on individual assets. The Coast Guard continues to take steps to address its acquisition workforce needs as it assumes the role of system integrator. For example, it is using a workforce planning model to estimate current and future needs for key acquisition personnel. The Coast Guard has also begun to implement initiatives such as promoting career growth for acquisition professionals. External limitations on the availability of acquisition personnel, coupled with 100 new positions authorized in fiscal year 2010, place the Coast Guard's acquisition directorate vacancy rate at about 20 percent. While it is using contractors in support roles, the Coast Guard has released guidance regarding the roles of government staff in overseeing contractors.

What GAO Recommends

GAO recommends that the Coast Guard complete an overall assessment that clarifies the quantities, mix, and cost of assets needed to meet requirements, given that the current Deepwater baseline is no longer feasible, and that the results be reported to Congress. DHS concurred with the recommendation.