In 1996, the Coast Guard began developing what came to be known as the  Integrated Deepwater System (IDS) acquisition program as its major effort  to replace or modernize these aircraft and cutters. The Deepwater program represents a unique approach to a major  acquisition in that the Coast Guard is relying on a prime contractor—the  system integrator—to identify and deliver the assets needed to meet a set  of mission requirements the Coast Guard has specified. Legacy Assets Show Declining Condition, but Measures Are Imprecise and Fail to Capture Impact on Mission Capabilities

Coast Guard condition measures show that the condition of most  deepwater legacy assets generally declined between 2000 and 2004, but the  Coast Guard’s available measures are inadequate to capture the full extent  of the decline in the condition of deepwater assets with any degree of  precision and are insufficient for determining the impact on mission  capabilities. In response to both  the continued decline in the condition of its legacy assets, as well as to  various observations we have made to the Coast Guard about its need to  develop more objective information on mission capability needs and more  precise condition measures, the Coast Guard has begun to undertake  additional efforts. These  ongoing efforts, while promising, are largely untested, and so it is too soon  to tell whether they will allow the Coast Guard to better determine and  improve the mission capabilities of its legacy assets. From this strategic  document, the Coast Guard has identified a number of upgrades to  improve the capabilities of the deepwater legacy aircraft and cutters. Enhancements are also planned for certain classes of  deepwater cutters. However, because these  measures have not been finalized or fully implemented, we were unable to  assess their effectiveness. In 2004  we 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. As the Coast Guard continues to develop  condition measures that are more robust and able to link the assets’  condition with mission capabilities, and as it further develops and  implements its Capital Asset Management System, it will be in a better  position to make more informed decisions regarding where its budget  should be spent to maximize the capabilities of its legacy assets as the  Coast Guard transitions to the Integrated Deepwater System. However, projects to address these problems are  nevertheless likely to be needed. Our work focused on three key questions: (1) How has the condition  of the Coast Guard’s deepwater legacy assets changed during fiscal years  2000 through 2004? (2) What actions has the Coast Guard taken to  maintain, upgrade, and better manage its deepwater legacy assets? (3) What are the management challenges the Coast Guard faces in  acquiring new assets, especially if a more aggressive schedule is adopted? This project would include hull sustainment work. GAO Related Products

Coast Guard’s Acquisition Management: Deepwater Project’s  Justification and Affordability Need to Be Addressed More Thoroughly,  GAO/RCED-99-6 (Washington, D.C.: Oct. 26, 1998)
Coast Guard: Budget Challenges for 2001 and Beyond,   GAO/T-RCED-00-103 (Washington, D.C.: March 15, 2000)
Coast Guard: Progress Being Made on Deepwater Project, but Risks  Remain, GAO-01-564 (Washington, D.C.: May 2, 2001)
Coast Guard: Actions Needed to Mitigate Deepwater Project Risks,   GAO-01-659T (Washington, D.C.: May 3, 2001)
Coast Guard: Strategy Needed for Setting and Monitoring Levels of  Effort for All Missions, GAO-03-155 (Washington, D.C.: Nov. 12, 2002)
Coast Guard: Comprehensive Blueprint Needed to Balance and Monitor  Resource Use and Measure Performance for All Missions, GAO-03-544T  (Washington, D.C.: March 12, 2003)
Contract Management: Coast Guard’s Deepwater Program Needs  Increased Attention to Management and Contractor Oversight,  GAO-04-380 (Washington, D.C.: March 9, 2004)
Coast Guard: Replacement of HH-65 Helicopter Engine, GAO-04-595  (Washington, D.C.: March 24, 2004)
Coast Guard: Key Management and Budget Challenges for Fiscal Year  2005 and Beyond, GAO-04-636T (Washington, D.C.: April 7, 2004)
Coast Guard: Deepwater Program Acquisition Schedule Update Needed,  GAO-04-695 (Washington, D.C.: June 14, 2004)
Coast Guard: Observations and Agency Priorities in Fiscal Year 2006  Budget Request, GAO-05-364T (Washington, D.C.: March 17, 2005)
Coast Guard: Preliminary Observations on the Condition of Deepwater  Legacy Assets and Acquisition Management Challenges, GAO-05-307T  (Washington, D.C.: April 20, 2005)
Coast Guard: Preliminary Observations on the Condition of Deepwater  Legacy Assets and Acquisition Management Challenges, GAO-05-651T  (Washington, D.C.: June 21, 2005)
Why GAO Did This Study

The Coast Guard has been asserting that its deepwater legacy assets are "failing at an unsustainable rate." After the events of September 11, 2001, the Coast Guard's deepwater missions expanded to include a greater emphasis on ports, waterways, and coastal security. These heightened responsibilities required changes to the Deepwater implementation plan to provide the assets with greater operational capabilities. To address these needs, in 2002, the Coast Guard began a multiyear acquisition program to replace or modernize its deepwater assets that is currently estimated to cost $19 to $24 billion. More recently, it began studying options for replacing or modernizing the assets more rapidly in an effort to avoid some of the costs that might be involved in keeping aging assets running for longer periods. This report addresses three questions related to this effort: (1) How has the condition of the Coast Guard's deepwater legacy assets changed during fiscal years 2000 through 2004? (2) What actions has the Coast Guard taken to maintain, upgrade, and better manage its deepwater legacy assets? and (3) What are the management challenges the Coast Guard faces in acquiring new assets, especially if a more aggressive acquisition schedule is adopted?

What GAO Found

Available Coast Guard condition measures indicate that the condition of most Coast Guard legacy aircraft and cutters generally declined during fiscal years 2000-2004, but these measures are inadequate to capture the full extent of the decline in the condition with any precision. GAO's field visits and interviews with Coast Guard staff, as well as reviews of other evidence, showed significant problems in a variety of asset systems and equipment that are not currently captured in the Coast Guard's condition measures. The Coast Guard has already taken actions to help keep its deepwater legacy assets operational. For example, to help meet mission requirements, Coast Guard staff are performing more extensive maintenance between deployments, but even so, aircraft and cutters continue to lose mission capabilities. Responding to these continued concerns, as well as to matters raised during this review and in prior GAO reports, the Coast Guard has begun to explore additional strategies and approaches to better determine and improve the mission capabilities of its legacy assets. These actions include (1) developing a more proactive approach for prioritizing maintenance and capability enhancement projects needed on its legacy assets; (2) developing measures that more clearly demonstrate the extent to which assets' conditions affect mission capabilities; and (3) for one command, proposing a new strategy to sustain one of its oldest classes of cutters. These ongoing efforts, while promising, are too new to allow GAO to assess whether they will allow the Coast Guard to better determine and improve the mission capabilities of its legacy assets. If the Coast Guard adopts a more aggressive acquisition schedule, it will likely continue to face a number of challenges to effectively manage the Deepwater program. GAO has warned that the Coast Guard's acquisition strategy of relying on a prime contractor ("system integrator") to identify and deliver the assets needed carries substantial risks. GAO found that well into the contract's second year, key components for managing the program and overseeing the system integrator's performance had not been effectively implemented. While the Coast Guard has been addressing these problems--for example, putting more emphasis on competition as a means to control costs--many areas have not been fully addressed. A more aggressive acquisition schedule would only heighten the risks.