Significant Work Remains to Field 14 Fully Capable C-27Js

As of January 2015, the Coast Guard has transferred 2 of 14 C-27Js to its  aircraft maintenance facility, after returning them to flyable status, and is  in the process of developing a detailed plan for fielding all 14 aircraft by  2022. Currently, the Coast Guard is assessing the first two planes  and establishing the key steps necessary to finish inducting these  aircraft. The Coast Guard Must Address Risks Related to Spare Parts, Technical Data, and Understanding the Condition of the Aircraft

The successful and cost effective fielding of the C-27J is contingent on  the Coast Guard’s ability to address three risk areas, related to the  following:
Purchasing spare parts—The Coast Guard had to develop its own  list of spare parts for the aircraft, as existing lists are not available. Accessing technical data—The Coast Guard does not have full  access to the technical data for the C-27J, which are required to  maintain the aircraft over the long term and make modifications to the  aircraft’s structure—for example, to install sensors. While the  Air Force was operating the C-27J, it encountered issues keeping its fleet  in operable condition due to difficulties with obtaining spare parts. Current Fixed-Wing Fleet Plan Achieves Savings but Does Not Meet Flying Hour Needs, and Revised Analysis Is Years Away

The C-27J will improve the affordability of the Coast Guard’s fixed-wing  fleet, but the current fleet of aircraft that the Coast Guard is pursuing is  not optimal in terms of cost and flight hour capability. However, the  source of these savings has shifted. A significant portion of the savings  now results from a drop in the number of flight hours the fleet will achieve  due to reducing the planned quantity of aircraft. In the  meantime, DHS and the Coast Guard have paused the HC-144  acquisition program, but historically the Coast Guard has received C-130J  aircraft without budgeting for them. Current Fleet Plan Should Save Money but Does Not Meet Flight Hour Goal

To determine the potential impact of the C-27J on the cost and fight hour  capability of the Coast Guard’s fixed-wing fleet, we compared three  scenarios:   the 2007 program of record (without the C-27J), to which we applied  updated assumptions and the data in the Coast Guard’s business  case,  the Coast Guard’s C-27J business case as presented to Congress in  2013, and  the Coast Guard’s current plan, to which we applied updated  assumptions and the data in the Coast Guard’s business case. We  calculated this difference using the Coast Guard’s goal of 52,400 annual  flight hours as a baseline. The Coast Guard is undertaking this  effort consistent with direction from Congress. According to the Coast  Guard, this action would add 600 flight hours per year and save $322  million over the next 30 years. In total, since 2000, the  Coast Guard has received 12 HC-130Js, currently valued at  approximately $100 million each, without including them in its budget  requests. In the meantime, although the Coast Guard has exercised  prudence in pausing the HC-144 program, it may continue to receive HC- 130Js before it knows that it needs these aircraft and before it has  determined the capabilities of its C-27J fleet. As a result, if the Coast  Guard continues to receive HC-130Js while it revisits its needs, the  capability and cost of the Coast Guard’s fixed-wing fleet runs the risk of  being dictated by the assets the Coast Guard already owns rather than  what it needs. Recommendations for Executive Action

We recommend that the Secretary of Homeland Security and the  Commandant of the Coast Guard inform Congress of the time frames and  key milestones for completing the fleet mix study, including the specific  date when the Coast Guard will publish its revised annual flight hour  needs and when it plans to inform Congress of the corresponding  changes to the composition of its fixed-wing fleet to meet these needs. DHS did not agree with our second recommendation, that the  Commandant of the Coast Guard advise Congress to modify the  provision of any additional HC-130Js pending the results of the fleet mix  study. Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to determine (1) the status of the  transfer of the C-27Js from the Air Force to the Coast Guard, including  cost and schedule estimates, plans for testing, and establishing a  maintenance program—as well as any obstacles the Coast Guard faces  to field the transferred aircraft, and (2) to what extent the acquisition will  affect the overall cost and performance of the Coast Guard’s fixed wing  aviation fleet.
Why GAO Did This Study

The Air Force is transferring 14 C-27J aircraft to the Coast Guard. Once modified into surveillance aircraft, the C-27Js will be a part of the Coast Guard's fixed-wing aircraft fleet. In 2007, the Coast Guard established a baseline of aircraft quantities and costs known as the program of record. This baseline established the cost and quantity of aircraft necessary to achieve its goal of 52,400 flight hours per year. The Coast Guard's aircraft, including the HC-144 and HC-130J/H, are integral to its missions, such as counterdrug and search and rescue.
GAO was asked to review the transfer of the C-27J to the Coast Guard. This report assesses (1) the status of the transfer and risks the Coast Guard faces in fielding the transferred aircraft; and (2) the extent to which acquiring the C-27J affects the overall cost and performance of the Coast Guard's fixed-wing aviation fleet.
GAO analyzed program documents and maintenance records for the C-27J. GAO interviewed Coast Guard and Air Force officials and private contractors. GAO also analyzed the Coast Guard's C-27J business case.

What GAO Found

As of January 2015, the Coast Guard had transferred 2 of the 14 C-27J aircraft it is receiving from the Air Force to its aircraft maintenance facility, with plans to field 14 fully operational C-27Js by 2022. According to initial Coast Guard estimates, while the aircraft come at no cost, the Coast Guard needs about $600 million to fully operationalize them. This process is complex and significant work and risk remain. For example, the Coast Guard must establish its needs and purchase a set of spare parts for each aircraft, but faces hurdles due to potential pricing issues and delivery delays from the manufacturer. Also, the Coast Guard does not have access to the manufacturer's technical data that are required for modifications to the aircraft's structure to, for example, incorporate radar. These and other risks may inhibit the Coast Guard's ability to operate the aircraft as planned. However, the Coast Guard is working to mitigate these risks.
The C-27J will improve the affordability of the Coast Guard's fixed-wing fleet, but the fleet as currently planned may not be optimal in terms of cost and flight hour capability. The Coast Guard submitted a business case to Congress in 2013 that determined the C-27J would save $837 million over 30 years, compared to the program of record, without reducing fleet performance. GAO estimates that the fleet the Coast Guard is currently pursuing achieves nearly all of these savings. However, the source of these savings has shifted. A significant portion of the savings now results from an 18 percent drop in flight hours due to a change in the mix of aircraft the Coast Guard intends to pursue. GAO used updated information in conducting its analysis, such as the expected service life of each aircraft type. Consistent with congressional direction, the Coast Guard is conducting a multi-phased analysis of its mission needs—including its flight hour goals and fleet of fixed-wing assets—but will not present the full results prior to its 2019 budget request. In the meantime, the Coast Guard has prudently paused its existing HC-144 acquisition program. However, since 2000, the Coast Guard has received 12 HC-130Js without budgeting for them and it may continue to receive these aircraft while it studies its fixed-wing fleet needs. If the Coast Guard continues to receive these aircraft in the near term, the capability and cost of the Coast Guard's fixed-wing fleet runs the risk of being dictated by the assets the Coast Guard already owns rather than what it determines it needs.

What GAO Recommends

The Department of Homeland Security (DHS) and the Coast Guard should advise Congress of the time frames for the Coast Guard's fleet analysis and to modify the provision of additional HC-130Js, as appropriate, in the interim. DHS agreed with the first recommendation, but did not agree with the second recommendation. If the Coast Guard accepts additional HC-130Js before completing the fleet mix study, the aircraft may be in excess of the Coast Guard's need.