In recent months, we have issued two reports that have raised concern  about the Coast Guard’s initial management of the Deepwater program  and the potential for escalating costs. In fact,  by law, DOD’s major defense acquisition programs have to report cost,  schedule, and performance updates to the Congress at least annually and  whenever cost and schedule thresholds are breached. In practice,  schedules on DOD’s major defense acquisitions are continually monitored  and reported to management on a quarterly basis. Although maintaining a current integrated schedule is a  best practice for ensuring adequate contract oversight and management  and is a requirement for DOD acquisitions, Coast Guard officials said they  have not done so because of the numerous changes the Deepwater  Program experiences every year and because of the cost, personnel, and  time involved in crafting a revised master plan with the systems integrator  on an annual basis. Our analysis indicates that several Deepwater assets and capabilities have  experienced delays and are at risk of being delivered later than anticipated  in the original implementation plan. The $168 million appropriated in fiscal year 2004 for the Deepwater  program above the President’s request of $500 million will allow the Coast  Guard to conduct a number of projects that had been delayed or would not  have been funded in fiscal year 2004, but it will not fully return the  program to its original 2002 acquisition schedule. Third, the delivery of  some assets has fallen so far behind schedule that it is impossible to  ensure their delivery according to the original 2002 implementation  schedule by simply providing more money. As evolving mission requirements are translated  into decisions about what assets are needed and what capabilities they  will need to have, it becomes even more imperative that Coast Guard  officials update the acquisition schedule on a more timely basis, so that  budget submissions by the Coast Guard can allow DHS and Congress to  base decisions on accurate information. The scope of our review was to determine the impact of  the additional $168 million in fiscal year 2004 on returning Deepwater to  its original 2002 schedule, not to determine effects of receiving  appropriations that were less than requested in previous years. Status of Acquisition Schedule

		The degree to which the program is on track with regard to its original 2002

acquisition schedule is difficult to determine, because the Coast Guard  does not maintain and update the acquisition schedule. Status of Acquisition Schedules for  Selected Assets (cont’d)
Part of the additional $168 million in funding allowed the Coast Guard to  start work delayed from fiscal year 2003 or to start work originally   scheduled for fiscal year 2004. Reason 2: The additional amount did not fund all work planned for  fiscal year 2004; some will be delayed to fiscal year 2005 or beyond.
Why GAO Did This Study

In 2002, the Coast Guard began its $17 billion, 20-year Integrated Deepwater System acquisition program to replace or modernize its cutters, aircraft, and communications equipment for missions generally beyond 50 miles from shore. During fiscal years 2002-03, Deepwater received about $125 million less than the Coast Guard had planned. In fiscal year 2004, Congress appropriated $668 million, $168 million more than the President's request. GAO has raised concern recently about the Coast Guard's initial management of Deepwater and the potential for escalating costs. GAO was asked to review the status of the program against the initial acquisition schedule and determine the impact of the additional $168 million in fiscal year 2004 funding on this schedule.

What GAO Found

The degree to which the Deepwater program is on track with its original 2002 integrated acquisition schedule is difficult to determine because the Coast Guard has not updated the schedule. Coast Guard officials said they have not updated it because of the numerous changes Deepwater experiences every year and the cost, personnel, and time involved. However, in similar acquisitions--those of the Department of Defense (DOD)--cost, schedule, and performance updates are fundamental to congressional oversight. DOD is required to update the schedule at least annually and whenever cost and schedule thresholds are breached. In practice, DOD continually monitors and reports schedules for management on a quarterly basis. Updating the acquisition schedule--including phases such as design and fabrication, interim phase milestones, and critical paths linking assets-- on a more timely basis is imperative so that annual Coast Guard budget submissions can allow Congress to base decisions on accurate information. GAO used available data to develop the current acquisition status for a number of selected Deepwater assets and found that they have experienced delays and are at risk of being delivered later than anticipated. The additional $168 million in fiscal year 2004, while allowing the Coast Guard to conduct a number of Deepwater projects that had been delayed or would not have been funded in fiscal year 2004, will not fully return the program to its original 2002 acquisition schedule. Reasons include: all work originally planned for fiscal year 2004 was not funded and some will have to be delayed to fiscal year 2005; delivery of some assets has fallen so far behind schedule that ensuring their original delivery dates is impossible; and nonfunding reasons have caused delays, such as greater than expected hull corrosion of patrol boats delaying length extension upgrades.