At the start of the Deepwater  Program, the Coast Guard chose to use a system-of-systems acquisition  strategy that would replace its assets with a single, integrated package of  aircraft, vessels, and communications systems through ICGS, a lead  system integrator that was responsible for designing, constructing,  deploying, supporting and integrating the assets to meet Coast Guard  requirements. Coast Guard Has Established a More Accountable Acquisition Organization but Faces Challenges in Building Acquisition Workforce

Acknowledging that the initial approach to Deepwater gave too much  control to the contractor, the Coast Guard has reoriented its acquisition  organization to position itself to execute systems integration and program  management responsibilities formerly carried out by industry. In the midst of these positive changes, the Coast Guard, like  other federal agencies, faces challenges in building a capable government  workforce to manage this large acquisition. While it attempts to reduce  vacancy rates, it is relying on support contractors in key positions. Deepwater Management Improved with Better Use of Project Managers and Government Control over Integrated Product Teams

In conjunction with the restructuring of its acquisition directorate, Coast  Guard officials have begun to increase the responsibilities and  accountability of the project managers who oversee the acquisition of  Deepwater assets. For example, a previous Deepwater  management plan emphasized “partnership” between the Coast Guard and  ICGS in managing Deepwater and “joint  and ICGS  responsibility for overall management and execution of the program,  including authorization of necessary resources and resolving performance,  cost, schedule, and risk tradeoff issues.” Under this scenario, according to  Coast Guard officials, project managers could not provide as much  direction as they wanted because of the terms of the contract, where ICGS  bore ultimate responsibility for outcomes. If the  recommendations had been heeded, changes to the ship’s design could  have been made earlier and some additional costs may have been avoided. Officials stated that for some specialties, such as cost  estimation, the Coast Guard can leverage existing relationships, such as  with the Navy. Transition to Asset- by-Asset Approach Results in Greater Visibility and Control, but the Coast Guard Has Not Determined How to Manage System-Level Aspects

The Coast Guard’s move away from the ICGS contract and the system-of- systems model to a more traditional, asset-level acquisition strategy has  resulted in greater government visibility and control. Coast Guard Is Not Fully Positioned to Manage Crucial System-Level Aspects of Deepwater

Although the shift to individual acquisitions is intended to provide the  Coast Guard with more visibility and control, key aspects still require a  system-level approach. The Coast Guard recognizes the need to develop an  architecture with common components for use on all assets. The analysis, in  general, did not make recommendations about the number of each asset to  be procured. Disciplined Project Management Approach Is Beneficial Going Forward, but Key Decision Point Is Missing and Consequences of Prior Decisions May Be Costly

As the Coast Guard moves the Deepwater Program from a system-of- systems acquisition to a more traditional asset-based approach, it is  introducing the use of a more disciplined and formalized process under its  Major Systems Acquisition Manual (MSAM). This process requires documentation and approval of  program activities at key points in a program’s life-cycle. Each milestone requires  documentation that captures key information needed for decision making. This requirement would apply to Deepwater, as it has been  designated a DHS major investment program. Conclusions

In response to significant problems in achieving its intended outcomes  under Deepwater, Coast Guard leadership has made a major change in  course in its management and oversight of this program. And because the Coast Guard’s knowledge of  the reasonableness of contractors’ proposed cost and schedule targets for  Deepwater assets relies in part on visibility into and confidence in the  contractors’ earned value management data, the Coast Guard may lack a  solid basis to evaluate future proposals by Northrop Grumman until  known problems with its data are resolved. The comments from the Department of Homeland Security are included in  their entirety in appendix III. 11, 2008). 5, 2008). Contract Management: Coast Guard’s Deepwater Program Needs  Increased Attention to Management and Contractor Oversight.
Why GAO Did This Study

The Coast Guard's Deepwater Program, under the Department of Homeland Security (DHS), has experienced serious performance and management problems. Deepwater is intended to replace or modernize Coast Guard vessels, aircraft, and the communications and electronic systems that link them together. As of fiscal year 2008, over $4 billion has been appropriated for Deepwater. The Coast Guard awarded a contract in June 2002 to a lead system integrator, Integrated Coast Guard Systems (ICGS), to execute the program using a system-of-systems approach. In response to a Senate report accompanying a Department of Homeland Security appropriations bill, 2008, this GAO report assesses whether the changes the Coast Guard is making to its management and acquisition approach to Deepwater will put it in a position to realize better outcomes. GAO reviewed key program documents and interviewed Coast Guard and contractor personnel.

What GAO Found

Coast Guard leadership is making positive changes to its management and acquisition approach to the Deepwater Program that should put it in a position to realize better outcomes, although challenges to its efforts remain. The Coast Guard has increased accountability by bringing Deepwater under a restructured acquisition function and investing its government project managers with management and oversight responsibilities formerly held by ICGS. Coast Guard project managers and technical experts--as opposed to contractor representatives--now hold the greater balance of management responsibility and accountability for program outcomes. However, like other federal agencies, the Coast Guard has faced obstacles in building an adequate government workforce. It has various initiatives under way to develop and retain a workforce capable of managing this complex acquisition program, but faced with an almost 20 percent vacancy rate, it is relying on support contractors, such as cost estimators, in key positions. The Coast Guard's decision to manage Deepwater under an asset-based approach, rather than as an overall system-of-systems, has resulted in increased government control and visibility over acquisitions. Agency officials have begun to hold competitions for Deepwater assets outside of the ICGS contract. While the asset-based approach is beneficial, certain cross-cutting aspects of Deepwater, such as the program's communications and intelligence components and the numbers of each asset needed, still require a systems-level approach. The Coast Guard recognizes this but is not yet fully positioned to manage these aspects. The Coast Guard has begun to follow the disciplined, project management framework of its Major Systems Acquisition Manual (MSAM), which requires documentation and high-level executive approval of decisions at key points in a program's life cycle. But the consequences of not following this approach in the past are now evident, as Deepwater assets have been delivered without a determination of whether their planned capabilities would meet mission needs. The MSAM process currently allows limited initial production to proceed before the majority of design activities have been completed. In addition, a disconnect between MSAM requirements and current practice exists because DHS had earlier delegated to the Coast Guard all Deepwater acquisition decisions, resulting in little departmental oversight. Coast Guard project managers and decision makers are now receiving information intended to help manage project outcomes, but some key information is unreliable. The earned value management data reported by ICGS lacks sufficient transparency to be useful to Coast Guard program managers, and subcontractor Northrop Grumman's system for producing the data may need to be re-certified to ensure its reliability. Officials state that they are addressing these issues through joint efforts with the Navy and the Defense Contract Management Agency.