Coast Guard Has Assumed the Role of Systems Integrator But Lags In Applying Disciplined Asset- Level Processes as It Continues with Procurements

The Coast Guard has taken three major steps to become the systems  integrator for the Deepwater Program. While the Coast Guard has made  progress in applying the disciplined MSAM acquisition process to its  Deepwater assets, it did not meet its goal of being fully compliant by the  second quarter of fiscal year 2009. In  2008, the Coast Guard acknowledged that in order to assume the role of  systems integrator, it needed to define systems integrator functions and  assign them to Coast Guard stakeholders. According  to an official, the results of this analysis are expected in the summer of  2009. In conjunction with its assuming the role of systems integrator, the Coast  Guard has significantly reduced the scope of work on contract with ICGS. According to a Coast  Guard official, the Coast Guard intends to have an approved  operational requirements document before procuring additional ships. Coast Guard Developing More Realistic Cost Estimates for Deepwater Assets, but Cost Reporting May Not Keep Congress Fully Informed

Since the establishment of the $24.2 billion baseline for the Deepwater  program in 2007, the anticipated cost, schedules, and capabilities of many  of the Deepwater assets have changed, in part due to the Coast Guard’s  increased insight into what it is buying. Coast Guard officials have stated that this baseline reflected not a  traditional cost estimate but rather the anticipated contract costs as  determined by ICGS. Better-informed Baselines Suggest Deepwater Costs Could Exceed $24.2 Billion

As the Coast Guard has developed its own cost baselines for Deepwater  assets, it has become apparent that some of the assets it is procuring will  likely cost more than anticipated. While the Coast Guard is still in the  process of communicating the effect and origin of these cost issues to  DHS, information available to date for assets shows that the total cost of  the program will likely exceed $24.2 billion, with potential cost growth of  approximately $2.1 billion through the life of the Deepwater Program. As  more baselines are approved by DHS, further cost growth may become  apparent. The Coast Guard’s reevaluation of baselines has also changed its  understanding of the delivery schedules and capabilities of Deepwater  assets. Current Budget Reporting Lacks Detail at Asset Level, and May Not Adequately Inform Congress

While the Coast Guard plans to update its annual budget requests with  asset-based cost information, the current structure of its budget  submission could limit Congress’s understanding of details at the asset  level. For example, while the  justification of the NSC request includes an account of the capabilities the  asset is expected to provide, how these capabilities link to the Coast  Guard’s missions, and details on what activities past appropriations have  funded, it does not include estimates of total program cost, future award  or delivery dates of remaining assets, or even the total number of assets to  be procured. Coast Guard Having Difficulty Staffing Government Acquisition Positions but Working To Improve Processes

One reason the Coast Guard originally sought a systems integrator was  because it recognized that it lacked the experience and depth in its  workforce to manage the acquisition internally. Now that the Coast Guard  has taken control of the Deepwater acquisition, it acknowledges that it  faces challenges in hiring and retaining qualified acquisition personnel and  that this situation poses a risk to the successful execution of its acquisition  programs. According to human capital officials in the acquisition  directorate, as of April 2009, the acquisition branch had funding for 855  military and civilian personnel and had filled 717 of these positions— leaving 16 percent unfilled. Even as it attempts to fill its current  vacancies, the Coast Guard plans to increase the size of its acquisition  workforce significantly by the end of fiscal year 2011. In addition to third party experts, the Coast Guard has been increasing its  use of support contractors. Coast Guard Has Made Progress in Identifying and Mitigating Acquisition Workforce Challenges

While the Coast Guard may be hard-pressed to fill the government  acquisition positions it has identified both now and in the future, it has  made progress in identifying the broader challenges it faces and is working  to mitigate them. Coast Guard: Observations on Changes to Management and Oversight of  the Deepwater Program. Coast Guard: Status of Efforts to Improve Deepwater Program  Management and Address Operational Challenges. Coast Guard: Deepwater Program Acquisition Schedule Update Needed.
Why GAO Did This Study

The Deepwater Program is intended to recapitalize the Coast Guard's fleet and includes efforts to build or modernize five classes each of ships and aircraft, and procure other key capabilities. In 2002, the Coast Guard contracted with Integrated Coast Guard Systems (ICGS) to manage the acquisition as systems integrator. After the program experienced a series of failures, the Coast Guard announced in April 2007 that it would take over the lead role, with future work on individual assets to be potentially bid competitively outside of the existing contract. A program baseline of $24.2 billion was set as well. In June 2008, GAO reported on the new approach and concluded that while these steps were beneficial, continued oversight and improvement was necessary. The Coast Guard has taken actions to address the recommendations in that report. This testimony updates key issues from prior work: (1) Coast Guard program management at the overall Deepwater Program and asset levels; (2) how cost, schedules, and capabilities have changed from the 2007 baseline and how well costs are communicated to Congress; and (3) Coast Guard efforts to manage and build its acquisition workforce. GAO reviewed Coast Guard acquisition program baselines, human capital plans and other documents, and interviewed officials. For information not previously reported, GAO obtained Coast Guard views. The Coast Guard generally concurred with the findings.

What GAO Found

The Coast Guard has assumed the role of systems integrator for the overall Deepwater Program by reducing the scope of work on contract with ICGS and assigning these functions to Coast Guard stakeholders. As part of its systems integration responsibilities, the Coast Guard has undertaken a fundamental reassessment of the capabilities, number, and mix of assets it needs; according to an official, it expects to complete this analysis by the summer of 2009. At the individual Deepwater asset level, the Coast Guard has improved and begun to apply the disciplined management process found in its Major Systems Acquisition Manual, but did not meet its goal of complete adherence to this process for all Deepwater assets by the second quarter of fiscal year 2009. For example, key acquisition management activities--such as operational requirements documents and test plans--are not in place for assets with contracts recently awarded or in production, placing the Coast Guard at risk of cost overruns or schedule slips. Due in part to the Coast Guard's increased insight into what it is buying, the anticipated cost, schedules, and capabilities of many of the Deepwater assets have changed since the establishment of the $24.2 billion baseline in 2007. Coast Guard officials have stated that this baseline reflected not a traditional cost estimate but rather the anticipated contract costs as determined by ICGS. As the Coast Guard has developed its own cost baselines for some assets, it has become apparent that some of the assets it is procuring will likely cost more than anticipated. Information to date shows that the total cost of the program may grow by $2.1 billion. As more cost baselines are developed and approved, further cost growth may become apparent. In addition, while the Coast Guard plans to update its annual budget requests with asset-based cost information, the current structure of its budget submission to Congress does not include certain details at the asset level, such as estimates of total costs and total numbers to be procured. The Coast Guard's reevaluation of baselines has also changed its understanding of the delivery schedules and capabilities of Deepwater assets. One reason the Coast Guard sought a systems integrator from outside the Coast Guard was because it recognized that it lacked the experience and depth in workforce to manage the acquisition internally. The Coast Guard acknowledges that it still faces challenges in hiring and retaining qualified acquisition personnel and that this situation poses a risk to the successful execution of its acquisition programs. According to human capital officials in the acquisition directorate, as of April 2009, the acquisition branch had 16 percent of positions unfilled, including key jobs such as contracting officers and systems engineers. Even as it attempts to fill its current vacancies, the Coast Guard plans to increase the size of its acquisition workforce significantly by the end of fiscal year 2011. While the Coast Guard may be hard-pressed to fill these positions, it has made progress in identifying the broader challenges it faces and is working to mitigate them. In the meantime, the Coast Guard has been increasing its use of support contractors.