In order  to plan for the individual maintenance needs of each cutter, SFLC  generates and maintains a 5-year maintenance plan for each asset class  depicting the major depot-level maintenance tasks. This can include conducting both anticipated and unanticipated  maintenance. Depot-Level Maintenance Is Lowering the Mission Capable Rates of the Fast Response Cutter and National Security Cutter

Over the past few years, when the FRC and NSC began using their  current mission capable metrics, they have both met their minimum  targets on average. According to Coast Guard officials, this is  primarily because of an increase in the amount of time the first 13 cutters  are spending in depot maintenance for warranty drydock work, which has  reduced the FRC’s ability to conduct operations. Failures associated with the main diesel engine have been  particularly problematic. The Coast Guard is also in the process of  developing prototype components to address issues with the main diesel  engine in advance of the completion of the propulsion study. The Coast Guard Is Addressing Some Maintenance Problems through Engineering Design Changes, but Has Not Documented Key Cost Analysis

During operations and testing, the FRC and NSC have experienced  problems that require engineering design changes or repairs. Replacing the FRC’s engines, which contributed to the cutter’s lost  operational days, represented about $52 million of the costs avoided. The FRCs Are Undergoing Several Design Changes and Several Repairs Covered by Warranty

The Coast Guard has encountered several issues on systems aboard the  FRC that were discovered during operations and testing and require  design changes and retrofits to correct. This  problem was first reported in the cutter’s Initial Operational Test and  Evaluation report in July 2013. Table 6 shows the list of design changes for the NSC  estimated to cost at least $1 million. This means  that systems with known defects or deficiencies will be installed during  production only to be replaced later, requiring maintenance on some of  these systems until the retrofits are complete. Cost Estimates for FRC and NSC Depot Maintenance Do Not Reflect Actual Expenditures and Estimates Are Not Regularly Updated

The FRC’s and NSC’s annual depot-level expenditures have generally  been well below their estimated levels since 2010. Combined, these  cutters have used $106.6 million less than estimated since 2012 and  2010, respectively. According to Coast Guard officials,  the combined difference of $106.6 million in depot maintenance funds  from the FRC and NSC remained in a centrally managed surface asset  depot maintenance account, which is available for use on other Coast  Guard surface assets, such as the High Endurance Cutter, which officials  explained requires additional maintenance funding over what was  originally planned. We recommended that this process conform to cost-estimating  best practices, with which the Coast Guard concurred. First, DHS stated that cost  estimating best practices are most applicable to new acquisitions. Visibility into decisions on how and when to  implement planned design changes on the NSCs—including those not yet  constructed—is currently limited because the Coast Guard’s guidance  does not require programs to perform and document cost analyses that  support the cost and timing of when the changes should be incorporated. Recommendations for Executive Action

To ensure that the Coast Guard makes effective use of its resources,  specifically regarding its budget, we recommend the Secretary of DHS  direct the Commandant of the Coast Guard to take the following two  actions:
Update the Joint Surface Engineering Change Process Guide to  require a documented cost analysis to provide decision makers  adequate data to make informed decisions regarding the expected  costs and when it is most cost effective to install design changes. Appendix 1: Objectives, Scope, and Methodology

To examine the maintenance, equipment failures, and spare parts  availability for the Fast Response Cutter (FRC) and National Security  Cutter (NSC), we reviewed the mission capability data provided from the  Coast Guard from the Electronic Asset Logbook (EAL) database for both  cutters and compared their rates to the target ranges for each cutter  established by the Coast Guard over at least a 12-month time frame as  Coast Guard officials stated was the most meaningful use of the data. To examine the extent to which the Coast Guard’s cost estimates for  depot maintenance reflects actual expenditures for the FRC and NSC, we  reviewed the Coast Guard’s standard support levels, which are the  estimated costs for depot-level maintenance each year over the course of  an asset’s life cycle, and compared that to the depot-level maintenance  expenditures for both cutters from fiscal years 2012 to 2016 for the FRC  and from 2010 to 2016 for the NSC. We compared the Coast Guard’s  process for creating and updating standard support levels to GAO’s best  practices for cost estimating.
Why GAO Did This Study

The Coast Guard is procuring the FRC and NSC to replace its aging cutters. Both cutters have had operational problems—such as propulsion system issues—that are being addressed through maintenance. Prior GAO work identified issues related to performance and maintenance of these vessels, particularly related to the main diesel engines on both cutters.
The House Subcommittee on Coast Guard and Maritime Transportation, Committee on Transportation and Infrastructure asked that GAO examine maintenance of the FRC and NSC. This report addresses the extent to which (1) maintenance issues are affecting FRC's and NSC's operational status, (2) design changes affect the maintenance of the cutters, and (3) the Coast Guard's cost estimates reflect actual expenditures for maintenance for the FRC and NSC.
To conduct this work, GAO analyzed data on cutter maintenance and operations; analyzed the costs and timing of design changes; reviewed Coast Guard budgets and compared GAO best practices in cost estimating to the Coast Guard's process for estimating depot maintenance costs; and interviewed Coast Guard officials.

What GAO Found

Maintenance work for the Fast Response Cutter (FRC) and National Security Cutter (NSC) has lowered the operational availability of each fleet. Although both cutters on average have met their minimum mission capable targets over the long term, increased depot maintenance has more recently reduced each cutter's rates below targets. The FRC's rate is lower, in part, because of a series of unanticipated drydock periods to correct issues covered by its 12-month warranty. The NSC's lower rate is primarily because of anticipated 2-year maintenance and system upgrade periods performed on each newly delivered NSC. Both cutters have experienced problems with the diesel engines, which caused lost operational days and hindered operations while underway.
The Coast Guard's 154-foot Fast Response Cutter and 418-foot National Security Cutter
The Coast Guard has initiated design changes on the FRC and NSC, but some of the NSC's changes to address maintenance problems will not be installed until after each cutter is delivered. While the Coast Guard plans at least $17 million on FRC design changes, officials estimate the warranty has helped avoid $77 million for repaired systems. This includes about $52 million to replace 20 diesel engines that have degraded FRC operations since first discovered in July 2013. Design changes on the NSCs are expected to cost the Coast Guard at least $260 million. In order to maintain production schedules, several changes will be completed after delivery of each NSC, including the ninth NSC, which has not yet begun construction. Thus, systems with known deficiencies are being installed, only to be replaced later. Officials stated this approach is more cost effective; however, the Coast Guard did not document its cost analyses, in accordance with GAO cost estimating best practices. Without such documentation, the Coast Guard cannot demonstrate that it is making cost-effective decisions.
Since 2010, depot maintenance expenditures for the FRC and NSC have been $106.6 million less than the Coast Guard estimated. This amount remains in a centrally managed account and is made available for other surface assets, such as aging, legacy vessels. Coast Guard officials stated that depot maintenance estimates are not adjusted or updated over the service life of an asset class. Periodically updating depot maintenance cost estimates—in accordance with GAO cost estimating best practices—for each asset class could provide decision makers with much needed information with which to determine future budgets.

What GAO Recommends

To ensure that it effectively uses its resources, the Coast Guard should document cost analyses on the cost and timing of engineering design changes and periodically evaluate and update its depot maintenance cost estimates. The Department of Homeland Security agreed with both recommendations and provided timeframes for actions to address them.