The Integrated Deepwater System acquisition program, which the Coast  Guard began developing in 1996, is its major effort to replace or modernize  these aircraft and vessels. The Deepwater program represents a unique approach to a major  acquisition in that the Coast Guard is using a prime contractor—the  system integrator—to identify and deliver the assets needed to meet a set  of mission requirements the Coast Guard has specified. To reflect added homeland security responsibilities based on the terrorist  attacks of September 11, 2001, the August 2005 revision and February 2006  update to the Deepwater implementation plan change the balance of  upgraded legacy versus new assets, the delivery schedules, and program  costs from the original 2002 plan. Coast Guard officials caution, however, that  this 25-year program is heavily dependent on receiving the anticipated  budget amount each fiscal year. Delivery Schedules for Deepwater Assets Have Changed

Estimated delivery schedules for the Deepwater assets have changed. Beyond the increases related solely to vessels, upgrades to the C4ISR and  maritime domain awareness capabilities to improve interoperability  between the Coast Guard and other Department of Homeland Security  components, as well as with the Department of Defense, account for the  second largest category of cost increases—increasing by $1.1 billion in the  2005 revised plan, and by $663 million in the 2006 plan. In contrast,  because the revised plans include upgrading the HC-130 aircraft and the  HH-60 helicopter rather than replacing them as called for in the original  plan and for scaling back on the number of unmanned aerial vehicles to be  acquired, costs for Deepwater aircraft decreased from the original plan to  the revised plan. Further, a Department of Defense review  board facilitated accreditation of the model and another group with  expertise in this type of modeling has studied the Coast Guard’s approach  and concluded that it is reliable. Because  the model has proved useful for guiding Coast Guard decisions on the  proper asset mix for enhancing the mission performance of the Deepwater  assets, the Coast Guard is considering ways to expand the model to guide  decisions on meeting its Coast Guard-wide Government Performance and  Results Act (GPRA) performance goals. This strategy was deemed by the Coast Guard to be the  most cost-effective solution for meeting Deepwater mission requirements. During  our 2005 review, we determined that the Coast Guard had addressed and  fully implemented 2 of these 11 recommendations. Recommendation status: The Coast Guard’s steps, combined with DHS’s  oversight requirements, should be sufficient to resolve this issue. Further, a project of  this magnitude will likely continue to experience other concerns and  challenges beyond those that have emerged so far. Appendix I: Objectives, Scope, and Methodology

This report, which focuses on the Coast Guard’s Deepwater management  challenges, provides details on three issues: (1) a comparison of the  revised Deepwater implementation plan issued in August 2005 with the  original (August 2002) plan in terms of cost, time frames, and the balance  of legacy and replacement assets; (2) an assessment of the degree to  which the operational effectiveness model and other analytical methods  used by the Coast Guard to develop the revised Deepwater asset mix are  sound and appropriate for such a purpose; and (3) an assessment of the  progress made in implementing our prior recommendations regarding  Deepwater program management. In assessing the Coast Guard’s modeling and other analytical methods  used for developing the revised Deepwater asset mix, we paid particular  attention to the most recent performance gap analysis (PGA) study (PGA  IV), which compared the projected performance of the revised Deepwater  asset mix to that of the original Deepwater asset mix—so that we could  gain a better understanding of how these results were used in developing  the revised Deepwater asset mix.
Why GAO Did This Study

The Deepwater program was designed to produce aircraft and vessels that would function in the Coast Guard's traditional at-sea roles. After the terrorist attacks of September 11, 2001, however, the Coast Guard began taking on additional homeland security missions, and so it revised the Deepwater implementation plan to provide assets that could better meet these new responsibilities. While many acknowledge that the Coast Guard's aging assets need replacement or renovation, concerns exist about the approach the Coast Guard adopted in launching the Deepwater program. The subsequent changes in the program's asset mix and delivery schedules only increased these concerns. This report (1) compares the revised Deepwater implementation plans with the original plan in terms of the assets to be replaced or modified, and the time frames and costs for doing so; (2) assesses the degree to which the operational effectiveness model and other analytical methods used by the Coast Guard to develop the revised Deepwater asset mix are sound and appropriate for such a purpose; and (3) assesses the progress made in implementing GAO's prior recommendations regarding program management. GAO is not making any new recommendations in this report.

What GAO Found

The revised Deepwater implementation plans change the balance between new and legacy assets, alter the delivery schedule for some assets, lengthen the overall acquisition schedule by 5 years, and increase the projected program cost from $17 billion to $24 billion. The higher cost generally relates to upgrading assets to reflect added homeland security mission requirements. Upgrades to vessels account for the single largest area of increase; with upgrades to the command, control, communications and other capabilities being second highest. In contrast, because the revised plans upgrade rather than replace most legacy aircraft and reduce the number of unmanned aircraft, the cost for Deepwater aircraft drops. The revised plans, like the original plan, are heavily dependent on receiving full funding each year. Coast Guard officials state that a shortfall in funding in any year could substantially increase total costs. The Coast Guard's analytical methods were appropriate for determining if the revised asset mix would provide greater mission performance and whether the mix is appropriate for meeting Deepwater missions. GAO and other independent experts found the Coast Guard's methods were reliable for assessing the effects of changing the asset mix and a Department of Defense review board facilitated accreditation of the Coast Guard's approach. Because the model has proved useful for guiding Coast Guard decisions on the proper asset mix for achieving Deepwater performance goals, the Coast Guard is considering ways to expand the model to guide decisions on meeting its Coast Guard-wide performance goals. Actions by the Coast Guard and the system integrator have fully implemented three of the eight GAO recommendations that were not fully addressed during GAO's review in 2005, and three more recommendations appear to be nearly implemented. The remaining two have unresolved concerns, but the Coast Guard is taking steps to resolve them. A program of this size, however, will likely experience other challenges beyond those that have emerged so far, making continued monitoring by the Coast Guard important.