Also, the Coast Guard  operates a fleet of more than 200 cutters and patrol boats, about 1,600  smaller boats, and almost 200 aircraft—mainly helicopters. Resource Hours Have Changed Substantially for Many Programs, While Performance Results Have Largely Remained Stable

Total Coast Guard resource hours devoted to its various programs have  increased by 39 percent since the September 11 terrorist attacks. Of the various  programs, the ports, waterways, and coastal security program saw by far  the largest increase—more than 1,200 percent. Homeland security  programs have been more likely to see increases in hours, while non- homeland security programs have been more likely to see decreases. For  that program, resources increased and performance results improved. These efficiencies were  of four main types—improved technology, improved tactics, stronger  partnerships, and improved intelligence. Without a clear understanding of this linkage or a timeframe to  ensure that it gets completed, the agency is at risk of misdirecting  resources and missing further opportunities to increase productivity and  efficiency to ensure the best use of its funds. Reliability and Cost Issues Associated with Key Deepwater Assets Heighten Program Funding and Management Challenges

Under the Deepwater program, the Coast Guard’s legacy assets are  expected to remain in service until they are replaced or modernized  through the Deepwater acquisition program. Coast Guard Is Facing Serious Challenges to Keep the Program on Schedule and within Budget Projections

The Coast Guard’s Deepwater program—which uses a unique contracting  approach requiring steady funding over 20 years—is facing serious  challenges to keep the program on schedule and within budget estimates. As a result, available future funding may have to be  used, in part, to address critical maintenance needs of the legacy  Deepwater assets, diverting funds otherwise intended for future  Deepwater replacements and upgrades. Due to revised homeland security requirements, some redesign of the  national security cutter has occurred. Increased Management and Oversight Attention Needed to Successfully Complete the Deepwater Program

While expeditiously completing the Deepwater program is important to  the ability of the Coast Guard to effectively fulfill its responsibilities in the  future, the agency must also be diligent in managing the contract, and  ensuring necessary competition among contractors to prevent additional  cost increases in the program. Almost 2 years after the contract was awarded for implementation of the  Deepwater program, the key components needed to manage the program  and oversee the system integrator’s performance have not been  effectively implemented in the following areas:    The effectiveness of the Integrated Project Teams—established as the  main tool for managing the program and overseeing the contractor— has been weakened due to changing membership, understaffing,  insufficient training, lack of authority for decision making, and  inadequate communication among members. The Coast Guard’s “hands-off” approach in this area raises  questions about whether the government will be able to control costs  in the Deepwater program. The HH-65 is the Coast Guard’s mainstay  helicopter, serving such missions as search and rescue, drug and migrant  interdiction, and homeland security. To address these problems, the Coast Guard plans to take action along  two tracks. Overview of Fiscal Year 2005 Budget and Funding for Several Areas of Particular Congressional Interest

The President’s fiscal year budget request for the Coast Guard of nearly  $7.5 billion represents an increase of about $534 million, or about   8 percent in nominal dollars over the enacted budget for fiscal year 2004. It includes almost $5.2 billion in operating expenses and $943 million for  its capital acquisition budget. The most significant new initiative at $102 million would be used  to implement the Maritime Transportation Security Act (MTSA) of 2002. An additional $2.2 million is being requested to fund a new  initiative for increasing maritime domain awareness—another homeland  security function. Appendix I: Scope and Methodology

To determine the most recent trends in both resource usage and  performance results for the Coast Guard’s homeland security and non- homeland security programs and the implication of these trends for Coast  Guard management and accountability, we summarized findings from a  recent GAO report. To determine the challenges the agency faces as it proceeds with its  program to modernize its Deepwater cutters and aircraft, we summarized  briefings prepared in 2004 by the Coast Guard for the Congress and for  internal use on the Deepwater program and the HH-65 helicopters. To give an overview of the President’s fiscal year 2005 budget request for  the Coast Guard, focusing on several areas of particular congressional  interest, we obtained information on the average workweek of personnel  at the Coast Guard’s multi-mission stations and interviewed Coast Guard  headquarters staff to determine how the fiscal year 2005 budget will  address MTSA implementation, Rescue 21, and multi-mission stations.
Why GAO Did This Study

As the lead federal agency for maritime homeland security within the Department of Homeland Security, the Coast Guard is facing extraordinary, heightened responsibilities to protect America's ports, waterways, and waterside facilities from terrorist attacks. At the same time, the Coast Guard remains responsible for many other programs important to the nation's interests, such as conducting search and rescue and protecting important fishing grounds. Its expanded responsibilities come at a time when budget resources are increasingly constrained, making prioritization among competing agencies and programs an even more critical factor in congressional decision-making. This testimony specifically addresses (1) the most recent trends in both resource usage and performance results for the Coast Guard's homeland security and non-homeland security programs; (2) challenges the agency faces as it proceeds with its Deepwater acquisition program to replace or modernize its key legacy cutters and aircraft; and (3) an overview of the President's fiscal year 2005 budget request for the Coast Guard, focusing on several areas of particular congressional interest.

What GAO Found

Resource usage for Coast Guard assets--its cutters, boats, and aircraft-- was up almost 40 percent from the pre-September 11th baseline. Homeland security programs, such as the ports, waterways, and coastal security program, have been more likely to see increases in usage, while nonhomeland security programs, such as living marine resources, remain below pre-September 11th levels. Although resource usage changed substantially for many of these programs, performance results generally improved or remained largely the same. The stable or improved performance results were attributed mainly to operational efficiencies (e.g., improved technology, improved tactics, stronger partnerships, and improved intelligence). However, the Coast Guard has limited data and no systematic approach to explain or account for the effects of these factors. Without such an approach and supporting data to link its resources and performance results, the agency may be missing further opportunities to increase productivity and efficiency to ensure best use of its funds. Some of the Coast Guard's legacy Deepwater cutters, patrol boats, and aircraft are increasingly unreliable and costly to maintain, and timely and effective implementation of the agency's ongoing Deepwater acquisition program to modernize these assets is crucial in order to reverse this trend. However, the Coast Guard faces serious challenges to keep the Deepwater program on schedule and within planned budget estimates. We estimate that to return the program to its original 20-year completion schedule will cost about $2.2 billion more than the Coast Guard estimated when the program was implemented in 2002. Also, available program funding, which has been less than the Coast Guard planned, may have to be used, in part, to address critical maintenance needs of the legacy assets, diverting funds otherwise intended for future Deepwater replacements and upgrades. Moreover, recent GAO work raised serious concerns about the management and oversight of the program, including the quality of the Coast Guard's assessment of the program contractor's performance and the uncertainty as to whether the Coast Guard would be able to effectively control costs. The President's fiscal year 2005 budget request of about $7.5 billion for the Coast Guard represents about an 8 percent increase over last year. It includes $5.2 billion in operating expenses and $943 million for its capital acquisition budget. Most of the new initiatives outlined in its operating expense budget are targeted for homeland security initiatives, including $102 million for implementation of the Maritime Transportation Security Act of 2002. Aside from the new initiatives, two other efforts in the budget request may require further attention. The Coast Guard's multi-mission stations are still experiencing a heavy workload for station personnel because of increased homeland security responsibilities. Also, the Coast Guard's Rescue 21 program, which will replace the Coast Guard's current antiquated communication system, faces possible delays because of software system development problems.