	Continued Improvement in Acquisition Management Capabilities, Including Leveraging DOD Expertise

The Coast Guard has updated policies and processes for major acquisition  programs to better reflect best practices and respond to our prior  recommendations. Updates to Policies and Processes  We found that the Coast Guard revised its Major Systems Acquisition  Manual in November 2010 to include    a description of the roles and responsibilities of a flag-level Executive  Oversight Council, which was formed in 2009 to review programs and  provide oversight;   aligning roles and responsibilities of independent test authorities to DHS  standards, which satisfied one of our prior recommendations;   a formal acquisition decision event before a program receives approval for  low-rate initial production, which addressed one of our prior  recommendations; and   a requirement to present an acquisition strategy when DHS is asked to  validate the need for a major acquisition program. The Coast Guard has made progress in reducing its acquisition workforce  vacancies. From April through November 2010, the percentage of  vacancies for government positions dropped from about 20 percent to13  percent. As of November 2010, the Coast Guard  support contractors made up 25 percent of the Coast Guard’s acquisition  workforce. According to the Coast Guard, it currently has 81 interagency agreements,  memorandums of agreement, and other arrangements in place primarily  with DOD to support its major acquisition programs. According to Coast Guard  contracting officials, the Coast Guard recently began to develop a  database of all interagency agreements with DOD and other agencies, but  at this point program staff have access to only 5 of the approximately 81  agreements. DHS agreed with the  recommendation. Challenges in Major Acquisition Programs Exacerbated by Unrealistic Budget Planning

We have previously reported that the Coast Guard has gained insights into  the risks it faces in managing its major acquisitions. At the same time,  most major programs continue to experience challenges in program  execution, resources, and schedule. The Coast Guard has  reported that projected funding levels in the fiscal years 2011-2015 capital  investment plan were lower than previously planned for some major  acquisition programs. Programs experiencing instability due to reduced projected funding levels. Coast Guard Has Not Completed a Comprehensive Trade-off Analysis for the Deepwater Assets

To support its role as systems integrator, the Coast Guard planned to  complete a fleet mix analysis in July 2009 to eliminate uncertainty  surrounding future mission performance and to produce a baseline for the  Deepwater acquisition. In July 2010, we  reported that while the Coast Guard had not yet released the results,  officials told us that the analysis considered the 2007 Deepwater baseline  to be the “floor” for asset capabilities and quantities and did not impose  financial constraints on the outcome. The Coast Guard initiated a second  phase of the analysis to impose cost constraints. We recommended in our  July 2010 report that since the 2007 DHS-approved baseline of $24.2 billion  was no longer feasible because of cost growth, the Coast Guard should  conduct a comprehensive review of Deepwater cost, schedule, quantities,  and mix of assets needed to meet mission needs, identify trade-offs given  fiscal constraints, and report the results to Congress. The Coast Guard’s  efforts to date have not addressed this recommendation. Given  the significant increase in the number of assets needed for this objective  fleet mix from the approved Deepwater program of record—the $24.2  billion baseline—the Coast Guard developed, based on risk metrics,  incremental fleet mixes to bridge the two. They told us that the lower- and upper- bound  constraints are, respectively, $1.2 billion and $1.7 billion annually;  however, the basis for selecting these cost constraints is not documented. Based on our review of recent budget data, this upper bound for  Deepwater is more than Congress has appropriated for the Coast Guard’s  entire acquisition portfolio in recent years. Moreover, the Coast Guard  officials stated that this analysis will not reassess whether the current  program of record is the appropriate mix of assets to pursue and will not  assess any mixes smaller than the current program of record. Because fleet mix  analysis phase 2 will not assess options lower than the program of record,  it will not prepare the Coast Guard to make the trade-offs that will likely  be needed in the current fiscal climate. It is important to  recognize that the Coast Guard continues to make progress in  strengthening its capabilities to manage its acquisition portfolio by  updating acquisition policies and practices, reducing vacancies in the  acquisition workforce, and leveraging DOD contracts and resources to  help support its major acquisitions. Nevertheless, the Coast Guard still  faces significant challenges in carrying out these major acquisitions within  a fiscally constrained environment, especially given continued cost growth  and schedule delays that are exacerbated in part by unrealistic budget  plans.
Why GAO Did This Study

The U.S. Coast Guard manages a broad major acquisition portfolio. GAO has reported extensively on the Coast Guard's significant challenges with its major acquisition programs, including its Deepwater Program. GAO has also recognized steps the Coast Guard has taken to improve acquisition management. Additionally, GAO has recommended that the Coast Guard complete a review of the Deepwater Program to clarify the mix of assets that are needed to meet mission needs and trade-offs while considering fiscal constraints, because the program had exceeded its $24.2 billion baseline. This testimony updates (1) Coast Guard efforts to manage major acquisitions, (2) challenges programs are facing in the areas of cost and schedule, and (3) the status of the Deepwater fleet mix analysis. This statement is largely based on GAO-11-480 , which is being issued today. In that report, GAO recommended that the Coast Guard formalize its database of agreements with the Department of Defense (DOD). The Department of Homeland Security agreed with the recommendation. This statement also draws from prior GAO reports and ongoing work related to Deepwater. GAO reviewed the first phase of the Coast Guard's fleet mix analysis, contract documents, and budget information. GAO also interviewed Coast Guard officials responsible for conducting the fleet mix analysis. For the new information, GAO obtained Coast Guard views and incorporated technical comments where appropriate

What GAO Found

The Coast Guard continues to improve its acquisition management capabilities by updating policies, reducing acquisition workforce vacancies, and leveraging DOD contracts. In November 2010, the Coast Guard updated its "Major Systems Acquisition Manual" to further incorporate best practices and respond to prior GAO recommendations, such as aligning the roles and responsibilities of independent test authorities to DHS standards. Additionally, the Coast Guard reduced its acquisition workforce vacancies from about 20 to 13 percent from April through November 2010. Shortfalls in hiring staff for certain key areas persist, though, and some programs continue to be affected by unfilled positions. The Coast Guard has entered into 81 memorandums of agreement and other arrangements--primarily with DOD--to support its major acquisition programs, but program staff currently have access to only 5 of the 81 agreements. Most of the Coast Guard's 17 major acquisition programs continue to experience challenges in program execution, schedule, and resources. Furthermore, the Coast Guard's unrealistic budget planning exacerbates these challenges. When programs receive funding lower than planned, schedule breaches and other problems are more likely to occur. In fact, 4 of the major acquisition programs have reported a baseline breach caused, at least in part, by reduced projected funding levels. Additionally, projected funding levels in the Coast Guard's fiscal years 2012-2016 capital investment plan are significantly higher than budgets previously appropriated or requested and therefore may be unrealistic. This is particularly true given the rapidly building fiscal pressures facing the nation. For example, the Coast Guard plans to request $2.35 billion for acquisitions in fiscal year 2015--including funding for construction of three major Deepwater surface assets--but the agency has not received more than $1.54 billion in any recent year. The Coast Guard has developed action items to address budget planning challenges. In July 2010, GAO recommended that because of significant cost growth in the Deepwater Program, the Coast Guard should review the cost and mix of assets and identify trade-offs given fiscal constraints. The Department of Homeland Security agreed with the recommendation; however, the Coast Guard has not yet implemented it. The Coast Guard began a fleet mix analysis in 2008 that considered the current Deepwater Program to be the "floor" for asset capabilities and quantities and did not impose cost constraints on the various fleet mixes. Consequently, the results will not be used as a basis for trade-off decisions. The Coast Guard has now begun a second analysis, which includes an upper cost constraint of $1.7 billion annually--more than Congress has appropriated for the entire Coast Guard acquisition portfolio in recent years. Further, Coast Guard officials told GAO that this analysis will not assess options lower than the current program of record. It therefore will not prepare the Coast Guard to make the trade-offs that will likely be needed in the current fiscal climate. The Coast Guard expects to complete the analysis this summer.