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 assumed the role of systems integrator for  Deepwater, concurrently downsizing the scope of systems engineering and  integration work under contract with ICGS. In conjunction with its role as  systems integrator, the Coast Guard has undertaken a fundamental  reassessment of the capabilities and mix of assets it needs to meet its  Deepwater missions. Recognizing the importance of ensuring  that each acquisition project is managed through a sustainable and  repeatable process and wanting to adhere to proven acquisition  procedures, in July 2008 the Coast Guard set a goal of completing the  MSAM acquisition management activities for all Deepwater assets by the  end of March 2009. Coast Guard Developing Better- Informed Cost and Schedule Estimates for Deepwater Assets, but Reporting May Not Keep Congress Fully Informed

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, it has become apparent that some of the assets will likely cost  more than anticipated. Information to date shows that the total cost of the  program will likely grow by at least $2.7 billion. While the  Coast Guard plans to update its annual budget requests with this new  information, the current structure of its budget submission to Congress  does not include details at the asset level, such as estimates of total costs  and total numbers to be procured. For the assets with revised cost estimates, this represents cost  growth of approximately 39 percent. As baselines for the additional assets  are approved, further cost growth will likely become apparent. Other federal agencies that acquire  systems similar to those of the Coast Guard, such as the Department of  Defense, capture these elements in justifications of their budget requests. Coast Guard Having Difficulty Staffing Government Acquisition Positions but Working to Improve Processes

The Coast Guard sought a systems integrator at the outset of the  Deepwater Program in part because its workforce lacked the experience  and depth 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  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. For  example, the Coast Guard’s fiscal year 2010 budget request includes  funding for 100 new acquisition workforce positions, and the Coast Guard  anticipates requesting funding for additional positions in future budget  requests. In addition to third-party experts, the Coast Guard has been increasing its  use of support contractors. Conclusions

In assuming the role of systems integrator, the Coast Guard has made a  major change in its management of the Deepwater Program, one that has  increased its insight into the capabilities needed to fulfill Coast Guard  missions, the costs and capabilities of what it is currently procuring, and  what resources are needed to complete the acquisition. Further, as operational testing proceeds for  Deepwater assets, the MSAM appears to be inconsistent with DHS policy  and the recent directive on test and evaluation, which require operational  test authorities to be independent of the system’s user. We supplemented this analysis with interviews of  acquisition directorate officials, including contracting and Office of  Acquisition Workforce Management officials and program and project  managers to discuss current vacancy rates—especially for key acquisition  positions such as contracting officials and systems engineers—and the  Coast Guard’s plans to increase the size of the acquisition workforce.
Why GAO Did This Study

The Deepwater Program includes efforts to build or modernize ships and aircraft and to procure other capabilities. In 2002, the Coast Guard contracted with Integrated Coast Guard Systems (ICGS) to manage the acquisition as systems integrator. After a series of project failures, the Coast Guard announced in April 2007 that it would take over the lead role, with future work on individual assets bid competitively, and a program baseline of $24.2 billion was set. In June 2008, GAO reported on the Coast Guard's progress and made several recommendations, which the Coast Guard and the Department of Homeland Security (DHS) have addressed. In response to a Senate report accompanying the DHS Appropriations Bill, 2009, GAO addressed (1) efforts to manage Deepwater, (2) changes in cost and schedule of the assets, and (3) efforts to build an acquisition workforce. GAO reviewed Coast Guard and DHS documents and interviewed officials.

What GAO Found

The Coast Guard has assumed the role of systems integrator for the overall Deepwater Program by reducing the scope of the 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 and 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 contained in its Major Systems Acquisition Manual (MSAM), but did not meet its goal of complete adherence to this process for all Deepwater assets by the end of March 2009. For example, key acquisition management activities--such as operational requirements documents and test plans--are not in place for assets with contracts or orders recently awarded (such as the Fast Response Cutter and C4ISR) or in production, placing the Coast Guard at risk of cost growth or schedule slips. In addition, the MSAM does not appear to be consistent with recent DHS policy that requires entities responsible for operational testing to be independent of the system's users. Due in part to the Coast Guard's increased insight into what it is buying, the anticipated cost, schedules, and capabilities of many Deepwater assets have changed since the $24.2 billion baseline was established 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 these assets it is procuring will likely cost more than anticipated--up to $2.7 billion more based on information to date. This represents approximately 39 percent cost growth for the assets with revised cost estimates. As more cost baselines are developed and approved, further cost growth is likely. Updated baselines also indicate that schedules have slipped for several of the assets. In addition, the current structure of the Coast Guard's budget submission to Congress does not include details at the asset level, such as estimates of total costs and total numbers to be procured, as do those of the Department of Defense, which acquires similar systems. One reason the Coast Guard hired a contractor as a systems integrator 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; the fiscal year 2010 budget request includes funding for 100 new acquisition workforce positions. In the meantime, the Coast Guard has been increasing its use of support contractors.