To carry out these  responsibilities, the Coast Guard operates a number of vessels and aircraft  and, through its Deepwater Program, is currently modernizing or replacing  those assets. As the systems integrator, ICGS was responsible  for designing, constructing, deploying, supporting, and integrating the  assets. Coast Guard Has Made Improvements but Faces Continued Challenges in Managing Deepwater Acquisitions

Since the Commandant’s April 2007 announcement that the Coast Guard  was taking over the lead role in systems integration from ICGS, the Coast  Guard has undertaken several initiatives that have increased  accountability for Deepwater outcomes within the Coast Guard and to  DHS. The Coast Guard has also  vested its government project managers with management and oversight  responsibilities formerly held by ICGS. The Coast Guard is also now managing Deepwater under an asset-based  approach, rather than as an overall system-of-systems as initially  envisioned. For example, cost and schedule information is now captured  at the individual asset level, resulting in the ability to track and report cost  breaches for assets. To manage Deepwater acquisitions at the asset level, the Coast Guard has  begun to follow a disciplined project management process using the  framework set forth in its Major Systems Acquisition Manual. This  process requires documentation and approval of program activities at key  points in a program’s life cycle. Other programs within DHS have also experienced cost growth and  schedule delays. Consequences of Prior Deepwater Acquisition Approach May Be Costly

While the decision to follow the Major Systems Acquisition Manual  process for Deepwater assets is promising, the consequences of not  following this acquisition approach in the past—when the contractor  managed the overall acquisition—are now apparent for assets already in  production, such as the NSC, and are likely to pose continued problems,  such as increased costs. The Coast Guard is not fully  positioned to manage these aspects under its new acquisition approach  but is engaged in efforts to do so. C4ISR is a key aspect of the Coast Guard’s ability to meet its missions. As the Coast Guard transitions from the ICGS-based system-of-systems  acquisition strategy to an asset-based approach, it will need to maintain a  strategic outlook to determine how many of the various Deepwater assets  to procure to meet Coast Guard needs. To that  end, the Coast Guard is modeling the planned capabilities of Deepwater  assets, as well as the capabilities and operations of existing assets, against  the requirements for Coast Guard missions. In fact, one of the reasons the Coast Guard  originally contracted with ICGS as a systems integrator was the  recognition that the Coast Guard lacked the experience and depth in its  workforce to manage the acquisition itself. In the meantime, the lack of a sufficient government acquisition workforce  means that the Coast Guard is relying on contractors to supplement  government staff, often in key positions such as cost estimators, contract  specialists, and program management support. Conflicts of interest, improper use of  personal services contracts, and increased costs are also potential  concerns of reliance on contractors. Concluding Observations

In response to significant problems in achieving its intended outcomes  under the Deepwater Program, the Coast Guard leadership has made a  major change in course in its management and oversight by re-organizing  its acquisition directorate, moving away from the use of a contractor as  the systems integrator, and putting in place a structured, more disciplined  acquisition approach for Deepwater assets.
Why GAO Did This Study

GAO has a large body of work examining government agencies' approaches to managing their large acquisition projects. GAO has noted that without sufficient knowledge about system requirements, technology, and design maturity, programs are subject to cost overruns, schedule delays, and performance that does not meet expectations. The Deepwater Program, intended to replace or modernize 15 major classes of Coast Guard assets, accounts for almost 60 percent of the Coast Guard's fiscal year 2009 appropriation for acquisition, construction and improvements. GAO has reported over the years on this program, which has experienced serious performance and management problems such as cost breaches, schedule slips, and assets designed and delivered with significant defects. To carry out the Deepwater acquisition, the Coast Guard contracted with Integrated Coast Guard Systems (ICGS) as a systems integrator. In April 2007, the Commandant acknowledged that the Coast Guard had relied too heavily on contractors to do the work of government and announced that the Coast Guard was taking over the lead role in systems integration from ICGS. This testimony reflects our most recent issued work on Deepwater, specifically our June 2008 report, Coast Guard: Change in Course Improves Deepwater Management and Oversight, but Outcome Still Uncertain, GAO-08-745 .

What GAO Found

Over the past two years, the Coast Guard has reoriented its acquisition function to position itself to execute systems integration and program management responsibilities formerly carried out by ICGS. The acquisition directorate has been consolidated to oversee all Coast Guard acquisitions, including the Deepwater Program, and Coast Guard project managers have been vested with management and oversight responsibilities formerly held by ICGS. Another key change has been to manage the procurement of Deepwater assets on a more disciplined, asset-by-asset approach rather than as an overall system of systems, where visibility into requirements and capabilities was limited. For example, cost and schedule information is now captured at the individual asset level, resulting in the ability to track and report breaches for assets. Further, to manage Deepwater acquisitions at the asset level, the Coast Guard has begun to follow a disciplined project management process that requires documentation and approval of program activities at key points in a program's life cycle. These process changes, coupled with strong leadership to help ensure the processes are followed in practice, have helped to improve Deepwater management and oversight. However, the Coast Guard still faces many hurdles going forward and the acquisition outcome remains uncertain. The consequences of not following a disciplined acquisition approach for Deepwater acquisitions and of relying on the contractor to define Coast Guard requirements are clear now that assets, such as the National Security Cutter, have been paid for and delivered without the Coast Guard's having determined whether the assets' planned capabilities would meet mission needs. While the asset-based approach is beneficial, certain cross-cutting aspects of Deepwater--such as command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) and the overall numbers of each asset needed to meet requirements--still require a system-level approach. The Coast Guard is not fully positioned to manage these aspects. One of the reasons the Coast Guard originally contracted with ICGS as the systems integrator was the recognition that the Coast Guard lacked the experience and depth in workforce to manage the acquisition itself. The Coast Guard has faced challenges in building an adequate government acquisition workforce and, like many other federal agencies, is relying on support contractors--some in key positions such as cost estimating and contract support. GAO has pointed out the potential concerns of reliance on contractors who closely support inherently governmental functions.