	The Coast Guard Is Reevaluating Its Aviation Fleet Mix in Light of C-27J Transfer

The Coast Guard is in the process of receiving 14 C-27Js as a part of a  Congressionally mandated transfer, at no cost to the Coast Guard, from  the Air Force, and these aircraft are planned to significantly contribute to  the Coast Guard’s missions once they are operational. However, as we  reported in March 2015, it will take time and money to fully transfer and  modify the aircraft. However, the Coast Guard is working to mitigate these risks. According to initial Coast Guard estimates, while the C-27J aircraft come  at no acquisition cost to the Coast Guard, the costs to fully operationalize  them will total about $600 million. The Capital Investment Plan also  notes that the Coast Guard has yet to fully estimate the total cost of  incorporating and operating the C-27J. In addition to the challenges in converting the C-27Js to fully operational  aircraft, we found in March 2015 that the Coast Guard faces a shortfall in   To fully meet its mission needs, the  achieving its overall flight hour goal.Coast Guard’s 2005 mission needs statement set forth a goal of 52,400  hours per year. Table 1 shows: (1) the aircraft that comprise the current 2014 fleet plan  and the Coast Guard’s planned fleet once the C-27Js are operational, (2)  the annual flight hours each fleet provides, and (3) the difference between  the flight hours of the fleets and the 52,400 hour goal. According to the fiscal year 2016 Capital Investment Plan, the Coast  Guard is currently conducting a revised fixed-wing fleet analysis, intended  to be a fundamental reassessment of the capabilities and mix of fixed- wing assets needed to fulfill its missions. The Coast Guard has begun to rewrite its mission needs statement and  concept of operations and plans to complete this effort by 2016. We  recommended in our March 2015 report that the Secretary of Homeland  Security and the Commandant of the Coast Guard inform Congress of the  time frames and key milestones for completing the fleet mix study,  including the specific date when the Coast Guard will publish its revised  annual flight hour needs and when it plans to inform Congress of the  corresponding changes to the composition of its fixed-wing fleet to meet  these needs. The Coast Guard Is Beginning to Field New Surface Fleet Assets but Faces Potentially Significant Capability Gap

The Coast Guard continues to field National Security Cutters (NSCs) and  Fast Response Cutters (FRCs), which are replacing the legacy 378’-foot  high endurance cutters and the 110’-foot patrol boats, respectively. As we  reported in April 2015, the Coast Guard is also in the process of working  with three potential shipbuilders to design the Offshore Patrol Cutter, but  this asset, needed to recapitalize the vast majority of the major cutter  fleet, remains years away from being fielded. In the meantime, the Coast  Guard’s legacy Medium Endurance Cutters, which the Offshore Patrol  Cutter is planned to replace, have begun to reach the end of their service  lives creating a potential gap. Despite the mixed test  results, Navy and DHS testers as well as Coast Guard program officials  all agreed that the FRC is a capable vessel, and the Coast Guard plans to  confirm that it has resolved these issues during follow-on testing planned  to be completed by the end of fiscal year 2015. We found in June 2014 that there are gaps between what the Coast  Guard estimates it needs to carry out its program of record for its major  acquisitions and what it has traditionally requested and received. For  example, senior Coast Guard officials have stated a need for over $2  billion per year, but the Coast Guard has received $1.5 billion or less over  the past 5 years. The Coast Guard, DHS, and  Office of Management and Budget officials have acknowledged that the  Coast Guard cannot afford to recapitalize and modernize its assets in  accordance with the current plan at current funding levels. Efforts are  underway to address this issue, but so far, these efforts have not led to  the difficult trade-off decisions needed to improve the affordability of the  Coast Guard’s portfolio. These issues pose  additional potential challenges to the affordability of the Coast Guard’s  overall acquisition portfolio.
Why GAO Did This Study

The Coast Guard is managing a multi-billion dollar effort to modernize aging assets, including ships, aircraft, and information technology, to provide new capabilities to conduct missions ranging from marine safety to defense readiness. The Coast Guard has made progress in its acquisition management capabilities, such as more closely following acquisition best practices and taking steps to increase competition. However, GAO has consistently found that DHS and the Coast Guard recognize, but have yet to address, the fact that the Coast Guard's acquisition needs are not affordable.
This statement is based on GAO's body of work issued during the past three years on Coast Guard major acquisitions and highlights GAO's recently completed review of the transfer to the Coast Guard of the C-27J aircraft as well as observations regarding the Coast Guard's fiscal year 2016 Capital Investment Plan. The statement addresses the status of the Coast Guard's (1) aviation assets, particularly the C-27J aircraft and (2) surface assets, as well as (3) the overall affordability of its major acquisition portfolio.
GAO has made a number of recommendations to improve acquisition management and assess the affordability of the Coast Guard's portfolio. DHS and the Coast Guard agreed with GAO's recommendations and are working on implementing them by revisiting the Coast Guard's mission needs and fleet mix, as well as creating a 20-year acquisition plan that balances needs and resources, though the agencies have not specified when they will finish these efforts.

What GAO Found

GAO reported in March 2015 that the Coast Guard is in the process of receiving 14 C-27J fixed-wing aircraft transferred from the Air Force at no cost to the Coast Guard. However, it will take 7 years and about $600 million to fully transfer and modify the aircraft by adding information technology and surveillance systems. Transfer of the C-27J faces a number of risks but the aircraft is expected to contribute significant flight hours toward the Coast Guard's goal once complete. In light of this transfer, the Coast Guard is in the process of determining the best mix of fixed-wing aircraft to provide the capabilities it needs to carry out its missions. As shown in the table, GAO reported that the Coast Guard has fallen short of its flight hour goal; this trend is expected to continue until the Coast Guard revises its mission needs, an effort it expects to complete in 2016. The Coast Guard also plans to complete a fixed-wing fleet mix analysis by 2019, which will revisit the current flight hour goal and the assets that will best meet its needs. The table reflects the existing fleet and flight hours as compared to GAO's analysis of the Coast Guard's planned fleet including the C-27J aircraft.
Note: The HC-144 and C-27J are medium range assets while the HC-130H and HC-130J are long range assets. The fiscal year 2014 ‘medium range' column includes 4 legacy medium range aircraft.
According to GAO's April 2015 review, the Coast Guard continues to field National Security Cutters and Fast Response Cutters. The Coast Guard is also working with three potential shipbuilders to design the Offshore Patrol Cutter, needed to recapitalize the majority of the major cutter fleet, with plans for the first ship to be fielded in 2022. In the meantime, the Coast Guard's legacy Medium Endurance Cutters, which the Offshore Patrol Cutter is planned to replace, have begun to reach the end of their service lives. The Coast Guard currently has no definitive plan to extend the service life of these legacy assets and as a result faces a potentially significant capability gap.
GAO found in June 2014 that budget officials have acknowledged that the Coast Guard's current plan for developing new, more capable assets is not affordable given current and expected funding levels. For the past 5 years, GAO has found that the Coast Guard's acquisition funding has fallen short of what it estimates it needs to fully recapitalize its assets. The Coast Guard has responded by annually delaying or reducing its capability. The Coast Guard and the Department of Homeland Security (DHS) have taken some steps to address these affordability issues, but as yet these efforts have not led to the types of significant trade-off decisions among resources and needs that would improve the long-term outlook of the Coast Guard's acquisition portfolio.