	Coast Guard Faces Challenges in Effectively Managing its Acquisition Portfolio

		Short-term Prioritization through the Annual Budget Process and the 5-Year Capital Investment Plan Limit Effective Planning

We found in September 2012, and in our July 2018 review, that the Coast  Guard’s approach of relying on the annual budget process and the 5-year  CIP to manage portfolio affordability does not provide the best basis for  making decisions to develop a more balanced and affordable portfolio in  the long term. Further, in June 2014, we found that there is no evidence  that short-term budget decisions will result in a good long-term strategy,  and the Coast Guard’s annual budget-driven trade-off approach creates  constant churn as program baselines must continually re-align with  budget realities instead of budgets being formulated to support program  baselines. The 5-year CIP is the Coast Guard’s  key acquisition portfolio planning tool. These shortcomings limit the Coast Guard’s ability to manage the  affordability of its acquisition portfolio. While the Coast Guard is not required under  statute to identify the effects of trade-off decisions in the CIP, failing to  show which acquisitions would take on more risk—such as delays to  certain recapitalization efforts—so other acquisitions can be prioritized  and adequately funded within budget parameters also makes it difficult for  Congress and other stakeholders, such as Department of Homeland  Security (DHS) and the Office of Management and Budget (OMB), to  understand any other options the Coast Guard considered. In the report we issued today, we  recommended that the Coast Guard work with Congress to include a  discussion of the acquisition programs it prioritized and describe how  trade-off decisions made could affect other acquisition programs in the  Coast Guard’s annual 5-year CIP. DHS agreed with our recommendation  and plans to include additional information in future CIP reports to  address how trade-off decisions could affect other major acquisition  programs. The Coast Guard plans to implement this recommendation by  March 2020. We found that reactive  planning and the Coast Guard’s constrained budget environment have  created a bow wave of near-term unfunded acquisitions, negatively  affecting future acquisition efforts and potentially affecting future  operations. According to Coast Guard officials, SLEPs are  necessary because the Coast Guard does not have the funds available to  initiate a new major acquisition program to recapitalize these assets in the  short term, or because a significant amount of maintenance work is  required to keep these assets operational until replacements are fielded. Coast Guard Is Developing Plans to Extend Medium Endurance Cutters’ Service Lives

The Coast Guard operates two fleets of Medium Endurance Cutters (270- foot and 210-foot cutters) and both are either approaching or have  exceeded their design service lives. Officials said this is a contingency plan in case not all Offshore Patrol  Cutters are delivered on time. While it is not unusual for the Coast Guard to operate cutters  for longer than originally planned, the lack of a more comprehensive,  collective portfolio management approach, in part, will result in some of  the Medium Endurance Cutters operating over 60 years, which is 30  years beyond their original design service lives. We will continue to monitor the Medium Endurance Cutters’ SLEP and  the Offshore Patrol Cutter acquisition in our annual review of major  acquisition programs.
Why GAO Did This Study

The Coast Guard, a component within DHS, is spending billions of dollars to acquire assets, such as cutters and aircraft. This portfolio of major acquisition programs is intended to help the Coast Guard accomplish its missions—including interdicting illegal drugs and search and rescue missions. GAO's extensive prior work on Coast Guard acquisitions has found that the Coast Guard's reliance on its annual budget process to manage its portfolio is a major management challenge. In the report issued today, GAO discusses particular challenges with the Coast Guard's approach in managing its acquisition portfolio, such as not performing a collective assessment of the portfolio to ensure affordability.
This statement addresses the challenges the Coast Guard faces in (1) managing its overall acquisition portfolio, and (2) sustaining aging assets. This statement is based on GAO's extensive body of published and ongoing work examining the Coast Guard's acquisition efforts over several years.

What GAO Found

The Coast Guard's approach of relying on the annual budget process and the 5-year Capital Investment Plan (CIP) to manage its acquisition portfolio does not provide the best basis for making decisions to develop a more balanced and affordable portfolio in the long term. Specifically, the Coast Guard's annual budget-driven trade-off approach creates constant churn as program baselines must continually re-align with budget realities instead of budgets being formulated to support program baselines. Further, Coast Guard officials have told GAO the CIP reflects trade-off decisions made as part of the annual budget process, but it does not describe the effects of those trade-offs because including such information is not statutorily required. This short-term approach has also left the Coast Guard with a bow wave of near-term unfunded acquisition programs, putting future missions at risk. Until these trade-offs are transparent to all stakeholders and decision makers, the effectiveness of Coast Guard's long-term acquisition portfolio planning is limited.
Until new assets being acquired become available, the Coast Guard plans to rely on aging assets, many of which are already past their intended service lives—the time an asset is expected to operate. For example, the Coast Guard plans to replace the Medium Endurance Cutters (see figure) with the Offshore Patrol Cutters beginning in 2023, but the Medium Endurance Cutters exhausted their intended service lives in 2014.
The Coast Guard plans to extend service lives for some of the Medium Endurance Cutters to keep them operating longer; however, maintenance for these vessels is becoming more expensive, and some systems are obsolete. GAO will continue to monitor the maintenance effort for the Medium Endurance Cutter and the Offshore Patrol Cutter acquisition in an annual review of Department of Homeland Security (DHS) major acquisition programs.

What GAO Recommends

The report on which this statement is primarily based ( GAO-18-454 ) recommends that the Coast Guard work with Congress to include in its annual CIP a discussion of how trade-off decisions could affect other acquisition programs. DHS agreed with this recommendation. GAO has also made other recommendations in this area in the past, as discussed in this testimony.