Majority Statement

• Daniel K. Inouye

  Senator
  Read statement

  Majority Statement

  Daniel K. Inouye

              Today’s hearing should shed some light on the challenges the Coast Guard’s Deepwater program has encountered, and provide insights on options for moving forward.

              The Deepwater program is essential to the Coast Guard’s success in the post-9/11 world.  Considering the aging condition of the Coast Guard fleet and the Coast Guard’s expanded responsibilities, the Deepwater acquisitions are vital to ensure that the Coast Guard can carry out its many security and other responsibilities, including search and rescue, fisheries enforcement, and drug interdiction.  It is imperative that the Deepwater assets meet the needs of the Coast Guard in this changing environment.  It is equally important that American tax dollars are well spent.

              The recent release of two reports by the Department of Homeland Security Inspector General (DHS IG) on the National Security Cutter (NSC) and the 123 foot patrol boats, and a major study by the Defense Acquisition University raise concerns about the Deepwater program and the manner in which the Deepwater contract has been managed by the Coast Guard.  

               As the Committee with oversight responsibility for the Coast Guard, we have an integral role to play to ensure that the Coast Guard obtains the tools it needs and that any problems with this major project are appropriately addressed.  Admiral Allen knows that this Committee has confidence in his extraordinary leadership and proven record and we are committed to working with him to solve this problem.  

              I thank all of the witnesses for appearing before us today and look forward to their testimony.

• Maria Cantwell

  Senator
  Read statement

  Majority Statement

  Maria Cantwell

   Thank you all for being here.  As chair of the Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard, I’m proud to welcome you to our first hearing of the 110th Congress.  It’s going to be a busy year for this Subcommittee and I look forward to working with Senator Snowe as we address issues that affect our oceans and coasts.

   

  I appreciate our witnesses taking time from their busy schedules, especially with this weather, to testify before us.

   

  Thank you, Admiral, for joining us today. I look forward to your testimony and I want you to know that I believe we are allies in getting the Coast Guard the assets you need.

   

  Admiral Allen, in our conversations you have always struck me as a man of action, a true problem solver, and a well respected leader.  We owe you our gratitude for your service both as Atlantic Area Commander during 9-11 and for your heroic efforts in the aftermath of Hurricane Katrina.

   

  I’ve said this to you in a private meeting, but I want it on the record today: No agency does more with less than the United States Coast Guard.  You all are the unsung heroes of our homeland security team. We cannot thank you enough for all the work that you do to keep us safe.

   

  Mr. Skinner and Mr. Caldwell, welcome to you as well.  Thank you for providing Congress with the critical information needed for our oversight role. I look forward to your expert testimony.

   

  This country needs a strong Coast Guard for our national security and for our domestic safety.  The Coast Guard’s key missions of maritime safety, aiding navigation, protecting natural resources, and ensuring national security are an enormous benefit to this country.  It’s the Coast Guard that ensures vessel traffic moves smoothly, our ports are secure, our fisheries laws are enforced, and our shores stay clean.

   

  We know this well In Washington state. Puget Sound is one of the busiest and most complex waterways in the world.  The Ports of Seattle and Tacoma are the nations third largest port center and move more than 11 thousand cargo containers daily, cruise ship traffic has increased tenfold in eight years from 5 vessels calls in 1999 to more than 200 last year, oil tankers and tank barges made more than 4,000 trips across Puget Sound last year, our ferry system carries more passengers every year than Amtrak, and recreational boats and fishing vessels ply our waterways every single day. 

   

  All this activity places us at the center of many multi mission challenges facing the Coast Guard, whether they be protecting our nation’s ports, enforcing security on our ferries, conducting search and rescue in heavily used waterways and shorelines, preventing oils spills, international border and drug interdictions, or carrying out mission the missions of Polar icebreaking fleet, which is homeported in Seattle.

   

  And it’s the Coast Guard that keeps our fishermen and mariners safe as well.  For us in the Pacific Northwest, The Guardian isn’t just Hollywood fiction.  Coast Guard Helicopter crews operating out of Port Angeles saved 39 lives in 2006.  And that’s just the tip of the iceberg.

   

  ***

  Today we are here to discuss the problems we’ve seen with the Deepwater program and look for ways forward.

   

  Before we begin, I want everyone at this hearing to know that all options are on the table as we discuss what we’ve seen with Deepwater and how to move forward.  We owe it to the Coast Guard and the American people to get this right, whatever it takes. 

   

  Four recent independent reports now show us that Deepwater is in deep trouble. The program is not delivering as promised.  If someone thought this was a creative experiment – it has failed. And that failure has cost taxpayers hundreds of millions of dollars.

   

  This is the fleecing of the taxpayer with ships that don’t float.

   

  To date Deepwater has failed to deliver on key assets: 

  • The 123-foot patrol boat conversion has failed, 8 Coast Guard patrol boats are now out of service, and $100 million has been wasted;
  • after spending $25 million, the Coast Guard suspended the Fast Response Cutter project because the contractors’ design failed to meet testing requirements;
  • the first two National Security Cutters are at least $500 million over-budget and the current design and construction fails to meet the Coast Guard’s performance goals; and
  • Deepwater’s Unmanned Aerial Vehicle, “Eagle Eye,” has huge delays, and the prototype crashed.

   I’ll be honest with you gentleman. I have trouble swallowing these cost increases in the NSC program.  The price tag for the first two cutters has jumped from $517 million to $775 million.  And I hear there is the possibility of an additional $302 million in a Request for Equitable Adjustment.  On top of that, I still haven’t seen how much more is needed to modify the first two cutters and get them in the water - and we still have six cutters left to build.

   

  If the current Deepwater contract isn’t delivering the results, and this Senator thinks it is not, then we must look to change our approach.

   

  I’m concerned that this contract gives industry too much authority to grant contracts to itself without open competition.  This offers little incentive to control costs, and sidelines the Coast Guard when it comes to oversight. 

   

  The Department of Defense’s Defense Acquisition University, an organization of experts on defense contracting, released a report on Deepwater on February 5^th.   The report makes key recommendations for improving Deepwater and also points out the positive steps the Coast Guard has already taken to reform their acquisition process.

   

  It specifically recommends that the Coast Guard “define and implement a revised acquisition strategy that does not rely on a single industry entity or contract to produce or support all or the majority of US Coast Guard capabilities.”

   

  Today, I hope we can begin to move forward quickly and constructively with a revised strategy, so that the Coast Guard receives the ships, planes, and technology you need at a price that’s fair to taxpayers.

   

  I am committed to doing all that is necessary to ensure this program gets back on the right track.  The Coast Guard needs to upgrade its aging fleet and air assets in order to carry out its missions for the safety and security of our nation’s coastlines and waterways. 

   

  I want to put all parties on notice that there will be increased Congressional oversight of this program and we will do what it takes to fix this.  There will be hearings and there will be continued investigations. 

   

  This hearing today is an opportunity for a fair and honest discussion about Deepwater.  Both the successes as well as failures are a key part of this discussion and I look forward to all the witnesses’ testimony.

   

  I’ve said this earlier, but it bears repeating:  No agency does more with less than the United States Coast Guard. We have to be absolutely certain they get the equipment they need and that the equipment works as it should

   

  Thank you for joining us.  Senator Snowe, your opening statement?

   

  ***

Minority Statement

• Olympia J. Snowe

  Senator
  Read statement

  Minority Statement

  Olympia J. Snowe

  Thank you very much.  We are here today to discuss the single most vital homeland security acquisition program facing our nation –  Deepwater.  Regrettably, despite the tremendous urgency for upgrading the Coast Guard’s assets on the water and in the air, we are compelled to focus our attention today on the Coast Guard’s apparent failure in managing this multi-billion dollar, multi-year project. 

  Before I turn to the Coast Guard and our other witnesses, I want to first commend you, Senator Cantwell, for calling this hearing so quickly.  And of course I congratulate you on assuming your position as Chairwoman.  I know you share my alarm over the troubling pattern of mis-management that the New York Times and the DHS Inspector General has discovered, and it is indisputable we must restore accountability to the Deepwater program for the sake of our critical Coast Guard service and our homeland security.  Because I’m deeply troubled that this mis-management is not only a breach of trust with the American people, but has also undermined a program that is so vitally important to our future.

  
  

  First, we must understand exactly what happened – and why – starting with the National Security Cutter.  As revealed by Eric Lipton of the New York Times on December 9th and the DHS Inspector General last month, the Coast Guard was fully aware of significant design problems with this cutter since at least 2004.  The investigators found that the design of the ship, if not corrected at considerable cost to the US taxpayer, may not allow it to meet a 30 year fatigue life.  In addition, they reported that the design and performance deficiencies are fundamentally the result of the Coast Guard’s failure to exercise its technical and management oversight. 

  And now, I am profoundly troubled by further reports that the Coast Guard intentionally withheld specific structural design flaws of the National Security Cutter when submitting documents to the IG.  Unquestionably the Coast Guard has jeopardized the trust that is so essential for support of its vital programs if this is so.   

  Indeed, I am not only troubled to learn of the Coast Guard’s problems with managing Deepwater and working with the IG – I am equally distressed about how these transgressions may have damaged the Coast Guard’s relationship with Congress.  I have been the Republican leader of this Coast Guard oversight subcommittee for more than ten years, and Deepwater has been the subject of at least 10 of our hearings since 2001.

  In addition, I have requested two GAO audits of Coast Guard’s Deepwater Oversight, asked Secretary Chertoff to conduct a “Best Practices” review of Deepwater management, and inserted language in three separate Coast Guard Authorization Bills directing the Coast Guard to report on Deepwater asset and timelines.  In fact, last October my staff visited the Northrup Grumman Shipyard in Mississippi, where the Coast Guard gave them a tour of the National Security Cutter from stem to stern, and they received no indication of any problems whatsoever. 

  
  

  Despite the numerous means by which we exerted our oversight, the Coast Guard failed to alert us to any allegations or investigations into problems with the Deepwater program.  Not once during these hearings, briefings, or visits was there any mention of the significance of structural design issues or fatigue life concerns.  Not once did the Coast Guard relay to Congress the intensity of the debate and the seriousness of the issues surrounding what many have called the Flagship of the Deepwater effort.  The failure to inform us of such serious structural failings in the National Security Cutter is unprecedented, and unacceptable.

  It is simply unconscionable that the Coast Guard did not bring these issues to light prior to December 2006.  Transparency and accountability are essential to any program of this magnitude, and even more so given the innovative nature of Deepwater’s public-private partnership.  And yet, the Coast Guard has had considerable difficulties with oversight and execution of Deepwater acquisitions.  Here we are, stunned by the scale and scope of management failures that threaten to derail the entire program.  Our taxpayers – and our national security – are not well served by the “ruthless execution” that the Coast Guard has demonstrated in charging forward on the National Security Cutter despite grave concerns with the ship.

  Admiral, understanding what went wrong in all these instances is only the first of many steps essential to correcting Deepwater’s course.  The second step is for all parties to hold themselves accountable for their roles and decisions in this debacle.  Admiral, I appreciate that you have assured me – in writing and in person – that you hold yourself personally responsible for all Coast Guard actions, regardless of when the decisions were made.  And it will be critical that the commitment to reorganize Coast Guard leadership that you expressed in yesterday’s State of the Coast Guard address comes to fruition – to help stem the tide of poor decisions that has brought us to this point.

  
  

  Moreover, in light of the recently released of the Defense Acquisition University recommending changes in Deepwater’s acquisition strategy, contract structure, and management, I expect the Coast Guard to develop and present to Congress a detailed plan outlining its strategy for regaining control of the this program before coming to a final agreement with ICGS on the next Deepwater Award Term.  Any new strategy must include the Coast Guard improving its acquisition processes and reasserting its oversight responsibilities.  To do anything less places the entire Deepwater program in jeopardy, and does a profound disservice to the brave men and women of the Coast Guard who desperately require these resources.

  As for the allegations of stonewalling and finger-pointing in the IG’s investigation, I will introduce legislation that directs DHS to develop an audit plan so that the IG will not be encumbered in its future work.  It is simply unacceptable that lack of clarity on IG authorities should hamper investigations on such a critical national security program.

  The reasons we need to improve – and perhaps even reform – the Deepwater process are rooted in the urgency for modernizing the Coast Guard fleet.  I chaired the April 2004 budget hearing when your predecessor brought in a thin, rusted piece of metal from the hull of a Coast Guard Cutter to make his point about the state of your fleet.  It is almost 3 years later and those decaying vessels – some up to 64 years old – are still patrolling the waters off our coast.        

  
  

  But despite the degrading condition of its assets, just last year the Coast Guard responded to over 28,000 mariners in distress and stopped more than 140,000 tons of cocaine from reaching our shores.  Clearly, our Nation must have a Coast Guard that is equipped, trained, and ready to meet our maritime and Homeland Security challenges.  We all had a chance to see the Coast Guard’s tremendous dedication – as well as your outstanding leadership, Admiral Allen – during Hurricane Katrina, and we have not forgotten that.

  Admiral, I look forward to your testimony today.  I also look forward to the testimony of Steven Caldwell from the Government Accountability Office and Richard Skinner from the Department of Homeland Security Office of Inspector General.  On our second panel, the testimony of Mr. Philip Teel of Integrated Coast Guard Systems and Northrop Grumman and Mr. Leo Mackay of Lockheed Martin will shed light on the role of the contractors in these problems, and retired Captain Jarvis will inform us how the Coast Guard previously handled technical design disagreements.

  Finally, I thank our new Chairwoman,  Senator Cantwell once again for holding this vital hearing today.

Testimony

• Mr. Richard L. Skinner

  Inspector General, Office of Inspector General

  U.S. Department of Homeland Security
  Read statement

  Testimony

  Mr. Richard L. Skinner

  STATEMENT OF RICHARD L. SKINNER

   

   

   INSPECTOR GENERAL

   

   

  U.S. DEPARTMENT OF HOMELAND SECURITY

   

   

  BEFORE THE

   

   

  SUBCOMMITTEE ON OCEANS, ATMOSPHERE, FISHERIES AND

  COAST GUARD

   

   

  COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

   

   

  UNITED STATES SENATE

   

   

  The United States Coast Guard’s Deepwater Program

  February 14, 2007

   

  Good afternoon, Chairman Cantwell and Members of the Subcommittee.  I am Richard L. Skinner, Inspector General for the Department of Homeland Security (DHS).  Thank you for the opportunity to discuss the status of the U.S. Coast Guard’s Deepwater Program.

   

  My testimony today will address the broader contract and program management challenges associated with the Deepwater Program.  We will also address how these challenges have impacted specific Deepwater assets, including the modernization of the 110/123-foot Island Class cutters; the National Security Cutter, the upgrades to the Coast Guard’s Command, Control, Communication, Computers, Intelligence, Surveillance and Reconnaissance system; the re-engining of the HH-65 helicopter; and the acquisition of the Fast Response Cutter. 

   

  Deepwater Program

   

  The Integrated Deepwater System Program (Deepwater) is a $24 billion, 25-year acquisition program designed to replace, modernize, and sustain the Coast Guard’s aging and deteriorating fleet of ships and aircraft, providing a deepwater-capable fleet for 40 years.  The Deepwater acquisition strategy is a non-traditional approach by which private industry was asked to not only develop and propose an optimal system-of-systems mix of assets, infrastructure, information systems, and people solution designed to accomplish all of the Coast Guard’s Deepwater missions, but also to provide the assets, the systems integration, integrated logistics support, and the program management.  Under a more traditional acquisition strategy, the government would have separately contracted for each major activity or asset involved, such as cutters, aircraft, their logistics support, communications equipment, systems integration, and program management support. 

   

  In June 2002, the Coast Guard awarded Integrated Coast Guard Systems (ICGS) with a  5-year contract to serve as the Deepwater systems integrator.  The current base contract expires in June 2007 and the Coast Guard may authorize up to five additional

  5-year award terms.  In May 2006, the Coast Guard announced its decision to award ICGS an extension of the Deepwater contract for 43 out of a possible 60 months for the next award term beginning in June 2007.  ICGS is a joint venture of Northrop Grumman and Lockheed Martin.  The 2002 award decision followed a multiyear competitive phase where two other industry teams vied with ICGS. 

   

  Deepwater Program Management and Oversight

   

  We have completed audits of the 110-foot/123-foot Modernization Project; the National Security Cutter, the information technology systems; and the re-engining of the HH-65 helicopters.  Common themes and risks emerged from these audits, primarily the dominant influence of expediency, flawed contract terms and conditions, poorly defined performance requirements, and inadequate management and technical oversight.  These deficiencies contributed to schedule delays, cost increases, and asset designs that failed to meet minimum Deepwater performance requirements. 

  
  

  Lead Systems Integrator Approach

   

  The route the Coast Guard took to outsource program management to the systems integrator has presented challenges in implementation.  The Deepwater contract essentially empowered the contractor with authority for decision-making.  Therefore, the Coast Guard was reluctant to exercise a sufficient degree of authority to influence the design and production of its own assets.  Specifically, under the contract ICGS was the Systems Integrator and assigned full technical authority over all asset design and configuration decisions; while the Coast Guard's technical role was limited to that of an expert "advisor."  However, there is no contractual requirement that the Systems Integrator accept or act upon the Coast Guard's technical advice, regardless of its proven validity.  Furthermore, there are no contract provisions ensuring government involvement into subcontract management and “make or buy” decisions.  The systems integrator decides who is the source of the supply.  Also, as the primary management tool for the Coast Guard to contribute its input on the development of Deepwater assets, the effectiveness of the contractor-led Integrated Product Teams (IPTs) in resolving the Coast Guard’s technical concerns has been called into question by both the GAO and my office. 

   

  Contractor Accountability

   

  Our reviews have raised concerns with the definition and clarity of operational requirements, contract requirements and performance specifications, and contractual obligations.  For example, in our report of the NSC, we reported the Coast Guard and the American Bureau of Shipping (ABS) jointly developed standards that would govern the design, construction, and certification of all cutters acquired under the Deepwater Program.  These standards were intended to ensure that competing industry teams developed proposals that met the Coast Guard’s unique performance requirements.  Prior to the Phase 2 contract award, the Coast Guard provided these design standards to the competing industry teams. Based on their feedback, the Coast Guard converted the majority of the standards (85% of the 1,175 standards) to guidance and permitted the industry teams to select their own alternative standards.  Without a contractual mechanism in place to ensure that those alternative standards met or exceeded the original guidance standards, the competing teams were allowed to select cutter design criteria. 

   

  Additionally, the Deepwater contract gives the Systems Integrator the authority to make all asset design and configuration decisions necessary to meet system performance requirements.  This condition allowed ICGS to deviate significantly from a set of cutter design standards originally developed to support the Coast Guard’s unique mission requirements, and ICGS was further permitted to self-certify compliance with those design standards.  As a result, the Coast Guard gave ICGS wide latitude to develop and validate the design of its Deepwater cutters, including the NSC.

   

  Deepwater Performance Requirements Are Ill-Defined

   

  A lack of clarity in the Deepwater contract’s terms and conditions have also compromised the Coast Guard’s ability to hold the contractor accountable by creating situations where competing interpretations of key provisions exist.  For example, the performance specifications associated with upgrading the information systems on the Coast Guard’s 123' Island Class Patrol Boats did not have a clearly defined expected level of performance.  Also, in our review of the HITRON lease, we determined that a similar lack of clarity in the asset’s contractual performance requirements challenged the Coast Guard’s ability to effectively assess contractor performance.  On the NSC acquisition, the cutter’s performance specifications were so poorly worded that there were major disagreements within the Coast Guard as to what the NSC’s performance capabilities should actually be.

   

  Deepwater Cost Increases

   

  The cost of NSCs 1 and 2 is expected to increase well beyond the current $775 million estimate, as this figure does not include a $302 million Request for Equitable Adjustment (REA) submitted to the Coast Guard by ICGS on November 21, 2005.  The REA represents ICGS’s re-pricing of all work associated with the production and deployment of NSCs 1 and 2 caused by adjustments to the cutters’ respective implementation schedules as of January 31, 2005.  The Coast Guard and ICGS are currently engaged in negotiations over the final cost of the current REA, although ICGS has also indicated its intention to submit additional REAs for adjusted work schedules impacting future NSCs, including the additional cost of delays caused by Hurricane Katrina.

   

  The current $775 million estimate also does not include the cost of structural modifications to be made to the NSC as a result of its known design deficiencies.  In addition, future REAs and the cost of modifications to correct or mitigate the cutter’s existing design deficiencies could add hundreds of millions of dollars to the total NSC acquisition cost.  We remain concerned that these and other cost increases could result in the Coast Guard acquiring fewer NSCs or other air and surface assets under the Deepwater contract.

   

  Impact on Coast Guard Operational Capabilities -- Short and Long Term

   

  The Deepwater record of accomplishment has been disappointing to date.  For example, while the re-engining of the HH-65 Bravo helicopters has resulted in an aircraft with significantly improved capabilities, the program has experienced schedule delays and cost increases.  For example, the delivery schedule calls for the HH-65 re-engining project to be completed by November 2007 or 16 months beyond the Commandant’s original July 2006 deadline.  Extending the delivery schedule has exposed HH-65B aircrews to additional risk due to the tendency of the aircraft to experience loss of power mishaps.  It also delays the replacement of the eight Airborne Use of Force-equipped  MH-68 helicopters that are being leased to perform the Helicopter Interdiction (HITRON) mission at a cost in excess of $20 million per year.

   

  There are also problems with Coast Guard's acquisition of the Vertical take-off and landing unmanned aerial vehicle (VUAV).  VUAVs have the potential to provide the Coast Guard flight-deck-equipped cutters with air surveillance, detection, classification, and identification capabilities.  Currently, the VUAV acquisition is over budget and more than 10 months behind schedule.  The Commandant of the Coast Guard recently testified that the VUAV acquisition was under review.  The Commandant indicated that the Coast Guard Research and Development Center is conducting a study and will provide recommendations for the way ahead with the VUAV.  A decision by the Coast Guard to stop work on the VUAV project would significantly impact the operational capability of the NSC and OPC by limiting their ability to provide long-range surveillance away from the parent cutter.  The Coast Guard's Revised Deepwater Implementation Plan, 2005 calls for the acquisition of 45 VUAVs at a total cost of approximately $503.3 million. As of December 31, 2006, Coast Guard had obligated  $108.4 million (73%) of the $147.7 million funded for the project. 

   

  The increased cost, schedule delays, and structural design problems associated with the 123-foot patrol boat and the FRC have further exacerbated the Coast Guard’s patrol boat operational hour and capability gap.  The Coast Guard is attempting to mitigate the problem by re-negotiating an agreement with the U.S. Navy to continue the operation of the 179-foot “Cyclone” class patrol boats, and to extend the operational capability of the 110-foot Island Class fleet through the use of multiple crews.  While the increased operations tempo this will help in the short term, it will also increase the wear and tear on these aging patrol boats in the long term.

   

  The structural design issues associated with the NSC could have the greatest impact on Coast Guard operational capabilities in both the near and long term.  This is due to cost increases that far exceed the cost of inflation even when the post 9/11 engineering change proposals and the costs increases associated with hurricane Katrina are left out of the equation.  These cost increases are largely due to: (1) existing and future Requests for Equitable adjustment that the Coast Guard expects to receive from ICGS; (2) the cost of NSC “structural enhancements,” the number, type, scope, and cost of which have yet to be determined; and (3) the schedule delays and lost operational capability, that are expected during the modification to NSCs 1-8. 

   

  Summary of Concerns Raised in Recent OIG Reports

   

  110/123’ Maritime Patrol Boat  Modernization Project

   

  We recently completed an inquiry into allegations of a Hotline Complaint alleging that the Coast Guard's 123-foot Island Class Patrol Boats (123' cutter) and short-range prosecutor (prosecutor) contained safety and security vulnerabilities.  The 123' cutter is a modification of the 110' Island Class patrol boat and was phased into service as part of the Deepwater project.  The original Deepwater plan projected the conversion of forty-nine 110' patrol boats into 123' patrol boats as a bridging strategy to meet patrol boat needs until the new Fast Response Cutter was introduced.  The prosecutor is a 24' 6" small boat that can be deployed from the National Security Cutter, Fast Response Cutter, and Offshore Patrol Cutter.  The revised Deepwater Implementation Plan calls for the acquisition of 91 prosecutors.  The complaint said that these vulnerabilities were the result of the contractor's failure to comply with Command, Control, Communications, Computer, Intelligence, Surveillance, and Reconnaissance (C⁴ISR) design requirements as defined in the Deepwater contract.  Specifically, the complainant alleged that:

   

  ·        The safety of the 123¢ cutter's crew was compromised by the contractor's failure to utilize low smoke cabling;

  ·        The contractor knowingly installed aboard the 123¢ cutter and prosecutor external C⁴ISR equipment that did not meet specific environmental requirements outlined in the Deepwater contract;

  ·        The cable installed during the upgrade to the cutter's C⁴ISR system represented a security vulnerability; and,

  ·        The video surveillance system installed aboard the 123¢ cutter does not meet the cutter's physical security requirements.

   

  Aspects of the C⁴ISR equipment installed aboard the 123¢ cutters do not meet the design standards set forth in the Deepwater contract.  Specifically, two of the four areas of concern identified by the complainant were substantiated and are the result of the contractor not complying with the design standards identified in the Deepwater contract.  For example, the contractor did not install low smoke cabling aboard the 123' cutter, despite a Deepwater contract requirement that stated, “all shipboard cable added as a result of the modification to the vessel shall be low smoke.”  The intent of this requirement was to eliminate the polyvinyl chloride jacket encasing the cables, which for years produced toxic fumes and dense smoke during shipboard fire.  Additionally, the contractor installed C⁴ISR topside equipment aboard both the 123' cutters and prosecutors, which either did not comply or was not tested to ensure compliance with specific environmental performance requirements outlined in the Deepwater contract. 

   

  The remaining two areas of concern identified by the complainant were in technical compliance with the Deepwater contract and deemed acceptable by the Coast Guard.   Specifically, while the type of cabling installed during the C⁴ISR system upgrade to the 123’ cutter was not high-grade braided cable; the type of cable used met the Coast Guard's minimum-security standards as required by the Deepwater contract.  Concerning the installation of the video surveillance system, while the system did not provide 360 degrees of coverage, it met minimum contract requirements. 

   

  Our review raises many concerns about Coast Guard's program and technical oversight of the Deepwater contractor responsible for the 110¢/123¢ Modernization Project.  For example, the contractor purchased and installed hundreds of non low smoke cables prior to Coast Guard's approval of the Request for Deviation.  We are concerned that Coast Guard accepted delivery and operated four 123' cutters without knowing the extent of the hazards associated with the use of the non low smoke cabling.  The contractor also purchased and installed hundreds of C⁴ISR topside components aboard the 123’ cutter and prosecutor knowing that they either did not meet contract performance requirements or compliance with the requirements had not been verified.  Had Coast Guard reviewed the contractor's self-certification documentation, it would have determined that the contractor had not complied with the stated weather environment standard.   For these reasons, we are concerned that similar performance issues could impact the operational effectiveness of C⁴ISR system upgrades recently installed aboard its legacy fleet of cutters. 

   

  We recommended that the Coast Guard investigate and address the low smoke cabling and environmental issues associated with the equipment installation identified in the hotline complaint and take steps to prevent similar technical oversight issues from affecting the remaining air, surface, and C⁴ISR assets to be modernized, upgraded, or acquired through the Deepwater Program.  The Coast Guard concurred with the principle findings of our report and its recommendations and said it is in the process of implementing corrective measures.

   

  For reasons unrelated to the issues identified during our inquiry, operations of the 123' cutter fleet have been suspended.   On November 30, 2006, the Coast Guard announced that it was suspending operations of all eight 123' cutters due to the continuing deformation of the hulls that in some instances resulted in hull breaches.  These problems had previously resulted in the implementation of operating restrictions that severely undermined the mission effectiveness of 123' cutter fleet.  However, these operating restrictions did not resolve the hull deformation problem but rather mitigated their impact on crew safety.  Consequently, the Coast Guard had to consider whether to implement additional operational restrictions in order to meet minimum crew safety requirements or to suspend 123' cutter operations until a solution to these problems could be identified and implemented.  The Coast Guard determined that additional operating limitations would have further undermined the operational effectiveness of the 123' cutter.  For these reasons, 123' cutter fleet was withdrawn from service.  Although the cutter operations have been suspended, the Coast Guard has not yet determined the final disposition of the 123' cutter fleet.

   

  National Security Cutter (NSC)

   

  We recently issued a report on the Coast Guard’s acquisition of the National Security Cutter (NSC). The objective of our audit was to determine the extent to which the NSC will meet the cost, schedule, and performance requirements contained in the Deepwater contract.

   

  The NSC, as designed and constructed, will not meet performance specifications described in the original Deepwater contract.  Specifically, due to design deficiencies, the NSC’s structure provides insufficient fatigue strength to achieve a 30-year service life under Caribbean (General Atlantic) and Gulf of Alaska (North Pacific) sea conditions.  To mitigate the effects of these deficiencies, the Coast Guard intends to modify the NSC’s design to ensure that the cutters will meet the service and fatigue life requirements specified in its contract with the systems integrator.  However, this decision was made after the Coast Guard authorized production of 2 of the 8 cutters being procured.

   

  The Coast Guard’s technical experts first identified and presented their concerns about the NSC’s structural design to senior Deepwater Program management  in December 2002, but this did not dissuade the Coast Guard from authorizing production of the NSC in June 2004 or from its May 2006 decision to award the systems integrator a contract extension.  Due to a lack of adequate documentation, we were unable to ascertain the basis for the decision to proceed with the production of the first two cutters, knowing that there were design flaws.

   

  Since the Deepwater contract was signed in June 2002, the combined cost of NSCs 1 and 2 have increased from $517 million to approximately $775 million.  These cost increases are largely due to design changes necessary to meet post 9/11 mission requirements and other government costs not included in the original contract price.  The $775 million estimate does not include costs to correct or mitigate the NSC’s structural design deficiencies, additional labor and material costs resulting from the effects of Hurricane Katrina, and the4 final cost of the $302 million Request For Equitable Adjustment (REA) that the Coast Guard is currently negotiating with the systems integrator (ICGS).

   

  NSC 1 was christened on November 11, 2006, and final delivery to the Coast guard is scheduled for August 2007.  NSC 2 is currently under construction and is scheduled for delivery during the summer of 2008.  As of December 31, 2006, Coast Guard had obligated $751.6 million (49%) of the $1,518 million funded for the project. 

   

  We made five recommendations to the Coast Guard.  Our recommendations are intended to ensure the NSC is capable of fulfilling all performance requirements outlined in the Deepwater contract: and to improve the level of Coast Guard technical oversight and accountability.

   

  Information Technology Systems

   

  We also audited the Coast Guard's efforts to design and implement command, control, communications, computers, intelligence, surveillance, and reconnaissance (C⁴ISR) systems to support the Deepwater Program.  We determined that the Coast Guard's efforts to develop its Deepwater C⁴ISR system could be improved.  Although Coast Guard officials are involved in high-level Deepwater information technology requirements definition process, they had limited influence over contractor decisions toward meeting these requirements.  A lack of discipline in requirements change management processes provided little assurance that the requirements remain up-to-date or effective in meeting program goals.  Certification and accreditation of Deepwater C⁴ISR equipment was difficult to achieve, placing systems security and operations at risk.  Further, although the Deepwater program had established information technology testing procedures, the contractor did not follow them consistently to ensure the C⁴ISR systems and the assets on which they are installed performed effectively.

   

  Additionally, the Coast Guard faced several challenges to implementing effectively its Deepwater C⁴ISR systems.  Due to limited oversight as well as unclear contract requirements, the agency did not ensure that the contractor was making the best decisions toward accomplishing Deepwater IT goals.  Insufficient C⁴ISR funding restricted accomplishing the “system-of-systems” objectives that are considered fundamental to Deepwater asset interoperability.  Inadequate training and guidance also hindered users from realizing the full potential of the C⁴ISR upgrades.  Instituting effective mechanisms for maintaining C⁴ISR equipment have been equally challenging. 

   

  We made 9 recommendations to the Coast Guard.  Our recommendations are intended to increase agency input and oversight into the requirements definition and to clearly define the management processes used to evaluate and apply changes to the Deepwater C⁴ISR requirements.  We also recommended that the Coast Guard increase staffing levels and evaluate its C⁴ISR spending priorities to improve technical and financial oversight over the C⁴ISR acquisition.  Finally, we recommended that the Coast Guard takes steps to improve the training and technical support provided to C⁴ISR system users. Coast Guard concurred with all nine recommendations contained in our audit report and is in the process of implementing corrective measures. 

   

  Recently, the Coast guard provided an update regarding the progress being made to implement the recommendations contained in our August 2006 report.  In their response, the Coast Guard stated that the language contained in the Deepwater contract, including the contract’s “award term” criteria, had been revised to further clarify contractor responsibilities for developing Deepwater C⁴ISR systems. 

   

  However, the Coast Guard is struggling to provide the funding needed to accomplish system of system objectives and maintain an adequate level of oversight over the Deepwater contractor.  For example, during FY 2005, C⁴ISR program managers requested 28 additional staff positions to help with contractor oversight.  However, only 5 positions were authorized due to a lack of funding.  As a result, the Coast Guard has had to divert management’s attention from systems development tasks to the re-planning and re-phasing the work to match the funding constraints and economize in carrying out its program oversight and support activities.

   

  HH-65 Helicopter

   

  We also reviewed the Coast Guard’s HH-65 Dolphin helicopter re-engining project.  The review was initiated in response to concerns that the re-engining requirements specified for the HH-65 helicopter were not sufficient for the needs of the Coast Guard over the Deepwater project time frame.  Specifically, the HH-65 was experiencing a sharp increase in the number in-flight loss of power mishaps that jeopardized the safety of HH-65 flight crews.  Between October 1, 2003, and August 31, 2004, HH-65 aircrews reported 150 in-flight loss of power mishaps.  This was in sharp contrast to the 64 in-flight loss of power mishaps that were reported between FY 2000 and FY 2003.  Concerns were also raised about: (1) the capabilities of the Honeywell LTS-101-850 engine; (2) the potential cost, delivery, and operational risks associated with the Coast Guard’s decision to enter into a contract with Integrated Coast Guard Systems (ICGS) to re-engine the HH-65 fleet with Arriel 2C2 engines; and (3) the ICGS proposal not meeting the Coast Guard’s desire to have 84 HH-65s re-engined within a 24-month period, by July 2006, as mandated by the Commandant.  In our view, extending the delivery dates unnecessarily exposed HH-65 aircrews to additional risk due to the unprecedented rate in which in-flight loss of power mishaps were occurring.

   

  Our review of the HH-65 re-engining project determined the replacement of the Honeywell LTS-101-750 engines originally installed aboard the HH-65 helicopter with the Ariel 2C2 engine would resolve the safety and reliability issues that had plagued the HH-65 fleet for much of the past decade.  Our report also determined that it would be timelier and more cost-effective to have the re-engining performed at the Coast Guard Aircraft and Repair Supply center (ARSC) than it would if the Coast Guard placed the responsibility for the re-engining under the auspices of ICGS.  The Coast Guard’s Assistant Commandant for Operations made a similar recommendation in May 2004. 

   

  ICGS’ cost proposal for re-engining the HH-65 fleet was $294 million, or $40 million more than the Coast Guard estimated for re-engining the aircraft in-house at ARSC.  This was a significant cost differential given ICGS’ intention to have 83 (87%) of the 95 HH-65s re-engined at ARSC, the effect these additional expenditures could have on the Coast Guard’s ability to sustain and upgrade its legacy aviation assets, and the stated inability of ICGS to re-engine the aircraft within the Commandant’s 24 month timeline.  To date, 69 re-engined HH-65s have been delivered to the Coast Guard.  The remaining HH-65 helicopters are to be delivered to the Coast Guard by the end of    FY 2007.  As of December 31, 2006, Coast Guard had obligated $307 million (89%) of the $343 million funded for the project.    

   

  We made five recommendations to the Coast Guard.  Specifically, we recommended the Coast Guard implement the Assistant Commandant for Operations May 2004 recommendation that the HH-65 re-engining project be taken from ICGS and performed as a government performed contract.  We also recommended that the Coast Guard: (1) refurbish additional HH-65 helicopters; (2) expedite the replacement of the MH-68 helicopters operated by it Helicopter Interdiction squadron in Jacksonville; and (3) take the savings from the termination of the HITRON lease to mitigate the costs associated with the maintenance of its legacy aviation assets.

   

  The Coast Guard did not concur with any of the report’s recommendations.  Their primary rationale being that ICGS minimized the operational, legal, and contract performance risks associated with the re-engining.  The Coast Guard also stated it believed that it received significant benefits from the current ICGS contract that far outweighed the costs of having the Coast Guard manage the project.  We did not and do not believe these benefits have been demonstrated in this instance.

   

  The Coast Guard, however, did state in its response that it supported our contention that additional refurbished HH-65s were needed and that the MH-68 helicopters needed to be replaced with AUF-equipped HH-65s as soon as possible.  However, in both instances, the Coast Guard cited a lack of funding as the primary reason for not implementing these recommendations.

   

  Fast Response Cutter

   

  The Fast Response Cutter is intended to be the Coast Guard’s maritime security workhorse, patrolling in both coastal and high seas areas.  According to the Coast Guard, the FRC can safely and effectively operate in higher sea conditions than its legacy counter part and can remain at sea for up to 7 days, 2 days longer than the Coast Guard’s legacy 110-ft cutter.  The original 2002 Deepwater implementation plan called for the Coast Guard to take delivery of the first FRCs in 2018.   However, because of the suspension of the 123-ft conversion project and deterioration of the remaining 110-foot patrol boats, the FRC project was accelerated to achieve delivery of the first FRCs in 2007, more than 10 years ahead schedule.  However, in February 2006, the Coast Guard announced that it was suspending design work on the FRC due to technical issues identified with the hull design.  The Coast Guard is currently assessing the suitability of designs in operational service in order to procure a proven patrol boat as an interim solution to address its urgent operational needs until the technical issues associated with the current FRC design are alleviated.  We have not yet evaluated the cost, schedule, and performance issues associated with the FRC acquisition.  We do know that as of December 31, 2006, Coast Guard had obligated $49.4 million (24%) of the $208 million funded for the project to date. 

   

  Conclusion

   

  The Coast Guard recognizes these challenges and is taking aggressive action to strengthen program management and oversight—such as technical authority designation; use of independent, third party assessments; consolidation of acquisition activities under one directorate; and redefinition of the contract terms and conditions, including award fee criteria.  Furthermore, and most importantly, the Coast Guard is increasing its staffing for the Deepwater program, and reinvigorating its acquisition training and certification processes to ensure that staff have the requisite skills and education needed to manage the program.  The Coast Guard is also taking steps to improve the documentation of key Deepwater related decisions. If fully-implemented, these steps should significantly increase the level of management oversight exercised over the air, surface, and C4ISR assets that are acquired or modernized under the Deepwater Program.  We look forward to working closely with the Coast Guard to continue the improvement of the efficiency, effectiveness, and economy of the Deepwater Program. 

   

  I will conclude by restating that we continue to be highly committed to the oversight of the Deepwater Program and other major acquisitions within the department.  We are working with the Coast Guard to identify milestones and due dates in order to assess the most appropriate cycle for reporting the program’s progress.

   

  Chairman Cantwell, this concludes my prepared remarks.  I would be happy to answer any questions that you or the Subcommittee Members may have.

• Mr. Stephen L. Caldwell

  Director, Homeland Security and Justice Issues

  U.S. Government Accountability Office
  Download Testimony (286.91 KB)

• Admiral Thad W. Allen

  Commandant

  United States Coast Guard
  Download Testimony (1.29 MB)

  Read statement

  Testimony

  Admiral Thad W. Allen

   

Witness Panel 2

• Dr. Leo Mackay

  Vice President and General Manager, Coast Guard Systems

  Lockheed Martin
  Read statement

  Witness Panel 2

  Dr. Leo Mackay

  Testimony before the U.S. the Senate Committee on Commerce, Science, and Transportation, Oceans, Atmosphere, Fisheries and Coast Guard Subcommittee

  Wednesday February 14, 2007, at 2:30 pm in Senate Russell Office Building, Room 253

   

  Dr. Leo S. Mackay, Vice President and General Manager, Coast Guard Systems

  Lockheed Martin Maritime Systems & Sensors

   

  Good Morning Madam Chairperson and distinguished Members of the Subcommittee.

  Thank you for the opportunity to explain the progress we are achieving on the U.S. Coast Guard’s Integrated Deepwater System program. Speaking for the men and women of Lockheed Martin, we are very proud to be associated with this critical program. The Coast Guard is a key national asset for assuring the security and safety of our country’s maritime transportation system. Each of us, in accomplishing our daily tasks on the program, has a deep sense of the importance of achieving the very best for the Coast Guard and our nation.

   

  Overview

  The Integrated Deepwater System program is delivering both new and upgraded fixed wing and rotary wing aircraft; new communications systems that are making a significant contribution to improved mission performance; and, the logistics systems necessary to support fielded assets. We understand the Integrated Deepwater System will continue to evolve. To meet this ongoing challenge, Lockheed Martin is applying a disciplined system engineering approach to the program. This will continue to be vital for achieving more robust capabilities given fiscal realities – a one-asset-at-a-time recapitalization approach would be unaffordable. Lockheed Martin is committed to providing our best talent and capabilities for supporting the Coast Guard.

  Lockheed Martin is primarily responsible for four Deepwater domains: System Engineering & Integration, C4ISR (the command and control network), Logistics and Aviation (refurbishment of existing assets and production of new assets). Lockheed Martin’s goal is the full application of system engineering methodologies to establish the best mix of assets and introduction of new capabilities as well as implementation of the associated logistics systems. Most important is maintaining emphasis on the implementation of the Deepwater system-wide command and control network. C4ISR (Command & Control, Computers, Communications, Intelligence, Surveillance and Reconnaissance) is the network “glue” that permits various assets including ships, aircraft and shore stations to work together to more effectively and efficiently achieve a common purpose. Thus, the C4ISR domain is of particular importance as most modern civil, commercial and military systems are dependent on the value delivered by the integrating power of the network.

  
  

  Key Achievements

  We are making good progress and are delivering significant new and upgraded capabilities. At the same time, we recognize the system level effects of networking are essential to achieving the level of mission performance needed by the Coast Guard. Lockheed Martin is accomplishing high rates of software re-use as well as system commonality and integration by the rigorous application of proven system engineering processes and capabilities. In addition, we are managing implementation of support systems for all Deepwater program domains. The Lockheed Martin team is working closely with our Integrated Coast Guard Systems, LLC (ICGS) joint venture partner, Northrop Grumman, to ensure that electronic equipment developed and produced under the cognizance of the C4ISR domain is appropriately configured for installation on the ships.

  Every one of the Coast Guard’s 12 high-endurance and 27 medium-endurance cutters have received not one but two command and control system upgrades – giving the fleet markedly improved capability to seize drugs, interdict migrants and save lives. As for shore sites, there are a total of 12 on contract: two Communication Area Master Stations, eight Districts, one Sector and Headquarters. Use and reuse of Commercial-Off-The-Shelf, Government-Off-The Shelf and fielded maritime systems are being maximized for commonality and interoperability. The application of off-the-shelf software permits Deepwater to take advantage of the rapid changes in the commercial market place and the investments which commercial firms make in their best of class technologies. This will facilitate Coast Guard interoperability with civil and international systems, a key consideration given their mission mix.

  The National Security Cutter is using 75 percent of the U.S. Navy’s Open Architecture Command & Decision System. The Command & Control System for Maritime Patrol Aircraft employs more than 50 percent of the functionality of the Navy’s P-3 Anti-Surface Warfare Improvement Program. The Operations Center consoles on the National Security Cutter utilize more than 70 percent of the design of the Navy’s UYQ-70 display systems. Use and reuse of available software and systems is the key to commonality. In addition, this approach takes greatest advantage of the work undertaken with the Navy to establish the best Human System Interface including workspace ergonomics, viewing characteristics, input devices and overall system architecture.

  The first medium-range surveillance maritime patrol aircraft, the newly designated HC-144, has been transferred to the Coast Guard. It arrived at Elizabeth City, N.C., on December 20, 2006 and is now undergoing missionization work that will be completed in April. The second aircraft was accepted by the government on January 25, 2007 and the third aircraft is in flight testing. The second aircraft will now be delivered to Elizabeth City for missionization and two crews are already in training. At the same time, we are working to complete re-engining and upgrading of HH-65 helicopters with 65 of 95 helicopters delivered to date. This project was part of the original Deepwater program plan. However, at the direction of the Coast Guard, it was rapidly accelerated due to safety of flight issues. Lockheed Martin and American Eurocopter working with the Coast Guard Aircraft Repair and Supply Center are now producing upgraded helicopters (“Charlies”) that can fly faster, twice as far and with twice the payload.

  Six long-range surveillance C-130J aircraft are undergoing missionization and will be delivered within 15 months after receipt of the contract with fully interoperable command, control and communications systems. The first aircraft was inducted for missionization at Greenville, S.C., on December 19, 2006. In addition, the service contract for the Helicopter Interdiction Tactical Squadron (HITRON) based in Jacksonville, Fla., has been renewed for a fifth year. These eight MH-68A helicopters are equipped with Airborne Use of Force and have had a significant impact on illicit drug interdictions. The squadron celebrated its 100th interdiction last May.

  Industry’s performance has been closely supervised by the Coast Guard with additional oversight from the Department of Homeland Security, the Congress and the Government Accountability Office. Each of the multiple reviews has provided constructive recommendations as requirements and funding levels continue to evolve. The results so far indicate that Deepwater has made a dramatic difference in the effectiveness of the Coast Guard with regard to the numbers of drug seizures, migrant interdictions and lives saved. Coast Guard statistics show double-and triple-digit percent improvements as Deepwater assets and upgrades enter the fleet.

  Strategic Context of ICGS

  The Deepwater program is modernizing the Coast Guard by providing new assets and expanding capabilities in aviation, ships, shore stations, logistics, and command, control and communications systems. The ICGS joint venture between Lockheed Martin and Northrop Grumman was designed as a low overhead contracting vehicle. Its purpose is to provide for rapid parsing of work between the two partners while at the same time achieving close collaboration and cooperation. It is important to note what it is not. The ICGS joint venture is not a replacement for Coast Guard decision-making. All designs and improvements are based on trade studies, analyses, and technical considerations. But make no question about it – the Coast Guard is the decision maker and contracting authority and all major acquisition decisions are reviewed and approved by Coast Guard senior leadership. ICGS utilizes the depth of capabilities and experience of its partners to provide solutions in accordance with Coast Guard requirements. The joint venture partners are utilizing more than 600 suppliers in 42 states plus the District of Columbia. In addition, ICGS maintains an active database of more than 3,000 supplier-product applications.

  The Deepwater program began in 1997 as competing teams were established to develop proposed solutions for bidding the program. In fact, proposals were submitted to the government less than two weeks after 9/11. Since then, the ICGS team was awarded the Deepwater program and successfully accomplished a number of changes. Most significant were those resulting from the dramatically increased Coast Guard operating tempo in the post-9/11 environment. This means that legacy equipment began to wear out far more rapidly than had been projected. A good example is the HH-65 helicopters mentioned above. While the ICGS team’s approach always included re-engining of this equipment, the original plan was to be accomplished over a longer time period. Nevertheless the team was able to process the urgent requirement for re-engining and more than two-thirds of the fleet have already been upgraded and returned to service. It is this inherent flexibility of the ICGS joint venture stemming from the deep capabilities of its partners that will facilitate our working with the new acquisition organization planned by the Coast Guard.

  The Way Ahead

  Our overarching goal is to provide more capability to the fleet, sooner. We are dedicated to analyzing and recommending approaches for maximizing the value delivered to the Coast Guard, in accordance with the customer’s view of value, not that of industry. This requires the best talent from each corporation. ICGS works closely with Coast Guard personnel to assure constant communications and improved working relationships. The strategic policy changes that have occurred since 9/11 must be factored into problem solving. The Coast Guard and the Department of Homeland Security have needs that can be satisfied by the Deepwater program and its approach to value delivery. The way forward will be difficult, but given the capabilities of the participants and the strategic imperative to better outfit our Coast Guard so the safety and security of our nation is improved, the Deepwater program is eminently achievable.

  Thank you again for the opportunity to present and explain the progress we are achieving on the Deepwater program, I look forward to answering your questions.

• Mr. Phillip Teel

  President, Ship Systems

  Northrop Grumman
  Read statement

  Witness Panel 2

  Mr. Phillip Teel

  STATEMENT FOR THE RECORD

   

  Mr. Philip A. Teel, President

  Northrop Grumman Ship Systems (NGSS)

   

  Testimony Before The

  Senate Subcommittee on Oceans, Atmosphere,

  Fisheries, and Coast Guard

  Senate Committee On Commerce, Science and Transportation

   

  WEDNESDAY, FEBRUARY 14, 2007

  2:30 PM

  SR-253 Russell Senate Office Building

   

   

   

  Good afternoon Chairperson Cantwell, Ranking Member Snowe, and distinguished members of the Subcommittee.

  Thank you for the opportunity to appear before you today to discuss the Deepwater Program.  As you know, within the Integrated Coast Guard Systems (ICGS) structure, a joint venture established by Northrop Grumman and Lockheed Martin, Northrop Grumman Ship Systems (NGSS) is responsible for design, construction and support of all three classes of cutters; the National Security Cutter (NSC), the Offshore Patrol Cutter (OPC), the Fast Response Cutter (FRC), as well as the 110’ to 123’ converted Island Class Patrol Boats.  References in this statement to ICGS or separately to Northrop Grumman or NGSS should be construed to mean the role of Northrop Grumman Ship Systems as part of ICGS.

  Northrop Grumman has nearly 70 years of experience designing, constructing and maintaining ships of all types.  In that time, NGSS's Gulf Coast operations has produced a total of 534 ships -- 351 ships at Ingalls and 183 at Avondale -- and has built 24 percent of the Navy's current fleet of 276 vessels.  In just the last 30 years, we have completed 15 new designs representing a diverse group of military and commercial seagoing ships: LSD 49; CG47, DDG993, LHD1, LHD8, LSD41, LMSR, USCGC Healy (Polar Icebreaker), 2 Classes of T-AO (Kaiser & Cimarron), Polar, NSC, LPD17, Saar5, and DDG1000.

  On behalf of Northrop Grumman and all of the men and women working in support of this program, I would like to thank this Subcommittee for your strong support of the Coast Guard, and of the Deepwater Program.  We look forward to working closely with you and the Coast Guard to ensure the success of this important modernization.  The following statement contains information that I, on behalf of Northrop Grumman, am submitting based on my current knowledge, information and belief.

  Overall Deepwater Program Management: On June 25, 2002, the Deepwater Program prime contract was awarded to ICGS.  As program requirements have changed since 9/11, the Deepwater prime contract has been amended accordingly to accommodate the new requirements in support of national security.

  There has been an extraordinary level of transparency in program management and execution between ICGS and the Coast Guard.  The Coast Guard has been involved in every aspect of the Program throughout its history.  Each Deepwater asset undergoes design reviews by government and contractor technical experts at key points in the design life cycle, with questions and issues adjudicated as part of the review process.  Personnel from the Coast Guard, Northrop Grumman, Lockheed Martin, various subcontractors and ICGS are co-located at production sites around the country as well as in the Systems Integration Program Office in Arlington, Virginia.  Full participation by the Coast Guard is built into every level and function within the ICGS team.  With respect to programmatic decision making, all major acquisition decisions are made by the Coast Guard, after review and approval by Coast Guard senior leadership through a series of cross-functional government teams.  These include reviews by subject matter experts from Engineering and Logistics, Electronics & Communications, Human Resources, Intelligence, and the Programs & Budget Directorate at the staff and flag level. Northrop Grumman and ICGS do not make decisions in relation to what cutters and boats to buy—we make recommendations.  The U.S. Coast Guard is the decision making and contracting authority, and has retained the traditional contract management functions, including the right to issue unilateral change orders, to stop or terminate work, to order or not order assets and supplies, and to accept or reject the work.

  There is a lot of interest about the way forward for Deepwater.  Leaders within the highest levels of the Coast Guard, Northrop Grumman and Lockheed Martin are committed and focused on the most important issues related to the 25-year, $24 billion acquisition program, including recent Coast Guard initiatives to strengthen program management and oversight--such as technical authority designation, use of independent (third party) assessments, and consolidation of Coast Guard acquisition activities under one directorate.  Objectives to achieve the way forward include: (1) Capitalize on proven, first-article Deepwater successes. (2) Sustain momentum in recapitalizing the Coast Guard through the Deepwater program and (3) Resolve outstanding challenges associated with some projects within Deepwater.  The senior leadership in each of our organizations is committed to meet regularly to review the progress of the program and provide executive level oversight at all times, with specific direction when warranted.

  Competition is also an important component of the Deepwater team’s effort to deliver “best value” to the Coast Guard.  The tenet of competition within the ICGS Deepwater program plan is an open business model that invites participation and competition through the life of the program. Both contractors have a Contractor Purchasing System that is patterned after the Federal Acquisition Regulations.  All Northrop Grumman purchases over $25K are individually reviewed for compliance with purchasing guidelines, and the purchasing system is audited (usually every three years) by the Defense Contract Audit Agency (DCAA).  A government sponsored third party review of Deepwater acquisition practices found our statistics favorable compared to large US Navy procurement programs.  In addition, competition for subcontract awards is encouraged via the annual Industry and Innovation Days where suppliers and vendors have an opportunity to provide input on new or improved products.  ICGS to date has placed orders with more than 600 suppliers representing more than 41 states and maintains an active database of over 3000 potential suppliers from which it draws to host annual supplier innovation and industry days.

  Patrol Boats are small naval ships, generally designed for coastal defense duties, operated by a nation's navy, coast guard or police force in marine – "blue water" - and littoral and river - "brown water" - environments.  They are commonly found in various border protection roles, including anti-smuggling, anti-piracy, fisheries patrols, immigration law enforcement and rescue operations.  Patrol boats usually carry a single artillery gun as main armament with a variety of lighter secondary armament such as machine guns, and are diesel-powered, with speeds generally in the 25-30 knot range.  The above definition aptly describes the 49 “Island Class” 110 foot patrol boats and the 123 foot conversions under the original Deepwater proposal. 

  The Coast Guard's current 110 foot patrol boats were built in the 1980s and early 1990s by Bollinger Shipyards, Inc.  These boats have seen extensive duty in support of the Coast Guard mission to save lives, interdict aliens and seize drugs.  ICGS and its teammate, Halter Bollinger Joint Venture (HBJV), proposed to convert the 110 foot boats to 123 foot boats as an interim measure to improve the capability and extend the life of this vessel until its FRC replacement entered operation in 2018.  ICGS proposed the conversion concept as the best means to provide the Coast Guard with the necessary capability to continue to meet its mission objectives while remaining within the confines of program funding requirements.  Deepwater competitors were required to propose a "system of systems" solution that did not exceed the funding limitation of $500 million per year.  With new assets such as the National Security Cutter (NSC), Maritime Patrol Aircraft (MPA) and the Vertical Unmanned Air Vehicle (VUAV) being developed early in the program, it was not possible to design, develop and construct new patrol boats at program inception while keeping within annual funding limitations.

  Bollinger had designed and built the original 110 foot boats and was very familiar with their construction.  Bollinger was awarded a contract for 16 110 Island class boats in August 1984 and another contract for 33 more boats in 1986.  The design of the 110 Island class was approximately 20 years old and was based on an existing patrol boat developed by a British firm, Vosper Thornycroft (UK) Ltd.  The 110 Island Class boats were commissioned between November 1985 and 1992.  Notably, after the first boats came into service, it was discovered that the 110s suffered from hull problems when operated in heavy seas.  As a correctional measure, heavier bow plating was added to hulls 17 through 49 during construction and additional stiffeners were retrofitted to earlier hulls.

  Under the proposed Deepwater conversion plan, HBJV added a 13 foot extension to the 110’, which accommodated a stern ramp for the launch and recovery of a small boat, used primarily to support boarding and rescue operations.  In addition, the conversion installed an improved pilot house, enhanced Command, Control, Communications, Computers and Intelligence, Surveillance and Reconnaissance (C4ISR) capabilities and tested, identified and renewed hull plating in areas where an ultrasonic thickness inspection indicated that the existing plating was deteriorated. 

  At the time the proposal was submitted, some general knowledge about the condition of the 110s was available, and ICGS believed that replacement of the hull plating would adequately address and offset their deteriorated condition.  This is consistent with the findings of the Coast Guard’s 110 WPB Service Life Extension Board, published in March 2002, which recommended a program of systematic hull repairs, predominantly in documented problem areas, to address the hull deterioration problems that were impacting 110’ WPB operational availability.

  After being awarded the patrol boat conversion work, ICGS engaged in a rigorous design process that included extensive reviews with all stakeholders.  These programmatic reviews included a Preliminary Design Review, a Critical Design Review and a Production Readiness Review all of which were conducted with the Coast Guard before the actual conversion work began.  Leading up to each of these reviews, the evolving design, design drawings and calculations were formally presented to the Coast Guard subject matter experts in increasing detail for their review, comment and approval.  During this series of reviews I am not aware that structural, buckling or deformation concerns were raised as an issue.  In addition, during the conversion of the Matagorda, the American Bureau of Shipping (ABS) examined the design of the hull extension and new deckhouse and monitored key elements of the work being performed.  At the conclusion of the Matagorda work, they issued a letter of approval for the conversion work and expressed no reservations with the feasibility of the conversion.

  The Performance Specification requirement calls for the 123’ to be capable of unrestricted operation up through sea state 3, or seas averaging less than four feet.  Operation restrictions are imposed beginning at sea state four, or seas less than eight feet, where the boats are to be able to sustain limited operations, altering course or reducing speed as required to maintain a ride which does not damage the boat or its machinery or overly fatigue the crew.  The 123’ is to be able to survive sea state 5, or seas averaging between eight and 13 feet, maneuvering as necessary to minimize damage or injury to the crew, and then be capable of returning to port under its own power once the seas have subsided.

  In September of 2004, after all 8 hulls had entered the conversion program and the first 4 hulls had been delivered, the Matagorda was forced to conduct a high speed transit to avoid Hurricane Ivan.  This operational necessity forced the Coast Guard to transit in a sea state and speed where the cutter was operating near or above the design limits of the 123’ conversion.  Upon arrival at their destination, the crew discovered buckling of the side shell and main deck on the starboard side near midships.  An engineering tiger team was formed consisting of Coast Guard and NGSS personnel.  This team was dispatched to investigate the problem where it was discovered that the Matagorda had an inherent workmanship issue in the baseline 110’ that existed prior to the conversion and contributed to the hull buckling.  Specifically, a hidden, unwelded aluminum deck stringer was discovered immediately beneath the area where the failure occurred.  Other boats were examined, and this unwelded stringer was also found on one additional hull undergoing conversion.  When modeled using finite element analysis, the stresses in the panels which failed on Matagorda were significantly higher than the stresses shown when the model was run with this stringer intact.  Based on this finding, the team believed this to be the primary cause of the buckling on Matagorda, and repairs were made accordingly.

  In addition, a reconstruction of the engineering analysis of the 123’ structure was conducted.  Based on this, it was also discovered that an early calculation overstated the strength margin for the boat.  A revised calculation using a common, agreed to set of assumptions by the engineering team showed the 123’ would still meet the required operations defined in the Performance Specification.

  In an effort to further improve the structural integrity on the 123’, three stiffener bands were installed; one at the upper edge of the side shell, one below this one and another on the edge of the main deck to increase the overall structural strength.  While the finite element analysis and conventional calculations both agreed that the original hull, with the stringer under the deck intact, should be sufficient throughout the operating range of the 123’, these additional stiffeners were considered to provide an added margin of strength. 

  In November 2004, ICGS received a contract modification that changed the arrival schedule of hulls 9-12 to TBD.  Long-lead time material for four additional hulls had already been authorized and work continued on the 3 remaining hulls in process.

  By March, 2005, 6 of the 123s had received the structural upgrade and had been delivered.  Certain operational restrictions imposed on these boats by the Coast Guard following repairs to the Matagorda had been lifted.  Then, during a transit from Key West to Savannah, GA, the Nunivak experienced hull deformation in an area aft of the new reinforcing straps.  This deformation occurred in a different area from that of the Matagorda. Further, this was not an area which had indicated potential for high stresses under any conditions modeled in the earlier finite element analysis.

  An outside engineering firm, Designers and Planners, was contracted by the Coast Guard to perform a more detailed finite element analysis of the 123’ hull, which showed that the overall hull structure design was adequate under all expected operating conditions up to the worst operating condition modeled.  The analyses were not able to replicate the deformation seen on Nunivak.  A more detailed look at specific regions on the hull showed an area with high potential for localized buckling in a section of the side shell where the original 110’ hull had been constructed of exceptionally thin four-pound plate.  Despite this finding, no actual failures had ever been experienced in this area on 110 or 123’ WPBs.  As a precaution, this thin plate was replaced with heavier plating on those cutters undergoing the Post Delivery Maintenance Availability, with plans to eventually upgrade all the boats.  Lastly, a metallurgical analysis of the deck material determined that the particular grade of aluminum used on the 110s is prone to corrosion and cracking in elevated heat and marine conditions.

  In July 2005, then Coast Guard Commandant Admiral Collins’ written testimony before Congress outlined the twofold reason for stopping the conversion process as follows: "As the first eight 110’ to 123’ conversions were conducted, the Coast Guard found that the 110’ WPB hulls were in much worse condition than anticipated.  This extended the conversion timeline and would have increased projected costs for conversions after the first eight (the first eight were negotiated under a firm-fixed-price contract).  An operational analysis of the 123’ WPBs also identified high risks in meeting mission needs, particularly in the post-9/11 environment."

  To date the problems associated with the 123’ conversion include buckling or hull deformation and shaft and propeller alignment problems.  In addition to the actions previously described, additional and substantial work has been (and continues to be) done.  In addition to the repairs and reviews of structural calculations, we have continued the review process by conducting two independent finite element analyses, modeling both the original and the upgraded hull, and we completed metallurgical testing that revealed an issue in the main deck which exists on both the 123’ and across the legacy 110 fleet.  Extensive strain gage testing has been conducted on a 123’ hull to validate the finite element model and to identify potential problem areas which the model may not show.  The parent craft designer, Vosper Thornycroft, has been engaged to evaluate the 123’ hull and provide recommendations.  Data is being collected on shaft alignment and maintenance procedures both during the conversion and since, so that the procedures for checking and correcting alignment can be validated for both the 110’ and the 123’.  Elements of the 123’ design, including the propellers and the SRP stern-launch system are being reexamined and validated.

  We are committed and determined to identify the root cause of the structural problems.  Northrop Grumman and Coast Guard engineers are currently reviewing and re-reviewing all available data on the 110’ and 123’ patrol boats in an effort to better understand the cause or causes of both hull buckling and shaft and propeller alignment problems.  Depending on the outcome of that analysis the possible outcomes range from removing the boats from service to effecting repairs with testing followed by placing them back in service.  Until all analyses are complete, it is premature to speculate on the final cause and the final way forward.

  Fast Response Cutter Acceleration: Before Congress in July 2005, then Coast Guard Commandant Collins testified:  “A key component of the Deepwater Program is the replacement of the Coast Guard’s 110’ Island Class Patrol Boat (WPB) fleet.  The Island Class patrol boat is a Coast Guard multi-mission workhorse and is rapidly approaching the end of its serviceable life. Under the initial IDS proposal, the 49 110’ Island Class WPBs were scheduled to undergo a conversion to 123’ WPBs by 2010 as a bridging strategy.  The 123’ WPBs would then be replaced by the Fast Response Cutter (FRC) starting in 2018.  As the first eight 110’ to 123’ conversions were conducted, the Coast Guard found that the 110’ WPB hulls were in much worse condition than anticipated. This extended the conversion timeline and would have increased projected costs for conversions after the first eight (the first eight were negotiated under a firm-fixed-price contract).  An operational analysis of the 123 WPBs also identified high risks in meeting mission needs, particularly in the post-9/11 environment.  The Coast Guard recently decided to stop the conversion project following the first eight conversions. Instead, the Coast Guard plans to advance the FRC design and construction by ten years, and is analyzing alternatives methods for extending the life of the 110-foot fleet, as discussed above.”

  Consistent with this testimony, the Coast Guard accelerated FRC design and construction by ten years.  The expanded set of post 9-11 requirements produced a set of required capabilities that exceeded the traditional patrol boat roles filled by the 110s and 123s and other similar worldwide patrol boat fleets.  A market study was conducted and concluded that none of the existing similar sized patrol boats would meet these requirements.  A series of business case analyses, Total Ownership Cost (TOC) studies and preliminary design efforts showed the benefits of using a composite hull form to meet this demanding set of requirements with a potential to save over $1B in lifecycle cost.  The predominate savings came from the superior service life of composites.  The Design to Cost constraints restricted the vessel length to 140 feet.  In order to accommodate the added capability and equipment required to meet the post 9/11 mission requirements the resultant design was wider for its length than historical and traditional patrol boat hull dimensions.  Independent third party analysis by John J. McMullen and Associates (JJMA) stated: “The review team believes that the FRC does appear to meet or is capable of meeting the requirements” and acknowledges that “The FRC preliminary design represents a design solution to a challenging set of requirements.”  Additionally, I would like to point out that, contrary to what was reported in the press, the FRC-A did not fail a tank test – a preliminary test was conducted improperly.  When this test conducted properly, the FRC-A met all requirements, as is confirmed in the final model test report.

  The Coast Guard made the decision to suspend the FRC-A program, as the all composite design is now called, and focus on a parent craft solution known as the FRC-B.  This decision seeks to ensure a proven solution to a lesser requirements set.  This will enable the additional time required to take the FRC-A through a design spiral, and perform trade analyses to optimize performance to cost including a robust operational test program for the fully capable FRC.  The Coast Guard is also performing an additional business case analysis and a technology readiness assessment to confirm viability of the composite approach. 

  The current patrol boat acquisition strategy includes two paths: FRC-A, mentioned above and FRC-B.  FRC-B will leverage existing patrol boat designs to serve as a bridging strategy while the fully capable FRC-A is undergoing design and development.  The FRC-B program will select the candidate design from a field of worldwide patrol boat providers and is expected to enter concept design later this year.

  I want to assure the Committee that Northrop Grumman will continue to work with the Coast Guard in satisfying its patrol boat mission requirements throughout the life of the Deepwater Program.

  National Security Cutter (NSC) Structure and Cost Growth: Designed to replace aging Hamilton Class High Endurance Cutters (WHEC) that have been in service over 40 years, the National Security Cutter (NSC) is a modern, well-armed, high-performance, 421-foot, 4000-ton frigate sized naval ship, with manned and unmanned aircraft, stern-launched rigid inflatable boats and secure communications facilities.  It provides the Coast Guard with enhanced post 9/11 Homeland Security and core mission capabilities (drug interdiction, search & rescue, economic zone & fisheries protection).  The first of the 8 ship class (USCGC Bertholf) has been launched and will be delivered to the Coast Guard in the fall of 2007.  The second (USCGC Waesche) is also under construction and is scheduled for delivery to the Coast Guard in early 2009.  

  With regard to the structure, we believe the NSC meets contract requirements/specifications.  The NSC design uses the same Data Design Sheet (DDS) standards used in structural design of ships since WWII.  The NSC is designed to meet a 30 year service life and many of the structural items raised by the Coast Guard have been addressed and were incorporated in the Bertholf and Waesche (NSC 1 and 2) prior to production.  For example, upgraded steel, thicker steel, modifications to Fashion Plates and Re-entrant Corners, and the addition of 2 longitudinal Hovgaard bulkheads to provide increased stiffness at the stern were incorporated into the design.  

  With regard to NSC fatigue life, even the best engineers will have different opinions. Analysis has been performed on the NSC utilizing a relatively new model developed by Naval Surface Warfare Center, Carderock Division (Carderock) utilizing two different approaches.  The difference in the two approaches is whether or not the model is benchmarked by calculating the fatigue strength of proven ship designs with similar operational characteristics and hull form that has been at sea for the desired time.  This enables the calculation of permissible stress levels that can be applied to test the new design.  The results of these two analyses have generated a responsible dialog between the engineers which will lead to final agreement about enhancements to fatigue structure

  Northrop Grumman does not self-certify compliance with the structural requirements in the contract.  The Bertholf has and will undergo a comprehensive internal and external certification process.  The American Bureau of Shipbuilding (ABS) certified 14 Systems Level drawings, including structural design drawings.  ABS will also certify 35 ship systems during this acceptance process.  These include; Command & Control Systems, Propulsion Plant, Machinery Monitoring & Control, Fuel Systems, Anchoring Systems, and Steering Systems.  During the design process, there will be a total of 46 independent third party certifications prior to or as part of the USCGC Bertholf (NSC 1) delivery process.  These include; Final Aircraft Facilities, Flight Deck Status and Signaling, Navigation Systems, Interior Communications Systems, Guns and Ammunition Weapons System Safety, DoD Information Security and Accreditation, and TEMPEST.  The US Navy’s Board of Inspection and Survey (INSURV) will conduct the Ship’s Acceptance Trials (AT) when the cutter gets underway later this year.

  Cost growth has also been mentioned in the media.  Two elements have led to the majority of cost growth on the NSC - increased post 9/11 requirements and the impact of Hurricane Katrina.  The NSC that will be delivered to the Coast Guard this year is not the same ship that was first proposed in 1998.  Today’s NSC has greatly improved operational capabilities that address post 9/11 requirements including Chemical, Biological & Radiation (CBR) protection, a Sensitive Compartmented Information Facility (SCIF) and more robust aviation installations so that the NSC, in addition to its normal embarked Coast Guard aviation complement, will be able to launch, recover and operate US Navy, US Government Agency and partner nation manned and unmanned rotary wing aircraft.  These enhancements have added approximately 1000 tons to the displacement, including a one third increase in electrical power systems, a tripling of air conditioning and ventilation capacity (HVAC), the addition of 25 antennas and a 26% growth in the size of the berthing spaces.

  It is true that Katrina delayed the delivery of Bertholf by several months and added cost to the program. Prior to Katrina, Bertholf was the best “first of class” ship in the 70 years that warships have been built in Pascagoula.  Even taking into account Katrina, Bertholf continues to set new lead ship standards in quality and efficiency with, higher performance to standards than both the first or second Arleigh Burke Class (DDG 51) destroyer and labor utilization measures that routinely out perform other programs in our shipyard.

  Much of what has been done on the NSC program is being transitioned to the rest of the shipyard to other construction programs.  In addition to the specific actions as they relate to the NSC program, we are investing $57.3 million dollars of our own money in a new suite of management tools that will increase our visibility, work sequencing capability, material and engineering modeling and capacity and resource planning.  These tools will enable the reduction in the number of units we construct to build the NSC.  Currently we build the vessel in 45 units and integrate these sub assemblies into 29 erection lifts on the ship.  The new tool set will allow us to plan and construct the vessel in less lifts, our target is 16, and as we know the less number of lifts the less cost.  We are investing in our human capital, process improvement, and our facilities to reduce the cost associated with building future ships.

  Thank you for this opportunity to personally update you on the progress of the Deepwater Program.

  This is the end of my statement.  I welcome your questions. 

   

• Captain Kevin Jarvis

  U.S. Coast Guard, Retired
  Read statement

  Witness Panel 2

  Captain Kevin Jarvis

  Captain Kevin P. Jarvis, USCG (ret)

   

   

  Written testimony for the Senate Committee on Commerce, Science and Transportation,

   

   

  Subcommittee on Oceans, Atmosphere, Fisheries and Coast Guard

   

   

  Oversight Hearing on Recent Setbacks to the Coast Guard’s Deepwater Program

   

   

  February 14, 2007

   

  
  

  Introduction:

   

  Good afternoon.  Senator Cantwell, as the chair of this committee, I’d like to thank you and the remainder of the committee members for holding this important hearing concerning a subject that has consumed a good portion of my life for the last seven years.  I’d also like to start off by thanking Senator Snowe whose name I recognize as both the ranking member of this committee but also as a supporter of the Coast Guard and a desired Deepwater acceleration.

   

  I am Kevin Jarvis a recent retiree from the United States Coast Guard, the military organization I have loved for over 29 years of commissioned service. I proudly wear my retirement pin for all to see. Because of my continued unmatched loyalty and love for this magnificent organization and the service it provides the United States, this specific topic (Deepwater) and the unfortunate negative publicity it has cast undeservedly on many of the men and women of Coast Guard, and my unique familiarity with many of the Deepwater tactical and strategic decisions, policies and resultant outcomes, I elected to come and testify today after a long train ride from Florida.  In providing this testimony, it is my solitary hope that it can assist you and the Coast Guard make this very important and critically needed asset acquisition program more effective, cost efficient and transparent, and most importantly, as the good stewards we’re supposed to be, more accountable to the American public.

   

  A short synopsis of my background is as follows:  I am a career Coast Guard commissioned officer who has spent a predominance of my service in Naval Engineering and logistic related assignments. From the deck plates and bilges in three different cutters, my selection as the DOT-U.S. Coast Guard 1993 Federal Engineer of the Year, to my final assignment as the Commanding Officer of the Coast Guard’s Engineering Logistic Center (ELC), I’ve seen, and/or done virtually everything a Naval Engineer could do.   In addition to my Coast Guard Academy education (BSE in Electrical Engineering), I’ve been fortunate enough acquire two Master Degrees from the University of Michigan in the areas of Naval Architecture and Marine Engineering, and Mechanical Engineering.  Moreover, I acquired a Master of Arts degree in National Security and Strategic Studies from the Naval War College; as a Naval Engineer, attending the Naval War College is a relative rarity. Lastly, I completed, in concurrence with my last Commanding Officer assignment, a Master of Science degree in Quality Systems Management with an emphasis in Six Sigma from the National Graduate School. It was a result of many of these engineering experiences, educational qualifications, proven leadership attributes and lucky timing that was I introduced as a G-S representative to the Deepwater program.

   

  Prior to any detailed discussion I have on the Deepwater program, let me state that I have read the recent DHS IG report dated Jan 2007 and agree with their findings and recommendations. Additionally, I’ve been provided a copy of the Commandant’s recent congressional testimony on this subject and I fully believe Admiral Allen’s legitimate emphasis and desire for program transparency, greater accountability and formally shifting technical authority from the contractor or elements of the acquisition directorate to the more rightful owner, the engineers within the CG-4 directorate are excellent steps in the right direction.

   

  The Deepwater Contract Strategy and Its Flaws:

   

  The contract strategy was in reality pretty simple and elegant to describe, but due to its uniqueness, getting any type of details beyond the “concept” was virtually impossible to acquire.  This Systems of Systems, performance based contract was to have as its major hallmarks; a “Systems” integrator to ensure all the working parts of the delivered assets worked together; a performance based contract that, with the exception of the National Security Cutter (NSC) which was relatively detailed in the Systems Performance Specification (SPS) Section 3.8, was all about the final performance of the “built out system”; a heavy reliance on Commercial Off The Shelf (COTS) and Commercial And Non-Developmental Items (CANDI); and an assortment of virtually every Contract Line Item (CLIN) billing strategy imaginable.  The Contractor’s performance would supposedly be monitored and assessed through the System’s increased Operational Effectiveness (OpEff), lower Total Ownership Costs (TOC), and Customer Satisfaction.  The strategy was indeed unique. Building the contract details, simultaneously moving down a very aggressive Request For Proposal (RFP) timeline concurrent with three separate industry teams desiring contract related guidance, and building the program and directorate support staffs all at the same time would prove to be an almost imaginable task. This constant dance between pre-set time driven requirements and necessary performance specifics would only get worse as the contract matured.

   

  Moreover, it was readily apparent to many prior to award with the three industry teams and immediately after award to ICGS that the implementation of this simple and elegant strategy would be extremely complex to manage properly and virtually impossible to hold the contractor’s feet to many of the performance measures since it was all built on the “end state” System of Systems performance; ergo we’d have to really wait until 2020 or so to really see if we ultimately got what we paid for. The contractor could easily state that a missed mark in articulated performance with an early delivery asset would be accounted for in a later version of another asset, or some other part of the still undeveloped part of the Systems of Systems planned concept. This became a constant moving target when trying to pin down any given System’s performance at any given point in time. Making matters worse was the fact that the Coast Guard couldn’t develop an accurate and repeatable OpEff model in time for the various industry teams to insert their System of System numbers and justify “real” OpEff increases from their contract proposal.  Eventually, with the established RFP solicitation date fast approaching the Coast Guard and industry teams settled on a “Presence Model” that evaluated the industry team’s proposal based on asset presence and coverage capabilities of locations and missions only; lost was the assessment of an integrated solution where the sum would exceed the individual parts!

   

  To make matter worse was the accepted realization that any induced Coast Guard changes in mission requirements, workforce management, maintenance needs, funding issues or virtually anything that could impact the “Systems of System” performance, could be the trigger for any of the contractors to ask for, and probably be awarded, a contract modification for either more money, more time, or readjustment of the already difficult to mandate operational effectiveness baseline.  Here was another flaw in the contract strategy.  To try and hold the contractor accountable for any Coast Guard induced change, adjustments to the OpEff model and measurements against an established and agreed upon baseline would be needed. This was a very transparent problem that was immediately highlighted after the needed Coast Guard mission changes from 9/11.

   

  As mentioned previously, only the NSC had any level of real defined and measurable asset performance requirements.  The remainders of the System of Systems deliverables were virtually non-defined and were left to the individual industry teams to be innovative and propose an integrated solution for a 20+ year performance period.  This enabled each industry team to propose an assortment of near term and out year ideas with costs estimates which were difficult to defend but even more difficult for the Coast Guard to analyze as rational and reasonable. As a result, cost proposal, TOC numbers and the process for fitting them into the annual coast constraints imposed by the Coast Guard as an acceptable bid was a skill mastered by the winning industry team, yet appeared to be elusive for justification and repeatability. 

   

  COTS and CANDI equipments are great catch words and were to be the basis of matching innovation’s potential higher costs with already proven, mature designs and equipment with supportable and manageable supply chains.  With a reliance on COTS/CANDI, the contract strategy often associated itself with the minimization of Acquisition, Construction and Improvement (AC&I) monies being funneled towards research and developmental (R&D) concepts.  Yet another contract enforcement flaw became apparent as the term “innovativeness” was often inserted by the contractors and accepted by the Deepwater program for what would otherwise be categorized as R&D initiatives. How else could the VUAV which only existed as a scaled model of a potential aircraft option, shipboard radars with never before achieved acquisition and detection capabilities, stern ramp designs on ships the size of the NSC, or the original CASA proposal which was at best, an unproven hybrid of other CASA platforms have survived the award process.  Each of the above are representative examples of concepts which have since, crashed when sized up from the model, have been substituted by more conventional designs, or replaced in their entirety.

   

  As for the System’s Integrator, this entity was advertised to be the glue that pulled all the individual asset pieces together into a collective product with measurable and increased performance returns. Individual assets were to mutually support and/or augment each other.  New asset “cradle to grave” logistic supporting requirements, maintenance activities, workforce apportionments, funding streams, and legacy asset sustainment and replacement schedules were all intersecting challenges that were supposed to be more efficiently and effectively managed through the use of the System’s Integrator. Much of these advertised Integrator outcomes have failed to materialize. 

   

  New asset logistic improvements, both processes and supporting IT systems have been painfully absent.  Throughout the shortened life of the first delivered asset, the 123, logistic support and complete supply chain management for Deepwater introduced equipment was marginal at best. The story doesn’t improve much for the other surface assets. Although there is more than enough positive rhetoric from the contractor and the Deepwater program, the fact that NSC #1 is now floating and getting closer to an operational status with many of the needed logistical support details and deliverables still ill defined, is indeed troubling.  Although the ICGS position that a particular shipboard system will be supported by a performance based contract is indeed refreshing and in alignment with many other government support strategies, a failure to produce any concrete examples of either the breadth and depth of these contracts, and more importantly where the gaps will exist between performance based contract boundaries was the state of affairs when I left the Coast Guard last June; I am unaware if much has changed since.  The fact that the Integrator failed to adequately respond to repeated calls for surface asset logistic details, failed to utilize or show any real purpose of the expensive Business Process Assessment and Redesign initiatives, benignly watched as replacement after replacement rotated through the top position of the Contractor’s logistic organization begs the question; where is the return on the investment for this high priced Integrator? I submit that this was and still is one of the biggest contract flaws associated the Deepwater program. The Coast Guard relied on significant Integrator involvement, influence and accountability to enable the Systems of Systems acquisition strategy.  The Integrator’s seemingly absent influence in key areas expected by the contract and their very real complicity in why we’re here today can not be overlooked when its painfully obvious that many of the initial contract strategies, requirements and deliverables which the Integrator was to be a significant enabler have either failed or are failing. Coast Guard management of the program is not without fault for these failures, but neither is what was billed by the elements of G-ADW and subsequently G-D, our “Strategic Partner”, the Integrator.

   

        

  My entry into the program and the G-ADW (G-D) culture:

   

   

  I was already aware of the basic Deepwater contract strategy through a variety of the internal Coast Guard publications prior to my official entry on November 2000 into the Deepwater experience as G-SDW.  Unfortunately, I was already aware of what was rumored to be troubling organizational differences between the elements of the G-ADW (predecessor of G-D) organization and many of the Coast Guard Headquarter Directorate personnel. In short order, I would find that these rumors were indeed very valid organizational problems which, in my opinion were critical and fundamental flaws in the execution of the planned acquisition strategy. Traditionally, and in accordance with the Systems Acquisition Manual (SAM), any major acquisition relies on the careful blending of the various Coast Guard directorates’ resources into what may be categorized as a purposefully designed set of acquisition checks and balances. In the simplest of terms and using only three of the many acquisition supporting directorates as an example, the Operational Directorate would assist with the development of the Mission Needs Statement, Operations Requirement Document and other operational related criteria.  The Engineering Directorate would assist with the necessary design standards, procedures, sustainment requirements and assessments to ensure that the Acquisition Directorate’s intended procurement would fulfill the mission needs established by the Operations Directorate.  Although the Acquisition Directorate was ultimately responsible for balancing cost, schedule and performance, the remaining support directorates were fully aware of, and greatly appreciative of the sometimes uncompromising cost, schedule and performance decisions. The Operations Directorate focused on operational capabilities and performance.  The Engineering Directorate would focus primarily on delivery performance and its long term corresponding elements of logistics and maintenance sustainment.  As proven with other recent and successful Coast Guard major acquisitions (WLB/WLM and Great Lakes Icebreaker), this very “healthy” balance and tension was expected to ensure the Coast Guard bought and built something it needed, could operate, and maintain for the expected life of the particular asset. With the Deepwater program, there would be nothing “healthy” about this balance. From the outset, this unhealthy situation, whose genesis lies imbedded in the overall procurement strategy, and the allowance granted to the Deepwater program to deviate from the SAM, would virtually compromise any chance for a successful execution of the Deepwater procurement plan.

   

  In my capacity as the Engineering Logistic Center’s Platform Manager (tour length from summer 1998 to November 2000), I had the opportunity to witness first hand some of the new acquisition strategy concepts and how they would impact “traditional” acquisition processes.  One such instance was during the “review” and “reclassification” of hundreds of G-S previously provided engineering and ship design, construction and evaluation standards and principles.  During this review process, I witnessed the elements of G-ADW, question every existing standard for its alignment with the “Systems of Systems” strategy and its reliance on the contractor to be held only to delivering an asset to a contractually specified “performance standard”.  Many existing engineering standards, procedures, criteria and testing requirements were summarily classified as “too prescriptive” which if included in the certification matrix would unduly prevent the individual contract teams to be “innovative”.  The fact that this process took place at all was not as startling to me as was the context behind the Deepwater Program’s perceived motive for its purpose; changing from traditional and proven asset construction procedures and standards to one where greater latitude was given to the contractor to do what was right when it came to designing and building the surface fleet. With full cognizance by the program’s leadership, this was Deepwater’s first overt act of dismantling and disrupting the proven support directorate’s roles and responsibilities associated with a major acquisition. In my opinion, this was yet another critical program mis-step which placated the individual industry teams at the expense of time tested and proven Coast Guard organic technical resources. This dangerous and repeated tactic of contractor appeasement and dismissing unbiased internal Coast Guard technical assessments and recommendations has culminated with the need for this hearing. 

   

  In November 2000, I was reassigned as an off season transfer, to fill the position as the Chief Systems’ Deepwater Integration Office (G-SDW).  I was responsible for the integration of all G-S’ organizational responsibilities, capabilities and technical input into the Deepwater acquisition. I had a staff of 10 personnel who represented the disciplines of surface, aviation, logistic and C4ISR.  As G-S’ Headquarter staff for Deepwater support, we coordinated and integrated the acquisition support program responsibilities and responses to their cognizant parts of the remaining internal and external pieces of the G-S organization. As an example, for the surface element of my staff, this meant Deepwater program coordination with G-SEN, ELC, the CG YARD, and both MLCs. I reported directly to G-S and had frequent, often daily meetings with my Admiral concerning the challenges and opportunities associated with Deepwater. From 2000 to 2002 this was RADM Ronald Silva. From 2002-2003, this was RADM Albert Kinghorn. As their direct representative to the Deepwater program, I attended all Deepwater related meeting which required 0-6 (Captain) presence and/or decision making, and often represented or accompanied the Admiral at those meetings requiring Flag presence.  Both Admirals trusted me implicitly and I had exceptionally wide latitude in not only speaking with G-S authority, but also establishing specific G-S positions on a variety of Deepwater related subjects.

   

  Within days of reporting to G-SDW, getting briefs from my staff elements and visiting the corresponding players from the other directorates, including meetings with G-ADW, his deputy and his various APMs (program managers for the various assets), it was immediately apparent that the rumors of organizational problems were very real.  Since G-ADW was identified as a “Re-invention Site” it was provided deviation status from the existing Coast Guard acquisition manual and as a result, there were no established organizational Roles and Responsibilities with many of the other Directorates.  Moreover, many of the normal acquisition program necessities were being developed and implemented while still in the draft or early developmental stages.

   

  On a timeline, the Coast Guard was still in the pre-award stage.  With three competing industry teams, having enough resources to cover all of the program or directorate needs was a constant challenge for all the directorate staffs including G-ADW.  It was during this hectic, and very fast paced time that more of the fundamental program aspects and the concept of a “Systems of Systems” strategy with a program and asset integrator became better defined.  It was also during this pre-award period that more organizational friction points were spawned.  G-ADW elements started using the phrase “Change Agent” more frequently and the Machiavellian justification of the program’s “ends will justify the means” as some of their overarching guiding principles.  To G-ADW, their mandate was to inculcate this acquisition philosophy change and its resultant organizational upheavals into the Coast Guard.  In simple terms, this meant that for real acquisition change to occur, anything that mirrored the way something was currently done, or done in the past, could not be a part of the Deepwater acquisition tactical plan.  As the G-S senior (with the exception of G-S himself) representative to the program, I immediately sensed that the locked doors of the Deepwater spaces and controlled access afforded the G-ADW staff much more than just procurement security during the contract development and pre-award period.  It was a very convenient mechanism of keeping all but “cleared” Coast Guard elements from entering their spaces as G-ADW virtually isolated themselves purposefully from the remainder of the Coast Guard.  Although all of the SDW and other Deepwater support directorate staffs were “cleared” and had access to the G-ADW staff, it became readily apparent from my in briefs and difficulty in getting details on many of the G-ADW current “goings-on” that the SDW staff was missing many important contract development and contract process meetings.  We were “invited” to only those meetings and strategy sessions when the G-ADW staff thought it was appropriate to do so. To a certain extent, G-ADW had a two year jump on me and many of what proved to be flawed execution strategies and tactics were already in place and firmly inculcated in the G-ADW staff elements.  My first direct order to my staff was “G-S will no longer be rolled by G-ADW”, followed in succession by “Attend every meeting we’re invited to, and barge into every one we weren’t invited to but should have”, and finally, “document everything and act with my authority as SDW”. The SDW staff immediately and with great zeal, increased our presence in the locked spaces of G-ADW and although unwanted by G-ADW, began asserting more of our traditional acquisition support roles and responsibilities.

   

  Concurrent with this, we increased liaison, communication and information flows with not only our G-S internal and external Headquarter staffs, but also the other acquisition support directorate staffs. Acknowledging what I call a “mischief gap” that G-ADW had with the SAM deviation approval, I worked to close this opening by establishing a formal set of agreed upon roles and responsibilities between G-S and G-ADW which would stabilize and hopefully mend broken organizational fences.  Due to the existing anti G-S culture within G-ADW and the reluctance of the existing Deepwater program manager to even entertain such an initiative, it took over 8 months of concerted effort with my classmate in the G-ADW organization while waiting for G-ADW to retire.  Although only 6 relatively short paragraphs long, this roles and responsibilities agreement was powerful in that it formally established a more defined relationship between G-S and G-D (note that by this time, G-ADW had been reclassified as G-D) elements. In simple terms, G-S was to establish and provide the engineering and logistical expertise and advice to G-D.  G-D was to use these G-S provided inputs in the development of the program as it procured new assets and services.  This agreement also accounted for any unforeseen or non-existent policies, and instructed both organizations to collaborate together in their development. Signed by both G-S, RADM Silva, and G-D, RADM Stillman, the memo was approved by the Coast Guard’s Vice Commandant, VADM Collins on 27 July 2001.  Although accepted and approved by the highest levels of both directorates, it became quickly apparent that it would be just another piece of Coast Guard policy that G-D elements would decide not to honor.  If there was ever doubt before hand, it was now crystal clear that the bedrock placed by G-ADW was being cemented in place by G-D; the G-S engineering and logistics expertise were not a priority.  Through the contract, the Deepwater program was expected to be supported by a “World Class” ship builder and their cognizant engineering design staffs. Any interim G-D program engineering expertise could be purchased through a multitude of readily available engineering support contractors. Concurrent with this intended and carefully crafted effort to minimize the need for any G-S technical or logistic input was the steady build up of a duplicative naval engineering technical capability within the G-D staff elements. Initially advertised as nothing more than additional  engineering resources to “manage’ the surface portions of the contract, these same naval engineering elements, both military and subcontractors, quickly became the mouth pieces of the contractor and virtually squashed any and all engineering design, maintenance and sustainment concerns from the G-S engineers.  This “World Class” ship builder reference would be used time and time again by the G-D elements whenever a difference of technical or logistical positions between G-S and G-D occurred.  With the “World Class” industry partners giving G-D all the input they needed, the G-S assessments, concerns and recommendations were often given nothing more than lip service and summarily dismissed. As will be discussed shortly, the Integrated Process Team (IPT) environment would be the cooking crucible for many heated discussions which primarily sided with the G-D, and the industry position.

   

  The Integrated Process Teams (IPTs), a missed opportunity:

   

  A key process management ingredient of the Deepwater strategy was the tactical execution of IPTs.  These teams were comprised of representatives of G-D, the program supporting directorates, and industry personnel. They existed at every aspect and every level of the program from the strategic Flag level, Overarching IPT (OIPT) and 0-6 Integrating IPTs (IIPT), to the more tactical Long Range Interceptor IPT which often consisted of Lieutenants and below. Typically chaired by either ICGS or G-D elements, they were touted as the entities where the majority of problems and issues would be resolved.  Enhanced communications, collaboration, consensus and sound program decisions were expected characteristics of each IPT. Although some IPTs were more successful than others, most did not function as planned for a varied of reasons; newness of the concept with poor training, trust issues, communication issues, resource issues, etc.  Of all the IPTs, the surface IPTs in specific were the most volatile.  It is safe to say that for the most part, the entire category of surface IPTs, (NSC, OPC, FRC, 123, etc) became cauldrons of discourse, resentment, mistrust, and even more caustic organizational fractures.

   

  The immediate disagreement of established roles and responsibilities (in spite of the signed G-D/G-S memo) was in my opinion the singular cause for these IPT failures.  A careful investigation of all surface IPT problems will track back to this critically important disagreement.  With the recently signed Flag memo which stipulated G-S and G-D roles and responsibilities, G-SDW thought it now had the backing of the Vice Commandant to ensure our voice, concerns and recommendations were “honestly” evaluated as part of the IPT format.  The G-S recommendations not incorporated were expected to at least be explained and documented as part of the IPT’s decision process. Rarely did this occur. Since I was leading the G-S charge for incorporating the organizational roles signed by both G-D, G-S and approved by the Vice Commandant, I highlighted the program’s overt flaunting of these roles at every opportunity. As one might expect, the IIPT was on more than one occasion a very caustic environment.

   

  Since all G-S surface IPT members worked either directly or indirectly for me, as G-SDW, I ensured that each G-S representative knew their approved role and at every IPT level, I was continually aware of the program’s flagrant failure to respect and comply with the Flag agreement.  In that regard, they all acted by my direction.  The G-S role was a critical program “check, balance, and technical assessment and recommendation” necessity.  With my years of engineering experience and variety of assignments, I had sufficient personal knowledge of the qualifications, personal attributes, and technical capabilities of most, if not all of the internal and external G-S and MLC logisticians and engineers who supported the Deepwater program with their thousands of years of proven engineering and logistical expertise. With the Flag memo in hand, I was not about to let this invaluable and irreplaceable organic Coast Guard capability be silently dismissed. In doing so, I ensured that each G-S IPT representative complied with the IPT rules for discussing our inputs, concerns, recommendations and documenting the IPT outcomes. It should be no surprise that the level of documentation on these related issues probably differs significantly between what’s retained by G-D and G-S elements.  We knew that with each and every dismissed G-S technical and logistic assessment and recommendation, we were traveling down a path that many, even very early in the program saw as an impending “train wreck”. The continual discussion within many G-S and MLC staffs was not if the wreck was going to happen, but how extensive it would be when it happened.

   

  Although the continual role disagreement was a significant causal factor in the surface IPTs struggles to become functional entities, it was not the lone culprit.  Other progress inhibitors such as the actual IPTs membership, who decided who was to be a member, who the members worked for, how meetings were coordinated, managed, and documented, how problems were resolved, and how the IPTs would make decisions were noteworthy issues which were hallmarks of the early IPT troubles. 

   

  IPT mechanics, intended characteristics and processes were described in the Deepwater program’s Project Maintenance Plan (PMP).  The PMP, would be the tactical execution of G-D’s Deepwater contract strategy.  To no surprise, many of the PMPs elements immediately became discussion hotspots.  G-D wanted all IPT members to report to the IPT chair.  Seeing this as a potential tactic to not only functionally, but also organizationally “control” and, or “manage” the IPT direction, this G-D desire was met with significant resistance with hard lines “drawn in the sand” from both G-S and the G-O IIPT representatives; other non-G-D IIPT representatives followed suit.  In our view, to ensure that the supporting organization’s representatives could confidently and safely, for their careers or employment for those civilian personnel, provide unbiased input and report back factual developments or concerns, they needed to stay out from under the thumb of the G-D IPT leads.

   

  Early IPT problems also raised the concern over who actually would determine IPT membership representatives.  On more than one occasion, the surface IPT lead tried exerting his authority and remove G-S surface IPT representatives as formal members. Ostensibly the reason and justification was the IPT members were disruptive to any positive and necessary IPT decision making.  Although, it was not uncommon for the G-S IPT representatives to have strong and vociferous mannerisms in fulfilling their IPT roles, in my opinion, it was the critical discussions and concerns that these G-S IPT members had on any particular engineering or logistic issue that was the real underlying reasoning for their desired removal from the IPT by G-D APMs.  I thwarted this effort in both my SDW and later in my ELC Commanding Officer capacity.

   

  Early IPT functionality was compromised by poor IPT management.  Meetings were often poorly advertised with sometimes only hours to respond, poorly documented or with the many resource challenges, poorly attended.  Established IPT agendas, with intended discussion items and articulated desired outcomes were rare.  With the plethora of possible issues, having knowledgeable, capable resources at the meetings was of a paramount importance to everyone. When these technical areas were covered with personal assets sometimes only one deep, it was critical to have the right person with the right talents and skills at the right meeting.  Due to poor agenda management, on more than one occasion the G-S IPT member was not the best available choice. In these circumstances, the G-S IPT representative would implement a “reach-back” effort to the more knowledgeable subject matter expert.  This “reach back” model was not readily accepted by G-D elements as an acceptable IPT representative strategy and was often ridiculed as not providing decision making “empowered” resources. In spite of this false “empowerment” claim, the “reach back” model worked very well for G-S and enabled a much more effective and efficient use of the limited AC&I funded project resources. Rarely was the absence of a G-S IPT member the cause of not making a decision.  To the contrary, it was because of our continued presence that planned IPT lead decisions were thoroughly discussed, evaluated and often questioned for supporting details and justification. Unfortunately, because of the induced time criticality of many program decision steps, the engineering decisions which would normally require and await much greater exploration and analysis, were made in the face of the G-S IPT representative’s objection.  The advertised IPT desire to achieve collaboration and consensus would quickly deviate to a model of unexplained or poorly justified IPT unilateral decisions by the IPT chair. This pervasive program tactic would come back to haunt the Coast Guard with the time driven pursuit of the 123 and NSC.

   

  The PMP did identify an agreed upon IPT problem resolution process. It was the expected responsibility of each IPT to make the maximum effort to resolve problems at the lowest level.  When the circumstances prevented this, any particular non-consensus voting representative could raise the particular issue to the next higher IPT for discussion and possible resolution. It was expected that the higher level IPT would quickly decide the issue and give task direction to the lower IPT so as not to negatively impede the time criticality of the overall schedule.  Due to the sometimes overwhelming number of IPT non-consensus decisions at all levels, this perfect decision resolution scenario rarely was the timely solution it was hoped to be. Moreover, an additional IPT, between the IIPT and the OPIT was inserted after contract award. It was co-chaired by the G-D and ICGS Program Managers and was titled the Program Management Team (PMT). The PMT’s membership consisted of senior G-D, ICGS and other contractor personnel.  With the exception of the G-O Deepwater 0-6 representative who was allow to “call-in, there was no non-G-D routine presence at the meeting.  It was advertised, that if a G-S related decision was to be discussed at the PMT, the G-D PM would make every effort to ensure a G-S representative would be notified in a timely manner to be part of the discussion.  If for whatever reason our presence wasn’t possible, or an “unexpected” G-S related discussion topic just happened to surface at the PMT, the G-D PM felt comfortable he could represent any G-S concerns. The fact that the PMT was between the IIPT and the OMPT, by IPTs rules meant that any IIPT disagreement that would normally be brought up to the OIPT for resolution first needed to go thought the PMT. This became a very convenient joint G-D/ICGS mechanism to resolve program problems that escaped 0-6 solutions but didn’t need Flag involvement.  With no routine G-S presence we were often trying to reverse PMT “agreed upon” decisions after the fact.  Even when I or my deputy was invited for the discussion, we were not voting members. As a result, it was unreasonable to expect our discussion points to convince enough of the 18 G-D or ICGS PMT members to reach a favorable G-S decision. Needless to say, G-S was advised of these IIPT disagreement areas for eventual Flag to Flag discussions with G-D directly or as part of an OIPT “non agenda” discussion topic.  Sadly, the G-S influence or objection, even at the Flag level rarely carried the day and those that did would not have occurred without the direct support of the G-O Flag.

   

  I suspect with the plethora of non-census and troubling IPT decisions, and the relatively slow progression of these concerns through each subsequent IPT level, the contract’s time reality somewhat supported the G-D APM’s pretext to unilaterally make their best decision and keep the program running forward, a concept I fundamentally agree with.  Unfortunately, what became very disturbing was the unusually high frequency at which this unilateral decision oddly turned out to be more aligned with the Deepwater contractor’s position than G-S’. As will be discussed later in the events surrounding the 123’WPB, the G-D position that the initial G-S 123 WPB technical concerns were unwarranted, was formally transmitted to G-S as follows: the ICGS engineering analysis was “good enough” and the 123 will move forward as planned. The fact that all eight 123 WPB’s suffered major structural failures, and are non functional Coast Guard assets is indicative of the dangers implicit with time driven decisions. With the constant reminder from the PEO himself, his deputy and PM for “ruthless execution of the contract”, more and more time based decisions would take priority over the performance concerns raised by G-S.  The “Iron Triangle” phrase of cost schedule and performance as coined by the G-D PM, was in more reality less a triangle and more of a rod with the only measurable dimensions of cost and schedule; performance in my opinion was becoming nothing more than a necessary word to be included with the other two. As long as the asset was delivered reasonably close to the planned delivery date, all was essentially well. Whatever performance we acquired with the asset would be computed into the OpEff model and if not sufficient or of the expected level, it would be accounted for by the contractor in later asset improvements or capabilities in the very fluid Systems of Systems grand plan. For example, any failure of the NSC to achieve the SPS required speed of 28 knots (which was still very much in question when I departed the service) was not as important as was meeting the scheduled NSC delivery date. So how does the contractor be held accountably?

   

  During these early IPT “storming” evolutions, a new G-D initiated phrase and contract strategy was further defined.  With the expected value-add of “World Class” ship builders, and the fact that the contract enabled them to be innovative in delivering “performance”, the desired expectation of the supporting directorate IPT members was that they only need to acquire “insight” into the contractor’s proposal and planned asset details.  The traditional government requirement for contractor “oversight” was not part of the new acquisition strategy and “change agent” concepts.  Regardless, “oversight” of the contractor was not to be a G-S concern. Any discussion with G-D elements where the term “oversight” was used by G-S personnel was quickly corrected by senior program elements. Although it might not have been the G-S specified responsibility for contract “oversight”, this more benign G-D “insight” perspective and greater expectation that the contractor would do the right thing in providing us the contracted Systems of Systems performance was indeed very troubling.  In spite of the G-D staff’s continual corrections, many in G-S were very concerned with what appeared to be G-D’s laissez faire “oversight” position.

   

  For the most part, these IPT realities and program disagreements plagued and challenged program progress from years before release of the RFP and well past the award date. Most were still very active when I left SDW in the spring of 2003 and were still raging even after I retired in 2006.  As such, the inability to effectively function at the lowest level of the program significantly hampered virtually every expected and projected contract deliverable.  This dysfunctional IPT problem was not news to anyone despite the carefully crafted Quad charts and reporting instruments by the program staff which typically minimized the reality.  As I did with my Flag in G-S, I feel confident the other IIPT members kept their Flags advised of the IPT troubles. Although the articulated position from senior G-D personnel was always of support and talked up the need for collaborative IPT decisions, it was also common knowledge that these same G-D senior personnel were losing patience with G-S’ continual requests for additional information, analysis or testing.  G-S performance warnings conflicted with the advertised performance attributes stipulated by the ICGS elements and trying to resolve them failed to conveniently mesh with the delivery schedule expectations. G-S’ “conservatism” was being cast by G-D senior personnel as obstructing timely contract progress. As time progressed, the terms of obstructionists and G-S were becoming linked by not only G-D elements but others as well.  Those who knew of the future we foresaw also knew that tagging G-S as an “obstructionists” was completely inappropriate.  Again, the 123 WPB non-performance realities, the G-S induced necessity to develop an alternative Fast Response Cutter (FRC) design and contract strategy, and the current NSC structural and performance issues seem to validate that time and money probably could have been better spent.

   

  The 110’ to 123’ Patrol Boat Conversion:

   

  Due to the rather significant funding constrains established by G-ADW at the beginning of the program, all three industry teams would be indeed challenged to squeeze new asset replacements and the sustainment of the legacy deepwater fleet into a workable plan.  The ICGS proposal devised what I always thought was, if achievable, an elegant concept and solution for the aging 110 Patrol Boat class. With the110 hull deterioration issues articulated to all of the industry teams well in advance of the RFP issuance, each team had the opportunity to incorporate this “known 110 WPB hull condition” into their plans or contract bids. ICGS’s pre award plan always included a “stretched” 110, and the hull condition was accounted for with a “bided” amount of expected hull replacement. Collectively their proposal would lengthen the 110 to 123 feet with a stern extension and make other hull replacement efforts as needed so the life of the new 123 WPB would coincide with the FRC introduction where more funding flexibility seemed to exist.  Although an elegant concept solution, the G-S engineers almost immediately started raising concerns of both the stern launch design and the overall engineering and model testing analysis of the entire platform, which included the Short Range Prosecutor (SRP).  While in the pre-award phase, Coast Guard Technical Assistance Teams (TAT) were severely limited in the level of actual “engineering evaluations” and ability to transmit detected problems to any of the industry teams.  All communication transmittals were really limited to asking how their proposal would address a particular problem.  The level of communication and interchange was expected to change drastically after award in the IPT environment with collaboration and consensus the way of doing business. 

   

  With the 123 WPB designated as the first delivered ICGS Deepwater asset, it was the first to get real intense G-S engineering and logistic reviews concerning the corresponding details unavailable during the pre-award period. Unfortunately, even in this new, less constrained contract environment, the engineering details surrounding the planned extension were less than desired by G-S engineers.  During IPT meetings, at all levels, a consistent message was coming from the G-S representatives; we were concerned about the stern ramp, how the SRP and 123 would act as a unit in the same sea way, and the overall structural integrity of the 110 hull girder.  Repeated requests were made for the timely delivery of the contract required CDRLs which hopefully would include some of the needed engineering analysis to answer these quesions. Concurrent with these requests were the arrival of scheduled contract “review gates” that supposedly were to be successfully negotiated prior to progressing forward with the release of a Delivery Task Order (DTO) authorizing additional ICGS work.

   

  These gates consisted of a Preliminary Design Review (PDR), a Contract Design Review (CDR), and a Production Readiness Review (PRR), all of which needed to be successfully completed prior to awarding the DTO to initiate the 1^st 110 conversion. Documentation exists that clearly indicates G-S’ engineering concerns with the lack of received CDRLs and the corresponding engineering analysis to enable a successful pass though each and every one of these contract gates. In spite of these documented concerns, the G-D surface APM concluded, from non-unanimous IPT inputs (G-S and G-O objected), that the contractor had successfully completed first the PDR in Oct 2002, then the CDR in Dec 2002 and finally the PRR in Jan 2003.  As a schedule driven decision, this VERY quick completion of three major contract gates enabled the timely arrival of the CGC MATAGORDA in February 2003 and the start of what would be an ill-fated hull extension. It was during the accelerated contract completion of these gates where the ICGS provided engineering analysis for the 110 conversion was deemed as “good enough” by the G-D surface APM.  With the impending APM unilateral decision, I ensured the IIPT was advised and warned that the110 PDR, CDR and PRR were to be inappropriately declared successful.  Even with the strongest objections at each and every contract review step, my voice and my IIPT vote was clearly insufficient as the G-D PM concurred with his APM’s decision each and every time. Even when any chance of winning the IIPT seemed lost, a last plea for caution was proposed by G-SDW; build only one 123 WPB as a full scale prototype and test the hull structure and the SRP interface with the stern ramp. If the design appeared sound after a prescribed test and evaluation period, the subsequent DTO’s could be released to restart the 110 modification line.  This was also dismissed due to overriding schedule and cost priorities.  With all options seemingly lost, in December 2002, G-S sent a memo to G-D indicating that because of our overall engineering concerns with the 123 WPB, no additional G-S controlled maintenance monies would be directed to MATAGORDA after the cutter’s departure.  This memo, along with virtually every other engineering concern G-S could muster failed to slow down the schedule driven 123 WPB conversion process.

   

  Very similar G-S concerns with the ICGS 123 WPB logistic support plan were running concurrent with the above cutter extension part of the project. Observing what appeared to be a significant logistic capability gap in ICGS’ proposal, G-S offered a “bridging logistic strategy” which would enable adequate logistic supply support until the ICGS logistic concept was ready for deployment. As with the engineering memo, this one was also disregarded by G-D acting under the advice of the ICGS logistic support staff.  The conversion results, the current non-operational use of the 123 WPBs and the wholly inadequate 123 WPB logistic support system experienced during their shortened life speak loudly of how the influence of the Deepwater contractor on the G-D APM’s performance related decision points negatively influenced the final delivered performance of these assets.

   

  The National Security Cutter (NSC) design issues:

   

  With the unilateral G-D surface APM decisions still fresh from the 123 project, in early 2003 many in G-S were openly referring to the NSC as a contract repeat of the 123.  That said, NSC designs issues followed a very similar path to that of the 110/123 WPB extension project in that even before the RFP was issued and the contract awarded to ICGS, G-S IPT elements had a relatively long and critical list of NSC design concerns.  In addition to the current and outstanding structural issues, G-S had concerns with the stern ramp interface and the fact that the original NSC design had no other small boat launch and retrieval system. So significant was this concern that G-S conducted a worldwide survey of existing stern ramp configurations and only after very conclusive findings did the first NSC design get modified for the inclusion of a side launch capability for the Long Range Interceptor (LRI); its unsure if this side launch capability will be incorporated on subsequent NSC designs.

   

  Although this particular design issue was a success, the structural issues raged with the NSC IPT members virtually at a standstill for any progress.  With no risk mitigation strategy apparent and no perceived hope of resolution at the NSC IPT level, in accordance with the PMP, this concern was raised to the 0-5 level System Engineering IPT (SEIT) in the early fall of 2002.  As with the NSC IPT, no apparent progress was forthcoming with the SEIT and in the same 2002 timeframe, it was brought officially to the attention to the IIPT.  Note however that all during this tumultuous duration at the lower IPTs, it was a brewing storm that the IIPT was watching and knew was coming.  Likewise with the 123 process, NSC DTOs were scheduled for release to ensure the advertised delivery of NSC 1.  Concurrent with a planned IIPT discussion of the NSC structural issues, a meeting was held with G-S, G-O, the PEO, many of the G-D senior staff and even some ICGS senior member were present when elements of the ELC staff who supported the NSC IPT, formally presented in great detail the basis for their engineering concerns and forecast of future performance problems.  Unfortunately this meeting failed to gain the desired outcome as even in the presence of three Flag officers, the level of distrust and friction that existed between the ELC, G-D and ICGS personnel related to the NSC, compromised any cogent and structured discussion. Subsequent discussions at the IIPT and OIPT also failed to get any resolution, and in spite of G-SDW objections, the DTO to initiate the NSC construction and procurement of NSC Long Lead Time material was awarded.  From this period, a variety of correspondence moved back and forth through the G-S and G-D organizations concerning the NSC structural issues.  At one point, the NSC ICGS representative developed singular one page rebuttals on how each of the structural issues had been resolved to the point they could be mitigated and removed from the G-D maintained and controlled risk data base. In spite of repeated G-D attempts to deemphasize the seriousness of these concerns, they were never mitigated successfully and still exist today. 

   

  My transfer from G-SDW to Commanding Officer at the ELC in May 2003 and the arrival of a new SDW and G-S later that summer brought a new strategy in dealing with these apparent irresolvable issues. For all subsequent ELC or G-SDW engineering concerns, an independent analysis and confirmation would be needed. Current documentation and separate DHS IG findings have since provided the results of the many independent studies and validations of the G-S initial concerns. During the time, these independent studies occurred, precious and irretrievable time elapsed, DTOs were awarded and the NSC moved along its advertised schedule. One of the strongest warnings I provided to the IIPT prior to leaving the G-SDW assignment was that with the continued construction process of the NSC, and many of the structural concerns dealing with the hull girder itself, if upon NSC delivery we finally get some resolution to these structural problems, it will be too late for the Coast Guard to economically fix the problems.  Unfortunately, this is exactly where we are today.  Since all these design issues started before any DTO was released, the Coast Guard missed the best time to make the needed design changes to the NSC. In lieu of making the necessary changes while the NSC was still in the “electron mode” and absorb what would have been at best a relatively minor cost increase and possible schedule slippage, we wasted over four years of “opportunity” passing memos back and forth avoiding what was addressed very early on as a critical design flaw. Another example where the Integrator, the actual NSC construction contractor and the G-D staff seemed to align too quickly and conveniently to ensure the schedule was maintained at the expense of performance.

   

  The Fast Response Cutter (FRC):

   

  The FRC became yet another performance problem but not because of any initial concept design in the proposal. Unlike the 123 and the NSC, this design failure came about after it was decided at the very highest levels of the Coast Guard that the hull was to be of a composite material construction.  Almost immediately red flags rose from G-S elements due to the lack of existing hulls of this size with all composite hulls.  Most of the subsequent IPT engagements and exchanges concerning the FRC occurred while I was the ELC Commanding Officer. The Deepwater organization I had at the ELC was led by a very seasoned G-S 15 who coordinated with another GS-15 whose staff of civilian naval architects and engineers completed the engineering analysis of the proposed composite platform.  As a result, I only engaged when the FRC details needed Commanding Officer correspondence signature or influence.  What I can testify to is that the analysis indicated serious and dramatic deviations from any parametric references to similar hull forms.  In addition to the pure naval architecture red flags, there were sustainment and maintenance concerns for a composite hull. With the uniqueness of the hull material fabrication techniques, and the apparent absence of any known large or small shipyard, with the exception of the Gulf coast, to do eventual hull repairs in areas where the FRC would normally operate, major maintenance or repair costs needed to be incorporated in the overall evaluation and eventually mitigated.  Since the decision to pursue a completely different FRC procurement strategy occurred after I left the Coast Guard, I can’t talk with any authority on what really brought about this decision.  That said, I have to believe the repeated and final realization of previous G-S engineering concerns with the 123 and NSC may have finally tipped the balance that maybe it should be the G-S engineers and not the “World Class” shipbuilders that should have the majority vote when it comes to making engineering design decisions.

   

  Funding and Personnel Resource Issues:

   

  Any Deepwater related discussion can’t be made without accounting for the funding and personnel resource constraints. Although both were significant, I still firmly believe that the overall goal of this contract; a complete integration of new surface and air assets with interoperable C4ISR capabilities and an integrated logistic support system spanning the entire spectrum of supply chain management, was possible without the need for a system integrator nor the extravagant and complex Deepwater procurement strategy.  It should be no surprise that I believe compliance with the SAM and its established “healthy” directorate tensions could have worked!

   

  Funding:

   

  Concurrent with the award decision, it was already a known problem that funding, both AC&I and non-AC&I accounts, would be in severe jeopardy. The Operational and Support (O&S) CLINS would place great strains on the remainder of the Coast Guard’s operational budget.  G-S elements quickly instituted the practice to “fence off” annual funding supporting Deepwater assets from non-Deepwater assets.  Based on significant annual increases in O&S costs, the amount of money shunted to ICGS to support the new Deepwater assets could easily and relatively quickly require augmentation from the non-Deepwater fleet.

   

  Projected AC&I program funds needed to reasonably manage the project were knowing deficient even before the release of the RFP.  Personal conversations I initiated with the most senior contract and management levels of the G-D organization before the release of the RFP identified no accounting for ANY cost growth, needed contract changes or award fees.  When the G-S 10-20 % repair maintenance cost metrics for growth and changes were used as an examples during our discussions, it became quickly apparent to these G-D officials that there was insufficient reserve in the AC&I program’s budget to account for this inescapable reality; there will be contract changes and there will be unexpected growth.  A too simplistic answer of, we’ll live within the budget and fund what we can fund, was linked to, this is a performance contract, and if the contractor doesn’t deliver the specified performance, changes will be their cost to bear, or words to that effect.  When the three industry teams were building proposals to utilize every spare AC&I dollar allowed, this over simplification of a very real funding problem crippled many of the needed asset modifications and resource needs early in the program.  When comparing this reality funding, to the millions of dollars provided to the Integrator, one can’t help but raise obvious questions if the limited AC&I funds are being expended most effectively.

   

  Personnel Resources:

   

  Personnel resources across all Directorates would be severely strained.  For some reason the early G-ADW and subsequent G-D personnel resource metrics always referred to other acquisition programs and government organizations for a comparison of funds to bodies.  This incorrect metric reference drove virtually all related resource decisions and distributions. At one point, the G-D mandate was that there would be no AC&I Full Time Equivalent (FTE) growth in FY04.  As a result of these types of management and funding induced decisions, personnel shortages were felt across the board!  It was hoped that the Integrator and the strength of the Contractor’s resources would help mitigate this resource capability gap.  As the program was to quickly find out, this did not materialize and as greater program management “oversight” was needed, there were simply not enough resources to cover the needs.  During one point during the initial program buildup, G-S developed a resource presentation that indicated an additional 200 FTE would be needed in G-S alone to provide the expected support directorate roles for the initial “transition” years of the program. This became known as the “Pig in the Snake” presentation because of the analogy of a relatively large mass being accepted and eventually run through the organization. Once the transition period was negotiated, it was expected that the final organization would be smaller because of the ICGS provided engineering, logistic and management support capabilities and efficiencies.  This has yet to and will probably never materialize.

   

  Recommendations:

   

  Other than what I’ve read on the internet, newspapers or NAVY Times, I’ve had extremely limited knowledge of what has happened with the Deepwater program since I left the service last spring.  I’d like to use this fact as a qualifier that some of my following improvement recommendations for your consideration might already be taking place or may be unnecessary because of other Coast Guard organizational decisions which I have no knowledge. 

   

  As indicated in the beginning of my statement, I have read the DHS IG report and Admiral Allen’ testimony on this subject and I whole heartily agree with the IGs findings and the Admiral’s initial corrective steps to solving the multitude of Deepwater problems.  Of the Admirals actions, the formal delineation of technical authority to G-S will have the most immediate positive returns.  Had this organizational responsibility been respected and accepted by the G-ADW or the subsequent G-D organizations, there’s a strong possibility we would not have required either this hearing or expended the countless tax dollars on numerous program examinations by a variety of auditing entities.

   

  Although an excellent start to organizational correction, there are others that I thing need to be instituted, In no particular order of importance:

   

  Oversight of the contractor must happen.  We’re fooling ourselves if we actually believe “insight” is enough and the contractor will self monitor, and self certify their work and deliverables.  This is a multi-billion dollar contract and we owe it to the American public to ensure that every dollar is accounted for and spent wisely.  This is painfully absent with the existing structure. Until Congress is satisfied with the program’s corrective progress, routine and periodic assessments need to be instituted. 

   

  Greater accountability is needed for how the program decisions are made and what was the basis for the decisions.  Real cost benefit analysis and trade studies must be the order of the day. Fabricated analysis, or after the fact studies which support a predisposed initiative must eradicated.

   

  Real risk based decisions with an active and managed data base need to part of the programs normal assessment of both short and long term risk exposures. Mitigation or removal of risks from the data base should require the independent verification by the Coast Guard’s technical Authority.

   

  Accurate, verifiable and repeatable metrics need to be developed and utilized. 

   

  The continuation of the System Integrator should cease.  I failed to see the justifiable return of the investment for these supposedly critical services.  Through careful and integrated planning with the current Coast Guard organic staffs, this integrator capability is well within the Coast Guard’s proven skill sets.

   

  The current contract should be modified or restructure to enable the Coast Guard to work directly with the asset manufactures for construction.

   

  Asset supported logistics and supply chain management should be managed by Coast Guard organic elements as one singular system for all Deepwater and non-Deepwater assets.  To date the money directed to the ICGS advertised logistic system has not have any noticeable return on the sizable dollar and personal resource investment.   

   

  Incorporate the exiting G-S cutter certification matrix in all future surface asset procurements.

   

  The IPT structure can work, but it takes a legitimate commitment and hard work by all parties for the opportunity to really collaborate.  IPT leadership and chairs should not be held by the same entities we’re trying to govern and manage.  It just can’t work.  If IPTs are retained, and I think they should, our contractors, whoever they are need to be part of the IPT environment.

   

  In closing, I greatly appreciate the opportunity this committee has offered me today to testify before you.  Concurrent with this oral testimony, I’ve provided a very lengthy and detailed written testimony for inclusion in the record. It further amplifies many of my oral comments concerning the variety of Deepwater subjects that have brought me here. 

   

  I’m more than happy and very willing to answer any and all of your questions to the best of my ability.