As I noted in part one, GAO has found the Coast Guard’s Deepwater program “unachievable.” Basically, they see a mismatch between the historic funding levels and the anticipated funding requirements. This in turn has impacted the delivery schedule, which in turn further adversely effects cost. Additionally significant questions still remain regarding the C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) system that was intended to tie the “system of systems” together. There also remains a significant unknown in the form of the Offshore Patrol Cutter (OPC) which, as the most costly single system in the program, constituted a third of the total “Deepwater” Program’s estimated cost in the 2007 Baseline.
I’m not sure I would call that “unachievable,” rather it is simply more expensive and more difficult than the Coast Guard was lead to believe, and four years later the plan is already well out of date. The Cost overruns are significant, but no more so than a lot of procurements and pale in comparison to the F-35 and Littoral Combat Ship cost overruns.
This is the cost growth GAO has seen. From Table 2 (page 12), “Increased Total Acquisition Cost Estimates for Deepwater Assets with approved baselines as of May 2011 (Then year dollars in millions)”:
Asset 2007 Baseline Revised Baseline % Change
NSC 3,450 4,749 38
FRC 3,206 4,243 32
OPC 8,098 Not yet revised —
Cutter Small Boats 110 Not yet revised — (see b. below)
MEC Sustainment 317 321 1
Patrol Boat Sustainment 117 194 66
MPA 1,706 2,400 41
C-130J 11 176 1,500 (see c. below)
C-130H 610 745 22
HH-65 741 1,242 68 (see d. below)
HH-60 451 487 8
UAS (unmanned air system) 503 Not yet revised —
C4ISR 1,353 2,522 86
Other Deepwater 3,557 No revision expected — (see e. below)
Total 24,230 29,347 21
There were some notes with this, including some that explained some of the increased costs:
If the revised baselines present both threshold costs (the maximum costs allowable before a
breach occurs) and objective costs (the minimum cost expected), threshold costs are used. An
acquisition program baseline breach of cost, schedule, or performance is an inability to meet the
threshold value of the specific parameter.
a. When a revised baseline is not available, the 2007 baseline cost is carried forward for calculating
the total revised baseline cost.
b. The cutter small boat program includes two different versions of small boats. Only one had an
approved revised baseline as of May 2011.
c. The acquisition costs are related to the mission system. The original HC-130J baseline only included
costs associated with the fleet introduction of missionized aircraft and did not include the cost of
acquiring the mission system and logistics support of the first six aircraft, and the revised baseline
corrected this omission.
d. The 2007 approved baseline did not include airborne use of force, National Capital Region Air
Defense, and the surface search radar for the HH-65. The addition of these capabilities constitutes
about $420 million of the revised costs.
e. Includes other Deepwater costs, such as program management, that the Coast Guard states do not
require a new baseline.
Additional note from page 13, “The original 2007 estimate for one OPC was approximately $320 million. However, the Coast Guard’s fiscal years 2012-2016 capital investment plan cites a planned $640 million in fiscal year 2015 for the lead cutter. Coast Guard resource and acquisition directorate officials stated that this $640 million is a point estimate for the lead cutter, some design work, and project management”
If we look at only the programs that have had revised baseline (these make up 64% of the 2007 baseline), the cost growth has actually been 33% and even that cost is not really reliable since, in some cases, prices have increased since the revised baseline. The true cost of the eight NSCs for which good cost information is now available is expected to be approximately $5.6B, a 62% increase over the 2007 baseline. There is also still considerable uncertainty about the final cost of the unmanned air systems and the C4ISR systems.
The second dimension that GAO regards as unachievable is projected delivery schedule. Figure 3 on page 16 shows scheduled deliveries of the final item in each of the several projects, as originally scheduled in the Baseline document approved in 2007, as approved in subsequent baseline revisions, and as projected in the FY2012-2016 Capital Investment Plan (CIP) and the projected delay, comparing the 2007 baseline and the 2012-2016 CIP. Because the projected costs exceed likely funding, they believe that even the FY2012-2016 Capital Investment Plan schedule is “unachievable.”
Asset 2007 Baseline Revised Baseline 2012-2016 CIP Projected Delay (years)
NSC 2014 2016 2018 4
FRC 2016 2021 2022 6
MEC Sustainment 2016 2017 2014 (2 years early)
Patrol Boat Sustainment 2013 2014 — ?
MPA 2016 2020 2025 9
C-130J 2009 2011 2011 2
C-130H 2017 2017 2022 5
HH-65 2013 2020 2020 7
HH-60 2019 2020 2020 1
C4ISR 2014 2027 2025 11
OPC 2021 — 2031 10
You might note that the Cutter boats and Unmanned Air Systems are not included in this table.
Beginning on page 30 the study notes, “Key Decisions Remain for Assets in Design to Ensure Promised Capabilities Are Achieved.”
The primary technical risk appears to be the C4ISR system which was to tie the “system of systems” together and allow the service to perform the missions with few (but more capable) assets. The CG has apparently already backed away from the concept of providing all units a common operational picture. The all singing, all dancing NTDS with pictures now appears both unnecessary and too expensive. The additional overhead in maintaining classified material may also a consideration. What the Coast Guard will ultimately choose was undecided when the study was written.
By far the largest chunk of “Deepwater” AC&I money is expected to go for the twenty-five Offshore Patrol Cutters (OPC). “DHS approved the OPC’s requirements document in October 2010 despite unresolved concerns about three key performance parameters—seakeeping, speed, and range—that shape a substantial portion of the cutter’s design. For example, DHS questioned the need for the cutter to conduct full operations during difficult sea conditions, which impact the weight of the cutter and ultimately its cost. The Coast Guard has stated that limiting the ability to conduct operations during difficult sea conditions would preclude operations in key mission areas. While it approved the OPC requirements document, DHS at the same time commissioned a study to further examine these three key performance parameters. According to Coast Guard officials, the study conducted by the Center for Naval Analysis found that the three key performance parameters were reasonable, accurate, and adequately documented.”–That is the good news–The GAO again took the CG to task because it has not completed a Fleet Mix Study that can be used for determining trade-offs (page 45/46), but noted that DHS is doing one that includes an updated 270 and the Littoral Combat Ship as alternatives.
The report talks about a number of remaining issues, some of which have already been corrected, some of which sound like typical teething problems for new systems. One that does bother me is that the helo haul down and traversing system referred to as “ASSIST,” has been found unsatisfactory. The CG, having already bought four systems and equipping one helicopter, is now looking at the system the Navy uses (p. 40). I’m a bit surprised we didn’t go to the Navy system first for the sake of commonality.
The Deepwater systems are not “unachievable” in the literal sense. The question remains, will it be pursued? and will it be pursued in a reasonably expeditious fashion?
The decision to “outsource” to ICGS (Integrated Coast guard Systems) was a mistake, but it was what the government was encouraging at the time. The 2007 baseline was the best the CG could do at the time, but it was inevitably flawed having been tainted by the “puffing” of contractors who were at best overly optimistic. Actual costs have exceeded estimates but they are not out of line compared to similar DOD programs. As I understand it, the Coast Guard engineering staffs had been gutted in previous economy moves so it is not surprising they did not get it 100% correct first try. To hold the CG to the 2007 baseline is simply unrealistic. The Question remains, does the nation want the CG to have a presence in the offshore regions? The Navy is shrinking and will not fill that void. Dragging out the procurement will only result in higher prices in the end.
The above GAO figures, show that the FRC has experienced a 32% growth. Being a former “bean” counter, I offer a possible, maybe even probable, explanation. I am sure someone from the CG Acquisition office can answer this more completely.
I believe this is not a case of the “beans” costing more. In fact the only price change in the FRC contract has been to provide structural enhancements beyond the required ABS rules for High Speed Naval Vessels. This modification was agreed to when the first cutter was over 80% complete and there were seven other cutters were in various stages of construction. While many can say this should have happened sooner, the change fully vetted by all of the Senior Coast Guard leadership and determined to be the right thing to do. The price increase for the eight cutters under construction was slightly more than 1% of the then current contract price. And when all of the cutters on the initial contract are considered, the increase will be less than 1/3 of one percent to modify all of the current and option cutters. (Compare that with other current shipbuilding contracts)
It is possible that the increase in the price above may be due to the infrastructure changes it will take to accomodate a fleet of 58 each 154 ft cutters as opposed to 49 each 110 foot cutters. With a crew of 23 aboard each SENTINEL Class cutter and a draft of just under 10 feet, there will have to be lots of changes and improvements to the various cutter’s home port(s). The increase could reflect the costs of those infrastructure changes as part of the program costs. So while it could be an increase in the total price of the FRC program, it is probably not an increase in price of the indiviual cutters. Also that increase would equally apply to any FRC, that has the same draft, crew size, and capabiliites.
So perhaps it is not the “cost of the bean” that caused the increase, but the “additional types of beans we are counting” that is reflected in the GAO numbers. The report may reflect the way costs are reported accordomg to GAO rules, but if you do not know the rules and the definitions being used, then you are lead to an incorrect conclusion.
If this explanation is correct then the numbers are at least misleading and do a disservice to the Coast Guard Acquisition team.
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