This is my commentary on the Fleet Mix Studies and GAO’s response to them. Part 1, which outlined the results of the studies and GAO’s reaction is here.
General Comments applicable to the evaluation process
While the best way to consider acquisitions is to consider lifecycle costs, these don’t seem to have been considered by any of the players involved. The NSCs have crews substantially smaller than the 378s they replaced. Presumably they also have lower maintenance and fuel costs as well. If lifecycle costs were considered there would have been less likelihood the NSCs would have been deferred or cancelled, as they seem to have been.
On the other hand the FRCs and OPCs are likely to cost more than the vessels they replace, except that some of the first OPCs are likely to actually replace 378s, which are probably much more costly to operate.
Also the value of these vessels as national security assets is not considered. Trade-offs of construction of cutters vs Navy ships was not considered.
How the Coast Guard has handled the process:
The Coast Guard may have made all the right decisions regarding type and number of assets, but they have not done a good job of explaining why the decisions are the right one, and they do not seem to have succeeded in building a consensus in favor of the program in the Department, Congress and the Administration. These people like to think they are part of the decision making process and, like it or not, they are. They have to be brought along the decision chain, so that they understand the rationale for the ultimate choices. The Fleet mix studies were an opportunity to do that, that was not fully exploited.
Some of the weaknesses I see in the Coast Guard’s studies were that
- There were no ice-capable ships, so the budgetary effect of this requirement was not dealt with.
- There is no consideration of trade-off between types.
- There are no alternative types considered.
- There was no exploration of the consequences of building less than the “Program of Record.”
- The time dimension is largely ignored, in that there was little reference to the catastrophic effect of stretching out the replacement program.
It is unfortunate that the Coast Guard took so long to deliver their Fleet Mix Study to Congress. It was certainly not perfect, but Congress asked for it, and it should have been seen as part of a continuing process to build support. Feedback could have been incorporated and there would be an improved product by now. It is still not too late to use follow on studies in an iterative process to help convince decision makers outside the Coast Guard.
The Department’s Cutter Study did the Coast Guard a service in rejecting two possible alternatives to the OPC as designed. It succeeded in explaining why a modernized WMEC270, although cheaper, and the Littoral Combat Ship, an on-going Navy program, are not good alternatives to the OPC. That these might be seen as potential alternatives was certainly predictable and the Coast Guard should have demonstrated that they had already considered these options and found them less desirable.
Unfortunately the Department study proposed a third alternative without actually testing the hypothesis, that of an austerely equipped OPC. Without analysis, this alternative becomes an impediment to decision. Hopefully they will proceed with an analysis of the effect of these equipment deletions. I made some cursory comments on this alternative here, “OPC, Design for Wartime, Build for peacetime.”
The GAO’s position:
The GAO still considers the program of record “unachievable.” This statement incomprehensible.
The Federal Budget for 2013 is on the order of $3,803B, The DHS budget is $55.4B. “Discretionary” spending is $1,261B so an extra $0.5B/year in the CG AC&I would be 0.013% of the Federal Budget, or 0.04% of the “discretionary” budget although ultimately it is all discretionary.
The belief that the government cannot reorder or somehow find an additional 0.04% shows incredible disillusionment with the budget process or, if true, would be an frightening indictment of the government’s competency.
The GAO is still thinking year by year, more interested in keeping the budget within reduced norms, and does not seem to recognize that the most economical way to buy ships is by making multi-unit, multi-year buys that are more efficient for the shipbuilder. The GAO is using recent budgetary history as a guide to what is necessary when Coast Guard shipbuilding is in fact cyclical. To be absolutely rigid in allocation of resources from year to year is to put the budget on autopilot.
Higher levels of funding are needed now precisely because the Coast Guard AC&I levels have been lower than they should have been since the late 1980s. The destructive effect of this neglect is now coming home to roost.
The Admiral Papp has expressed his frustration with this lack of perspective. Speaking before a Senate sub-committee: the Commandant,
… took an opportunity to decry what he said is a Washington, D.C. consumed “by people whose vision only goes from year to year–and we spend 75 percent of our time dealing with people who do not have vision, that only focus on year-to-year challenges and ‘how do you fit within a topline.'”
The GAO needs to change their basis for evaluating Coast Guard procurement from “What was spent in the past?” to “What are we going to ultimately buy, and what is the most economical way to reach that capability?”
What is a proper metric? It might be instructive to compare the Coast Guard to similar organizations in the Federal Government.
As noted in Congressional Research Service, “Coast Guard Cutter Procurement: Background and Issues for Congress,” by Ronald O’Rourke
“The Coast Guard has about 12.5% as many active-duty personnel as the Navy. If the amount of funding for surface ship acquisition and sustainment in the Coast Guard’s budget were equivalent to 12.5% of the amount of funding in the Navy’s shipbuilding account, it would be about $1.7 billion per year, or about 93% more than the $879.5 million that the Coast Guard has requested for FY2013 for surface ship acquisition and sustainment programs.”
“Funding in the Navy’s shipbuilding account is equivalent to about 50% of the Navy’s funding for active-duty personnel. If Coast Guard funding for surface ship acquisition and sustainment were equivalent to 50% of Coast Guard funding for military pay and allowances, it would again be about $1.7 billion per year.”
The Navy has eight times the personnel of the Coast Guard but their ship building budget is almost 16 times larger. But that considers only the Navy’s shipbuilding budget. They spend much more on aircraft. Their total budget equivalent to the Coast Guard’s AC&I–Procurement $42.4B,RDT&E 16.9B, Military Construction $1.9B, Family Housing $0.48B, totals $61.7B about 44 time the Coast Guard’s AC&I budget.
Total military end strength for the DOD is projected to be 2,238,400 in FY2013. This includes approximately 1,401,000 active duty. The total DOD FY2013 budget request is $613.9B including a base of $525.4B and an Overseas Contingency Operations (OCO) request of $88.5B
The Coast Guard has about 42,000 active duty personnel, and about 49,000 including reservists. Its budget is approximately $10B. The Coast Guard’s 2013 AC&I budget request is $1.2B.
Considering only the DOD’s base budget,their per capita spending is approximately $375,000 per active duty member.
By comparison the Coast Guard’s per capita budget is approximately $238,000 per active duty member.
Considering only the items that appear to be comparable to the Coast Guard’s AC&I budget–Procurement, RDT&E, Military Construction, and Family Housing–The DOD expects to spend $179,453,831,000 or $127,816 per active duty member or $80,171 per service member including both active and reserve.
Comparable figures for the Coast Guard are less than $28,600 per active duty member and less than $24,500 per member active and reserve.
If the same per capita investment were made in the Coast Guard, the AC&I budget would be over $4B if based on both active and reserve., and $5.37B if based on active duty personnel only.
I don’t think the Coast Guard need that level of AC&I, but the current levels are clearly inadequate.