“Coast Guard Cutter Procurement: Background and Issues for Congress, Updated August 30, 2022” –CRS

The Congressional Research Service has again updated their “Report to Congress on Coast Guard Cutter Procurement”. (This link will always take you to the most recent edition of the report.) My last post on this evolving document was in reference to a July 22, 2022 update. I have reproduced the one page summary in full below.

A decision on Eastern’s protest of the Stage 2 contract to Austal is still pending, with a decision due Oct. 24, 2022.

Since my last update, there have been two significant events. First, the Coast Guard has exercised an option for FRC#65, still leaving a considerable portion of the $130M voted for the FRC program in the FY2022 budget unobligated. Second, the Senate Appropriations Committee has reported.

Fast Response Cutter Program: 

On August 9, 2022, the Coast Guard exercised a contract option with Bollinger Shipyards for $55.5 million of the $130 million for production of one FRC plus associated deliverables; this FRC will be the 65th. (p.16)

FY2023 Budget Status: 

  • NSC: Requested,   60.0; HAC, 147.0;  SAC,   60.0
  • OPC: Requested, 650.0; HAC, 650.0;  SAC, 650.0
  • FRC: Requested,   16.0; HAC, 131.0;  SAC,   16.0

(HAC is House Appropriations Committee. SAC is Senate Appropriations Committee)

The Senate Appropriations Committee did have some notes for the Coast Guard, DHS, and the administration (from page 27):

Fleet Mix Analysis.—The Committee continues to be interested in the Fleet Mix Analysis required in the Joint Explanatory Statement accompanying Public Law 117–103, and appreciates the Coast Guard’s periodic status updates. The Committee reiterates its expectation, as stated in the requirement, that the analysis be truly comprehensive and include all classes of vessels, even those whose mission might not have a direct bearing on the workload of other vessel classes.

Full-Funding Policy.—The Committee again directs an exception to the current acquisition policy that requires the Coast Guard to attain the total acquisition cost for a vessel, including long lead time materials [LLTM], production costs, and post-production costs, before a production contract can be awarded. This policy has the potential to make shipbuilding less efficient, to force delayed obligation of production funds, and to require post-production funds far in advance of when they will be used. The Department should position itself to acquire vessels in the most efficient manner within the guidelines of strict governance measures.

Domestic Content.—To the maximum extent practicable, the Coast Guard shall utilize components that are manufactured in the United States when contracting for new vessels. Such components include: auxiliary equipment, such as pumps for shipboard services; propulsion equipment, including engines, reduction gears, and propellers; shipboard cranes; and spreaders for shipboard cranes….

Funded Projects.—The Committee expects that when it funds specific projects, those projects shall be executed expeditiously and responsibly. Given project cost increases across Coast Guard’s portfolio, the Committee is concerned about recent efforts by the Coast Guard to cancel funded projects in order to finance cost increases elsewhere. The Coast Guard shall be transparent with respect to cost increases, executability concerns, and any other issues that may increase the risk profile of a project, and shall provide the Committee sufficient time to consider the issue and respond in an appropriate manner….

Offshore Patrol Cutter [OPC].—The Committee provides the requested amount of $650,000,000 for the construction of the fourth OPC and LLTM for the fifth OPC. While the Committee supports OPC procurements, the Committee remains concerned about costs for the program and continues the requirement for the Coast Guard to brief the Committee within one week prior to taking any procurement actions impacting estimated costs for the OPC program. (Pages 75-76)

Bottom Line: 

As the FY2023 Budget currently stands, it includes only one additional OPC, #5 plus long lead time items for OPC#6, but no additonal Bertholf class NSCs or Webber class FRCs.


Summary

The Coast Guard’s program of record (POR), which dates to 2004, calls for procuring 8 National Security Cutters (NSCs), 25 Offshore Patrol Cutters (OPCs), and 64 Fast Response Cutters (FRCs) as replacements for 90 aging Coast Guard high-endurance cutters, medium-endurance cutters, and patrol craft. The total of 64 FRCs includes 58 for domestic use and 6 for use by the Coast Guard in the Persian Gulf.

NSCs are the Coast Guard’s largest and most capable general-purpose cutters; they are replacing the Coast Guard’s 12 Hamilton-class high-endurance cutters. NSCs have an estimated average procurement cost of about $670 million per ship. Congress has fully funded the procurement of 11 NSCs—three more than the 8 in the Coast Guard’s POR—including the 10th and 11th in FY2018, which (like the 9th NSC) were not requested by the Coast Guard. In FY2020, Congress provided $100.5 million for procurement of long lead time materials (LLTM) for a 12th NSC, so as to preserve the option of procuring a 12th NSC while the Coast Guard evaluates its future needs. The Coast Guard’s proposed FY2023 budget requests $60.0 million in procurement funding for the NSC program. This request does not include further funding for a 12th NSC; it
does include funding for closing out NSC procurement activities and transitioning to sustainment of in-service NSCs. Nine NSCs have entered service; the ninth was commissioned into service on March 19, 2021. The 10th is scheduled for delivery in 2023.

OPCs are to be less expensive and in some respects less capable than NSCs; they are intended to replace the Coast Guard’s 29 aged medium-endurance cutters. Coast Guard officials describe the OPC program and the Polar Security Cutter (PSC) program as the service’s highest acquisition priorities. (The PSC program is covered in another CRS report.) The Coast Guard’s FY2020 budget submission estimated the total acquisition cost of the 25 ships at $10.270 billion, or an average of about $411 million per ship. The first OPC was funded in FY2018. The first four OPCs are being built by Eastern Shipbuilding Group (ESG) of Panama City, FL. The Coast Guard held a full and open competition for a new contract to build the next 11 OPCs (numbers 5 through 15). On June 30, 2022, the Coast Guard announced that it had awarded a fixed-price incentive (firm target) contract to Austal USA of Mobile, AL, to produce up to 11 offshore patrol cutters (OPCs). The initial award is valued at $208.3 million and supports detail design and procurement of LLTM for the fifth OPC, with options for production of up to 11 OPCs in total. The contract has a potential value of up to $3.33 billion if all options are exercised. The Coast Guard’s proposed FY2023 budget requests $650.0 million in procurement funding for the 5th OPC, LLTM for the 6th, and other program costs.

FRCs are considerably smaller and less expensive than OPCs; they are intended to replace the Coast Guard’s 49 aging Island-class patrol boats. The Coast Guard’s FY2020 budget submission estimated the total acquisition cost of the 58 cutters intended for domestic use at $3.748.1 billion, or an average of about $65 million per cutter. A total of 64 FRCs were funded through FY2021. The Coast Guard’s proposed FY2022 budget did not request funding for the procurement of additional FRCs. In acting on the Coast Guard’s proposed FY2022 budget, Congress added $130 million in FRC procurement funding for the construction of up to two additional FRCs and associated class-wide activities. On August 9, 2022, the Coast Guard exercised a contract option with the FRC builder (Bollinger Shipyards of Lockport, LA) for $55.5 million of the $130 million for production of one FRC plus associated deliverables; this FRC will be the 65th . As of July 22, 2022, 48 FRCs have been commissioned into service. The Coast Guard’s proposed FY2023 budget requests $16.0 million in procurement funding for the FRC program; this request does not include funding for any additional FRCs.

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