Below is a news release in full. It reports that “contract relief” will be granted to Eastern Shipyard for construction of the first four ships but that the Coast Guard will reopen bidding for the follow on ships. The Coast Guard always had this option although it seemed unlikely before. The statement that this relief will be granted, “in parallel with immediate recompete” probably means we will see a request for proposal in the near future.
It seems unlikely that the follow-on ships would be of a different design. The Coast Guard now owns the detail design (correction, I am told the CG does not own all the design details yet but has the option to purchase them) and a different design would introduce additional delays and expense for design development.
A recompete once again opens the possibility of using a block buy which could result in substantial savings. The recompete could easily provide a block buy for ten ships over five years. A block buy, rather than a contract for two with options, would tend to level the playing field between Eastern, that has the advantage of already building this class, and other shipyards.
From a historical perspective, the 270 program was also completed by two different shipyards, the first four being built by Tacoma Boat, the other nine by Derecktor Shipyard in Rode Island. The change did result in an 18 month gap between the fourth and fifth ship.
WASHINGTON – The Department of Homeland Security, in close coordination with the U.S. Coast Guard, granted extraordinary relief to the Eastern Shipbuilding Group (ESG) for the Offshore Patrol Cutter (OPC) under the authority of Public Law (P.L.) 85-804.
ESG submitted a request June 30, 2019, for extraordinary relief after their shipbuilding facilities sustained significant damages from Hurricane Michael, a Category 5 storm, in October 2018.
Acting Secretary of Homeland Security Kevin K. McAleenan made the decision to grant extraordinary contract relief limited to the first four hulls on the basis that ESG’s performance on the OPC contract is vital to the national defense. The Coast Guard will immediately transition to a follow-on competitive contract for the remaining OPC program of record.
P.L. 85-804 was enacted in 1958 and extended to DHS through Presidential Executive Order in 2003. Under this law, an existing contract may be amended or modified when such actions are necessary to facilitate the national defense.
The Coast Guard, supported by DHS and the Navy, conducted an extensive analysis of ESG’s request guided by law and Federal Acquisition Regulation. This review included an assessment of the cost, schedule, and performance impacts on the existing contract. The review was overseen by a Contract Adjustment Board chaired by the DHS Deputy Under Secretary for Management.
“Eastern Shipbuilding’s request for extraordinary relief was carefully considered,” said Coast Guard Vice Commandant, Admiral Charles W. Ray. “This review validated the essential contributions the OPC will provide to our national security and determined that limited relief, in parallel with immediate recompete, is the best option in this exceptional situation. Doing so is consistent with the law, fiscally responsible, and the most expeditious means to deliver this essential national capability.”
The Coast Guard intends to release a Request for Information to gauge industry interest in re-competing the remainder of the OPC program of record. This information will inform the acquisition strategy for the follow-on procurement.
The OPC will replace the fleet of Medium Endurance Cutters, commissioned between 1964 and 1991, providing a critical capability between the National Security Cutter and the Fast Response Cutter. OPC acquisition will expand the Coast Guard’s capability to secure the U.S. border and approaches, disrupt drug cartels and other illicit actors, prevent unlawful immigration, and enhance national preparedness. This decision will ensure critical capabilities are delivered to the fleet as expeditiously and responsibly as possible.
Congress is back in session. It is likely the current Congress will attempt to complete the Department of Homeland Security (DHS) Budget before the new Congress is seated in January.
On October 11, 2018, the Senate Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard held a public hearing entitled, “The Future of the Fleets: Coast Guard and NOAA Ship Recapitalization.” I feel I have been remiss in not talking about this earlier, but the topics are still in question and it appears all the major players in the sub-committee will be returning next year, although committee assignments may change. Despite the name of the hearing, the NOAA representative was unable to attend, so the entire hearing was about Coast Guard programs.
Unfortunately the hearing video was not posted on YouTube so I was unable to post it here. The Commerce Committee website with the video of the hearing, list of witnesses, and links to the prepared statements is here.
I’d like to call attention to the Congressional Research Service’s evaluation of the Coast Guard’s shipbuilding programs in the form of Mr. Ronald O’Rourke’s prepared testimony for the hearing. It is relatively short at 21 pages, and covers the Waterways Commerce Cutter (Inland tenders) and Polar Security Cutter (Heavy Polar Icebreaker) as well as the National Security Cutter (NSC), Offshore Patrol Cutter (OPC), and Fast Response Cutter (FRC) programs.
As he has done frequently in the past, he makes the case for procuring cutters using Block Buy or Multi-Year Procurement as the Navy has done in some of its most successful Program. I have a hard time understanding why the Coast Guard has not taken advantage of this option. We had an opportunity to do it with the NSC, another with the FRC. Now we have the option of using Block Buy for the Polar Security Cutter (heavy polar icebreaker) and Offshore Patrol Cutter (OPC). The recent Coast Guard Authorization Bill includes authorization to use Block Buy.
26:00 GAO Ms. Marie Mak Director, Contracting and National Security Acquisitions, Government Accountability Office began her prepared statement.
Mrs Mak of GAO is again saying we have not made a good business case for the new icebreaker and that our planning is short term. Pointed to the Navy 30 year shipbuilding plan as a good example of long term planning.
29:30 Mr. Ronald O’Rourke Specialist in Naval Affairs, Congressional Research Service began his prepared statement
An illustration of how useful long term planning can be is found in this quote from Mr. O’Rourke’s written submission, p.3:
“As one example of how…Congress has exercised its constitutional power to set funding levels and determine the composition of federal spending, during the period FY2008-FY2015, when the Navy’s shipbuilding account averaged about $14.7 billion per year in then-year dollars, there was recurring discussion about the challenge of increasing the account to the substantially higher annual funding levels that would soon be needed to begin implementing the Navy’s 30-year shipbuilding plan. Projections were prepared by CBO showing the decline in the size of the Navy that would occur over time if funding levels in the shipbuilding account did not increase substantially from the average level of about $14.7 billion per year. Congress, after assessing the situation, increased the shipbuilding account to $18.7 billion in FY2016, $21.2 billion in FY2017, $23.8 billion in FY2018, and $24.2 billion in FY2019. These increasing funding levels occurred even though the Budget Control Act, as amended, remained in operation during those years. At the most recent figure of $24.2 billion, the Navy’s shipbuilding account is now 74% greater in then-year dollars than it was as recently as FY2010.”
Mr. O’Rourke pointed out that using Multi-Year contracting to procure the Offshore Patrol Cutters could save us $1B, enough to pay for the Polar Security Cutter (PSC or Polar Icebreaker) or the entire Waterways Commerce Cutter program.
He discussed increasing rate of OPC procurement.
He noted that there had been a reduction in the estimated cost of the Polar Icebreaker from an initial estimate of $1B to a projected cost of $2.1B for three ships. From pages three and four of his prepared statement.
Coast Guard’s Non-Use of Multiyear Contracting
In connection with my work on ship acquisition, I maintain the CRS report on multiyear procurement (MYP) and block buy contracting. In both that report and in testimony I have given to other committees in recent years on Coast Guard ship acquisition, I have noted the stark contrast between the Navy— which uses multiyear contracting (in the form of MYP or block buy contracting) extensively to reduce its ship- and aircraft-procurement costs by billions of dollars—and the Coast Guard, which to date has never used multiyear contracting in one of its ship or aircraft acquisition programs.
The Navy in recent years, with congressional approval, has used multiyear contracting for, among other things, all three of its year-to-year shipbuilding programs—the Virginia-class attack submarine program, the DDG-51 destroyer program, and the Littoral Combat Ship (LCS) program. The Navy has been using multiyear contracting for the Virginia-class and DDG-51 programs more or less continuously since the 1990s. Savings from the use of MYP recently have, among other things, helped Congress and the Navy to convert a nine-ship buy of DDG-51 class destroyers in FY2013-FY2017 into a 10-ship buy, and a nine ship buy of Virginia-class attack submarines in FY2014-FY2018 into a 10-ship buy. The Navy is also now using block buy contracting in the John Lewis (TAO-205) class oiler program, and is considering or anticipating using them for procuring LPD-17 Flight II amphibious ships, FFG(X) frigates, and Columbia-class ballistic missile submarines. The Navy’s use or prospective use of multiyear contracting for its year-to-year shipbuilding programs is arguably now almost more of a rule than an exception in Navy shipbuilding. For Congress, granting approval for using multiyear contracting involves certain tradeoffs, particularly in connection with retaining year-to-year control of funding. In the case of Navy shipbuilding, Congress has repeatedly accepted these tradeoffs.
In contrast with Navy practice, the Coast Guard often uses contracts with options in its ship-procurement programs. Contracts with options can be referred to as multiple-year contracts, but they are not multiyear contracts. Instead, contracts with options operate more like annual contracts, and they cannot achieve the kinds of savings that are possible with multiyear contracts. Like the other military services, the Coast Guard has statutory authority to use MYP contracting and can be granted authority by Congress to use block buy contracting.
Questioning began time 33:00 I will try to summarize some of the discussion, but this is in no way complete.
Senator Sullivan
33:30 questioned how the CG could meet increasing challenges with nearly 14,000 fewer major cutter OP Hours.
RAdm Haycock says new assets are more capable. (He might have noted that FRCs are more capable than Island class and can conduct some missions previously conducted only by major cutters.) He did favorably compare FRCs with existing 110s in Alaska, but perhaps missed an opportunity to push for more assets and/or higher rate of construction.
37:30 Senator Sullivan push to use shipyard in Ketchikan.
Senator Baldwin
42:30 Why are we using predominately foreign made outboards rather than Mercury or Evinrude which are made Wisconsin?
Ans. We want to use American made products, but we also employ competition. We could create a demand signal that is not sustainable. Builders choose components, but must comply with Buy American requirements.
49:30 Senator Sullivan:
Suggestion that perhaps we could lease.
Ans. Design time has decreased as has price due to Navy assistance and use of parent design. Ship and power plant can be smaller than previously thought without loss of capability. Icebreaker will be based on Parent design. Cooperation with the Canadians. This has shortened time line and cost has come down. There are still some risks.
59:30 We have looked exhaustively at foreign designs. Our missions are very different. Our design will be based on yet unbuilt Canadian design (CCGS Diefenbaker).
1:01:30 Baldwin:
Great Lakes Icebreaker–not enough resources, push to build a Great Lakes Icebreaker at least as capable as Mackinaw, some funding provided for design of a Great Lakes icebreaker, what are we doing?
We are looking at requirements. 140s are going through service life extension.
1:04:40 More on made in American requirements.
Ans. Sometime foreign made components can be problematic over lifecycle.
1:07:00 Senator Wicker
The Senator pushing for 12th NSCs.
NSCs are having a profound impact as we push border south
1:09:00 Polar Security Cutter, what about the fact funding is not included in House budget?
Ans. Will impact scheduling and the interest of the industrial base.
1:12:00 Senator Blumenthal
Concern about opioids, what additional assets do we need?
Talked about Unmanned Air Systems but really did not specifically address opioids intel which I would assume has more to do with importation by merchant ships through our ports.
1:15:00 CG museum. Committed to location at New London.
1:16:30 Admissions at the CG Academy–concern about possible discrimination
1:17:30 Senator Baldwin
1:18:00 More on “Made in America” components
1:20:00 Specifically referenced need to buy propulsion pods for Polar Security Cutter from Scandinavia.
1:21:30 Timeline for Inland tenders? Possibility of using parent craft?
Our needs are different. Have to have more people because of our missions, we need more range, mixed gender birthing. Probably nine months to complete analysis and a year before we start to contract. In service 2023. We are moving as fast as we can.
(Was pleased to note that RAdm Haycock made a strong witness and appeared both competent and cooperative.)
This is not going to flow well, I apologized for the mishmash. The video above is of a House Sub-Committee hearing that occurred on July 24. I think it is still worth a look. The video does not actually begin until just before time 19:55
Before watching the video, I would suggest a look at the “Summary of Subject Matter.” This is what the Congressional Representatives are looking at.
End of Service Lives for Medium Endurance Cutters (MEC) with Planned Offshore Patrol Cutter (OPC) Delivery Dates:
Check out the charts on page 2. The second chart shows “End of Service Lives for Medium Endurance Cutters (MEC) with Planned Offshore Patrol Cutter (OPC) Delivery Dates.” It illustrates the risks and loss of capacity that appears likely, if OPCs are funded at the planned rate of no more than two ships a year. It is unclear why the WMECs are to be retired in the order intended since it is not the order of their completion. Presumably it is based on an assessment of the condition of the ships, but it is very clear that they will all be well over aged. The 210s will retire first. The youngest retirement would be at age 53 and some would qualify for Social Security before replacement. (Diligence, 66)
How they arrived at the expected service life shown is hard to understand, because every 210 is going to be 53 years old or older at the end of projected service life plus 15 year life extension. The 210s were, of course, substantially reworked during a “Major Maintenance Availability” 1986 to 1990, but no further life extension work is apparently planned based on the testimony in the video.
It may appear we are in much better shape with respect to the 270s, but these more complex ships may actually be harder to keep operational. We saw this in the number of breakdown experienced after the Haitian Earthquake eight years ago. They were commissioned between 1983 and 1991 and are expected to be replaced between 2130 and 2135. Legare, second to newest, is planned to be the first replaced, and would be “only” 40 years old. Harriet Lane one of the earliest completed is expected to be one of the last replaced and would be 50 years old. The rest fall within that range. SLEP for 270s beginning 2021, but it is not certain it will be applied to all 13 ships.
Because ships are not being replaced as quickly as they were originally built, we see a growing gap between the end of the ship’s projected service life, even with a 15 year service life extension, and the projected date of replacement.
Cutter Capability (by operating hour):
See also Appendix A, which illustrates the current shortfall in cutter hours available compared to the “Legacy Fleet” the recapitalization program was intended to replace. The “Legacy Fleet” is based on 12 WHECs, 29 WMECs, and 49 island class WPBs. (Not sure why they used 29 WMECs, since we had 32 as recently as 2001.)
There are two charts, the first includes WPBs and Webber class WPCs as well as WHECs, WMECs, NSCs, and OPCs. The second considers on the only the larger vessels, excluding WPCs and WPBs.
The first chart shows that we are currently down 20,450 hours (8.6%) relative to the legacy fleet, but that when the recapitalization is complete the total will be 31,970 hours (13.4%) greater than the legacy fleet. This increase is all due to the greater number Webber class and the greater number of hours each is expected to operate annually compared to 110s.
The second chart looks only at the larger ships, leaving aside the Webber and Island class WPCs and WPBs. It shows we are currently down 13,950 op hours (10%) and further, that when the program is completed, we will be down 15,030 hours (10.7%)reflecting the smaller number of large patrol cutters. If we could view this as a chart of actual cutter available on a yearly basis, it suggest that we will never be down by more than the 10.7% that shows upon completion of the program. Actually that is unlikely to be the case. The aging fleet means a higher probability of unplanned maintenance and even catastrophic failure that may result in WMECs being decommissioned prematurely and becoming parts donors like the Polar Sea.
At some point Coast Guard leadership is going to have to tell Congress the ugly truth that we have started the OPC/WMEC replacement program much too late, and we need to double down on the production rate. As soon as the first ship is completed and tested we need to issue a Multi-Year Procurement contract and it should include building up to four ships a year, at least until all sixteen 210s are replaced and at least three ships a year until all the WMECs are replaced.
We need to tell the Congress this as soon as possible, because bad news does not get better with age. Unfortunately it did not happen in this hearing. In fact when asked about the possibility of accelerating OPC production, time 1:10:00, VAdm McAllister seemed to dismiss the possibility saying we had other higher priorities. This was the wrong answer. You don’t always get to decide how money is spent. If we should get the opportunity to accelerate OPC construction, as has happened with the FRCs, we should welcome it.
Mission Needs Statement:
You can see the “Mission Needs Statement” referred to here. It is 70 pages plus about 45 pages of Appendices, but as noted, “… it does not identify asset gaps or a material solution to meet Coast Guard’s mission needs.”
GAO findings, failure to plan long term:
The GAO has taken the Coast Guard to task because their acquisition portfolio planning has been limited to apparently short term planning using the annual budget and five year Capital Investment Plan (CIP). That this has resulted a bow wave of unfunded requirements being pushed progressively further into the future.
“When you are up to your ass in alligators, it is difficult to remember that your initial objective was to drain the swamp.”
I have to think GAO has a point here.
We still have not provided a 20 year acquisition plan that the Coast Guard said they would provide in 2014, much less the 30 year plan I have suggested that would parallel the Navy’s planning process.
We have only done one fleet mix study. It was completed in 2007 and included the apparent assumption of applying the now rejected Crew Rotation Concept to both the NSCs and OPCs. Even so, it is still being used as a basis for critiquing the program of record that was last re-baselined in 2005. Things change, we now have better information about how our assets actually function. It is long past time for updated planning.
The Video:
Witnesses were:
Vice Admiral Daniel Abel, Deputy Commandant for Operations, United States Coast Guard | Written Testimony
Vice Admiral Michael McAllister, Deputy Commandant for Mission Support, United States Coast Guard | Written Testimony
Ms. Marie A. Mak, Director of Acquisition and Sourcing Management, Government Accountability Office | Written Testimony
Here is a brief outline of the topic discussed. Video actually begins 19:55.
23:00 Administration and CG leadership priorities do not demonstrate a commitment to rebuild infrastructure.
42:00 Appropriation deleted $1.4B including $750M for the Heavy Polar Icebreaker and the rest from an account to repair of replace hurricane damaged infrastructure.
46:00 Icebreaker schedule is overly optimistic.
47:00 WMEC gap.
49:00 No service life extension program for 210s. Some, but not all 270s, will have 10 year life extension.
51:00 Capabilities vs hours.
55:30 WMECs are operating at higher than anticipated tempo. Anticipate catastrophic failures within in the WMEC fleet. 5 out or 14 WMEC 210s are at high risk.
59:30 Maintenance backlog.
1:08:00 Still no 20 year plan has been provided since it was requested in 2014.
1:10:00 accelerate OPC procurement?
1:12:30 OPC homeports, of the first four, two will go to Kodiak and two to LA
1:14:00 Great Lakes icebreaking, Mackinaw replacement? SLEP of 140′
1:15:45 Will be doing a fleet mix study for the Great Lakes.
1:20:00 Homeport for icebreakers has not been decided. Working on homeport decisions for the entire fleet.
1:23:00 UAS
1:24:00 Counter UAS capability. The six WPBs in CENTCOM have some capability.
1:25:00 Manpower analysis
—-
Opening Statement of the Sub-Committee Chair:
The Subcommittee is meeting today to review how the Coast Guard is integrating their acquisition, manpower, and maintenance plans to align to their mission needs and assure the Service has the assets, personnel, and expertise needed to carry out its missions.
On June 1, 2018, Admiral Karl Schultz became the 26th Commandant of the Coast Guard. His guiding principles for the Service are: Ready, Relevant, and Responsive. He said, “These guiding principles frame my direction and will support the Department of Homeland Security, the Secretary of Defense and Combatant Commanders, and other national and global maritime interests.” Admiral Schultz and his senior leadership team are in the midst of reviewing the status of the Coast Guard and making changes to align the Service with those guiding principles. Today, we will hear from two members of that team, and look forward to better understanding their perspectives on the status of the Coast Guard.
The ongoing recapitalization of the Service’s cutters was planned two decades ago to address mission demands at that time. The world and the demands on the Coast Guard have since changed and it is critical that the Service be ready to respond to the demands of today, as well as those that will exist in decades to come. It is also important that the Coast Guard is prepared to manage capability gaps that are occurring and likely to continue to occur as recapitalization continues.
The decisions being made today will shape the Coast Guard of the future. The cutters being built today have a planned 30-year service life and will probably serve longer, and the final OPC is projected to be patrolling the seas until 2064. Like Admiral Schultz, Congress wants to ensure the Coast Guard is Ready, Relevant, and Responsive for years to come. In order to do so, we need accurate information from the Service to determine whether current plans will provide the capabilities to meet future demands.
Even more important than Coast Guard ships and aircraft are the people who operate them. The Coast Guard’s active duty workforce is only slightly larger than that of the New York City police department and less than ¼ the size of the next smallest U.S. Armed Force. Congress has encouraged the Coast Guard to better understand and articulate its workforce needs to meet current and emerging needs. Looking forward, it is likely that the Service will need to make tough, strategic decisions regarding how Coast Guard personnel are allocated. Even before the advent of a new cybersecurity operating domain, the Coast Guard was struggling to meet mission demands; creating a cybersecurity workforce while also conducting legacy operations poses an additional challenge that must be addressed immediately.
In addition to our focus on Coast Guard assets and personnel, this Subcommittee has continually pushed the Service to improve its shore infrastructure made up of approximately 43,400 assets nationwide. Unfortunately, even after several years of us stressing the need for action, much of that property is in dire need of rebuilding or repair. While Coast Guard leaders consistently stress the importance of investing in shore infrastructure, the budgetary trade-offs being made within the Coast Guard and the Administration do not reflect a genuine commitment to address this need. For example, despite a shore infrastructure backlog of more than $1.5 billion, the Coast Guard’s Fiscal Year 2019 budget request only includes $30 million to address those projects.
Shore infrastructure is critical to every Coast Guard mission – cutters need piers, aircraft need runways, inspectors need buildings, etc. – and if the Service truly desires to remain Ready, Relevant, and Responsive, it needs to find ways to address these critical needs.
The Government Accountability Office (GAO) has issued a number of reports since 2012 reviewing Coast Guard acquisition programs and providing recommendations to improve those programs. Over the years, the Coast Guard has agreed with many of those recommendations and agreed to take action on them. However, the new GAO report released today notes that the Coast Guard has not fully implemented those prior recommendations. Hopefully, today’s hearing will help us understand why that is.
A new senior leadership team brings new perspectives, new ideas, and new priorities. I look forward to hearing from our witnesses today on how they see the Coast Guard and how we can best position the Service for success going forward.
Note the video does not really start until approximately time (17m08s).
This is going to be a hodgepodge, but it is all about the 2019 budget. There is a video above. There will be my own observations on the video. There will be a brief outline of the Procurement, Construction, and Improvement (formerly AC&I) portion of the budget copied from the “Summary of Subject Matter.” At the tail end I have reproduced the Commandant’s prepared statement that was presented at the hearing
You can look here for the FY2018 budget request. I haven’t found the actual final FY2018 as enacted.
ABOUT THE VIDEO
Above is a video of a 14 March, 2018, House Coast Guard and Maritime Transportation Subcommittee. The commandant testified as well as Master Chief Steven W. Cantrell, Master Chief Petty Officer of the Coast Guard, United States Coast Guard, Rear Admiral Mark H. Buzby, USN, Ret., Administrator, Maritime Administration, and The Honorable Michael A. Khouri, Acting Chairman, Federal Maritime Commission
You can find more information including all the prepared statements and the subcommittee chairman’s opening remarks here.
MY OBSERVATIONS
This subcommittee has been highly supportive of the Coast Guard, and we see the same in this hearing. The chairman, Duncan Hunter (R, CA), (17m30s) expressed his opinion that the Coast Guard was not fairing well under the Department of Homeland Security (DHS). He also noted the apparent obstruction of measures of effectiveness by DHS.
Ranking member, John Garamendi (D, CA), (22m) noted that there had been a welcomed significant bump in Coast Guard funding, but questioned if this would continue or would it prove an anomaly. He noted that attempting to stop drug trafficking would be better served by putting more money into the Coast Guard than by building a border wall.
(29m30s) The Coast Guard’s unfunded priority list, submitted long ago is still hung up in the administration.
(33m30s) MCPO Cantrell addressed quality of life concerns.
(55m30) Ranking member Garamendi noted the addition of $720M added to the budget for Heavy Polar Icebreaker(s) (HPIB) in addition to $30M already in the budget, and stated that he saw this as money for the second icebreaker because the DOD was not relieved of their obligation to fund a HPIB.
(1h03m) Commandant expressed his confidence in the helicopter life extension programs expected to keep them in operation until 2033 when the Coast Guard would be able to join in the Army lead Future Vertical Lift program. He suggested that a single helicopter type might be able to replace both the MH-65 and MH-60s.
(1h07m) Commandant answering a question about AMIO in the Caribbean noted that the Webber class Fast Response Cutters (FRC) we working well in this role, but there is a shortage of ISR assets that he believed might be addressed by land based unmanned air systems (UAS).
(1h17m) In answer to a question about replacement of the Island Class six 110 foot Island class cutters currently assigned to CENTCOM as PATFORSWA, the Commandant, noting the 110s would time out in 2022, said this has been discussed at the highest levels with the Navy and there was a possibility that Webber class replacements could be funded by the Navy. Interestingly, he also noted that the Navy’s Cyclone class patrol craft would time out in 2023 suggesting to me perhaps he believes the Navy is considering a version of the Webber class.
(1h39m) Concern was expressed that while the Commandant has consistently expressed a need for $2B annual in the AC&I account (now PC&I) and $1.8B was provided in FY2018 and $1.9B in FY2019, that the current projection is only $1.4B in FY2020.
There is also a note on a change in accounting procedure.
In FY 2019, the Coast Guard will transition to the DHS Common Appropriations Structure (CAS). Accordingly, activities funded through the previous Operating Expenses, Reserve Training, Environmental Compliance and Restoration, and Medicare Eligible Retiree Health Care Fund Contribution are included as part of the new Operations and Support (O&S) account. In addition, acquisition personnel costs previously funded through the Acquisition, Construction, and Improvements account ($118.2m in the FY2018 budget request–Chuck) are included as part of the O&S account. The Acquisition, Construction, and Improvements account transitions into the Procurement, Construction, and Improvements account and the Research, Development, Test and Evaluation account becomes the new Research and Development account.
Below is the summary information on the PC&I section that replaces the AC&I portion of the budget.
Procurement, Construction, and Improvements (previously Acquisitions, Construction, and Improvements)The President requests $1.89 billion for the Procurement, Construction, and Improvements (PC&I) account, a $516.7 million (or 37.7 percent) increase over the FY 2017 enacted level. The PC&I account funds the acquisition, procurement, construction, rebuilding, and physical improvements of Coast Guard owned and operated vessels, aircraft, facilities, aids-to-navigation, communications and information technology systems, and related equipment.The FY 2019 budget request includes $1.76 billion for the acquisition of aircraft, vessels, and the continued build-out of Command, Control, Communications, Computer, Intelligence, Surveillance, and Reconnaissance (C4ISR) systems. This represents an increase of $597.1 million (or 51.7 percent) from the FY 2017 enacted level. The budget request includes:$30 million for the construction of a Heavy Polar Icebreaker. The FY 2019 Budget Addendum included an additional $720 million, for a total of $750 million;
$65 million to conduct Post Delivery Activities on National Security Cutters (NSC) 7 through 9;
$240 million for the production of four Fast Response Cutters (FRC);
$400 million for the construction of the second Offshore Patrol Cutter (OPC) and to facilitate evaluation of the Long Lead Time Materials for OPC 3. The OPCs will replace the Service’s aging 210-foot and 270foot Medium Endurance Cutters (MEC);
$80 million to fund the requirement to establish logistics for 14 newly acquired HC-27J aircraft. The request funds HC-27J Asset Project Office activities, logistics, training, and engineering studies to assess and resolve aircraft obsolescence issues;
$20 million for the continued modernization and sustainment of the HH-65 Dolphin helicopter fleet;
$23.3 million for C4ISR design, development, and integration; and
No funding for the Alteration of Bridges program in FY 2019. The program did not receive funding in FY 2017 or FY 2016. Established by the Truman-Hobbs Act of 1940 (33 U.S.C. 511 et. seq.), the Alteration of Bridges program authorizes the Coast Guard to share with a bridge’s owner the cost of altering or removing privately or publicly owned railroad and highway bridges that are determined by the Service to obstruct marine navigation.
The budget requests $135 million to construct or renovate shore facilities and aids-to-navigation. This request is a $35.5 million (or 26.3 percent) increase over the FY 2017 enacted level. The Coast Guard currently has a backlog of 95 prioritized shore facility improvement projects with an estimated combined cost of over $1.5 billion
____
THE COMMANDANT’S PREPARED TESTIMONY
Below you will find “TESTIMONY OF ADMIRAL PAUL F. ZUKUNFT COMMANDANT, U.S. COAST GUARD ON “THE COAST GUARD’S FISCAL YEAR 2019 BUDGET REQUEST” BEFORE THE HOUSE COAST GUARD AND MARITIME TRANSPORTATION SUBCOMMITTEE” which I have copied in full.
Introduction
Mr. Chairman and distinguished members of the Committee, I appreciate the opportunity to testify today. Thank you for your enduring support of the United States Coast Guard, particularly the significant investments provided in the FY 2017 Consolidated Appropriations Act, recent Hurricane Supplemental, and ongoing deliberations to support our FY 2018 and FY 2019 President’s Budget requests.
As the world’s premier, multi-mission, maritime service, the Coast Guard offers a unique and enduring value to the Nation. The only branch of the U.S. Armed Forces within the Department of Homeland Security (DHS), a federal law enforcement agency, a regulatory body, a first responder, and a member of the U.S. Intelligence Community – the Coast Guard is uniquely positioned to help secure the maritime border, combat transnational criminal organizations (TCO), and safeguard commerce on America’s waterways.
The Coast Guard’s combination of broad authorities and complementary capabilities squarely aligns with the President’s national security and economic prosperity priorities; furthermore, it offers an agile toolset to address the Nation’s most pressing challenges. Appropriately positioned in DHS, the Coast Guard is a military service and a branch of the Armed Forces of the United States at all times.1 We are also an important part of the modern Joint Force2 and currently have forces assigned to each of the five geographic Combatant Commanders, as well as Cyber Command.
As demonstrated in the 2017 record hurricane season, the Coast Guard is the Nation’s “maritime first responder” and plays a leading role in executing the National Response Plan (NRP) for disaster situations. Our ability to rapidly surge in response to emerging threats or contingencies are critical to success across the spectrum of missions we prosecute.
We live in an increasingly volatile, uncertain, complex, and ambiguous world. Rapid technological advancement, increasing globalization, and intensifying threats from state and nonstate actors alike challenge international norms and threaten global governance.
To ensure we meet the demands of today while preparing for tomorrow, the Coast Guard is guided by a five-year Strategic Intent and suite of regional and functional strategies that drive our Service’s operations and investments.
These strategic efforts are informed by the National Security Strategy and applicable DHS strategies, and are coordinated to augment Department of Defense (DoD) priorities. Using these strategies as guideposts, leveraging the intelligence community, and employing a risk-based approach to focus our limited resources allows us to address maritime threats with the greatest precision and effect.
Strategic Effects
Fueled by the Service’s unique authorities and capabilities, our Western Hemisphere Strategy continues to yield large-scale successes in our counter-drug mission. The Coast Guard’s persistent offshore presence and associated interdiction efforts sever the supply lines of criminal networks where they are most vulnerable—at sea. Leveraging over 30 multilateral and bilateral agreements with a host of government organizations, the Coast Guard’s long-term counter-TCO efforts promote stability and strengthen the rule of law throughout these regions. Working with interagency partners, the Coast Guard seized 223 metric tons of cocaine and detained and transferred 606 smugglers for criminal prosecution in FY 2017. Highlighting our record-breaking mission performance for drug interdiction was the STRATTON’s offload of over 50,000 pounds of illicit narcotics, with an estimated street value of over $6.1 billion. This was a result of collaborative efforts between four U.S. Coast Guard cutters, DHS maritime patrol aircraft, and a U.S. Navy ship in over 25 separate interdictions. Beyond the important task of removing cocaine from the illicit system that gets it to U.S. streets, prosecuting smugglers facilitates deeper understanding of TCOs and ultimately helps our unified efforts to dismantle them.
Without question, National Security Cutters (NSC) have been a game-changer not only for our drug interdiction and counter-TCO operations in the southern maritime transit zone, but also in contributing to other national security priorities, such as supporting DoD Combatant Commander requirements across the globe and projecting sovereign rights in the Arctic.
Looking forward, the Offshore Patrol Cutter (OPC) will provide the tools to more effectively enforce Federal laws, secure our maritime borders, disrupt TCOs, and respond to 21st century threats. Continued progress on this acquisition is absolutely vital to recapitalizing our aging fleet of Medium Endurance Cutters (MECs), some of which will be over 55 years old when the first OPC is delivered in 2021. In concert with the extended range and capability of the NSC and the enhanced coastal patrol capability of the Fast Response Cutter (FRC), OPCs will be the backbone of the Coast Guard’s strategy to project and maintain offshore presence.
As one of the five Armed Forces, the Coast Guard deploys world-wide to execute our statutory Defense Operations mission in support of national security priorities. On any given day, 11 cutters, two maritime patrol aircraft, five helicopters, two specialized boarding teams, and an entire Port Security Unit are supporting DoD Combatant Commanders on all seven continents. In the Middle East, our squadron of six patrol boats continues to police the waters of the Northern Arabian Gulf in close cooperation with the U.S. Navy, promoting regional peace and stability. Likewise, as one of the principal Federal agencies performing detection and monitoring in the southern maritime transit zone, the Coast Guard provides more than 4,000 hours of maritime patrol aircraft support and 2,000 major cutter days to DoD’s Southern Command each year.
In the high latitudes, the Arctic region is becoming increasingly accessible at a time when global interests in energy, clean water, and subsistence continue to intensify. The Coast Guard is committed to the safety, security, and environmental stewardship of the Arctic, and we will remain closely engaged with our partners, including Russia, via the Arctic Coast Guard Forum. By focusing on collaboration over conflict, we are promoting governance and building a shared approach to prevention and response challenges in the region.
Meanwhile, the 42-year old POLAR STAR recently completed another Operation DEEP FREEZE patrol in Antarctica. Just one major casualty away from leaving the Nation without any heavy icebreaking capability, POLAR STAR supported U.S. strategic interests and the National Science Foundation by breaking a navigable shipping lane to deliver fuel and critical supplies to the U.S. base at McMurdo Sound.
I appreciate your support for the $150 million appropriated in Shipbuilding and Conversion, Navy (SCN) funding in the FY 2017 Omnibus. This is a great step forward to secure our future in the Polar Regions and finally recapitalize the Nation’s icebreaker fleet. This funding coupled with the $750 million in the FY 2019 President’s Budget, would enable the Coast Guard to award a contract for detail design and construction and deliver the first new heavy polar icebreaker in 2023. These critical investments reflect our interests and standing as an Arctic Nation and affirm the Coast Guard’s role in providing assured access to the Polar Regions.
At the same time the Service was conducting counter-drug missions in the Eastern Pacific and projecting sovereign rights in the Arctic, the Coast Guard also launched one of the largest responses in history during a historic 2017 hurricane season. Over a five week period, Hurricanes HARVEY, IRMA, MARIA, and NATE impacted over 2,540 miles of shoreline3, and Coast Guard men and women in helicopters, boats, cutters, vehicles and on foot rescued over 11,300 people and over 1,500 pets.
During our 2017 hurricane response, the Coast Guard resolved over 1,269 aids to navigation discrepancies, handled 290 pollution cases, located and assessed more than 3,623 grounded vessels, with more than 1,585 removed to date. Within hours after each storm’s passage, Coast Guard damage and recovery assessment teams were on-scene determining the status of ports and waterways, leveraging electronic aids to navigation when feasible to facilitate the rapid reopening of key ports and waterways, and assessing impacts to Coast Guard facilities and capabilities. This enabled a vital portion of the country’s waterways to reopen, helping maintain our Maritime Transportation System (MTS) which contributes $4.6 trillion annually to our Gross Domestic Product.
The daily activities of Coast Guard men and women are heroic, as they support nearly every facet of the Nation’s maritime interests, protect our homeland, and secure our economic prosperity. In addition to the hurricane responses, the Coast Guard prosecuted over 16,000 search-and-rescue cases and saved more than 4,200 lives; interdicted more than 2,500 undocumented migrants; completed over 9,100 Safety of Life at Sea safety exams on foreign vessels; and responded to over 12,200 reports of pollution incidents.
Beyond operations, we earned our fifth consecutive clean financial audit opinion – the only Armed Service that can make such a claim. Further, our major acquisition programs and product lines are delivering new assets on schedule and on budget that have proven to meet our operational requirements. To better guide our modernization, we developed a Long Term Major Acquisitions Plan (LTMAP), a roadmap to field modern platforms to address 21st century threats. We have been working with the Administration to finalize the details of the LTMAP and are committed to delivering this report to Congress as soon as possible.
Our greatest strength is undoubtedly our people. Coast Guard operations require a resilient, capable workforce that draws upon the broad range of skills, talents, and experiences found in the American population. In FY 2019, the Coast Guard will maintain a proficient, diverse, and adaptable workforce that responds effectively to changing technology, an increasingly complex operating environment, and dynamic partnerships. Together, modern platforms and a strong, resilient workforce will maximize the Coast Guard’s capacity to meet future challenges.
Conclusion
History has proven that a responsive, capable, and agile Coast Guard is an indispensable instrument of national security. Funding 21st century Coast Guard platforms and people are especially prudent investments given today’s challenging fiscal environment. I firmly believe no other investment will return more operational value on every dollar than the extraordinary men and women of the U.S. Coast Guard—which includes 48,000 Active Duty and Reserve members, 8,500 civilians, and over 27,000 volunteer members of the Coast Guard Auxiliary. As illustrated by our sustained response to an historic hurricane season, another record year removing illicit narcotics from the maritime approaches, and unique support to Combatant Commanders around the globe; our ability to rapidly surge resources to emerging threats continues yield unprecedented results for the Nation.
With the continued support of the Administration and Congress, the Coast Guard will continue to live up to our motto – Semper Paratus – Always Ready. Thank you for all you do for the men and women of the Coast Guard.
Dan Sullivan, Sub-Committee chair (R, Alaska)(Lt.Col., US Marine Corps Reserve)
Gary Peters, ranking member (D, Michigan)(LCdr. US Navy Reserve, Supply Corps)
Bill Nelson, ranking member of the Commerce Committee (D, Florida)(Capt. US Army Reserve)(NASA Scuttle payload specialist)
Roger Wicker, Chairman of the Seapower sub-committee (R, Mississippi)(Lt.Col. ret. USAF reserve)
Richard Blumenthal (D, Connecticut) (USMC Reserve 1970 to 1976 discharges as Sargent)
Brian Schatz (D, Hawaii)
Ed Markey (D, Mass.) (Spec4, US Army Reserve, 1968-73)
Jim Inhofe (R, Oklahoma) (Spec4, US Army, 1956-1958)
Maria Cantwell (D, Washington)
You can also check out the original post from the Senate Committee on Commerce, Science, and Transportation. (Same video is available there, but the meeting does not actually start on that version of the video until minute 36.) There you can also find the written statements of the other three witness who constituted the second panel. The Commandant was the sole witness on the first panel.
This was something of a love fest for the Coast Guard with repeated praise for the people and actions of the Coast Guard.
This hearing was reputedly about how the Coast Guard had been impacted by the unusually severe Hurricane season. There is not a lot new here but there were some interesting remarks.
Polar Icebreaker Contracts
The intention is to Contract for the first Icebreaker and then employ block buy for the next two (28m). To me this seems to negate most of the advantage of a block buy. I don’t believe we will or should buy one and then wait until we have tried it out before contracting for the next two. That would necessitate a delay of at least five years during which we would still have the nightmare scenario of our only heavy icebreaker having no rescue if it should break down in the ice–certainly not an impossibility even with a new ship. If we are going to contract for the remaining two before testing the first, we might as well block buy all three.
First of class is always the most expensive. If the shipyard gets a block buy they know that initial improvements in productivity can be amortized over the entire block buy quantity. In some cases, in order to win the whole project, the shipyard will cut the price of the first ship substantially knowing they will make a profit over the entire project.
If we buy one and then block buy the second and third, we have paid for improvements to the winning yard with the first contract and minimized the chances for a competitive bid for numbers two and three.
Legislation has capped DOD participation in icebreaker procurement, so the bulk of icebreaker procurement costs will come out of the Coast Guard budget.
Authorization
There was a lot of discussion about the need to have the Coast Guard Authorization Bill signed into law, still not approved. You can see it here.
Other topics
There was a discussion of the high cost of the Coast Guard response to the recent series of Hurricanes.
Representative Sullivan spent a lot of time, discussing and advocating for an eleven mile road from King Cove (population estimate–989) to Cold Bay, Alaska (population estimate–122) which has an all-weather airport with two runways, one 10,180 feet and one 6285 feet in length. The Coast Guard connection is that the road would minimize or eliminate the necessity for the Coast Guard to Medivac emergencies from King Cove by helicopter, which is frequently hazardous. It is a Federal issue, because the road would run through a Federal reserve. The Commandant fully supported the desirability of completing the proposed single lane gravel road as a means of minimizing the requirement for helicopter medivac.
Video Breakdown
28m Domestic icebreakers–Design work on new domestic icebreakers is expected to start in 2030. That sounds a bit late to me. Mackinaw was commissioned in 2006 so if that is what he is really talking about, that makes sense, but the 140 foot icebreaking tugs are a different story. The first for of these will be 51 years old in 2030. More than half of them have already completed in-service which was expected to add 15 years to their service life. Morro Bay, at least, is expected to reach the end of her service life in 2030, and considering how long it takes us to build a ship we really need to start the process not later than 2025.
45m Western Pacific Fisheries Protection–They have not seen much risk of Illegal, Unregulated, or Unreported fishing.
51m Inland River Tenders
56m We may need to replace the 52 ft MLBs with something larger than the 47 foot MLB sometime in the future, but their end of life is not yet apparent
58m Coast Guard Museum in New London
60m Sexual Assault in the CG
1h02m Puerto Rico/Virgin Islands continuing commitment and its effects on drug seizures and alien migrant interdiction.
1h05m Vessel homeporting
1h08 CG center of expertise, particularly in regard to clean up spills in ice and fresh water
Certainly good news to see the process moving along, but it is also important to remember what it is not.
It is only a draft. “Responses to the draft RFP are due Dec. 11, and the Coast Guard and Navy will release a final RFP early next year, to support a Fiscal Year 2019 contract award.”
Like all of our contracts so far, there is no apparent consideration of a block buy that would lock Congress into funding the entire program–three ships in this case. Perhaps an astute shipbuilder will include that in their ultimate response, in case the Congress wants to commit for all three.
Unfortunately I can’t comment on the draft because of its limited distribution. Hopefully because,
“…Polar icebreakers enable the U.S. to maintain defense readiness in the Arctic and Antarctic regions; enforce treaties and other laws needed to safeguard both industry and the environment; provide ports, waterways and coastal security; and provide logistical support – including vessel escort – to facilitate the movement of goods and personnel necessary to support scientific research, commerce, national security activities and maritime safety.”
They will be provided with the means to be upgraded to allow them to exercise both self-defense and a modicum of offensive capability.
The House Subcommittee on Coast Guard and Maritime Transportation hearing recorded above is a follow-on to one already discussed. The video does not actually begin until minute 10:40. It is basically done in two parts as indicated below.
Panel I
Admiral Paul F. Zukunft, Commandant, United States Coast Guard | Written Testimony
Panel II
Rear Admiral Michael J. Haycock, Assistant Commandant for Acquisition and Chief Acquisition Officer, United States Coast Guard | Written Testimony
Ms. Marie A. Mak, Director of Acquisition and Sourcing Management, Government Accountability Office | Written Testimony
Rear Admiral Richard D. West (Navy Ret.), Chair, Committee on Polar Icebreaker Assessment, National Academy of Sciences | Written Testimony
Mr. Ronald O’Rourke, Specialist in Naval Affairs, Congressional Research Service | Written Testimony
Elsewhere the Coast Guard reported on the Commandant’s testimony, but what we really need to listen to is what the Congressional Sub-Committee members are telling us. They seem to love and respect the Coast Guard (you may have noticed Congress keeps giving us more than we ask for), but they are not pleased with the planning documents they are getting from the Coast Guard. I would particularly recommend you watch the opening comments of Representatives Hunter (10:40 to 13:30), Garamendi (to 17:00), and DeFazio (to 21:20). It will probably make you mad. You should be mad. We have to identify the problem and fix it.
If you want only a taste, here is a short version:
So what is discussed?:
27:00 Great Lakes icebreakers, line item for design of a Great Lakes Icebreaker is being budgeted but no plan for buying one.
29:30 Five Year plan “reflects Fiscal guidance.” That is, we are being told, we have to fit our budget request into predetermined ceilings, so it is less than we really need.
35:00 We are asking DOD to fund six FRCs CENTCOM has requested to replace the 110s currently assigned.
37:00 Graph comparing AC&I funding as requested, authorized, and funded.
39:00 Twenty year plan which was due to Congress at the end of June has not been submitted to Department.
44:00 DOD does not see icebreakers as a National Defense resource. Navy will not pay for the first icebreakers.
54:00 Strong support for icebreakers among the representatives.
57:30 Question on icebreaker lease. Ice trials issue still on the table.
1h02:00 Discussion of Cyber.
1h09 Why not a block buy on the first ship?
1h18m Commandant’s testimony ended
1h34m.Particularly watch Ronald O’Rourke’s testimony, he suggests accelerating the OPC program may be an alternative to WMEC life extension program.
1h43m Sub-Committee liked getting the fleet mix study, but that was several years ago.
Block Buy Report due in Dec.
Expected cost of heavy icebreaker has dropped about $200M.
2h07m again, “no military requirement for an icebreaker.” Representatives feel that question should be studied.
2h15m if we wait a number of years between the first and second WAGB contract results in loss of expertise and additional cost.
The discussion was dominated by three topics,
Coast Guard long term planning,
block buys for the OPC and Icebreakers,
whether we should build three or four heavy icebreakers.
Three or four heavy icebreakers: The proposal to build four heavy icebreakers rather than three came from a study by the National Academies of Sciences, Engineering, and Medicine. It is largely based on the reasonable assumption that heavy icebreaker #4 will cost less than medium icebreaker #1, as a result of the learning curve savings on heavy icebreakers and first of class costs for the medium icebreakers. I have not read the study but they don’t seem to have addressed the question, of the need for a total of six icebreakers found in the high altitude study. Assuming we build four of a single class of icebreakers, should we then start on a new class of two medium icebreakers with its attendant start-up costs or should we go ahead and build six heavies?
Block Buys for OPC and Icebreakers: The Congress has authorized the Coast Guard to use “Block Buy” funding for its shipbuilding programs. The Coast Guard seems hesitant to even ask to do this. In the case of the OPC, it might save us more than $1B. We could have (and I believe should have) asked to use multi-year procurement for the second phase of the Webber class WPC buy, but we did not.
The National Academy of Sciences study recommends we use block buy procurement for four icebreakers. The current contract for the OPCs is a contract for the first with options for eight more to be funded through FY2023. Until the options are executed we have the option of seeking a block buy contract for future construction.
Block buys commit Congress to fully fund all vessels included in a program to the extent of the contract. If they back out there are penalties incurred. From the Coast Guard’s point of view it would seem a commitment from Congress would be a good thing.
Because of that commitment, shipyards are likely more willing to invest in productivity improvements, resulting in lower costs.
The Commandant’s remarks on the Icebreaker seem to indicate we will wait until we finish and evaluate operations of the first new Polar Icebreaker before seeking funding for a second. If that happens not only will we miss the potential savings of the a block buy, we will also lose the experience the shipyard gained building the first. Long delays between the first few NSCs was largely why we did not see a significant price drop after the first ship.
Coast Guard long term planning: Our current program of record is a continuation of the “Deep Water” program which originated in 2002 and updated in 2005 following 9/11. A fleet mix study (apparently completed in 2009) confirmed that the Program of Record, if executed, would be an improvement of the fleet as it existed in 2007, but it also showed that it fell well short of meeting all the Coast Guard’s statutory requirements with many missions at risk. Additionally the fleet mix study assumed 230 days away from homeport for both the NSCs and the OPC using the “Crew Rotation Concept.”
We still have a very long way to go before we can achieve the Program of Record. There has been no meaningful test of the “Crew Rotation Concept” in spite of the fact that virtually every test of rotating multiple crews among multiple ships has proven problematic and has failed to realize the claimed benefits. Aircraft are also not achieving utilization hours planned. The OPCs, if constructed as currently planned, will not be completed until 2034.
In short our planning is out of date and the current planning seems to be limited to answering the question, “What will fit in the predetermined, but inadequate budget?”
If five-year plan is subject to “fiscal guidance” then why would the 20 year plan not also be subject to “fiscal guidance.” If we are to provide a true picture of what we need we need to change what we are doing.
What do we need to do?:
We need to know what we need.
We need to know the consequences of not getting what we need.
We need to be able to communicate both what we need and the consequences of inadequate funding to the Congress and Administration.
As noted in the introduction to the executive summary of the Offshore and Aviation Fleet Mix Analysis.
To support its role as Systems Integrator (SI), the Coast Guard (CG) needs to establish and continually update a strategic plan for the acquisition, operation, and sustainment of capabilities necessary in achieving organizational goals. Key to this strategic plan is a repeatable, comprehensive process that identifies alternative capabilities and Fleet mix solutions that will meet future mission requirements in an efficient, effective, and affordable manner.
This should not be a one time thing. We need to do this regularly as a repetitive process that is improved over time. We also really need to look at alternatives, not just already chosen solutions.
Once we know where we want to go we can come up with a 20 year (or better yet a 30 year) plan, beginning with what are we going to lose.
It might be best if the long-term plan did not include cost figures. Then we don’t have to comply with preconceptions of cost limits. Identify generic platform types with the capabilities we need.
Chuck Hill's CG Blog 