“Coast Guard Cutter Procurement: Background and Issues for Congress” –CRS, October 16, 2019, A New Version Only Five Days After the Last

Congressional Research Service has again updated their review of the Coast Guard’s Cutter acquisition programs and the changes are significant. You can see it here.

Again the significant changes begin on page 8, with the section labeled “October 2019 Announcement of Contractual Relief and Follow-on Competition.” It looks at the authority for contract relief. It goes on to discuss the “60-Day Congressional Review Period That Started on October 11” on page 9. This is followed by quotation of various press reports about the decision through page 11. Discussion of the OPC resumes on page 14 in the “Issues for Congress” section under the title, “Contractual Relief and Follow-on Competition for OPC Program.” These include questions that might be asked during the 60 day Congressional Review period. This continues through page 16

It quotes the Commandant as saying, “the first ship now delayed 10 to 12 months and the three subsequent ships about nine to 10 months each from that point,” and that “If DHS decided to reopen the competition immediately, that would probably mean a three year delay before a new vendor delivers the first OPC.” (I expect a minimum of four years.) and “If another vendor is selected through a re-competition, it’s unlikely the new shipbuilder would be tasked with building multiple ships per year immediately, Schultz said.”

The Coast Guard’s rights to Eastern’s OPC design data are discussed. My position would be that relief should be granted only if Eastern conveyed rights to all design data to the Coast Guard upon final grant of contract relief. 

The possibility of procuring a twelfth National Security as a means of ameliorating the effects of the delays to the OPCs program was discussed on page 17. (It is not addressed here, but delays in the OPC program also argue strongly for fully funding the FRC fleet to 64 units.)

The form of the follow-on contract, either annual or multi-year, was discussed on page 17 and 18. (A block buy could encourage more competition, offering stable work and to a degree offsetting Eastern’s learning curve edge in a re-compete, possibly resulting savings that might approach $1B.)

OPC procurement rate is addressed on pages 18 and 19. This question was raised in all previous editions of the report, but may gain additional urgency because of the delays associated with contract relief and because the program was supposed to transition from one ship per year to two ships per year with OPC #4 and #5 in FY2021.

If I had my druthers, we would fund NSC#12 in addition to OPC#3 in FY2020, then in FY2021 award two block buy contracts for ten ships each over five years (1, 2, 2, 2, 3) to two different shipyards. Assuming award near the end of FY2021 we might have all 20 plus the four currently planned from Eastern by the end of FY2029, five years earlier than previously planned. That could mean the last 270 would only be 38 years old when decommissioned, and we might not need to do as much work on old ships to keep the operational. That would give us 36 large ships (12 NSCs and 24 OPCs), more than the original Program of Record. That would mean funding three OPCs in FY2021, one to Eastern and one to each of the two new shipyard contracts.

“Appendix E. Impact of Hurricane Michael on OPC Program at Eastern Shipbuilding Group (ESG)” provides additional background on the decision to provide contract relief.

Incidentally, on page 20, the House Appropriations Committee is reported to have recommended funding five FRCs in FY2020 and on page 21 the Senate Appropriations Committee is reported to have recommended funding four FRCs instead of the two requested by the administration.

“Coast Guard Cutter Procurement: Background and Issues for Congress” –CRS, October 11, 2019

Busy as always, the Congressional Research Service has already updated their examination of the Coast Guard’s cutter procurement program to reflect the results of the contract relief extended to Eastern Shipbuilding Group (ESG) and the intention to re-compete for contracts to construct OPC#5 and later. You can see the new report here. 

Significant changes are found on pages 8-10 under the title “October 2019 Announcement of Contractual Relief and Follow-on Competition,” and pages 13-15 under the title “Issues for Congress–Contractual Relief and Follow-on Competition for OPC Program.”

Delays in the execution of the OPC program might be seen as justification for NSC#12 particularly if it is seen as a trade-off for a future OPC.

Not new to this edition, but looking at “Table 1. NSC, OPC, and FRC Funding in FY2013-FY2020 Budget Submissions” on page 13, raises a question about how many Webber class FRCs are to be built. The Program of Record is 58, but this did not include replacements for the six vessels assigned to Patrol Forces SW Asia. Adding six for PATFORSWA should bring the total to 64. So far 56 Webber class have been funded, including four to replace 110 foot patrol boats assigned PATFORSWA. There is $140M in the FY 2020 budget request, which would fund two more, but there are insufficient funds in the out years to fund even a single additional FRC. This appears to mean the program will end with a total of 58 vessels unless Congress steps in.

 

“Coast Guard Polar Security Cutter (Polar Icebreaker) Program: Background and Issues for Congress” –CRS

19 September, the Congressional Research Service has issued an update to its “Coast Guard Polar Security Cutter (Icebreaker) Program: Background and Issues for Congress” replacing an edition published on eight days earlier. You can see the latest version here. The only significant changes I see in the latest edition is reflected in table C-1 to include future year PSC funding though FY2024 and table C-2 that provides projected Procurement, Construction and Improvements (PC&I) funding through FY2024. Notably these PC&I projections are well below the $2B annually that the Coast Guard has been saying they need.

Projected PC&I totals by FY are:

  • 2020: $1,234.7M
  • 2021: $1,679.8M
  • 2022: $1,555.5M
  • 2023: $1,698.5M
  • 2024: $1,737.0M

You can track the changes made between consecutive editions here.

CRS: “Coast Guard Polar Security Cutter (Polar Icebreaker) Program: Background and Issues for Congress”/ Plus a Note on Great Lakes Icebreaker Procurement

The Congressional Research Service his issued a revised “Coast Guard Polar Security Cutter (Polar Icebreaker) Program: Background and Issues for Congress” updated 9 August 2019.

It includes a short appendix (Appendix E, pp 63-66) on the issue of a potential new Great Lakes icebreaker. The final paragraph of that appendix states:

“An examination of procurement costs for Mackinaw, the National Science Foundation’s ice-capable research ship Sikuliaq, new oceanographic research ships being procured for NOAA, and OPCs suggests that a new Mackinaw-sized heavy Great Lakes icebreaker built in a U.S. shipyard might have a design and construction cost between $175 million and $300 million, depending on its exact capabilities and the acquisition strategy employed. The design portion of the ship’s cost might be reduced if Mackinaw’s design or the design of some other existing icebreaker were to be used as the parent design. Depending on the capabilities and other work load of the shipyard selected to build the ship, the construction time for a new heavy Great Lakes icebreaker might be less than that of a new heavy polar icebreaker.”

If you would like a quick, only slightly out of date (May 2017), summary of world icebreaker fleets, take a look at Fig. B-1, page 40.

“The U.S. Navy-Coast Guard Partnership Is Heading For Trouble: Here’s How To Fix It” –Forbes

141219-N-DX365-258
BAHRAIN (Dec. 19, 2014) Helicopter Sea Combat Squadron (HSC) 26, Det. 1, conducts a vertical onboard delivery with the U.S. Coast Guard Cutter Maui (WPB 1304). HSC-26 is a forward deployed naval force asset attached to Commander, Task Force 53 to provide combat logistics and search and rescue capability throughout the U.S. 5th Fleet area of responsibility. (U.S. Navy photo by Mass Communication Specialist 1st Class Joan E. Jennings/Released)

Forbes points to growing strain in the Navy/Coast Guard relationship as defense focus shifts from counter terrorism to near peer conflict.

The author, Craig Hooper, points to limits on reimbursement of Coast Guard costs in support of DOD, limited Navy support for drug interdiction and law enforcement efforts, a push for more Coast Guard assets in the Western Pacific, a need to recapitalize the Coast Guard Yard as a national asset, and possible deployment of Navy personnel and assets, particularly rotary wing, to aid in the execution of missions.

“Reorienting the Coast Guard to address “new” state-based threats is a complex problem that will require patient investment and a lot of  preparatory work to be successful. The Coast Guard is part of America’s large National Fleet, and the tighter integration of Coast Guard forces—along with the U.S. Merchant Marine, NOAA’s research fleet and other Federal maritime assets—into the U.S. national security mission space merits thoughtful consideration…”

The topic raises a number of issues.

The Coast Guard is simply underfunded. If the Coast Guard’s defense related missions were properly recognized and funded as part of our very day missions, no reimbursement would be necessary. Certainly fisheries patrols in the US Western Pacific EEZ are a real everyday Coast Guard mission.

As cutters go increasingly into harms way, maybe they need to be better equipped for the possibility of combat.

Mobilization planning really should address how Navy Reserve Personnel and equipment, notably ASW helicopters, LCS mission modules, and ASW, EW, and Weapons operators and support personnel, could augment cutters and bring them up to a wartime compliment.

Coast Guard Cutter Procurement: Background and Issues for Congress, Updated May 22, 2019

Offshore Patrol Cutter future USCGC ArgusThe Congressional Research Service has once again updated their look at Coast Guard Cutter procurement.

I have quoted the summary below and will comment on some of the questions.

The Coast Guard’s program of record (POR) calls for procuring 8 National Security Cutters (NSCs), 25 Offshore Patrol Cutters (OPCs), and 58 Fast Response Cutters (FRCs) as replacements for 90 aging Coast Guard high-endurance cutters, medium-endurance cutters, and patrol craft. The Coast Guard’s proposed FY2020 budget requests a total of $657 million in procurement funding for the NSC, OPC, and FRC programs.

NSCs are the Coast Guard’s largest and most capable general-purpose cutters; they are intended to replace the Coast Guard’s 12 aged Hamilton-class high-endurance cutters. NSCs have an estimated average procurement cost of about $670 million per ship. Although the Coast Guard’s POR calls for procuring a total of 8 NSCs to replace the 12 Hamilton-class cutters, Congress through FY2019 has funded 11 NSCs, including the 10th and 11th in FY2018. Six NSCs have been commissioned into service. The seventh was delivered to the Coast Guard on September 19, 2018, and the eighth was delivered on April 30, 2019. The ninth through 11th are under construction; the ninth is scheduled for delivery in 2021. The Coast Guard’s proposed FY2020 budget requests $60 million in procurement funding for the NSC program; this request does not include funding for a 12th NSC.

OPCs are to be smaller, 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 as the service’s top acquisition priority. OPCs have an estimated average procurement cost of about $421 million per ship. On September 15, 2016, the Coast Guard awarded a contract with options for building up to nine OPCs to Eastern Shipbuilding Group of Panama City, FL. The first OPC was funded in FY2018 and is to be delivered in 2021. The second OPC and long leadtime materials (LLTM) for the third were funded in FY2019. The Coast Guard’s proposed FY2020 budget requests $457 million in procurement funding for the third OPC, LLTM for the fourth and fifth, 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. FRCs have an estimated average procurement cost of about $58 million per boat. A total of 56 have been funded through FY2019, including six in FY2019. Four of the 56 are to be used by the Coast Guard in the Persian Gulf and are not counted against the Coast Guard’s 58-ship POR for the program, which relates to domestic operations. Excluding these four, a total of 52 FRCs for domestic operations have been funded through FY2019. The 32nd FRC was commissioned into service on May 1, 2019. The Coast Guard’s proposed FY2020 budget requests $140 million in acquisition funding for the procurement of two more FRCs for domestic operations.

The NSC, OPC, and FRC programs pose several issues for Congress, including the following: 

  •     whether to provide funding in FY2020 for the procurement of a 12th NSC;
  •  whether to fund the procurement in FY2020 of two FRCs, as requested by the Coast Guard, or some higher number, such as four or six;
  •  whether to use annual or multiyear contracting for procuring OPCs;
  •  the annual procurement rate for the OPC program;
  •  the impact of Hurricane Michael on Eastern Shipbuilding of Panama City, FL, the shipyard that is to build the first nine OPCs; and
  •     the planned procurement quantities for NSCs, OPCs, and FRCs.

Bertholf Class National Security Cutters (NSCs):

If there is going to be a 12th NSC, it almost certainly has to be funded this year. Future years will see the Polar Security Cutters and OPCs further crowding the budget. Frankly I see little to choose between the NSC and OPC for peacetime missions, but the replacement of the legacy fleet is becoming urgent and the price of the NSCs has decreased as funding became more regular, so a 12th might be reasonable. If we had started the OPC program earlier, it might have offered a lower cost alternative to additional NSCs, but we will not be ready to start multi-ship procurements of the OPCs until FY2021 and then only at the rate of two per year if we follow current planning.

Argus Class Offshore Patrol Cutters (OPCs):

There is probably good reason to accelerate the OPC program beyond the two per year currently planned to begin in FY2021. If we maintain that rate, the last 210 foot WMEC will not be replaced until 2028, the last 270 not until 2034. I expect we may see some catastrophic failures that will result in either sidelining ships or unacceptably high repair costs, before the program of record is complete.

The Coast Guard should plan on expediting testing of the first OPC so that production could move from the current contract with options to a true Multi-Year contract as soon as the design has proven successful.

We probably will need more than 25 OPCs. The Coast Guard has operated more than 40 cutters of more than 1,000 tons for decades. It seems likely we are going to need more than 36 total NSCs and OPCs. (See the discussion about the Fleet Mix Study below.)

Webber Class Fast Response Cutters (FRCs):

We are nearing the end of the Webber class program with 52 of the 58 program of record vessels, plus four additional vessels for Patrol Forces South West Asia (PATFORSWA), already funded. Buying only two for FY2020 raises the unit costs of these vessels. Congress has consistently increased purchases to four or even six per year when only two have been requested. Adding the final two additional FRCs intended to replace the 110s assigned to PATFORSWA would bring the total buy to four. That would leave only four to be purchased in FY2021 which could wrap up the funding. The question is, will Congress stop the program at the 64 vessels total when there may be justification for more?

Impact of Hurricane Michael: 

The Coast Guard budget is not the place to provide disaster relief for businesses. Maybe they have insurance. Maybe the state or Federal Government wants to provide aid, but renegotiating the contract for OPCs is not the way to do it. No way should it come out of the Coast Guard budget.

If on the other had we do renegotiate the contract, it is not to late to make it a “Block Buy.”

One solution might be for the contract to be converted to a block buy, using purchase amounts no more than current contract with options. That would assure the contractor and its creditor that they would have a steady stream of work. The contract might even have options for production of additional ships at rates higher than two per year.

We Need a New Fleet Mix Study:

The number of OPCs and FRCs actually required to fulfill Coast Guard statutory missions was examined in a fleet mix study (see pages 19 and 20 of the report) that found that the Program of Record (8 NSCs, 25 OPCs, and 58 FRCs) fell far short of the number of vessels required to meet all statutory requirements. Phase One of the study (2009) found that the total “objective” requirement was 9 NSCs, 57 OPCs, and 91 FRCs. Phase Two found that only 49 OPCs would be required but found the same requirements for NSCs and FRCs (see page 22).

The problem is that the analysis is getting pretty old and its assumptions were wrong. The Coast Guard will have at least 11 NSCs. The FRCs appear to be more capable than anticipated. Perhaps most importantly, the study assumed the NSCs and OPCs would use the “Crew Rotation Concept,” resulting in an unrealistic expectation for days away from homeport. From my point of view, the study failed to even consider the requirement to be able to forcibly stop a medium to large size ship being used as a terrorist weapon. None of our ships are capable of doing that reliably, and even our ability to stop small fast highly maneuverable ships under terrorist control is far from assured, even if the objective fleet were available.

The Procurement, Construction, and Improvements FY2020 budget request is about $1.2B. Adding NSC #12 and a pair of FRCs using the costs in the CRS report ($670M/NSC plus 2x$58M/FRC) which are probably high for the current marginal costs, would still leave the PC&I budget under the $2B/year the Coast Guard has been saying they need and about $250M less than the FY2019 PC&I budget.

For the Future:

While we are thinking about cutters, with the FRC program coming to an end, it is not too early to think about the 87 foot WPB replacement. I think there might be a  window to fund them after the third Polar Security Cutter if we have our requirements figured out. That means preliminary contracts such as conceptual designs have to be done during the same period we are building PSCs, e.g. FY2022 and earlier. .

To avoid always being constantly behind the power curve, as we have been for the last two decades, we really need a 30 year shipbuilding plan. The Navy does one every year. There is no reason the Coast Guard should not be able to do one as well. The Congress has been asking for a 25 year plan for years now, but so far no product.

Thanks to Grant for bringing this to my attention. 

“Coast Guard Needs Congress for Budget Bailout” –National Defense

US Capital West Side, by Martin Falbisoner

National Defense reports that the Administration’s 2020 budget request makes deep cuts in the Coast Guard budget compared to recent years, but that there is a good chance Congress will make up at least some of the difference.

You can see a brief summary of the budget submission here.

We have Congress plus up the Coast Guard’s budget in the past, particularly in terms of increasing numbers of Webber class cutters funded. The 2020 budget includes only two. This is likely to be increased to four or even six.

Congress has also added three Bertholf class NSC to the program of record and there have been suggestions that a 12th is needed to fully replace the 378 foot WHECs. If we are to get a 12th NSC, it almost has to happen in FY2020 before we OPC construction goes to two per year and before we need to fund Polar Security Cutters 2-6.

The Commandant has been talking about maintenance backlogs recently. Unfortunately maintenance does not have the highly visible job creation impact of new construction, although the dollar for dollar impact may be as great. It seldom makes the evening news, so this may be a harder sell.