“Building the Fleets of the Future: Coast Guard and NOAA Fleet Recapitalization”–Senate Hearing

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.

Conducting the hearing were:

The video does not actually begin until about time 9:30

Senator Baldwin pushes “Made in America Shipbuilding Act” advocating that components as well as the ships themselves be made in America.

20:30 Admiral Haycock’s prepared statement begins.

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.)