Tag Archives: Budget

Could This Be the Start of Something Big?

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ice-breakers-540688_1280

We got word today of an interesting development in the Senate from frequent contributor Tups.

“Today, U.S. Senators Maria Cantwell (D-WA) and Lisa Murkowski (R- AK) introduced the Icebreaker Recapitalization Act. The bill would authorize the U.S. Navy to construct up to 6 heavy icebreakers. The new icebreakers would be designed and operated by the Coast Guard. The Coast Guard is the sole service responsible for icebreaking missions.”

Here is the announcement of the bill.

The actual bill is here (pdf).

I note few things about how this bill and how it was written.

  • First it is a long way from funding a new icebreaker fleet.
  • Second funding through the Navy, while perhaps easier, will not help pump up the Coast Guard’s ship building budget so that adequate funding is seen as normal and expected.
  • Clearly they expect the ships to be built in Washington State.
  • The bill authorizes multiyear funding, but the program does not seem to meet the requirements of multi-year funding.
  • It only talks about up to six heavy icebreakers while the High Latitude Study also talks about medium icebreakers. In fact the most frequently sighted requirement is for three heavy and three medium icebreakers. This may be a ploy to insure that all the work goes to Washington, rather than being split between Washington and the Gulf Coast.
  • Even so, there is a requirement in the High Latitude study for six heavy and four medium icebreakers, under some circumstances. Series production of six heavy icebreakers might bring down the unit cost.

It is a Theme

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FierceHomelandSecurity is reporting on testimony of VAdm. Charles Michel before the House Transportation subcommittee on Coast Guard and maritime transportation. As we have seen so many times recently, the Deputy commandant for Operations is pointing out that we simply do not have enough cutters to act upon all the intelligence we have for counter-drug operations. (If you look at the actual testimony, he also covers much more.)

It seems the Commandant and his staff have been repeating the same story at every opportunity.

I think they are doing the right thing. The Commandant makes a convincing case for why the country should want to do this. The other theme that accompanies it is the need for three heavy and three medium icebreakers, and the fact that the Coast Guard cannot afford to build them without a substantial budget increase.

It seems the Commandant and staff are doing their best to make a case for more money for shipbuilding. They are using the DHS Fleet Mix Study to point to the need for even more cutters than provided in the program of record and the “High Latitude Region Mission Analysis” to justify the Icebreakers.

I could point to additional shortfalls including the dearth of assets in the Western Pacific, but it looks like the Commandant has chosen his battle, and he is fighting it with determination.

The question now is, is anyone really interested in the Polar regions and our neighbors in Latin America and the problems created by the criminals that run the drug trade there.

Timely Actions Needed to Address Risks in Using Rotational Crews–GAO

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Waesche Carat 2012

The GAO has recently issued a report, “Coast Guard, Timely Actions Needed to Address Risks in Using Rotational Crews” (pdf) which discusses the “Crew Rotation Concept” (CRC) which has been part of the proposed National Security Cutter (NSC) program for at least a decade, but never tested. I believe there has also been discussion of using it on the Offshore Patrol Cutter as well.

This is perhaps the last, worst vestige of the Deep Water program.

First there is this explanation of the expectations of the plan from an Acquisitions Directorate web page that has since been taken down.

“Initially, the Coast Guard will employ four crews for three NSCs at a single homeport, rotating the cutters among the crews to limit crew PERSTEMPO to 185 days while maintaining each cutter’s operational tempo (OPTEMPO) at 230 days. The three-cutter, four-crew prototype will be evaluated in 2009 through an operational testing-and-evaluation process. Policy and procedures for CRC are based on the lessons learned by the Coast Guard and the U.S. Navy, as well as consideration of the recommendations made by auditors from the Government Accountability Office.”

Please forgive me for quoting myself but I feel the need to repeat some calculations from a post from 2010.

First assuming the projections are correct, we are replacing 12 ships which would provide 2,220 operating days with eight ships that will provide at best 1,840 so we are already two ships short.

Then you will also note that the presumption is that the ships will be operated in groups of three from the same home port, but there are only eight ships planned, meaning there will be a rump group of two somewhere. Will they be operated by three crews or by a single crew per ship?

What we hope to save here is acquisition cost, because the operating costs per op day cannot be lowered by this strategy and will actually be higher. I don’t know the projected life cycle costs for the National Security cutters, but in general, I’ve heard that the acquisition costs for similar systems is about 15% of the life cycle cost. Fuel and personnel costs are the real driver. Fuel costs should be the same per op day. Personnel costs will actually be higher, since each crew under the multi-crewing concept will only provide 172.5 op days instead of 185, so personnel costs will be 7.25% higher.

In addition, because the ship will only be in port 135 days a year instead of 180, there will be fewer opportunities for the crew to make repairs. These repairs, normally done by the crew, will have to be done by contractors at additional costs.

I would also note that the acquisition costs we hope to save actually decline as we add more ships. Four additional units are likely to cost far less on the average than the first 8. There is also the long term value of having four additional ships in hand if the country should need them in the future.

Frankly I don’t think we will see any significant savings from this manning approach and it may actually cost us in the long run.

If a truly convincing argument can be made for the concept, I would like to see it. And if the argument involves lower overhead because we get more “mission” op days compared to RefTra day, remember the reason we go, is to train the crews, not the ships, so every crew will needs to go.

As I noted above three into eight does not make for three ship groups. At that time, I thought it would be two ports with three ships and one with two, but in fact, apparently the intention is now two in Charleston, two in Honolulu, and four in Alameda, so it is three ships nowhere.

I am a little surprised the testing has not already started. After all we have had three ships in Alameda for three years now.

As far as I can tell, rotating multiple crews among multiple ships has never worked out. More here and here. We have certainly had the opportunity to test the concept on simpler platforms, but it has yet to be attempted in earnest. Frankly I think everyone knows this is not going to work, but they have just been pushing facing the embarrassing truth off into the future.

There may be viable alternatives to swapping out entire crews. In fact, apparently crews of existing NSCs have been augmented to allow them to provide 210 days away from Homeport. Actually nine augmented ships, U/W 210 days a year, would provide more availability (1890 days) than eight multi-crewed ships U/W 230 days a year (1840 days) but they would still not reach the level provided by twelve un-augmented ships (2220 days).

Unlike wine, bad news does not get better with age. It is time to bit the bullet. Try CRC or find an alternative. If it doesn’t work, well it was really someone else’s idea after all.

Defense News Interviews the Commandant

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DefenseNews.Com just posted a three part video interview with the Commandant. Each segment is five to ten minutes in length.

Impact of Sequestration: http://www.defensenews.com/videos/defense-news/2015/03/01/24221471/

The Commandant notes, in the first two months of 2015 we have seized more drugs than we seized in all of 2013. He talks about establishing priorities and specifically mentions the Arctic and Western Hemisphere Drug enforcement.  He did not say what will drop out.

Capability vs Affordability http://www.defensenews.com/videos/defense-news/2015/03/01/24221423/

The Commandant has quite properly put emphasis on the OPC, and he has hit the point that spreading out procurement will cost more in the long run. He talked about icebreakers and discussed how we will need help funding them. He is pushing the results of the previous High Latitude study, saying the US needs three heavy and three medium icebreakers.

Coast Guard Modernization http://www.defensenews.com/videos/defense-news/2015/03/01/24221467/

Here he repeated themes from the State of the Coast Guard address. The importance of defending against Cyber attacks both within the Coast Guard and in the larger Maritime Transportation industry, the formation of an Arctic CG forum, and making the Coast Guard a hostile environment for those that might attempt sexual assault.

Observations

Seems the Commandant has recognized the need to sell the service and push for more funding, particularly for AC&I. It would not hurt to see the rest of the Coast Guard repeating the themes that he seems to have focused on, to make sure the message gets delivered.

The Commandant will continue to focus on the six major topics he highlighted in the State of the Coast Guard Address. Specifically I expect to see a lot more Coast Guard effort in the Eastern Pacific Transit Zone; we will continue to hear that the US needs three heavy and three medium icebreakers as the Commandant pushes for supplemental icebreaker funding; less obvious, but I think he is laying the ground work for an attempt to speed up the OPC construction schedule which would require at least another $500M annually in the AC&I account. There will be a lot more emphasis on cyber and tougher action on sexual assault. In terms of the objective of “maximizing return on investment,” I think we will see closer examination of fuel efficiency, manning, and other operating economies as a basis for where to invest modernization dollars.

Subcommittee on Coast Guard and Maritime Transportation: Examining Cutter, Aircraft, and Communications Needs

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“The Coast Guard’s FY2014 Five Year (FY2014-FY2018) CIP (Capital Investment Plan–Chuck) includes a total of about $5.1 billion in acquisition funding, which is about $2.5 billion, or about 33%, less than the total of about $7.6 billion that was included in the Coast Guard’s FY2013 Five Year (FY2013-FY2017) CIP. (In the four common years of the two plans—FY2014-FY2017—the reduction in funding from the FY2013 CIP to the FY2014 CIP is about $2.3 billion, or about 37%.) This is one of the largest percentage reductions in funding that I have seen a five-year acquisition account experience from one year to the next in many years.”–Ronald O’Rourke, Specialist in Naval Affairs, Congressional Research Service

The video above is long (one hour and forty two minutes) but I think it is important, and it might even make you mad. This is a hearing before the House Committee on Transportation and Infrastructure’s subcommittee on the Coast Guard and Maritime Transportation. The first hour and ten minutes are fairly routine and I’ll summarize some of it below. It includes the obligatory thank you to the Department Secretary (Secretary Nepolitano has been “particularly supportive”) when in fact the Coast Guard has been cut far more deeply than the rest of DHS. The real meat begins with Ronald O’Rourke’s presentation at 1hr.10min.

(1:10 to 1:15) Mr. O’Rourke’s stance is neutral, as befits a good researcher, preparing a balanced assessment for the law makers, but he succeeds in making some of the best arguments I have heard for increased funding for the Coast. (Unfortunately this seems in marked contrast to the passivity of the Coast Guard leadership. Hopefully this is more apparent than real and there are things going on that we do not see. There is some indication this is true, here and here.) He also takes the Coast Guard to task for not employing multi-year and block buy contracting.

(1:15 to 1:19) Dr. Bucci provides his personnel view, noting that the Coast Guard has not learned to play the Washington bureaucratic game of asking for more than really need. (He also specifically advocates an exemption to the Jones act to allow the Coast Guard to lease foreign built icebreakers.)

(1:19 to 1:24) Dr. Korb advocates a Unified National Security Budget that looks as trade-offs between the Departments of Defense, Homeland Security, and State. He also advocates including the Commandant in the Joint Chiefs of Staff and appointing a Civilian Service Secretary to act as an advocate. Later, when questioned, he points out that the Coast Guard’s unofficial motto is “We can do more with less” and if that is what you ask for “that is what you will get.” Among his telling points was that the Navy budget is 16 times that of the Coast Guard even though they have only eight times the people.

(1:24 to 1:42) Testimony of these three witnesses continued in response to the Representatives’ questions.

You can take a short cut and read the text of the prepared statements, but the Congressmen’s questions and reactions are also instructive, and generally supportive of the Coast Guard.

(0:00 to 1:10) Discussion with Vice Admiral Currier, Vice Commandant

Vice Admiral Currier’s prepared statement was completed at 14 minutes. Questions, answers and committee member statements continued to 1 hour and 10 minutes.

(Note, I am not taking the points in chronological order as discussed)

C-27J: The Coast Guard is apparently counting on getting at least 14 of these aircraft, perhaps as many as 21. Eighteen C-144s have been funded so far of a total of 36 in the “Program of Record.” Substituting C-27Js (which do have a higher operating cost) for the remaining 18 could represent a savings of up to $800M in acquisition costs. Calling it a strategic pause, the Coast Guard has zeroed additional C-144 purchases as it waits to find out if it will get these surplus Air Force assets.

Zeroing future C-144 purchases accounted for about a third of the reduction of the CIP compared to last years. As much as I have supported this course of action, and as confident as the subcommittee sounded, this is really not a done deal because the Air National Guard wants to keep the planes and they are very well connected politically. Additionally there are others who also want these aircraft.

Webber Class WPCs: Another major change was the decision to fund only two Fast Response Cutters annually instead of the four or six funded previously. Simply spreading out the buy is a really bad decision. Building six per year cost less per ship. Buying only two per year will require a renegotiation of contract. In addition, inflation in the ship building industry is not only higher that inflation in general, its rate is higher than the interest rate on government borrowing, so it would cost less in the long run to borrow money and build as rapidly as we can, even including the interest paid on the bonds. This consideration applies to the Offshore Patrol Cutter as well as the FRC. I don’t think this is the last word on construction of the FRCs, and we may see more money added to the budget.

Bertholf Class WMSLs: It now appears all eight National security Cutters will be completed, but we can waste time and money if we do not fund long lead time items and this is currently the plan. This was also discussed and generally deplored.

Multiple Crewing: Questions were raised about when the Coast Guard would demonstrate the “Crew Rotation Concept” which has been touted as being able to provide 225-230 days per year from each of the larger cutters. The Vice Commandant responded that the plan would not be implemented until 2017, but until that time the NSCs are expected to average 210 days AFHP.

Offshore Patrol Cutters:  VAdm Currier said the CG expects to select to three preliminary designs for further development by the end of this FY, and that the final selection will be made a year later, by the end of FY2014.

Unmanned Air Systems: The uncertain future of the Coast Guard’s Unmanned Air Siystem (UAS) programs, and its dependence on the US Navy’s development, was discussed, with Representative Garamendi pointing out this represented a major hole in the Coast Guard’s plan to maintain Maritime Domain Awarenes (MDA).

Response Boat Medium: A Representative questioned why the Coast Guard had stopped the Response Boat, Medium program at 170 RBMs rather than building the 180 approved by Congress, without submitting a justification report for the smaller program as required by Congress.

Port Security: Representative Janice Hahn, California, expressed discomfort with the current container inspection rate of only 2 to 3%. She also suggested the possibility of diverting from some customs money to port security.

The Arctic: A pleasant surprise was that VAdm Currier expressed confident that the Coast Guard can already demonstrate good Maritime Domain Awareness (MDA) in the Arctic. Don Young, Alaska, asked several questions about icebreaker. He opined that the Coast Guard should lease an “American built” icebreaker, never mind the fact that no heavy icebreakers have been built in the US since the Polar Sea. We could of course lease a ship someone would call an icebreaker, but that sort of misses the point. VAdm. Currier did say the Polar Sea could be returned to operation after about three years work at a cost of $100M and have a seven to ten year additional useful life.

Missions: The question, what missions the Coast Guard will not do, given reduced funding. The only answer was that we will have to make some tough choices and the CG and the Department will do a portfolio analysis, date of completion unknown.

Tone: Generally the Committee was supportive. The irony of spending $5B for an East Coast Missile Defense system while shorting the Coast Guard assets that are necessary to prevent a much more probable method of introducing weapons of mass destruction was not lost on the Committee. They also saw the foolishness adding $46B to  beef-up patrols along the Mexican Border and simultaneously undercutting the Coast Guard. They also discussed the double standard by which they could write a $2.6B blank check to purchase unspecified aircraft for Afghanistan, while demanding detailed justification for all Coast Guard purchases. They seemed to recognize that if “National Security” were considered in a holistic fashion, the Coast Guard would do a lot better, but that the committee structure in Congress prevented this kind of evaluation of trade-offs.

Sexual assault: The Vice Commandant addressed this in his prepared remarks and it was also discussed in the subsequent question and answer period.

Things the Coast Guard might do differently:

There was a clear message from the three civilian witnesses that the Coast Guard has not learned to “play the game,” that the Coast Guard has been excessively modest in pointing out its needs, and that because of this reticence important missions are being short changed.

We have repeatedly told our elected representatives about our successes, but that leaves the impression everything is alright. Everything is not alright. We need to keep reminding them what is not getting done and the possible consequences of inaction. Every time a Congressionally mandated task is not done to the fullest extent, it should be reported, and they should be made to understand that the reason it was not done is lack of resources. We need to put the onus on Congress and the Executive.

When asked what mission the CG will not do, Adm Currier “we can adjust.” Given an opportunity to address why the aging fleet’s patrol hours now down 8-12%, Admiral Currier said, Currier, “We are OK for OPC/MEC” (Frankly I don’t think that is true. The Coast Guard’s own studies point out a need not only for newer replacements but also more ships) and “The gap is in the Offshore and the NSC is key.” The construction of the eight NSCs seems assured, it was time to point out how the fleet will continue to age and deteriorate. We can expect even more breakdowns and higher maintenance costs for the legacy fleet. In the nine years 1964 to 1972, 28 new ships entered service with the Coast Guard (3.11 ships per year). Only three have been replaced and we are building at a rate of less than one a year, and we don’t expect to deliver more than one replacement per year until at least 2023 and then never more than two a year. Things are going to get much worse before they get better.

We have done an absolutely terrible job of conveying an sense of urgency in replacing our over-aged patrol ships. I have on my desk the August issues of the Navy League’s magazine “SeaPower” and the US Naval Institute’s Magazine “Proceedings.” Both magazines carry happy glowing reports of the Coast Guard’s successes. There is hardly a word about the growing problems with our major cutters. There is hardly a mention of the OPC and certainly no article designed to explain the urgency of its funding and why the naval and maritime community should be excited about it.

The Coast Guard needs to publish a 30 year ship building plan. When I first saw that the Navy was doing this, I thought it was ridiculous, but think about what it does for you. It lays out intentions far into the future and prepares the decision makers to deal with uneven funding requirements. It also highlights the bow wave effect of deferring acquisitions.

If the Coast Guard can get seven to ten years out of the Polar Sea for $100M then compared to 30 years from a new $800M to $1B icebreaker then the costs are not out of line. Perhaps we should not reject the idea. By the time the new icebreaker is ready, the remaining life in Polar Star will be used up (if it actually lasts that long) and we will still have only one heavy icebreaker. Putting an second heavy icebreaker into the fleet, as soon as possible, is the best way to create a presumption that there will be a second new icebreaker to follow the one currently planned. These ships break, we really need more than one.

Perhaps it is also time to make another examination of the legacy of Deepwater that is still with the Coast Guard. Are there alternatives to the long range aircraft/UAVs and the ship types that have been perpetuated long after the program failed?

The Coast Guard has belittled its role in national defense and in doing so has also minimized the future utility of its assets in this role. Fear is a stronger motivator than altruism. We need to recognize that the nation is motivated more by fear than by the desire to do good or maintain its infrastructure. This is the reason the Defense Department is well funded.  The national defense role of the Coast Guard, both against terrorism in peacetime and as a naval auxiliary that can bring needed additional numbers to the fight in wartime needs much more emphasis. It is obvious, listening to the subcommittee, that the counter-terrorism role was what they had in the forefront of their minds.

The Sub-Committee:

—Republicans

Duncan Hunter, California, Chairman
Don Young, Alaska
Howard Coble, North Carolina
Frank A. LoBiondo, New Jersey
Patrick Meehan, Pennsylvania
Steve Southerland, II, Florida, Vice Chair
Tom Rice, South Carolina
Trey Radel, Florida
Mark Sanford, South Carolina
Bill Shuster, Pennsylvania, (ex officio)

—Democrats

John Garamendi, California, Ranking Member
Elijah E. Cummings, Maryland
Corrine Brown, Florida
Rick Larsen, Washington
Timothy H. Bishop, New York
Janice Hahn, California
Lois Frankel, Florida
Nick J. Rahall, II, West Virginia, (ex officio)

“Reinvent the Fifth Armed Service, Quickly”-USNI

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The August issue of US Naval Institute Proceedings is appropriately enough, the “Coast Guard Issue,” although less than a third of the content is Coast Guard related. I was disappointed but not surprised to see that there was no article about the OPC. It includes four articles that are written by Coasties, active or retired, and includes a “rouges gallery” of CG flag officers and senior enlisted as well an orgainizational chart.

There is one particular article I’d like to recommend that actually dares to be a bit controversial, and it is available on line, “Reinvent the Fifth Armed Service, Quickly”.  I think it is definitely worth a read.

They talk about

  • reorganization within the Coast Guard
  • exploitation of UAS technology
  • integration of DHS maritime aviation and vessel fleets.
  • coordination of procurement with the Navy
  • integration of the NOAA fleet into the Coast Guard

As I say it is controversial, it is going to ruffle some feathers, and hopefully it will start some thinking and some discussion.

Five Year Capital Investment Plan, FY 2014-2018

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Both Fiercehomelandsecurity.com and  Homeland Security today. have reported on the Senate’s reaction to the Coast Guard’s Five Year Capital Investment Plan, but until last night I had been unable to get much detail. I have found a one page summary, and I have to say it is profoundly disappointing.

FY 2014-2018 Five Year Capital Investment Plan … – U.S. Coast Guard

AC&I  Budget Projections (x$1000) Total            Vessels        Aircraft

  • FY 2012 Enacted           1,403,924            642,000       289,900
  • FY 2104 Request              951,116            743,000         28,000
  • FY 2015                          1,195,729            935,000        66,000
  • FY 2016                             901,042            512,000      123,000
  • FY 2017                          1,024,827            723,500        56,700
  • FY 2018                          1,030,302            739,500        45,000

While I don’t have access to the narrative that I am sure accompanied this, some things are apparent.

Vessels:

The “Program of Record” still stands but realization is being substantially delayed. The Coast Guard will apparently get all eight of the NSCs currently planned with #8 to be funded in FY 2015.

The long delayed Offshore Patrol Cutter Program, which had been expected to award a contract for the first ship in FY 2015, has been delayed two years with first construction to be funded in 2017. This means the first ship will likely not be completed until 2021.

The Homeland Security Today report says that the Fast Response Cutter (FRC) Program will average four a year, but looking at the out-year funding, $110M/year in FY 2015-2018, I find it hard to believe that is enough for even two per year, since the program is mature and we have been budgeting about $60M each.

There is a total of $221M in the five years for In-Service Vessel Sustainment. This will apparently fund renovation of 140ft icebreaking tugs and 225ft buoy tenders.

The Response Boat-Medium and Medium Endurance Cutter Sustainment Programs are expected to be completed prior to this planning period, and are zeroed for FY 2014-2018

Over the planning period $230M is expected to go toward the new Polar Icebreaker, but with no more that $100M in any one year, clearly there will be no construction contract until after FY2018.

Aircraft:

There is very little in the aircraft budget. The largest chunk of the money, $152M over the five years, will go to “HH-65 Conversion/Sustainment.”

The second largest total, $76M over the five years will go to “Long Range Surveillance Aircraft (C-130H/J).” This is not enough to buy new J models, so apparently this will go for upgrades to the existing C-130Hs.

There is $16M in FY 2015 and $20M in FY-2016 for the MPA (HC-144) program, other years are zero, but totaled, this $36M is less than the cost of the last aircraft purchased.

There is $48M for Unmanned Aircraft Systems in FY-2016, but other years are zero.

$6.7M total is in FY2017/2018 for H-60 conversion.

Other:

The Commandant is making good on his pledge to keep together the procurement organization built up painfully over the years. AC&I Personnel and Management is essentially level, ranging from $110.2M in FY2012 to $119.3M in FY2018.

Investment in C4ISR continues with just under $237M planned over the five year period.

Major Shore, Military Housing, AtoN, and S&D took a big hit going from $112.9M in FY2012 to a total of $82M over the entire five year period.

CG funding diverted to Bio and Agro Defense Facility?:

Both “Fiercehomelandsecurity.com” and  “Homeland Security Today” note that DHS is apparently funding a new “Bio and Agro Defense Facility” at the expense of the Coast Guard budget.

One might ask if the proposed Bio and Agro Defense facility doesn’t duplicate tasking already assigned to Center Disease Control, the Army’s bio lab at Fort Detrick, and the FDA, FBI and USDA laboratories.

And where will this new lab get its expert staff except from existing labs by offering them higher wages to induce them to move to Kansas?

There are many labs, there is only one Coast Guard and procurement of replacements have already been too long deferred.

A late note:

I have been reminded that the decision to fund long lead items for the first OPC in FY2016 and construction of the first in FY2017 was made last year and that it was published in June. So we are on schedule, relative to the revised schedule, even if the large amounts of money projected for FY2015 in the 2012 and 2013 budgets are no longer there. Hopefullly is will not take four or five years to build the OPC and we may see it earlier than 2021. In the old days we could have certainly have funded the ship at the beginning of FY2017 (Oct. 2016), and have had delivery by the end of 2019, when we have been saying the first ship would be delivered, but I remain skeptical.

The Detail Design contract is still expected in FY2015 with options for long lead time items and construction in the out years.

Additional Note as of May 22, 2013:

I’ve been informed this is the current projected schedule for the OPC.

– Present day: source selection for Preliminary & Contract Design phase (up to
three awards possible) underway.
– 4QFY13: P&CD award
– FY14: P&CD work continues
– FY15: Complete P&CD work and down-selection to one offeror for Detail Design
– FY16: Detail Design and Long Lead Time Materials contracts for OPC 1 awarded
– FY17: Begin OPC 1 construction
– FY20: Planned delivery of OPC 1

How the Coast Guard Presents its Shipbuilding Programs to Congress

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I would like to talk about an observation found here : “Coast Guard Cutter Procurement: Background and Issues for Congress”  (pdf) Congressional Research Service, Ronald O’Rourke, July 20, 2012

“Another oversight issue for Congress concerns the adequacy of information available to Congress to support review and oversight of Coast Guard procurement programs, including cutter procurement programs. The Coast Guard has entered a period where, like the Navy, it is requesting significant funding each year from Congress to execute multiple ship procurement and modernization programs. Congress, however, lacks ready access to basic information exhibits on Coast Guard shipbuilding programs that are equivalent to those that support congressional review and oversight of Navy ship procurement programs.” (from p.32)

Could this be at least part of the reason, why we have such a problem selling our shipbuilding programs?

Quoting from p.34,

• “Although the Coast Guard’s annual budget submission includes a budget justification book, the entries in that book for the Coast Guard’s ship procurement programs do not present information as detailed and structured as that presented in the P-40, P-5, and P-27 exhibits. (note–the reference provides samples of these, see Appendix A–Chuck)
• “Reports on Coast Guard programs equivalent to DOD’s SAR reports are not readily available to Congress. (SAR=”Selected Aquisition Reports”–no sample of this–Chuck)
• “The Coast Guard’s POR (Program of Record–Chuck) is a statement of desired procurement quantities for certain procurement programs, but not a concise statement of the Coast Guard’s overall ship force structure objective, which would take into account continued service of existing ships that are not in need of immediate replacement. (Navy sample provided as Appendix C–Chuck)
• “The Coast Guard’s five-year capital investment plan shows annual funding amounts for individual programs, but not annual procurement quantities, and annual procurement quantities are not always easy to discern from annual funding amounts. (Sample in Appendix D–Chuck)
• “The Coast Guard’s budget submission does not include an equivalent of the Navy’s 30-year shipbuilding plan.” (Sample in Appendix D–Chuck)

This report is addressed to Congress, but there is no reason we should not consider its findings.

Why don’t we have a statement of what our force structure objective is?

How can we have a Five Year Procurement Plan and not include procurement quantities?

And lastly why don’t we have a 30 year shipbuilding program if that is what Congress expects?

When I first heard that the Navy had a 30 year shipbuilding program, I thought it was a little ridiculous, because It is a long way out, but maybe it is a way of building consensus on where we are going. It will provide a warning when increases will be required. Patrol ships, Patrol boats, Polar Icebreakers, Buoy tenders, Icebreaking tugs, Inland construction tenders, and major renovations all have to fit into the same budget. A long term road map is needed because experience has shown that the budget is not elastic.

Among the advantages claimed for the Navy’s way of doing this (from p.33) are:

  • “identifying and evaluating cost growth and schedule delays in the execution of shipbuilding programs;
  • “understanding the relationship between annual procurement rates and unit procurement cost;
  • “evaluating whether programs are achieving satisfactory production learning curves over time;
  • “evaluating whether proposed sequences of annual procurement quantities for programs would be efficient to execute from an industrial standpoint;
  • “evaluating stability in Navy shipbuilding planning by tracking year-to-year changes in the five-year shipbuilding plan;
  • “identifying potential financial and industrial-base linkages between shipbuilding programs that are being funded in overlapping years;
  • “identifying and evaluating Navy assumptions concerning service lives and retirement dates for existing ships;
  • “evaluating whether ship procurement needs are being pushed into the future, potentially creating an expensive ship procurement “bow wave” in coming years; and
  • “understanding when the Navy will achieve its ship force level goals, and whether the Navy will experience ship inventory shortfalls relative to those goals that could affect the Navy’s ability to perform its missions in coming years.”

This all sounds like it should also apply to the Coast Guard.

The service is attempting to improve presentation of its programs, but even the planned improvements don’t address all these concerns. From a recent GAO report “COAST GUARD, Portfolio Management Approach Needed to Improve Major Acquisition Outcomes” (download the report, GAO-12-918 (.pdf)).

“Coast Guard acquisition officials told us that one way it is trying to address portfolio affordability is through an update to its Major Systems Acquisition Manual. According to draft language, the acquisition directorate’s Office of Resource Management will be required to maintain a chart to visually depict all competing acquisition program priorities within the capital investment plan at various points in time. Officials told us that each acquisition program will be required to include this chart in its required materials for future acquisition decision events. This update to the Coast Guard’s acquisition manual follows best practices outlined in GAO’s Cost Estimating and Assessment Guide with the exception that the guide notes the affordability assessment should, preferably, be conducted several years beyond the programming period. (emphasis applied) However, deferring costs could lead to what is commonly characterized as a bow-wave—or an impending spike in the requirement for additional funds—unless the Coast Guard proactively chooses to make some tradeoff decisions by re-examining requirements.

The Coast Guard has certainly encountered the “bow wave.” We need a way to address it now and avoid it in the future.

At the very least we need a “Force Structure Objective” and a 30 year shipbuilding (and disposal) Plan to identify how we intend to get there. ———————————————————————————————————-

While on the topic of selling a program the Naval Aviation has a fine example:

To view “Naval Aviation Vision, January 2012,” visit http://www.public.navy.mil/airfor/nae/Vision%20Book/Naval_Aviation_Vision.pdf.)

GAO-12-918, “COAST GUARD, Portfolio Management Approach Needed to Improve Major Acquisition Outcomes”

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September 26, Fiercehomelandsecurity posted a story (“GAO: Not eliminating two National Security Cutters will cause ‘difficult choices'”) on a recent GAO report, “COAST GUARD, Portfolio Management Approach Needed to Improve Major Acquisition Outcomes” (download the report, GAO-12-918 (.pdf)). While the post focused on the apparent recommendation not to seek to build units seven and eight of the National Security Cutters, there was much more to the report.

Basically the GAO is saying that the Coast Guard is not using a systematic approach to its acquisitions, that much of the information that its budget is based on is out of date, and that the Coast Guard is allowing the Congressional Budget Process to determine its priorities.

I’m going to quote the report liberally:

What GAO Found

“The planned cost and schedule of the Coast Guard’s portfolio of major acquisitions is unknown because of outdated acquisition program baselines and uncertainty surrounding affordability. The Coast Guard’s approved baselines, which reflect cost and schedule estimates, indicate the estimated total acquisition cost of Coast Guard major acquisitions could be as much as $35.3 billion—an increase of approximately 41 percent over the original baselines. However, the approved baselines for 10 of 16 programs do not reflect current cost and schedule plans because programs have breached the cost or schedule estimates in those baselines, changed in scope, or do not expect to receive funding to execute baselines as planned. Furthermore, a continued mismatch between resources needed to support all approved baselines and expected funding levels has required the Coast Guard to make decisions about which programs to fund and which programs not to fund as part of its annual budget process. Both DHS and the Coast Guard have acknowledged this resource challenge, but efforts to address this challenge have not yet resulted in a clear strategy for moving forward.

“The Coast Guard has taken steps through its requirements process—a process that takes mission needs and converts them to specific capabilities—to address affordability, but additional efforts are required. For example, in an effort to consider affordability, the Coast Guard made some capability trade-offs when developing requirements for its largest acquisition, the Offshore Patrol Cutter. But whether the cutter ultimately will be affordable depends on some key assumptions in the cost estimate that are subject to change. At the fleet level, the Coast Guard completed two efforts to reassess what mix of assets it requires to meet mission needs, but neither effort used realistic fiscal constraints or considered reducing the number of assets being pursued. The mix of assets the Coast Guard is acquiring is based upon needs identified in 2005, but the Coast Guard may not be on a path to meet these needs and it has not re-examined the portfolio in light of affordability.

“The Coast Guard has established an acquisition governance framework that includes the following cross-directorate teams: the Executive Oversight Council, the Systems Integration Team, and Resource Councils. The Executive Oversight Council—composed of admirals and senior executives—is well-positioned to delegate tasks to the other teams or obtain information as needed to assist in managing acquisitions. This Council has been active in meeting to discuss individual acquisitions; however, it has not met to discuss the portfolio as a whole. Coast Guard officials told us it manages portfolio affordability through the budget process. GAO’s best practices work has found that successful commercial companies assess product investments collectively from an enterprise level, rather than as independent and unrelated initiatives. The Coast Guard’s current approach of relying on the annual budget process to manage portfolio affordability involves immediate trade-offs but does not provide the best environment to make decisions to develop a balanced long-term portfolio.

——————————————————————–

“Outdated acquisition program baselines and uncertainty surrounding the affordability of the Coast Guard’s acquisition portfolio continue to limit visibility into the current cost and schedule of the Coast Guard’s major acquisitions. Even though the Coast Guard has revised 15 out of 16 baselines in its major acquisition portfolio at least once, 10 of those 15 baselines do not reflect the current cost or schedule of the programs. According to the acquisition program baselines that are approved as of July 2012 and total program cost for programs with no planned funding beyond fiscal year 2014, the Coast Guard is managing a portfolio of major acquisitions that could cost as much as $35.3 billion—or 41 percent more than the original estimate of $25.1 billion—but the majority of these baselines do not reflect the current status of these programs. DHS and the Coast Guard have acknowledged that affordability of the Coast Guard’s portfolio is a challenge, but the mismatch between resources needed to support all approved baselines and anticipated funding levels continues to affect Coast Guard acquisitions. Some of this mismatch could be alleviated by the Coast Guard’s current five-year budget plan which does not include the final two National Security Cutters; however, Coast Guard officials have stated that, regardless of this plan, it continues to support completing the program of record. A decision to pursue the final two National Security Cutters in the near-term budget years could have significant portfolio-wide implications.

In other words, the Coast Guard hopes to buy a really nice dinner table, but can only afford three of the four legs. GAO is telling us we really should be looking a nice little Formica topped breakfast table.

I can see why they would say this, but on the other hand, I can see that the Coast Guard may view it differently. The GAO assumes that the Coast Guard’s AC&I budget will remain essentially the same with minor fluctuations. From the Coast Guard perspective that is a prescription for disaster. It really needs to increase to approximately $2B/year. There is also likely, a fear that if they ask procurement that would fit within the budget, that would be trimmed even more by the the Department and the Administration, and the service would be even worse off.

Costs are greatly dependent on order quantity and time of funding. Is the estimated price of a system to be based on the build rate we need, or the build rate we think we will see? If we choose wrong, the baseline will be wrong and will not reflect reality.

Congress and GAO do recognize inflation rates, but they don’t seem to have recognized that inflation is higher in the shipbuilding industry than in the economy as a whole, so as ship construction is pushed to the right, the projects will get more expensive, even on an inflation adjusted basis.

“DHS stated that future breaches in Coast Guard programs would almost be inevitable as funding resources diminish. (p.17)

“Due to these capability shortfalls, the Coast Guard is at risk of purchasing a fleet that will not be able to close all of the gaps identified following the September 11, 2001 terrorist attacks or fully conduct operations in a presence-based manner. While the 2005 Mission Need Statement presented a business case for the Coast Guard’s future investments, the Coast Guard has not re-examined the value of these assets in light of the difficult affordability decisions likely to come. By continuing to pursue some capabilities and not others without reevaluating the portfolio as a whole, the Coast Guard is increasing the risk that it may not accomplish the goals envisioned in 2005 and cannot ensure it is maximizing the value of the assets it is buying.”

While unmanned systems, and comprehensive maritime domain awareness may have allowed the CG to do with fewer ships, in the absence of these systems we need more ships and manned aircraft.

“Coast Guard program officials also added that the cost estimate for the Offshore Patrol Cutter is optimistic in that it assumes that the cutter will be built in accordance with the current acquisition strategy and planned schedule. They noted that any delays, design issues, or contract oversight problems—all of which were experienced during the purchase of the National Security Cutter—could increase the eventual price of the Offshore Patrol Cutter.”

——————————————————————–

While the (Coast Guard’s) Executive Oversight Council has had opportunities to discuss affordability of the entire portfolio and make informed trade-off decisions, Coast Guard officials told us that all of these decisions are handled through the annual budget process, which also takes into account budgeting for operating expenses. However, the Coast Guard’s current approach of relying on the budget process to manage the affordability of its portfolio has proven ineffective. The preparation of the annual budget request involves immediate trade-offs, but does not provide the best environment to make decisions to develop a balanced, long-term portfolio. As we have previously reported, given that the Coast Guard is managing more programs than its budget can support, and it does not review its portfolio outside of the annual budget process, the Coast Guard has relied on budget decisions each year to drive the acquisitions process. As a result, program managers react to the budget request each year as opposed to having a reliable funding profile consistent with their approved baselines by which to execute their programs. One of the responsibilities in the Executive Oversight Council’s charter is to synchronize projects with planning, programming, budgeting, and execution milestones to align them for successful completion of key milestones, but Coast Guard officials acknowledged that this alignment has not yet occurred.

“Opportunities Exist to Address Affordability through the Requirements Process”

Perhaps there are opportunities to look at alternatives to the platforms in the existing program of record.

The program of record replaces the existing fleet with more sophisticated more capable platforms, but these platforms are also relatively expensive, and cannot be procured in the numbers needed, within the existing budget. But should the budget be fixed at this level?

Essentially the size of Coast Guard’s cutter fleet actually shrank as we went from a 3 mile territorial sea, to a 12 mile territorial sea, to a 200 Exclusive Economic Zone; as we went from doing “courtesy” boardings where we did a little research and swapped dirty magazines with foreign F/V crews, to enforcing fisheries regulations and hunting for drugs of the West Coast of South America. The job has grown immensely but the fleet never did.

The DHS Cutter Study, Trade-offs, and the Case for “Cutter X”

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I have had an opportunity to look a bit more closely at the Department of Homeland Security Cutter Fleet Study, “Options for the Future USCG Cutter Fleet Performance Trade-Offs with Fixed Acquisition Cost,” by Alarik Fritz • Raymond Gelhaus • Kent Nordstromr (.pdf).

The Study

I highly recommend at least the synopsis, which is the first thirteen pages. I think the study is an honest attempt to determine the best mix for the Coast Guard fleet; it is quite well done. Basically it holds cost constant and looks at possible alternatives to build the most effective fleet possible. It builds on work done for the earlier Coast Guard Fleet mix studies, but unlike the CG studies, it looks at alternatives to the program of record. It looks at where the missions are being performed and considers the effects of weather on mission performance in four regions, the Northeast, Southeast, West, and Alaska.

The study considers:

  • trading National Security Cutters (NSC) for more Offshore Patrol Cutters (OPC) (Approx. two OPCs per NSC)
  • trading OPC as currently described for OPCs that have reduced capabilities but retain the seakeeping and endurance of the OPCs (This was postulated but not explored in depth. It did not appear to make much difference.)
  • trading OPCs for a modernized version of the 270 (approx. four mod-270s for three OPCs)
  • trading OPCs for an equal number of LCS (This was seen as a non viable choice because of the higher cost and lower seakeeping and endurance of the LCS)

The problems (and these were recognized by the study) are:

  • Further delays in beginning building ships severely impacts near term capability
  • A major Cutter fleet of only NSCs and mod-270s does not meet the needs for heavy weather capability where it does exist.
  • Because the Mod-270s have as large a crew as the OPCs, a larger number of ships would add to the operating cost of the fleet.

What comes through loud and clear, from this study is that

  • We need ships with the capability to do boat and helicopter ops in State Five Seas particularly in the Northeast and Alaska.
  • In the Southeast and West, where the primary missions are Drug Enforcement and Migrant Interdiction, we are a long way from a point of diminishing returns, that is, mission performance is most directly linked to the number of cutters, increasing in in almost direct proportion to the number available.
  • The cutters ability to launch boats and helicopters in State Five conditions are much less important in the West and Southeast where most of the cutters are normally deployed.

An Alternative

In simplistic terms, while we need some highly capable hulls, we also need even more hulls on patrol, but the additional hulls don’t need to be particularly sophisticated. This leads me to the conclusion to the we really need another option, another class of ship, I’ll call it “Cutter X.” Think of this new class as taking the crew and equipment of a Webber class Fast Response Cutter (FRC) and putting them in a larger hull with more endurance and seakeeping, while accepting lower top speed than the FRC. We can take advantage of the training and corporate experience with the FRCs, if we add similarly equipped larger cutters.

I am going to talk about one possible fleet mix including this additional class. It is not necessarily the optimum mix, I’ll leave that for further analysis, but I think it may illustrate the advantage of including this additional class. For this proposed new mix I believe we can hold acquisition and operating costs constant, ie the same as the program of record. The proposal would trade 24 units in the program of record (2 NSCs, 4 OPCs, and 18 FRCs) for 22 units of this additional class (depending on cost we might get more) and could allow us to:

I’ll compare this possible fleet mix to the Coast Guard Fleet as it existed in 2000/2001 and the fleet in the Program of Record (POR). on the basis of cutter days available and crewing requirements using both conventional and augmented crewing.

Before we do that, what would “Cutter X” look like? The design that I think comes closest to what I have in mind is the French built L’Adroit (also here and here). It is four times as large as the FRC at 1,450 tons but even with far less horsepower than the FRC (7,500 vs 11,600) it still does 21 knots. With the FRCs engines it would likely do about 24. It might be thought of as a modernized 210, in that unlike the 270 it has no medium caliber gun, fire control system, or ESM.

(There are other similar ships that could be used as examples, see the addendum at the end of the post.)

As we have noted earlier, increased size doesn’t necessarily add much to the cost of a ships. Adding only volume, storage, and larger fuel and ballast tanks, I think these ships can be produced for no more than three times the price of the FRCs, perhaps less than twice as much. I don’t have prices for other examples, but for one, BAEs “Port of Spain” class, the original price for  was only $80M each, less than twice the cost of a FRC and that figure included continued maintenance and training for the crew.

Basically my assumption is that the tradeoffs would work something like this:

1 NSC = 2 OPCs = 4 Cutter Xs = 12 FRCs

This equates to approx. prices of: $700M/NSC, $350/OPC, $175M/Cutter X, and $60M/FRC.

Lets compare the Fleets

As a baseline, take a look at the CG fleet as reported in the 2000/2001 Combat Fleets of the World (I happen to have a copy). It included:

  • 12 Hamilton class 378s
  • 13 Bear class 270s
  • 16 Reliance class 210s
  • Alex Haley
  • Acushnet
  • Storis
  • 49 Island class 110s

or 93 vessels including 44 “cruising cutters” to use the old generic term.

The Program of Record if completed will include:

  • 8 NSC
  • 25 OPC
  • 58 FRC

or 91 vessels including 33 cruising cutters.

The proposed alternative mix would include:

  • 6 NSC
  • 21 OPC
  • 22 Cutter X
  • 40 FRC

or 89 vessels including 49 cruising cutters.

Cutter Days AFHP and Crew Requirements:

For the analysis below I have used the following as the personnel allowances for the new classes:

  • NSC 113
  • OPC   90 (still to be firmed up)
  • FRC    24 (includes two extra junior officers assigned to gain experience)

The personnel allowance for new class could be as little as 30 but is likely going to be more, if only as an opportunity to provide more at sea experience. Using the assumed personnel allowances and the trade-off identified earlier, the proposed mix would require no more personnel than the program of record unless the personnel allowance for “Cutter X”  is more than 46. At most the personnel allowance should not be more than that of the 210s. My figures may be out of date, but at least at one point that was a crew of 62. I’ll use this as the upper limit.

The 2000/2001 fleet theoretically could have provided 8,140 cruising cutter days away from homeport (AFHP) (44 cruising cutters x 185 days) and would have required a total personnel allowance of 5,509.

Without augmentation, the program of record would theoretically provide 6,105 cruising cutter days AFHP (33 cruising cutters x 185 days) and require a total personnel allowance of 4,526.

With Augmentation (increasing their personnel allowance by a third and running the cruising cutters 230 days/year) the program of record would theoretically provide 7,590 cruising cutter days and require a total personnel allowance of 5259.

Without augmentation, the proposed mix would theoretically provide 9,065 cruising cutter days AFHP (49 cruising cutters x 185 days) and require a total personnel allowance of between 4,188 (assuming a crew of only 30 for Cutter X) and 4,892 (assuming a crew of 62 for Cutter X).

With Augmentation (increasing their personnel allowance by a third and running the cruising cutters 230 days/year) the proposed mix would theoretically provide 11270  cruising cutter days AFHP (49 cruising cutters x 230 days) and require a total personnel allowance of between 5264 (assuming a crew of only 30 for Cutter X) and 6203 (assuming a crew of 62 for Cutter X).

What about the loss of FRCs? The proposal would trim 18 FRC from the POR. They are projected to operate up to 2500 hours per day. If we assumed that all 2500 hours were devoted to offshore cruising for the 18 additional units, that would add 1875 days AFHP to the POR for a total of 7,980 days AFHP for the un-augmented fleet and 9,465 days AFHP for the augmented POR. (disregarding the 40 additional FRC that are included in both proposals).

In summary Cutter Days Available:

  • ————————————————–Un-Augmented———Augmented by 1/3
  • 2000/20001 (cruising cutters only)                     8,140                            N/A
  • POR (cruising cutters only)                                 6,105                          7,590
  • POR (w/1,875 additional FRC day AFHP)           7,980                          9,465
  • Proposed Mix w/Cutter X (cruising cutters only) 9,065                        11,270

It looks like this alternative provides an improvement of at least 13% over the program of record, possibly as much as 48.5% depending on how you view the FRCs as a patrol asset. It appears that the un-augmented version may be superior to the augmented version of the program of record while using far fewer people.

Is it doable? What is the timing? How would it mess with other programs?

Cutter X production could ramp up as FRC construction trails off. If we are unable to increase the FY2013 from the current two units, that will put the program at 20 units funded. With no NSCs planned for FY 2014 and 2015, hopefully there will be funding for six in FY2014. Out-years, beginning in FY2015 will require a new contract to complete the additional 14 units proposed. Assuming six units a year, in FY 2015 and 2016, the last two would be funded in FY2017.

If the CG starts soon they could fund the prototype unit of Cutter X in FY2017. L’ Adroit was completed in approximately 13 months, so it is at least theoretically possible the first unit could be delivered well before the first OPC (expected FY2020). Replacing the FRC in the budget, two units a year could be funded in parallel with OPC construction.

Addendum: Other Patrol Vessels similar in concept:

File:HMS-Clyde Fox-Bay.jpg

HMS Clyde, 267x45x12, 8,250 HP 21 knots, crew 42 + accommodations for 20 more, endurance 7,800 nmi @ 12 knots, 1x30mm, Flight deck for up to Merlin (16 ton helicopter)

HMS Tyne (P281) Offshore Patrol Vessel at sea

British River class OPV (UK) (and here), 261x45x12, 1,677 fl, 5,532 HP 20 knots, crew 30 + accommodations for 20 more, 1x20mm, no flight deck or hangar

File:T&T Port of Spain-1-tonal.jpg

BAE’s Port of Spain class  (Brazil and Thailand) (more here), 264x44x12, 1700 tons,  9,700 HP 25 knots, crew 34+5 trainees, endurance , 1x30mm, 2x25mm, Helo deck, but no hangar (Thai version HTMS Krabi has a 76mm Oto Melara and 2x30mm)

File:Vega P404.jpg

Italian Ship Vega, Cassiopia Class, Nov. 2001, by Antoio Munoz Criado

Cassiopea class (Italy), 262x39x12, 1,475 tons fl, 8,800 HP 21 knots, crew 60,  endurance 35 days, 3300 nmi @ 17 knots (probably 5,000 at 12 or 13 knots) 76mm gun and FCS helo deck and hangar.