Coast Guard Deepwater Acquisition Programs: Background, Oversight

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CRS Report for Congress Prepared for Members and Committees of Congress Coast Guard Deepwater Acquisition Programs: Background, Oversight Issues, and Options for Congress Ronald O'Rourke Specialist in Naval Affairs March 30, 2010 Congressional Research Service 7-5700 www.crs.gov RL33753 Coast Guard Deepwater Acquisition Programs Congressional Research Service Summary The term Deepwater refers to a collection of more than a dozen Coast Guard acquisition programs for replacing and modernizing the service 9s aging fleet of deepwater-capable ships and aircraft. Until April 2007, the Coast Guard pursued these programs as a single, integrated acquisition program that was known as the Integrated Deepwater System (IDS) program or Deepwater program for short. The now-separated Deepwater acquisition programs include plans for, among other things, 91 new cutters, 124 new small boats, and 247 new or modernized airplanes, helicopters, and unmanned aerial vehicles (UAVs).

The year 2007 was a watershed year for Deepwater acquisition. The management and execution of what was then the single, integrated Deepwater program was strongly criticized by various observers. House and Senate committees held several oversight hearings on the program.

Bills were introduced to restructure or reform the program in various ways. Coast Guard and industry officials acknowledged certain problems in the program 9s management ... more. less.

and execution and defended the program 9s management and execution in other respects. The Coast Guard announced a number of reform actions that significantly altered the service 9s approach to Deepwater acquisition (and to Coast Guard acquisition in general). Among these was the change from a single, integrated Deepwater acquisition program to a collection of separate Deepwater acquisition programs. The Coast Guard 9s management of Deepwater acquisition programs, including implementation of recommendations made by the Government Accountability Office (GAO), is a topic of continuing congressional oversight. Additional oversight issues include cost growth in Deepwater acquisition programs and the execution of individual Deepwater acquisition efforts, particularly those for surface ships. The Coast Guard 9s proposed FY2011 budget requests $1,112.5 million in acquisition funding for Deepwater programs, including $101.0 million for aircraft, $856.0 million for surface ships and boats, and $155.5 million for other items. Coast Guard Deepwater Acquisition Programs Congressional Research Service Contents Introduction................................................................................................................... .............1 Background .................................................................................................................... ............1 Deepwater Missions............................................................................................................. .1 Origin of Deepwater Acquisition Effort.................................................................................2 Structure of Deepwater Acquisition Effort.............................................................................2 Structure Until 2007........................................................................................................2 Revised Structure Since 2007..........................................................................................3 Deepwater Assets Planned for Acquisition.............................................................................4 Acquisition Program Baseline.........................................................................................4 Fleet Mix Analysis..........................................................................................................5 Examples of Deliveries of Deepwater Assets.........................................................................6 Deepwater Acquisition Funding ............................................................................................6 Prior-Year Funding..........................................................................................................6 FY2011 Funding Request................................................................................................7 Criticism of Deepwater Management in 2007........................................................................8 Coast Guard Reform Actions in 2007....................................................................................9 Justice Department Investigation...........................................................................................9 Oversight Issues for Congress.................................................................................................. ...9 Management of Deepwater Programs in General...................................................................9 Coast Guard Perspective .................................................................................................9 GAO Perspective..........................................................................................................12 Cost Growth ................................................................................................................... ....14 Coast Guard Perspective ...............................................................................................14 GAO Perspective..........................................................................................................15 Reporting of Costs and Planned Procurement Quantities .....................................................15 National Security Cutter (NSC)...........................................................................................16 Coast Guard Perspective ...............................................................................................16 GAO Perspective..........................................................................................................18 Sentinel Class Fast Response Cutter (FRC).........................................................................18 Coast Guard Perspective ...............................................................................................19 GAO Perspective..........................................................................................................20 110/123-Foot Patrol Boat Modernization.............................................................................21 Revolving Door and Potential for Conflicts of Interest.........................................................22 Potential Options for Congress................................................................................................. .23 Legislative Activity in 111 th Congress........................................................................................23 FY2011 Funding Request....................................................................................................23 Summary of Action on Request.....................................................................................23 Other Legislation.............................................................................................................. ..24 FY2010 DHS Appropriations Act (H.R. 2892/P.L. 111-83)............................................24 Coast Guard Authorization Act of 2010 (H.R. 3619)......................................................32 Other Bills Reforming Coast Guard Acquisition (H.R. 1665 and S. 1194)......................33 Coast Guard Deepwater Acquisition Programs Congressional Research Service Tables Table 1. Deepwater Assets Planned for Acquisition .....................................................................4 Table 2. Prior-Year Acquisition Funding For Deepwater Programs ..............................................6 Table 3. FY2010 and FY2011 Acquisition Funding for Deepwater Programs...............................7 Table 4. Action on FY2011 Deepwater Acquisition Funding Request.........................................24 Appendixes Appendix A. Criticism of Deepwater Management in 2007 .......................................................34 Appendix B. Coast Guard Reform Actions in 2007....................................................................38 Contacts Author Contact Information..................................................................................................... .41 Coast Guard Deepwater Acquisition Programs Congressional Research Service 1 Introduction The term Deepwater refers to a collection of more than a dozen Coast Guard acquisition programs for replacing and modernizing the service 9s aging fleet of deepwater-capable ships and aircraft. Until April 2007, the Coast Guard pursued these programs as a single, integrated acquisition program that was known as the Integrated Deepwater System (IDS) program or Deepwater program for short. The now-separated Deepwater acquisition programs include plans for, among other things, 91 new cutters, 124 new small boats, and 247 new or modernized airplanes, helicopters, and unmanned aerial vehicles (UAVs). The year 2007 was a watershed year for Deepwater acquisition. The management and execution of what was then the single, integrated Deepwater program was strongly criticized by various observers. House and Senate committees held several oversight hearings on the program. Bills were introduced to restructure or reform the program in various ways. Coast Guard and industry officials acknowledged certain problems in the program 9s management and execution and defended the program 9s management and execution in other respects. The Coast Guard announced a number of reform actions that significantly altered the service 9s approach to Deepwater acquisition (and to Coast Guard acquisition in general). Among these was the change from a single, integrated Deepwater acquisition program to a collection of separate Deepwater acquisition programs. The Coast Guard 9s proposed FY2011 budget requests $1,112.5 million in acquisition funding for Deepwater programs, including $101.0 million for aircraft, $856.0 million for surface ships and boats, and $155.5 million for other items. The Coast Guard 9s management of Deepwater acquisition programs, including implementation of recommendations made by the Government Accountability Office (GAO), is a topic of continuing congressional oversight. Additional oversight issues include cost growth in Deepwater acquisition programs and the execution of individual Deepwater acquisition efforts, particularly those for surface ships. Congress 9s decision concerning Deepwater acquisition programs could affect Coast Guard capabilities and funding requirements, Coast Guard acquisition policies and practices, and the industrial base that produces items for Deepwater acquisition programs. Background Deepwater Missions The Coast Guard performs a variety of missions in the deepwater environment, which generally refers to waters more than 50 miles from shore. These missions include search and rescue, drug interdiction, alien migrant interdiction, fisheries enforcement, marine pollution law enforcement, enforcement of lightering (i.e., at-sea cargo-transfer) zones, the International Ice Patrol in northern waters, overseas inspection of foreign vessels entering U.S. ports, overseas maritime intercept (sanctions-enforcement) operations, overseas port security and defense, overseas peacetime military engagement, and general defense operations in conjunction with the Navy. Deepwater-capable assets are also used closer to shore for various operations. Coast Guard Deepwater Acquisition Programs Congressional Research Service 2 Origin of Deepwater Acquisition Effort The Coast Guard initiated the Deepwater acquisition effort in the late 1990s, following a determination by the Coast Guard that many of its existing (i.e., clegacy d) deepwater-capable legacy assets were projected to reach their retirement ages within several years of one another. The Coast Guard 9s legacy assets at the time included 93 aging cutters and patrol boats and 207 aging aircraft. Many of these ships and aircraft are expensive to operate (in part because the cutters require large crews), increasingly expensive to maintain, technologically obsolete, and in some cases poorly suited for performing today 9s deepwater missions. Structure of Deepwater Acquisition Effort Structure Until 2007 Until 2007, the Coast Guard pursued Deepwater acquisition through a single, performance-based, system-of-systems acquisition program that used a private-sector lead system integrator (LSI): " System-of-Systems Acquisition. Rather than replacing its deepwater-capable legacy assets through a series of individual acquisition programs, the Coast Guard initially decided to pursue the Deepwater acquisition effort as an integrated, system-of-systems acquisition, under which a combination of new and modernized cutters, patrol boats, aircraft, along with associated C4ISR 1 systems and logistics support, would be procured as a single, integrated package (i.e., a system of systems). The Coast Guard believed that a system-of-systems approach would permit Deepwater acquisition to be optimized (i.e., made most cost effective) at the overall Deepwater system-of-systems level, rather than suboptimized at the level of individual Deepwater platforms and systems. " Private-Sector Lead Systems Integrator (LSI). To execute this system-of- systems acquisition approach, the Coast Guard initially decided to use a private- sector lead system integrator (LSI) 4an industry entity responsible for designing, building, and integrating the various elements of the package so that it met the Coast Guard 9s projected deepwater operational requirements at the lowest possible cost. 2 The Coast Guard decided to use a private-sector LSI in part because the size and complexity of the Deepwater program was thought to be beyond the system-integration capabilities of the Coast Guard 9s then-relatively small in-house acquisition work force. " Performance-Based Acquisition. The Coast Guard initially pursued the Deepwater program as a performance-based acquisition, meaning that the Coast Guard set performance requirements for the program and permitted the private- sector LSI some latitude in determining how the various elements of the Deepwater system would meet those requirements. 1 C4I stands for command, control, communications, computers, intelligence, surveillance, and reconnaissance. 2 For more on private-sector LSIs, see CRS Report RS22631, Defense Acquisition: Use of Lead System Integrators (LSIs) 4Background, Oversight Issues, and Options for Congress , by Valerie Bailey Grasso. Coast Guard Deepwater Acquisition Programs Congressional Research Service 3 The Coast Guard conducted a competition to select the private-sector LSI for the Deepwater program. Three industry teams competed, and on June 25, 2002, the Coast Guard awarded the role to Integrated Coast Guard Systems (ICGS) 4an industry team led by Lockheed Martin and Northrop Grumman Ship Systems (NGSS). ICGS was awarded an indefinite delivery, indefinite quantity (ID/IQ) contract for the Deepwater program that included a five-year baseline term that ended in June 2007, and five potential additional award terms of up to five years (60 months) each. On May 19, 2006, the Coast Guard announced that it was awarding ICGS a 43-month first additional award term, reflecting good but not excellent performance by ICGS. With this additional award term, the contract has been extended to January 2011. Revised Structure Since 2007 In 2007, as the Coast Guard 9s management and execution of the then-integrated Deepwater program was being strongly criticized by various observers, the Coast Guard announced a number of reform actions that significantly altered the service 9s approach to Deepwater acquisition (and to acquisition in general). As a result of these reforms, the Coast Guard, among other things, stopped pursuing Deepwater acquisition through a single, performance-based, system-of-systems acquisition program that used a private-sector LSI, and began pursuing Deepwater acquisition as a collection of individual, defined-based acquisition programs, with the Coast Guard assuming the lead role as systems integrator for each: " Individual Programs. Although Deepwater acquisition programs still appear in the budget under the common heading IDS, the Coast Guard is now pursuing Deepwater acquisition programs as individual programs, rather than as elements of a single, integrated program. The Coast Guard states that it is still using a systems approach to optimizing its acquisition programs, including the Deepwater acquisition programs, but that the system being optimized is now the Coast Guard as a whole, as opposed to the Deepwater subset of programs. " Coast Guard as System Integrator. The Coast Guard announced in April 2007 that, among other things, it would assume the lead role as systems integrator for all Coast Guard Deepwater assets (as well as other major Coast Guard acquisitions as appropriate). The Coast Guard is phasing out its reliance on ICGS as a private-sector LSI for Deepwater acquisition, and shifting system-integration responsibilities to itself. To support this shift, the Coast Guard is increasing its in- house system-integration capabilities. " Defined-Based Acquisition. The Coast Guard has decided to shift from performance-based acquisition to the use of more-detailed specifications of the capabilities that various Deepwater assets are to have. The Coast Guard states that although this new approach involves setting more-detailed performance specifications, it does not represent a return to minutely-detailed specifications such as the Military Specification (MilSpec) system once used in Department of Defense (DOD) acquisition programs. The Coast Guard refers to its new approach as defined-based acquisition. Coast Guard Deepwater Acquisition Programs Congressional Research Service 4 Deepwater Assets Planned for Acquisition 3 Acquisition Program Baseline Table 1 shows the Deepwater assets planned for acquisition under a November 2006 Deepwater Acquisition Program Baseline (APB), and the acquisition cost of these assets in then-year dollars as estimated at that time. As shown in the table, the total acquisition cost of these assets was estimated at the time at $24.23 billion in then-year dollars. Acquisition funding for Deepwater assets were scheduled at the time to be completed in FY2025, and the buildout of the assets was scheduled at the time to be completed in 2027. Table 1. Deepwater Assets Planned for Acquisition (with acquisition costs in millions of then-year dollars, as estimated at the time the Acquisition Program Baseline was published) Qty. Item Cost Air assets 6 Missionized HC-130J Long Range Surveillance (LRS) aircraft (cost of missionization) 11 16 Modernized and upgraded HC-130H LRS aircraft (cost of modernization and upgrading) 610 36 New HC-144A Medium Range Surveillance (MRS) aircraft (also called Maritime Patrol Aircraft, or MPA) based on the European Aeronautic Defence and Space Company (EADS)/CASA CN-235 Persuader MPA aircraft design 1,706 42 Modernized and upgraded MH-60T Medium Range Recovery (MRR) helicopters (cost of modernization and upgrading) 451 102 Modernized and upgraded HH-65C Multi-Mission Cutter Helicopters (MCHs) (cost of modernization and upgrading) 741 45 New vertical take-off unmanned aerial vehicles (VUAVs), also called unmanned aircraft systems (UASs) 503 Subtotal air assets 4,022 Surface assets 8 New National Security Cutters, or NSCs, displacing about 4,000 tons each (i.e., ships analogous to today 9s high-endurance cutters) 3,450 25 New Offshore Patrol Cutters, or OPCs, displacing about 3,200 tons each (i.e., ships analogous to today 9s medium-endurance cutters) 8,098 46 New Fast Response Cutters 4Class A (FRC-As) displacing roughly 200 tons each, to replace most of the Coast Guard 9s existing 110-foot Island-class patrol boats 2,613 12 New Fast Response Cutters 4Class B (FRC-Bs) displacing roughly 200 tons each, to replace the rest of the Coast Guard 9s existing 110-foot Island-class patrol boats 593 27 Medium Endurance Cutters (MECs) upgraded with a Mission Effectiveness Project (MEP) (cost of upgrading) 317 17 Patrol boats (PBs) upgraded with a MEP (cost of upgrading) 117 124 New small boats for Deepwater cutters, including 33 Long-Range Interceptors (LRIs) and 91 Short- 110 3 Additional background information on Deepwater acquisition programs is available at the Coast Guard 9s acquisition website at http://www.uscg.mil/acquisition/. Coast Guard Deepwater Acquisition Programs Congressional Research Service 5 Qty. Item Cost Range Prosecutors (SRPs) 8 110-foot Island-class PBs converted into 123-foot PBs (cost of conversion; program not successful and halted after 8 boats) 95 Subtotal surface assets 15,393 C4ISR systems 4 Common operational picture 1,071 4 Shore systems 102 4 Cutter upgrades 180 Subtotal C4ISR systems 1,353 Integration and oversight 4 System engineering and oversight 1,118 4 Government program management 1,518 4 Technology obsolescence prevention 345 4 Logistics and infrastructure upgrades 481 Subtotal integration and oversight 3,462 TOTAL 24,230 Source: Deepwater Acquisition Program Baseline (APB) approved November 7, 2006. Although Table 1 shows 12 FRCs and 46 FRC-Bs, the Coast Guard 9s Request for Proposals (RFP) for the FRC-B program includes options for building up to 34 FRC-Bs (which, if exercised, would reduce the number of FRC-As to as few as 24). The Coast Guard has also stated that if the FRC-Bs fully meet the requirements for the FRC, all 58 of the FRCs might be built to the FRC-B design. A version of the baseline approved by DHS in May 2007 shows some different quantities compared to those shown above 4specifically, 20 patrol boats upgraded with a MEP (rather than the 17 shown above); a figure to be determined for an unmanned aerial system (UAS) (rather than 45 VUAVs shown above); and no 110/123-foot modernized Island class patrol boats (rather than the 8 shown above). 4 Fleet Mix Analysis As a consequence of assuming the role of lead system integrator for Deepwater acquisition programs, the Coast Guard is performing a fleet mix analysis to review its requirements for Deepwater assets. The analysis could lead to changes in the planned mix of Deepwater assets. 5 The results of the analysis might be released some time in 2010. 4 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and Acquisition Workforce , GAO-09-620T, April 22, 2009, p. 4. 5 Rebekah Gordon, cCoast Guard Conducting Fleet-Mix Analysis for Deepwater Assets, d Inside the Navy , April 6, 2009. Coast Guard Deepwater Acquisition Programs Congressional Research Service 6 Examples of Deliveries of Deepwater Assets 6 Examples of deliveries and other milestones for Deepwater assets include the following: " The Coast Guard commissioned the first NSC, Bertholf, into service on August 4, 2008. The U.S. Coast Guard conducted preliminary acceptance of the second NSC, Waesche, on November 6, 2009. The third, Stratton, had its keel laying on July 20, 2009, and was 37% complete as of March 16, 2010. " The HC-144A Ocean Sentry MPA aircraft achieved Initial Operational Capability (IOC) on April 22, 2009. As of October 16, 2009, eight HC-144As had been delivered. The first was accepted by the Coast Guard on March 10, 2008, and the eighth was delivered on June 3, 2009. On February 6, 2009, an HC-144A officially stood watch for the first time on a scheduled operational patrol. " The first missionized HC-130J LRS aircraft was accepted by the Coast Guard on February 29, 2008, and the fifth was delivered to the Coast Guard on January 21, 2010. As of March 24, 2010, new surface search radars had been installed on 14 of 17 HC-130H aircraft. " The MH-60T cJayhawk d Medium Range Recovery Helicopter project achieved Initial Operational Capability (IOC) on October 1, 2009. The first production MH-60T was delivered on June 3, 2009. As of February 9, 2010, 10 MH-60Ts have been delivered to the Coast Guard. " The Coast received its first MH-65C helicopter in October 2007. As of March 24, 2010, the Coast Guard had configured and delivered 55 MH-65Cs and two MH- 65Ds. Deepwater Acquisition Funding Prior-Year Funding Table 2 below shows prior-year acquisition funding for Deepwater acquisition programs. Table 2. Prior-Year Acquisition Funding For Deepwater Programs (in millions of dollars, rounded to nearest tenth) Prior a FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Request n/a 320.2 500.0 500.0 678 966.0 934.4 836.9 990.4 1,051.5 Appropriation n/a 320.2 478.0 668.2 724.0 933.1 1065.9 783.3 1034.0 1,123.0 Rescissions n/a 3.1 57.6 38.9 98.7 132.4 Transfers n/a 49.7 77.8 78.7 6 Information in this section is taken from the Coast Guard Acquisition Directorate 9s web page on acquisition programs and projects http://www.uscg.mil/acquisition/programs/acquisitionprograms.asp, and Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22 April 2009. Coast Guard Deepwater Acquisition Programs Congressional Research Service 7 Prior a FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Supplemental appropriations n/a 124.2 Total b 117.0 320.2 474.9 610.6 734.8 1036.4 1144.6 650.8 1034.0 1,123.0 Source: Prepared by CRS using Coast Guard data provided on January 29, 2007 (FY2007 and prior years), FY2008 and FY2009 appropriations bills for FY2008 and FY2009, and (for FY2010) Coast Guard FY2011 budget submission. Totals may not add due to rounding. Note: n/a=not available a. Pre-award funding prior to 2002. b. Excludes HC-130J funding prior and airborne use-of-force funding prior to FY2007. The figure for FY2010 excludes $4.0 million funding for High Endurance Cutter sustainment and $27.3 million in funding for polar icebreaker sustainment. Although these funds were appropriated in FY2010 under the surface category of the Integrated Deepwater System (IDS), the Coast Guard, as part of its FY2011 budget display of its Acquisition, Construction and Improvement (AC&I) account, shows these two line items outside the IDS collection of line items. FY2011 Funding Request Table 3 shows acquisition funding requested for the Deepwater program for FY2011, along with enacted FY2010 funding. As shown in the table, the Coast Guard for FY2011 has requested $1,112.5 million in acquisition funding for Deepwater programs, including $101.0 million for aircraft, $856.0 million for surface ships and boats, and $155.5 million for other items. The $856.0 million requested for surface ships and boats includes funding for production of the fifth NSC; continued analysis and design of the OPC; production of the FRCs numbers 9 through 12; production of one LRI and one SRP; and operational enhancement of three Medium Endurance Cutters at the Coast Guard Yard through the Mission Effectiveness Project. Table 3. FY2010 and FY2011 Acquisition Funding for Deepwater Programs (in millions of dollars, rounded to nearest tenth; as shown in FY2009 budget) Program FY10 enacted FY11 requested Maritime Patrol Aircraft (MPA) 138.5 40.0 HH-60 Conversion Projects 45.9 32.0 HH-65 Conversion/Sustainment Projects 38.0 0 HC-130H Conversion/Sustainment Projects 45.3 25.0 HC-130J Fleet Introduction 1.3 4.0 Subtotal aircraft 269.0 101.0 National Security Cutter (NSC) 389.5 538.0 Offshore Patrol Cutter (OPC) 9.8 45.0 Fast Response Cutter (FRC) 243.0 240.0 Deepwater small boats 3.0 3.0 Medium-endurance cutter sustainment 31.1 30.0 Patrol boats sustainment 23.0 0 Coast Guard Deepwater Acquisition Programs Congressional Research Service 8 Program FY10 enacted FY11 requested Subtotal surface ships 699.4 856.0 Government program management 45.0 45.0 Systems engineering and integration 35.0 29.0 C4ISR 35.0 30.5 Deepwater logistics 37.7 50.0 Technology obsolescence prevention 1.9 1.0 Subtotal other 154.6 155.5 TOTAL 1,123.0 1,112.5 Source: Coast Guard FY2011 budget submission. C4ISR means Command and control, communications, computers, intelligence, surveillance and reconnaissance. The total of $1,123.0 million for FY2010 excludes $4.0 million funding for High Endurance Cutter sustainment and $27.3 million in funding for polar icebreaker sustainment. Although these funds were appropriated in FY2010 under the surface category of the Integrated Deepwater System (IDS), the Coast Guard, as part of its FY2011 budget display of its Acquisition, Construction and Improvement (AC&I) account, shows these two line items outside the IDS collection of line items. Criticism of Deepwater Management in 2007 The management and execution of the then-integrated Deepwater program was strongly criticized in 2007 by the DHS Inspector General (IG), 7 GAO, 8 the Defense Acquisition University (DAU) (whose analysis was requested by the Coast Guard), 9 several Members of Congress from committees and subcommittees that oversee the Coast Guard, and other observers. House and Senate committees held several oversight hearings on the program, at which non-Coast Guard, non-ICGS witnesses, as well as several Members of Congress, strongly criticized the management and execution of the program. Criticism focused on overall management of the 7 See, for example, Statement of Richard L. Skinner, Inspector General, U.S. Department of Homeland Security, Before the Committee on Transportation and Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, U.S. House of Representatives, cDeepwater: 120-Day Update, d June 12, 2007; as well as Department of Homeland Security, Office of Inspector General, Acquisition of the National Security Cutter , OIG -07-23, January 2007 (available online at http://www.dhs.gov/xoig/assets/mgmtrpts/OIG_07-23_Jan07.pdf); Department of Homeland Security, Office of Inspector General, 110 9/123 9 Maritime Patrol Boat Modernization Project, OIG -07-27, January 2007 (available online at http://www.dhs.gov/xoig/assets/mgmtrpts/OIG_07-27_Feb07.pdf); U.S. Department of Homeland Security, Office of Inspector General, Major Management Challenges Facing the Department of Homeland Security (Excerpts from the FY 2006 DHS Performance and Accountability Report) , December 2006. (OIG-07-12); and U.S. Department of Homeland Security, Office of Inspector General. Improvements Needed in the U.S. Coast Guard 9s Acquisition and Implementation of Deepwater Information Technology Systems , August 2006. (Office of Information Technology, OIG-06-55). 8 See, for example, Government Accountability Office, Coast Guard[:] Challenges Affecting Deepwater Asset Deployment and Management and Efforts to Address Them , GAO-07-874, June 2007; Government Accountability Office, Coast Guard[:] Status of Efforts to Improve Deepwater Program Management and Address Operational Challenges, Statement of Stephen L. Caldwell, Acting Director Homeland Security and Justice Issues, Testimony Before the Subcommittee on Coast Guard and Maritime Transportation, Committee on Transportation and Infrastructure, House of Representatives , GAO-07-575T, March 8, 2007; and Government Accountability Office, Coast Guard[:] Coast Guard Efforts to Improve Management and Address Operational Challenges in the Deepwater Program, Statement of Stephen L. Caldwell, Acting Director Homeland Security and Justice Issues, Testimony Before the Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard, Committee on Commerce, Science and Transportation, U.S. Senate , GAO-07-460T, February 14, 2007. 9 Defense Acquisition University, Quick Look Study, United States Coast Guard Deepwater Program , February 2007. Coast Guard Deepwater Acquisition Programs Congressional Research Service 9 program, and on problems in three cutter acquisition efforts 4the NSC, the modernization of the 110-foot patrol boats, and the FRC. For a more detailed discussion, see Appendix A . Coast Guard Reform Actions in 2007 In 2007, as the Coast Guard 9s management and execution of the then-integrated Deepwater program was being strongly criticized by various observers, the Coast Guard announced a number of reform actions that significantly altered the service 9s approach to Deepwater acquisition (and to Coast Guard acquisition in general). Among these was the change from a single, integrated Deepwater acquisition program to a collection of separate Deepwater acquisition programs. For a more detailed discussion, see Appendix B . Justice Department Investigation On April 18, 2007, it was reported that the Justice Department was conducting an investigation of the Deepwater program. Press reports at the time stated that investigation centered on communications systems, the conversion of the Coast Guard 9s 110-foot patrol boats, and the National Security Cutter (NSC). The Justice Department reportedly notified Lockheed, Northrop, and certain other firms involved in the Deepwater program of the investigation on December 13, 2006, and directed the firms to preserve all documents relating to the program. 10 Oversight Issues for Congress The Coast Guard 9s management of Deepwater acquisition programs, including implementation of recommendations made by the Government Accountability Office (GAO), is a topic of continuing congressional oversight. Additional oversight issues include cost growth in Deepwater acquisition programs and the execution of individual Deepwater acquisition efforts, particularly those for surface ships. Management of Deepwater Programs in General Coast Guard Perspective The Coast Guard testified in April 2009 that: Efforts to consolidate the Coast Guard Acquisition Directorate, assume Lead System Integrator responsibilities, and implement the [Coast Guard 9s] Blueprint for Acquisition Reform [document] have left us better equipped to manage costs, schedules and performance. These business improvements have led to a number of high profile project successes. Consider the recent award of the Fast Response Cutter (FRC) Sentinel-class patrol boat. Initially planned as part of the Deepwater program, to be delivered through Integrated Coast Guard Systems (ICGS), we took this project back within the Coast Guard to ensure full and 10 Ana Radelat, cJustice Investigating Deepwater Contractors, d NavyTimes.com , April 18, 2007; Chris Strohm, cDeepwater Contractors Face Justice Probe d GovExec.com , April 19, 2007; Patricia Kime, cJustice Investigating Deepwater Contract, d NavyTimes.com , April 20, 2007. Coast Guard Deepwater Acquisition Programs Congressional Research Service 10 open competition and responsible program management. We have followed our reformed acquisition processes, conducting a deliberative proposal review and award determination with integrated participation from technical authorities and the operational community. The FRC 9s proven parentcraft design will minimize cost and schedule risk and mitigate the patrol boat hour gap in the shortest time possible. Neither ICGS nor the Coast Guard 9s pre- modernized acquisition program could have accomplished this feat as efficiently or effectively, and I am confident we will build on this record of advances for future acquisitions programs as well.... Today, I am pleased to discuss our wholly reformed acquisition organization, an organization with processes and procedures in place to ensure successful program management and oversight. I expect further challenges, but I have the utmost confidence that the processes now in place allow us to address those challenges head-on and facilitate delivery of assets and systems with capabilities to meet the mission needs of today and tomorrow. The most pointed example of the success of our reformed acquisition processes is Fast Response Cutter Sentinel-class patrol boat. With a total potential contract value of more than $1 billion, it was a highly competitive process, and our selection survived two post-award protests, demonstrating that our robust acquisition process was beyond reproach. As the yard stick by which to measure the success of our reformed acquisition enterprise, the Sentinel project provides a number of assurances - all built on the cornerstones for successful acquisition - for its own and future acquisition management successes, including: " Establishment and maintenance of a direct Coast Guard relationship with the contractor, rather than through a separate lead systems integrator; " Development of detailed technical requirements, and firm adherence to those requirements throughout the proposal design evaluation process and construction; " Classification of cutters to established and recognized standards (i.e., American Bureau of Shipping and High Speed Naval Vessel Rules); " Use of parent craft designs where applicable, with parent craft designer and builder co- located on engineering team; " On-site government staff at production facilities; " Fixed price contract structure; " Extensive involvement of technical authority throughout acquisition and delivery process; " Independent validation (i.e., independent cost estimates and design assessments); " Leveraging Navy and other government partnerships; and, " Ability to re-compete thru options for data and licensing. The Sentinel project has become the model for all current and future Coast Guard acquisition programs. By adopting needed reforms, and guided by this Subcommittee, we 9ve demonstrated the right way to develop and manage an acquisition project. With those reforms solidly in place, the foundation for continued success is firm.... Coast Guard Deepwater Acquisition Programs Congressional Research Service 11 As acquisition policy and process improvements have promoted project successes, one persistent set of challenges has been the recruitment, development, and retention of a highly qualified acquisition workforce. We have accomplished much in our reforms of contracting, business and financial management, program management, systems engineering and other key disciplines. But, like other federal agencies, we must work hard to attract and retain the best and brightest in a highly competitive market. In the 1990s, the level of investment in Coast Guard acquisition was approximately $200 million. In FY 2009, we were appropriated nearly $1.5 billion for our recapitalization programs. This growth in investment has required our professional workforce to grow to ensure adequate program management and contractor oversight and management. We have worked hard to build capacity. Today the Acquisition Directorate has 855 military and government civilian personnel, and is continuing to grow 4including 104 added positions in 2008 and another 65 positions in 2009. With many agencies competing for qualified acquisition professionals, it is critically important for the Coast Guard to remain competitive in the labor market. The Coast Guard must be able to use all hiring and workforce management tools effectively and expeditiously. Once hired, however, another challenge is ensuring the appropriate training, skills, and career progression for our workforce. As a government manager, I have an obligation to properly equip my personnel with the skills and tools they need to accomplish their missions. One of the areas where we have placed enormous pressure is on our training and certification programs. A couple of years ago we had a lot of people who might have had the right experience but had not completed required training or certification, so it was difficult to see standardized skills across projects. We have addressed this challenge. Today, of the 14 Level I investments in our acquisition portfolio (valued at greater than $1 billion total life cycle cost), 100 percent are led by DHS Level III (the highest level) certified program managers. We have also developed a new Human Capital Strategic Plan that outlines several goals aimed at improving the skills of our workforce. An overarching objective is to raise the profile of Coast Guard acquisition as a profession with well-defined career paths for both uniformed and civilian employees. That strategy sets goals for training and educational opportunities, using internal resources as well as reaching out to third parties, such as the Defense Acquisition University and the Naval Postgraduate School, to provide additional support. The goal in these efforts is to improve the career path that can be followed by uniformed and civilian employees, ultimately narrowing the gap between the complexity of acquisition tasks and the availability of skilled workers to accomplish them.... With acquisition reform firmly taking root, the future of Coast Guard acquisition is bright. We have learned from the past, but our focus remains on the future. Reformed processes have already led to acquisition success, but I am confident our greatest successes lay ahead, if we remain committed to the foundational principles and acquisition cornerstones that have driven our reforms. As the Coast Guard 9s mission support organization is established fully, those principles will become further engrained in our mission support and acquisition culture. The future will see new requirements for ever new assets and systems. In fact, we will soon begin the largest single acquisition project in our history 4the Off-Shore Patrol Cutter. Now Coast Guard Deepwater Acquisition Programs Congressional Research Service 12 that our reforms are in place, I am confident that this and other future projects will be managed effectively and efficiently. 11 GAO Perspective GAO for several years has been assessing, providing reports and testimony on, and making recommendations for Coast Guard management of Deepwater acquisition. The Coast Guard has implemented many of GAO 9s recommendations. The extent to which the Coast Guard has implemented GAO recommendations has been a topic of continuing congressional oversight for Deepwater acquisition. GAO testified in February 2010 that: the Coast Guard has also had several acquisition management challenges throughout the history of [the Deepwater] program and some of those challenges remain. To address some of these past acquisition management challenges, in April 2007, the Coast Guard assumed the role of systems integrator for the Deepwater Program, reduced the scope of the work by the former systems integrator (or prime contractor), Integrated Coast Guard Systems (ICGS), and assigned these functions to Coast Guard stakeholders. Additionally, the Coast Guard has improved and begun to apply the disciplined management process contained in its Major Systems Acquisition Manual (MSAM) for individual assets, although it did not meet its goal of adhering to this process for all Deepwater assets by March 2009. In addition, we reported in July 2009 that the MSAM does not appear to be consistent with DHS policy that requires entities responsible for operational testing to be independent of the system 9s users. The Coast Guard concurred with our recommendation to consult with DHS on policies regarding the independent operational test authority.... Problems in Deepwater management and oversight have led to delivery delays and other operational challenges for certain assets, as our prior work has identified, particularly (1) patrol boats and their anticipated replacements, the Fast Response Cutters and (2) the National Security Cutter. Specifically, we reported in June 2008 that conversion of the first eight 110-foot patrol boats was unsuccessful, and subsequently, the Coast Guard decided to remove these vessels from service and accelerate the design and delivery of the replacement Fast Response Cutters. The removal from service of the eight converted patrol boats in November 2006 created operational challenges by reducing potential patrol boat availability by 16 percent or 20,000 annual operational hours. To mitigate the loss of these eight patrol boats and the associated 2,500 operational hours per patrol boat in the near term, the Coast Guard implemented a number of strategies beginning in fiscal year 2007. For example, the Coast Guard began using the crews from the eight patrol boats removed from service to augment the crews of eight other patrol boats so that these assets could operate for longer duration, yet still met crew rest requirements. To help fill the longer-term patrol boat operational gap, Coast Guard officials continue to pursue the acquisition of a commercially available Fast Response Cutter. The Coast Guard reports that the first of these cutters, the Sentinel, will commence operations in Miami, Florida in fiscal year 2011. While the contract is for the design and production of up to 34 cutters, the Coast Guard intends to acquire a total of 12 by fiscal year 2011 to assess the capabilities of these first 12 before exercising options for additional cutters. Coast Guard officials noted that they plan to assess the capabilities of 11 Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22 April 2009, pp. 2-3, 8-11. Coast Guard Deepwater Acquisition Programs Congressional Research Service 13 the new cutter through operational test and evaluation before exercising options for additional cutters. Regarding the National Security Cutters, delays in the delivery of National Security Cutters and the support assets of unmanned aircraft and small boats have created operational gaps for the Coast Guard that include the projected loss of thousands of days in National Security Cutter availability for conducting missions until 2018, as we reported in July 2009. The first vessel (USCGC Bertholf, see figure 1) was initially projected for delivery in 2006 but was not delivered to the Coast Guard until May 2008. We reported in July 2009 that this first vessel was undergoing final trials as the Coast Guard prepared it for full operational service in the fourth quarter of fiscal year 2010. The Coast Guard deployed this first National Security Cutter without its planned support assets. Given the delivery delays, the Coast Guard must continue to rely on High Endurance Cutters that are becoming increasingly unreliable. Coast Guard officials said that the first National Security Cutter capabilities will be greater than those of a High Endurance Cutter; however, the Coast Guard cannot determine the extent to which the National Security Cutters 9 capabilities will exceed those of the High Endurance Cutter until the National Security Cutters 9 support assets are operational, which will take several years. To mitigate these operational gaps, the Coast Guard is considering extending the service life of some of its High Endurance Cutters and is using existing aircraft and small boats until unmanned aircraft and new small boats are operational. However, because the High Endurance Cutters are increasingly unreliable, the Coast Guard planned to perform a series of upgrades and maintenance procedures on selected vessels. Before this work could begin, the Coast Guard conducted an analysis on the condition of the High Endurance Cutters and this resulted in the plan to decommission 4 High Endurance Cutters by fiscal year 2011, which could further negatively impact the Coast Guard 9s ability to more effectively conduct missions. Looking forward, Coast Guard officials stated that they must review and continuously re- validate whether assumptions used to determine the original fleet mix (i.e., types and number of vessels and aircraft) of Deepwater assets are still reflective of mission demands and operational requirements. For example, the Coast Guard is conducting an updated review to determine whether it will continue with the contractor 9s original 2001 baseline mix of 8 National Security Cutters, 25 Offshore Patrol Cutters, and 58 Fast Response Cutters. From 2005 to 2006, the Coast Guard worked to rebaseline the Deepwater program to reflect its post-September 11 mission. In April 2006, we reported on this baseline, looking at key changes in asset numbers and capabilities between the original (2001) and revised (2005 and 2006) Deepwater baseline implementation plans. At that time, we found that the Coast Guard 9s analytical methods were appropriate for determining if the revised asset mix would provide greater mission performance and whether the mix was appropriate for meeting Deepwater missions. In May 2007, the DHS approved the Deepwater Acquisition Program Baseline, which reflects the revised 2005 to 2006 implementations plans. Since that time, as the Coast Guard has taken over the acquisition and management responsibilities for the Deepwater program from the contractor, it has realized that its knowledge of how the various proposed assets would work together to help meet mission needs were limited because the contractor, in certain cases, had developed the plans for these assets without using all of the input from the Coast Guard. Coast Guard officials stated that as part of the on-going process to review the original work completed by the contractor, and in light of technology advances, the Department 9s maturation, program oversight, and new assets coming online, the Coast Guard has initiated an analysis of the capabilities, number, and mix of assets it needs to fulfill its Deepwater missions by undertaking a new fleet mix analysis. The Coast Guard expects that this fleet mix analysis will assist in determining capability-capacity-performance sensitivities and serve as one tool, among many, in making future capability requirements determinations, including future fleet mix decisions. The results of this study were originally expected in the summer of 2009, but U.S. Coast Guard officials told us that, as of February 2010, the finalization of this study is not expected for a few more months, at which time Coast Guard Deepwater Acquisition Programs Congressional Research Service 14 Coast Guard leadership is to assess the results and plan for future asset procurement decisions. According to Coast Guard officials, the Coast Guard plans to update this fleet mix analysis every 4 years and use it as a basis to update the numbers and types of assets needed for the Deepwater program. At this time, it is too soon to determine the extent to which the fleet mix analysis will inform the Coast Guard 9s future Deepwater investment decisions. 12 Cost Growth Coast Guard Perspective The Coast Guard testified in April 2009 that: [a] persistent challenge is controlling costs in complex, multiple-year projects 3 especially those costs driven by economic factors outside the Coast Guard 9s control, more specifically, those types of cost increases recently impacting the National Security Cutter and Maritime Patrol Aircraft projects. Current economic conditions have seen a steady six-month decline in the cost of commodities such as nickel, steel and copper. However, when we award production contracts, our contract price reflects commodity prices at the time of award. In the case of the National Security Cutter we are executing production contracts for NSCs two and three and the long lead time materials contract for NSC four that were priced based on historically high commodity and fuel prices in effect during the summer of 2008. Likewise, when current NSC and MPA contracts were awarded, the value of the U.S. dollar was at a record low when compared to other foreign currencies, meaning all foreign components necessary for production were more expensive. While the government will never be able to eliminate these types of cost changes completely, we have taken steps to minimize their impact within Coast Guard acquisitions. Once again, by building on the cornerstones for acquisition success, we have established a firm commitment to independent cost estimates within each project to validate projected program costs. We have initiated more rigorous government oversight of contractor performance and cost accounting, including renewed emphasis on Earned Value Management data. And we continue to work with industry to balance risk and ensure affordable acquisition programs at best value for the government. 13 A July 2009 news report stated: cThe total cost of the Coast Guard 9s beleaguered Deepwater acquisition program is a 8moving target 9 that could rise beyond the latest $26.3 billion price tag, but the completion date for the purchases could come sooner than projected, the service 9s top officer testified last week. d 14 12 Government Accountability Office, Coast Guard[:] Observations on the Requested Fiscal Year 2011 Budget, Past Performance, and Current Challenges, GAO-10-411T, February 25, 2010 (Testimony before the Subcommittee on Coast Guard and Maritime Transportation, Committee on Transportation and Infrastructure, U.S. House of Representatives), pp. 12-17. 13 Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22 April 2009, pp. 17-18. 14 Rebekah Gordon, cCoast Guard Commandant: Deepwater Price Tag A 8Moving Target, 9 d Inside the Navy , July 13, 2009. Coast Guard Deepwater Acquisition Programs Congressional Research Service 15 GAO Perspective GAO testified in February 2010 that: The Coast Guard has also made other improvements to its oversight and management of the Deepwater program. Due in part to the Coast Guard 9s increased insight into its purchases, the anticipated cost, schedules, and capabilities of many Deepwater assets have changed since the $24.2 billion baseline was established in 2007. Coast Guard officials have stated that this baseline reflected not a traditional cost estimate, but rather the anticipated contract costs as determined by ICGS. As the Coast Guard developed its own cost baselines for some assets, as of July 2009, it has become apparent that some of the assets it is procuring will likely cost up to $2.7 billion more than anticipated. This represents about a 39 percent cost growth for the assets under the revised cost estimates. According to Coast Guard, as more cost baselines are developed and approved, further cost growth is likely. Updated baselines also indicate that schedules have slipped for delivery of several of the assets. 15 Reporting of Costs and Planned Procurement Quantities Regarding Coast Guard reporting of costs and planned procurement quantities for Deepwater acquisition programs, a July 2009 GAO report stated: The Coast Guard 9s budget submission, as currently structured, limits Congress 9s understanding of details at the asset level in so far as it does not include key information such as assets 9 total acquisition costs or, for the majority of assets, the total quantities planned. For example, while the justification of the NSC request includes a detailed description of expected capabilities and how these capabilities link to the Coast Guard 9s missions and activities funded by past appropriations, it does not include estimates of total program cost, future award or delivery dates of remaining assets, or even the total number of assets to be procured. Our past work has emphasized that one key to a successful capital acquisition, such as the multibillion-dollar ships and aircraft the Coast Guard is procuring, is budget submissions that clearly communicate needs.11 An important part of this communication is to provide decision makers with information about cost estimates, risks, and the scope of a planned project before substantial resources are committed. Good budgeting also requires that the full costs of a project be considered upfront when decisions are made. Other federal agencies that acquire systems similar to those of the Coast Guard, such as the Department of Defense, capture these elements in justifications of their budget requests.... While the Coast Guard 9s asset-level Quarterly Acquisition Reports to Congress and the annual Deepwater Program Expenditure Report include some information on total costs and quantities, these documents are provided only to the appropriations committees, and they contain selected information that is restricted due to acquisition sensitive material. The budget justification prepared by the Coast Guard is a tool that Congress uses in its budget and appropriations deliberations. Presentation of information on the full costs and quantities 15 Government Accountability Office, Coast Guard[:] Observations on the Requested Fiscal Year 2011 Budget, Past Performance, and Current Challenges, GAO-10-411T, February 25, 2010 (Testimony before the Subcommittee on Coast Guard and Maritime Transportation, Committee on Transportation and Infrastructure, U.S. House of Representatives), pp. 13-14. Coast Guard Deepwater Acquisition Programs Congressional Research Service 16 of Deepwater assets in the Coast Guard 9s budget submission can provide Congress greater insights in fulfilling its roles of providing funding and conducting oversight. 16 National Security Cutter (NSC) Oversight issues concerning the NSC program have included whether the original design for the NSC was rugged enough to ensure that the ships could be operated for their full 30-year intended service lives; whether the electronic systems on the ship met technical standards (including some referred to as TEMPEST) for information assurance (or IA 4the ability of the ship 9s various electronic systems to protect classified data); and cost growth in building the ships. Coast Guard Perspective The Coast Guard testified in April 2009 that: We have been actively running Bertholf through her paces during the operational test and evaluation process now underway and have received very positive feedback from her crew and the Coast Guard 9s operational community. Of particular note, Bertholf has conducted her first operational patrols and completed flight deck dynamic interface testing and attained interim flight deck certification. Additionally, Bertholf recently conducted towing exercises with CGC [Coast Guard cutter] Morgenthau, a fueling at sea evolution with USNS [U.S. naval ship] Kaiser, and testing of the 57mm deck gun and close-in weapon system against high-speed maneuvering surface targets and unmanned aerial vehicles.... We continue to see real progress in the areas of Information Assurance, which includes TEMPEST, on the NSC. Our technical authority, with support from the Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) and NSC project managers, conducted TEMPEST certification inspections prior to preliminary acceptance of Bertholf in May 2008. Those pre-delivery inspections have contributed to building a TEMPEST baseline, which will serve as a reference point for all future TEMPEST-related activities. Using the test-fix-test methodology, we now have resolved all 122 visual TEMPEST discrepancies identified during that pre-acceptance process. We are conducting additional instrumented TEMPEST surveys using a National Security Agency (NSA) approved contractor to prepare for final TEMPEST testing, which is scheduled to be conducted by SPAWAR [the Navy 9s Space and Naval Warfare Systems Command] and in April 2009. We continue to build on lessons learned and are making some significant improvements to the Stratton, including construction process efficiencies, enhanced functionality and better hull design. One of the most notable process improvements is a significant reduction in the number of grand blocks 4multiple units stacked together in large assembly halls away from the waterfront 4used to assemble the ships hull. We used 29 grand blocks to assemble Bertholf, but expect to use as few as 14 to assemble Stratton. This will enable more sub- assembly work in each grand block in a controlled environment and potentially lead to fewer construction hours compared to the process for Bertholf. Other improvements include an enhanced replenishment at sea station, which incorporates a redesigned refueling area that will be more efficient and ergonomic for cutter personnel. We 16 Government Accountability Office, Coast Guard[:]As Deepwater Systems Integrator, Coast Guard Is Reassessing Costs and Capabilities but Lags in Applying Its Disciplined Acquisition Approach , GAO-09-682, July 2009, pp. 21-22. Coast Guard Deepwater Acquisition Programs Congressional Research Service 17 are also improving the gas turbine removal route, which will make it easier to remove and repair the gas turbine modules that power the cutter. And we have enhanced the hull fatigue design on Stratton, ensuring she will achieve a 30-year fatigue life. We are currently working toward production award for the fourth NSC, Hamilton. In line with accomplished acquisition reforms and our efforts to become the lead systems integrator, the production award for Hamilton will occur outside the Integrated Coast Guard Systems (ICGS) LSI construct and include a fixed price contract structure. 17 The Coast Guard also testified in April 2009 that: our reform efforts are facilitating the successful resolution of past and current project challenges. One such challenge is the fatigue lifespan of the National Security Cutter 4which the Coast Guard insists be at least 30 years 4meaning at least 30 years before the onset of major repairs due to normal mission use. In 2007, in accordance with the acquisition success cornerstones and working through our technical authority for engineering and logistics, the Coast Guard arranged to work with the Navy 9s Naval Surface Warfare Center, Carderock Division to provide independent third party analysis of fatigue design solutions developed by Coast Guard naval engineers. Using the newest available computer fatigue modeling software, Carderock reached two main conclusions in its final report, presented to the Coast Guard earlier this year. First, Carderock determined Coast Guard-developed design fatigue enhancements for the hulls of NSCs three through eight will achieve the desired 30-year fatigue life, while also recommending monitoring of localized stress in several structural details. Second, the report identifies major improvements with fatigue life after completing identified modifications to hulls one and two, but the Carderock transmittal letter recommends more data be gathered for several areas which are still modeling a less-than 30-year fatigue life. We agree with Carderock 9s assessments. In fact, we have already outfitted CGC Bertholf with strain gauge sensors to measure actual encountered stresses and collect data to enable more precise design modeling. Our technical authority is also reviewing each area identified by Carderock, based on Coast Guard missions and the planned operational profile of the NSC, and will develop a plan to address those concerns prior to implementing any related design fix. Plans are to gather data and modify design enhancements over a span of multiple years, even after NSCs one and two transition to full operations, as the upgrades are completed over potentially several future yard availabilities. We plan to continue to collaborate with Carderock to conduct further analysis, including possible re-validation of changes to the proposed design as a result of the recommendations in their repor

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