US Coast Guard’s Deepwater Effort Sinks

Final updates: Deepwater officially done – updates from 2007-2011, as article closes.

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The US Coast Guard is currently operating vessels that date from the 1950s and 1960s, and a fleet-wide recapitalization is becoming an urgent priority given its new domestic security responsibilities. That effort is being handled as an integrated, multi-year $25 billion project called Deepwater that encompasses everything from long-range patrol aircraft and UAVs, to new communications and computing backbones, to new ship designs. Integrated Coast Guard Systems (ICGS), a joint venture between Lockheed Martin and Northrop Grumman, has been serving as the program’s overall system-of-systems integrator.

Deepwater has been fraught with difficulties since the program’s inception. The Coast Guard was guaranteed a rough ride due to the issues with its existing fleet and lower status than the military services; its choice of program structure has also received negative reviews (as well as some official reports of improvement) for some time. DID offers some quick pointers to the New York Times and Washington Post articles covering Deepwater, as well as links to additional in-depth background from agencies like the GAO and our own previous coverage.

• Deepwater 2006: A Gathering Storm
  
• Deepwater: Key Updates [NEW]
  
• Additional Readings [updated]
  

Deepwater 2006: A Gathering Storm

In August 2005 the GAO scrutinized Deepwater’s program structure while Seapower Magazine and other sources followed suit. By May 2006, the GAO seemed to be seeing major improvements, and the USCG’s sterling performance after Hurricane Katrina made them the only non-military government agency that received widespread accolades for their work. Hence “US Coast Guard Gets GAO Praise, Extends ICGS Deepwater Contract to 2011.”

In September 2006, an article drew readers’ attention to Mike De Kort, who reappears in the latest New York Times article. His core complaints concerned a Coast Guard project, and he has been quite open in his desire for a Congressional investigation of Lockheed Martin. Reporter David Axe added:

“Lockheed hasn’t been shy about all this DeKort stuff. In fact, it was [Lockheed spokesman Tony] Scully who alerted me to the second video. But it has always been the company’s position that that DeKort’s core complaint — that the Coast Guard patrol boats are unsafe — is baseless. Scully says that perhaps all the media attention has granted DeKort more legitimacy than his allegations warrant.”

In December 2006, a pair of in-depth media investigations offered detailed descriptions of a major ship refurbishment program that has foundered, a key ship program in suspended status, radios that weren’t up to maritime use, a $400+ million per ship National Security Cutter with potentially serious structural flaws, ship-borne tilt-rotor UAVs that won’t be ready until 2103 at least, long-range UAVs that have had serious weather issues in the key patrol zone of Alaska, protests and serious concerns from contractors and Coast Guard personnel that were swept aside, and more:

• New York Times (Dec 8/06) – Billions Later, Plan to Remake the Coast Guard Fleet Stumbles. The article’s most serious weakness is its failure to put many of the things it describes into context vis-a-vis other programs of this magnitude and type; this would be helpful and balancing. It also presents more drama than the facts sometimes warrant. Having said that, the article addresses real deficiencies, has a lot of research behind it, and takes the welcome step of adding background documents from official sources like the Coast Guard, GAO, et. al. for the reader’s perusal. It is very good at describing many of the political/ lobbying activities involved, and clarifying the current state of the Deepwater program’s various pieces.

• Washington Post (Dec 8/06) – Costly Fleet Update Falters: Contractors Oversee Coast Guard Project. Less comprehensive than the NY Times report. This excerpt was particularly interesting, pointing to serious project management issues on both sides of the fence:

“One contracting official told the inspector general that the Coast Guard, because of personnel shortages, struggles to review documents within the 30 days the contractors allow. By the time it reviews the documents, the companies may have moved ahead with their plans, leaving the agency to accept the work or try to change it at additional cost, the report said.”

Admiral Thad W. Allen, who took over as Coast Guard Commandant in May 2006, was quoted by the New York Times as saying:

“Our people are demoralized by it, they don’t deserve it, and it really impedes our ability to execute our mission… You will see changes shortly in the Coast Guard in our acquisition organization… It will be significantly different than we have done in the past.”

Many observers and reports believe this signals less responsibility and authority for the contractor partnership of Integrated Coast Guard Systems, and more for Coast Guard personnel. Meanwhile, off-the shelf “good enough” buys from foreign suppliers are being given serious consideration for some of Deepwater’s requirements.

Deepwater: Key Updates

CGC Bertholf: compromised?
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Oct 3/11: The US GAO testifies to Congress, and its assessment is not positive. Key excerpts from GAO-12-101T:

“This report discusses areas in which the Coast Guard has strengthened its acquisition management capabilities but also emphasizes actions the Coast Guard needs to take to address the cost growth, schedule delays, and capability shortfalls that have made the approved Deepwater Program unachievable… we found that several factors preclude a solid understanding of the true cost and schedule… as of May 2011, the total Deepwater Program could cost as much as $29.3 billion, an increase of more than 20 percent in 4 years… However, additional cost growth is looming because the Coast Guard has yet to develop revised baselines for all assets, including the Offshore Patrol Cutter – the largest cost driver in the program, comprising approximately $8 billion of the $24.2 billion 2007 baseline. In addition, Coast Guard officials stated that some of the more recently approved acquisition program baselines fall short of true funding needs… we recommended that [USCG] clarify the overall cost, schedule, quantities, and mix of assets required to meet mission needs, including trade-offs in light of fiscal constraints, given that the currently approved Deepwater baseline was no longer feasible. The Coast Guard’s efforts, as of July 2011, have not addressed this recommendation.”

The GAO’s testimony is based on their full July 28/11 report, and USCG responds with their own thoughts. USCG Commandant Adm. Robert Papp said that:

“We got about the business of hiring good people, including some people we hired away from the Navy… Our people are good now, and they know how to take very rigorous reviews of costs. And what we’ve found is there were some costs out there that we didn’t account for… There’s this triangle of performance, cost and schedule. We’re controlling the costs now, we know what they are. We know what the performance is that we want. It’s the schedule that will drive any cost increases, because the further you drive the schedule to the right, the further the cost is going to increase. I am trying to make the effort to build the things we need as fast as we can. I fully understand there are fiscal constraints in our government, but it’s my job to tell you what we need, and that the faster we build them, the lower our costs will be in the long run. We can decommission our aging, costly assets and get a better price for our newer assets if we build them quicker.”

April 13/11: The GAO highlights staffing and budget issue in its Congressional testimony:

“The Coast Guard continues to improve its acquisition management capabilities… Shortfalls in hiring staff for certain key areas persist, though, and some programs continue to be affected… the Coast Guard’s unrealistic budget planning exacerbates these challenges. When programs receive funding lower than planned… 4 of the major acquisition programs have reported a baseline breach caused, at least in part, by reduced projected funding levels. Additionally, projected funding levels in the Coast Guard’s fiscal years 2012-2016 capital investment plan are significantly higher than budgets previously appropriated or requested and therefore may be unrealistic.”

Oct 20/10: The US Coast Guard releases their v5.0 Blueprint for Continuous Improvement in acquisition and contracting. USCG release | Full document [PDF].

June 2/09: Lawsuit. Deepwater whistleblower and former Lockheed Martin engineer Michael DeKort files a qui tam False Claims Act lawsuit against Integrated Coast Guard Systems, a joint venture of Lockheed Martin and Northrop Grumman Corp. He claims that a series of known deficiencies by the contractors, and acquiescence in the deficiencies of other contractors, has led to major safety, security and national security problems with the entire Deepwater acquisition program. This includes the critical area of communications security, which reportedly extends to the new National Security Cutters due to system re-use. From his announcement of his lawsuit, with the cooperation of the Project on Government Oversight:

“On May 29 [2009], the Department of Homeland Security Inspector General (DHS IG) presented its “Letter Report: U.S. Coast Guard’s Plans to Improve Deepwater Accountability” to Commandant Thad W. Allen. This IG report states that the Coast Guard is justified in holding contractors Lockheed Martin and Northrop Grumman financially accountable for problems in the Deepwater program. While the report includes appropriate items, it also omits some – purposefully and glaringly.

In the report, the DHS IG purposely omits information pertaining to the refunds for the C4ISR systems the Coast Guard is entitled to recover… and completely omits any reference to the 123 C4ISR issues… But, when I questioned the DHS IG’s lead auditor about the [2007] errors and other relevant issues (such as the Ron Porter illegal waiver and the use of flawed classified systems that leaked classified information in Cuban waters) he… apologized to me. When I told him this gave ICGS cover and would effectively ensure the same problems on the National Security Cutter (NSC), he agreed that it was a concern… But, to this day, the DHS IG has not righted that wrong. The auditor was removed from the effort… This spring, the lead investigator for Congressman Oberstar’s Transportation Committee told me he knew that the DHS IG had gotten those same areas wrong in their report – and that I had gotten it right. He confirmed what the DHS IG auditor told me and he said the auditor had also personally told him… [So] the Coast Guard and its contractors were forced to use the same basic designs going forward – on the NSC. Accepted or “waived” failures enabled ICGS to make the case that they met spec or that the spec came up short. Actually, ICGS was legally bound by the “system of systems” requirement to repeat designs on the ships that shared systems.”

Hence the lawsuit’s contention that:

“Additionally as these deficiencies have corrupted national agency communications security, there are likely collateral damages to other law enforcement and military organizations, foreign or domestic, that have utilized the same communications systems under the impression that communications were encrypted or protected from eavesdropping, when they were not.”

DeKort’s lawyer Sam Boyd, of Dallas-based Boyd & Associates, says that he expects the pretrial motions and discovery phase alone to last at least 18 months. If successful, DeKort would become eligible to receive some of the damages awarded to the government; qui tam cases are designed that way, in order to encourage disclosure and mitigate the risks that whistleblowers take with their careers. Northrop Grumman would not comment on the pending case per corporate policy, but Lockheed Martin promises to defend itself vigorously. Copy of lawsuit [PDF] via Cryptome | POGO article by DeKort re: lawsuit | Corporate Counsel magazine | Federal Computing Weekly | Mother Jones feature article | Washington Technology | Washington Examiner.

July 31/07: By a unanimous roll call vote, the US House of Representatives approved bill H.R. 2722, 426-0. It was introduced by Elijah Cummings [D-MD-7], chairman of the House Transportation and Infrastructure Committee’s subcommittee on Coast Guard and Maritime Transportation.

The bill makes far-reaching changes in the U.S. Coast Guard’s Deepwater program, removing the NGC/ Lockheed Martin Integrated Coast Guard Systems consortium from the project within 4 years, installing a civilian Chief Acquisitions Officer, and imposing a series of deadlines, reports and oversight on its programs. The removal clause may not be that significant, however, as this is a 2007 vote and the ICGS Deepwater contract ends in 2011.

With respect to the NSC ships, Rep. Cummings, said that the bill would require that the designs for cutters 3 – 8 be reviewed by the Naval Surface Warfare Center – Carderock Division, which helped identify potential concerns with the hull fatigue life of cutters 1 and 2. That provision, and other components, satisfy Rep. Gene Taylor [D-MS, and chair of the House Armed Services Committee’s Maritime & Expeditionary Forces subcommittee], who had called for the review by the naval experts in an amendment when the bill was approved by the House Transportation Committee in June 2007. The bill would also require that the design and construction be certified by an independent third party. HR 2722 | Mississippi Sun-Herald article.

July 13/07: Coast Guard Establishes New Acquisition Directorate. Rear Adm. Gary T. Blore leads the new enterprise as assistant commandant for acquisition.

June 27/07: Lockheed Martin and Northrop Grumman send a return letter, contesting the legality of the USCG’s revocation of acceptance – and hence the ICGS Deepwater consortium’s liability for refunds. ICGC had also sent a letter on May 23/07, which was followed by the Coast Giuard letter on June 5/07. The legal moves are on. POGO report | PDF of letter.

May 17/07: The US Coast Guard takes the first legal steps to recoup up to $100 million from the contractors who oversaw the failed Island Class cutter modernization, via a revocation of acceptance letter. WIRED’s Danger Room later relays a Defense Daily report that:

“Richard Skinner, the IG, said his office is having difficulty getting accesses to people and records belonging to Integrated Coast Guard Systems (ICGS) during its investigation of the cutter program. For instance, Skinner said that ICGS wants a lawyer to be present whenever one of its employees meets with the IG, something that would jeopardize the confidentiality of the encounter. This is something Skinner said he had never seen before as a government inspector.”

Whatever the merits or demerits of the contractor’s conduct, this seems like the only possible response after leading Congressmen have openly called for fraud charges to be laid against the firm and/or its employees. Though it’s hard for many politicians to grasp, there is sometimes real virtue in keeping one’s cards close and one’s words careful in these situations. Seattle Times article | WIRED Danger Room article.

May 25/07: In “Tide Closes in on Deepwater,” Federal Computing Weekly reports that the new supplemental bill, H.R. 2206, contains provisions that place limits on $650 million in Deepwater funding until certain criteria are met. The Coast Guard must find a way forward that:

• Includes an expenditure plan that defines activities, milestones, yearly costs and life-cycle costs for procurement of each major asset;
  
• Identifies life-cycle and training needs for Coast Guard employees;
  
• Identifies competition for each contract;
  
• Describes procurement plans that do not rely on a single industry entity or contract; and
  
• Provides justifications and limits for indefinite-delivery, indefinite-quantity contracts

The bill also requires technical reviews, third-party assessments, life-cycle cost estimates and other actions as the Deepwater program moves forward.

April 17/07: Commandant Admiral Thad Allen announces that the converted patrol boats that had experienced hull cracking will be permanently decommissioned – and that the Coast Guard will take over the lead integrator role from ICGS Deepwater.

March 23/07: Voted Off the Island: The USCG’s Deepwater FRC Program draws on primary reporting and government documents to offer an in-depth examination of the troubled Island Class cutter conversion and Fast Response Cutter programs.

Jan 23/07: The US Department of Homeland Security, Inspector General’s Office releases its report: Acquisition of the National Security Cutter, US Coast Guard.

Jan 11/07: Jane’s Defence Weekly reports that the US Coast Guard announced plans on January 10 to make sweeping management changes. “USCG commandant Admiral Thad Allen said details of the restructuring of the acquisition branch would be unveiled on February 11, 2007, but noted that one possible change might involve creating a single procurement agency divided into technical directorates such as surface, air, and networks and sensors.” Speaking at the Surface Navy Association (SNA) symposium on January 10, Adm Allen said he might also create a new leadership position at the rank of vice commandant to oversee the entire spectrum of the agency’s acquisition and sustainment activities.

Additional Readings

• US Coast Guard – Integrated Deepwater System

• Integrated Coast Guard Systems (ICGS), the Lockheed/N-G partnership serving as Deepwater’s systems integrator.

• USCG – Fast Response Cutter – B Class System Acquisition Project. Includes RFP.

• DID FOCUS Article – The USCG’s National Security Cutters. These ships have had their own trials and tribulations. DID reports on the ship class, the key issues, and the contracts.

• DID Spotlight Article – Voted Off the Island: The USCG’s Deepwater FRC Program. An in-depth report that takes a long look at the issues surrounding the Island Class cutter upgrade and Fast Response Cutter project, and summarizes what we know.

• US GAO (Oct 3/11, #GAO-12-101T) – Action Needed as Approved Deepwater Program Remains Unachievable. Based on their similarly-titled full report from July 28/11 (#GAO-11-743). The USCG has their own thoughts.

• US GAO – (Apr 13/11, #GAO-11-535T) – Observations on Acquisition Management and Efforts to Reassess the Deepwater Program

• US Coast Guard (Oct 20/10) – The Blueprint for Continuous Improvement Version 5.0. That’s acquisition & contracting improvement. See also full document [PDF]

• DID (Aug 24/10) – USCG Orders Up to 9 More CN-235/ HC-144A Patrol Planes
  

• IBM Center for the Business of Government (December 2008) – The Challenge of Contracting for Large Complex Projects: A Case Study of the Coast Guard’s Deepwater Program. This report was also discussed in USCG Rear ADM. Blore’s Dec 31/08 blog post.

• DID (Aug 17/08) – Adm. Thad Allen’s Reforms at the USCG. Points to a set of features in the USNI’s Proceedings magazine.

• US Congressional Government Accountability Office (#GAO-08-745, June 24/08) – Change in Course Improves Deepwater Management and Oversight, but Outcome Still Uncertain.

• US Congressional Government Accountability Office (#GAO-07-575T, March 8/07) – Coast Guard: Status of Efforts to Improve Deepwater Program Management and Address Operational Challenges

• Defense Tech (Feb 15/07) – Taking on LockMart. Was Mike DeKort right? David Axe looks at the Inspector General report, and concludes that the contractor was “guilty of minor crimes,” but the biggest problem was out of their hands: “…these boats were designed to last 15 years. And they did. The Coast Guard ran into problems when it tried to keep the boats past their intended service life.”

• US Congressional Government Accountability Office (#GAO-07-446T, Feb 15/07) – Coast Guard: Preliminary Observations on Deepwater Program Assets and Management Challenges

• US House of Representatives Committee on Commerce, Science, & Transportation; Oversight Hearing on Recent Setbacks to the Coast Guard Deepwater Program (Feb 14/07) – Statement of DHS Inspector General Mr. Richard L. Skinner. See also Statement of Phillip Teel, President of Northrop Grumman Ship Systems.

• Committee On Oversight And Government Affairs, US House Of Representatives (Feb 8/07) – Statement Of Admiral Thad W. Allen, Commandant, On The Procurement Practices Of The Department Of Homeland Security: Integrated Deepwater Systems [PDF format]. A critical document that lays out the Coast Guard’s approach going forward.

• US Department of Homeland Security, Inspector General’s Office (Jan 23/07) – Acquisition of the National Security Cutter, US Coast Guard. [Full report, PDF format]

• US Coast Guard (Dec 6/06) – Commandant’s “ALCOAST” Message on the Deepwater Program

• DID (Sept 20/06) – Lockheed Whistleblower Wants Congressional Investigation. Mike De Kort, quoted in the NY Times article, is the Lockheed whistleblower in question.

• Military.com (Sept 13/06) – Whistleblower Calls Out Lockheed. Describes some of DeKort’s specific allegations.

• US Congressional Government Accountability Office (#GAO-06-546, April 28/06) – Coast Guard: Changes to Deepwater Plan Appear Sound, and Program Management Has Improved, but Continued Monitoring Is Warranted

• DID (March 30/06) – US Government Ship-Building Roundup. Inclding Deepwater.

• DID (Aug 25/05) – Seapower: USCG Deepwater Program Special Issue

• DID (Aug 16/05) – U.S. Coast Guard’s Deepwater Acquisition Plan In Deep Water?

• US Congressional Government Accountability Office (#GAO-05-757, July 22/05) – Coast Guard: Progress Being Made on Addressing Deepwater Legacy Asset Condition Issues and Program Management, but Acquisition Challenges Remain

• Government Executive (April 15/04) – Rough Seas: The Coast Guard’s revolutionary acquisition strategy hits choppy waters.

• DID (Jan 3/06) – Cobham Catches A$ 1B CoastWatch Contract. Australia has a very different and interesting outsourcing approach to the Coast Guard function, which is also its border patrol. This coverage deals with the renewal of the multi-year CoastWatch contract.