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$21 billion fleet plan runs into budget snags

Dec. 11, 2012 - 11:43AM   |  
By SEAN REILLY   |   Comments

A decade after awarding the first contract to modernize its aging fleet, the Coast Guard is making modest headway. But snags are surfacing as the agency struggles to mesh its plans with tightening budgets.

“How do you make all of this fit?” John Hutton, a director on the Government Accountability Office’s acquisition sourcing management team, asked in an interview.

Last year, GAO labeled the modernization plan — the most ambitious in the Coast Guard’s history —”unachievable” and urged the agency to retrench. Frustration also is mounting on Capitol Hill. Despite reforms, “significant delays, cost overruns and capabilities gaps remain,” House members said in an analysis attached to a reauthorization bill now moving through Congress.

In all, the Coast Guard wants to buy 91 ships over the next two decades or so; aircraft replacements and other equipment upgrades also are part of the mix.

The new fleet, like the vessels they are supposed to replace, would be used for search and rescue, coastal patrols and other operations. The centerpiece would be eight national security cutters, 418-foot vessels with automated weapons systems and secure communications that can stay at sea for up to three months at a time. Much smaller and cheaper would be the 58 fast response cutters, also known as Sentinel-class patrol boats, with about one-fourth the range and a cruising limit of five days. Rounding out the new fleet will be 25 offshore patrol cutters that will rank between the other two ship classes in size and price; the Coast Guard is still developing their exact specifications.

The total projected price tag exceeds $21 billion, more than one-third higher than a 2007 estimate. The Coast Guard is already building national security and fast response cutters. Production of the offshore patrol cutter is scheduled to start in 2017.

But when the Coast Guard released an updated five-year purchasing plan early this year, it included no money for procurement of the seventh and eighth national security cutters, which was to get underway in 2014 and 2015, respectively. While those two ships formally remain part of the modernization plan, it’s now unclear when, if ever, they will be built. Some observers saw the cuts as a tradeoff needed to secure funding for a new heavy icebreaker.

Under governmentwide budget caps imposed last year, “we are going to have to look at each and every asset … and work doubly hard to justify whatever we can get to spend on those projects,” Adm. Robert Papp, the Coast Guard’s commandant, said at a March congressional hearing. If the money doesn’t come through, Papp said, the Coast Guard will have to consider keeping several of its older “high endurance cutters” on active duty.

“That presents a challenge,” Papp said, given that those ships are more than 40 years old and in some cases need millions of dollars worth of repairs to stay seaworthy.

Financial shortfalls are also slowing production of the fast response cutters. After initially planning to buy six in fiscal 2012, the Coast Guard cut that number to four. In a separate hearing, Papp attributed that decision to making up for a potential funding cut in 2013. Under its contract with Bollinger Shipyards in Louisiana, the Coast Guard is supposed to buy at least four fast response cutters each year; delaying the purchase of two ships until 2013 would allow it meet that quota, Papp said in May.

“I admit there’s a little bit of a shell game,” he said. With a push from Congress, the Coast Guard eventually went ahead and made the six purchases scheduled for fiscal 2012. Although both the House and Senate appropriations committees have approved additional money to permit at least four more buys this year, lawmakers have yet to pass a final bill.

Earlier, however, the Coast Guard’s eagerness to steam ahead led it to start building the fast response cutters before dealing with design and technical risks, the Department of Homeland Security’s inspector general said in a recent report. As a result, six of the ships needed rework that added at least nine months of delays to the construction schedule and almost $7 million to the overall cost, the audit said.

The problems may not end there, the IG added. Because the Coast Guard went ahead with the buys before testing the lead ship in “actual operations,” it is unclear how well the cutter will perform at sea. If defects turn up, the upshot could be more “costly rework and delays,” or the Coast Guard may have to accept ships that don’t meet its mission requirements, the report said.

In a written response to the IG’s findings, Coast Guard officials said they gave the first ship an operational assessment in February and otherwise followed existing acquisition policies. They agreed, however, to consider whether any changes are needed to those policies.

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