COAST GUARD Actions Needed to Mitigate Deepwater Project Risks

We appreciate the opportunity to testify on the Deepwater Capability Replacement Project, which was initiated by the Coast Guard to replace and modernize its aging fleet of over 90 cutters and 200 aircraft used beyond 50 miles from shore. This project, the largest acquisition ever attempted by the Coast Guard, will likely cost over $10 billion or more and will not be completed for 2 to 3 decades. Already, the Coast Guard has spent about $116 million on the project's design, and this year is asking for $338 million to begin the acquisition phase. The Congress and the Coast Guard are now at a major crossroads with the Deepwater Project, in that the planning is essentially complete, and the Congress is now being asked to commit to a multibillion dollar project that will define the way the Coast Guard performs many of its missions for decades to come. The acquisition strategy the Coast Guard has chosen for the Deepwater Project is unique and untried for a project of this magnitude. It carries many risks that could potentially cause significant schedule delays and cost increases. Since 1998, we have reviewed numerous aspects of this project at the request of this Subcommittee and others. Most recently, we evaluated the major risks associated with the project, and our testimony today is based on a report 1 released earlier this week. We will discuss risks the project faces in four major areas: (1) planning the project around annual funding levels far above what the administration has told the Coast Guard it can expect to receive, (2) keeping costs under control in the contract's later years, (3) ensuring that procedures and personnel are in place for managing and overseeing the contractor once the contract is awarded, and (4) minimizing potential problems with developing unproven technology. In summary: Affordability is a major risk for the Deepwater Project. The Coast Guard has chosen a contracting approach that depends on a sustained funding stream of over $500 million each year (in 1998 dollars) for the next 20 years or more. Contractors now competing for the right to acquire the entire deepwater system have been told to plan their entire proposals around this level of funding. According to budget projections from the Office of Management and Budget (OMB), the Coast Guard faces the real possibility that $500 million annually will not be available for the project and that the …