Coast Guard Acquisitions Called ‘Unaffordable’

By Yasmin Tadjdeh
The Coast Guard has laid out an ambitious modernization and recapitalization plan for its future fleet of cutters and aircraft, but experts and government watchdogs have thrown cold water on it.

In a recent report, the Government Accountability Office said the chronically underfunded sea service’s overall acquisition portfolio is unaffordable, particularly as it prepares to pay billions of dollars for the offshore patrol cutter — a vessel that is meant to replace aging 270-foot and 210-foot medium-endurance cutters.

“The OPC will absorb about two-thirds of the Coast Guard’s acquisition funding between 2018 and 2032 while it is being built. As a result, remaining Coast Guard acquisition programs will have to compete for a small percentage of funding during this time,” said Michele Mackin, director of acquisition and sourcing management at the GAO.

Adm. Paul Zukunft, commandant of the Coast Guard, has continually stressed that the procurement of the OPC — which is estimated to cost $12.1 billion — is his biggest priority. However, the program has suffered some setbacks.

“The Coast Guard currently plans to begin construction on the lead ship in fiscal year 2018 — one year later than planned in its most recent program baseline — and deliver this ship in 2022,” Mackin said in May in her prepared remarks to the House Transportation and Infrastructure Committee’s subcommittee on Coast Guard and maritime transportation. “The Coast Guard attributes the schedule delay to procurement delays, including a bid protest.”

Last year, the service awarded three firm fixed-price contracts for the preliminary and contract design of the vessel to Bollinger Shipyards Lockport LLC, Eastern Shipbuilding Group Inc. and General Dynamics-Bath Iron Works. The Coast Guard will select a single vendor by the end of fiscal year 2016, officials have said.

Congress must help the Coast Guard meet its goal of 25 ships, James Offutt, president of the Navy League of the United States, testified.

“The highest acquisition, construction and improvement priority for the Coast Guard is to lay the groundwork for the construction of the offshore patrol cutter, which will replace cutters built in the ‘60s and ‘80s,” he said. “The importance of the OPC cannot be overstated. It will function as a service operational workhorse to carry out the Coast Guard’s primary missions over the next 40 years.”

He called on Congress to fund the construction of two OPCs annually.

Getting the offshore patrol cutter funded and procured is a matter of national security, said Brian Slattery, a defense and security studies policy analyst at the Heritage Foundation, a Washington, D.C.-based think tank.

“There are a number of national security missions that the United States Coast Guard undertakes every day, particularly things like drug interdiction and other illicit activities that could be occurring in or near U.S. territorial waters,” he said.

The Coast Guard is already suffering from a lack of presence and a fleet size that is not as high as it should be, he said. “If we’re not replacing the medium-endurance cutters that are on their last legs that the offshore patrol cutter is supposed to replace, then that will only worsen.”

The GAO found that the Coast Guard has often faced a disconnect between how much funding it estimates it will need for future acquisitions and how much it traditionally requests and receives, Mackin said.

The office noted that senior leaders of the Coast Guard have repeatedly said the service needs $2 billion per year for its acquisitions to meet its requirements, but has requested and received less than $1.5 billion over the last five years.

For fiscal year 2016, the service requested a little more than $1 billion, its latest five-year capital investment plan (CIP) showed. Through fiscal year 2020, the request never exceeds $1.29 billion.

“Budget officials have acknowledged that the Coast Guard’s current plan for developing new, more capable assets is not affordable given current and expected funding levels,” she said. Over the past five years the service’s “acquisition funding has fallen short of what it estimates it needs to fully recapitalize its assets. The Coast Guard has responded by annually delaying or reducing its capability.”

A 20-year plan, as opposed to a five-year plan, would be more beneficial to the service, Mackin said. “Our concern is that the Coast Guard has not set forth a long-term acquisition plan for its surface and aviation assets such as the 20-year plan we recommended last year,” she said. “Such a plan should include necessary trade offs that reflect budget realities. We’ve recommended since 2010 that the Coast Guard conduct this type of assessment.”

A long-term plan would give all stakeholders, including Congress, the resources to understand the constraints that the Coast Guard is facing and what it can reasonably acquire at certain funding levels, Mackin said.

It is clear that the Coast Guard is not receiving the funding it needs, Offutt said. With 11 statutory missions and growing responsibilities as it expands its role around the globe, the Coast Guard needs more support, he said.

“The service will not be properly equipped to meet these challenges unless we make serious investments now,” Offutt said. “The administration continues to request an acquisition budget that hovers at or below $1 billion with Congress providing the extra funding. The administration’s low budget request for acquisition, construction and improvements, or AC&I, represents the bare minimum funding for the Coast Guard to accomplish its missions.”

Funding levels for fiscal year 2016 are “totally unsatisfactory,” Offutt said. He recommended the Coast Guard receive a minimum of $1.5 billion per year to meet its recapitalization goals.

Rep. Duncan Hunter, R-Calif., chairman of the subcommittee, criticized the Obama administration for not better prioritizing the Coast Guard’s recapitalization efforts in its budget.

“The president’s budget cuts funding needed to acquire critically needed replacement assets by 17 percent. The budget also fails to guarantee the funding needed to begin detailed design for the offshore patrol cutter,” he said. “Failure to move into detailed design on the OPC by the end of fiscal year 2016, could result in significantly higher costs and substantial acquisition delays. Moving this, and other, acquisitions further to the right will only further degrade Coast Guard mission performance.”

There appears to be no relief in sight for the Coast Guard, he said. The service’s CIP continues to request funding levels too low to meet acquisition requirements, he said. “The Capital Investment Plan is nothing more than a roadmap to additional acquisition delays, increased costs for taxpayers and ongoing mission performance failures.”

Ashley Godwin, a senior defense advisor for the Shipbuilders Council of America, agreed that the president has not made enough investment in Coast Guard programs.

“It has not been a priority for them, and it looks like it is going to be up to Congress to actually … give the money to the Coast Guard,” she said. “They’re not going to ask for it.”

The service, while part of the military, is funded under the Department of Homeland Security. That means it has to constantly compete for precious funds, Godwin said. “It’s tough for them. They’re kind of the neglected stepchild.”

Rear Adm. Bruce D. Baffer, assistant commandant for acquisition for the Coast Guard, said unpredictable funding levels make it difficult for the service to meet its program goals. If it is appropriated a smaller figure than expected, that forces procurements to shift to the right and become more expensive.

“That lack of predictable funding increases cost for the program. Time costs money especially on a major program,” he said. “We stretch them out [but] you still incur the overhead and the fixed cost that go along with that production.”

The Coast Guard is also facing issues with its acquisition of 14 C-27J fixed-wing aircraft that were transferred to it by the Air Force at no cost, the GAO found.

“These aircraft are planned to significantly contribute to the Coast Guard’s missions once they are operational. However, as we reported in March 2015, it will take time and money to fully transfer and modify the aircraft,” Mackin said. It is anticipated that all 14 aircraft will be operational by 2022 at a cost of $600 million, she said. The service’s CIP includes $482 million for this effort over fiscal years 2016-2020.

Before the aircraft can be operational, however, the Coast Guard has three major hurdles to overcome, she said: purchasing spare parts, assessing technical data and understanding the condition of the aircraft.

One acquisition program that has continued to plague Coast Guard officials is the procurement of a new polar icebreaker. The Coast Guard has a statutory responsibility to maintain the nation’s fleet of polar icebreakers and is currently sailing two vessels — the Polar Star, a heavy duty icebreaker and the Healy, a medium duty icebreaker commissioned primarily for scientific use.

The Coast Guard has said it will cost $1 billion to procure a new vessel, but Congress has balked at funding it.

The situation has become so grave that the Coast Guard is now considering revamping the decommissioned Polar Sea, the sister vessel to the Star, Godwin said. The Star recently underwent a major refurbishment at the cost of about $90 million, but the Sea will be even more costly, she noted.

“The Polar Sea might be more difficult because … they cannibalized parts from Polar Sea in order to get Polar Star up and running,” she said.

The Polar Sea’s refurbishment could cost $100 million, a steep price for the Coast Guard to pay as it balances multiple costly acquisition programs, she said.

Getting the service the equipment it needs is a critical need for the country, Godwin said.

“You don’t really think of the Coast Guard as a national security [organization]. A lot of people don’t. They think of the Navy,” she said. “But they do it all. From national security, homeland security, search and rescue, humanitarian. These ships do all of the above.”

“I’m not sure why they just don’t get the attention and resources they deserve,” she said.

Topics: Defense Department, DOD Budget, Shipbuilding, Surface Ships

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