Coast Guard takes control from Deepwater's integrators

The Coast Guard has taken full control of developing a new flagship vessel from an embattled industry team and is determined to stay on schedule and keep costs from skyrocketing, a senior Homeland Security official told House lawmakers Tuesday.

The transition marks the end of the Homeland Security Department's reliance on a team headed by Lockheed Martin and Northrop Grumman as "lead systems integrators," coordinating development of the fourth national security cutter under the Coast Guard's Deepwater recapitalization plan, said Deputy Homeland Security Secretary Jane Holl Lute.

She told a House Homeland Security Appropriations Subcommittee hearing that the department has reorganized its acquisition review process to better manage major procurements.

The intention, she said, is to address Government Accountability Office findings that the department lacked the involvement of senior leadership in major procurement efforts.

House Homeland Security Appropriations Subcommittee Chairman David Price, D-N.C., and ranking member Hal Rogers, R-Ky., said Deepwater represents a major federal acquisition program that went astray.

Integrated Coast Guard Systems, a joint venture of Lockheed Martin and Northrop Grumman, was awarded the Deepwater program contract in June 2002. After heavily publicized cost overruns, schedule delays and design problems, the Coast Guard began to take over more responsibility for the program.

"The Coast Guard now has two of these vessels, but problems were identified with the design that would shorten the service life of these ships, costs have escalated significantly, and the production timetable has slipped," Price said.

"While supporters of the program say the vessels are extremely capable, critics have charged that the Deepwater acquisition process was more focused on the contractors designing a profitable ship instead of giving the Coast Guard what it needed to accomplish its missions," Price added.

Lute said Homeland Security previously relied on an acquisition process modeled after the Defense Department.

"However, as DHS acquisition is generally focused on service and information technology programs, we revised the acquisition review process to match our needs, effectively queuing programs for leadership review and decision based on milestones and risk management," she said in written testimony.

"This review process provides a clear insight into each program's overall performance and controls related to cost, schedule and contract performance. It allows us to make a risk assessment for each major program and then take appropriate actions to mitigate risk and align our resources," she added.

The department is seeking about $540 million in its fiscal 2011 budget request for a fifth national security cutter. But the department has yet to give appropriators an expenditure plan for the Deepwater program.

Rogers said he would not vote in favor of Deepwater funding until the expenditure plan is submitted.

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