Making the Case

n Dec. 17, a 600-foot cruise ship collided with a ferocious winter storm off the Virginia coast. The vessel, carrying 34 crewmembers, was on its way to Charleston, S.C., when the engine compartment filled with water. Responding to the ship's distress call, the Coast Guard-battling 70-knot winds and 30-foot waves-rescued all 34 people before the ship sank, stacking 26 of the rescued "like cordwood" in one helicopter.

Death-defying feats are the Coast Guard's specialty, but lately, a lack of funding also has presented a challenge."If we hadn't gotten supplemental funding from Congress in August, we might not have had the helicopter to go out and do that rescue," says Vice Adm. Timothy Josiah, the Coast Guard's chief of staff.

The Coast Guard's fiscal 2000 budget was about $4 billion, but it grew in August when Congress gave the agency an additional $700 million in supplemental funding for its operating expenses budget. Approximately $77 million of the extra funds were used to keep planes and boats in good condition.

The Coast Guard earned the only A for overall management in last year's Federal Performance Report. The service won As for its management of human resources, physical assets, information and for managing for results. Its only B came in financial management. The past year brought more successes:

‰ Thanks largely to the agency's efforts to account for its property, the Transportation Department received a clean financial audit for fiscal 1999 from its inspector general. Transportation failed to receive a clean audit for fiscal 2000, but the problem was not attributed to the Coast Guard.

‰ Congress increased its budget 15 percent from fiscal 2000, earmarking $565 million for drug interdiction activities. ‰ The Coast Guard seized a record amount of cocaine on the high seas in 2000-more than 62 tons.

But, the agency is concerned about performing multiple missions with aging equipment, a tired workforce and tight funds. Coast Guard Commandant James M. Loy frequently has told the story of a can-do organization whose duties are mounting as its wherewithal declines. Judging from the Coast Guard's fiscal 2001 budget-$594 million more than in fiscal 2000-Congress and the administration are listening.

Congress increased the Coast Guard's budget by 15 percent in fiscal 2001, to $4.6 billion. Although Loy is pleased,he is quick to point out the difficulties of the budget process. "For example," he says, "this year, our bill-the 2001 Transportation appropriations bill-was a pretty strong one . . . . But then, once on the Hill, we ran into that same 'mechanical' issue again."

The "mechanical" issue involves the annual Defense Authorization bill approved after the Coast Guard's budget is appropriated. Under the fiscal 2001 Defense authorization bill, the Coast Guard must shell out $33 million from its $4.6 billion budget for entitlements, such as housing expenses and raises for officers, that were not taken into account when the Coast Guard's 2001 appropriation was negotiated. Loy says this forces him to seek supplemental funding to sustain primary missions.

The Coast Guard often has trouble getting heard. Although the Transportation Department is the Coast Guard's parent agency, its duties are split between transportation, maritime law enforcement and national security. Despite that, Loy says 2000 was a watershed in terms of successfully communicating the agency's needs not only to Congress, but also to the administration. And the fiscal 2002 budget proposal proves that the administration got the message: It has proposed $5.1 billion for the Coast Guard in fiscal 2002-$545 million more than in 2001.

Going Into Deepwater

Restoring readiness and shaping the future are the keys to Loy's strategic vision for the next two years. According to Josiah, "shaping the future is always contingent on the Deepwater project." Deepwater, the Coast Guard's long-term acquisition project, seeks to upgrade the agency's equipment for missions 50 miles or more offshore. These activities include interdicting drugs and illegal immigrants and carrying out search-and-rescue missions. The project began in 1998, and the agency hopes to award a contract in January 2002. The General Accounting Office has estimated that Deepwater is likely to have a price tag somewhere between $8 billion and $12 billion over the next 20 years.

"The coming year is pivotal because we are asking for a lot more money for Deepwater," says Josiah-about $350 million for 2002. The fiscal 2001 budget includes $43 million for the acquisition project. Deepwater garnered strong support during the Clinton administration. Two months ago, however, GAO voiced concern that the Coast Guard was requesting more money for Deepwater before fully addressing the endeavor's risks. "Asking for funds prior to completing the planning process and fully addressing the risks . . . raises uncertainties about whether the funds will be used effectively," John Anderson, managing director of physical infrastructure at GAO, told the Senate Appropriations Subcommittee on Transportation at a hearing. Anderson said the Coast Guard's contracting approach-awarding a series of contracts to one vendor for potentially 20 years or more-posed a major risk.

E-Coast Guard

One of the Coast Guard's greatest recent achievements was helping Transportation get a clean opinion on its fiscal 1999 financial statement. Loy credits the agency's financial team for retooling financial management.

On the technology front, Loy is making a big push to create an "E-Coast Guard," ordering agency leaders to improve their business processes by 30 percent over the next two years through technology. Loy hopes that aggressively pursuing innovative information technology and business practices will energize the agency's workforce and help the Coast Guard achieve its strategic mission. Loy says the agency's chief information officer, along with the chief financial officer and its director of planning, policy, programming and budgeting, will form a "pivotal trio" at the center of the agency's e-government efforts.

But a December GAO report, "Coast Guard Practices Can Be Improved," (GAO-01-190), criticized the Coast Guard for poor management oversight and lackluster security policies with regard to its information technology system. The agency scored lowest on its policies and practices for tracking IT assets and overseeing its IT investments. Josiah defended the Coast Guard's commitment to improving information technology, saying that the agency spent much time and effort tackling the year 2000 problem and that it continues to focus on making wise investments in IT.

Restoring Readiness

The Coast Guard continues to stretch to live up to its motto, Semper Paratus, or "Always Ready." Overzealous streamlining-from 1994 to 1998 the Coast Guard cut 4,000 jobs and $400 million from its budget-has hampered recruiting. The size of the workforce hasn't changed much since 1967, and civilian staffing is down. Josiah says the agency is short about 600 petty officers and is having problems keeping pilots.

"I have asked human resources to really work hard at understanding what might be the skill sets and competencies of Coast Guard people 10 to 20 years from now so we can be in the business of building those skills to ensure that our workforce serves the Coast Guard-and thereby the nation-well down the road," says Loy.

Josiah notes that problems with recruiting and retention exacerbate the Coast Guard's readiness problems. Loy has dealt with these challenges, as well as the problem of aging equipment, in part by ordering Coast Guard commanders to slow down the pace of operations to save resources and people.

GAO's Randy Williamson, assistant director for maritime issues and physical infrastructure in the Seattle office, acknowledges the Coast Guard's problem with aging infrastructure, but credits the agency for doing the best it can under the circumstances."The Coast Guard makes use of what it has very well; its people are very dedicated and are doing a great job. The wheels aren't coming off yet, but if replacements aren't made in the near future, some assets will have to be put on the shelf," he says.

In his March 2000 address, Loy said that many of the Coast Guard's problems

could be solved with money. Williamson agrees that the toughest challenge will be funding major modernization projects designed to upgrade equipment and ease the burden on the workforce. "The challenge is, how is the Coast Guard going to fund Deepwater and capitalize their assets over the next 20 years with all the other demands placed on the federal budget?" asks Williamson. No one disputes the importance of funding, but as the Coast Guard has proved, gumption goes a long way on the high seas. It goes a long way in Washington, too.