Out of Its Depth

The Coast Guard's decision to take over Deepwater raises concern about the government's ability to oversee large contracts.

As with many debacles, there were plenty of warning signs that the Coast Guard's massive $24 billion program to modernize the fleet was veering off course. The signs came long before last month, when Coast Guard Commandant Adm. Thad Allen announced that the service would cut its losses and scrap eight newly upgraded patrol boats, so flawed they are not seaworthy, and take over the role of lead systems integrator from Integrated Coast Guard Systems, a joint venture of Lockheed Martin and Northrop Grumman founded to manage the program known as Deepwater.

The warning signs appeared in Government Accountability Office reports before the contract was even awarded in 2002 and in subsequent inspector general reports after the program began. There were warning signs among contractors and Coast Guard managers and engineers who witnessed shoddy work and flawed decision-making, only to have their concerns brushed aside or buried by supervisors or managers. There were the concerns raised by members of Congress, worried that the Coast Guard had lost control of a program whose management structure obscured accountability.

Many of those warning signs came into stark relief at an April 18 House Transportation and Infrastructure Committee hearing lasting nine and a half hours. Among those testifying was Michael DeKort, who in the summer of 2003, was Lockheed Martin's project manager on the Deepwater program to convert 49 legacy 110-foot patrol boats to 123 feet and upgrade their electronics equipment. A former Navy electronics technician and State Department communications engineer, DeKort assumed the project manager role after the final design review had been completed and most of the equipment had been purchased for the first several boats. When he was told contractors were planning to install nonweatherproof radios on small boats open to the elements, "I found it too incredible to believe," he said.

It was only the first of a number of things DeKort would find incredible on the patrol boat program. There were the surveillance systems with significant blind spots, the low-smoke cables that posed a danger to the crew should fire break out, the nonshielded cables that could compromise secure communications and finally, the vulnerability of equipment to rain, heavy seas, high winds and extreme temperatures-the very conditions under which the Coast Guard was likely to operate. DeKort did what any conscientious program manager would do: He put his concerns in writing and took them to his superiors through his chain of command. In 60 pages of written testimony, DeKort documented in painstaking detail how both ICGS and the Coast Guard worked to keep Deepwater on schedule at all costs, no matter the flaws. Eventually, DeKort grew so frustrated that last fall he posted his concerns on the Web site YouTube to draw public attention to the issues.

DeKort was not alone in his concerns. There also was Scott C. Sampson, a naval architect with the Navy's combatant craft division, a detachment of the Naval Surface Warfare Center Carderock division. The division has total design and engineering authority for Navy combatant craft and boats. When he became aware of the Coast Guard's plans to extend the 110-foot patrol boats to 123 feet, he was very concerned-the Navy had done a similar extension that led to hull buckling that required expensive fixes. Sampson thought the Coast Guard would benefit from the Navy's prior experience and avoid making the same mistakes. He contacted Debu Ghosh, a naval architect at the Coast Guard's Engineering Logistics Center. After they met, Ghosh requested from Sampson an estimate of costs for the combatant craft division to provide technical support to the Deepwater patrol boat conversion program. Sampson estimated the consulting costs would run about $42,000. But when Ghosh submitted the request for engineering support from the Navy, it was turned down by his Coast Guard superiors, he told the House committee.

Trouble with the conversion program was evident in early 2004, when Government Executive correspondent Jason Peckenpaugh chronicled some of the problems with the first 110-foot patrol boat conversion, the Matagorda, in the April 15 story "Rough Seas."

"Refurbishing the Matagorda was the first test of how the Coast Guard-ICGS partnership would work in the field, where some employees still puzzle over the division of labor between both parties," Peckenpaugh reported. "But when the Matagorda arrived at Bollinger, ICGS had no permanent representative at the shipyard. The integrator seemed reluctant to interfere with Bollinger, an experienced company used to working as a prime contractor. 'I don't think people understood the level of coordination it would take,' says Lt. Ben Fleming, a Deepwater representative who was sent to Bollinger in August [2003]."

Peckenpaugh quoted officials from Lockheed, the Coast Guard and Bollinger, all of whom had a different understanding of how the contract was to be managed. Said one maintenance chief quoted in the story: "What it boils down to is, the roles and responsibilities of all the parties concerned, although it may be written down somewhere, weren't clearly defined to everyone."

While lines of responsibility and authority apparently were ambiguous to those involved in the program, it's now painfully clear that the Coast Guard has a lot of work to do to put Deepwater on track again. The inspector general at Homeland Security, the Coast Guard's parent department, raised serious concerns about design flaws in Deep-water's centerpiece, the National Security Cutter. Commandant Allen told reporters in April that the Coast Guard and ICGS are negotiating fixes to those problems before the Coast Guard accepts the first ship, which is slated for late fall.

Deepwater is among the most ambitious and expensive federal procurements in history. Designed to modernize an aging fleet increasingly crippled by growing maintenance re-quirements and outmoded communications systems, Deepwater was broadly supported by lawmakers of both parties. The indefinite-delivery, indefinite-quantity contract was awarded to ICGS in 2002 to oversee the acquisition of new or upgraded cutters, patrol boats, helicopters, fixed-wing aircraft and the communications systems that would link all these assets. As the lead systems integrator, ICGS had broad authority to select and manage subcontractors and to shape the acquisition plan to best meet the Coast Guard's mission requirements. The five-year deal was designed to be extended in five-year increments up to 25 years, the program's anticipated duration.

But the contract's significance went far beyond the Coast Guard. From Deepwater's inception, it was widely viewed as a model for how federal agencies could more efficiently and effectively buy complex assets requiring integrated communications systems.

Because agencies are struggling to manage a growing number of highly technical contracts with fewer experienced acquisition professionals, they are increasingly turning to lead systems integrators such as ICGS to provide the technical expertise they lack. A recent report by the Congressional Research Service found that the Defense Department's acquisition workforce was cut by more than 50 percent between 1994 and 2005, during a period when Defense spending soared.

Not surprisingly, the military services have turned to lead systems integrators to manage some of their most important programs, such as the Army's Future Combat Systems and the Air Force's Transformational Communication System. The Coast Guard's experience with Deepwater offers a cautionary tale for other agencies.

"It is not practical to think one can provide an ironclad set of requirements and an associated contract that will avoid all problems," DeKort told lawmakers at the April 18 hearing. "All that was needed were leaders who were competent and ethical in any one of the key contractor or Coast Guard positions. Any one of dozens of people could have simply done the right thing on this effort and changed the course of events that followed."

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