oversight

Homeland Security: Challenges Facing the Coast Guard as it Transitions to the New Department

Published by the Government Accountability Office on 2003-02-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                               United States General Accounting Office

GAO                            Testimony
                               Before the Subcommittee on Oceans, Atmosphere, and
                               Fisheries, Committee on Commerce, Science, and
                               Transportation, U.S. Senate


For Release on Delivery
Expected at 2:30 p.m. EST
Wednesday, February 12, 2003   HOMELAND SECURITY

                               Challenges Facing the
                               Coast Guard as it
                               Transitions to the New
                               Department

                               Statement of JayEtta Z. Hecker, Director
                               Physical Infrastructure




GAO-03-467T
                                               February 2003


                                               HOMELAND SECURITY

                                               Challenges Facing the Coast Guard as it
Highlights of GAO-03-467T, a testimony         Transitions to the New Department
before the Subcommittee on Oceans,
Atmosphere, and Fisheries, Senate
Committee on Commerce, Science, and
Transportation




The Coast Guard is one of 22                   The Coast Guard faces major challenges in effectively implementing its
agencies being placed in the new               operations within the Department of Homeland Security. GAO has identified
Department of Homeland Security.               critical success factors for reorganizing and restructuring agencies, and its
With its key roles in the nation’s             recent work in reviewing the Coast Guard has focused on challenges dealing
ports, waterways, and coastlines,              with six of these factors—strategic planning, communications and
the Coast Guard is an important
part of enhanced homeland
                                               partnership-building, performance management, human capital strategy,
security efforts. But it also has              information management and technology, and acquisition management.
non-security missions, such as
search and rescue, fisheries and               The Coast Guard faces challenges in all of these areas. The difficulty of
environmental protection, and                  meeting these challenges is compounded because the Coast Guard is not just
boating safety. GAO has conducted              moving to a new parent agency: it is also substantially reinventing itself
a number of reviews of the Coast               because of its new security role. Basically, the agency faces a fundamental
Guard’s missions and was asked to              tension in balancing its many missions. It must still do the work it has been
testify about the Coast Guard’s                doing for years in such areas as fisheries management and search and
implementation challenges in                   rescue, but now its resources are deployed as well in homeland security and
moving to this newly created                   even in the military buildup in the Middle East. The Coast Guard’s expanded
Department.
                                               role in homeland security, along with its relocation in a new agency, have
                                               changed many of its working parameters, and its adjustment to this role
                                               remains a work in process. Much work remains. Some of the work is
GAO is not making new                          strategic in nature, such as the need to define new missions and redistribute
recommendations in this                        resources to meet the wide range of missions. Others include
testimony, but past reports have               accommodating a sudden surge of new positions or trying to ensure that its
made specific recommendations                  most ambitious acquisition project—the Deepwater Project—remains viable.
aimed at some of these
implementation challenges, such as
developing a long-term strategy for
how its resources will be used
among its various missions.




www.gao.gov/cgi-bin/getrpt?GAO-03-467T.
                                               The Coast Guard is still in the process of determining how the use of resources such as this patrol
To view the full report, including the scope   boat will be divided among the many missions the agency must meet.
and methodology, click on the link above.
For more information, contact JayEtta Hecker   Source: U.S. Coast Guard.
at (202) 512-2834 or heckerj@gao.gov.
Madame Chair and Members of the Subcommittee:

I am pleased to be here today to discuss key implementation challenges
facing the Coast Guard as it transitions into the newly created Department
of Homeland Security (DHS). Creating this new department means
merging disparate organizational structures, cultures, and systems into a
cohesive working unit. The newly created DHS represents one of the
largest reorganizations and consolidations of government agencies,
personnel, programs, and operations in recent history. The department
and agencies within it must deal with a myriad of organizational, human
capital, process, technology, and environmental challenges that must be
addressed and resolved at the same time that the new department is
working to maintain readiness. For these and other reasons, we have
designated the implementation and transformation of DHS as a high-risk
area.1

But the Coast Guard, even as a separate entity, was rapidly reinventing
itself in many respects in the wake of the terrorist attacks of September
11th. After these attacks, the Coast Guard’s priorities and focus had to
shift suddenly and dramatically toward protecting the nation’s vast and
sprawling network of ports and waterways. The National Strategy for
Homeland Security2 recognizes the important role the Coast Guard now
plays in protecting the nation’s borders and infrastructure. While
homeland security has long been one of the Coast Guard’s missions, the
agency has for decades focused its efforts on other major national
objectives, such as conducting search and rescue operations at sea,
preventing and mitigating oil spills and other threats to the marine
environment, protecting important fishing grounds, and stemming the flow
of illegal drugs and migrants into the United States. September 11th
drastically changed the Coast Guard’s priorities, and it did so by adding to
the agency’s many responsibilities rather than by replacing responsibilities
that were already in place. For example, the recently enacted Maritime
Transportation Security Act3 made the Coast Guard responsible for
numerous new port security functions that will likely require sizable
personnel and hardware commitments.


1
 Major Management Challenges and Program Risks: Department of Homeland Security
(GAO-03-102, January 2003).
2
 National Strategy for Homeland Security, The White House, Office of Homeland Security,
July 16, 2002.
3
Pub. L. 107-295, Nov. 25, 2002.



Page 1                                                                   GAO-03-467T
My testimony today, which is based on a large body of work we have
completed in recent years, both on governmental reorganization in general
and the Coast Guard in particular, focuses on six key factors for
implementation success: strategic planning, communication and
partnership-building, performance management, human capital,
information management and technology, and acquisition management. In
prior reports and testimony before the Congress, we have identified these
factors as among those that are critical to success in organizational
change.4 Our recent work in reviewing the Coast Guard has focused on
challenges the Coast Guard faces in dealing with these six success factors.

In summary, even though the Coast Guard has in many respects done a
credible job of managing such things as strategic planning, partnership-
building, and aligning its work force with its missions, it now faces major
challenges in implementing all six of the implementation success factors.
Its expanded role in homeland security and its relocation in a new agency
have changed many of its priorities and working parameters, and its
adjustment to this new environment remains a work in process. Thus,
there is much work to be done. Some of the work is strategic in nature,
such as the need to better define its homeland security mission and the
level of resources needed to meet not only its new security mission
responsibilities but its existing missions as well. Others include
accommodating a sudden surge of thousands of personnel that are being
added and trying to ensure that its most ambitious acquisition project—the
Deepwater Project to modernize its fleet of cutters and aircraft—is well
managed and remains on track. Overlying these challenges is a
fundamental tension that the agency faces in balancing its many missions.
On the one hand, it must still do the job it has been doing for years in
fisheries management, search and rescue work, ship inspections, marine
environmental protection, and other areas. On the other hand, a sizable
portion of its resources are now deployed in homeland security work. In
addition, the Coast Guard is contributing to the military buildup in the
Middle East. Effectively addressing these implementation challenges in the
context of this overarching tension is a sizeable task.



4
 Homeland Security: Proposal for Cabinet Agency Has Merit, But Implementation Will
Be Pivotal to Success (GAO-02-886T, June 25, 2002). Highlights of a GAO Forum: Mergers
and Transformation: Lessons Learned for a Department of Homeland Security and
Other Federal Agencies (GAO-03-293SP, November 14, 2002). GAO has identified several
other factors as important to success, including organizational alignment, knowledge
management, financial management, and risk management. However, these factors, as
they relate to the Coast Guard were not covered in the scope of completed GAO work.



Page 2                                                                   GAO-03-467T
                                           The Coast Guard has a wide variety of missions, related both to homeland
Background                                 security and its other responsibilities. Table 1 shows a breakout of these
                                           missions—both security and non-security related—as delineated under the
                                           Homeland Security Act of 2002.5

Table 1: Security and Non-Security Missions of the Coast Guard

Mission area                            Activities and functions within each mission area
Security Missions:
Ports, waterway, and coastal security   Conducting harbor patrols, vulnerability assessments, intelligence gathering and analysis,
                                        and other activities to prevent terrorist attacks and minimize the damage from attacks that do
                                        occur.
Drug interdiction                       Deploying cutters and aircraft in high drug trafficking areas and gathering intelligence to
                                        reduce the flow of illegal drugs across maritime boundaries.
Migrant interdiction                    Deploying cutters and aircraft and conducting vessel inspections to eliminate the flow of
                                        undocumented migrants entering the United States by maritime routes.
Defense readiness                       Participating with the Department of Defense (DOD) in global military operations; deploying
                                        cutters and other boats and aircraft in and around harbors to protect DOD force mobilization
                                        operations.
Non-Security Missions:
Maritime safety                         Setting standards and conducting vessel inspections to better ensure the safety of
                                        passengers and crew aboard cruise ships, ferries, and other passenger vessels and
                                        commercial and fishing vessels; partnering with states and boating safety organizations to
                                        reduce recreational boating deaths.
Search and rescue                       Operating small boat stations and a national distress and response communication system;
                                        conducting search and rescue operations for mariners in distress.
Living marine resources                 Protecting our nation’s fishing grounds from foreign encroachment; enforcing domestic
                                        fishing laws and regulations through inspections and fishery patrols.
Environmental protection                Preventing and responding to marine oil spills; preventing the illegal dumping of plastics and
                                        garbage into our nation’s waters.
Aids to navigation                      Maintaining an extensive system of navigation aids in our waterways; monitoring marine
                                        traffic through vessel traffic service centers.
Ice operations                          Conducting polar operations to facilitate the movement of critical goods and personnel in
                                        support of scientific and national security activity; conducting domestic icebreaking
                                        operations to facilitate year-round commerce.
                                           Source: U.S. Coast Guard.


                                           The Coast Guard has overall federal responsibility for many aspects of
                                           port security and is involved in a wide variety of activities. Using its
                                           cutters, boats, and aircraft, the Coast Guard conducts security patrols in
                                           and around U.S. harbors, escorts large passenger vessels in ports, and
                                           provides protection in U.S. waterways for DOD mobilization efforts. It also
                                           gathers and disseminates intelligence information, including gathering
                                           information on all large commercial vessels calling at U.S. ports; the


                                           5
                                            Pub. L. 107-296, Nov. 25, 2002.



                                           Page 3                                                                        GAO-03-467T
agency monitors the movement of many of these vessels in U.S. territorial
waters. It conducts port vulnerability assessments; helps state and local
port authorities to develop security plans for protecting port
infrastructure; and actively participates with state, local, and federal port
stakeholders in a variety of efforts to protect port infrastructure and
ensure a smooth flow of commerce. In international maritime matters, the
Coast Guard is also active in working through the International Maritime
Organization to improve maritime security worldwide. It has spearheaded
proposals before this organization to implement electronic identification
systems, ship and facility security plans, and the undertaking of port
security assessments.

The Coast Guard’s homeland security role is still evolving; however, its
resource commitments to this area are substantial and will likely grow.
For example, under the recently enacted Maritime Transportation Security
Act, the Coast Guard will likely perform numerous security tasks, such as
approving security plans for vessels and waterside facilities, serving on
area maritime security advisory committees, assessing antiterrorism
measures at foreign ports, and maintaining harbor patrols. The Coast
Guard has not yet estimated its costs for these activities; however, the
President’s fiscal year 2004 budget request includes over $200 million for
new homeland security initiatives, including new patrol boats, additional
port security teams, and increased intelligence capabilities.

To provide for the orderly transition of the Coast Guard to DHS on March
1, 2003, the Coast Guard established a transition team last year that
identified and began addressing issues that needed attention. Coast Guard
officials told us that they patterned their transition process after key
practices that we identified as important to successful mergers,
acquisitions, and transformations.6 The agency’s transition team consists
of top management, led by the Chief of Staff, and enlists the assistance of
numerous staff expertise throughout the agency through matrixing.
According to Coast Guard officials, the scope of transition issues spans a
wide variety of topics, including administrative and support functions,
strategy, outreach and communication issues, legal considerations, and
information management. The transition team focuses on both DHS-
related issues and on issues related to maintaining an enduring



6
Highlights of a GAO Forum: Mergers and Transformation: Lessons Learned for a
Department of Homeland Security and Other Federal Agencies (GAO-03-293SP,
November 14, 2002).



Page 4                                                               GAO-03-467T
                       relationship with the Department of Transportation (DOT). In addition to
                       its own transition team, senior Coast Guard officials participated with
                       OMB in developing the DHS reorganization plan late last year.7 Also, key
                       Coast Guard officials participate on joint DHS and DOT transition teams
                       that have been established to deal with transition issues in each
                       department.


                       We have testified that, despite the complexity and enormity of the
The Coast Guard        implementation and transformation of DHS, there is likely to be
Faces Numerous         considerable benefit over time from restructuring homeland security
                       functions.8 These benefits include reducing risk and improving the
Complex                economy, efficiency, and effectiveness of these consolidated agencies and
Implementation         programs. In the short term, however, there are numerous complicated
                       challenges that will need to be resolved, making implementation a process
Challenges as It       that will take considerable time and effort. Reorganizations frequently
Transitions into DHS   encounter start-up problems and unanticipated consequences, and it is not
                       uncommon for management challenges to remain for some time. Our past
                       work on government restructuring and reorganization has identified a
                       number of factors that are critical to success in these efforts. Coast Guard
                       officials now involved in transition efforts told us that they are aware of
                       these factors and are addressing many of them as they prepare to move to
                       DHS. Our testimony today focuses on six of these factors—strategic
                       planning, communication and partnership-building, performance
                       management, human capital strategy, information management and
                       technology, and acquisition management—and, based on past work, some
                       of the key challenges the Coast Guard faces in addressing and resolving
                       them.


Strategic Planning     The strategic planning process involves assessing internal and external
                       environments, working with stakeholders, aligning activities, processes,
                       and resources in support of mission-related outcomes. Strategic planning
                       is important within the Coast Guard, which now faces a challenge in



                       7
                        Department of Homeland Security Reorganization Plan, November 25, 2002. This plan,
                       required by the Homeland Security Act of 2002, addresses (1) the transfer of agencies,
                       personnel, assets, and obligations to DHS, and (2) any consolidation, reorganization, or
                       streamlining of agencies transferred to DHS.
                       8
                       Homeland Security: Proposal for Cabinet Agency Has Merit, But Implementation Will
                       Be Pivotal to Success (GAO-02-886T, June 25, 2002).



                       Page 5                                                                      GAO-03-467T
                       merging past planning efforts with the new realities of homeland security.
                       The events of September 11th produced a dramatic shift in resources used
                       for certain missions. Cutters and patrol boats that were normally used
                       offshore were quickly shifted to coastal and harbor security patrols. While
                       some resources have been returned to their more traditional activities,
                       others have not. For example, Coast Guard patrol boats in the nation’s
                       Northeast were still conducting security patrols many months later,
                       reducing the number of fisheries patrols by 40-50 percent from previous
                       years. Even now, the Coast Guard continues to face new security-related
                       demands on its resources. Most notably, as part of the current military
                       build-up in the Middle East, the Coast Guard has sent nine cutters to assist
                       the DOD in the event of war with Iraq.9

                       While its greatly expanded homeland security role has already been
                       merged into its day-to-day operations, the Coast Guard faces the need to
                       develop a strategic plan that reflects this new reality over the long term.
                       Where homeland security once played a relatively small part in the Coast
                       Guard’s missions, a new plan must now delineate the goals, objectives,
                       strategies, resource requirements, and implementation timetables for
                       achieving this vastly expanded role while still balancing resources among
                       its various other missions. The agency is now developing a strategic
                       deployment plan for its homeland security mission and plans to finish it
                       sometime this year. However, development has not begun on a long-term
                       strategy that outlines how it sees its resources—cutters, boats, aircraft,
                       and personnel—being distributed across all of its various missions, as well
                       as a timeframe for achieving desired balance among missions. We
                       recommended in a recent report to this Subcommittee that the Coast
                       Guard develop such a strategy to provide a focal point for all planning
                       efforts and serve as a basis for spending and other decisions.10 The Coast
                       Guard has taken this recommendation under advisement but has not yet
                       acted on it.


Communication and      There is a growing realization that any meaningful results that agencies
Partnership-Building   hope to achieve are likely to be accomplished through matrixed



                       9
                        The Coast Guard is sending one 378-foot high endurance cutter and eight 110-foot patrol
                       boats to the Middle East in support of DOD’s Enduring Freedom, the Global War on
                       Terrorism.
                       10
                        Coast Guard: Strategy Needed for Setting and Monitoring Levels of Effort for All
                       Missions (GAO-03-155, November 12, 2002).



                       Page 6                                                                      GAO-03-467T
relationships or networks of governmental and nongovernmental
organizations working together. These relationships exist on at least three
levels. First, they exist within and support the various internal units of an
agency. Second, they include the relationships among the components of a
parent department, such as DHS. Third, they are also developed
externally, to include relationships with other federal, state, and local
agencies, as well as private entities and domestic and international
organizations. Our work has shown that agencies encounter a range of
barriers when they attempt coordination across organizational
boundaries.11 Such barriers include agencies’ concerns about protecting
jurisdictions over missions and control of resources, differences in
procedures, processes, data systems that lack interoperability, and
organizational cultures that may make agencies reluctant to share
sensitive information.

Specifically, our work has shown that the Coast Guard faces formidable
challenges with respect to establishing effective communication links and
building partnerships both within DHS and with external organizations.
While most of the 22 agencies moving to DHS will report to under
secretaries for the department’s various directorates,12 the Coast Guard
will remain a separate entity reporting directly to the Secretary of DHS.
According to Coast Guard officials, the Coast Guard has important
functions that will require coordination and communication with all of
these directorates, particularly the Border and Transportation Security
Directorate. For example, the Coast Guard plays a vital role with Customs,
Immigration and Naturalization Service, the Transportation Security
Administration, and other agencies that are organized in the Directorate of
Border and Transportation Security. Because the Coast Guard’s homeland
security activities require interface with these and a diverse set of other
agencies organized within several DHS directorates, communication,
coordination, and collaboration with these agencies is paramount to
achieve department-wide results.

Effective communication and coordination with agencies outside the
department is also critical to achieving the homeland security objectives,



11
 Managing for Results: Barriers to Interagency Coordination, (GAO/GGD-00-106, March
9, 2000).
12
 Most agencies within DHS are organized within one of the four directorates: Science and
Technology, Information Analysis and Infrastructure Protection, Border and
Transportation Security, and Emergency Preparedness and Response.



Page 7                                                                     GAO-03-467T
                         and the Coast Guard must maintain numerous relationships with other
                         public and private sector organizations outside DHS. For example,
                         according to Coast Guard officials, the Coast Guard will remain an
                         important participant in DOT’s strategic planning process, since the Coast
                         Guard is a key agency in helping to maintain the maritime transportation
                         system. Also, the Coast Guard maintains navigation systems used by DOT
                         agencies such as the Federal Aviation Administration. In the homeland
                         security area, coordination efforts will extend well beyond our borders to
                         include international agencies of various kinds. For example, the Coast
                         Guard, through its former parent agency, DOT, has been spearheading U.S
                         involvement in the International Maritime Organization. This is the
                         organization that, following the September 11th attacks, began
                         determining new international regulations needed to enhance ship and
                         port security. Also, our work assessing efforts to enhance our nation’s port
                         security has underscored the formidable challenges that exist in forging
                         partnerships and coordination among the myriad of public and private
                         sector and international stakeholders.13


Performance Management   A performance management system that promotes the alignment of
                         institutional, unit, and individual accountability to achieve results is an
                         essential component for organizational success. Our work has shown
                         performance management is a key component of success for high-
                         performing, results-oriented organizations. High-performing organizations
                         have recognized that a key element of a fully successful performance
                         management system is aligning individual employees’ performance
                         expectations with agency goals so that employees can see how their
                         responsibilities contribute to organizational goals. These organizations (1)
                         define clear missions and desired outcomes, (2) measure performance as a
                         way of gauging progress toward these outcomes, and (3) use performance
                         information as a basis for decision-making.14 In stressing these actions, a
                         good performance management system fosters accountability.

                         The changed landscape of national security work presents a challenge for
                         the Coast Guard’s own performance management system. The Coast



                         13
                          Container Security: Current Efforts to Detect Nuclear Materials, New Initiatives, and
                         Challenges (GAO-03-297T, November 18, 2002). Port Security: Nation Faces Formidable
                         Challenges in Making New Initiatives Successful (GAO-02-993T, August 5, 2002).
                         14
                          Executive Guide: Effectively Implementing the Government Performance and Results
                         Act (GAO/GGD-96-118, June 1, 1996).



                         Page 8                                                                    GAO-03-467T
                         Guard has applied the principles of performance management for most of
                         its missions, but not yet for homeland security. However, the Coast Guard
                         has work under way to define its homeland security mission and the
                         desired outcomes stemming from that mission. The Coast Guard expects
                         to have such measures this year and begin collecting data to gauge
                         progress in achieving them. Progress in this area will be key in the Coast
                         Guard’s ability to make sound decisions regarding its strategy for
                         accomplishing its security mission as well as its various other missions.


Human Capital Strategy   In any organization, people are its most important asset. One of the major
                         challenges agencies face is creating a common organizational culture to
                         support a unified mission, common set of core values, and organization-
                         wide strategic goals. The Coast Guard, like the 21 other agencies moving
                         to DHS, will have to adjust its own culture to work effectively within the
                         department. The Coast Guard also faces other important new human
                         capital challenges. For example, to deal with its expanded homeland
                         security role and meet all of its other responsibilities, the Coast Guard
                         expects to add thousands of new positions over the next 3 years. The
                         Coast Guard acknowledges that such a large increase could well strain the
                         agency’s ability to hire, develop, and retain talent. Coast Guard officials
                         acknowledge that providing timely training for the 2,200 new personnel it
                         plans to bring on by the end of fiscal year 2003 and the additional 1,976
                         staff it plans to add by the end of fiscal year 2004 will likely strain its
                         training capabilities. Compounding this challenge is that over the next
                         decade, the Coast Guard is modernizing its entire fleet of cutters and
                         aircraft with more modern, high technology assets that require a higher
                         skill level to operate and maintain.


Information Management   One factor that often contributes to an organization’s ineffectiveness or
and Technology           failure is the lack of accurate, complete, and timely information.
                         Sometimes this lack of information contributes to the failure of a system
                         or to cumbersome systems that cannot be effectively coordinated. In other
                         instances, however, it can relate to the institutional willingness to share
                         information across organizational boundaries. Concerns about information
                         management have been well chronicled in the discussions about
                         establishing DHS. Programs and agencies will be brought together from
                         throughout the government, each bringing its own systems. Integrating
                         these diverse systems will be a substantial undertaking.

                         The Coast Guard is among several agencies moving to DHS that will bring
                         with it existing information technology problems. For example, 14 years

                         Page 9                                                         GAO-03-467T
                             after legislation was passed requiring the Coast Guard to develop a vessel
                             identification system to share vessel information, no such system exists,
                             and future plans for developing the system are uncertain.15 Given today’s
                             heightened state of homeland security, such a system has even more
                             potential usefulness. Coast Guard officials stated that law enforcement
                             officials could use a vessel identification system to review all vessels that
                             have been lost or stolen and verify ownership and law enforcement
                             history.


Acquisition Management       Sound acquisition management is central to accomplishing the
                             department’s mission. DHS is expected to spend billions annually to
                             acquire a broad range of products, technologies, and services. Getting the
                             most from this investment will depend on how well DHS manages its
                             acquisition activities. Our reports have shown that some of the
                             government’s largest procurement operations need improvement.

                             The Coast Guard has major acquisitions that pose significant challenges.
                             The agency is involved in two of the most costly procurement programs in
                             its history—the $17 billion Integrated Deepwater Project to modernize its
                             entire fleet of cutters and aircraft, and the $500 million national response
                             and distress system, called Rescue 21, to increase mariner safety. We have
                             been reviewing the planning effort for the Deepwater Project for a number
                             of years, and the agency’s management during the planning phase was
                             among the best of the federal agencies we have evaluated, providing a
                             solid foundation for the project. While we believe the Coast Guard is in a
                             good position to manage this acquisition effectively, the current phase of
                             the project represents considerably tougher management challenges. The
                             major challenges are:

                         •   Controlling costs. Under the project’s contracting approach, the
                             responsibility for the project’s success lies with a single systems integrator
                             and its contractors for a period of 20 years or more. This approach starts
                             the Coast Guard on a course potentially expensive to alter once funding
                             has been committed and contracts have been signed. Moreover, this
                             approach has never been used on a procurement of this size or
                             complexity, and, as a result, there are no models in the federal government
                             to guide the Coast Guard in developing its acquisition strategy. In response



                             15
                              Coast Guard: Vessel Identification System Development Needs to Be Reassessed.
                             (GAO-02-477, May 24, 2002).



                             Page 10                                                                 GAO-03-467T
    to the concerns we and others have raised about this approach, the Coast
    Guard developed cost-related processes and policies, including
    establishing prices for deliverables, negotiating change order terms, and
    developing incentives.
•   Stable sustained funding. The project’s unique contracting approach is
    based on having a steady, predictable funding stream of $500 million in
    1998 dollars ($544.4 million in 2003 dollars) over the next 2 to 3 decades.
    Significant reductions in levels from planned amounts could result in
    reduced operations, increased costs, and/or schedule delays, according to
    the Coast Guard. Already the funding stream is not materializing as the
    Coast Guard planned. The 2002 fiscal year appropriation for the project
    was about $18 million below the planned level. The fiscal year 2003
    transportation appropriations have not yet been signed into law; however,
    the Senate appropriations committee has proposed $480 million for the
    Deepwater Project, and the House appropriations committee proposed
    $500 million.
•   Contractor oversight. Because the contracting approach is unique and
    untried, the challenges in managing and overseeing the project will
    become more difficult. To address these challenges, the Coast Guard’s
    plans require the systems integrator to implement many management
    processes and procedures according to best practices. While these
    practices are not yet fully in place, in May 2002, the Coast Guard released
    its Phase 2 Program Management Plan, which establishes processes to
    successfully manage, administer, monitor, evaluate, and report contract
    performance.
•   Unproven technology. Our reviews of other acquisitions have shown that
    reliance on unproven technology is a frequent contributor to escalated
    costs, schedule and delays, and compromised performance standards.
    While the Coast Guard has successfully identified technologies that are
    sufficiently mature, commercially available, and proven in similar
    applications for use in the first 7 years of the project, it has no structured
    process to assess and monitor the potential risk of technologies proposed
    for use in later years. Specifically, the Coast Guard has lacked uniform and
    systematic criteria, which is currently available, to judge the level of a
    technology’s readiness, maturity, and risk. However, in response to our
    2001 recommendation, the Coast Guard is incorporating a technology
    readiness assessment in the project’s risk management process.
    Technology readiness level assessments are to be performed for
    technologies identified in the design and proposal preparation and
    procurement stages of the project.

    For these and other reasons, our most recent series of Performance and
    Accountability Reports continues to list the Deepwater Project as a project

    Page 11                                                          GAO-03-467T
meriting close management attention.16 We will continue to assess the
department’s actions in these areas.

The Coast Guard’s move to DHS may complicate these challenges further.
For example, central to the acquisition strategy for the Deepwater Project
is a clear definition of goals, needs, and performance capabilities, so that a
contractor can design a system and a series of acquisitions that can be
carried out over 2 to 3 decades, while meeting the Coast Guard’s needs
throughout this time. These system goals and needs were all developed
prior to September 11th. Whether the Coast Guard’s evolving homeland
security mission will affect these requirements remains to be seen.
Properly aligning this program within the overall capital needs of DHS is
critical to ensuring the success of the Deepwater Project. Also, the
Homeland Security Act of 2002 requires the Secretary of DHS to submit a
report to the Congress on the feasibility of accelerating the rate of
procurement of the Deepwater Project. If the project is accelerated, even
greater care would need to be exercised in managing a project that already
carries numerous risks.

In conclusion, these challenges are daunting but not insurmountable. The
Coast Guard continues to do an admirable job of adapting to its new
homeland security role through the hard work and dedication of its
people, and it has the management capability to address the
implementation issues discussed here as well. However, reorganizations
frequently encounter startup problems and unanticipated consequences,
and even in the best of circumstances, implementation is a lengthy process
that requires a keen focus, the application of sound management
principles, and continuous reexamination of challenges and issues
associated with achieving desired outcomes. As the Coast Guard
addresses these and other challenges in the future, we will continue to
monitor its efforts as part of our ongoing work on homeland security
issues, and we will be prepared to report to you on this work as you deem
appropriate.

Madame Chair, this concludes my testimony today. I would be pleased to
respond to any questions that you or members of the Subcommittee may
have at this time.




16
 Major Management Challenges and Program Risks: Department of Transportation
(GAO-03-108; January 30, 2003).



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                   For information about this testimony, please contact JayEtta Z. Hecker,
Contacts and       Director, Physical Infrastructure, at (202) 512-2834, or heckerj@gao.gov.
Acknowledgements   Individuals making key contributions to this testimony include
                   Christopher Jones, Sharon Silas, Stan Stenersen, and Randall Williamson.




                   Page 13                                                       GAO-03-467T
Related GAO Products


             Major Management Challenges and Program Risks: Department of
             Transportation. GAO-03-108. Washington, D.C.: January 30, 2003.

             Major Management Challenges and Program Risks: Department of
             Homeland Security. GAO-03-102. Washington, D.C.: January 30, 2003.

             Homeland Security: Management Challenges Facing Federal Leadership.
             GAO-03-260. Washington, D.C.: December 20, 2002.

             Container Security: Current Efforts to Detect Nuclear Materials, New
             Initiatives, and Challenges. GAO-03-297T. New York, NY: November 18,
             2002.

             Highlights of a GAO Forum: Mergers and Transformation: Lessons
             Learned for a Department of Homeland Security and Other Federal
             Agencies. GAO-03-293SP. Washington, D.C.: November 14, 2002.

             Coast Guard: Strategy Needed for Setting and Monitoring Levels of
             Effort for All Missions. GAO-03-155. Washington, D.C.: November 12,
             2002.

             National Preparedness: Technology and Information Sharing
             Challenges. GAO-02-1048R. Washington, D.C.: August 30, 2002.

             Homeland Security: Effective Intergovernmental Coordination Is Key to
             Success. GAO-02-1011T. Washington, D.C.: August 20, 2002.

             Port Security: Nation Faces Formidable Challenges in Making New
             Initiatives Successful. GAO-02-993T. Washington, D.C.: August 5, 2002.

             Homeland Security: Critical Design and Implementation Issues. GAO-
             02-957T. Washington, D.C.: July 17, 2002.

             Managing for Results: Using Strategic Human Capital Management to
             Drive Transformational Change. GAO-02-940T. Washington, D.C.: July 15,
             2002.

             Homeland Security: Title III of the Homeland Security Act of 2002. GAO-
             02-927T. Washington, D.C.: July 9, 2002.

             Homeland Security: Intergovernmental Coordination and Partnerships
             Will Be Critical to Success. GAO-02-899T. Washington, D.C.: July 1, 2002.



             Page 14                                                        GAO-03-467T
           Homeland Security: New Department Could Improve Coordination but
           May Complicate Priority Setting. GAO-02-893T. Washington, D.C.: June
           28, 2002.

           Homeland Security: Proposal for Cabinet Agency Has Merit, But
           Implementation Will Be Pivotal to Success. GAO-02-886T. Washington,
           D.C.: June 25, 2002.

           Homeland Security: Key Elements to Unify Efforts Are Underway but
           Uncertainty Remains. GAO-02-610. Washington, D.C.: June 7, 2002.

           National Preparedness: Integrating New and Existing Technology and
           Information Sharing into an Effective Homeland Security Strategy.
           GAO-02-811T. Washington, D.C.: June 7, 2002.

           Coast Guard: Vessel Identification System Development Needs to Be
           Reassessed. GAO-02-477. Washington, D.C.: May 24, 2002.

           National Preparedness: Integration of Federal, State, Local, and Private
           Sector Efforts Is Critical to an Effective National Strategy for Homeland
           Security. GAO-02-621T. Washington, D.C.: April 11, 2002.

           Coast Guard: Budget and Management Challenges for 2003 and Beyond.
           GAO-02-538T. Washington, D.C.: March 19, 2002.

           Homeland Security: Progress Made, More Direction and Partnership
           Sought. GAO-02-490T. Washington, D.C.: March 12, 2002.

           Homeland Security: Challenges and Strategies in Addressing Short-and
           Long-Term National Needs. GAO-02-160T. Washington, D.C.: November 7,
           2001.

           Coast Guard: Actions Needed to Mitigate Deepwater Project Risks. GAO-
           01-659T. Washington, D.C.: May 3, 2001.

           Coast Guard: Progress Being Made on Deepwater Project, but Risks
           Remain. GAO-01-564. Washington, D.C.: May 2, 2001.

           Managing for Results: Barriers to Interagency Coordination. GAO/GGD-
           00-106. Washington, D.C.: March 9, 2000.

           Executive Guide: Effectively Implementing the Government Performance
           and Results Act. GAO/GGD-96-118. Washington, D.C.: June 1, 1996.


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