oversight

Coast Guard: Legacy Vessels' Declining Conditions Reinforce Need for More Realistic Operational Targets [Reissued on August 30, 2012]

Published by the Government Accountability Office on 2012-07-31.

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

             United States Government Accountability Office

GAO          Report to Congressional Requesters




July 2012
             COAST GUARD

             Legacy Vessels’
             Declining Conditions
             Reinforce Need for
             More Realistic
             Operational Targets




               On August 30, 2012, this report was revised to correct a
               number in the last sentence of the first paragraph on
               page 32.




GAO-12-741
                                               July 2012

                                               COAST GUARD
                                               Legacy Vessels’ Declining Conditions Reinforce Need
                                               for More Realistic Operational Targets
Highlights of GAO-12-741, a report to
congressional requesters




Why GAO Did This Study                         What GAO Found
The Coast Guard’s legacy vessels are           From fiscal years 2005 through 2011, the physical condition of the Coast Guard’s
either approaching or have exceeded            legacy vessels was generally poor; and the Coast Guard has taken two key
their designed life expectancies. The          actions to improve the vessels’ condition: reorganizing its maintenance command
Coast Guard is replacing these vessels         structure and implementing sustainment initiatives for portions of its legacy
with a more capable fleet; however, cost
and management problems have led to
                                               vessel fleet. The Coast Guard’s primary measure of a vessel’s condition is the
delays in the delivery of new vessels.         operational percent of time free of major casualties (a major casualty is a
GAO was asked to study the conditions          deficiency in mission essential equipment that causes the major degradation or
of the legacy fleet. This report addresses:    loss of a primary mission). This measure shows that the 378-foot high endurance
(1) how the physical condition of the          cutters (HEC), the 210-foot and 270-foot medium endurance cutters (MEC), and
Coast Guard’s legacy vessels changed           110-foot patrol boats generally remained well below target levels from fiscal
from fiscal years 2005 through 2011, and       years 2005 through 2011. To improve the condition of the vessel fleet, in 2009,
key actions the Coast Guard has taken          the Coast Guard reorganized its maintenance command structure to focus on
related to the physical condition of its       standardization of practices, and reported it was on schedule to complete
legacy fleet; (2) key annual maintenance
expenditure trends for the legacy vessel
                                               sustainment initiatives by fiscal year 2014, which are intended to improve vessel
fleet, and the extent the Coast Guard’s        operating and cost performance.
cost-estimating process has followed           Annual maintenance expenditures for the legacy vessel fleet—such as those
established best practices; and (3) the
                                               associated with scheduled maintenance costs—declined from fiscal years 2005
operational capacity of the legacy vessel
fleet and the extent the Coast Guard
                                               to 2007 and then rose from fiscal years 2007 to 2011; and the Coast Guard’s
faces challenges in sustaining the legacy      maintenance cost estimating process does not fully reflect best practices.
vessel fleet and meeting mission               Scheduled maintenance expenditures rose from $46.1 million to $85.2 million
requirements. GAO analyzed Coast               from fiscal years 2008 to 2009, an increase Coast Guard officials attributed to
Guard data from fiscal years 2005              better identifying maintenance needs and receiving supplemental funding. GAO’s
through 2011 on legacy vessels’                Cost Estimating and Assessment Guide states that a high-quality and reliable
condition, cost, and operational               cost estimate includes best practice characteristics, three of which are relevant to
performance. GAO visited five locations        the Coast Guard’s process: well-documented, comprehensive, and accurate. The
where vessels were based or undergoing
                                               Coast Guard’s process partially meets these characteristics. For example, it is
maintenance. The results of these visits
are not generalizable, but provided
                                               partially comprehensive because it defines the program, among other things, but
insights.                                      does not document all cost-influencing ground rules and assumptions (e.g.,
                                               inflation rate). Annual cost estimates for legacy vessel fleet maintenance that
                                               incorporate established best practices would provide better information to inform
What GAO Recommends                            the Coast Guard’s decisions in effectively allocating available resources in the
GAO recommends that the Department             constrained federal budget environment.
of Homeland Security (DHS) direct the
Coast Guard to ensure its cost estimates       The operational capacity of the legacy vessel fleet generally declined from fiscal
conform to best practices and adjust           years 2005 through 2011, contributing to operational capacity targets becoming
legacy vessel fleet operational hour           increasingly unrealistic. For example, the HECs and 210-foot MECs did not meet
targets to levels that reflect actual          operational hour targets from fiscal years 2005 through 2011. Coast Guard
capacity. DHS concurred with the first         officials reported that declining operational capacity hindered mission
recommendation but did not concur with         performance. The Coast Guard uses operational hour targets to inform planning
the second stating that reducing the           decisions, such as setting performance targets. Legacy vessel capacity is
operational hour targets would fail to fully
                                               declining and expected to continue to decline; nevertheless, the Coast Guard has
utilize those assets not impacted by
maintenance issues. GAO believes the           not revised operational hour targets. Coast Guard officials reported that adjusting
recommendation remains valid as                operational hour targets would lower its mission performance targets; however,
discussed in this report.                      these targets have gone unmet because of declining legacy vessel capacity.
                                               Legacy fleet operational hour targets that reflect actual capacity, as evidenced by
View GAO-12-741.
 For more information, contact Stephen L.      historic performance, could help the Coast Guard more effectively allocate its
Caldwell at (202) 512-8777 or                  resources and ensure it sets achievable performance targets.
caldwells@gao.gov.
                                                                                        United States Government Accountability Office
Contents


Letter                                                                                            1
                       Background                                                                 5
                       Legacy Vessel Fleet’s Condition Is Poor and Generally Declining
                         despite Coast Guard Maintenance Efforts                                10
                       Depot-Level Maintenance Expenditures for the Legacy Vessel Fleet
                         Have Recently Increased, and the Coast Guard’s Process for
                         Estimating Related Costs Does Not Fully Reflect Best Practices         19
                       Declining Condition of the Legacy Vessel Fleet Makes Operational
                         Capacity Targets Increasingly Unachievable                             29
                       Conclusions                                                              43
                       Recommendations for Executive Action                                     44
                       Agency Comments and Our Evaluation                                       45

Appendix I             Scope and Methodology                                                    48



Appendix II            Comparison of the Capabilities of the Coast Guard’s Legacy
                       Vessels with Those of Their Replacements                                 51



Appendix III           Further Information on Condition and Costs of the Coast Guard’s
                       Legacy Vessel Fleet                                                      56



Appendix IV            Evaluation of the Coast Guard’s Process for Estimating Legacy Vessel
                       Maintenance Costs                                                        63



Appendix V             Comments from the Department of Homeland Security                        66



Appendix VI            GAO Contact and Staff Acknowledgments                                    69



Related GAO Products                                                                            70




                       Page i                                  GAO-12-741 Coast Guard Legacy Vessels
Tables
          Table 1: Costs and Implementation Schedule for the MEPs
                   Conducted for MECs and PBs, as of May 2012                      17
          Table 2: GAO Assessment of the Extent to Which the Coast Guard’s
                   Annual Legacy Vessel Fleet Maintenance Cost Estimating
                   Process Reflects Best Practices                                 26
          Table 3: Comparison of Capabilities between the HEC and Its
                   Replacement, the NSC                                            52
          Table 4: Comparison of Capabilities of the 270-foot and 210-foot
                   MECs and their Replacement, the OPC                             53
          Table 5: Comparison of Capabilities of the 110-foot PB and Its
                   Replacement, the FRC                                            55
          Table 6: HEC Fleet Top Five Major Mission Degraders and Top
                   Cost Drivers and Associated Total Obligation Amounts,
                   Fiscal Year 2011                                                56
          Table 7: 210-Foot MEC Fleet Top Five Major Mission Degraders
                   and Cost Drivers and Associated Total Obligation
                   Amounts, Fiscal Year 2011                                       58
          Table 8: 270-Foot MEC Fleet Top Five Major Mission Degraders
                   and Cost Drivers and Associated Total Obligation
                   Amounts, Fiscal Year 2011                                       58
          Table 9: 110-Foot PB Fleet Top Five Major Mission Degraders, Cost
                   Drivers, and Associated Costs, Fiscal Year 2011                 61
          Table 10: Summary Assessment of the Coast Guard’s Cost
                   Estimation Process Compared with Best Practices                 64


Figures
          Figure 1: Information on the Coast Guard’s Legacy Vessels, as of
                   June 2012                                                         6
          Figure 2: Vessel Delivery Dates for the Final National Security
                   Cutter, Offshore Patrol Cutter, and Fast Response Cutter
                   Identified in the 2007 Deepwater and Revised Baselines            9
          Figure 3: Condition of the High and Medium Endurance Cutters as
                   Measured against the Coast Guard’s OpPOTF Target,
                   Fiscal Years 2005 through 2011                                  11
          Figure 4: Condition of the 110-Foot Patrol Boats as Measured
                   against the Coast Guard’s OpPOTF Target, Fiscal Years
                   2005 through 2011                                               12
          Figure 5: Mission Effectiveness Project Upgrades on Medium
                   Endurance Cutters                                               18



          Page ii                                 GAO-12-741 Coast Guard Legacy Vessels
Figure 6: Scheduled and Unscheduled Depot-Level Maintenance
         Expenditures for the Legacy Vessel Fleet from Fiscal
         Years 2005 through 2011                                         20
Figure 7: The Coast Guard’s Process for Estimating Annual Legacy
         Vessel Maintenance Costs, by Product Line                       25
Figure 8: Summary of the Legacy Vessels’ Operational Hour
         Performance Compared with Targets, Fiscal Years 2005
         through 2011                                                    31
Figure 9: Lost Cutter Days for Legacy High and Medium Endurance
         Cutters, Fiscal Years 2006 through 2011                         33
Figure 10: Comparison of the Projected End of Service Lives for
         the MEC Fleet with the Planned OPC Delivery Dates, as of
         May 2012                                                        38
Figure 11: HEC Fleet Scheduled and Unscheduled Depot-Level
         Maintenance Expenditures Compared with Standard
         Support Levels (SSL), Fiscal Years 2005 through 2011            57
Figure 12: 270-Foot MEC Fleet Scheduled and Unscheduled Depot-
         Level Maintenance Expenditures Compared with
         Standard Support Levels, Fiscal Years 2005 through 2011         59
Figure 13: 210-Foot MEC Fleet Scheduled and Unscheduled
         Deport-Level Maintenance Expenditures Compared with
         Standard Support Levels, Fiscal Years 2005 through 2011         60
Figure 14: 110-Foot PB Fleet Scheduled and Unscheduled Depot
         Level Maintenance Expenditures Compared with
         Standard Support Levels, Fiscal Years 2005 through 2011         62




Page iii                                GAO-12-741 Coast Guard Legacy Vessels
Abbreviations

DHS               Department of Homeland Security
FRC               Fast Response Cutter
HEC               High Endurance Cutter
HTHM              High Tempo/High Maintenance
MEC               Medium Endurance Cutter
MEP               Mission Effectiveness Project
NSC               National Security Cutter
OMB               Office of Management and Budget
OPC               Offshore Patrol Cutter
OpPOTF            Operational Percent of Time Free from Major Casualties
PB                Patrol Boat
SFLC              Surface Forces Logistics Center
SSL               Standard Support Level


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Page iv                                           GAO-12-741 Coast Guard Legacy Vessels
United States Government Accountability Office
Washington, DC 20548




                                   July 31, 2012

                                   Congressional Requesters

                                   The Coast Guard’s missions include, among others, protecting our
                                   nation’s ports, waterways, and coastal areas from security threats;
                                   interdicting illegal drugs and migrants; and conducting search and rescue
                                   operations. To accomplish these missions, the Coast Guard relies heavily
                                   on its legacy vessel fleet. 1 These legacy vessels are capable of
                                   conducting operations in the Coast Guard’s deepwater area of
                                   operations, which may be far from the nation’s shores and in rough sea
                                   conditions. 2 However, these legacy vessels are either approaching or
                                   have exceeded their designated service life expectancies, with many of
                                   the vessels having entered service in the 1960s and 1970s. The Coast
                                   Guard reports these legacy vessels have become increasingly costly to
                                   maintain because of high rates of failure of major parts and systems, and
                                   the vessels’ degraded condition has negatively affected the Coast
                                   Guard’s operational capacity to meet mission requirements. For example,
                                   in the aftermath of the Haiti earthquake in 2010, the Coast Guard
                                   reported that it deployed 12 legacy vessels to Haiti to assist in
                                   humanitarian relief operations, and 10 of these vessels suffered severe
                                   failures of parts or systems, which diminished their availability to deliver
                                   emergency aid and perform medical evacuations.

                                   The Coast Guard is in the midst of a long-term recapitalization plan that
                                   could cost more than $29 billion—the largest acquisition program in the
                                   Coast Guard’s history—to replace legacy vessels and aircraft with a




                                   1
                                    For the purposes of this report, we use the term “legacy vessels” to refer to four legacy
                                   vessel classes, including the 378-foot high endurance cutters, the 210-foot and 270-foot
                                   medium endurance cutters, and the 110-foot patrol boats.
                                   2
                                    The Coast Guard’s deepwater area of responsibility is defined as that area beyond the
                                   normal operating range of single-crewed shore-based small boats (generally more than 50
                                   miles from shore), where either extended on scene presence, a long transit or forward
                                   deployment is required to perform the missions.




                                   Page 1                                             GAO-12-741 Coast Guard Legacy Vessels
modernized and more capable fleet. 3 However, since beginning the
program in 1996, the Coast Guard has experienced problems in the areas
of costs, management, and oversight that have led to considerable delays
in the delivery of new vessels. For example, according to 2007
Deepwater Acquisition Program Baseline projections, the Coast Guard
was to have received four vessels—national security cutters—to replace
its fleet of 378-foot high endurance cutters by the end of calendar year
2011, but had received only three by that date. Delays in the delivery of
the replacement vessels for the 210-foot and 270-foot medium endurance
cutters—the offshore patrol cutter—are more substantial. For example,
the planned delivery of the offshore patrol cutter has been delayed by
13 years.

Delays in delivery of the replacement vessels have created uncertainties
regarding how the Coast Guard will sustain its legacy vessels while
meeting its operational requirements. In particular, the Coast Guard
projects that delays in the delivery of the replacement vessels will lead to
increasingly greater operational capacity shortfalls that it expects to
persist until the deliveries of the replacement vessels are completed—an
event the Coast Guard’s most recent schedule projects will not be until
2034. These operational shortfalls represent a formidable challenge as
the Coast Guard must effectively balance resources between its
increasingly expensive vessel recapitalization and the need to invest in
keeping its legacy vessels operational for longer periods of time than
originally planned.

You expressed an interest in the conditions of, and costs for, maintaining
the Coast Guard’s fleet of legacy vessels, and the challenges the Coast
Guard faces in sustaining these vessels longer than planned in an effort
to maintain operational readiness. In response to your request, this report
evaluates those issues and, in particular, addresses the following three
questions:




3
 The Coast Guard’s asset recapitalization plan includes projects to build or modernize five
classes each of vessels and aircraft, and procurement of other capabilities, such as
improved command, control, communications, computers, intelligence, surveillance, and
reconnaissance. This report focuses only on the legacy vessel fleet. For more information
on the recapitalization effort as a whole, see GAO, Coast Guard: Action Needed As
Approved Deepwater Program Remains Unachievable; GAO-11-743 (Washington, D.C.:
July 28, 2011).




Page 2                                            GAO-12-741 Coast Guard Legacy Vessels
•   How has the physical condition of the Coast Guard’s fleet of legacy
    vessels changed from fiscal years 2005 through 2011, and what key
    actions has the Coast Guard taken related to the physical condition of
    its legacy fleet?
•   What have been the key annual maintenance expenditure trends for
    the Coast Guard’s fleet of legacy vessels, and to what extent does the
    Coast Guard’s cost-estimating process follow established best
    practices?
•   What is the operational capacity of the Coast Guard’s fleet of legacy
    vessels and to what extent does the Coast Guard face challenges in
    sustaining the legacy vessels and meeting mission requirements
    given delays in deploying replacement vessels?

To address the first question, we analyzed data the Coast Guard reported
it used to determine and track the condition of its legacy fleet of vessels
for fiscal years 2005 through 2011. The Coast Guard reported that
Operational Percent of Time Free from Major Casualties (OpPOTF) was
its primary measure for tracking, capturing, and communicating the
condition of the legacy vessel fleet from fiscal years 2005 through 2011.
We compared vessel OpPOTF against established Coast Guard
standards. We assessed the reliability of these data by reviewing the
Coast Guard’s data management practices and questioning
knowledgeable officials about the data and the systems that produced the
data. On the basis of our assessments, we determined the data to be
sufficiently reliable for the purposes of this report. We also interviewed
relevant Coast Guard headquarters officials to obtain information on the
physical condition of the legacy vessels and actions Coast Guard officials
reported as key to improving the physical condition of the legacy vessel
fleet. We also conducted site visits to five Coast Guard field locations
where Coast Guard officials reported the legacy vessels were either
homeported or undergoing maintenance, and therefore available for us to
observe the condition of the legacy vessels and to interview cognizant
maintenance officials, operational commanders, and crew members.
Specifically, we visited the following Coast Guard locations: the Pacific
Area Command in Alameda, California; the Atlantic Area Command in
Portsmouth, Virginia; the Coast Guard Yard in Baltimore, Maryland;
district and sector offices in Miami, Florida; and the Coast Guard’s district
office and Naval Engineering Support Unit in Seattle, Washington. The
results of these visits are not generalizable, but provided insights on key
maintenance and operational issues.

To address the second question, we obtained Coast Guard data on the
total annual depot-level legacy vessel maintenance expenditures,



Page 3                                    GAO-12-741 Coast Guard Legacy Vessels
including scheduled versus unscheduled expenditures, for maintaining
the 378-foot high endurance cutters, the 210-foot and 270-foot medium
endurance cutters, and the 110-foot patrol boats for fiscal years 2005
through 2011. Senior Coast Guard officials in charge of legacy vessel
maintenance confirmed that analyzing these data would be the best way
to understand key maintenance expenditure trends. We also analyzed
Coast Guard data on budgeted annual maintenance funds for these four
vessel classes for the same period of time to identify cost trends and to
determine how expendutures for the respective legacy vessel classes
compared with planned costs. We interviewed cognizant officials to obtain
their perspectives on data trends. We assessed the reliability of these
data by reviewing the Coast Guard’s data management practices and
interviewing knowledgeable officials about the data and the systems that
produced the data. On the basis of our assessments, we determined the
data to be sufficiently reliable for the purposes of this report. We
compared the documentation that the Coast Guard uses to compute its
annual legacy vessel maintenance cost estimates against criteria outlined
in GAO’s Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs to determine the extent
to which the Coast Guard’s process adhered to best practices. 4

To address the third question, we analyzed Coast Guard vessel data and
measures that the Coast Guard reported were key indicators of the
relationship between vessel maintenance condition and operational
performance—operational hours and lost cutter days—for fiscal years
2005 through 2011. We compared operational hour data with Coast
Guard targets for each legacy vessel class across each year. We
assessed the reliability of these data by reviewing the Coast Guard’s data
management practices and interviewing knowledgeable officials about the
data and the systems that produced the data. On the basis of our
assessments, we determined the data to be sufficiently reliable for the
purposes of this report. We also reviewed Coast Guard recapitalization
and sustainment plans, and obtained evidence from Coast Guard officials
that outlined challenges the Coast Guard faces in sustaining its legacy
vessels and meeting mission requirements given delays in deploying the
replacement vessels. We evaluated the Coast Guard’s actions against
guidance in the Program Assessment Rating Tool Guidance Number



4
 GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and
Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: Mar. 2, 2009).




Page 4                                        GAO-12-741 Coast Guard Legacy Vessels
                           2007-2 from the Office of Management and Budget (OMB). 5 Appendix I
                           provides further details on our scope and methodology.

                           We conducted this performance audit from September 2011 through July
                           2012 in accordance with generally accepted government auditing
                           standards. Those standards require that we plan and perform the audit to
                           obtain sufficient, appropriate evidence to provide a reasonable basis for
                           our findings and conclusions based on our audit objectives. We believe
                           the evidence obtained provides a reasonable basis for our findings and
                           conclusions based on our audit objectives.


                           The Coast Guard, within the Department of Homeland Security (DHS), is
Background                 the principal federal agency responsible for maritime safety, security, and
                           environmental stewardship. According to the Coast Guard, its legacy
                           vessel fleet is essential for meeting its homeland security missions—as
                           well as sustaining other mission areas, such as search and rescue, law
                           enforcement, and environmental protection—some of which are
                           conducted more than 50 miles off the shore of the United States.


The Coast Guard’s Legacy   The Coast Guard’s legacy vessel fleet, as of June 2012, included a total
Vessel Fleet               of 77 vessels of various sizes and capabilities, including the 378-foot high
                           endurance cutters (HEC), 270-foot and 210-foot medium endurance
                           cutters (MEC), and 110-foot patrol boats (PB). 6 These vessels are critical
                           for Coast Guard missions, such as defense operations; search and
                           rescue; enforcing fishing laws; securing ports, waterways, and coastal
                           areas; and interdicting illegal drugs and migrants. While the HECs spend
                           up to 30 days at sea without reprovisioning and the MECs spend up to 21
                           days at sea without reprovisioning during these missions, the smaller PBs
                           may be on-scene for a maximum of 5 days. Figure 1 provides more
                           details on the four legacy vessel classes.




                           5
                            Office of Management and Budget, Program Assessment Rating Tool Guidance Number
                           2007-2, (Washington, D.C.: January 29, 2007).
                           6
                           As of July 2012, the Coast Guard’s entire vessel fleet includes 245 vessels.




                           Page 5                                           GAO-12-741 Coast Guard Legacy Vessels
Figure 1: Information on the Coast Guard’s Legacy Vessels, as of June 2012




a
 The Coast Guard operated a fleet of 12 HEC’s from 1972 until 2012.The Coast Guard
decommissioned 3 of the 12 vessels during fiscal years 2011 and 2012.
b
 According to the Coast Guard, HECs can achieve a 14,000 nautical mile range only if they ballast
their fuel tanks once the tanks are depleted, a procedure that is rarely undertaken. HECs have a
range of 9,600 nautical miles under normal circumstances.
c
 The Coast Guard refurbished the fleet of 12 HECs through a service life extension program—known
as the Fleet Renovation and Modernization Program—from 1987 to1992. According to Coast Guard
documentation, the expected service life extension was 20 to 25 years. The Coast Guard performed a
life service extension program on the 210-foot MECs through a program known as the Major
Maintenance Availability between 1987 and 1998, for an expected service life extension of 15 years.




Page 6                                                 GAO-12-741 Coast Guard Legacy Vessels
                           d
                            The 110-foot PB fleet originally included 49 vessels. The Coast Guard converted 8 of the 110-foot
                           PBs to 123-foot PBs, but discontinued further conversions in 2005 and decommissioned the 123-foot
                           PBs in 2007 because they were experiencing technical difficulties, such as hull buckling, and were
                           not able to meet post-September 11, 2001 mission requirements.




Replacement of the Coast   Most of the Coast Guard’s legacy vessels are nearing or past the end of
Guard’s Legacy Vessel      their estimated service lives, as shown in figure 1, and as part of the
Fleet                      largest acquisition in the Coast Guard’s history, the Coast Guard is in the
                           process of acquiring new vessels to replace the four classes of legacy
                           vessels. The Coast Guard’s new vessel fleet is to include national
                           security cutters (NSC), offshore patrol cutters (OPC), and fast response
                           cutters (FRC), as follows:

                           •   NSC: The NSC is to replace the HECs. The NSC is the flagship of the
                               Coast Guard’s fleet, with an extended on-scene presence, and a
                               capability for long transits and forward deployment. The vessel and its
                               supporting aircraft and small boats are to operate worldwide. To date,
                               the Coast Guard has commissioned three NSCs and is planning to
                               receive three more by fiscal year 2017.
                           •   OPC: The OPC is to replace the 270-foot and 210-foot MECs. The
                               OPC is intended to conduct patrols for homeland security, law
                               enforcement, and search and rescue missions. It is designed for
                               extended on-scene presence, long transits, and operations with
                               aircraft and small boats. The Coast Guard is conducting pre-
                               acquisition design work and plans to award Preliminary & Contract
                               Designs for the OPC in fiscal year 2013.
                           •   FRC: The FRC is to replace the 110-foot PBs. The FRC is to have
                               high readiness, speed, and adaptability, and the endurance to perform
                               a wide range of missions. The Coast Guard received the first FRC in
                               March 2012, and is planning to receive six more by the end of fiscal
                               year 2013.

                           These new vessels are designed to perform the same missions as the
                           legacy vessels they are replacing, but with greater capabilities. 7 For
                           example, the NSC, unlike the HEC, has a secure information system for
                           transmitting classified data. Also, the FRC is designed to operate in



                           7
                            The Coast Guard plans for the NSC and the FRC to be able to perform marine safety
                           missions that the 110-foot PB and HEC cannot perform. Also, the Coast Guard envisions
                           the OPC as a flexible vessel that will be able to perform emergent missions that the MECs
                           cannot perform.




                           Page 7                                                 GAO-12-741 Coast Guard Legacy Vessels
                     conditions with maximum 13-foot waves, while the PB is designed to
                     operate in conditions with maximum 8-foot waves. Appendix II provides
                     further information comparing each of the four legacy vessel classes with
                     its replacement vessel class.


Replacement Vessel   Since 2001, we have reported several times that the Coast Guard’s
Program’s Cost and   acquisition of replacement vessels for its legacy fleet has experienced
Schedule Problems    serious performance and management problems, such as cost overruns
                     and schedule slippages, despite the Coast Guard having taken more
                     direct responsibility for the program’s acquisition strategy and
                     management in recent years. 8 At the start of the program, the Coast
                     Guard chose a system-of-systems strategy that was to replace the legacy
                     assets with an integrated package of assets rather than using a traditional
                     acquisition approach of replacing individual classes of legacy assets
                     through a series of acquisitions. 9 To carry out this acquisition, the Coast
                     Guard awarded a competitive contract to a systems integrator (i.e., prime
                     contractor) that was responsible for designing, constructing, deploying,
                     supporting, and integrating the various assets to meet projected
                     operational requirements of the recapitalization program. We informed
                     Congress, DHS, and the Coast Guard of the risks and uncertainties
                     inherent with such a system-of-systems approach and made
                     recommendations to address them. In May 2007, the Coast Guard
                     acknowledged that it had relied too heavily on contractors and that the
                     government and industry had failed to control costs, and announced its




                     8
                      Since 2001, we have reviewed the Coast Guard’s recapitalization program efforts and
                     reported to Congress, DHS, and the Coast Guard on the risks and uncertainties inherent
                     with this program. Recent reports include GAO, Coast Guard: Better Logistics Planning
                     Needed to Aid Operational Decisions Related to the Deployment of the National Security
                     Cutter and Its Support Assets, GAO-09-497 (Washington, D.C.: July 17, 2009); Coast
                     Guard: As Deepwater Systems Integrator, Coast Guard Is Reassessing Costs and
                     Capabilities but Lags in Applying Its Disciplined Acquisition Approach, GAO-09-682
                     (Washington, D.C.: July 14, 2009); GAO, Coast Guard: Deepwater Requirements,
                     Quantities, and Cost Require Revalidation to Reflect Knowledge Gained, GAO-10-790
                     (Washington, D.C.: July 27, 2010); and GAO-11-743
                     9
                      The Coast Guard’s system-of-systems approach planned to integrate vessels, aircraft,
                     and communication links together as a system to accomplish mission objectives.




                     Page 8                                           GAO-12-741 Coast Guard Legacy Vessels
                                          intention to take over the role of systems integrator. 10 At that time, the
                                          Coast Guard established a $24.2 billion program baseline that included
                                          schedule and performance parameters. The Coast Guard has since
                                          developed baselines for some assets, most of which have been approved
                                          by DHS, that indicate the estimated total acquisition cost could be as
                                          much as $29.3 billion, or about $5 billion over the $24.2 billion baseline. 11
                                          Furthermore, the deliveries of the NSCs, OPCs, and FRCs to replace the
                                          legacy vessels are years behind schedule, as summarized in figure 2.

Figure 2: Vessel Delivery Dates for the Final National Security Cutter, Offshore Patrol Cutter, and Fast Response Cutter
Identified in the 2007 Deepwater and Revised Baselines




                                          Notes: The Coast Guard established the 2007 Deepwater baseline—which included a revised
                                          delivery schedule for the NSCs, OPCs, and FRCs—after transferring program management
                                          responsibilities from the contractor back to the Coast Guard. Since 2007, the Coast Guard has
                                          developed revised baselines for these vessels that indicate that the delivery dates for these
                                          replacement vessels are years behind schedule. As we reported in July 2011, the revised baselines
                                          for the NSC and FRC may not reflect the most current data and additional delays are likely. See
                                          GAO-11-743. For example, according to the NSC Acquisition Program Baseline Breach Remediation
                                          Plan, the delivery of the final NSC may not occur until fiscal year 2020.




                                          10
                                            In March 2004, we recommended the Coast Guard address three broad areas of
                                          concern: improving program management and oversight, strengthening contractor
                                          accountability, and promoting cost control through greater competition among potential
                                          subcontractors. The Coast Guard concurred with GAO’s recommendations and has
                                          implemented many of them. See GAO, Contract Management: Coast Guard’s Deepwater
                                          Program Needs Increased Attention to Management and Contractor Oversight,
                                          GAO-04-380 (Washington, D.C.: Mar. 9. 2004).
                                          11
                                               GAO-11-743.




                                          Page 9                                                GAO-12-741 Coast Guard Legacy Vessels
                            From fiscal years 2005 through 2011, the physical condition of the Coast
Legacy Vessel Fleet’s       Guard’s legacy vessel fleet, as evidenced by the Coast Guard’s primary
Condition Is Poor and       vessel condition measure, was generally poor. Other evidence, such as
                            our review of vessel condition assessments, shows that the condition of
Generally Declining         the legacy vessel fleet is also generally declining. The Coast Guard has
despite Coast Guard         implemented two key actions to improve the physical condition of the
Maintenance Efforts         legacy vessel fleet: (1) reorganization of the maintenance command
                            structure and (2) completion of a 10-year, almost half-billion-dollar set of
                            sustainment projects to refurbish PBs and upgrade MECs.


The Legacy Vessel Fleet     From fiscal years 2005 through 2011, the physical condition of the Coast
Did Not Meet Key Physical   Guard’s legacy vessel fleet, as evidenced by the Coast Guard’s primary
Condition Targets           physical condition measure, was generally poor, with variations by vessel
                            class. A primary Coast Guard summary measure of condition—the
                            operational percent of time free of major casualties—shows the legacy
                            fleet as a whole generally remained well below target levels during fiscal
                            years 2005 through 2011. 12 For example, the Coast Guard has an annual
                            OpPOTF performance target of 72 percent for its major cutters—the 378-
                            foot HEC and the 210-foot and 270-foot MECs—and 86 percent for the
                            110-foot PBs. 13 According to a yearly scorecard the Coast Guard uses to
                            track vessel condition measures, the Coast Guard classifies performance
                            below target levels as “poor.” As figure 3 shows, measured against these
                            standards, the HECs and MECs were generally poor during fiscal years


                            12
                              The Coast Guard maintains a variety of measures or metrics to track the physical
                            condition or performance of the legacy vessel fleet, which it calls Naval Engineering
                            Metrics. Officials responsible for maintaining the legacy vessels reported that OpPOTF is
                            the key measure that conveys the overall condition of the legacy fleet. A casualty is a
                            deficiency in mission-essential equipment; a major casualty causes the major degradation
                            or loss of at least one primary mission. This measure captures the amount of planned
                            operational time with which a vessel experienced a major casualty. The Coast Guard
                            reports casualties on a scale ranging from 1 to 4, with category 3 and 4 reports considered
                            major casualties. OpPOTF is the operational percent of time free from an open casualty 3
                            or 4 report.
                            13
                              The Coast Guard reports that these targets reflect the need of the major cutters to be
                            ready to conduct all missions for 5 out of every 7 days deployed, and for the 110-foot PB
                            to be available for 6 out of every 7 days deployed. According to Coast Guard guidance,
                            the difference in performance targets is based on differing maintenance philosophies for
                            the major legacy cutters versus the smaller 110-foot PB—and the cutters’ respective
                            capability to repair casualties while deployed. For example, PBs must return to homeport
                            for repairs and thus should have a higher OpPOTF since they will not continue to operate
                            with major casualties. In contrast, the Coast Guard’s major cutters can remain at sea with
                            serious casualties because they have the capability to perform repairs at sea.




                            Page 10                                           GAO-12-741 Coast Guard Legacy Vessels
2005 through 2011. In particular, the HECs and the 270-foot MECs were
in the poorest condition, as evidenced by the HEC fleet remaining
substantially below targets throughout this time period (averaging
approximately 44 percent OpPOTF) and the 270-foot MEC class meeting
targets in just 2 of the 7 years in the period (averaging approximately 59
percent OpPOTF).

Figure 3: Condition of the High and Medium Endurance Cutters as Measured
against the Coast Guard’s OpPOTF Target, Fiscal Years 2005 through 2011




Note: While remaining far below the target, HEC performance raised slightly during the time period
with the exception of a steep drop in fiscal year 2009, which Coast Guard officials attributed to
increased frequency of major casualties, particularly failures to main propulsion systems and diesel
engines. Coast Guard officials reported that the steep decline in MEC performance between 2009
and 2010 was due to major casualties experienced by 10 of 12 MECs deployed during response
operations to the 2010 Haiti earthquake, including severe, mission-affecting casualties to main
propulsion, propeller, and communications systems.


Coast Guard data show the 110-foot PBs did not meet the 86 percent
OpPOTF target in any year during fiscal years 2005 through 2011, as
shown in figure 4. While remaining below target levels, Coast Guard data
show the 110-foot PBs generally improved from fiscal years 2006 through




Page 11                                                  GAO-12-741 Coast Guard Legacy Vessels
fiscal year 2010, with the OpPOTF rising from approximately 47 percent
to 63 percent. 14

Figure 4: Condition of the 110-Foot Patrol Boats as Measured against the Coast
Guard’s OpPOTF Target, Fiscal Years 2005 through 2011




Note: This analysis includes Coast Guard data covering 35 of the 41 PBs currently in the PB fleet. It
does not include 6 PBs that the Coast Guard has deployed overseas in support of Operation Iraqi
Freedom. Coast Guard maintenance officials reported that they could not directly attributed the rise to
one event, but noted that contributing factors may include improved consistency in maintenance
practices and the effects of vessel sustainment projects, both of which we discuss later in this report.




14
  Coast Guard maintenance officials attributed the respective variations in the OpPOTF of
the legacy vessel fleet to two primary factors. First, officials reported that the HEC and
MEC vessels were the oldest with respect to designated service life and thus in the
poorest condition. Second, officials noted that the larger HECs and MECs have more
numerous and complex operating systems vulnerable to casualty than do the 110-foot
PBs.




Page 12                                                  GAO-12-741 Coast Guard Legacy Vessels
Other Evidence Shows the   Our review of vessel physical condition assessments, discussions with
Legacy Vessel Fleet’s      Coast Guard maintenance and operational personnel, and site visits to
Condition Is Declining     various Coast Guard field units further point to a Coast Guard legacy
                           vessel fleet that is in overall poor condition and is generally declining. For
                           example, Coast Guard vessel condition assessments provide details
                           regarding the legacy fleet’s deteriorating and obsolete systems and
                           equipment. The Coast Guard conducts a variety of assessments and
                           inspections of the legacy fleet’s condition as part of its efforts to identify
                           and address maintenance needs and guide vessel decommissioning
                           decisions. According to these condition assessments, critical operating
                           systems on the legacy vessels have been increasingly prone to mission-
                           degrading casualties. For example, the Coast Guard’s Surface Forces
                           Logistics Center and Office of Naval Engineering have tracked the annual
                           major mission degraders and cost drivers for each of the legacy vessel
                           fleet classes. 15 Among the list of fiscal year 2011 top five mission
                           degraders and cost drivers were main gas turbines for the 378-foot HECs
                           and, as a mission degrader, the Reverse Osmosis Desalination Plant for
                           the 210-foot and 270-foot MECs. 16 While the list of key mission degraders
                           and cost drivers varies by vessel class, main diesel engines were listed
                           as common top major mission degraders and cost drivers across the
                           legacy fleet in fiscal years 2010 and 2011.

                           In addition, Coast Guard senior maintenance officials and vessel crew we
                           interviewed at the five locations we visited where legacy vessels were
                           homeported or undergoing maintenance noted the increased
                           maintenance challenges facing the legacy vessels because of their age.
                           In particular, the maintenance managers for both the HECs and MECs
                           reported that with the vessels past or nearing the end of their estimated
                           service lives, the performance of critical systems has become
                           increasingly unpredictable, and refurbishments of systems that have had
                           a relatively high rate of failure have brought limited returns on
                           investments. For example, according to these program managers, in
                           2009 and 2010, the Coast Guard spent about $200,000 per vessel to
                           rebuild several HEC main diesel engines. However, these officials said


                           15
                             Coast Guard maintenance officials reported that these lists are prepared by the Surface
                           Forces Logistics Center on a yearly basis and are summarized by the Office of Naval
                           Engineering to (1) track vessel condition; (2) identify, prioritize, and address maintenance
                           needs; and (3) guide planning and budgetary decisions.
                           16
                              A Reverse Osmosis Desalination Plant converts seawater to freshwater. See appendix
                           III for a list of fiscal year 2011 legacy vessel key mission degraders and cost drivers.




                           Page 13                                            GAO-12-741 Coast Guard Legacy Vessels
                           that some of these diesel engines broke down within a short period of
                           time because other parts of the engines that were not included in the
                           rebuild failed. These officials told us that investing in main diesel engine
                           replacements—because the engines are outdated, are failing at high
                           rates, and have obsolete parts—would be important to sustaining the
                           aging HECs and MECs. However, the officials told us that main diesel
                           engine replacements for the HECs and MECs may be too costly in the
                           current fiscal environment given the need for the Coast Guard to balance
                           legacy vessel maintenance needs with its ongoing acquisition of
                           replacement vessels. Consequently, for the HECs and MECs, Coast
                           Guard maintenance program managers reported that they expect the
                           main diesel engines in these vessels will continue to fail at high rates until
                           the cutters are replaced by the NSCs and OPCs, respectively.

                           Maintenance officials and vessel crew members we interviewed at the
                           five locations we visited also reported that they have had to devote
                           increasing amounts of time and resources to troubleshoot and resolve
                           maintenance issues on the legacy vessels. In particular, these officials
                           said that because the systems and parts are outdated compared with
                           current technology and equipment, it can be challenging and time
                           consuming to diagnose a maintenance issue and find parts or determine
                           what corrective actions to take. According to maintenance program
                           managers, some parts needed to maintain the legacy vessels are
                           obsolete and, as a result, the Coast Guard has had to reengineer these
                           parts or find a supplier who can manufacture the obsolete parts—efforts
                           that can be time consuming and costly. For example, during our tour of
                           the HEC Midgett, the vessel’s engineering officer discussed challenges
                           he had faced in diagnosing and replacing a failed small boat davit system
                           component—which he attributed to the time Coast Guard engineers
                           needed to troubleshoot, identify, and procure a replacement system from
                           a vendor. 17


The Coast Guard Has        The Coast Guard has implemented two key actions to improve the
Taken Actions to Improve   condition of the legacy vessel fleet: (1) reorganization of the maintenance
the Condition of the       command structure and (2) completion of the Mission Effectiveness
                           Projects (MEP), a 10-year, almost half-billion-dollar set of sustainment
Legacy Vessel Fleet        projects to refurbish PBs and upgrade MECs.



                           17
                            A davit is a mechanical system used for launching and recovering small boats.




                           Page 14                                         GAO-12-741 Coast Guard Legacy Vessels
Reorganization of the maintenance command structure. In 2009, the
Coast Guard reorganized its maintenance command structure with a
focus on standardization of practices. Previously, Coast Guard vessel
maintenance was overseen by one of the Coast Guard’s two area
Maintenance and Logistics Commands, and management of a vessel was
generally determined by whether its homeport location was in the Coast
Guard’s Atlantic or Pacific Area Command rather than by its class. Under
this reorganization, the Coast Guard eliminated its two Maintenance and
Logistics Commands and replaced them with a centralized command
structure—the Surface Forces Logistics Center (SFLC)—whereby a
single manager oversees the maintenance of an entire class of vessels. 18
For example, a single manager now oversees maintenance of all 27
MECs, whereas previously maintenance responsibility was decentralized
amongst the area commands and the vessel operators. Coast Guard
SFLC officials reported that this change was made to enable better
oversight of the condition of entire classes of the vessel fleet, reduce the
workload on vessel crews by providing centralized support for
procurement of replacement parts, and implement centralized
maintenance plans to address commonly occurring casualties. 19 A key
part of this effort is a prioritization of preventive maintenance practices by
completing scheduled maintenance in a timely manner and better
identifying maintenance trends—which officials said could ultimately help
the Coast Guard better predict maintenance and funding needs. 20




18
  The Coast Guard established the SFLC under which Coast Guard vessels are grouped
into five product lines whose mission support, maintenance procedures, priorities, and
funds are overseen by a single product line manager. The product lines are the (1) Long
Range Enforcer (which includes the HEC and NSC), (2) Medium Endurance Cutter; (3) Ice
Breaker, Buoy Tender and Construction Tender; (4) Patrol Boat (which includes the PB
and FRC); and (5) Small Boat.
19
  According to the Coast Guard, vessel crews themselves had previously been
responsible for managing procurement of replacements for minor casualties. According to
officials, doing so could be time consuming for crews. Under the reorganization, the SFLC
manages a greater share of the procurement of replacement parts and systems to both
reduce the workload of crews and provide better oversight across the vessel fleet.
Additionally, the new organization is structured to provide a single point of accountability
(the Product Line Manager) for all maintenance, system upgrades, and supply functions
for an asset class.
20
  Although we interviewed Coast Guard officials, it was outside the scope of this review to
assess the impact the reorganization has had to date on Coast Guard maintenance
practices and costs.




Page 15                                            GAO-12-741 Coast Guard Legacy Vessels
Completion of MEPs. The Coast Guard is nearing completion of the
MEPs for its MECs and PBs. Begun in fiscal year 2005 and scheduled for
completion in fiscal year 2014, these sustainment projects are intended to
improve the legacy vessels’ operating and cost performance by replacing
obsolete, unsupportable, or maintenance-intensive equipment that had
been key sources of degraded performance. The project scope of
sustainment work varies considerably for the PB and MEC classes, with
the PBs being overhauled and the MECs having far more limited
upgrades. For example, the Coast Guard is almost completely
refurbishing those PBs included in the MEP, which includes 17 of the 41
PBs in the fleet. For the PBs going through the MEP, the Coast Guard is
removing major portions of the interior and replacing them with new and
upgraded equipment, such as overhauled main diesel engines, a new
generator and electrical systems, and also identifying and correcting
structural deterioration in the vessels’ hulls. In contrast, for the MECs, the
MEP includes the entire fleet of 270-foot and 210-foot MECs, and
constitutes an upgrade of selected systems rather than the almost
complete overhaul that the PBs received. For example, MEC work
includes replacement of primary sources of degraded equipment, such as
the main propulsion control and monitoring system, small boat davits, and
air conditioning systems, but does not involve replacement of main diesel
engines. As of July 2012, Coast Guard officials reported the Coast Guard
was on schedule for the MEP and had completed work on all 14 210-foot
MECs. 21 The Coast Guard estimates total costs for the MEC and PB
projects to be $453.5 million. 22 Table 1 provides an overview of the MEPs’
costs and completed work as of May 2012.




21
  The Coast Guard completed the MEP for the 210-foot MEC class in fiscal year 2010,
expects to complete work on the final PB in July 2012, and plans to complete the
remainder of the 270-foot MEC class by the end of fiscal year 2014.
22
  The Coast Guard reported that total MEP costs covering both the 270-foot and 210-foot
MECs are projected to be $279.75 million and 110-foot PB costs are projected to be
$163.5 million for a total cost of $443.25 million for the fiscal years 2005 through 2014
projects. These projections do not include the Coast Guard’s fiscal year 2013 budget
request for MEP, which was an additional $13 million to complete work on the 270-foot
MECs.




Page 16                                           GAO-12-741 Coast Guard Legacy Vessels
Table 1: Costs and Implementation Schedule for the MEPs Conducted for MECs and PBs, as of May 2012

                                           Actual or expected                     Average                   Total                Total
Vessel class     Work status               completion date                    Cost per hull          expenditures       appropriations
210-foot MEC     14 of 14 completed        September 2010                           $7.2 million    $101.27 million     $279.75 milliona
270-foot MEC     6 of 13                   August 2014                             $14.1 million     $105.9 million
                 completedb
PB               16 of 17 completed        July 2012                                $8.4 million     $137.2 million       $163.5 million
Total            37 of 44                                                                                               $443.25 million
                                       Source: GAO analysis of Coast Guard data.
                                       a
                                        As of May 2012, the Coast Guard had received a total of $279.75 million for completing MEP work
                                       on both 210-foot and 270-foot MECs. These funds were appropriated as a lump sum and not per
                                       MEC class. These projections do not include the Coast Guard’s fiscal year budget request for MEP,
                                       which was an additional $13 million to complete work on the 270-foot MECs.
                                       b
                                       This number includes only 270-foot MECs that have completed their entire 11-month availability for
                                       MEP, or—if done in phases—6 to 7-month availabilities.’


                                       Figure 5 shows selected photographs of an MEC undergoing a MEP.




                                       Page 17                                                     GAO-12-741 Coast Guard Legacy Vessels
Figure 5: Mission Effectiveness Project Upgrades on Medium Endurance Cutters




Note: The top photograph is of an MEC undergoing an upgrade at the Coast Guard Yard. The bottom
left photograph shows an old propulsion control console from an MEC and the photograph on the
bottom right shows the propulsion control console installed on a 270-foot MEC during an upgrade.




Page 18                                              GAO-12-741 Coast Guard Legacy Vessels
                           The Coast Guard’s expenditures to maintain its legacy vessels declined
Depot-Level                from fiscal year 2005 to fiscal year 2007, and then rose from fiscal year
Maintenance                2007 to fiscal year 2011. The Coast Guard’s process for estimating
                           related legacy vessel maintenance costs does not fully reflect relevant
Expenditures for the       best practices, which state that cost estimates should be comprehensive,
Legacy Vessel Fleet        well documented, and accurate.
Have Recently
Increased, and the
Coast Guard’s Process
for Estimating
Related Costs Does
Not Fully Reflect Best
Practices

Depot-Level Expenditures   Expenditures for the two key types of legacy vessel annual depot level
to Maintain the Legacy     maintenance—scheduled and unscheduled maintenance—declined from
Vessels Rose from Fiscal   fiscal year 2005 to fiscal year 2007, and then rose from fiscal year 2007
                           to 2011. 23 While scheduled maintenance activities are planned and are
Years 2007 to 2011
                           based on the historical maintenance needs of the vessel class,
                           unscheduled maintenance activities are performed in response to
                           mission-limiting equipment or system casualties (i.e., failures). Figure 6
                           shows how the scheduled and unscheduled maintenance expenditures
                           changed across the four legacy vessel classes from fiscal years 2005
                           through 2011. See appendix III for more specific maintenance
                           expenditure information for the HECs, MECs, and PBs. 24




                           23
                             Depot-level maintenance is vessel maintenance that is beyond the capability of the
                           operating units. This report analyzes depot-level maintenance funds spent through the
                           Naval Engineering Allotment Fund Control Code, which represents 85 to 95 percent of all
                           legacy vessel maintenance expenditures from fiscal years 2005 through 2011.
                           24
                             In fiscal year 2010, the Coast Guard developed a new metric called Maintenance Cost
                           per Operational Hour. According to senior Coast Guard maintenance officials, this metric
                           will enable the Coast Guard to make a long-range comparison of vessel costs and may be
                           used for budgeting decisions once the Coast Guard has acquired 4 years-worth of data.




                           Page 19                                          GAO-12-741 Coast Guard Legacy Vessels
Figure 6: Scheduled and Unscheduled Depot-Level Maintenance Expenditures for
the Legacy Vessel Fleet from Fiscal Years 2005 through 2011




Note: Scheduled and unscheduled depot level maintenance expenditure data have been adjusted for
inflation and are stated in fiscal year 2012 dollars.


Coast Guard data show that scheduled annual maintenance expenditures
generally rose across all legacy vessel classes from fiscal years 2007 to
2011. For example, scheduled maintenance expenditures rose from
$46.1 million in fiscal year 2008 to $85.2 million in fiscal year 2009—an
increase of 85 percent—and then dropped to approximately $69 million in
both fiscal years 2010 and 2011. Senior Coast Guard vessel maintenance
officials attributed the rise in scheduled maintenance expenditures to two
primary factors. First, the SFLC implemented new maintenance practices
since its establishment in fiscal year 2009, which officials report have
allowed the Coast Guard to better identify maintenance needs for the
vessel fleet, as well as place a higher priority on completing 100 percent
of scheduled maintenance each year. Second, the Coast Guard received
supplementary funding to support rising maintenance costs. For example,




Page 20                                              GAO-12-741 Coast Guard Legacy Vessels
in fiscal years 2010 and 2011, the Coast Guard dedicated $93.85 million
of supplemental funding from Congress to the maintenance of legacy
vessels. 25 The officials noted that this funding has been critical in enabling
the Coast Guard to better address maintenance items that would
otherwise have to be deferred. 26 For example, in fiscal year 2009 deferred
maintenance for the legacy vessels was $68.5 million, which then
declined to $39.2 million in fiscal year 2011.

While unscheduled maintenance expenditures varied by vessel class
from fiscal years 2005 through 2011, Coast Guard data show that the
HEC fleet incurred the greatest share of unscheduled maintenance
expenditures. Of the four legacy vessel classes, the Coast Guard
consistently spent more on unscheduled maintenance for the HECs than
for any of the other three legacy vessel classes. For example, in fiscal
year 2011, the Coast Guard spent $8.5 million of the $18.4 million
unscheduled maintenance funds (or 46 percent) on the HECs. In
comparison, in fiscal year 2011, the Coast Guard spent $4.0 million for
the 270-foot MECs, $4.6 million for the 210-foot MECs, and $1.3 million
for the 110-foot PBs. Further, unscheduled maintenance consistently
represented a greater portion of total maintenance expenditures for the
HECs than for any of the other legacy vessel classes. For example, in
fiscal year 2011, unscheduled maintenance represented 41 percent of
total maintenance expenditures for the HECs. In comparison, in fiscal
year 2011, unscheduled maintenance expenditures represented 20
percent of total maintenance expenditures for the 270-foot MECs, 24
percent for the 210-foot MECs, and 5 percent for the PBs. Coast Guard
officials reported that the comparatively high unscheduled maintenance
expenditures for the HECs were generally due to the HECs being the




25
  In fiscal year 2010, the Coast Guard was appropriated $10 million of supplemental
funding for maintenance of the HECs and dedicated $19.75 million of additional
supplemental funding, available through fiscal year 2012, to the legacy vessel fleet. See
Pub. L. No. 111-32, 123 Stat. 1859, 1881 (2009); Pub. L. No. 111-212, 124 Stat. 2302,
2315 (2010). The Coast Guard also reported receiving $25.2 million in fiscal year 2010
and $38.9 million in fiscal year 2011 of Overseas Contingency Operations funding for
maintenance of HECs and PBs, and the occasional 270-foot MECs assigned to the
Department of Defense’s Africa Command.
26
  Deferred maintenance is the amount of scheduled maintenance on a vessel that must
be postponed in order to pay for unscheduled maintenance. Such deferrals can occur
when the Coast Guard does not have enough money to absorb unexpected maintenance
expenditures and still perform all of its scheduled maintenance, thus creating a backlog.




Page 21                                           GAO-12-741 Coast Guard Legacy Vessels
oldest and largest legacy vessels in the fleet, and thus having the
greatest number of systems prone to failure. 27

Budgeted depot level maintenance funds. From fiscal years 2005
through 2011, annual depot-level maintenance expenditures often
exceeded the Coast Guard’s budgeted funds for depot-level
maintenance—known as Standard Support Levels—for the legacy
vessels. The Standard Support Levels have generally remained
unchanged over decades and do not reflect the rising costs to maintain
the legacy vessels as they have aged. 28 According to Coast Guard data,
annual depot-level maintenance expenditures exceeded Standard
Support Levels for all legacy vessel classes in fiscal year 2005, and from
fiscal years 2009 through 2011. Furthermore, in the case of the HECs
and PBs, actual depot-level maintenance expenditures far exceeded
Standard Support Levels each year from fiscal years 2005 through 2011.
For example, actual depot-level maintenance expenditures for the HECs
were 3.6 times higher than Standard Support Levels in fiscal years
2009—$55.5 million compared with $15.5 million. Senior Coast Guard
vessel maintenance officials cited this funding gap as a management
challenge, noting that supplemental funding had been critical to enable
the Coast Guard to fund necessary maintenance for the legacy vessel
fleet. Appendix III includes a further comparison of depot-level
maintenance expenditures with Standard Support Levels for each legacy
vessel class, which shows the widespread discrepancy between the
Standard Support Levels and the actual expenditures for the HECs and
PBs in particular.




27
  Coast Guard officials told us that major casualties on three HECs—the Chase, Dallas
and Gallatin—contributed disproportionately to these expenditures in fiscal years 2010
and 2011. The Coast Guard has since decommissioned the Chase and Dallas.
28
  According to the Coast Guard, Standard Support Levels are established when a vessel
class enters service or undergoes a service life extension program. For example, the
Coast Guard reset the Standard Support Level for the HECs after conducting a service life
extension program between 1987 and 1992—the Fleet Renovation and Modernization
Program—but has not reset the Standard Support Levels for the MECs or PBs. The Coast
Guard indicated that it increases Standard Support Levels using non-pay inflation, but it
has not done so every year. Standard Support Level data in this report have been
adjusted for inflation and are stated in fiscal year 2012 dollars.




Page 22                                          GAO-12-741 Coast Guard Legacy Vessels
The Coast Guard’s Process
for Estimating Annual
Legacy Vessel Maintenance
Costs Does Not Fully
Reflect Best Practices

The Coast Guard’s Process for   Cost estimates are a vital factor for sound management decision making
Estimating Legacy Vessel        and they aid in the formation of a project’s budget. The Coast Guard uses
Maintenance Costs               cost estimates, in part, to justify Operations and Expenses budget
                                requests and determine whether vessel maintenance projects can
                                proceed. Coast Guard vessel maintenance officials told us that they
                                estimate vessel maintenance costs following a set process, as
                                summarized below.

                                Scheduled maintenance. The Coast Guard uses maintenance plans for
                                each cutter class to document (1) scheduled maintenance items, (2) who
                                should perform them, and (3) the frequency at which they should be
                                performed. 29 The Coast Guard also uses these maintenance plans to
                                develop a vessel-specific list of maintenance items to be accomplished
                                during a designated period. 30 The Coast Guard imports the maintenance
                                items from this vessel-specific list into the Fleet Logistics System
                                database, which assigns rough cost estimates to each maintenance
                                item. 31 Project managers are then to review the rough cost estimate for
                                each maintenance item and adjust these estimates, if necessary, using
                                project-specific knowledge. Once the Coast Guard is ready to move a
                                scheduled maintenance item into the acquisition phase, a naval engineer
                                is to construct a detailed cost estimate. 32

                                Unscheduled maintenance. The Coast Guard cannot assign cost
                                estimates specific to unscheduled maintenance items within the Fleet
                                Logistics System because it cannot know which maintenance items will



                                29
                                 These plans are called Class Maintenance Plans.
                                30
                                 These vessel-specific lists are called Naval Engineering Project Lists.
                                31
                                  These rough cost estimates are derived from historical costs documented in Contract
                                Workbook, a database that tracks costs for each ongoing or completed maintenance
                                contract.
                                32
                                 These detailed cost estimates are referred to as Independent Government Estimates.




                                Page 23                                           GAO-12-741 Coast Guard Legacy Vessels
occur in a given year. Consequently, Coast Guard maintenance officials
plan for unscheduled maintenance needs using funds budgeted for
casualty repairs by the relevant SFLC product line. The amount of funding
is based on historical costs for casualty repairs and is equal to
approximately 20 percent of each product line’s total budget. Once the
Coast Guard is ready to perform unscheduled maintenance, it develops a
more specific cost estimate. For unscheduled maintenance that is
expected to cost more than $150,000, naval engineers are to construct a
detailed cost estimate. For unscheduled maintenance under this
threshold, naval engineers are to ensure that the estimated costs are
reasonable. 33

The cost estimates from the Fleet Logistics System for scheduled
maintenance and the historical costs of casualty repairs for unscheduled
maintenance comprise estimated legacy vessel maintenance costs for
each product line. SFLC product line managers are to use this estimate—
along with estimates of overhead, electronics, and reimbursable costs
related to vessel maintenance—to produce a budget request for each
product line. Figure 7 provides a graphical summary of this process.




33
  Naval engineers ensure the cost estimates are reasonable by completing what is
referred to as a market research form. The Coast Guard uses a market research form to
document market research in a manner appropriate to the size, complexity, and urgency
of an acquisition. It can include information such as research techniques and information
sources, relevant products and companies, a description of the commercial marketplace,
prevalent business practices, and pricing and market issues.




Page 24                                           GAO-12-741 Coast Guard Legacy Vessels
                               Figure 7: The Coast Guard’s Process for Estimating Annual Legacy Vessel
                               Maintenance Costs, by Product Line




The Coast Guard’s Cost         The Coast Guard’s process for estimating annual legacy vessel
Estimating Process Does Not    maintenance costs reflects some features of best practices, but it does
Fully Reflect Best Practices   not fully reflect best practices. The ability to generate reliable cost
                               estimates is a critical function that is necessary to support OMB’s capital
                               programming process. GAO’s Cost Estimating and Assessment Guide
                               states that a high-quality and reliable cost estimate includes best practice
                               characteristics—it should be (1) well documented, (2) comprehensive,
                               and (3) accurate. 34 Following these best practices is a key step in
                               successfully managing a project within cost and affordability guidelines.
                               Moreover, GAO’s cost guide establishes 10 steps that, if followed, should
                               result in high-quality cost estimates. 35 As shown in table 2, the Coast



                               34
                                 GAO-09-3SP. Since the cost estimate is for the maintenance of Coast Guard legacy
                               vessels rather than an acquisition type cost estimate, we have determined that the fourth
                               best practice characteristic identified in GAO’s Cost Estimating and Assessment Guide—
                               ”credible”— is not appropriate for this assessment.
                               35
                                 Since we determined that the fourth best practice characteristic—”credible”—is not
                               appropriate for this assessment, we did not assess two steps related to the “credible”
                               characteristic as identified in GAO’s Cost Estimating and Assessment Guide.




                               Page 25                                           GAO-12-741 Coast Guard Legacy Vessels
                                         Guard’s process for estimating the annual costs for maintaining its legacy
                                         vessel fleet partially meets the three characteristics for producing a high-
                                         quality, reliable cost estimate as established by best practices. Appendix
                                         IV shows the relationship between these best practice characteristics and
                                         each step of a high-quality cost estimate, and also provides more details
                                         on the extent to which the Coast Guard’s cost estimating process meets
                                         the three best practices characteristics.

Table 2: GAO Assessment of the Extent to Which the Coast Guard’s Annual Legacy Vessel Fleet Maintenance Cost
Estimating Process Reflects Best Practices

Best practice        Best practice description                                                                                Assessment
Comprehensive        Cost estimates should include government and contractor costs over the program’s full life   Partially met
                     cycle, from program inception through design, development, deployment, and operation and
                     maintenance to retirement. They should provide an appropriate level of detail to ensure that
                     cost elements are not omitted or double counted and document all cost-influencing ground
                     rules and assumptions.
Well documented      Cost estimates should have clearly defined purposes and be supported by documented            Partially met
                     descriptions of key program or system characteristics. The estimates should capture in
                     writing such things as the source data used and their significance, the calculations
                     performed and their results, and the rationale for choosing a particular estimating method.
                     Moreover, this information should be captured in such a way that the data used to derive the
                     estimate can be traced back to, and verified against, their sources. The cost estimate should
                     be reviewed and accepted by management.
Accurate             Cost estimates should provide for results that are unbiased and not overly conservative or               Partially met
                     optimistic. The estimates should be updated regularly to reflect material changes in the
                     program, and steps should be taken to minimize mathematical mistakes and their
                     significance. The estimate should be grounded in a historical record of cost estimating and
                     actual experiences on comparable programs.
                                         Source: GAO analysis of U.S. Coast Guard information.

                                         Note: “Not met”: The Coast Guard provided no evidence that satisfies any portion of the criterion.
                                         “Minimally met”: The Coast Guard provided evidence that satisfies a small portion of the criterion.
                                         “Partially met”: The Coast Guard provided evidence that satisfies about half of the criterion.
                                         “Substantially met”: The Coast Guard provided evidence that satisfies a large portion of the criterion.
                                         “Met”: The Coast Guard provided evidence that completely satisfies the criterion.


                                         Our assessment showed that the Coast Guard’s legacy vessel
                                         maintenance cost estimating process partially met the three
                                         characteristics, as follows:

                                         Partially comprehensive. The Coast Guard’s process for estimating
                                         costs is partially comprehensive because it defines the program, reflects
                                         the current schedule, is technically reasonable, is product-oriented, is
                                         traceable to the statement of work and objectives, and contains an
                                         appropriate level of detail to ensure that cost elements are not omitted or



                                         Page 26                                                   GAO-12-741 Coast Guard Legacy Vessels
double-counted. However, the process is not fully comprehensive
because it does not document all cost-influencing ground rules and
assumptions, such as the inflation rate used in the cost estimate. 36 Unless
ground rules and assumptions are clearly defined, the cost estimate will
not have a basis to identify and mitigate areas of potential risk. Further,
the Coast Guard did not provide documentation showing a link between
the work breakdown structure and costs. 37 Doing so would allow the
program to track costs by defined deliverables, which in turn allows a
program manager to more precisely identify which components are
causing cost overruns and to more effectively mitigate the root cause of
the overruns.

Partially well documented. The Coast Guard’s process for estimating
costs is partially well documented because it discusses the technical
baseline description and the data in the baseline are consistent with the
estimate. However, the process is not fully well documented because the
Coast Guard did not provide documentation that discusses how the data
were normalized or the reliability of the cost estimate data. 38 Further, the
Coast Guard did not provide documentation that (1) verifies the validity of
the estimating approach or the link between the primary cost-estimating
data sources and actual cost estimate, or (2) describes step by step how
the cost estimate was constructed. For example, although the Coast
Guard has guidance that outlines how to implement the maintenance
process, develop budgets, and allocate resources within the SFLC, Coast
Guard officials told us that similar guidance does not exist for how to
construct cost estimates. Specifically, Coast Guard officials told us that
cost estimation processes for unscheduled maintenance items are
undocumented. Without developing a well-documented cost estimate,



36
  Ground rules are a set of estimating standards that provide guidance and minimize
conflicts in definitions. Assumptions are judgments about past, present, or future
conditions that may affect the estimate.
37
  A work breakdown structure shows the requirements and what must be accomplished to
develop a program and provides the basis for identifying resources and tasks for
developing a program cost estimate. It provides a basic framework for estimating costs,
developing schedules, identifying resources, determining where risks may occur, and
providing the means for measuring program status.
38
  The purpose of data normalization is to make a given data set consistent with and
comparable to other data used in the estimate. Since data can be gathered from a variety
of sources, they are often in different forms and need to be adjusted before being used for
comparison analysis or as a basis for projecting future costs.




Page 27                                           GAO-12-741 Coast Guard Legacy Vessels
management and oversight organizations do not have reasonable
assurance that the cost estimate is reliable, supporting data will not be
available for creating a historical database, questions about the approach
or data used to create the estimate cannot be answered, lessons learned
and a history for tracking why costs changed cannot be recorded, and the
scope of the analysis cannot be thoroughly defined. Further, unless the
estimate is well documented, analysts unfamiliar with the program will not
be able to replicate the estimate.

Partially accurate. The Coast Guard’s process for estimating costs is
partially accurate because it contains few, if any, minor mathematical
mistakes and is regularly updated to reflect significant changes in the
program so that it reflects the current status. However, the cost estimate
is not considered fully accurate because although Coast Guard officials
told us that the data they provided to us incorporated an inflation index of
3 percent for all years based on the consumer price index, they could not
provide us with documentation explaining why the Coast Guard chose to
use this inflation rate or how it was applied to the data. Applying inflation
indexes is an important step in cost estimating because, in the
development of an estimate, cost data must be expressed in the same
terms. If a mistake is made or the inflation amount is not correct, cost
overruns can result. Also, although the cost estimate is based on an
average of historical, actual contractor bids for the maintenance project,
the Coast Guard was unable to provide documentation that would allow
us to assess the reliability of the historical data used, the accuracy of the
calculations, the relationship of the data to the historical contractor bids,
or the final estimates for all maintenance costs. While having access to
historical data can provide the cost estimator with insights into actual
costs on similar programs, the utility of the Coast Guard’s historical cost
estimate data is uncertain because of the limited documentation
mentioned above.

According to GAO’s 2009 Cost Estimating and Assessment Guide,
endorsed by OMB and DHS, cost estimates are integral to determining
and communicating a realistic view of likely cost outcomes that can be
used to plan the work necessary to develop, produce, and support a
program. 39 Senior Coast Guard officials responsible for legacy vessel
maintenance acknowledged over the course of our review that, although



39
 GAO-09-3SP.




Page 28                                    GAO-12-741 Coast Guard Legacy Vessels
                          they thought that the Coast Guard had been following cost-estimating
                          best practices, upon close examination, they realized that the Coast
                          Guard had not fully incorporated these best practices into its cost-
                          estimating process. Ensuring that its annual-depot level cost estimates for
                          legacy vessel fleet maintenance incorporate established best practices
                          would better position the Coast Guard to use its cost estimates to more
                          effectively allocate available resources in the constrained federal budget
                          environment.


                          The operational capacity of the Coast Guard’s legacy vessel fleet
Declining Condition       declined from fiscal years 2006 through 2011. In particular, while
of the Legacy Vessel      performance varied across the legacy vessel classes, two key Coast
                          Guard metrics—operational hours and lost cutter days—show that the
Fleet Makes               legacy vessels did not meet their operational capacity targets and lost
Operational Capacity      considerable planned operational time. Coast Guard headquarters
                          officials reported that the declining operational capacity of its legacy
Targets Increasingly      vessel fleet—particularly the HECs and MECs—has been a prime
Unachievable              contributor to the Coast Guard’s declining ability to meet its mission
                          needs. Coast Guard officials reported that delays in the delivery of
                          replacement vessels will require the Coast Guard to continue to operate
                          its legacy vessels beyond their remaining service lives and result in a
                          widening capacity gap.


Legacy Vessel Fleet’s     The operational capacity of the Coast Guard’s legacy vessel fleet
Declining Condition Has   declined from fiscal years 2006 through 2011, as shown by key Coast
Reduced Operational       Guard performance data. While performance varied across the legacy
                          vessel classes, two key Coast Guard metrics—operational hours and lost
Capacity                  cutter days—show that legacy vessels did not meet their operational
                          capacity targets and lost considerable planned operational time, which
                          Coast Guard officials attributed to the legacy vessel fleet’s degraded
                          condition and increased maintenance needs. According to the Coast
                          Guard, the reduced operational capacity of its legacy vessel fleet is a
                          prime contributor to the Coast Guard’s declining ability to fully meet its
                          missions.

Operational Hours Have    Coast Guard data show that the operational capacity of the legacy vessel
Generally Declined        fleet overall, as measured by operational hours, has fluctuated over the
                          last 7 fiscal years, with a general decline since 2005. For example, in
                          fiscal year 2011, the legacy vessel fleet’s cumulative target for operational
                          hours was 222,740, yet the actual number of operational hours achieved
                          was 180,202—about 23 percent less. Specifically, as shown in figure 8,


                          Page 29                                   GAO-12-741 Coast Guard Legacy Vessels
Coast Guard operational hour data show a decrease in the HECs’
operational capacity in recent years with the HECs accounting for the
largest decline in the legacy vessel fleet’s operational capacity. In
particular, the HEC fleet did not meet the Coast Guard’s operational hour
target in any year from fiscal year 2005 through 2011. HEC operational
hours declined by about 32 percent, or over 12,170 hours, from fiscal
year 2008 to 2011. 40 Moreover, the MEC fleet also generally did not meet
its operational hour targets, with only the 270-foot MECs meeting their
targets in fiscal year 2008 and the total operational hours of the 270-foot
and 210-foot MEC classes combined declining nearly 21 percent (17,500
hours) from fiscal year 2007 to fiscal year 2011. 41 Over the last 5 fiscal
years, 270-foot MECs accounted for the largest loss in MECs’ operational
hours, declining by 39 percent, or nearly 18,000 hours, since last meeting
their operational hour target in fiscal year 2008. In comparison, while the
210-foot MECs did not meet the operational hours target in any year
between fiscal years 2005 through 2011, the fleet’s operational hours
fluctuated, declining from fiscal years 2007 through 2009, before
improving in fiscal years 2010 and 2011. 42 Finally, the 110-foot PB fleet
did not meet operational hour targets in 5 of the last 7 fiscal years. 43
Coast Guard data show that since exceeding its target in fiscal year 2006,
the PB fleet has faced an increasing capacity gap over the last 5 fiscal



40
  Coast Guard headquarters officials reported that two HEC hulls were decommissioned
in fiscal year 2011 for a total reduction of 3,330 HEC operational hours in comparison with
operational hours for the previous fiscal year.
41
  Coast Guard officials attributed declines in MEC capacity primarily to increased
unscheduled maintenance. However, they also reported that because MECs were taken
out of service on a rotating basis to undergo MEP, doing so may have also decreased
MEC operational hours by as much as 9,900 hours annually. The 210-foot MECs
underwent the MEP from fiscal years 2008 through 2010 and 270-foot MECs began the
MEP from fiscal year 2005 and are scheduled to run through fiscal year 2014.
42
   Coast Guard maintenance officials attributed the improved 210-foot MEC operational
hour performance to completion of the MEP for that class in 2010. However, they also
said that completion of the MEP does not guarantee improved capacity long-term because
the MEP replaced only select systems and many aging parts and systems were not
included. For example, the officials cited the case of the MEC Northland, which completed
its MEP in March 2011, yet suffered two consecutive major casualties in 2011 that
resulted in a loss of 396 operational hours.
43
  Our analysis of PB operational hour data included both 123-foot and 110-foot PBs.
Coast Guard officials reported that, prior to decommissioning the 123-foot PBs in fiscal
year 2007, both vessel classes were categorized within the Coast Guard’s PB fleet for the
purposes of setting operational hour targets and data analysis.




Page 30                                           GAO-12-741 Coast Guard Legacy Vessels
                                       years—losing an average of 13,856 operational hours each year across
                                       the fleet, or about 16 percent below PB targets. 44

Figure 8: Summary of the Legacy Vessels’ Operational Hour Performance Compared with Targets, Fiscal Years 2005 through
2011




Lost Cutter Days Are Generally         Coast Guard data also show that the legacy vessel fleet lost a
Rising                                 considerable number of planned operational days because of
                                       unscheduled maintenance. For example, for the HECs and MECs, the



                                       44
                                        Coast Guard officials attributed this decline in PB capacity to an overall increase in the
                                       maintenance needs of PBs given their age and deteriorating hull conditions.




                                       Page 31                                            GAO-12-741 Coast Guard Legacy Vessels
Coast Guard tracks lost cutter days, which are the number of planned
operational days that a vessel was unavailable to conduct operations,
typically because of maintenance.45 Coast Guard officials said that lost
cutter days are a primary indicator of operational readiness. Specifically,
Coast Guard data show the HECs and MECs collectively averaged about
618 lost cutter days per year from fiscal years 2006 through 2011.46

As shown in figure 9, HECs accounted for the largest share of lost cutter
days, averaging 465 lost cutter days each year from fiscal years 2006
through 2011.47 Further, the number of lost cutter days for the HEC fleet
rose rapidly beginning in fiscal year 2008, peaking at 654 lost cutter days
in fiscal year 2010. Moreover, for each of the last 3 fiscal years, the
number of lost HEC cutter days has been nearly equivalent to three HECs
being out of service each year.48

In addition, MEC lost cutter days more than doubled from fiscal year 2006
to fiscal year 2010, peaking at 276 lost cutter days for both 210-foot and
270-foot MECs combined. Coast Guard officials attributed the peak in
MEC lost cutter days to their deployment to Haiti for humanitarian
operations. Coast Guard officials said that, because of their age, all 10
MECs deployed to Haiti suffered severe, mission-affecting casualties,
which limited their capacity to conduct the mission. According to the
maintenance manager for the MEC fleet, the Haitian earthquake
deployment was a wakeup call for the Coast Guard because it
demonstrated that the Coast Guard’s legacy vessel fleet had been
operating with a false sense of readiness because, prior to that incident,
the legacy fleet had not been recently challenged to surge assets.



45
  The Coast Guard tracks lost cutter days for HECs and MECs because they are
deployed for up to 3 months at a time. The Coast Guard measures PBs’ performance in
hours since they are deployed for no more than 5 days at a time.
46
 The Coast Guard did not have MEC lost cutter day data available for fiscal year 2005.
47
  According to Coast Guard guidance, HECs and MECs are expected to operate 185 days
away from home port each year to conduct missions, which equals 3,330 operational
hours. See Commandant Instruction 3100.5B (June 29, 2007).
48
  Coast Guard officials attributed the majority of HEC lost cutter days to propulsion system
casualties. For example, the Coast Guard reported that catastrophic engine failure
rendered the HECs Dallas, Chase, and Gallatin inoperative for 1 year, 1 year and 5
months, and 2 years, respectively, during this time period. The Coast Guard
decommissioned the Chase on May 13, 2011, and the Dallas on March 30, 2012.




Page 32                                            GAO-12-741 Coast Guard Legacy Vessels
Figure 9: Lost Cutter Days for Legacy High and Medium Endurance Cutters, Fiscal Years 2006 through 2011




Reduced Operational Capacity            Coast Guard headquarters officials reported that the declining operational
Hinders Mission Performance             capacity of its legacy vessel fleet—particularly the HECs and MECs—has
                                        been a prime contributor to the Coast Guard’s declining ability to meet its
                                        mission needs and to intercept threats beyond U.S. territorial waters.
                                        Specifically, Coast Guard headquarters officials reported that the HEC
                                        fleet has become increasingly unreliable and has degraded the Coast
                                        Guard’s capacity to conduct missions, particularly drug interdiction
                                        missions. 49 For example, according to Coast Guard headquarters
                                        officials, the number of hours the HEC fleet spent on drug interdiction
                                        missions declined 65 percent, or nearly 13,000 hours, from fiscal year
                                        2007 to fiscal year 2010 largely as a result of increased unscheduled


                                        49
                                          Coast Guard headquarters officials reported that the total amount of drugs interdicted
                                        depends on various factors, such as estimated drug flow rate and vessel operational
                                        hours and availability. The decline in cocaine interdicted by HECs was parallel to the
                                        decline in counter-drug mission hours completed from fiscal years 2007 through 2010.




                                        Page 33                                           GAO-12-741 Coast Guard Legacy Vessels
                           maintenance. Coast Guard headquarters officials also noted that the
                           decreased operational capacity of the HEC has decreased HEC
                           availability to conduct missions in Alaska. Coast Guard headquarters
                           officials noted that the HECs and their replacement NSCs are the only
                           vessels in its fleet capable of safely launching and recovering small boats
                           and aircraft in the Bering Sea. As a result, lost HEC operational capacity
                           has led the Coast Guard to reassign HECs, as well as three MECs, from
                           missions in other geographic areas to provide additional coverage to
                           missions in Alaska.

                           Coast Guard headquarters officials stated that the decline in MEC
                           operational hours has most significantly affected the Coast Guard’s ability
                           to conduct its alien interdiction mission because the MEC fleet is the
                           primary platform for carrying out this mission. For example, Coast Guard
                           data show the MECs’ operational hours in the alien interdiction mission
                           declined 40 percent, or 12,000 hours, from fiscal years 2007 to 2011.
                           Further, Coast Guard headquarters officials reported that the number of
                           migrants interdicted by the MEC fleet declined from 2,200 to 1,200 during
                           this period and noted that increased unscheduled maintenance had been
                           a key contributing factor.


The Operational Capacity   Coast Guard officials reported that delays in the delivery of replacement
Gap is Expected to Widen   vessels will require the Coast Guard to continue to operate its legacy
                           vessels beyond their remaining service lives and result in a widening
                           capacity gap. 50 The officials added that as the legacy vessels operate
                           further past their service lives, they expect these vessels to become
                           increasingly unreliable, have increasingly diminished operational capacity,
                           and be increasingly costly and challenging to maintain. Coast Guard
                           acquisition documents, assessments, and maintenance managers have
                           noted that past sustainment efforts have shown little correlation between
                           large maintenance expenditures and extended improvements in
                           operational capacity or reduction in maintenance costs. Nonetheless,
                           Coast Guard officials said that the significant delays in delivering some
                           replacement vessels, and the declining condition and capacity of its
                           legacy vessel fleet, warrant further action to ensure the legacy vessels


                           50
                             The Naval Engineering Manual defines “remaining service life” as the time period during
                           which no major expenditures will be required for hull and structural repairs or
                           modernizations, or for machinery or system modernizations based solely on the vessel’s
                           capability to meet existing mission requirements.




                           Page 34                                          GAO-12-741 Coast Guard Legacy Vessels
                                 remain operational until their decommissioning so that the Coast Guard
                                 can better achieve its missions. Coast Guard officials reported that they
                                 are determining potential future actions, including additional
                                 refurbishment of MEC vessels, which we discuss later in this report. The
                                 Coast Guard reported, and our analysis of Coast Guard documents
                                 confirms, that the MEC fleet will be most affected by delays in delivery of
                                 replacement vessels. In particular, according to current plans, some of
                                 the 270-foot MECs are to remain in service as late as 2033—up to 21
                                 years beyond their expected service lives—before they are replaced by
                                 OPCs.

Near Term Increase in Capacity   In the next few years, the operational capacity gap that exists for the HEC
Gap Expected for the HEC and     and PB fleets is expected to increase because of actions the Coast Guard
PB Fleets                        plans to take to reduce legacy fleet expenditures in an effort to better
                                 balance the needs of the legacy fleet with the acquisition of replacement
                                 vessels. For example, to reduce legacy fleet maintenance expenditures,
                                 the Coast Guard plans to decommission the next two most degraded and
                                 costly HECs in fiscal year 2013 and anticipates that this will allow it to
                                 save about $17 million. 51 A senior maintenance official reported that
                                 decommissioning these HECs may also reduce maintenance
                                 expenditures in the long term. Coast Guard officials acknowledged that
                                 this accelerated HEC decommissioning will result in operational capacity
                                 gaps in the near term, but noted that the delivery of the fourth NSC in
                                 fiscal year 2014 and the fifth NSC in fiscal 2016 would mitigate these
                                 gaps.

                                 In addition to accelerating the pace of the decommissioning of some
                                 HECs, the Coast Guard also did not request funds for its “High
                                 Tempo/High Maintenance” (HTHM) program for fiscal year 2013 to save
                                 $33.5 million. HTHM was designed to mitigate the loss of 8 PBs to hull




                                 51
                                   By decommissioning 2 HECs in fiscal year 2013, the Coast Guard will have
                                 decommissioned a total of 5 of 12 HECs before their replacements have fully entered into
                                 service.




                                 Page 35                                          GAO-12-741 Coast Guard Legacy Vessels
                             failure and 6 to deployment to Bahrain (14 PBs total) 52 by doubling the
                             operational hour output of 8 PBs through the use of double crews and
                             increased maintenance over the last 5 fiscal years. Coast Guard officials
                             reported that all 8 HTHM PBs will return to their pre-HTHM operational
                             tempo on HTHM’s termination at the end of fiscal year 2012. Coast Guard
                             officials stated that termination of the HTHM program is to coincide with
                             the commissioning of seven FRCs, thus mitigating any lost PB capacity.
                             However, our analysis shows that without HTHM, a capacity gap
                             equivalent to the operational hours of 10 PBs will remain even after the
                             seventh FRC is commissioned, which is projected to occur at the end of
                             fiscal year 2013. This is because after the commissioning of the seventh
                             FRC, the capacity gap would decrease equivalent to the operational
                             hours of 7 PBs—but because the Coast Guard also plans to
                             decommission 3 PBs in fiscal year 2013, the capacity gap would grow to
                             be equivalent to the operational hours of 10 PBs.

Longer-Term Capacity Gap     While the delivery of replacement vessels is ongoing to help mitigate the
Expected for the MEC Fleet   operational capacity gap that exists for the legacy HEC and PB fleets, the
                             significant delay in the delivery of the OPC will result in a longer-term
                             operational capacity gap for the legacy MEC fleet. According to Coast
                             Guard documents, the combined MEC fleet, with 27 vessels, is the
                             largest class of major cutters in terms of numbers of vessels and—
                             because of its size and versatility—is relied upon to conduct a wide
                             variety of missions far from shore. Coast Guard officials stated that the
                             role of the MEC fleet has become even more important in recent years
                             given the declining condition of the HEC fleet. In particular, Coast Guard
                             officials report increasingly using MECs to recover lost HEC capacity. For
                             example, the officials reported shifting MEC operational hours from
                             alien/migrant interdiction missions to drug interdiction missions. According
                             to these Coast Guard officials, a loss of MEC capability puts performance
                             goals at risk. Specifically, the Coast Guard officials reported that the
                             continued decline of legacy fleet operational hours would, among other
                             things, likely result in more cocaine and illegal migrants reaching U.S.


                             52
                               As we reported in June, 2008, the Coast Guard decommissioned all eight 123-foot PBs
                             in fiscal year 2007 due to structural failure of their hulls as a result of their conversion from
                             110-foot to 123-foot PBs. In addition, beginning in March 2003, six 110-foot patrol boats
                             have contributed to the joint U.S. Navy and Coast Guard National Fleet Policy and the
                             Coast Guard’s general defense mission by operating in the Persian Gulf. See GAO, Coast
                             Guard: Strategies for Mitigating the Loss of Patrol Boats Are Achieving Results in the Near
                             Term, but They Come at a Cost and Longer Term Sustainability Is Unknown, GAO-08-660
                             (Washington, D.C.: June 23, 2008).




                             Page 36                                              GAO-12-741 Coast Guard Legacy Vessels
shores and a decreased capability to protect U.S. waters and fish stocks
from the encroachment of foreign fishing vessels.

The Coast Guard also reported that the MECs’ engineering systems are
becoming increasingly obsolete, expensive, and difficult to maintain,
which will continue to challenge mission performance. For example,
according to a Coast Guard senior commander, because of expectations
of diminished capacity of the MEC fleet, the Coast Guard—which relies
heavily on the MEC for conducting missions—will need to make difficult
choices regarding mission prioritization.

Figure 10 shows that the MECs are rapidly approaching or already have
passed the end of their expected service lives and, because of delays in
the delivery of the replacement OPCs, the capacity gap will continue to
grow. As previously discussed, the Coast Guard is refurbishing every
MEC through a MEP with a goal to increase the MECs’ reliability and
reduce longer-term maintenance costs. Senior Coast Guard officials
responsible for the project reported that the MEP may also provide up to
15 years of additional service life to the MEC fleet. Third-party
assessments show that the MEP has improved the performance of MECs
that have completed the project; 53 however, the Coast Guard
acknowledges that the MEP will not entirely bridge the gap between the
estimated end of MEC service life and the projected OPC deliveries.
Since fiscal year 2007, the expected delivery dates for the OPCs have
slipped by 13 years and are now well outside the MEC class’s designed
service life or any ancillary service life gains that might be achieved by
the MEP. Specifically, as a result of OPC delays, some of the 270-foot
MECs are now to remain in operation until 2033, up to 21 years beyond
their remaining service lives. Even if the most optimistic projections were
to be true and the MEP were to extend MECs’ service lives by 15 years,
the MECs would remain in service increasingly beyond the end of their
service lives before full recapitalization by the OPC fleet. The largest
MEC capacity gap would occur from fiscal years 2026 through 2033.
Coast Guard officials estimate that MEP upgrades may extend each
vessel’s service life up to 15 years, but they noted that this estimate is
optimistic and has no basis in firm engineering studies. Therefore, figure



53
  The Coast Guard has contracted with the Department of Transportation, Research and
Innovative Technology Administration’s Volpe National Transportation Systems Center to
conduct annual assessments of the effectiveness of the MEP.




Page 37                                         GAO-12-741 Coast Guard Legacy Vessels
                                         10 shows MECs’ end of service lives if the MEP were to provide 5, 10, or
                                         15 years of additional service.

Figure 10: Comparison of the Projected End of Service Lives for the MEC Fleet with the Planned OPC Delivery Dates, as of
May 2012




                                         Note: This analysis is based on the Coast Guard’s existing fleet of 27 MECs, each of which is
                                         identified by class and name. Coast Guard officials also reported that there is no correlation between
                                         the end of a vessel’s service life and its decommissioning date.


                                         According to senior Coast Guard planners, MEC operating requirements
                                         will be unachievable given fiscal and resource constraints without the
                                         Coast Guard undertaking a service life extension project in the future. For
                                         example, a senior Coast Guard maintenance official estimated that the


                                         Page 38                                                  GAO-12-741 Coast Guard Legacy Vessels
                                Coast Guard would need to raise annual depot-level maintenance funding
                                for the MEC class by 300 percent for the Coast Guard to be able to
                                maintain the MECs until their projected decommissioning dates. Coast
                                Guard officials reported that a further refurbishment of the MECs will be
                                necessary to meet operational requirements and that the Coast Guard is
                                in the early stages of developing plans for addressing the expected gap
                                between remaining MEC fleet service lives and the delivery of the OPC
                                replacements. Officials from the Office of Naval Engineering reported that
                                MEC condition is to be assessed over the next 2 fiscal years and that
                                they plan to use MEC assessments to develop alternatives and present
                                their recommendations to the Cutter Resource Council for approval.
                                Because the Coast Guard is in the early stages of developing this plan, it
                                is too soon evaluate it.

Uncertainties Further           Coast Guard efforts to sustain its legacy vessel fleet and meet mission
Challenge Sustainment Efforts   requirements until the replacement vessels are delivered are also
                                challenged by uncertainties in two areas. First, the future mix of vessels
                                (fleet mix) is uncertain. The Coast Guard’s fiscal years 2013-to-2017 5-
                                year Capital Investment Plan does not allocate funds for the acquisition of
                                the last two replacement NSCs, as called for by the program of record. 54
                                If funds are not requested for these replacement vessels or their
                                deliveries are delayed, it is unclear how this could affect the
                                decommissioning schedule of the HECs, the last of which the Coast
                                Guard currently plans to decommission in fiscal year 2023. Second, it is
                                unclear if the Coast Guard will implement a rotational crew concept for
                                the replacement NSCs. The Coast Guard’s program of record assumes
                                that the new NSC fleet will achieve more operational capacity than the
                                legacy HEC fleet (230 versus 185 days away from homeport each year),
                                but this assumption is predicated on implementation of a crew rotation
                                concept in which the Coast Guard would have four sets of crew staff and
                                operate three NSCs on a rotating basis to increase the vessels’
                                operational time. However, we reported in May 2012 that the Coast
                                Guard is reevaluating this rotational crewing concept because initial
                                analysis indicates it may be difficult and too costly to achieve. 55 Coast


                                54
                                  The Capital Investment Plan projects Coast Guard’s acquisition priorities for the next 5
                                years assuming the limits of budgetary growth set by the Budget Control Act of 2011, P.L.
                                112-25. We reported in July 2011 that the Capital Investment Plan is subject to change
                                annually (see GAO-11-743).
                                55
                                 GAO, Homeland Security: Observations on the Coast Guard’s and the Department of
                                Homeland Security’s Fleet Studies, GAO-12-751R (Washington, D.C.: May 31, 2012).




                                Page 39                                           GAO-12-741 Coast Guard Legacy Vessels
                                 Guard officials reported that even if the NSCs are not able to achieve 230
                                 operational days away from homeport, the Coast Guard does not plan to
                                 keep the HECs in service longer than current decommissioning schedules
                                 show. 56 However, should the NSCs be unable to achieve 230 days away
                                 from homeport and given its historic reliance on HECs to conduct certain
                                 missions, including the drug interdiction and Alaska missions, it is
                                 uncertain how the Coast Guard would be able to fully meet its mission
                                 goals without a delay in HEC decommissioning that would necessitate
                                 further HEC sustainment. 57

Operational Hour Targets for     As previously noted, the Coast Guard has established operational hour
Legacy Vessels Are Unrealistic   targets for the number of hours its vessels are expected to conduct
                                 operations or missions each fiscal year. Coast Guard headquarters
                                 officials reported that the Coast Guard uses these targets to inform
                                 operational planning and force management decisions, such as setting
                                 mission performance targets and corresponding resource allocations. 58
                                 Specifically, senior Coast Guard officials from the Office of the Deputy
                                 Commandant for Operations told us that they set overall mission
                                 performance targets on an annual basis. These officials also reported
                                 that, in collaboration with the area commands, headquarters issues
                                 guidance prescribing the operational hours that Coast Guard commands
                                 are to achieve within each mission area. 59 According to these officials,
                                 this guidance serves as a projection of the forces necessary to achieve
                                 the performance targets within each mission area and is based on




                                 56
                                   However, Coast Guard headquarters officials also reported that the agency is in the
                                 midst of a 3-year, $4 million study—to be completed in 2013—to develop potential
                                 maintenance and sustainment strategies based on assessments and engineer design
                                 analyses on the HECs. The officials added that the study results are to inform
                                 development of maintenance availability packages, and development and implementation
                                 of engineering changes to improve HEC reliability until decommissioning.
                                 57
                                   The Coast Guard recently revised the HEC decommissioning schedule to delay the
                                 decommissioning of the last HEC from 2020 to 2023 in its fiscal years 2013-2017 Capital
                                 Investment Plan.
                                 58
                                   Coast Guard headquarters officials also reported that vessels’ operation hour targets
                                 form the basis of their funding levels and Coast Guard fuel models.
                                 59
                                   Coast Guard statutory missions are (1) Ports, Waterways, and Coastal Security; (2)
                                 Drug Interdiction; (3) Migrant Interdiction; (4) Living Marine Resources; (5) Other Law
                                 Enforcement; (6) Marine Safety; (7) Search and Rescue; (8) Marine Environmental
                                 Protection; (9) Defense Readiness; (10) Aids to Navigation; and (11) Ice Operations.




                                 Page 40                                            GAO-12-741 Coast Guard Legacy Vessels
budgeted operational capacity for each asset. 60 Operational commanders
reported also using this guidance to allocate their resources by
determining the number of operational hours that the assets under their
command must achieve (i.e., targets) within each mission area.

Senior Coast Guard headquarters officials reported that when setting
overall mission performance targets, they consider various factors
including continuous improvements and initiatives, expected asset
capability, past performance, and external factors. However, they also
stated that when setting these targets they assume that if assets achieve
their planned operational hour targets, the Coast Guard should generally
meet or exceed its performance targets for each mission. For example,
senior officials from the Office of the Deputy Commandant for Operations
reported on multiple occasions that the Coast Guard adjusts its mission
performance targets annually based on each vessel class’s capacity with
the assumption that each vessel will operate at 100 percent of its planned
operating time. Similarly, area commanders also reported allocating their
resources based on the assumption that their assets will achieve 100
percent of their operational hour targets.

However, the legacy fleet has increasingly fallen below operational hour
targets in recent years. The annual target for the HECs and MECs is
3,330 operational hours; however, these legacy vessel classes have
consistently fallen short of this target in each of the last 5 to 7 fiscal years.
Moreover, in March 2012 the Commandant of the Coast Guard testified
before Congress that HECs are achieving only 70 percent of their
operational hour targets and are sailing with major debilitating casualties
more than 50 percent of the time. 61 In addition, Coast Guard officials at
headquarters and in both area commands reported that the decline in
legacy vessel operational capacity has challenged the Coast Guard’s
ability to meet its mission performance targets. Coast Guard operational
commanders reported taking actions to mitigate the effect of declining
legacy vessel capacity, such as diverting vessels tasked to other missions


60
  Coast Guard officials stated that Coast Guard areas may request adjustments to
headquarters’ operational hour guidance based on intelligence, achieved performance to
date, or the emergence or disappearance of threats.
61
  U.S. Coast Guard Fiscal Year 2013 Budget: Hearing Before Senate Committee on
Commerce, Science and Transportation, Subcommittee on Oceans, Atmosphere,
Fisheries, and Coast Guard, 2,112th Congress (March 7, 2012) (Oral Testimony of
Admiral Robert J. Papp, Jr., Commandant, U.S. Coast Guard).




Page 41                                         GAO-12-741 Coast Guard Legacy Vessels
to help complete operations. For example, an operational planner from
the Coast Guard’s Pacific Area Command said that legacy vessels have
been temporarily deployed outside his command on a recurring basis to
mitigate the effect of legacy vessel casualties on higher-priority missions
elsewhere. In these instances, he said that he was challenged to meet
certain mission performance targets.

The Coast Guard has not revised the operational hour guidance for its
HEC, MEC, or PB classes in at least 8 years, despite declining
operational capacity and expectations that capacity will continue to
decline in the future. As a result, legacy vessel operational hour targets
are not realistic. In addition, because the Coast Guard’s overall mission
performance targets are based, at least in part, on these vessels
operational hour targets, the Coast Guard faces increased risk to its
ability to meet these performance targets. OMB guidance states that
agencies should set performance targets that are ambitious and
achievable given program characteristics and should consider
circumstances, including past performance, and may annually adjust
targets as these factors change. 62 Coast Guard officials reported that they
were cognizant of OMB guidance and have considered the merits of
changing the operational hour targets, but have elected not to do so
because the targets are the foundation of the Coast Guard’s mission
requirements baseline. In this way, officials said, altering legacy vessel
operational targets would (1) lower the mission performance and planning
standards that must be met to ensure that the Coast Guard achieves its
missions, (2) reduce the funding available to support legacy vessels
because budget models are based on resource hour targets, and (3)
diminish the Coast Guard’s ability to effectively conduct trend analysis of
past performance because of shifting baselines and targets. However, our
analysis of performance data and testimonial evidence from senior Coast
Guard officials shows that the Coast Guard’s mission performance and
planning standards have gone unmet because of declining legacy vessel
operational capacity. For example, operational commanders reported
routinely missing mission performance targets because of legacy vessel
casualties.




62
  OMB, Program Assessment Rating Tool Guidance Number 2007-2, (Washington, D.C.:
January 29, 2007).




Page 42                                      GAO-12-741 Coast Guard Legacy Vessels
              Because it sets mission performance targets and allocates resources on
              the assumption that legacy vessels will achieve 100 percent of
              operational hour targets, the Coast Guard’s allocation of resources is not
              realistic. Coast Guard guidance states that, in accordance with OMB
              guidance, one should not expect to achieve every target every year. 63
              However, because the Coast Guard uses vessels’ operational hour
              targets as an input for setting agency-wide performance targets and to
              allocate area resources, consistent achievement of its performance
              targets is at increased risk. The Coast Guard could choose to adjust its
              legacy fleet targets for annual planning purposes, but retain the
              underlying assumptions of its budget and fuel models to ensure that the
              operational and maintenance needs of its legacy vessel fleet are still met.
              Finally, we have previously reported that the Coast Guard has adjusted
              legacy vessel operational hour targets in the past for its PB fleet. For
              example, in June 2008, we reported that the Coast Guard had revised PB
              operational hour targets in 2004 to account for its greater mission
              responsibilities since the terrorist attacks of September 11, 2001. 64 By
              adjusting legacy fleet operational hour targets annually to reflect their
              actual capacity as evidenced by historic performance and not desired
              capacity, the Coast Guard would be better able to set achievable and
              realistic performance targets and plan how to execute its mission by
              ensuring it allocates legacy vessel operational hours more realistically.


              In each of the past 2 fiscal years, the Coast Guard has received
Conclusions   supplemental funding to address its growing legacy vessel fleet
              maintenance needs. Unrealistically low Standard Support Levels have
              been one factor contributing to this need. However, in the current,
              constrained fiscal environment, there are no guarantees that such
              supplemental funding will continue to be available to meet the Coast
              Guard’s legacy vessel fleet maintenance expenditures, which are likely to
              continue to rise as vessel conditions continue to decline. Thus, it is
              especially important for the Coast Guard to develop high-quality and
              reliable cost estimates that clearly convey to decision makers the
              potential risk of costs exceeding funding levels so that senior Coast
              Guard leadership and Congress can make more informed funding


              63
               U.S. Coast Guard, Standard Operational Planning / Global Force Management Process
              Guide.
              64
               See GAO-08-660.




              Page 43                                       GAO-12-741 Coast Guard Legacy Vessels
                      decisions. In particular, the Coast Guard’s annual vessel maintenance
                      cost estimation process could be strengthened by better conforming to
                      cost estimating best practices, particularly with respect to
                      comprehensiveness, documentation, and accuracy.

                      The operational capacity of the legacy vessel fleet has been in decline, as
                      highlighted by the Coast Guard’s generally failing to meet operational
                      hour targets for these vessels over the past 7 fiscal years. Further, delays
                      in deploying some of the replacement vessels will lead to a growing
                      operational capacity gap that could persist for some years to come.
                      Despite the growing operational capacity gap, the Coast Guard has not
                      revised legacy vessel operational hour targets to reflect this diminishing
                      capacity. As a result, the Coast Guard’s legacy vessel fleet operational
                      hour targets—which are used to inform the Coast Guard’s mission
                      planning processes—are not realistic. In addition, because the Coast
                      Guard’s mission performance targets are based, in part, on operational
                      hour targets, they risk not being achievable, as called for by OMB
                      guidance. Given historic performance trends and expectations of a
                      widening capacity gap, it is important that the Coast Guard realistically
                      assess the operational capacity of its legacy vessel classes to ensure the
                      operational performance goals and missions are achievable. By adjusting
                      legacy vessel fleet operational hour targets annually to reflect actual
                      capacity, as evidenced by historic performance, the Coast Guard would
                      be better able to plan its missions by ensuring it allocates legacy vessel
                      operational hours more realistically.


                      We recommend that the Secretary of Homeland Security direct the
Recommendations for   Commandant of the Coast Guard to take the following two actions:
Executive Action
                      To strengthen the comprehensiveness, documentation, and accuracy of
                      the Coast Guard’s annual depot-level maintenance cost estimates for its
                      legacy vessel fleet, ensure that the Coast Guard’s annual depot-level
                      maintenance cost estimates conform to cost-estimating best practices.

                      To help ensure that the Coast Guard’s planning processes result in the
                      effective allocation of available resources and to better ensure it sets
                      achievable performance goals, adjust legacy vessel fleet operational hour
                      targets to reflect actual capacity, as appropriate by class.




                      Page 44                                   GAO-12-741 Coast Guard Legacy Vessels
                     We requested comments on a draft of this report from the Secretary of
Agency Comments      Homeland Security and the Coast Guard. In its written comments,
and Our Evaluation   reprinted in appendix V, DHS concurred with the first recommendation,
                     but the actions DHS reported that the Coast Guard has taken or plans to
                     take may not fully address the intent of this recommendation. DHS did not
                     concur with the second recommendation. In addition to the DHS letter,
                     the Coast Guard provided technical comments that we have incorporated,
                     as appropriate.

                     DHS concurred with the first recommendation, but the actions DHS
                     reported that the Coast Guard has taken or plans to take may not fully
                     address the intent of this recommendation. Specifically, in its letter, DHS
                     raises three issues that could limit the Coast Guard’s implementation of
                     the recommendation. The first issue concerns DHS’s position that cost
                     estimating best practices are most applicable to new asset acquisitions.
                     We disagree. We assessed the Coast Guard’s vessel maintenance cost
                     estimating process using the three best practices from our cost estimating
                     guide that are intended to be applicable to programs and assets in all
                     stages of their life cycles, including maintenance and support. The
                     second issue DHS raised is that although sustainment and maintenance
                     costs for individual vessels are uncertain and challenging to estimate, the
                     Coast Guard mitigates these uncertainties through centralized
                     management. We believe that even given the Coast Guard’s centralized
                     management of funding, it is especially important in the face of such
                     uncertainty to follow cost estimating best practices. Following these best
                     practices can help ensure that cost estimates are comprehensive and
                     accurate, which in turn can help ensure that funds will be available when
                     needed. The third issue DHS raised is that, given current fiscal
                     constraints, the Coast Guard will focus on improvements that do not
                     require additional resources. While we agree that federal resources are
                     limited, aligning the cost estimating process for legacy vessel
                     maintenance with best practices would not necessarily require a large
                     investment of resources. In fact, having a well documented cost
                     estimating process and using accurate historical data should enable the
                     Coast Guard to operate more efficiently.

                     DHS did not concur with the second recommendation that the Coast
                     Guard adjust legacy vessel fleet operational hour targets to reflect actual
                     capacity, as appropriate by class. DHS stated that the Coast Guard has
                     already taken actions to meet the maintenance challenges associated
                     with its aging vessel fleet and strives to meet the annual operational
                     targets associated with those vessels. DHS added that while the legacy
                     vessel fleet has not been able to meet operational hour targets because


                     Page 45                                   GAO-12-741 Coast Guard Legacy Vessels
of maintenance challenges, reducing the operational hour targets would
fail to fully utilize those assets not impacted by maintenance issues. We
disagree. As noted in this report, while senior Coast Guard officials
reported that the Coast Guard adjusts its mission performance targets
annually, it does not adjust legacy vessel operational hour targets
annually. These officials also stated that Coast Guard’s mission
performance targets are based on each vessel class’s capacity, with the
assumption that each vessel will operate at 100 percent of its planned
operating time. We do not believe that reducing the operational hour
targets would result in a failure by the Coast Guard to fully utilize assets
not impacted by maintenance challenges. Moreover, as noted in this
report and as DHS acknowledges in its letter, the legacy vessel fleet has
not been able to meet operational hour targets in recent years. Despite
declining operational capacity and expectations that capacity will continue
to decline in the future, the Coast Guard has not revised the operational
hour guidance for its legacy vessel fleet in at least 8 years. Given that (1)
OMB guidance states that agencies should set targets that are
achievable, (2) operational decisions are being made on the assumption
that legacy vessels will achieve 100 percent of operational hour targets,
and (3) the Coast Guard has adjusted legacy vessel operational hour
targets in the past, we continue to believe that this recommendation has
merit.


We are sending copies of this report to the Secretary of Homeland
Security and the Commandant of the Coast Guard. This report is also
available at no charge on GAO’s web-site http://www.gao.gov.

If you or your staff have any questions, please contact me at
(202) 512-9610 or caldwells@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Staff acknowledgments are provided in appendix VI.




Stephen L. Caldwell
Director
Homeland Security and Justice




Page 46                                   GAO-12-741 Coast Guard Legacy Vessels
List of Congressional Requesters

The Honorable Susan M. Collins
Ranking Member
Senate Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable Lisa Murkowski
United States Senate

The Honorable John L. Mica
Chairman
House Committee on Transportation and Infrastructure
House of Representatives

The Honorable Frank A. LoBiondo
Chairman
Subcommittee on Coast Guard and Maritime Transportation
House Committee on Transportation and Infrastructure
House of Representatives

The Honorable Candice S. Miller
Chairwoman
Subcommittee on Border and Maritime Security
House Committee on Homeland Security
House of Representatives




Page 47                                GAO-12-741 Coast Guard Legacy Vessels
Appendix I: Scope and Methodology
             Appendix I: Scope and Methodology




             To determine how the condition of the Coast Guard’s fleet of legacy
             vessels changed from fiscal years 2005 through 2011, and to identify the
             key actions the Coast Guard has taken to improve the condition of the
             legacy fleet, we analyzed data the Coast Guard reported it used to
             determine and track the condition of its legacy fleet of vessels over each
             of these fiscal years. Of the four measures and supporting data the Coast
             Guard provided, the Coast Guard’s Office of Naval Engineering reported
             that it considers Operational Percent of Time Free from Major Casualties
             (OpPOTF) to be primary measure for tracking, capturing, and
             communicating the condition of the legacy vessel fleet from fiscal years
             2005 through 2011. We compared vessel OpPOTF against established
             Coast Guard standards. We assessed the reliability of these data by
             reviewing the Coast Guard’s data management practices and questioning
             knowledgeable officials about the data and the systems that produced the
             data. We determined the data to be sufficiently reliable for the purposes
             of this report. We also interviewed relevant Coast Guard headquarters
             officials responsible for maintaining the legacy cutter fleet to obtain
             information on the physical condition of the legacy vessels and actions
             the Coast Guard reported as key actions to improve the physical
             condition of the legacy fleet, including officials from the Coast Guard’s
             Office of Naval Engineering and Office of Cutter Forces. We also
             conducted site visits to five Coast Guard field locations where Coast
             Guard officials reported the legacy vessels were either homeported or
             undergoing maintenance and therefore available for us to observe the
             condition of the legacy vessels and to interview cognizant maintenance
             officials, operational commanders, and crew members. Specifically, we
             visited (1) the Pacific Area Command in Alameda, California; (2) the
             Atlantic Area Command in Portsmouth, Virginia; (3) the Coast Guard Yard
             in Baltimore, Maryland; (4) district and sector offices in Miami, Florida;
             and (5) the Coast Guard’s district office and Naval Engineering Support
             Unit in Seattle, Washington. The results of these visits are not
             generalizable to all Coast Guard field locations, but they did provide
             valuable insights on key maintenance and operational issues. We also
             reviewed relevant standards and program documentation, such as the
             Coast Guard’s Cutter Employment Standards and Acquisition Program
             Baselines for legacy vessel sustainment programs.

             To determine the key annual maintenance expenditure trends for the
             Coast Guard’s fleet of legacy vessels from fiscal years 2005 through
             2011, we obtained Coast Guard data on the total annual legacy vessel
             maintenance expenditures, including scheduled versus unscheduled
             expenditures, for maintaining the 378-foot high endurance cutters, the
             210-foot and 270-foot medium endurance cutters, and the 110-foot patrol


             Page 48                                  GAO-12-741 Coast Guard Legacy Vessels
Appendix I: Scope and Methodology




boats. Senior Coast Guard officials in charge of legacy vessel
maintenance confirmed that analyzing these data was the best way to
understand key expenditure trends. We also obtained and analyzed
Coast Guard data on budgeted annual maintenance funds for these four
vessel classes for the same period of time to further identify any
expenditure trends and to determine how expenditures for the respective
legacy vessel classes compared with budgeted funds. We interviewed
cognizant officials from Coast Guard headquarters and Atlantic and
Pacific Commands to obtain their perspectives on data trends. We
assessed the reliability of these data by reviewing the Coast Guard’s data
management practices and interviewing knowledgeable officials about the
data and the systems that produced the data. We determined the data to
be sufficiently reliable for the purposes of this report. To determine the
extent to which the Coast Guard’s cost-estimating process follows
established best practices, we analyzed documentation, such as the
guidance the Coast Guard uses to conduct legacy vessel maintenance
and to compute its annual legacy vessel maintenance budget, and
compared the documentation with criteria for cost estimating best
practices outlined in GAO’s Cost Estimating and Assessment Guide: Best
Practices for Developing and Managing Capital Program Costs. 1 Finally,
we interviewed cognizant Coast Guard officials to obtain information
about the Coast Guard’s legacy vessel maintenance cost estimating
methods.

To determine the operational capacity of the Coast Guard’s legacy fleet
and the extent to which the Coast Guard faces challenges in sustaining
its legacy vessels and meeting mission requirements given delays in
fielding the replacement vessels, we analyzed Coast Guard vessel data
and measures that the Coast Guard reported were key indicators of the
relationship between vessel maintenance condition and operational
performance. These included operational hours and lost cutter days. For
the operational hour data, we compared the documented performance
with established Coast Guard targets for each legacy vessel class across
each of the fiscal years. We assessed the reliability of these data by
reviewing the Coast Guard’s data management practices and interviewing
knowledgeable officials about the data and the systems that produced the
data. On the basis of our assessments, we determined the data to be
sufficiently reliable for the purposes of this report. We interviewed



1
GAO-09-3SP.




Page 49                                  GAO-12-741 Coast Guard Legacy Vessels
Appendix I: Scope and Methodology




cognizant Coast Guard headquarters officials, including maintenance
officials from the Coast Guard’s Office of Naval Engineering, as well as
officials responsible for budgeting and resources and for assessing and
developing operational requirements for the legacy vessels. As previously
noted, we conducted site visits to Coast Guard field locations to interview
cognizant maintenance officials and operational commanders. We
analyzed Coast Guard reports and recapitalization plans, including the
Deepwater Implementation Plan, Cutter Capital Asset Management Plan,
and various assessments of vessel condition. We evaluated the Coast
Guard’s actions against Program Assessment Rating Tool Guidance
Number 2007-2 from the Office of Management and Budget. 2

We conducted this performance audit from September 2011 through July
2012 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.






















2
 OMB, Program Assessment Rating Tool Guidance Number 2007-2, (Washington, D.C.:
January 29, 2007).




Page 50                                     GAO-12-741 Coast Guard Legacy Vessels
Appendix II: Comparison of the Capabilities
                      Appendix II: Comparison of the Capabilities of
                      the Coast Guard’s Legacy Vessels with Those
                      of Their Replacements


of the Coast Guard’s Legacy Vessels with
Those of Their Replacements
                      This appendix provides further details on how the capabilities of the Coast
                      Guard’s legacy vessels compare with the planned capabilities of the
                      replacement vessels. 1 According to the Coast Guard, the replacement
                      vessels are designed to perform the same missions as the legacy
                      vessels, but with greater capabilities. 2 Specifically, this appendix provides
                      further details on how the high endurance cutters (HEC) compare with the
                      national security cutters (NSC), how the medium endurance cutters
                      (MEC) compare with the offshore patrol cutters (OPC), and how the 110-
                      foot patrol boats (PB) compare with the fast response cutters (FRC).


The HEC and the NSC   The Coast Guard plans to replace the HEC with the NSC. Coast Guard
                      officials indicated that better aircraft command and communication
                      capabilities are especially notable when comparing the NSC with the
                      HEC. Table 3 provides a comparison of operational capabilities between
                      the HEC and its replacement, the NSC.




                      1
                       None of the replacement vessels have completed initial operational test and evaluation, a
                      major test event that identifies deficiencies by evaluating operational effectiveness during
                      the execution of simulated operational missions. In advance of this testing, the Coast
                      Guard has completed preliminary tests for the NSC and FRC, such as operational
                      assessments, which the Coast Guard is using to mitigate risk and address problems
                      during asset development prior to initial operational test and evaluation.
                      2
                       The Coast Guard plans for the NSC and the FRC to be able to perform marine safety
                      missions that the 110-foot PB and HEC cannot. Also, the Coast Guard envisions the OPC
                      as a flexible vessel that will be able to perform emergent missions.




                      Page 51                                            GAO-12-741 Coast Guard Legacy Vessels
                                                Appendix II: Comparison of the Capabilities of
                                                the Coast Guard’s Legacy Vessels with Those
                                                of Their Replacements




Table 3: Comparison of Capabilities between the HEC and Its Replacement, the NSC

Capability                                      HEC                                                                NSC
                                                                             a
Number in fleet                                 Originally 12, now 9                                               8 plannedb
Year first-in-class cutter commissioned         1967                                                               2008
Crew size                                       166                                                                109
Length                                          378 feet                                                           418 feet
Days away from homeport                         185 days per year                                                  Up to 230 days per yearc
Maximum time at sea without                     45 days                                                            60 days
reprovisioning
Range                                           14,000 nautical milesd                                             12,000 nautical miles
                                                             e
Maximum speed                                   29 knots                                                           28 knots
Patrol speed                                    12 knots                                                           15 knots
Draftf                                          19 feet                                                            22 feet
Seakeeping capabilities for normal              Up to 13-foot seas                                                 Up to 13-foot seas
operations
Intelligence gathering                          On-board intelligence gathering facility                           Secure information system for transmitting
                                                (cannot transmit classified data) and                              classified data, unmanned aircraft
                                                helicopter                                                         (planned), and helicopters
Weapons                                         Gun weapon system and close-in weapon                              Gun weapon system and close-in weapon
                                                system, four machine guns, and two                                 system, six machine guns, and two
                                                countermeasure launching systems                                   countermeasure launching systems
Ability to withstand a biological or chemical   Yes                                                                Yesg
attack
Aircraft command capabilities                   No comprehensive aircraft launch and                               Comprehensive aircraft launch and
                                                recovery control center, one aircraft                              recovery control center, two aircraft
                                                hangar, partially automated helicopter                             hangars, partially automated helicopter
                                                recovery system                                                    recovery systemh
Small boat capabilities                         Carries two small boats and has two small                          Carries three small boats, and has one
                                                boat recovery systems                                              side-mounted small boat recovery system
                                                                                                                   for one small boat and one stern-mounted
                                                                                                                   small boat recovery system for two small
                                                                                                                   boats
                                                Source: GAO analysis of information provided by the Coast Guard.
                                                a
                                                 The high endurance cutter fleet originally included 12 vessels, but the Coast Guard has
                                                decommissioned 3 since fiscal year 2011.
                                                b
                                                 As of July 2012, the Coast Guard had commissioned three NSCs. The Coast Guard’s fiscal year
                                                2013-2017 5-year Capital Investment Plan does not allocate funds for the acquisition of NSCs 7 and
                                                8, as called for by the program of record.
                                                c
                                                 To achieve 230 days away from homeport, the Coast Guard plans to use a “crew rotational concept”
                                                in which four crews staff and operate three cutters on a rotating basis.
                                                d
                                                 According to the Coast Guard, HECs can achieve a 14,000 nautical mile range only if they ballast
                                                their fuel tanks once the tanks are depleted, a procedure that is rarely undertaken. HECs have a
                                                range of 9,600 nautical miles under normal circumstances.




                                                Page 52                                                                  GAO-12-741 Coast Guard Legacy Vessels
                                          Appendix II: Comparison of the Capabilities of
                                          the Coast Guard’s Legacy Vessels with Those
                                          of Their Replacements




                                          e
                                           According to the Coast Guard, the age and condition of the HECs, coupled with renovation and
                                          modernization modifications made to these vessels over the years, make many HECs unable to
                                          achieve a maximum speed of 29 knots.
                                          f
                                              Draft refers to the depth of water needed to float the vessel.
                                          g
                                           NSCs are outfitted with a Collective Protective System, which should allow continued operations in a
                                          contaminated environment.
                                          h
                                           According to the Coast Guard, the HEC flight deck is certified to accommodate a multimission (HH-
                                          65) helicopter, while the NSC flight deck is certified to accommodate a multimission helicopter and
                                          the larger medium-range recovery (HH-60) helicopter.




The MECs and the OPC                      The Coast Guard plans to replace the 210-foot and 270-foot MECs with
                                          the OPC. While the OPCs are in the initial stages of design, Coast Guard
                                          officials told us that they anticipate that the OPC’s speed, seakeeping,
                                          small boat capabilities, and ability to operate in a full spectrum of climate
                                          and environmental conditions will be especially notable in comparison
                                          with those of the MECs. Table 4 provides a comparison of operational
                                          capabilities between the 270-foot and 210-foot MECs and their
                                          replacement, the OPC.

Table 4: Comparison of Capabilities of the 270-foot and 210-foot MECs and their Replacement, the OPC

Capability                     210-foot MEC                             270-foot MEC                           OPC
Number in fleet                14                                       13                                     25 planned
Year first-in-class cutter     1964                                     1983                                   2020 planned
commissioned
Crew size                      76                                       100                                    90 to 104, with additional
                                                                                                               detachments for aviation and
                                                                                                               intelligence support. Maximum
                                                                                                               accommodation for 120-126
                                                                                                               people.
Length                         210 feet                                 270 feet                               To be determined
Days away from homeport        185                                      185                                    Up to 230 days per year
Maximum time at sea without    21 days                                  21 days                                45 days to 60 days
re-provisioning
Range                          6,100 nautical miles at 13 knots 9,900 nautical miles at 12 knots 8,500 to 9,500 nautical miles at
                                                                                                 14 knots
Maximum speed                  18 knots                                 19.5 knots                             22 to 25 knots
Patrol speed                   6 to 8 knots                             12 knots                               10 knots
Draft                          11 feet 6 inches                         14 feet                                To be determined
Seakeeping                     Launch and recover boats in up           Launch and recover boats in up Launch and recover boats and
                               to 8-foot seas. Launch and               to 8-foot seas. Launch and      helicopters in up to 13-foot seas
                               recover helicopters in up to 4-          recover helicopters in up to 8-
                               foot seas                                foot seas




                                          Page 53                                                       GAO-12-741 Coast Guard Legacy Vessels
                                              Appendix II: Comparison of the Capabilities of
                                              the Coast Guard’s Legacy Vessels with Those
                                              of Their Replacements




Capability                          210-foot MEC                               270-foot MEC                            OPC
Intelligence gathering              Secure information system for              Prototype carry-on signals              Carry-on signals exploitation
                                    transmitting classified data               exploitation system aboard              system (objective), secure
                                                                               limited number of vessels and           information system for
                                                                               secure information system for           transmitting classified data, and
                                                                               transmitting classified data            unmanned aircraft
Ability to withstand a biological   No                                         Yes                                     Yes
or chemical attack
Weapons                             Three machine guns and small               Gun weapon system, fire control         Gun weapon systems, multi-
                                    arms                                       radar, decoy launching system;          mode radar (objective) electro-
                                                                               four machine guns, and small            optical sighting system, decoy
                                                                               arms                                    launching system, and two
                                                                                                                       stabilized small arm mounts
                                                                                                                       with small arms
Aircraft command capabilities       Helicopter capture system, no              Helicopter capture system and           One hangar for a H-65
                                    hangar                                     one hangar for an MH-65                 helicopter (threshold) or H-60/H-
                                                                               helicopter                              65/H60R helicopter (objective)
                                                                                                                       and a future unmanned aircraft
                                                                                                                       system space/weight/power
                                                                                                                       (threshold)
Small boat capabilities             Two side-launching dual point              One side-launching dual point           Two side-launched small boats
                                    davits for the two small boatsa            davit starboard side for one            (threshold) or three side-
                                                                               small boat and one articulated          launched small boats (objective)
                                                                               single point davit on the port
                                                                               side of the stern for a second
                                                                               small boat
                                              Source: GAO analysis of information provided by the Coast Guard.
                                              a
                                               A davit is the mechanical system used to lower a vessel’s small boat into the water.




The PB and the FRC                            The Coast Guard plans to replace the 110-foot PB with the FRC. Coast
                                              Guard officials told us that the better seakeeping, communications, and
                                              small boat capabilities are especially notable when comparing the FRC
                                              with the PB. Table 5 provides a comparison of operational capabilities
                                              between the 110-foot PB and its replacement, the FRC.




                                              Page 54                                                            GAO-12-741 Coast Guard Legacy Vessels
                                                Appendix II: Comparison of the Capabilities of
                                                the Coast Guard’s Legacy Vessels with Those
                                                of Their Replacements




Table 5: Comparison of Capabilities of the 110-foot PB and Its Replacement, the FRC

Characteristic                                      110-foot PB                                                    FRC
                                                      a
Number in fleet                                     41                                                             58 plannedb
Year first-in-class cutter commissioned             1986                                                           2012
Crew size                                           16                                                             24
Length                                              110 feet                                                       154 feet
Operational tempo/days away from                    1,800 operational hours per year                               2,500 operational hours per year
homeport
Maximum time at sea without                         5 days                                                         5 days
reprovisioning
Range                                               1,900 nautical miles at 15 knots                               2,500 nautical miles at 15 knots
Maximum speed                                       28 knots                                                       28 knots
Patrol speed                                        15 knots                                                       18 knots
Draft                                               7.5 feet                                                       10 feet
Seakeeping capabilities for operations              Up to 8-foot seas                                              Up to 13-foot seas
Intelligence gathering                              No                                                             No
Weapons                                             One cannon crew-served weapon and two                          One cannon gyro-stabilized remote
                                                    machine guns                                                   operated weapon with an optical targeting
                                                                                                                   sensor and four machine guns
Ability to withstand a biological or chemical       No                                                             No
attack
Aircraft command capabilities                       Not flight deck equipped                                       Not flight deck equipped
Small boat capabilities                             One 18-foot rigid hull inflatable boat with                    One small boat with seating for 11 crew, 40
                                                    seating for 8 crew, 28 knots maximum                           knots maximum speed, communications,
                                                    speed, handheld communications, and a                          stern ramp launch and recovery, integrated
                                                    single point davit launch system                               radar and electronic charting, and 200
                                                                                                                   nautical miles range capable for over-the-
                                                                                                                   horizon operations
                                                Source: GAO analysis of information provided by the Coast Guard.
                                                a
                                                 The 110-foot PB fleet originally included 49 vessels. The Coast Guard converted 8 of the 110-foot
                                                PBs to 123-foot PBs, but discontinued further conversions in 2005 and decommissioned the 123-foot
                                                PBs in 2007 because they were experiencing technical difficulties, such as hull buckling, and were
                                                not able to meet post-September 11, 2001 mission requirements.
                                                b
                                                As of May 2012, the Coast Guard has commissioned one FRC.




                                                Page 55                                                                 GAO-12-741 Coast Guard Legacy Vessels
Appendix III: Further Information on
                                        Appendix III: Further Information on Condition
                                        and Costs of the Coast Guard’s Legacy Vessel
                                        Fleet


Condition and Costs of the Coast Guard’s
Legacy Vessel Fleet
                                        This appendix provides further details on the condition and costs of the
                                        Coast Guard’s HEC, MEC, and PB fleet of legacy vessels from fiscal
                                        years 2005 through 2011. In particular, this appendix summarizes
                                        condition and cost information for each legacy vessel class using Coast
                                        Guard data on top mission degraders, cost drivers, and associated costs;
                                        and compares scheduled and unscheduled depot-level maintenance
                                        expenditures with the vessels’ Standard Support Levels (SSL). 1


The HEC Fleet                           As stated earlier, the condition of the HEC fleet is poor. Coast Guard
                                        officials attributed the poor performance of the HEC fleet to the increased
                                        frequency of major casualties. Each year the Coast Guard’s Office of
                                        Naval Engineering compiles a list of the top five mission degraders and
                                        cost drivers and their total obligated amounts. Table 6 provides that
                                        information for the HEC fleet for fiscal year 2011.

Table 6: HEC Fleet Top Five Major Mission Degraders and Top Cost Drivers and Associated Total Obligation Amounts, Fiscal
Year 2011

Major mission degraders                                      Top cost drivers and total obligated amount
1. Main diesel engines                                       1. Main gas turbine, $594,000
2. Ship’s service diesel generators                          2. Main diesel engine, $294,800
3. Main gas turbine                                          3. SPS-73 surface search radar, $230,100
4. SPS-73 surface search radar                               4. Propeller hub assembly, $189,800
5. Main reduction gear                                       5. Emergency gas turbine generator, $174,300
                                        Source: GAO analysis of Coast Guard data.



                                        Scheduled and unscheduled maintenance expenditures for the HEC fleet
                                        fluctuated from fiscal year 2005 through 2011, peaking in fiscal years
                                        2009 and 2010. Coast Guard officials told us that major casualties on
                                        three HECs contributed disproportionately to the unscheduled
                                        maintenance expenditures in fiscal years 2010 and 2011, and that they
                                        have since decommissioned two of these vessels. Depot-level
                                        maintenance expenditures for the legacy HEC fleet were 1.4 to 3.6 times
                                        greater than SSLs in each year from fiscal years 2005 through 2011.
                                        Figure 11 shows the scheduled and unscheduled depot-level



                                        1
                                         SSLs are the Coast Guard’s annual budgeted funds for depot-level maintenance for each
                                        of its vessel classes. Scheduled and unscheduled maintenance expenditures and SSLs
                                        have been adjusted for inflation, and are reported here in fiscal year 2012 dollars.




                                        Page 56                                                GAO-12-741 Coast Guard Legacy Vessels
                Appendix III: Further Information on Condition
                and Costs of the Coast Guard’s Legacy Vessel
                Fleet




                maintenance expenditures for the legacy HEC class during fiscal years
                2005 through 2011, along with how these expenditures compared with
                the HEC fleet’s SSLs.

                Figure 11: HEC Fleet Scheduled and Unscheduled Depot-Level Maintenance
                Expenditures Compared with Standard Support Levels (SSL), Fiscal Years 2005
                through 2011




The MEC Fleet   As stated earlier, the condition of the Coast Guard’s fleet of 27 MECs is
                generally poor, although the 210-foot MECs were generally in better
                condition than the 270-foot MECs. Tables 6 and 7 provide information on
                the top five mission degraders and cost drivers and their total obligated
                amounts for the 210-foot and 270-foot MEC fleets, respectively, for fiscal
                year 2011.




                Page 57                                          GAO-12-741 Coast Guard Legacy Vessels
                                           Appendix III: Further Information on Condition
                                           and Costs of the Coast Guard’s Legacy Vessel
                                           Fleet




Table 7: 210-Foot MEC Fleet Top Five Major Mission Degraders and Cost Drivers and Associated Total Obligation Amounts,
Fiscal Year 2011

Major mission degraders                                               Top cost drivers and total obligated amount
1. Machinery plant control and monitoring system                      1. SPS-73 surface search radar, $134,700
2. Main diesel engine                                                 2. Main diesel engine, $133,300
3. SPS-73 surface search radar                                        3. Reverse osmosis desalination plant, $50,100
4. Reverse osmosis water maker                                        4. Helicopter in-flight refueling hose, $46,500
5. P6 dewatering pump                                                 5. Welin Lambie boat davit, $43,800
                                           Source: GAO analysis of Coast Guard data.



Table 8: 270-Foot MEC Fleet Top Five Major Mission Degraders and Cost Drivers and Associated Total Obligation Amounts,
Fiscal Year 2011

Major mission degraders                                               Top cost drivers and total obligated amount
1. Machinery plant control and monitoring system                      1. MK39 gyrocompass, $693,100
2. Main diesel engine                                                 2. SPS-73 surface search radar , $98,100
3. Reverse osmosis desalination plant                                 3. Main diesel engine, $72,200
4. Welin Lambie boat davit                                            4. Gallery oven, $57,500
5. Ship’s service diesel generator                                    5. Fuel transfer pump, $54,200
                                           Source: GAO analysis of Coast Guard data.



                                           Scheduled depot-level maintenance expenditures for the 270-foot MEC
                                           fleet fluctuated from fiscal year 2005 through 2011, while unscheduled
                                           depot-level maintenance expenditures for the 270-foot MEC fleet
                                           remained comparatively stable during this same time period. The depot-
                                           level maintenance expenditures were less than SSLs for the 210-foot
                                           MEC fleet in fiscal years 2007 and 2008, but were 1.6 to 2.4 times greater
                                           than SSLs throughout the rest of this period. Figure 12 compares the
                                           scheduled and unscheduled depot-level maintenance expenditures for
                                           the 270-foot MECs during fiscal years 2005 through 2011 with the SSLs.




                                           Page 58                                                   GAO-12-741 Coast Guard Legacy Vessels
Appendix III: Further Information on Condition
and Costs of the Coast Guard’s Legacy Vessel
Fleet




Figure 12: 270-Foot MEC Fleet Scheduled and Unscheduled Depot-Level
Maintenance Expenditures Compared with Standard Support Levels, Fiscal Years
2005 through 2011




As shown in figure 13, scheduled and unscheduled depot-level
maintenance expenditures for the 210-foot MEC fleet fluctuated from
fiscal years 2005 through 2011. The depot-level maintenance
expenditures were less than SSLs for the 210-foot MEC fleet from fiscal
years 2006 through 2008, and nearly equal in fiscal year 2010, but were
1.5 to 2.2 times greater than SSLs throughout the rest of this period.




Page 59                                          GAO-12-741 Coast Guard Legacy Vessels
               Appendix III: Further Information on Condition
               and Costs of the Coast Guard’s Legacy Vessel
               Fleet




               Figure 13: 210-Foot MEC Fleet Scheduled and Unscheduled Deport-Level
               Maintenance Expenditures Compared with Standard Support Levels, Fiscal Years
               2005 through 2011




The PB Fleet   As stated earlier, the legacy PB fleet is generally in poor condition, but
               has improved some in recent years, which Coast Guard officials attribute
               to improved maintenance practices and the effects of vessel sustainment
               projects. Table 8 shows the Coast Guard’s top five mission degraders,
               cost drivers, and the associated costs for the legacy PB fleet for fiscal
               year 2011.




               Page 60                                          GAO-12-741 Coast Guard Legacy Vessels
                                           Appendix III: Further Information on Condition
                                           and Costs of the Coast Guard’s Legacy Vessel
                                           Fleet




Table 9: 110-Foot PB Fleet Top Five Major Mission Degraders, Cost Drivers, and Associated Costs, Fiscal Year 2011

Major mission degraders                                           Top cost drivers and total obligated amount
1 Main diesel engine                                              1. Fin stabilizer hydraulic ram, $102,300
2. P-100 dewatering/firefighting pump                             2. Reduction gear, $87,900
3. Ship’s service diesel generator                                3. Main diesel engine, $76,700
4. Ship’s service diesel generator raw water pump                 4. Propulsion shaft, $57,800
5. Air conditioning raw water pump                                5. Gyro compass, $47,500
                                           Source: GAO analysis of Coast Guard data.



                                           Scheduled depot-level maintenance expenditures for the legacy PB fleet
                                           fluctuated from fiscal year 2005 through 2011, while unscheduled depot
                                           level maintenance expenditures for the fleet declined steadily during this
                                           period. Coast Guard officials reported that this decline was likely due to
                                           increased scheduled maintenance, which helped reduce casualties.
                                           Depot-level maintenance expenditures were 1.6 to 2.9 times greater than
                                           SSLs for the PB fleet in each year from fiscal years 2005 through 2011.
                                           Figure 14 compares the scheduled and unscheduled depot-level
                                           maintenance expenditures for the PB fleet during fiscal years 2005
                                           through 2011 with the SSLs.




                                           Page 61                                                  GAO-12-741 Coast Guard Legacy Vessels
Appendix III: Further Information on Condition
and Costs of the Coast Guard’s Legacy Vessel
Fleet




Figure 14: 110-Foot PB Fleet Scheduled and Unscheduled Depot Level Maintenance
Expenditures Compared with Standard Support Levels, Fiscal Years 2005 through
2011




Page 62                                          GAO-12-741 Coast Guard Legacy Vessels
Appendix IV: Evaluation of the Coast Guard’s
              Appendix IV: Evaluation of the Coast Guard’s
              Process for Estimating Legacy Vessel
              Maintenance Costs


Process for Estimating Legacy Vessel
Maintenance Costs
              This appendix provides information on the relationship between the three
              best practice characteristics and the 15 related steps of a high-quality
              cost estimate as established in GAO’s Cost Estimating and Assessment
              Guide. 1 In particular, this appendix provides more details on the extent to
              which the Coast Guard’s cost-estimating process meets the best
              practices characteristics and steps, and explains how we determined the
              overall assessment ratings.

              In determining that the Coast Guard’s process for developing legacy
              vessel maintenance cost estimates does not fully reflect best practices,
              we evaluated the Coast Guard’s cost estimation process against GAO’s
              2009 Cost Estimating and Assessment Guide. This guide states that a
              high-quality and reliable cost estimate includes best practice
              characteristics—three of which are relevant to the Coast Guard’s
              estimating process. These characteristics are that the estimate is (1) well
              documented, (2) comprehensive, and (3) accurate. Moreover, the guide
              establishes 10 related steps that, if followed, should result in high-quality
              cost estimates. 2 Because this report deals with only the maintenance of
              legacy Coast Guard vessels, we tailored our evaluation criteria, as shown
              in table 8. We applied the following scale across the categories of best
              practices and related steps:

              •   Not met: The Coast Guard provided no evidence that satisfies any
                  portion of the criterion.
              •   Minimally met: The Coast Guard provided evidence that satisfies a
                  small portion of the criterion.
              •   Partially met: The Coast Guard provided evidence that satisfies
                  about one-half of the criterion.
              •   Substantially met: The Coast Guard provided evidence that satisfies
                  a large portion of the criterion.
              •   Met: The Coast Guard provided complete evidence that satisfies the
                  entire criterion.

              After reviewing the documentation that the Coast Guard submitted for its
              cost estimation process, conducting interviews with knowledgeable


              1
               GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and
              Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: Mar. 2, 2009).
              2
               Since we determined that the fourth best practice characteristic—”credible”—is not
              appropriate for this assessment, we did not assess two steps related to the “credible”
              characteristic as identified in GAO’s Cost Estimating and Assessment Guide.




              Page 63                                           GAO-12-741 Coast Guard Legacy Vessels
                                          Appendix IV: Evaluation of the Coast Guard’s
                                          Process for Estimating Legacy Vessel
                                          Maintenance Costs




                                          officials, and reviewing relevant source documents, we determined that
                                          the Coast Guard’s process partially meets three characteristics of a
                                          reliable cost estimate, as shown in table 9. We determined the overall
                                          assessment rating by assigning each individual assessment rating a
                                          number: Not met = 1, minimally met = 2, partially met = 3, substantially
                                          met = 4, and met = 5. We then took the average of the individual
                                          assessment ratings to determine the overall assessment rating for each
                                          characteristic. The resulting average becomes the overall assessment as
                                          follows: Not met = 1 to 1.4, minimally met = 1.5 to 2.4, partially met = 2.5
                                          to 3.4, substantially met = 3.5 to 4.4, and met = 4.5 to 5.0.

Table 10: Summary Assessment of the Coast Guard’s Cost Estimation Process Compared with Best Practices

                   Overall                                                                                    Individual
Best practice      assessment      Step                                                                       assessment
Comprehensive      Partially met   The cost estimate includes all life cycle costs                            Not applicable
                                   The cost estimate completely defines the program, reflects the current     Substantially met
                                   schedule, and is technically reasonable.
                                   The cost estimate work breakdown structure is product-oriented,           Substantially met
                                   traceable to the statement of work/objective, and at an appropriate level
                                   of detail to ensure that cost elements are neither omitted nor double-
                                   counted.a
                                   The estimate documents all cost-influencing ground rules and               Minimally met
                                   assumptions.
Well documented    Partially met   The documentation captures the source data used, the reliability of the    Partially met
                                                                           b
                                   data, and how the data were normalized.
                                   The documentation describes in sufficient detail the calculations          Partially met
                                   performed and the estimating methodology used to derive each
                                   element’s cost.
                                   The documentation describes step by step how the estimate was              Minimally met
                                   developed, so that a cost analyst unfamiliar with the program could
                                   understand what was done and replicate it.
                                   The documentation discusses the technical baseline description and the Substantially met
                                   data in the baseline is consistent with the estimate.
                                   The documentation provides evidence that the cost estimate was             Partially met
                                   reviewed and accepted by management.
Accurate           Partially met   The cost estimate results are unbiased, not overly conservative or         Minimally met
                                   optimistic, and based on an assessment of most likely costs.
                                   The estimate has been adjusted properly for inflation.                     Minimally met
                                   The estimate contains few, if any, minor mistakes.                         Substantially met
                                   The cost estimate is regularly updated to reflect significant changes in   Substantially met
                                   the program so that it always reflects the current status.
                                   Variances between planned and actual costs are documented,                 Minimally met
                                   explained, and reviewed.




                                          Page 64                                           GAO-12-741 Coast Guard Legacy Vessels
                                    Appendix IV: Evaluation of the Coast Guard’s
                                    Process for Estimating Legacy Vessel
                                    Maintenance Costs




                Overall                                                                                          Individual
Best practice   assessment   Step                                                                                assessment
                             The estimate is based on a historical record of cost estimating and                 Partially met
                             actual experiences from other comparable programs.
                                    Source: GAO analysis of Coast Guard information.
                                    a
                                     A work breakdown structure shows the requirements and what must be accomplished to develop a
                                    program, and provides the basis for identifying resources and tasks for developing a program cost
                                    estimate. It provides a basic framework for estimating costs, developing schedules, identifying
                                    resources, determining where risks may occur, and providing the means for measuring program
                                    status.
                                    b
                                     The purpose of data normalization is to make a given data set consistent with and comparable with
                                    other data used in the estimate. Since data can be gathered from a variety of sources, they are often
                                    in different forms and need to be adjusted before being used for comparison analysis or as a basis for
                                    projecting future costs.




                                    Page 65                                                 GAO-12-741 Coast Guard Legacy Vessels
Appendix V: Comments from the Department
             Appendix V: Comments from the Department
             of Homeland Security



of Homeland Security




             Page 66                                    GAO-12-741 Coast Guard Legacy Vessels
Appendix V: Comments from the Department
of Homeland Security




Page 67                                    GAO-12-741 Coast Guard Legacy Vessels
Appendix V: Comments from the Department
of Homeland Security




Page 68                                    GAO-12-741 Coast Guard Legacy Vessels
Appendix VI: GAO Contact and Staff
                  Appendix VI: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Stephen L. Caldwell, Director (202) 512-9610 or caldwells@gao.gov
Staff Contact
                  In addition to the contact named above, Christopher Conrad (Assistant
Acknowledgments   Director), Jason Berman, Chloe Brown, and Michael Lenington made key
                  contributions to this report. Also contributing to this report were David
                  Alexander, Jennifer Echard, Richard Eiserman, Eric Hauswirth, Anna
                  Irvine, Tracey King, Dawn Locke, Lara Miklozek, Robin Nye, Joshua
                  Ormond, Karen Richey, and Jack Smuck.




                  Page 69                                  GAO-12-741 Coast Guard Legacy Vessels
Related GAO Products
             Related GAO Products




             Observations on the Coast Guard’s and the Department of Homeland
             Security’s Fleet Studies. GAO-12-751R. Washington, D.C.: May 31, 2012.

             Coast Guard: Observations on Arctic Requirements, Icebreakers, and
             Coordination with Stakeholders. GAO-12-254T. Washington, D.C.:
             December 1, 2011.

             Coast Guard: Action Needed as Approved Deepwater Program Remains
             Unachievable. GAO-12-101T. Washington, D.C.: October 4, 2011.

             Coast Guard: Action Needed As Approved Deepwater Program Remains
             Unachievable. GAO-11-743. Washington, D.C.: July 28, 2011.

             Coast Guard: Observations on Acquisition Management and Efforts to
             Reassess the Deepwater Program. GAO-11-535T. Washington, D.C.:
             April 13, 2011.

             Coast Guard: Opportunities Exist to Further Improve Acquisition
             Management Capabilities. GAO-11-480. Washington, D.C.: April 13,
             2011.

             Coast Guard: Deepwater Requirements, Quantities, and Cost Require
             Revalidation to Reflect Knowledge Gained. GAO-10-790. Washington,
             D.C.: July 27, 2010.

             Department of Homeland Security: Assessments of Selected Complex
             Acquisitions. GAO-10-588SP. Washington, D.C.: June 30, 2010.

             Coast Guard: Observations on the Requested Fiscal Year 2011 Budget,
             Past Performance, and Current Challenges. GAO-10-411T. Washington,
             D.C.: February 25, 2010.

             Coast Guard: Better Logistics Planning Needed to Aid Operational
             Decisions Related to the Deployment of the National Security Cutter and
             Its Support Assets. GAO-09-497. Washington, D.C.: July 17, 2009.

             Coast Guard: As Deepwater Systems Integrator, Coast Guard Is
             Reassessing Costs and Capabilities but Lags in Applying Its Disciplined
             Acquisition Approach. GAO-09-682. Washington, D.C.: July 14, 2009.

             Coast Guard: Observations on Changes to Management and Oversight of
             the Deepwater Program. GAO-09-462T. Washington, D.C.: March 24,
             2009.


             Page 70                                 GAO-12-741 Coast Guard Legacy Vessels
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           Coast Guard: Change in Course Improves Deepwater Management and
           Oversight, but Outcome Still Uncertain. GAO-08-745. Washington, D.C.:
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           Coast Guard: Strategies for Mitigating the Loss of Patrol Boats Are
           Achieving Results in the Near Term, but They Come at a Cost and
           Longer Term Sustainability Is Unknown. GAO-08-660. Washington, DC:
           Jun 23, 2008.

           Status of Selected Assets of the Coast Guard’s Deepwater Program.
           GAO-08-270R. Washington, D.C.: March 11, 2008.




(441001)
           Page 71                                GAO-12-741 Coast Guard Legacy Vessels
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