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Marine Log

January 30, 2007

DHS OIG report highlights Deepwater problems

The Coast Guard's new National Security Cutter (NSC), "as designed and constructed, will not meet performance specifications described in the original Deepwater contract," says a report from the Department of Homeland Security Office of Inspector General.

The report says "The NSC's design and performance deficiencies are fundamentally the result of the Coast Guard's failure to exercise technical oversight over the design and construction of its Deepwater assets.

You can access the full report here.

Following is the tezt of the Executive Summary:

This report presents the results of our review of the U.S. Coast Guard's acquisition of the National Security Cutter (NSC). The objective of our audit was to determine the extent to which the NSC will meet the cost, schedule, and performance requirements contained in the Deepwater contract.

The NSC, as designed and constructed, will not meet performance specifications described in the original Deepwater contract. Specifically, due to design deficiencies, the NSC's structure provides insufficient fatigue strength to be deployed underway for 230 days per year over its 30-year operational service life under Caribbean (General Atlantic) and Gulf of Alaska (North Pacific) sea conditions. Coast Guard technical experts believe the NSC's design deficiencies will also increase the cutter's maintenance costs and reduce its service life. To mitigate the effects of these deficiencies, the Coast Guard intends to modify the NSC's design to support an operational profile of 170 to 180 days underway per year in the North Pacific region, lower than the 230- day performance standard required by the Deepwater contract.

The NSC's design and performance deficiencies are fundamentally the result of the Coast Guard's failure to exercise technical oversight over the design and construction of its Deepwater assets. The Coast Guard's technical experts first identified and presented their concerns about the NSC's structural design to senior Deepwater Program management in December 2002, but this did not dissuade the Coast Guard from authorizing production of the NSC in June 2004 or from awarding ICGS a contract extension in May 2006.

Since the Deepwater contract was signed in June 2002, the combined cost of NSCs 1 and 2 has increased from $517 million to approximately $775 million, resulting primarily from design changes necessary to meet post 9/11 mission requirements and other government costs not included in the original contract price. The $775 million estimate does not include costs to correct or mitigate the NSC's structural design deficiencies, additional labor and materials costs resulting from the effects of Hurricane Katrina, and the final cost of a $302 million Request for Equitable Adjustment (REA) that the Coast Guard is currently negotiating with ICGS.

NSC 1 was christened on November 11, 2006, and final delivery to the Coast Guard is on schedule for August 2007. NSC 2 is currently under construction and is scheduled for final delivery to the Coast Guard in October 2008, seven months ahead of schedule.

Finally, we encountered resistance from the Coast Guard and ICGS in our effort to evaluate the structural design and performance issues associated with the NSC. The impediments we experienced in obtaining access to personnel, information, and documentation associated with the NSC acquisition are unacceptable in light of the statutory mandates of our office; the severity of the NSC design and performance deficiencies; the importance of the NSC to the Coast Guard's national security and Deepwater missions; and the expenditure of billions of taxpayer dollars that are being invested in this critical acquisition.

We are making five recommendations to the Coast Guard, and one to the Department's Chief Procurement Officer and Office of General Counsel. Our recommendations are intended to: (1) ensure the National Security Cutter is capable of fulfilling all performance requirements outlined in the Deepwater contract; (2) improve the level of Coast Guard technical oversight and accountability; and (3) ensure Office of Inspector General access to all records, personnel, and contractors of the department during all current and future audits and inspections.

The Coast Guard's written response to our draft report was received on December 22, 2006. The response, however, did not indicate whether it concurred or non-concurred with the recommendations, as requested in the transmittal memorandum that accompanied the draft report. Consequently, it is not clear the extent to which the Coast Guard intends to implement the recommendations. We are asking the Coast Guard to advise our office within 90 days of the date of this memorandum of its progress in implementing the recommendations and the date by which each recommendation will be fully implemented.

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