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CARBON TAX ON BUNKER FUEL
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Marine Log

June 26, 2008

GAO recommends more changes to Deepwater acquisition

A new report by the GAO--Coast Guard: Change in Course Improves Deepwater Management and Oversight, but Outcome Still Uncertain GAO-08-745--assesses whether the changes the Coast Guard is making to its management and acquisition approach to the Deepwater acquisition will put it in a position to realize better outcomes. It finds that Coast Guard leadership is making positive changes to its management and acquisition approach to the Deepwater Program that should put it in a position to realize better outcomes, although challenges to its efforts remain.

Among changes GAO recommends are that the Department of Homeland Security rescind its earlier delegation to the Coast Guard of all Deepwater acquisition decisions and that the Coast Guard develop an approach to increase visibility into earned value management data reporting by Northrop Grumman Ship Systems before entering into any further contractual relationships with the contractor.

The Coast Guard has increased accountability by bringing Deepwater under a restructured acquisition function and investing its government project managers with management and oversight responsibilities formerly held by the ICGS joint venture of Lockheed Martin and Northrop Grumman. Coast Guard project managers and technical experts--as opposed to contractor representatives--now hold the greater balance of management responsibility and accountability for program outcomes.

However, like other federal agencies, the Coast Guard has faced obstacles in building an adequate government workforce. It has various initiatives under way to develop and retain a workforce capable of managing this complex acquisition program, but faced with an almost 20 percent vacancy rate, it is relying on support contractors, such as cost estimators, in key positions.

The Coast Guard's decision to manage Deepwater under an asset-based approach, rather than as an overall system-of-systems, has resulted in increased government control and visibility over acquisitions. Agency officials have begun to hold competitions for Deepwater assets outside of the ICGS contract.

While the asset-based approach is beneficial, certain cross-cutting aspects of Deepwater, such as the program's communications and intelligence components and the numbers of each asset needed, still require a systems-level approach. The Coast Guard recognizes this but is not yet fully positioned to manage these aspects.

The Coast Guard has begun to follow the disciplined, project management framework of its Major Systems Acquisition Manual (MSAM), which requires documentation and high-level executive approval of decisions at key points in a program's life cycle. But the consequences of not following this approach in the past are now evident, as Deepwater assets have been delivered without a determination of whether their planned capabilities would meet mission needs. The MSAM process currently allows limited initial production to proceed before the majority of design activities have been completed.

In addition, a disconnect between MSAM requirements and current practice exists because the Department of Homeland Security had earlier delegated to the Coast Guard all Deepwater acquisition decisions, resulting in little departmental oversight.

GAO is recommending that the Secretary of Homeland Security direct the Under Secretary for Management to rescind the delegation of Deepwater acquisition decision authority "to help ensure that the initiatives to improve Deepwater management and oversight continue as intended and to facilitate decision-making across the department."

GAO finds that Coast Guard project managers and decision makers are now receiving information intended to help manage project outcomes, but some key information is unreliable.

The earned value management data reported by ICGS lacks sufficient transparency to be useful to Coast Guard program managers, and subcontractor Northrop Grumman's system for producing the data may need to be re-certified to ensure its reliability.

Officials state that they are addressing these issues through joint efforts with the Navy and the Defense Contract Management Agency.

GAO recommends that to improve program management of surface assets contracted to Northrop Grumman Ship Systems, the Commandant of the Coast Guard, develop an approach to increase visibility into that contractor's earned value management data reporting before entering into any further contractual relationships, such as for long lead material for and production of the fourth National Security Cutter.


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