Coast Guard Acquisitions: Actions Needed to Address Longstanding Portfolio Management Challenges

The Coast Guard spends billions of dollars on its major acquisition programs to meet its missions. GAO's prior work has identified the Coast Guard's reliance on its annual budget process to manage its acquisition portfolio as a challenge.

GAO was asked to review the recapitalization of the Coast Guard's acquisition portfolio. This report assesses, among other topics, the extent to which the Coast Guard has made changes to how it manages its acquisition portfolio.

GAO assessed Coast Guard's major acquisition programs to determine changes since GAO's 2014 portfolio review. GAO analyzed program baselines and interviewed Coast Guard officials. GAO analyzed the CIP for fiscal years 2014 through 2018, and reviewed the EOC's documentation.

The Coast Guard, a component within the Department of Homeland Security (DHS), continues to manage its acquisitions through its annual budget process and the 5-year Capital Investment Plan (CIP)—congressionally mandated and used for oversight. This management approach creates constant churn as program baselines must continually re-align with budget realities instead of budgets being formulated to support program baselines. Further, Coast Guard officials said the CIP reflects the highest priorities of the department—such as the Offshore Patrol Cutter, which is the Coast Guard's highest priority—and that trade-off decisions are made as part of the annual budget process. However, the effects of these decisions, such as which acquisitions would take on more risk so others can be prioritized and adequately funded, are not communicated in the CIP to key decision makers, because including such information is not statutorily required. Over the years, this approach has left the Coast Guard with a build up—or bow wave—of near-term unfunded acquisitions, negatively affecting recapitalization efforts and limiting the effectiveness of long-term planning. Including the effects of these trade-offs in the CIP would align with GAO's cost estimating best practices. Until it does so, the Coast Guard limits its ability to manage its acquisition portfolio in the long-term, beyond the time covered in the 5-year CIP.

In response to a September 2012 GAO recommendation, the Coast Guard updated the Executive Oversight Council's (EOC)—a cross-directorate group that oversees major acquisition programs—charter in 2014 to require annual reviews of the acquisition portfolio collectively. However, EOC officials said that these annual reviews never occurred, and GAO found that the annual review requirement was removed from the charter in 2017. Thus, the Coast Guard is without a senior-level group charged to collectively review and ensure affordability of its acquisition portfolio. The Office of Management and Budget's Capital Programming Guide states that a senior-level executive committee should be responsible for reviewing the agency's entire asset portfolio and for making decisions on the proper composition of assets needed to achieve strategic goals within budget constraints.

GAO recommends that the annual CIPs reflect acquisition trade-off decisions and their effects, and that the EOC review the overall acquisition portfolio and its affordability annually. DHS concurred with the CIP recommendation. DHS did not concur with the EOC recommendation. It noted that other existing Coast Guard bodies are responsible for evaluating and prioritizing funding. However, DHS stated that the EOC charter will be updated to require it to review the overall acquisition portfolio, including long-term planning. If this long-term planning accounts for budget realities for the acquisition portfolio, GAO believes the intent of the recommendation will be met.

Since 1996, the Coast Guard—a component within the Department of  Homeland Security (DHS)—has been acquiring a portfolio of new surface  and aviation assets as part of a multibillion-dollar recapitalization effort— replacing assets that have reached or will soon reach the end of their  service lives. These assets are intended to conduct missions that range  from illegal drug and migrant interdiction to search and rescue operations.  For more than 15 years, we have reported extensively on the Coast  Guard’s portfolio of major acquisition programs and its risks and  uncertainties. In our prior work, we found shortcomings in the Coast  Guard’s acquisition planning practices, such as its reliance on the annual  budget process to plan major acquisitions without a thorough plan to  ensure the affordability of the entire acquisition portfolio. This approach  has resulted in delayed acquisitions and reduced capabilities. In  September 2012, we recommended that the Coast Guard conduct a  comprehensive portfolio review to focus on acquisition priorities.

Although DHS agreed with our recommendation at the time, as of  October 2017 it had not yet been implemented.

Subsequently, in June 2014, we recommended that the Coast Guard  develop a 20-year fleet modernization plan to aid in identifying the assets  that need to be recapitalized, the resources required, and the trade-offs  necessary given fiscal constraints. DHS agreed with our  recommendation but the Administration has not yet approved a 20-year  plan.

Delayed acquisitions have also strained existing Coast Guard resources.  Specifically, older assets in the fleet—such as the 210-foot and 270-foot  Medium Endurance Cutters and Polar Star (heavy icebreaker)—have  become more expensive to maintain as they continue to operate well  beyond the estimated service life dates determined when they were built.

You asked us to review the Coast Guard’s acquisition portfolio. This  report assesses (1) the extent to which the Coast Guard has made  changes to how it manages its acquisition portfolio and (2) how the Coast  Guard is sustaining existing assets until new assets become operational.

To assess the extent to which the Coast Guard has changed how it  manages its acquisition portfolio, we assessed the Coast Guard practices  for managing the portfolio’s affordability through long-term planning to  determine how it has changed since our last Coast Guard acquisition  portfolio review in 2014. We analyzed the Coast Guard’s 5-year Capital  Investment Plans (CIP) that supported the budget requests for fiscal  years 2014 through 2018 to determine how the Coast Guard has  managed the affordability of its acquisition portfolio. We compared Coast  Guard practices for managing affordability and long-term planning with  best practices outlined in GAO’s Cost Estimating and Assessment Guide  and prior GAO reports. We also reviewed a range of acquisition  programs based on if they were already major acquisition programs  (programs with a life-cycle cost estimate greater than or equal to $300  million or a total acquisition cost greater than or equal to $100 million) by  definition, the programs were part of our 2014 review, or they are likely to  be major acquisition programs that will require significant funding in the  near future. We reviewed charters for the Coast Guard’s various cross  directorate groups that help oversee Coast Guard acquisitions to identify  responsibilities and membership, and conducted interviews with officials  from these bodies to better understand their portfolio oversight activities.  We also interviewed Coast Guard officials to ascertain the anticipated  content of the 20-year Long-term Major Acquisitions Plan.

To assess how the Coast Guard is sustaining existing assets until new  assets become operational, we selected and reviewed assets that were at  or approaching their end of design service lives—an estimated period  before the asset reaches obsolescence—and if the Coast Guard was  planning to extend their design service lives through a Service Life  Extension Project. We collected and analyzed program documentation on  asset operational availability and mission capability, sustainment needs  and maintenance history, and plans for extending the service lives of  selected assets. We assessed Coast Guard expenditures on depot-level  maintenance—which, according to the Coast Guard, is maintenance that  is beyond the capability of the crew of a cutter or other asset—for fiscal  years 2010 through 2017 for legacy assets, and compared them with  annual funding estimates for those assets. Appendix I contains more  information regarding our scope and methodology.

We conducted this performance audit from March 2017 to July 2018 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.

Overview of Coast Guard’s Major Acquisition Programs

As of March 2018, the Coast Guard’s portfolio of major acquisitions has  10 programs, 2 more than during our June 2014 review, when the Coast  Guard had 8 major acquisition programs (see figure 1). DHS defines  major acquisition programs as those with life-cycle cost estimates of at  least $300 million.

Appendix II provides information on the programs included in the Coast  Guard’s major acquisition portfolio in 2018.

Programs in the acquisition portfolio progress through a series of four  acquisition phases, accompanied by a series of acquisition decision  events (ADE), outlined in the DHS’s acquisition life-cycle framework  (acquisition process). Figure 2 depicts the acquisition process.

Oversight of the Coast Guard’s Acquisition Portfolio

The Coast Guard currently has three cross-directorate groups that include  members from the acquisitions, resources, and requirements directorates  and are responsible for addressing and overseeing issues across the  Coast Guard. Since 2011, these three groups—the Executive Oversight  Council, the Systems Integration Team, and the Resource Councils— have helped oversee the Coast Guard’s acquisition portfolio. Table 1  provides information on the roles and responsibilities of these three  groups.

Each of these groups has a charter to identify its purpose and scope of  responsibilities, which involve providing cross-directorate representation  and information on all of the acquisition programs to help manage its  portfolio. The Coast Guard updated the roles and responsibilities for two  of its cross-directorate groups in its Major Systems Acquisition Manual,  including how the groups are to interact and work together within the  established acquisition governance framework. For example, the  Resource Councils are to serve as advisors to the senior-level Executive  Oversight Council. Each of the Resource Councils is to report directly to  the Executive Oversight Council for issues within its own domain and  report to the Systems Integration Team for issues that cross domains.  The Executive Oversight Council oversees the acquisition governance  framework and is positioned to delegate tasks to the other two cross- directorate groups or obtain information from them to assist in the  management of acquisitions to address problems related to acquisitions.

Asset Service Life and Maintenance of Legacy Assets

Coast Guard assets are developed with a specific design service life.  According to Coast Guard officials, the design service life for aircraft is  established as a maximum number of flight hours; while for cutters, the  design service life is the number of years the cutter is expected to operate  based on contractual design requirements.

An asset’s design service life can be extended through major  maintenance events, such as Service Life Extension Projects (SLEP).  SLEPs are funded with the Coast Guard’s acquisition, construction, and  improvements appropriation account whereas routine depot-level  maintenance is funded with the Coast Guard’s operating expenses  appropriation account. SLEPs address specific systems and major  maintenance to extend the service life of an asset beyond the original  plan. A SLEP is not designed to increase an asset’s capability; it extends  the service life by replacing obsolete, unsupportable, or maintenance- intensive equipment. Table 2 provides more details about the design  service life and maintenance history of select legacy assets.

We have issued several reports since 2012 on the Coast Guard’s  management of its acquisition portfolio and the oversight of its depot-level  maintenance resources. We have made several recommendations in  these reports. For example, in September 2012, we found a mismatch  between resources needed to support all approved major acquisition  program baselines and expected funding levels. This resulted in the  Coast Guard requesting funding for programs as a part of its annual  budget process below the levels identified in programs’ life-cycle cost  estimates, resulting in a bow wave of future funding requirements. At  the time, DHS and the Coast Guard acknowledged this resource  challenge, but we found they had not developed a clear strategy for  moving forward. At that time, DHS officials stated that funding variability  results in inevitable trade-off decisions being made on an annual basis.  We recommended that the Coast Guard conduct a comprehensive  portfolio review to develop revised baselines that reflect acquisition  priorities as well as realistic funding scenarios. DHS concurred with our  recommendation. Since 2014, the Coast Guard has undertaken efforts to  address this issue, but, as of October 2017, we found these efforts have  not led to the significant trade-off decisions needed to improve the  affordability of the Coast Guard’s portfolio.

Additionally, in September 2012, we found that the Coast Guard had  established an acquisition governance framework and that the Executive  Oversight Council was well positioned to receive information from other  cross-directorate groups in order to manage the acquisition portfolio.  However, while the Executive Oversight Council had been active in  overseeing individual programs, it had not met to oversee the portfolio  collectively. Officials told us at that time that the portfolio oversight was  done through the annual budget process. We found this approach to  managing portfolio affordability was ineffective and facilitated immediate  trade-offs, and did not provide the best environment to make decisions in  developing a balanced long-term portfolio. We recommended that the  Coast Guard identify the Executive Oversight Council as the governing  body to oversee the Coast Guard’s acquisition enterprise with a portfolio  management approach. In addition, this council should supplement  individual program reviews with acquisition portfolio-wide reviews to make  performance and affordability trade-off decisions that will help ensure the  Coast Guard is acquiring a balanced portfolio to meet mission needs.  DHS concurred and the Coast Guard updated the Executive Oversight  Council’s charter in 2014 to require the group to annually oversee the  acquisitions collectively as a balanced long-term and affordable portfolio.

Similarly, in June 2014, we found that the Coast Guard had repeatedly  delayed and reduced its capabilities through its annual budget process  and did not know the extent to which it would meet mission needs and  achieve desired results. We reported that this was because the Coast  Guard did not have a long-term fleet modernization plan that identified all  acquisitions needed to meet mission needs over the next 20 years within  available resources. We recommended that the Coast Guard develop a  20-year fleet modernization plan that identifies all acquisitions needed to  maintain the current level of service and the fiscal resources necessary to  build the identified assets. We recommended this plan consider trade-offs  in cases where the fiscal resources needed to execute the plan are not  consistent with annual budgets. DHS concurred, but, according to Coast  Guard officials, the plan has yet to be approved.

In addition to reporting on the Coast Guard’s management of its  acquisition portfolio, we have also issued several reports on how it  oversees depot-level maintenance funding. For example, in July 2012, we  found that the Coast Guard’s depot-level maintenance cost-estimating  process did not fully reflect best practices. We recommended that the  Coast Guard conform its estimated depot-level maintenance expenditures  with cost-estimating best practices. DHS concurred; however, it raised  several points that we found could limit the implementation of the  recommendation. DHS stated, for example, that cost-estimating best  practices are most applicable for new acquisitions. As our report noted,  our cost-estimating best practices guide is intended to be applicable to  programs and assets in all stages of their life cycles, including  maintenance and support.

Additionally, in March 2017, we found that the cost estimates were not  adjusted or updated over the course of an asset’s service life, leading to a  large discrepancy between expected and actual annual depot-level  maintenance expenditures. We recommended that the Coast Guard  periodically update standard support levels, which are annual estimates  for depot-level maintenance over the course of an asset’s life cycle, to  account for actual expenditures. DHS concurred with our  recommendation and plans to complete actions to implement it by  December 2018.

Effectiveness of the 5-Year Capital Investment Plan Is Limited and Coast Guard Does Not Review Its Acquisition Portfolio Collectively

The Coast Guard’s 5-year CIP, a congressionally mandated report, does  not fully reflect cost realities or acquisition needs. For example, the most  recent CIP—from fiscal years 2018 through 2022—projects funding for its  portfolio of major acquisitions that, over the 5-year period, exceeds  average budget requests in the last several years. As such, we found that  the Coast Guard continues to face the same programmatic risks that  annual CIP-based planning perpetuates, similar to what we have been  reporting since 2011. To address funding constraints, the Coast Guard  has been in a reactive mode by making prioritization decisions through  the annual budget process without identifying how trade-off decisions  made in the current budget cycle will affect the future of the acquisition  portfolio. As a result of this planning process, and as we found in 2012  and in this current review, the Coast Guard has continued to defer  planned acquisitions to future years and left a number of operational  capability gaps unaddressed that could affect future operations.  Moreover, the Coast Guard has not conducted portfolio-wide oversight  through its cross-directorate groups.

Coast Guard CIP-based Planning Has Shortcomings That Limit Its Effectiveness

The 5-year CIP is the Coast Guard’s key acquisition portfolio planning  tool. However, since 2011, we have reported on shortcomings that limit its  effectiveness. As required by statute, the Coast Guard prepares a 5-year  CIP that is required to be updated and submitted annually with the  administration’s budget request. This 5-year CIP provides information  on the proposed budget for the upcoming fiscal year and the following 4  fiscal years. Coast Guard officials told us the 5-year CIP is the starting  point for developing the acquisition, construction, and improvements  budget for a given year, which funds asset acquisitions as well as major  sustainment projects and infrastructure investments. Officials also  indicated that operational commanders provide input for the budget, as do  senior Coast Guard officials for operations, resources, and others who  have a role within its resource governance construct.

As we have previously found, the Coast Guard’s 5-year CIPs continue to  demonstrate a pattern of certain planning practices, to include: not identifying priorities or trade-offs between acquisition programs  and not showing the effect of current decisions on the overall  affordability of the acquisition portfolio; projecting funding levels for the current budget year that do not reflect  the full extent of the Coast Guard’s projected acquisition needs; and projecting funding levels for future years that frequently surpass the  average funding amounts requested by the Coast Guard in recent  years.

These shortcomings limit the Coast Guard’s ability to manage the  affordability of its acquisition portfolio. Coast Guard officials said the CIP  reflects the highest priorities of the department within the given top  funding level and that prioritization and trade-off decisions are made as  part of the annual budget cycle. However, these decisions, and the  resulting impacts on affected programs, are not articulated in the CIPs.  While the Coast Guard is not required under statute to identify the effects  of trade-off decisions in the CIP, failing to show which acquisitions would  take on more risk so other acquisitions can be prioritized and adequately  funded within budget parameters also makes it difficult for Congress and  other stakeholders, such as DHS and the Office of Management and  Budget (OMB), to understand other options the Coast Guard considered.  GAO’s Cost Estimating and Assessment Guide states that comparative  analyses showing facts and supporting details among competing  alternatives, such as budget priorities, should consider trade-offs needed  to identify solutions and manage risk. Our past work has also  highlighted other best practices for portfolio management, such as  demonstrating comprehensive knowledge of the portfolio, including  needs, gaps, and how to address those gaps; prioritizing investments  through alignment of requirements, acquisition, and budget processes;  and use of long-term planning.

As we found in September 2012, the Coast Guard’s approach of relying  on the annual budget process to manage portfolio affordability does not  provide the best basis for making decisions to develop a more balanced  and affordable portfolio in the long-term. In June 2014, we also found  that there is no evidence that short-term budget decisions will result in a  good long-term strategy, and the Coast Guard’s annual budget-driven  trade-off approach creates constant churn as program baselines must  continually re-align with budget realities instead of budgets being  formulated to support program baselines. This results in trade-off  decisions between capability and cost being pushed into the future. For  example, the Coast Guard has a stated requirement for three medium  icebreakers and three heavy icebreakers, and has initiated an acquisition  program for heavy icebreakers. Assets acquired under this program will  replace the Coast Guard’s only operating heavy icebreaker—the Polar  Star—which is well past the end of its original design service life. The  Coast Guard currently plans to have the three heavy icebreakers  delivered in 2023, 2025, and 2026. Additionally, the Coast Guard  operates one medium icebreaker, the Healy, which has an expected end  of service life in 2029. Despite the requirement for three medium  icebreakers, Coast Guard officials said they are not currently assessing  acquisition of the medium polar icebreakers because they are focusing on  the heavy icebreaker acquisition and plan to assess the costs and  benefits of acquiring medium polar icebreakers at a later time.

This planning approach can also lead to delayed capabilities and program  risks, as the 5-year CIP does not prioritize acquisition programs in its  projections for the 5-year period. We found in 2017 that both acquisition  needs—as articulated in program baselines—as well as the 5-year CIP’s  funding projections frequently surpass the average requested funding  amounts in recent years. Similarly, in this review, we found this to be the  case in the 5-year CIP covering fiscal years 2018 through 2022.

Congressional appropriations for Coast Guard acquisition, construction,  and improvements in fiscal years 2013 through 2018 exceeded the Coast  Guard’s requests. Explanatory materials on the annual appropriations  acts for these fiscal years indicated, among other things, that funding was  provided above requested amounts for procurement of one HC-130J  aircraft each year. The House Committee on Appropriations report  accompanying the Homeland Security appropriations bill for 2018 noted  that the Secretary is expected to include adequate funding in the fiscal  year 2019 budget request to normalize the recapitalization of the HC-130  fleet. Recent annual appropriations acts also direct the use of funds to  contract for three National Security Cutters that were not a part of the  program of record for the fleet of these cutters.

Absent any additional funding appropriated by Congress above Coast  Guard requests, the acquisition portfolio put forth in the fiscal year 2018  CIP will not be affordable by fiscal year 2019 based on average recent  budget requests. Figure 3 shows aggregate projected funding for various  major Coast Guard acquisitions over the fiscal year 2018 through 2022  CIP, along with average budget requests and appropriations from fiscal  years 2014 through 2018.

Further, the previous Commandant of the Coast Guard testified in  November 2017 that an annual acquisition budget of $2 billion is needed  to modernize the fleet and address other critical priorities, such as the  recapitalization of the Coast Guard’s icebreaker fleet. However, the  fiscal year 2018 through 2022 CIP, dated October 2017, does not reflect  this need for any year in its 5-year budget window. By not providing  comprehensive information in the CIP on the acquisitions needed to  perform its missions as well as the trade-offs necessary at different  funding levels, the Coast Guard is not providing decision makers,  including those in Congress, information to help decide which programs  are the highest priority and which funding increases may or may not be  consistent with the Coast Guard’s programs of record, as approved by  DHS. For example, even though recent annual appropriations acts direct  the use of funds to contract for three additional National Security Cutters,  the Coast Guard had not identified a need for these cutters as they were  not part of the original program of record.

Coast Guard Is Developing a 20-Year Long-term Major Acquisitions Plan

The Coast Guard has initiated the development of a 20-year Long-term  Major Acquisitions Plan, but it is incomplete as of March 2018. According  to Coast Guard officials, the Coast Guard’s efforts were in response to  Congressional direction in 2016. In February 2016, Congress directed  that the Coast Guard develop a Long-term Major Acquisitions Plan to  cover the upcoming 2017 fiscal year, and for each of the 20 fiscal years  thereafter, and stated that it should be updated every 2 years.  Specifically, each plan is to include the following: (1) the number and  types of cutters and aircraft to be decommissioned; (2) the number and  types of cutters and aircraft to be acquired to replace the cutters and  aircraft or address an identified capability gap; and (3) the estimated level  of funding in each fiscal year required to acquire the cutters, aircraft, and  command and control systems as well as acquire, construct, or renovate  shore-side infrastructure.

As of November 2017, officials told us that the Coast Guard was  developing a 20-year Long-term Major Acquisitions Plan that specifically  focused on its highest priority recapitalization and sustainment efforts for  its assets and will focus on meeting the intent of the 2016 congressional  mandate. These officials said that the plan will also be based on the  Coast Guard’s 5-year CIP and will contain the necessary sustainment  activities for current assets, according to service life limitations and  recapitalization efforts for assets that reach the end of their service lives.  Coast Guard officials stated that the plan will not be a budget document,  but rather an overall planning document for future budgets. As of March  2018, the Coast Guard had not completed this long-term plan.

Coast Guard Made Progress in Reducing Cost of the Portfolio but Reactive Planning Has Created Impending Surge of Unfunded Acquisitions

Since our 2014 review, the Coast Guard has generally demonstrated  improved fiscal management of the major programs in its acquisition  portfolio and made progress in acquiring the assets in the portfolio. At that  time, we found that program cost increases were consuming significant  amounts of funding, and the Coast Guard was further from fielding its  planned fleet than it was in 2009, in terms of the fiscal resources needed  to finish those programs—or the remaining investment required. Since  2014, program costs have generally been stable and, from 2014 to 2018,  the Coast Guard reduced the remaining investment required to complete  those acquisitions by $4.9 billion or 24 percent (see table 3).

However, while the Coast Guard has reduced the remaining investment  required to complete its acquisition portfolio, there is little room for  additional major acquisitions based on recent budget requests. For  example, the National Security Cutter and Fast Response Cutter—two of  the Coast Guard’s most expensive acquisitions programs—both  experienced delays and were not delivered as originally scheduled. As a  result, these delays stretched its acquisition budget longer than intended.  Going forward, our analysis indicated that once the Coast Guard begins  funding construction of Offshore Patrol Cutters—another major  acquisition program critical in replacing vessels well past their service  lives—that program is expected to consume a significant portion of the  Coast Guard’s planned acquisition, construction, and improvements  budget between 2018 and 2032, also raising uncertainties in how the  Coast Guard will be able to fund other priorities.

According to the previous Commandant of the Coast Guard, the Offshore  Patrol Cutter is the Coast Guard’s top priority and, as such, the Coast  Guard will prioritize its budget requests for the Offshore Patrol Cutter  before other assets, potentially limiting funds requested for other  acquisition programs. This approach will limit the portfolio for the  foreseeable future and affect other new programs, such as the Heavy  Polar Icebreaker and Waterways Commerce Cutter. These two programs  represent critical needs for the Coast Guard, as the legacy assets they  are intended to replace are well past their designed service lives, but  there are limited resources for them if acquisition of the current portfolio is  to be completed as scheduled.

The polar icebreaker program has an estimated total acquisition cost  of more than $3 billion and, according to the Coast Guard, is needed  to alleviate a potential icebreaking mission capability gap. Heavy  icebreakers are needed, as Coast Guard officials also indicated, to  provide year-round access to the Polar Regions, including the  clearance of a navigable channel for access to the National Science  Foundation’s McMurdo Research Station on Ross Island, Antarctica  as well as to facilitate other national security interests in polar waters.  DHS approved the icebreaker program for entry into the obtain phase  of the acquisition process in March 2018. The Coast Guard—in  partnership with the Navy—is expected to award a contract for design  and construction of up to 3 heavy polar icebreakers by June 2019,  and plans for the first icebreaker to be delivered by the end of fiscal  year 2023. We recently reported on this program in April 2018 and  have an ongoing review that is expected to be completed by summer  2018.

DHS recently approved a new program, known as the Waterways  Commerce Cutter program, to recapitalize aging vessels such as its  fleet of 35 Inland Tenders (river, buoy, and construction tenders). The  assets in the current fleet continue to age beyond their expected  service lives and the Waterways Commerce Cutter program is  currently in the analyze/select phase of the acquisition process. Coast  Guard officials said they are still determining how many new vessels  are needed to provide capabilities similar to the current fleet of  vessels that replace or relocate river buoys and builds fixed aids to  navigational marine structures. A life-cycle cost estimate has not yet  been developed for this program, but, according to Coast Guard  officials, the preliminary rough order of magnitude estimate for total  acquisition cost is $1.1 billion.

As we reported in July 2017, the Coast Guard has no method in place to  capture the effects of deferred acquisitions on its future portfolio. The  lack of a long-term plan, as discussed earlier, and determining priorities  and making trade-off decisions based on the annual budget have put the  Coast Guard in a reactive planning mode each year. We found that this  type of reactive planning and the Coast Guard’s constrained budget  environment have created a bow wave of near-term unfunded  acquisitions, negatively affecting future acquisition efforts and potentially  affecting future operations. This bow wave consists of new acquisition  programs and recapitalization efforts, as well as high-cost maintenance  projects that use the acquisition construction and improvements account,  which continue to put pressure on available resources. These projects  include some that are not currently identified in the acquisition portfolio.  For instance, the Coast Guard’s 87-foot patrol boats are forecast to  require recapitalization beginning in 2023. Additionally, the ocean-going  175-foot coastal buoy tenders—not included in the Waterways Commerce  Cutter program—are past the point in their service lives when a midlife  maintenance availability would normally have been conducted.  However, we found that the Coast Guard has historically operated  vessels well past their expected end of service life, and it will likely need  to do so with these assets given limited available acquisition funding.

Furthermore, the Coast Guard has identified more than $1.5 billion in  shore infrastructure projects, which are paid for with funding from the  acquisition, construction, and improvements account that it has not been  able to address, primarily due to lack of funding, among other reasons.  Some of these projects are detailed in an unfunded priorities list the  Coast Guard submitted to congressional committees in July 2017  pursuant to statutory requirements. Among the projects identified are  recapitalization for waterfront facilities damaged in hurricanes; major  acquisition systems infrastructure associated with homeporting the ninth  National Security Cutter; and a number of pier replacements, building  construction, and navigational aid realignment projects in several  locations. The Explanatory Statement regarding the Consolidated  Appropriations Act, 2018, reflected approximately $135 million in  acquisition, construction, and improvements funding for shore  infrastructure/construction projects, including for some previously  unfunded priorities. We currently have an ongoing review to assess  Coast Guard shore infrastructure projects and expect to issue a report in  early 2019.

Figure 4 shows the current and future acquisitions that, based on current  Coast Guard programs and requirements, need to be addressed in order  for the Coast Guard to meet its statutory missions, along with the backlog  of shore infrastructure projects noted above. For more information about  the Coast Guard’s 11 mission areas, including which assets perform each  mission, see appendix III.

Federal standards for internal control state that quality information that is  appropriate, current, complete, accurate, accessible, and timely is  necessary for an organization to achieve its objectives. The Coast  Guard has not communicated quality information to Congress or  demonstrated how deferred acquisitions will affect the future acquisition  portfolio. Including information in the CIP, such as how trade-off decisions  will affect other programs in the portfolio, would allow decision makers,  including Congress, to better understand Coast Guard priorities and how  changes to one program might potentially affect other programs.

Coast Guard Does Not Conduct Oversight of Its Acquisitions Portfolio Collectively

The Coast Guard has a management body in place to conduct oversight  of its major acquisition programs; however, this management body has  not conducted oversight across the entire acquisition portfolio from a  collective approach. Among the Coast Guard’s three cross-directorate  groups, the Executive Oversight Council is positioned to oversee the  portfolio collectively and has the potential to implement key portfolio-wide  management practices, including conducting formal reviews and issuing  reports. This council has cross-directorate senior-level management  representation, access to information on acquisition programs, and  support from the other two cross-directorate groups (the Systems  Integration Team and the Resource Councils). However, this council has  not carried out these portfolio-wide practices. Since 2012, the  responsibilities of the Executive Oversight Council regarding portfolio- wide management have been changed multiple times (see figure 5).

In 2014, the Coast Guard updated the Executive Oversight Council’s  charter, in response to our September 2012 recommendation, adding the  responsibility for portfolio-wide oversight to include conducting an annual  review to assess and oversee acquisitions collectively. However, during  our current review, we found that the Coast Guard revised the council’s  charter in June 2017, removing this responsibility. According to Executive  Oversight Council officials, this responsibility was removed from the 2017  charter because the council did not conduct these annual reviews.  Instead, Executive Oversight Council officials indicated that the council  facilitates a balanced and affordable portfolio of acquisition programs  through the individual program-level reviews. GAO’s best practices work  states that successful organizations assess product investments in  aggregate, rather than as independent products or programs. For  example, by considering the requirements, acquisition, and budget  processes collectively, it helps organizations prioritize their product  investments.

In addition, Coast Guard officials said that a portfolio-wide affordability  review or assessment is undertaken by the Systems Integration Team—a  cross-directorate, cross-enterprise group below the flag/Senior Executive  Service-level—to help inform the annual budget process. The Systems  Integration Team’s responsibilities outlined in its current charter include  addressing issues tasked by the Executive Oversight Council chair,  reporting to the council on cross-programmatic issues, and providing  recommendations to the council. For example, officials with the Systems  Integration Team said they met with, and gathered information from, each  of the Resource Councils and briefed the Executive Oversight Council in  February 2018 with proposals for looking at investments collectively  across the Coast Guard enterprise to include potential priorities and  trade-offs. They said the briefing included a review of the upcoming  annual budget, a look at the overall portfolio of major acquisition  programs over the next 10 years, and prospective new start initiatives at  low, medium, and high funding levels. It is unclear what actions the  Executive Oversight Council has taken as a result of the Systems  Integration Team briefing. However, we found that the Executive  Oversight Council did not review the portfolio from a collective  perspective.

Further, the members of the Systems Integration Team, who inform and  report to the senior-level Executive Oversight Council, are not at the  appropriate senior position to oversee or make decisions for the  acquisition portfolio. Specifically, the Executive Oversight Council’s  revised 2017 charter states that the Systems Integration Team is to  support the council in its role to facilitate a balanced and affordable  portfolio as a whole. However, as the higher-level cross-directorate group,  the Executive Oversight Council has not engaged in overseeing or  reporting on the acquisition portfolio collectively and annually. OMB’s  2017 Capital Programming Guide outlines a capital programming process, including how agencies should effectively and collectively  manage a portfolio of capital assets. This OMB guidance states that a  senior-level executive review committee should be responsible for  reviewing the agency’s entire capital asset portfolio on a periodic basis  and for making decisions or priorities on the proper composition of  agency assets needed to achieve strategic goals and objectives within  the budget limits. In the case of the Coast Guard, only the Executive  Oversight Council has representation at the senior-level executive level  and has the responsibility for oversight of its major acquisition programs.  Without collective portfolio reviews at the senior management level, the  Coast Guard does not have sufficient cross-directorate information to  determine needed trade-offs in the major acquisitions realm, considering  budget realities.

Coast Guard Plans to Extend Service Lives of Certain Legacy Assets as Sustainment Costs and Other Risks Are Increasing

Given the Coast Guard’s limited acquisition budget in recent years, it is  unclear how the Coast Guard will be able to fund planned Service Life  Extension Projects (SLEP) on several aging assets in order to sustain  them—that is, keep them operating at acceptable levels—until  replacement assets are available. We found that each of these  sustainment efforts involves a certain amount of risk. For example,  according to Coast Guard officials, they plan to operate H-65 and H-60  helicopters to flight hours beyond what has been flown for those aircraft.  In addition, several of the Coast Guard’s aging cutters have spent more  on depot-level maintenance than was planned. Combined, these  cutters—the 210-foot and 270-foot Medium Endurance Cutters, the  icebreaker Polar Star, and Inland Tenders—expended in excess of $460  million more than what was originally estimated (standard support levels)  from 2010 to 2017. When combined with the challenges facing the  acquisition portfolio noted above, the Coast Guard will likely struggle to  pay for the maintenance of older assets, a situation that could lead to  deferred maintenance and lost operational capability, as we found in our  July 2012 review and in our current review. As discussed earlier, the 20- year long-term plan, if completed as directed by our June 2014  recommendation and subsequent congressional direction, will begin to lay  out the prioritization of all efforts, trade-offs, and impacts.

Coast Guard Intends to Extend the Service Lives of Certain Legacy Assets

The Coast Guard currently operates several assets that have passed, or  will soon pass, the end of their design service lives—the total period for  which they were designed to operate. We found that these legacy assets  are generally meeting metrics for availability to conduct operations;  however, they are in need of major maintenance overhauls—or SLEPs— in order to continue providing capabilities to operators. According to  Coast Guard officials, SLEPs are necessary because the Coast Guard  does not have the funds available to initiate a new major acquisition  program to recapitalize these assets in the short term, or because a  significant amount of maintenance work is required to keep these assets  operational until replacements are fielded. Table 4 provides details about  the Coast Guard’s plans for SLEPs for selected assets.

These planned SLEPs involve several risks including technical,  scheduling, and funding. While SLEPs will extend these assets’ expected  service lives, they will also add cost to an already constrained Coast  Guard acquisition, construction, and improvements account. Since these  projects use these funds, we would expect them to be included in the  Coast Guard’s forthcoming 20-year long-term plan so that decision  makers and stakeholders can see their effects on the broader acquisition  portfolio. Additional detail on these planned SLEPs follows.

The Coast Guard is planning to conduct a SLEP that will add an  additional 10,000 hours to the H-65 rotary-wing aircraft, taking the service  life of each aircraft in the fleet to 30,000 hours. The Coast Guard is  evaluating alternatives to extend the service lives of the H-60 fleet.  According to DHS, two options the Coast Guard is considering include  utilizing newer H-60 aircraft from the Navy and conducting a SLEP on  those aircraft to extend their service lives to 20,000 hours or extending  the life of the current fleet to 30,000 hours. Coast Guard officials said that  this will allow both the H-65 and H-60 aircraft to operate into the mid- 2030s so that the Coast Guard can focus funds from the acquisition,  construction, and improvements account on the Offshore Patrol Cutter  procurement and align its next helicopter acquisition effort with the  Department of Defense’s future vertical lift acquisition plans. However,  there are risks associated with these SLEP plans. According to Coast  Guard officials, they plan to operate H-65 and H-60 helicopters to flight  hours beyond what has been flown for those aircraft. The Coast Guard is  working with the original manufacturers to identify structural components  that would need to be replaced to accomplish the service life extension.

From fiscal years 2012 to 2017, the H-65 operational availability—time  available to conduct missions—averaged 70.9 percent and the H-60  averaged 73.5 percent, compared to their target of 71 percent. Both  aircraft generally met their target but are approaching their end of service  lives, with the H-65 expected to reach its 20,000 flight hour limit starting in  2020 and the H-60 in 2023. The Coast Guard expects the H-65 SLEP to  cost about $61.6 million, but the H-60 SLEP cost is unknown because the  effort has not progressed to the acquisition decision event at which a cost  estimate is required to be approved. The H-60 SLEP was recently  approved for entry into the analyze and select phase, where it was  designated as a level 1 program, which DHS defines as programs with  estimated life-cycle costs greater than or equal to $1 billion.

The Coast Guard conducted reactivation work on the Polar Star from  2010 to 2013, and the icebreaker resumed its missions for the annual  breakout of the National Science Foundation’s McMurdo Research  Facility in Antarctica in 2014. The Coast Guard is planning a SLEP on the  Polar Star to keep it operational until the first and second new heavy polar  icebreakers are delivered (planned for 2023 and 2025, according to  current acquisition plans) in order to bridge a potential operational gap.  This approach would allow the Coast Guard to operate a minimum of two  heavy icebreakers once the first polar icebreaker is delivered. The  approach would also provide the Coast Guard with a self-rescue  capability—the ability for one icebreaker to rescue the other if it became  incapacitated while performing icebreaking operations.

The Coast Guard’s plan to conduct the Polar Star SLEP during its existing  annual depot-level maintenance periods may not be feasible given the  amount of maintenance already required on the cutter. The Polar Star’s  mission capable rating has been decreasing in recent years and reached  a low point of 29 percent—well below the target of 41 percent—from  October 2016 to September 2017. Based on mission capable data, we  found this is mostly due to additional time spent in depot-level  maintenance, which has increased in recent years from about 6 months in  2015 to more than 8 months in 2017.

Additionally, the Polar Star has required extensions of about 3 months for  its annual dry dock periods—the period of time when a cutter is removed  from the water so that maintenance can be conducted—in 2016 and 2017  to complete required maintenance activities. These dry docks were  originally planned to last between 2-1/2 months and 4 months. These  extensions also compressed the amount of time that the crew had to  prepare for its annual mission to Antarctica, which, according to members  of the Polar Star crew, placed a large stress on the crew, risked the  quality of work, and reduced or eliminated the crews’ planned rest and  personal preparation for their roughly 4-month deployment. Based on our  analysis, these delays and extensions are likely to continue as the cutter  ages. According to Coast Guard officials, the Polar Star’s SLEP work will  be conducted during the annual dry dock periods by adding an additional  1 or 2 months to the annual dry docks. However, if the work is unable to  be completed during this time frame, it could force the Coast Guard to  miss its commitment to conduct the annual Antarctica mission. Coast  Guard maintenance officials stated that until the Polar Star completes the  SLEP, its repairs will likely continue to get more expensive and time  consuming. We will continue to monitor the Polar Star’s SLEP through our  annual review of DHS programs.

As we found in July 2017, the Polar Star SLEP effort has a rough order  cost estimate of $75 million, which is based on the reactivation work  completed in 2013. However, this estimate may be unrealistic based on  assumptions the Coast Guard used, such as that it would continue to use  parts from the Coast Guard’s other heavy polar icebreaker, the Polar Sea,  which has been inactive since 2010. The Coast Guard’s recent  assessment of the Polar Star’s material condition—the physical condition  of the cutter, which includes the hull structure, habitability, major  equipment systems, and spare parts availability—was completed in  January 2018. The material assessment stated that many of the  available parts from the Polar Sea have already been removed and  installed on the Polar Star. As a result of the finite parts available from the  Polar Sea, the Coast Guard may have to acquire new parts for the Polar  Star that could increase the $75 million SLEP estimate. The Polar Star’s  recent material assessment will form the basis to determine which  systems will be overhauled during the SLEP and for a more detailed cost  estimate. The Coast Guard expects the program to reach the obtain  phase of the acquisition life cycle by December 2019, at which time the  Polar Star could reach the end of its current useful service life (currently  projected to be between 2020 to 2023). This timeline contains risk that  the Polar Star could be rendered inoperable before the cutter is able to  undergo a SLEP.

The Coast Guard operates two fleets of Medium Endurance Cutters (270- foot and 210-foot cutters) and both are either approaching or have  exceeded their design service lives. According to Coast Guard  maintenance officials, the primary problem facing the 270-foot Medium  Endurance Cutters is obsolescence given the age of these cutters. The  cutters have several systems that are no longer manufactured, and in  many cases the original manufacturer no longer makes parts for the  systems, such as the generators, fire pumps, and main diesel engines. In  order to sustain the 270-foot Medium Endurance Cutters until the  Offshore Patrol Cutters—replacements for the Medium Endurance  Cutters—are delivered, the Coast Guard is planning to conduct a SLEP.  Officials stated they are evaluating how many of the 13 cutters will  undergo the SLEP. The Coast Guard does not have a cost estimate for  the SLEP, but officials said that the project should enter the obtain phase  and complete its first cost estimate by June 2019.

Despite the age and condition of the cutters, the mission capable rate for  the 270-foot Medium Endurance Cutters has been increasing since the  fleet first started using the metric in August 2014 and has met its  minimum target of 49 percent. Specifically, the 270-foot Medium  Endurance Cutters’ mission capable rate increased from 47.6 percent in  2015 to 69.4 percent in 2017. This indicates that the Coast Guard has  been increasing the amount of time that the cutters are available to  conduct operations. However, the mission capable rating of 69.4 percent  in 2017 is above the maximum target—61 percent—which means the  Coast Guard is operating the cutters more than planned. This could be  troublesome since the percentage of time above the 61 percent target is  time that is allocated to depot-level maintenance, meaning these cutters  are not spending as much time as planned in maintenance. In May 2016,  we found that deferring maintenance can lead to declining ship conditions  and longer maintenance periods that can reduce a ship’s operational  availability.

The Coast Guard is also evaluating how long the 270-foot Medium  Endurance Cutters should remain in service. According to Coast Guard  officials, this decision is at least partially dependent on the delivery of the  Offshore Patrol Cutters—specifically the shipbuilder’s ability to deliver 2  cutters per year, which is expected to start in fiscal year 2024 with the 4th  and 5th cutters. Officials stated that the Coast Guard does not plan to  operate any Medium Endurance Cutters once all 25 Offshore Patrol  Cutters are operational, yet the fiscal year 2018 through 2022 CIP report  indicates that 7 of the 270-foot Medium Endurance Cutters will still be in  service when all 25 Offshore Patrol Cutters are delivered and operational.  Officials said this is a contingency plan in case not all Offshore Patrol  Cutters are delivered on time. As we found in June 2017, the Coast  Guard completed refurbishment work on the 210-foot and 270-foot  Medium Endurance Cutters in 2014, but this was not intended to extend  the cutters’ service lives. Figure 9 shows the delivery dates for the  Offshore Patrol Cutters and the decommissioning dates for the legacy  Medium Endurance Cutters.

The fiscal year 2018 through 2022 CIP shows that there is little, if any,  gap between when the 210-foot and 270-foot Medium Endurance Cutters  will be removed from service and when the Offshore Patrol Cutters will be  operational. However, both Medium Endurance Cutter classes will be well  past their end of service lives by the time they are decommissioned. For  instance, in our July 2012 report, we reported that the 210-foot Medium  Endurance Cutter Dependable reached its end of service life in 2006. In  addition, based on the fiscal year 2018 through 2022 CIP, we found that  the Coast Guard plans for the cutter to operate for an additional 23 years  (until 2029) without any major sustainment work to extend its service life.  While it is not unusual for the Coast Guard to operate cutters for longer  than originally planned, the acquisition schedule for fielding the Offshore  Patrol Cutters will result in some of the Medium Endurance Cutters being  expected to operate up to 30 years beyond their original design service  lives when they are removed from service.

In the February 2017 Sustainability Assessment of the 210-foot Medium  Endurance Cutters, the Coast Guard rated 5 of the 14 cutters as a high  risk for sustainability, which reflects either a poor material condition or  high maintenance costs. Additionally, the most recent material condition  assessments for the Medium Endurance Cutters, which were completed  in 2015, found that the:

210-foot Medium Endurance Cutters cannot be expected to meet  operational requirements using the normal depot-level maintenance  funding levels due to the time required to complete maintenance and  the increased maintenance costs in recent years; and mission effectiveness of the 270-foot Medium Endurance Cutters will  continue to degrade without a near-continuous recapitalization of  older sub-systems.

Further, according to the fiscal year 2018 through 2022 CIP, the Coast  Guard is planning to operate some of the Medium Endurance Cutters for  about the same period of time as other Medium Endurance Cutters that  will undergo the SLEP project. This raises questions as to how those  cutters that do not go through the SLEP will continue operating until their  planned decommissioned date, which in some cases is the same time  period as those cutters undergoing the SLEP. As shown in figure 9, the  210-foot Medium Endurance Cutter Alert will be decommissioned in 2030  and will not undergo a SLEP, while the 270-foot Medium Endurance  Cutter Bear will also be decommissioned in 2030 and could undergo the  SLEP. In July 2012, we found that as assets age beyond their design  service lives, they can negatively affect the Coast Guard’s operational  capacity to meet mission requirements as the cutters require more  maintenance. As discussed earlier, in response to Congressional  direction, as the Coast Guard continues its development of a 20-year  Long-term Major Acquisitions Plan, it is important to include more details  about the 270-foot Medium Endurance Cutter SLEP, including when the  SLEP should begin and how much service life the SLEP should add to  the cutters.

Depot-Level Maintenance Costs for Aging Assets Are Increasing

As legacy assets operate longer than originally planned, they are  becoming costlier to maintain, which introduces risk to an already  constrained Coast Guard budget. For example, depot-level maintenance  expenditures from fiscal years 2010 to 2017 for the 210-foot and 270-foot  Medium Endurance Cutters, Polar Star, and Inland Tenders exceeded by  $460 million the assets’ estimated costs for depot-level maintenance  (standard support levels—the Coast Guard’s annual estimates for depot- level maintenance) since these assets are near the end of or have  exceeded their expected service lives. Specifically, over the 8-year period  the:

210-foot Medium Endurance Cutters’ expenditures were about $151  million (219 percent) more,

270-foot Medium Endurance Cutters’ expenditures were $192 million  (265 percent) more,

Polar Star’s expenditures were about $15 million (31 percent) more,  Inland Tenders expenditures were about $102 million (151 percent)  more than standard support levels.

The most recent material assessments for the 210-foot and 270-foot  Medium Endurance Cutters, completed in September 2015 and  November 2015 respectively, stated that the cutters’ current standard  support level funding is not sufficient to continue funding the necessary  maintenance activities. The assessments noted that there is the likelihood  that maintenance will be deferred, postponed, or modified to  accommodate this funding shortfall and that the cutters could degrade at  an increasing rate if additional funding is not identified. According to  Coast Guard guidance, once the cost to maintain or repair equipment is in  excess of 50 percent of a cutter’s annual standard support level, it is  considered to have zero years of remaining service life. The 210-foot and  270-foot Medium Endurance Cutters and Inland Tenders exceeded this  threshold each year from 2010 to 2017 and the Polar Star exceeded this  threshold in 2016. This indicates that, although the legacy cutters we  reviewed continue to perform missions, the Coast Guard is accepting a  significant level of risk based on the cutters’ increased depot-level  maintenance expenditures, and that these cutters could experience  catastrophic failures. Such an event could result in assets being removed  from service without available replacement assets. Our March 2017  recommendation that the Coast Guard periodically update standard  support levels to account for actual expenditures would, if implemented,  begin to address this problem so that standard support levels would  better align with depot-level maintenance expenditures.

The Coast Guard continues to use the annual budget process to address  the affordability of its portfolio of major acquisition programs by making  trade-off decisions that result in delayed acquisitions and reduced  capabilities. This approach places decision makers, including those in  Congress in a position of committing fiscal resources to individual  programs without knowing whether they are affordable or achievable  within the context of the Coast Guard’s overall portfolio. While the 5-year  CIP shows the Coast Guard’s immediate trade-off decisions, it does not  show how these decisions could affect other programs in the portfolio or  future acquisition efforts. Not providing comprehensive information in the  CIP on the acquisitions needed to perform its missions, the trade-offs  necessary at different funding levels, and the impact of the trade-off  decisions made, the CIP limits the information available to decision  makers, including those in Congress.

In addition, the Coast Guard currently is not conducting key oversight that  could facilitate a balanced, affordable portfolio. While the Coast Guard  has a group in place to conduct portfolio reviews as a part of the annual  budget cycle in the Systems Integration Team, it does not have senior- level executive representation or responsibilities necessary for the  oversight and management of the portfolio as a whole. The Executive  Oversight Council is a flag/Senior Executive Service-level group that  monitors major risks and provides direction to other cross-directorate  teams. In the past, this council had a documented role to annually review  and oversee the Coast Guard’s overall acquisition portfolio, but it never  conducted these reviews. Without collective portfolio reviews at the senior  management level, the Coast Guard does not have sufficient information  to determine needed trade-offs between the major acquisition programs  while also considering the affordability of the portfolio and budget  realities.

We are making the following two recommendations to the Coast Guard:  The Commandant of the Coast Guard should work with Congress to  include in the Coast Guard’s annual 5-year CIP a discussion of the  acquisition programs it prioritized that describes how trade-off decisions  made could affect other acquisition programs, such as by delaying  recapitalization efforts or needing to conduct Service Life Extension  Projects for legacy assets. (Recommendation 1)

The Commandant of the Coast Guard should require the Executive  Oversight Council, in its role to facilitate a balanced and affordable  acquisition portfolio, to annually review the acquisition portfolio  collectively, specifically for long-term affordability. (Recommendation 2)

We provided a draft of this report to DHS for review and comment. DHS’s  written comments are reprinted in appendix IV. The Coast Guard also  provided technical comments that we incorporated into the report as  appropriate. In responding to a draft of our report, DHS concurred with  our first recommendation and non-concurred with our second  recommendation. In its response, with respect to our second  recommendation DHS noted that several existing organizations within the  Coast Guard—such as its Investment Board, Deputies Council, and  Investment Review Board—are responsible for making decisions  regarding out-year funding. Further, DHS noted that the Executive  Oversight Council works outside the Planning, Programming, Budgeting,  and Execution process and that the phrase “long-term affordability” is  subject to interpretation in the context of our recommendation. DHS also  stated that, to meet the spirit of our recommendation, the Coast Guard  will update the Executive Oversight Council’s charter to require a review  of the collective acquisition portfolio, specifically evaluating long-term  planning.

We believe that updating the Executive Oversight Council’s charter to  include long-term planning is a positive step. However, long-term  affordability, as discussed throughout this report, should include the  budget realities faced by the Coast Guard in its major acquisition portfolio.  If the planning accounts for long-term funding considerations to achieve  the Coast Guard’s acquisition goals and objectives, we believe the intent  of our recommendation would be met.

We are sending copies of this report to the Secretary of Homeland  Security and the Commandant of the Coast Guard. In addition, the report  is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or makm@gao.gov. Contact points for our Office of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

The objectives of this report are to assess (1) the extent to which the  Coast Guard has made changes to how it manages its acquisition  portfolio and (2) how the Coast Guard is sustaining existing assets until  new assets become operational.

To examine the extent to which the Coast Guard has changed how it  manages its acquisition portfolio, we assessed Coast Guard practices for  managing the portfolio’s affordability and long-term planning. We looked  at the portfolio to determine how its composition changed since our last  Coast Guard acquisition portfolio review in 2014. We selected a range of  acquisition programs based on if they were already major acquisition  programs (programs with a life-cycle cost estimate greater than or equal  to $300 million or a total acquisition cost greater than or equal to $100  million) by definition, the programs were part of our 2014 review, or they  are likely to be major acquisition programs that will require significant  funding in the near future.

Using acquisition program baselines, we also identified changes in the  expected total acquisition costs of these programs using the threshold  costs and compared them with what we reported in 2014. We used the  threshold acquisition costs—the maximum amount the program should  cost as approved by DHS—when referring to the total acquisition cost of  a program. We calculated the remaining investment required for each  program by taking the total acquisition cost, as reported in the program’s  acquisition program baseline, and subtracting the funding reflected for the  program in Explanatory Statements regarding annual appropriations acts  through fiscal year 2018 appropriations.

We reviewed program documentation and interviewed officials from  program offices and the Coast Guard’s capabilities and engineering  directorates. These discussions helped identify program achievements as  well as any risks associated with realizing planned cost, schedule, and  capability targets. We analyzed Coast Guard 5-year Capital Investment  Plans (CIP) that supported the budget requests for fiscal years 2014  through 2018 to determine how the Coast Guard has managed the  affordability of its acquisition portfolio. We also compared annual  appropriations acts and accompanying explanatory materials since fiscal  year 2014 with acquisition needs and capability gaps identified in the  CIPs. We compared Coast Guard practices for managing the affordability  of its acquisition portfolio and long-term planning with best practices  outlined in GAO’s Cost Estimating and Assessment Guide and prior GAO  reports. In addition, we reviewed Atlantic Area Command annual area  planning assessments for fiscal years 2011 through 2016 and other Coast  Guard documents highlighting shore-side infrastructure and vessel  recapitalization needs. We reviewed charters for Coast Guard cross  directorate groups—the Executive Oversight Council and Systems  Integration Team—that help oversee Coast Guard acquisitions—to  identify responsibilities and membership for these organizations, and  conducted interviews with officials from these bodies to better understand  their portfolio oversight activities. We also reviewed surface and aviation  fleet mix studies and other strategy and planning documents. We  interviewed Coast Guard officials about the anticipated content of the 20- year Long-term Major Acquisitions Plan. Additionally, we interviewed  officials from the Coast Guard resources directorate; the Coast Guard’s  two operational commands (Pacific Area Command and Atlantic Area  Command); the Department of Homeland Security (DHS) offices for  Program Accountability and Risk Management, and Program Analysis  and Evaluation; and the Office of Management and Budget (OMB) to  discuss Coast Guard planning and budget preparation. We visited  Eastern Shipbuilding Group and the Offshore Patrol Cutter Project  Resident Office in Panama City Beach, Florida, to discuss Offshore Patrol  Cutter production.

To examine how the Coast Guard is sustaining existing assets until new  assets become operational, we selected assets to review that were at or  approaching their end of design service lives—an estimated period before  the asset reaches obsolescence—and if the Coast Guard was planning to  conduct a Service Life Extension Project (SLEP). We collected and  analyzed program documentation on asset operational availability and  mission capability, sustainment needs and maintenance history, and  plans for extending the service lives of selected assets. We assessed  Coast Guard expenditures on depot-level maintenance—which, according  to the Coast Guard, is maintenance that is beyond the capability of the  crew—for fiscal years 2010 to 2017 for legacy assets, and compared  them with standard support levels—annual funding estimates for depot- level maintenance—for those assets over that same time period. We  interviewed Coast Guard officials from the Long Range Enforcer Product  Line Office, which is responsible for sustainment of the Polar Star, the  Coast Guard’s only active heavy icebreaker. We conducted site visits— based on Coast Guard’s availability of assets—to the Coast Guard’s  Medium Endurance Cutter Product Line Office in Portsmouth, Virginia,  and the Aviation Logistics Center in Elizabeth City, North Carolina. We  also toured a 270-foot Medium Endurance Cutter in Portsmouth, Virginia,  and interviewed the officers serving on the cutter at the time. Based on  the nature of the information we collected, we are not making any  generalizable statements from these site visits.

Appendix II: The Coast Guard’s Major Acquisition Portfolio

The Coast Guard’s major acquisition portfolio comprises 10 surface,  aviation, and command and control programs. Major acquisition programs  are those with life-cycle cost estimates of at least $300 million. Table 5  provides quantities and descriptions of each major acquisition program in  the Coast Guard’s 2018 portfolio.

The Coast Guard performs 11 statutory missions, some of which align with DHS  missions (such as undocumented migrant interdiction; defense readiness; and  ports, waterways, and coastal security) and some of which are broader (such as  search and rescue, and living marine resources). Table 6 shows select Coast  Guard assets we reviewed and which of the 11 statutory missions they perform.

Appendix IV: Comments from the U.S. Department of Homeland Security

Appendix V: GAO Contact Staff and Acknowledgments

Marie A. Mak, (202) 512-4841 or makm@gao.gov.

In addition to the contact above, Rick Cederholm, Assistant Director,  Peter W. Anderson, John Crawford, Kristine Hassinger, Andrew Redd,  Suzanne Sterling, and Roxanna Sun all made key contributions to this  report.

Homeland Security Acquisitions: Leveraging Programs’ Results Could  Further DHS’s Progress to Improve Portfolio Management. GAO-18- 339SP. Washington, D.C.: May 17, 2018.

Coast Guard Acquisitions: Status of Coast Guard’s Heavy Polar  Icebreaker Acquisition. GAO-18-385R. Washington, D.C.: April 13, 2018.

Coast Guard Acquisitions: Limited Strategic Planning Efforts Pose Risk  for Future Acquisitions. GAO-17-747T. Washington, D.C.: July 25, 2017.

Coast Guard Recapitalization: Matching Needs and Resources Continue  to Strain Acquisition Efforts. GAO-17-654T. Washington, D.C.: June 7,  2017.

Coast Guard Cutters: Depot Maintenance Is Affecting Operational  Availability and Cost Estimates Should Reflect Actual Expenditures.  GAO-17-218. Washington, D.C.: March 2, 2017.

Coast Guard Aircraft: Transfer of C-27J Aircraft Is Complex and Further  Fleet Purchases Should Coincide with Study Results. GAO-15-325.  Washington, D.C.: March 26, 2015.

Coast Guard Acquisitions: Better Information on Performance and  Funding Needed to Address Shortfalls. GAO-14-450. Washington, D.C.:  June 5, 2014.

Coast Guard: Portfolio Management Approach Needed to Improve Major  Acquisition Outcomes. GAO-12-918. Washington, D.C.: September 20,  2012.

Coast Guard: Legacy Vessels’ Declining Conditions Reinforce Need for  More Realistic Operational Targets. GAO-12-741. Washington, D.C.: July  31, 2012.

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

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

The Coast Guard is spending billions of dollars to replace aging ships, aircraft, and other assets.

Because the Coast Guard has managed its acquisitions with a short-term, asset-by-asset focus, it has at times lost sight of the balance and cost of its overall asset portfolio. For example, some high-priority acquisitions have been delayed.

Also, the Coast Guard continues to operate its fleets for longer than originally planned, placing risk on its ability to accomplish its missions.

We recommended, among other things, that the Coast Guard annually assess the long-term affordability and balance of its acquisition portfolio.