Testifying before a Senate Subcommittee on July 7, 2009, Commandant Admiral Thad Allen highlighted some of the service’s recent successful acquisition reform efforts as a piece of the agency’s overall drive toward modernization. Those efforts, begun nearly three years ago, have established a revitalized and robust acquisition management and oversight organization—better equipped to oversee costs, manage schedules, and ensure delivered assets meet operational requirements. The Government Accountability Office, through testimony this week by Mr. Stephen Caldwell, said, “Things have turned around to a large extent… And some of the evidence of that is that the Coast Guard is taking over the role of system integrator, it's applying a more disciplined approach to individual assets, coming up with more realistic and accurate cost estimates, beefing up its acquisition work force.”
Reform efforts have been guided by input from the Defense Acquisition University, Government Accountability Office, Department of Homeland Security Office of Inspector General and other acquisition experts. Using that input, the Coast Guard developed its strategic plan—the Acquisition Directorate Blueprint for Continuous Improvement, formerly the Blueprint for Acquisition Reform, which outlines business process improvements to enhance acquisition and contracting capabilities. The Blueprint, which is updated annually to document progress and ensure effective future planning, incorporates Office of Federal Procurement Policy “Guidelines for Assessing the Acquisition Function,” and has been highlighted by the GAO and DHS Chief Procurement Officer as a model for reforming acquisition processes.
Other specific reform efforts include updating and renewing compliance with the service’s primary reference for acquisition management, the Major Systems Acquisition Manual (MSAM); achieving 100 percent DHS Level III program manager certification for major acquisition project managers; developing a Human Capital Strategic Planto address critical workforce challenges; and, creating a new Quarterly Project Report for DHS, OMB and Congress. To date, six of the 12 Deepwater projects are MSAM compliant. The remaining projects are planned to transition to full compliance no later than their next Acquisition Decision Event, a formal project milestone.
A major component of reform efforts has been the deliberate and responsible transition by the Coast Guard to fully become the Lead Systems Integrator for all acquisition projects, including Deepwater. Today, for all functional purposes, the Coast Guard is the LSI—effectively overseeing each project and making all project decisions previously delegated to the private sector LSI. The final remaining pieces of the original Deepwater contract are being completed and closed out to ensure system designs and plans are properly transferred to the Coast Guard. Earlier this year, the Coast Guard completed a bi-lateral contract modification with Integrated Coast Guard Systems to formally end the current LSI contract, with no option for renewal, in January 2011.
A clear understanding of project cost and schedule estimates is a critical component of the Coast Guard’s increased responsibility for Deepwater and improved management and oversight structure. Earlier baselines for the Deepwater program provided program- or system-level estimates—outlining cost, schedule and operational requirements as a whole for the entire system. That approach, however, did not reflect a traditional cost estimate, which assesses costs at the individual asset level. To ensure more accurate estimates and enable more effective project oversight, the Coast Guard is now completing all-new baselines for each Deepwater project using traditional, disciplined cost estimating procedures and assumptions, including independent third party review. Currently, ten of those asset-level Acquisition Program Baselines have been approved, with four more in the approval process.
A result of these new baselines, as reported and discussed by the GAO and Coast Guard during a March 2009 hearing before House of Representatives overseers, is a realization that some critical assets may cost more than previously anticipated. During that hearing, and again in a July 2009 report, GAO identified that Deepwater costs are likely to grow by $2.1 billion across all projects in the planned 25-year program. That means, based on currently approved estimates, the complete Deepwater program as originally envisioned is likely to cost $26.3 billion over approximately 25 years. The increase is a result of efforts to estimate cost drivers such as dollar exchange rates, labor rates and raw material prices over 20 to 25 years. As additional asset APBs are developed and approved, the total cost estimate for Deepwater is likely to change and become clearer. For instance, the Offshore Patrol Cutter project, which accounts for fully one-third of the total costs associated with the Deepwater program, is still in its earliest stages and has not yet developed a new asset-level APB. So, until a new APB is developed for that project, the Coast Guard must base current estimates on the OPC cost as it was included in the previously approved system-level Deepwater baseline.
To ensure ongoing project oversight, successful management of costs and schedules, and delivery of assets and systems that meet strict operational requirements, the Coast Guard has based its reformed structure on a foundation of eight cornerstones for acquisition success:
The clearest recent example of the success of the Coast Guard’s new acquisition structure was the contract award for the Fast Response Cutter Sentinel-class patrol boat, which has a potential total contract value of more than $1 billion. The Coast Guard’s decision was thorough and followed a highly competitive process to ensure an absolutely fair, full and open competition. Two post-award protests—filed with the GAO and then subsequently with the U.S. Court of Federal Claims—served to help validate that reformed acquisition processes were consistent, well defined and robust. The protests were denied by the GAO and dismissed with prejudice by the Court of Federal Claims.
Coast Guard acquisition is now on a stable and firm course toward success. Its new organization and processes enable it to appropriately and effectively manage a complex portfolio of projects that are desperately needed to recapitalize the Coast Guard. By responsibly delivering advanced, mission-capable assets and systems to the field, the acquisition organization continues to show that “mission execution begins here.”