Coast Guard confident despite Deepwater wake

The Coast Guard's commandant said he considers the Integrated Deepwater System Project a model for future government procurements, despite congressional concerns that the service's largest acquisition ever is at risk for cost overruns and delays.

Deepwater, which will replace 90 Coast Guard cutters and 200 aircraft used for missions beyond 50 miles from shore, as well as the command, control, communications and surveillance systems that connect them, is expected to cost about $500 million a year for 20 or more years. A request for proposals is due for release June 15, and an award is expected in March 2002.

Under Deepwater, a single systems integrator would procure the Coast Guard's ships, aircraft, leased satellite capacity and equipment, and integrate the latest technology with the new assets. Adm. James Loy, the Coast Guard commandant, defended the program's novel contracting approach at two House hearings last week not only as the best way for the service to modernize but also as a prototype for other large capital acquisitions.

"It will allow [the contractor] to prove the prototype that will become relatively standard acquisition procedure for the future," Loy told the House Appropriations Committee's Transportation Subcommittee May 2.

The Coast Guard would enter a public/private partnership with the winning integrator that would offer incentives for the integrator to remain on time and on budget, Loy said. Teams led by Science Applications International Corp., Boeing Co. and Lockheed Martin Corp. have emerged as competitors.

"I'm not able to sit here and say this is a risk-free project," Loy said. "It will be a tremendous challenge to get it right. But there is flexibility in the acquisition strategy to absorb fluctuation up or down."

Hal Rogers (R-Ky.), chairman of Appropriations' Subcommittee on Transportation, supports the effort but said he was concerned that the system's budget exceeds Office of Management and Budget targets by $500 million in the first five years. "One of these days, budget pressure is going to come," Rogers said. "How do we ensure that we don't create a monster that will eat us alive?"

Loy said the Coast Guard is comfortable with OMB's estimates for future Deepwater funding. He said he is willing to decommission several cutters and aircraft now in anticipation of Deep-water's enhancements.

Affordability poses the greatest risk to the program, said JayEtta Hecker, director of physical infrastructure at the General Accounting Office, who testified May 3 before the House Transportation and Infrastructure Committee's Coast Guard subcommittee. Because the contracting approach depends on a sustained and high level of funding, if there are funding shortfalls, the Coast Guard will have to renegotiate the baseline and performance specifications, she said.

Hecker said the Coast Guard has made progress in planning Deepwater and has adopted NASA's rigorous technology evaluation process to test unproven technologies. During the first seven years, the contract will mostly use commercial off-the-shelf technology.