Deepwater acquisition sinks, but not without lessons

The waters have closed in on the Coast Guard’s $27 billion Deepwater procurement, with Chief Acquisition Officer Jake Korn declaring the troubled asset modernization program officially over. In lay terms, that means it’s sunk, folks.

The controversial acquisition was swept under by growing costs, a major technical misstep and waves of delays. From an original cost of $17 billion in 2002, it was expanding toward the $29 billion mark.

But at least the huge ships and swift boats produced under the Deepwater program came fully stocked with lessons learned.

“There is a great deal of good that has emerged from this endeavor,” Korn wrote on the agency’s website Jan. 4. “We have learned many hard lessons, fostered systems thinking, built our acquisition expertise and are collectively smarter as a service.”

The Deepwater program spawned plenty of bad press for the Coast Guard, such as this account of an inspection as reported by Andrea Stone on the Huffington Post Dec. 21, 2011:

"Stepping over a pipe with paint blistered and bubbled by rust, the commanding officer ducks into a narrow storage area beside the hull and shines a flashlight into a dark corner mottled with rust, the smell of corroded iron mingling with diesel fuel and saltwater. 'I'm not sure how far into the hull plating it goes,' [Cmdr. William] Lane says as he peers into the void two feet below the cutter's waterline."

Korn said the service's biggest mistake was probably taking too much of a hands-off attitude and giving too much power to the contractors.

“In the end, the general consensus is that we ceded too much responsibility to the contractor, including some functions that should have been reserved for government employees,” he wrote.

Korn said he believes the problems have been addressed since the Coast Guard took over as the lead systems integrator for Deepwater in 2007. The agency is moving forward with a comprehensive asset recapitalization effort to fully support the service's missions, he added.

But criticisms continue to bubble up, mainly because the magnitude and slow resolution of the Deepwater problems leave room for doubt that concerns have been fully resolved. “There were errors in design, management and oversight," said Scott Amey, general counsel at the Project on Government Oversight. "Why were some of these problems not prevented?”

“The era of Deepwater was an era when the government was trying to hand off as much as they could to industry, and in some cases, it went too far,” said Warren Suss, president of Suss Consulting. “Program management needs to be a shared responsibility between government and industry.”

Deepwater was designed to replace cutters, patrol boats, and other vessels and aircraft in the agency’s deteriorating fleet.

The initial strategy to extend and rebuild the hulls of existing patrol boats to 123 feet was viewed as risky by the Government Accountability Office, and those warnings proved true as the first eight finished boats were deemed to be structurally unsound, a major technical setback. The Coast Guard has asked the contractor for a refund on those boats and earlier this year sued a subcontractor for alleged false statements.

A whistle-blower’s False Claims Act lawsuit is still pending on claims that the Deepwater contractor offered a misleading guarantee that might have influenced the Coast Guard’s choice of vendor.