03.14.07

Cantwell, Snowe Put Pressure on Coast Guard to Fix Deepwater and Recoup Taxpayer Money

Call on Coast Guard Commandant to work with DoJ to hold contractor accountable, negotiate settlement that does not punish taxpayers for contractor mistakes

WASHINGTON, DC - Wednesday, U.S. Senator Maria Cantwell (D-WA) and Olympia Snowe (R-ME) sent a letter to Coast Guard Commandant Admiral Thad Allen calling on him to work with the Justice Department to ensure taxpayers are not held responsible for cost overruns with the National Security Cutter and to implement the significant changes needed to correct widespread problems with the Deepwater fleet replacement program. As Chair of the Senate Subcommittee on Oceans Atmosphere, Fisheries and Coast Guard, Cantwell and Ranking Member Snowe are also asking the Coast Guard to hold ICGS financially responsible for assets that fail to meet contract specifications and work with Congress to revise the Deepwater contract.

"We need a comprehensive fix for Deepwater's problems before any more taxpayer dollars go down the drain," said Cantwell. "The delivery of defective ships that can't even leave the dock, a contract with no oversight, and massive cost overruns are not acceptable and continuing down this path is not an option. It's critical that the Coast Guard works with Congress to get this program under control and back on track."

Snowe said "I am deeply concerned by the missteps, mistakes, and mismanagement that have plagued the Deepwater program. Both the Coast Guard and the Congress have a responsibility to provide the resources and tools the brave men and women of the Coast Guard need, but we also have an obligation to ensure the obvious shortcomings of the Deepwater program are addressed and corrected before we move forward. We should all be deeply troubled by the mismanagement of this program that has damaged the Coast Guard's relationship with Congress and the American people, and undermined a program that is so vitally important."

Deepwater—a partnership between the Coast Guard and a joint venture by Lockheed Martin and Northrop Grumman, known as Integrated Coast Guard Systems (ICGS)—is a 25-year, $24 billion initiative to replace the aging fleet of Coast Guard assets used in missions more than 50 miles from the coast.

The Deepwater program is plagued by cost overruns, debilitating design flaws, ships and technology that fall far short of contract requirements, and a contract structure that strips the Coast Guard of oversight and decision-making authority.

"We are counting on you to do everything in your power to hold the contractor responsible for costs associated with assets that do not meet Coast Guard's requirements," wrote Cantwell and Snowe. "...The Coast Guard must ensure that the American taxpayer does not bear the financial consequences caused by poor contractor judgment or performance."

In a second letter, also sent Wednesday, Cantwell and Snowe asked Homeland Security (DHS) Inspector General (IG) Richard Skinner to review and report on the Coast Guard's plans to hold ICGS accountable for failures to meet contract requirements.

Recent reports from DHS and the Defense Department have detailed Deepwater's many problems, citing flaws with specific portions of the contract as well as the overall contract structure. A report from the Defense Acquisition University called the overall Deepwater approach inappropriate and recommended fundamental changes to the program, including a revised acquisition strategy that does not rely on a single industry entity.

Major problems with Deepwater include:

  • The 123-foot patrol boat conversion has failed and eight of the converted patrol boats are now out of service—a waste of $100 million.
  • After spending $25 million, the Coast Guard suspended the Fast Response Cutter project because the contractors' design failed to meet testing requirements.
  • The National Security Cutter—the largest of the new Deepwater ships—is over budget and the current design and construction fails to meet the Coast Guard's performance goals.
  • Deepwater's UAV, Eagle Eye, has significant delays, and the prototype crashed.
  • Mistakes have cost taxpayers hundreds of millions of dollars, while delays have forced the Coast Guard to rely more heavily on outdated equipment that was not built for post-9/11 missions.

In February, Cantwell chaired the first Senate hearing on Deepwater, and heard testimony from Commandant Allen, Inspector General Skinner, and Deepwater contractors. During the coming months, she will continue to work closely with the Coast Guard to resolve Deepwater's problems.

[The text of Cantwell and Snowe's letter to Admiral Allen follows below]

 

March 14, 2007

Admiral Thad W. Allen
Commandant, United States Coast Guard
2100 Second Street SW
Washington, DC 20593

Dear Admiral Allen,

We would like to express our sincere appreciation for your testimony at the Subcommittee's hearing on the Deepwater program on February 14, 2007. You clearly understand the seriousness of our concerns, and that significant changes are needed to correct the current problems with the Deepwater program. It is also clear that the Coast Guard and Congress must work closely together to get the Deepwater program back on track.

We are counting on you to do everything in your power to hold the contractor responsible for costs associated with assets that do not meet Coast Guard's requirements. These include the estimated $100 million that the Coast Guard has paid for the conversion and upgrade of eight 110-foot patrol boats that are now out of service, and the costs of modifying the National Security Cutters (NSCs). Moreover, while the Coast Guard may choose to modify its performance requirements, it should only do so if it receives fair consideration in return. Thus, if the Coast Guard intends to modify the "days underway" standard for the NSCs from 230 days to 185 days, it should receive a fair adjustment to the contract price. We are also very concerned to learn that the contractor is seeking to recoup from the Coast Guard significant costs related to Hurricane Katrina as well as a $302 million Request for Equitable Adjustment due to changes to the production and deployment schedule.

The Coast Guard must ensure that the American taxpayer does not bear the financial consequences caused by poor contractor judgment or performance. To that end, we strongly urge you to ask the Department of Justice to work with you as you negotiate a settlement with ICGS.

We understand that the current contract term expires in June 2007. The recent reports and testimony on the Deepwater program indicate that many of the problems can be traced back to the structure and terms of the contract. We expect to be closely consulted on any changes that the Coast Guard intends to pursue, well before the deadline for entering into new contract arrangements. We also ask that you make your staff available to meet with our staff to discuss such changes in detail.

Finally, the Coast Guard clearly needs to provide better and more frequent communications about the status of the Deepwater program. We will be considering additional reporting requirements and would welcome your input.

We look forward to a candid and open dialogue about the Deepwater program as we move into the future. By working together, we can ensure that the Coast Guard is stronger than ever before.

Sincerely,

Maria Cantwell
Chair, Subcommittee on Oceans Atmosphere, Fisheries and Coast Guard


Olympia Snowe
Ranking Member, Subcommittee on Oceans Atmosphere, Fisheries and Coast Guard