By Calvin Biesecker
The Coast Guard’s cost estimates to complete its ongoing recapitalization of major assets such as aircraft, cutters and related communications has increased over $1 billion in the past year to $27.4 billion as the service dismantles the Deepwater program’s original budget structure in favor of one that gives it a clearer understanding of individual program elements, testimony and budget information presented at a House hearing yesterday show.
The original Acquisition Program Baseline (APB) for Deepwater consolidated the various projects that make up the recapitalization effort. As the Coast Guard has moved to take over responsibility for system integration from the original Deepwater contractor, Integrated Coast Guard Systems (ICGS), it is creating APBs for the individual programs.
“The additional baselines provide more fidelity and accuracy in our cost estimating,” Rear Adm. Ronald Rabago, assistant commandant for Acquisition for the Coast Guard, told the House Transportation and Infrastructure Coast Guard Subcommittee. There are four more APBs that the Coast Guard is “pulling out” of the original Deepwater APB that will allow it to complete its cost estimating for the entire program, he said.
The current $27.4 billion estimate is 4 percent, or $1.1 billion, higher than the Coast Guard estimated a year ago.
APBs are formal documents that outline a program’s cost, schedule ad performance objectives. They provide the baseline for tracking actual program performance.
For the various APBs that the Coast Guard has already generated, each shows a higher estimated cost than the version of the integrated Deepwater APB presented in May 2007 shows for these separate projects. The Fast Response Cutter, which will replace the fleet of more than 50 110-foot Island-class patrol boats, accounts for most of the higher estimates, with the program projected to cost $3.9 billion under an APB approved last August. That estimate is $700 million higher than program estimates presented in the 2007 integrated Deepwater plan, according to budget documents presented by the subcommittee.
Estimates also rose significantly for the HH-65 search and rescue helicopter conversion and sustainment effort, with an APB that was approved last May estimating $1.1 billion in project costs versus $901 million two years ago.
The Coast Guard awarded a Lead Systems Integrator (LSI) contract for Deepwater to ICGS in 2002. The initial program cost was $17 billion for a period up to 25 years. However, cost overruns and schedule slips led the Coast Guard to begin taking on the LSI role about four years ago, giving the service greater oversight and accountability in the management of Deepwater. ICGS is a joint venture between Lockheed Martin [LMT] and Northrop Grumman [NOC].
Rep. Elijah Cummings (D-Md.), chairman of the subcommittee, praised the Coast Guard’s performance in bolstering its acquisition directorate and improving program oversight.
“I’m very pleased…at the progress we’ve made with regard to acquisitions,” Cummings said at the conclusion of the hearing. “It has simply been phenomenal and we’re very proud of what you all have been able to achieve.”
Regarding the planned Offshore Patrol Cutter (OPC), which will replace the current fleet of medium-endurance cutters as part of the Deepwater recapitalization, Rabago said the requirements for the vessel have been completed and were recently sent to the Department of Homeland Security for approval.
This year, the Coast Guard expects to issue a Request for Proposals for preliminary and contract design for the OPC. The OPC is the most expensive program within Deepwater, with current cost estimates pegged at $8.1 billion for 25 vessels. An APB for the OPC is still being developed. The Coast Guard is seeking $45 million for OPC efforts in FY ’11.