Last week the US Coast Guard announced that it would takeover management of the $24 billion dollar Deepwater program designed to refit the Coast Guard’s fleet after it was discovered that Integrated Coast Guard Systems (ICGS), the Lockheed Martin and Northrop Grumman partnership, had seriously fumbled the contract.
This week the Deepwater program faces a new problem – namely, the Coast Guard’s ability to effectively manage it. According to a UPI article:
Rand recommended switching control of Deepwater to the Coast Guard. But the think tank did not count on the problems of converting the Coast Guard's 110-foot cutters into 123-footers. The extensions were made to accommodate new equipment and mixed crews, but the eight stretched-out vessels were declared potentially unsafe in high seas and recommended for scrap.
Deepwater had been designed to give Integrated Coast Guard Systems, a joint venture of Lockheed-Northrop Grumman, a high degree of autonomy in running the program. But the Coast Guard is not the U.S. Navy; it is a small service involved in a major overhaul of ships, planes and complex electronics and communications. The Coast Guard does not have the Pentagon's vast pool of contracting officers, accountants and engineers to check the work turned in by ICGS.
The result, witnesses told Congress, was a lack of supervision in which problems were not caught by the Coast Guard.
For starters, the decision to hand over such inherently governmental functions like contract oversight and management should have raised red flags long before now. Yet, as the above quote points out, the Coast Guard lacked the necessary means to accomplish this government function, and thus sought to cut costs by relying on the contractor. It's true that the Coast Guard doesn't have the same resources as the US Navy, but the Pentagon has certainly had its own share of massive screw-ups, most notably with reconstruction contracts in Iraq.
In the Coast Guard's case, the results have been disastrous. Correcting the botched ships that have already been converted will alone cost tens of millions of dollars, not to mention the costs of adding new staff now that the Coast Guard is in charge of the operation.
On a larger level, this debacle raises questions about to what extent the government as a whole has privatized core functions. Federal contracting has increased dramatically under the Bush Administration, roughly doubling during the past five years. Furthermore, many of the top officials in government agencies have worked for many of these contractors and vice versa. WaPo reported last month on Deepwater's revolving door:
Washington's revolving-door laws have long allowed officials from industry giants such as Lockheed, the nation's largest defense contractor, to spend parts of their careers working for U.S. security agencies that make huge purchases from those companies, though there are limits.
But Deepwater dramatizes a new concern, current and former U.S. officials said: how dwindling competition in the private sector, mushrooming federal defense spending and the government's diminished contract management skills raise the stakes for potential conflicts of interest.
Deepwater also illustrates how federal ethics rules carve out loopholes for senior policymakers to oversee decisions that may benefit former or prospective employers. These include outsourcing strategies under which taxpayers bear most of the risks for failure, analysts said.
It should be noted that none of the individuals mentioned in the article have been charged with any wrongdoing in connection to Deepwater. Nevertheless, the Deepwater debacle highlights issues that demand consideration. What are the limits of federal contracting? Have agencies and contractors grown too enmeshed for proper oversight to occur? What are the consequences of corporate consolidation on contract competition?
-- John Pruett