Deepwater Update: Coast Guard Shows Progress, Whistleblower Files Lawsuit

A recent report and testimony from the Government Accountability Office (GAO) discuss the significant progress the Coast Guard has made in improving its troubled Deepwater acquisition program, but also point out some significant problems that remain. Some highlights from the GAO's recent releases:

• The Coast Guard has assumed the role of Lead Systems Integrator (LSI) responsible for the overall management of the project. This position was previously held by Integrated Coast Guard Systems (ICGS), a joint venture between defense contracting giants Lockheed Martin and Northrop Grumman. ICGS still has some more specific “systems integration” responsibilities, but will not serve in this capacity at all after February 2011.
• The Coast Guard has begun to apply the rigorous management procedures of its Major Systems Acquisition Manual, but it has missed its goal of fully applying these rules by March 2009. As a result, the Coast Guard faces an elevated risk of encountering cost overruns and receiving products that ultimately cannot meet the service's needs as it continues to order additional ships and aircraft before fully completing operational tests and other evaluations of the equipment that has already been delivered. The service's haste might at first suggest intentional recklessness, but it actually reflects the fact that delaying acquisitions creates additional, unanticipated costs for maintaining aging assets such as the 40-year-old High Endurance Cutters.
• The GAO's recommendations to the Coast Guard on Deepwater, including delaying further task orders on two projects until certain assessments have been completed, have either been implemented already or are in the process of being implemented.
• The Coast Guard is currently using various contractors and independent parties to provide technical expertise and assist in managing Deepwater. However, the GAO notes that the service has been careful to ensure contractors are not performing inherently governmental functions. In addition, the Coast Guard is undertaking a major attempt to reform and expand its acquisition workforce so that it can assume responsibility for currently outsourced tasks.
• Cost overruns on the project continue to be a concern, and the currently estimated $24.2 billion price tag may grow by a few billion dollars. One report estimates $2.1 billion, and the other estimates $2.7 billion.
• Delays in the acquisition of new Fast Response Cutters and National Security Cutters, combined with the loss of several 110-foot patrol boats from faulty refits and the diminishing reliability of aging High Endurance Cutters, could create difficulties for the Coast Guard's ability to fulfill its various missions.

In 2002, the Coast Guard awarded a contract to ICGS to manage the massive Deepwater program to upgrade and replace aging aircraft and surface vessels. ICGS initially had broad discretion, as the Coast Guard had determined it lacked adequate in-house expertise to manage the program itself, but problems with Deepwater spurred the Coast Guard to attempt to reform the program over the past several years. As the GAO put it in a report earlier this year, “the Commandant acknowledged in April 2007 that the Coast Guard had relied too heavily on contractors to do the work of government and that government and industry had failed to control costs.”

Problems with Deepwater have included delays, cost overruns, and various technical problems with designs and even completed ships, including the cancellation of a program to overhaul and lengthen all 49 of the Coast Guard's 110-foot patrol boats because major cracks appeared in the hulls of several of the refitted vessels. In fact, all 8 of the patrol boats that had been refitted before the program's cancellation were removed from service in November 2006.

In early June, Washington Technology reported that former Lockheed engineer and Deepwater whistleblower Michael DeKort had filed a False Claims Act lawsuit against ICGS for design and construction flaws on the 110-foot patrol boats that he claims include deficient command, control, and communications equipment, improperly-labeled and inadequate cabling, engine problems, and failure to meet standards for secure transmission of classified information. Lockheed Martin quickly dismissed DeKort's allegations, and the Department of Justice, which can join in the lawsuit under the False Claims Act, has yet to join the case even though it could potentially win $720 million in damages, according to Washington Technology. DeKort would also be entitled to a percentage of that sum.

Last month, the Department of Homeland Security Inspector General reported that the Coast Guard was seeking to recoup funds from contractors for the 110-foot boat “upgrades” and for flawed communication equipment on small Short-Range Prosecutor boats. However, the Coast Guard did not plan to seek refunds for three other projects “which also experienced technical and structural problems even though the contract terms were met”: the flagship National Security Cutter, the smaller Fast Response Cutter intended to replace the 110-foot patrol boats, and the Vertical-Takeoff-and-Landing Unmanned Aerial Vehicle.

On a somewhat unrelated note, but while we're on the topic of the Coast Guard, the Coast Guard's Aviation Logistics Center published a solicitation on Monday looking for a contractor to establish an "Earned Value Management" (EVM) system for the center that would be operated by Coast Guard personnel. EVM is a tool for assessing whether projects are on-schedule and within budget, and efforts across the federal government to implement it could potentially save a hefty sum of taxpayer dollars. The creation of an EVM system at the Aviation Logistics Center, which, according to its website, manages approximately 2000 contracts worth $750 million, is a promising sign for the Coast Guard's efforts to improve its acquisition procedures.

-- Scott Amey

Note: This version corrects the last paragraph to clarify the scope of the contractor's work on the EVM system.

Comments

[Posted on: Jul 27, 2009 at 05:09 PM]

Open call for assistance in Deepwater case:

Within the next few months we will be fighting the motions to dismiss from Lockheed, Northrop and ICGS. If we lose this round the case is over. That means there will be no refund and the contractors will not be held accountable for the Deepwater problem.

(In addition to that Northrop has signaled that the companies actually intend to seek damages from the Coast Guard for stopping the program. Text from Northrop motion to dismiss the Bollinger suit states the following:

"Presumably, Lockheed Martin could seek compensation from the Coast Guard under the CDA for C4ISR equipment and information delivery delays, if any, caused by the government. As the prime contractor, ICGS, not NGSS or Bollinger, could best determine whether Lockheed Martin or NGSS could assert a CDA claim against the government for delays experienced in delivering equipment or information to Bollinger. ICGS could also sponsor such a claim against the Coast Guard on behalf of Lockheed Martin.")

Additionally one of the tactics Northrop is using is to blame the Coast Guard for the 123 problems. They state that the Coast Guard abused these boats, did not operate nor not maintain them properly. From the motion:

"The Coast Guard decision to decommission vessels does not lead to the inescapable conclusion that the defendants committed fraud. To the contrary, there is strong evidence suggesting that the 123 structural issues were attributable to the Coast Guard's operation of the vessels beyond their performance parameters and failure to maintain the structural integrity of the vessels, not any nonconformance with contract requirements."

This is an open call for assistance. We are asking for the Coast Guard and even contractor personnel who read these blogs to get involved. We feel there should actually be very little trouble winning this motion but given the importance and finality of the event we believe it is prudent to not take anything for granted. If there was ever a time to act to ensure the refund is paid and the contractors are held responsible this may be the last opportunity. Finally I am calling on the Commandant himself to make a public and service wide call for the men and women who serve in the Coast Guard to assist in our efforts.

- Michael DeKort
imispgh@yahoo.com

[Posted on: Jul 27, 2009 at 12:43 PM]

The Coast Guard's EVM System solicitation was cancelled on 21 July with the following comment: "Solicitation HSCG38-09-R-800008 is cancelled effective immediately. Various internal processes have not been met and therefore we are unable to proceed with the acquisition at this time. The Government may, in the future, move forward with this effort and therefore all potential offerors are advised to continuously monitor FedBizOps."