The Coast Guard has dumped the controversial private-sector venture it hired to manage the Deepwater program.
In April, Commandant Adm. Thad Allen announced that Integrated Coast Guard Systems (ICGS) would no longer serve as the prime contractor for the fleet modernization initiative.
ICGS, a joint venture between Lockheed Martin Corp. and Northrop Grumman Corp., is eligible to compete for individual contracts only.
Congressional and Department of Homeland Security officials had criticized the Coast Guard’s arrangement with ICGS, which served as project manager for the 25-year, $24 billion Deepwater program.
Now, the Coast Guard itself will serve as the lead manager of the wide-ranging acquisition project.
“We’ve relied too much on contractors to do the work of government as a result of tightening budgets, a dearth of contracting expertise in the federal government, and a loss of focus on critical governmental roles and responsibilities in the management and oversight of acquisition programs,” Allen said in announcing the change April 17.
ICGS had been in charge of a plan to lengthen 49 Island-class, 110-foot cutters to 123 feet. After eight of the vessels had undergone their refit, engineers discovered cracking and buckling in many of the hulls. They were declared unseaworthy in November 2006 after the Coast Guard spent an estimated $100 million on them.
Allen announced in April that he decommissioned those eight vessels forever, because of “permanent deformations of each hull” that could cost over $50 million to fix.
Separate plans to build 58 fast-response cutters and the $564 million national security cutter have also been plagued by design problems.
In March the Coast Guard terminated an acquisition of the Fast Response Cutter-B from ICGS. That program calls for the delivery of 12 replacement vessels beginning in 2010. Allen instead placed it under in-house management by the Coast Guard’s newly created Acquisition Directorate.
The earlier design blunders — together with chronic cost overruns — have drawn the ire of congressional leaders this year. The Coast Guard was criticized for allowing the private-sector manager to oversee the gigantic public project as “lead systems integrator.” Under the novel management structure, ICGS was delegated the responsibility of designing, building and coordinating Deepwater’s complex elements.
“Outsourcing management and oversight of Deepwater to industry has not worked,” Sen. Maria Cantwell, chairwoman of the Senate Coast Guard Subcommittee, said in March. “The lack of transparency combined with technical failures has wasted tens of millions of dollars.”
Cantwell, a Democrat from Washington state, urged the Coast Guard to use more third-party analysis and to recoup cost overruns. Just five years ago, Deepwater’s estimated price tag was $17 billion.
One day after it was removed as lead systems integrator, ICGS said the Department of Justice is investigating the causes of the cost, oversight and design problems. ICGS promised to cooperate with the probe. ICGS has already been paid about $92 million to manage Deepwater.
Allen said improved accountability is necessary.
“Both industry and government have failed to fully understand each other’s needs and requirements, all too often resulting in both organizations operating at counter-odds to one another that have benefited neither industry nor government,” the commandant said in April.
“Both industry and government have failed to accurately predict and control costs,” he said. “We must improve.”
The Fast Response Cutter-B replacement patrol boats will be 120 to 160 feet long, with a crew size of 22, and will be based on already proven designs. A new request for proposals was due in May.