WASHINGTON, D.C. –– This week, House Homeland Security Subcommittee on Transportation and Maritime Security Chairman Carlos Gimenez (R-FL) held a hearing to examine the U.S. Coast Guard’s (USCG) shipbuilding and acquisitions process, the state of efforts to modernize the service’s fleet, and ways in which the Department of Homeland Security (DHS) can facilitate faster turnaround times for USCG acquisitions programs. The Coast Guard is currently in the process of replacing several mission-critical assets with new ships, but two of its programs, the Polar Security Cutter (PSC) and the Offshore Patrol Cutter (OPC) programs, have been significantly delayed and over budget.

Testimony was provided by Director of Contracting and National Security Acquisitions for the Government Accountability Office (GAO), Shelby Oakley; Congressional Research Service (CRS) Specialist in Naval Affairs Ron O’Rourke;  Senior Analyst for Naval Weapons and Forces at the Congressional Budget Office (CBO), Eric Labs; U.S. Coast Guard Deputy Commandant for Mission Support, Vice Admiral Paul Thomas; and DHS Under Secretary for Management Randolph “Tex” Alles. Representatives Jim Moylan (R-Guam) and Amata Coleman Radewagen (R-American Samoa) waived on for the hearing.

Last year, Committee Chairman Mark E. Green, MD (R-TN) joined Subcommittee Chairman Gimenez in requesting a CBO estimate for the PSC program. Last week, the CBO previewedthe report and stated the program is going to likely cost 60 percent more than the Coast Guard initially estimated.

In this week’s hearing, members received a vital update from the administration and the Coast Guard on these lagging programs, and learned construction on the first new icebreaker will not begin until potentially later this year––even though the ship was supposed to be operational by that time. This delay is concerning, as these ships are crucial to maintaining a presence in the Arctic and defending U.S. sovereignty and freedom of navigation amid increased threats from Russia and China. In addition, members and witnesses both highlighted the numerous factors contributing to these significant delays, including but not limited to a lack of experience in both the Coast Guard and the domestic industrial base workforce with building icebreakers, rising inflation, a failure to follow standard practices, and most of all, a failure to effectively estimate costs for both programs.

In his opening line of questioning, Chairman Gimenez asked Labs about the CBO estimates for the PSC program:
 
“Somebody said the Coast Guard is hoping—hoping—to begin construction later this year, but didn’t they ‘hope’ to have the first icebreaker in operation this year?”
 
Labs answered:
 
“Yes, Mr. Chairman, I did use the word ‘hoping.’ It was the best term I think I could come up with under the circumstances of the troubled history of this program. Delays in the past are no guarantee those delays are going to continue in the future.” 
 
Chairman Gimenez then asked Oakley about where construction on the icebreaker currently stands:
 
“How close are they to beginning construction on the icebreaker?”
 
Oakley answered:
 
“The most recent information that we have on that is they are about 67 percent complete with their functional design. GAO’s best practices would say that you should have 100 percent of your basic and functional design complete by the time you begin construction, including systems that run throughout the ship called distributive systems. The Coast Guard, I know, is hoping to make the case to start construction by the end of the year, and 67 percent to a 100 [percent] is quite a lot of work to happen over the remainder of the year to hit that marker—even at their own marker of 95 percent, which is different than ours. It’s a significant amount of work remaining.”
 
Later in the hearing, Chairman Gimenez asked Vice Admiral Thomas why the PSC program is delayed:
 
“We had an icebreaker that we put out a contract for five years ago––we have not even started construction on it. So where does the buck stop? Whose fault is that, and what have we done to resolve this issue?”
 
Vice Admiral Thomas answered:
 
“Congressman, I appreciate your frustration because I share it. In the case of the polar icebreaker, we had a conversation earlier in the last panel about how it really works. The Coast Guard does not design the ship, we let a contractor that includes the detailed design of that ship. Our first contractor, early on I believe, decided they were going to try to get out of this deal and they essentially stopped designing the ship … Now that we have a new prime contractor, we are making very good progress on that detailed design. We have taken some actions to restructure the contract to put additional resources after it, more engineers for example. There were a lot of roadblocks. But right now, the buck stops with me, and I am focused on getting to detailed design and construction because our nation needs the ship and our nation needs the shipyard, and that’s our focus.”
 
Chairman Gimenez continued:
 
“Give me a time. When will you be done with a design? When will construction stop? And I am going to hold you to it, so what is the time?”
 
When pressed, Vice Admiral Thomas answered:
 
“Probably in December. We are currently building prototype modules that will become a part of the ship. We will not be at the level of design maturity the GAO would like to see when we do that.”

Subcommittee on Border Security and Enforcement Chairman Clay Higgins (R-LA) outlined the challenges facing commercial construction of new Coast Guard cutters, as described in the CBO report:
 
“Number one, the actual PSC design is larger than the government’s original design, what they anticipated, by 35 percent. Obviously, up to 35 percent larger vessels, larger displays, are going cost a lot more. 
 
“Number two, the Navy has frequently underestimated lead ship cost. The CBO averaged 25 to 40 percent. In a broad study across 19 programs––an average of 25 to 40 percent underestimated costs at inception for Navy shipbuilding. Our ship builders have to deal with this down the line, they’re being told by the Navy ‘oh you’re over cost.’ When in reality, historically, the model seems to be that the United States Navy underestimates costs. 
 
“Number three, recent inflation in shipbuilding––you say the residual effects of inflationary pressures over the past few years and workforce challenges plus increased labor and supply costs across the defense enterprise all drove costs associated with shipbuilding, up roughly an additional 20 percent. 
 
“Number four, potential need for increases in workers’ wages and benefits. Shipyards and associated supplier firms face challenges in recruiting and retaining new workers. And finally, scheduled delays which move to design, you state that a principal cause of delay has been the time needed to achieve design maturity––meaning to complete the detailed design of the ship. 
 
“We have issues in the way we’re rolling out shipbuilding in America, and the polar security cutter is no exception…We are responsible to address the larger issues because we cannot continue to pretend that the original estimates for shipbuilding projects are going to fall within the parameters that are presented to Congress for funding.”

Rep. Moylan highlighted the strategic importance of the region and the need for an increased Coast Guard presence amid malign influence from China:

“[The Coast Guard] has been called the tip of the spear for the United States in the Indo Pacific region and for good reason. The People’s Republic of China’s maritime militia and distant water fishing operations pressure our allies and threaten regional security. So how does increasing the Coast Guard’s capability capacity in the region directly respond to the threat that China poses?”

O’Rourke answered:

“The Coast Guard has identified a need for, among other things, six additional Fast Response Cutters to be assigned out into that region. Of those six, two were funded in last year’s appropriation and another two were requested for procurement and this year’s appropriation. The Coast Guard has also moved another older medium Endurance Cutter out into the region and engages in a wide range of not always well reported or well understood engagement activities with many of the countries in that region. All these things are directed at serving not just law enforcement missions, but also broader U.S. interests in countering China.”

Moylan then asked Oakley for potential solutions to the challenges plaguing the Coast Guard acquisitions process:

“What are the top three most important things DHS and the Coast Guard can do to improve the outcomes for their shipbuilding programs and get the capabilities out to the operators?”

Oakley answered:

“First, I think DHS in its oversight role of the Coast Guard can demand the Coast Guard to present better business cases for its programs that are based on realistic assessments of risk. And that would include not only what you can do from a requirements perspective, but also from a cost and schedule of perspective as well. Second, I would say that the Coast Guard needs to begin to look toward these commercial companies that I mentioned before and identify how they could begin to incentivize their builders that they work with in the broader industrial base to operate more in that space––more how these commercial builders operate. I think that Congress also plays a role too. There are demands and accountability that Congress can ask for from the Coast Guard and from DHS about the basis for its programs, and what the realistic assessment is of those programs––before they’re approved.”

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