Coast Guard wants its money back

The Coast Guard confirmed Thursday it is seeking a refund for eight 123-foot converted patrol boats under its Integrated Deepwater Systems procurement. Also, a senior official testified that the performance-based acquisition for the modernization program has been a failure.

The amount of the refund being sought has not been released; while the estimated cost of the patrol boats was $30 to $80 million. The eight boats were permanently decommissioned last month after the Coast Guard contended they displayed significant structural flaws.

Coast Guard officials yesterday distributed a letter informing the Deepwater contractor, Integrated Coast Guard Systems Inc., a joint venture of Lockheed Martin Corp. and Northrop Grumman Corp., that they were revoking earlier acceptance of the boats. The letter paves the way for a refund request.

"ICGS has only just received the Coast Guard's letter," Margaret Mitchell-Jones, a spokeswoman for the company, said in a statement. "ICGS will evaluate the letter and provide an appropriate and timely response to the Coast Guard."

The action is the latest in a series of Coast Guard moves to tighten oversight of the troubled $24 billion Deepwater multi-year procurement, which was initiated in 2002. In recent weeks, the Coast Guard has reclaimed the role of lead systems integrator for itself and said it is putting out for bid all remaining task orders for the procurement.

"I applaud the Coast Guard for taking this critically important step to recoup millions of dollars wasted by the contractor," Sen. Maria Cantwell, chair of the Senate Coast Guard Subcommittee, said in a news release. "We must continue to hold ICGS responsible for these flawed ships that fall far short of contract requirements. Taxpayers should not get stuck with this bill. We will keep on this issue until we fix Deepwater."

Also on Thursday, a senior Coast Guard official testified that the performance-based acquisition approach for Deepwater has not been successful.

"When Deepwater was developed it was envisioned as a purely performance-based acquisition," Rear Admiral Gary T. Blore, the Coast Guard's program executive officer for Deepwater, told the House Homeland Subcommittee on Management, Investigations and Oversight yesterday. "The thought was that we'd simply lay out performance requirements for our assets and then allow industry the freedom to design and build assets that met those requirements. What we've found is that this approach doesn't work in our complex systems acquisition."

Coast Guard officials were not available for further comment today.

Headquartered in Bethesda, Md., Lockheed Martin employs about 140,000 people and had $39.6 billion in revenue in 2006. The company ranks No. 1 on Washington Technology's 2007 Top 100 list of the largest federal government prime contractors.

Northrop Grumman, based in Los Angeles, ranked No. 3 on Washington Technology's 2007 Top 100 list of the largest federal government prime contractors.