IG: Coast Guard not recouping on NSCs

The Coast Guard will not seek to recoup the costs of technical and structural problems related to the National Security Cutter under the Deepwater acquisition program, according to a new report from the Homeland Security Department Inspector General Richard Skinner.

The service identified structural and technical problems with the National Security Cutter program even though contract terms have been met, the report of June 25 said. To deal with the problems, the Coast Guard has renegotiated part of the contract and the problems are being corrected, it added.

The report said the Coast Guard has experienced problems in five Deepwater assets for which purchases were made under the $24 billion Deepwater acquisition effort. The prime contractor is a joint venture of Lockheed Martin Corp. and Northrop Grumman Corp.

For two of the Deepwater assets, the $87 million 123-foot patrol boats and the $3 million inflatable Prosecutor boats, the service is seeking financial recoupment, the report said. The Coast Guard rejected the patrol boats due to major structural flaws and is modifying communications equipment on the Prosecutors so they can be put in service.

The service also cancelled the Fast Response Cutter program, for which $43 million had been spent, and the vertical take-off unmanned aerial vehicle program, for which $93 million had been spent. Both programs were in the design phase. Designs for those assets met contract terms, but the fast response cutter no longer met mission needs and the aerial vehicle was deemed technically immature, the IG wrote.

“Because of problems encountered in their development, construction, and testing phases, these acquisitions were canceled, modified, or accelerated, in some instances creating or increasing gaps in the Coast Guard’s operational capacity to accomplish its offshore missions. The Coast Guard was left to determine what funds, if any, it could recoup from the contractor for the unsuccessful acquisition efforts,” the IG wrote.

The service has spent approximately $1.6 billion on development of eight National Security Cutters. The first cutter, the Bertholf, is in operation, while the second, the Waesche, is nearing completion, and six others are in various phases of development.

In developing the first two cutters, the Coast Guard identified structural changes to address design issues, the report said. If left uncorrected, these design issues could result in fatigue cracks, resulting in significantly increased maintenance costs and reduced service life. To correct the problems, structural changes to the Bertholf and Waesche will be made after delivery.

“The Coast Guard also renegotiated the contracts for the first two National Security Cutters and thus resolved outstanding contracting actions estimated at $300 million, added incentives for the contractor to control costs, and aligned the contracts more closely with U.S. Navy best shipbuilding practices. For National Security Cutters three to eight, design modifications have been identified for completion during the production phase,” Skinner wrote.

The report was addressed to Adm. Thad Allen, commandant of the Coast Guard.