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.


About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

Reader Comments

Sat, Jun 27, 2009 Michael DeKort

In the report, Skinner purposely failed to include refunds for the C4ISR systems the Coast Guard is entitled to recover. Instead, he transparently and boldly pins nearly everything on Northrop and completely omits any reference to the 123 C4ISR issues. These problems relate to safety and security problems, huge unjustified expenditures of money and massive cover up. This means it will be much harder for the government to recover the Coast Guard’s investments in Lockheed-Martin systems designs. Basically the government is sabotaging its own case. I believe the report reveals a significant level of panic and desperation from the contractors and certain government officials, who are trying to cover up their roles in the ordeal. While the report appears to sabotage my federal lawsuit, which I filed to recover funds for the American people and to punish those who committed fraud (and more), it also emboldens me. It tells me that our case is very strong. It also tells me that the Coast Guard and the contractors are desperate to make this entire fiasco go away. Of course, we may have to treat some senior government officials as hostile witnesses to prove the cover up and fraud. So be it. They should not have betrayed their positions of trust. The DHS IG report left out chronic, ongoing, long-term problems, which are far more damaging than those that have already been widely reported. These safety and security problems incurred huge, unjustified financial expenditures and were hidden under a massive cover up. The C4ISR systems, particularly topside equipment, should have been listed in Skinner’s report. I also have documents to prove that Skinner's report should have listed refunds relative to TEMPEST, When I questioned the DHS IG’s lead auditor about the errors and other relevant issues he told me that:  they did not have enough time to work the case;  they had missed key items like the ones I described;  their conclusions were wrong; This spring, the lead investigator for Congressman Oberstar’s Transportation Committee told me he knew that the DHS IG had gotten those same areas wrong in their report--and that I had gotten it right. He confirmed what the DHS IG auditor told me and he said the auditor had also personally told him. The investigator also told me about an episode on the bridge of one of the 123s the night before our 4/2007 hearing. He said the commandant confessed to the congressman present that he had not told the truth, had not been cooperative, and that he knew the issues existed. He apologized and promised to get it right from that point forward. Of course, this occurred while the most crucial bits of data the committee had requested from the Commandant filtered in just hours before the hearing. This after they were already weeks overdue. (The original response would not fit in this space. Proof was listed for each ascertain)

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