The Coast Guard needs to stabilize its design for the offshore patrol cutter before construction moves forward on the third vessel in its accelerated acquisition and build program that was “significantly disrupted” by 2018’s Hurricane Michael, the Government Accountability Office said in a new report.
In addition to an unstable design that could result in construction delays to fix deficiencies, GAO said the OPC program schedule has been mired in “significant deficiencies” including optimism on timetables that doesn’t fully take into account the hurricane’s schedule impact and cost estimates that omit key analyses.
Acting Homeland Security Secretary Chad Wolf told the Senate Appropriations Subcommittee on Homeland Security in February that the offshore patrol cutter “really will become the backbone of what the Coast Guard does.” A year ago, after DHS approved Eastern Shipbuilding Group’s request for limited extraordinary contract relief due to damage sustained to shipbuilding facilities in Hurricane Michael, Coast Guard Commandant Adm. Karl Schultz stressed that the OPC program “remains one of the department’s highest acquisition priorities.”
“The Coast Guard’s determination to deliver the OPCs in a timely manner has driven the program through key acquisition decisions despite significant design, testing, schedule, and cost risks, which remained or were exacerbated after the hurricane,” said GAO, which found that USCG made changes to adjust to Hurricane Michael’s impact but “has limited opportunities for oversight in the near term.”
The Coast Guard plans to spend more than $12 billion on 25 offshore patrol cutters. GAO was asked by the House Transportation and Infrastructure Committee to examine the OPC program and how USCG plans to deal with the aging medium endurance cutters: “how the Coast Guard revised the OPC program after Hurricane Michael, the extent to which the OPC program addressed major risks before proceeding through key acquisition decisions both pre- and posthurricane, and how the Coast Guard plans to mitigate the potential capability gap between end of service life for the MECs and the delivery of the OPCs.”
In March, the construction award for the second OPC was announced, along with rebaselining of the OPC program that divided it into two stages, with stage 1 consisting of OPCs 1 through 4 and stage 2 consisting of OPCs 5 through 25. The third OPC award is planned for April 2021, and the fourth in January 2022. The stage 2 request for proposals is planned for release by the end of December, with contractor submissions due by May 2021 and a contract award planned to take place in January 2022.
The Coast Guard awarded industry study contracts worth up to a total of $22 million to eight shipyards in March to review Eastern Shipbuilding Group’s existing design and identify potential risks and recommended revisions. “Our review of industry’s input on the Coast Guard’s plans to recompete the requirement for OPCs 5 through 25 found that certain industry partners raised concerns about using ESG’s design, stating that the Coast Guard would be providing the incumbent an advantage,” the GAO report said. “These industry partners also noted that this approach created technical, cost, and schedule risks because any potential rework to address design deficiencies could be costly and fall under the responsibility of the non-incumbent shipbuilder.”
Scheduled baselines for the first phase were also revised: completion of initial operational testing and initial operational capability were delayed by 21 months, to no later than September 2025. USCG plans to conduct a production readiness review for OPC 5 — the beginning of the second phase — by December 2023.
“The OPC program faced a number of program risks before the Coast Guard awarded construction of OPC 1 in September 2018, a month before Hurricane Michael. However, since the hurricane, these risks have been carried forward and in some cases exacerbated. We found that the program faces risks in three key areas: (1) design and testing, (2) schedule and (3) cost. Further, ESG’s deficient business systems limited Coast Guard’s insight into the program’s cost and schedule progress. Additionally, the program’s lack of a comprehensive risk management process limits the program’s ability to effectively manage cost and schedule risks,” GAO wrote. “Coast Guard officials have emphasized the urgent need to push forward with the OPC program to address the potential capability gap resulting from the aging MEC fleet and, more recently, to prevent ESG’s financial insolvency resulting from the hurricane. As such, the OPC program continued to move forward with key acquisition decisions despite these program risks.”
GAO found that at the start of OPC 2 construction in March design drawings contained outstanding concerns and are not fully certified, 3D modeling of distributive system designs is incomplete, and design of the boat davit is immature.
“The OPC program will likely face additional design and operational risks in the future as a result of the program’s current test strategy. As noted earlier, the Coast Guard does not plan to conduct initial operational testing of the OPC until September 2024 at the earliest, and potentially as late as September 2025,” the report said. “This would be about 2 years after OPC 1’s planned delivery and after OPCs 2 and 3 are planned to be delivered.”
“…Without revising its test and evaluation master plan for stage 1, the OPC program cannot identify the associated cost, schedule, and operational risks with its testing strategy, which may limit the Coast Guard’s ability to determine the capabilities or limitations of the OPC for operational use. This approach also further increases the risk that any design challenges related to meeting mission requirements will not be discovered until after delivery of OPC 3, which could lead to additional costs to the program or the OPCs not fully meeting operational requirements.”
Cost estimates developed in March 2020 to support rebaselining the cost goals for stage 1 of the OPC program lacked a sensitivity analysis, lacked a risk and uncertainty analysis, were not informed by a current technical baseline document, and were not independently assessed, GAO said.
GAO made eight recommendations, four to DHS and four to the Coast Guard, including revising the OPC’s acquisition program baseline for stage 1 to include OPC’s delivery dates, ensuring the OPC design for stage 1 is stable prior to approval of construction start for OPC 3, ensuring the Coast Guard Component Acquisition Executive revises Coast Guard’s acquisition policy to include criteria and a methodology for demonstrating design maturity for shipbuilding programs that are aligned with shipbuilding best practices, and ensuring incorporation of better developed cost estimates and risk analyses. DHS concurred with all of the recommendations.
“While the program is taking steps to improve its risk management approach, its current approach is not timely or comprehensive,” the report said. “Given the OPC program’s track record in carrying risks forward, it is imperative that the program take a more robust risk management approach to help ensure these risks are properly documented and addressed.”