A new GAO (Government Accountability Office) report into the U.S. Coast Guard’s Offshore Patrol Cutter (OPC) program is critical of several aspects of the acquisition strategy and makes eight recommendations that, it says, could reduce risk.
The Coast Guard plans to spend over $12 billion over a period of 20 years to acquire a fleet of 25 OPCs to replace its aging fleet of Medium Endurance Cutters (MECs), which are either approaching or have exceeded their design service lives.
The GAO notes that the Coast Guard selected Eastern Shipbuilding Group (ESG) as OPC’s shipbuilder, exercising ESG’s contract option for detail design in September 2016 and the option for construction of the first OPC in September 2018. In October 2018, as ESG was about to begin construction on the first OPC, Hurricane Michael devastated the shipyard and the surrounding area in Panama City, Fla.
Subsequently, DHS granted ESG up to $659 million in cost relief to ESG for production of up to the first four OPCs and directed the Coast Guard to recompete the requirement for the remaining 21 cutters as expeditiously as possible.
The GAO says that Coast Guard accepted significant risk with the design, schedule, and cost—both before and after the hurricane—to get the cutters built quickly. But, it says “the cutter’s design is unstable, its schedule optimistic, and its cost estimate incomplete—making it likely that building it will take longer and cost more.”
Unstable Design. The Coast Guard authorized the start of construction for the first two OPCs despite not having a stable design, which, says GAO, is inconsistent with shipbuilding best practices. Proceeding towards OPC 3 construction before stabilizing the design—including maturing the design drawings of major ship systems—increases the risk of construction rework if changes are needed. This could further delay schedules and increase costs.
Deficient and Optimistic Schedule. Prior to the construction award for OPC 1, the OPC program’s schedule has contained significant deficiencies that are contrary to what is called for in best practices for developing schedules that GAO identified. Further, the revised post-hurricane delivery dates for the first four OPCs are optimistic and do not fully incorporate schedule risks, increasing the likelihood that the OPCs will not be delivered when promised.
Incomplete Cost Estimate. The cost estimate used to inform the program’s new cost goals did not include key analyses called for in best practices for developing cost estimates GAO identified. These key analyses include varying assumptions to determine how sensitive the estimates are to various factors and quantifying the effects of potential risks. Omitting these analyses undermines the credibility of the estimated program costs, increasing the risk that decision makers do not have a complete picture of the full range of costs the program could incur.