Case Study 13: From Coast Guard, GAO-12-741, July 31, 2012

The Coast Guard’s legacy vessels were either approaching or had exceeded their designed life expectancies. The Coast Guard is replacing these vessels with a more capable fleet; however, cost and management problems have led to delays in the delivery of new vessels. From fiscal years 2005 through 2011, the physical condition of the Coast Guard’s legacy vessels was generally poor; and the Coast Guard had taken two key actions to improve the vessels’ condition: reorganizing its maintenance command structure and implementing sustainment initiatives for portions of its legacy vessel fleet. The Coast Guard’s primary measure of a vessel’s condition is the operational percent of time free of major casualties (a major casualty is a deficiency in mission essential equipment that causes the major degradation or loss of a primary mission). This measure showed that the 378-foot high endurance cutters (HEC), the 210-foot and 270-foot medium endurance cutters (MEC), and 110-foot patrol boats generally remained well below target levels from fiscal years 2005 through 2011. To improve the condition of the vessel fleet, in 2009, the Coast Guard reorganized its maintenance command structure to focus on standardization of practices, and reported it was on schedule to complete sustainment initiatives by fiscal year 2014, which were intended to improve vessel operating and cost performance.

Annual maintenance expenditures for the legacy vessel fleet—such as those associated with scheduled maintenance costs—declined from fiscal years 2005 to 2007 and then rose from fiscal years 2007 to 2011; and the Coast Guard’s maintenance cost estimating process did not fully reflect best practices. Scheduled maintenance expenditures rose from $46.1 million to $85.2 million from fiscal years 2008 to 2009, an increase Coast Guard officials attributed to better identifying maintenance needs and receiving supplemental funding. GAO’s Cost Estimating and Assessment Guide states that a high-quality and reliable cost estimate includes best practice characteristics, three of which are relevant to the Coast Guard’s process: well documented, comprehensive, and accurate. The Coast Guard’s process partially met these characteristics. For example, it was partially comprehensive because it defined the program, among other things, but did not document all cost-influencing ground rules and assumptions (e.g., inflation rate). Annual cost estimates for legacy vessel fleet maintenance that incorporate established best practices would have provided better information to inform the Coast Guard’s decisions in effectively allocating available resources in the constrained federal budget environment.

GAO recommended that to strengthen the comprehensiveness, documentation, and accuracy of the Coast Guard’s annual depot-level maintenance cost estimates for its legacy vessel fleet, the Secretary of Homeland Security should direct the Commandant of the Coast Guard to ensure that the Coast Guard’s annual depot-level maintenance cost estimates conform to cost-estimating best practices. In July 2013, the Coast Guard issued the Government Estimating for Ship Repair Process Guide, which the Coast Guard reported was to incorporate best practices for cost estimating that could be adapted for use in estimating the cost of legacy vessel repairs. The document made improvements in each of the three relevant characteristics: comprehensiveness, documentation, and accuracy.

GAO reported these findings on July 31, 2012 in Coast Guard: Legacy Vessels’ Declining Conditions Reinforce Need for More Realistic Operational Targets, GAO-12-741.