Feb 14 2002


WASHINGTON, DC - U.S. Senator Richard C. Shelby (R-AL), Ranking Member of the Transportation Appropriations Subcommittee, today commented on Coast Guard Appropriations for Fiscal Year 2003:

"Thank you, Madame Chairman. And welcome Inspector General Mead and Admiral Loy, for what may be one of your final appearances before this Subcommittee. Admiral Loy, I don't want to miss this opportunity to acknowledge your contributions to, and your stewardship of the Coast Guard."

"You are to be commended for your service to the Coast Guard and this nation. While we have not always agreed on tactics, priorities or the best way to accomplish the mission, we have always agreed on the need to support the varied missions of the Coast Guard, the need to recapitalize the Coast Guard's asset base, and to make the Coast Guard a meaningful and attractive career choice for young Americans. While we have agreed on many, if not most issues facing the Coast Guard, we do have healthy differences on how to address many of these challenges. I'd like to spend a few minutes on some of those differences.

"I'm concerned that the Coast Guard is trading away capability and coverage in the National Distress System Modernization program in order to trim costs after receiving contractor estimates which were three times Coast Guard projections. The promise of this modernization was the capability to precisely locate a boater in distress. Unfortunately, the Coast Guard seems willing to trade that capability away and settle for just knowing in what direction the distressed mariner is in.

"On top of that, the Coast Guard's own capital budget doesn't appear to fully fund even this less capable system. My staff tells me that this procurement appears to be underfunded by at least $110 million. If we're going to do this modernization, and I believe we must, why would we buy a system that has coverage gaps and dumbs down capabilities?

"Why would we want to give up on that critical 9-1-1 lifesaving feature when time is of the essence in an emergency situation? Local police and fire officials have had that capability since the 1970s – time is long past for the Coast Guard to have this capability as well.

"The Inspector General's recent report on National Distress System Modernization concludes that we should develop a firm plan before contract award. This is good advice and the Coast Guard should not delay in developing that plan.

"Unfortunately, the National Distress System Modernization problems are a piece of cake compared to the Integrated Deepwater System procurement. For four years, this Subcommittee has expressed concern about the risks inherent in the Coast Guard's big bang procurement strategy for Deepwater.

"We have questioned the affordability, the procurement risk, the lack of exit strategies, the Coast Guard's blind eye to changing circumstances, and the impact that Deepwater's funding tail has on other capital investments that the Coast Guard must make to maintain its capital plant.

"And, we're at this critical point just at the time when the Administration is saying that we have to do more for Homeland Security; when the Congress is saying that we cannot neglect other missions including search and rescue and fisheries enforcement; and when the Inspector General is saying that the National Distress System Modernization is in danger of being underfunded.

"The Coast Guard's capital numbers do not add up. And, it appears that the Department is not reviewing and restructuring the capital budget to accommodate the other internal challenges within the A,C&I budget line and the changing circumstances since the attacks of September 11th..

"To illustrate the changing nature of the operational mission requirements facing the Coast Guard, I would draw your attention to the two charts I have here. Admiral, these charts should look familiar – they came from a Coast Guard presentation about the nature of the threat and the 'new normalcy.'

"The first chart depicts the positioning of Coast Guard assets on the 10th of September. That pre-terrorist attack deployment can be characterized as being in the transitional zone between brown and blue water. The second chart depicts the redeployment of those assets a week later to better meet the emerging threat. That chart shows Coast Guard assets hugging America's coastline, deployed almost exclusively in the littoral zone – in brown water.

"Many of you will recall the press pictures of Coast Guard cutters, I believe it was a 378 foot cutter on station in New York harbor, and more recently, the substantial Coast Guard presence in New Orleans for the Super Bowl. Both of those deployments were appropriate and necessary in light of the threat.

"The events of September 11th , as graphically illustrated on the charts, dramatically changed the Coast Guard's mission profile. The capital budget request, as represented by Deepwater, does not reflect that change.

"That's not the only problem with Deepwater. Forget for a moment the disconnect between the mission profile and the budget request. From my experience on this subcommittee, the Department has struggled with large and complicated procurements. Inspector General Mead could go on for hours about the Boston Central Artery; the Advanced Automation System; WAAS and plenty of other procurements.

"My experience on other subcommittees leads me to believe that this problem is not unique to the Department of Transportation. The one conclusion we can draw is that the larger and the more complicated the procurement, the more certain the overruns and schedule slippages.

"Deepwater is already slipping, even though it hasn't delivered anything but studies and internal machinations. Yet for the fourth year in a row, we're being asked to appropriate a blank check – this year for $500 million – and being asked to trust an untried, unproven, and risky strategy.

"In some situations, complexity and size are unavoidable, but not here. Deepwater is basically four categories of procurements: ships, aircraft, sensors, and communications systems. It's almost as though someone sat around and asked what the most difficult and risky way to recapitalize the Coast Guard's long range assets would be – here it is.

"But, the problems don't end there. If you combine funding projections for Deepwater and the National Distress System Modernization, they consume 80% of the capital appropriation for the next five years. If history is any guide, these programs will consume an even greater portion of the capital budget in the future as their costs escalate.

"Deepwater is already squeezing out other capital projects. If you take a look at the Coast Guard's 5-year capital plan, you see that the number of projects shrinks by more than 60% this year alone. That includes the Coast Guard family housing appropriation which isn't programmed for any funding in fiscal years 04 and 05. I know that will come as a surprise to Secretary Mineta and to the Coast Guard enlisted personnel.

"The Coast Guard magazine regularly highlights how important improving Coast Guard housing is for retention and quality of life, but this budget tells me that those issues get sacrificed at the altar of Deepwater.

"Now, it's hard to envision cost escalations in Deepwater even before contract award, but that is what the budget presents. After multiple briefings characterizing Deepwater as a 20 year, $500 million per year procurement, the capital plan now inflates future funding.

"To my knowledge, there is not other procurement line in the transportation budget that gets a COLA. This inflation adjustment effectively robs all the other capital projects of an additional $292 million over the next four fiscal years. Why then, is the Coast Guard unnecessarily bundling these four procurements categories and ignoring changing circumstances, the warning signals, and the crowding out occurring in the AC&I budget? I wish I knew.

"Simply put, this procurement strategy makes little sense and is a black hole in the Coast Guard's capital budget. There are many reasons to be concerned by the Deepwater program:

. This procurement was justified by a cooked study;

· The law requires a certification that Deepwater and the National Distress System Modernization are fully funded within the capital plan – there is a tab for that certification in the budget justification, but no certification;

· The budget outyears have been inflated, yet we still don't know what we are buying;

· The law requires details on assets to be procured, but the budget justification is non-responsive;

· Last year, this was a twenty-year procurement – now, the Coast Guard says it could last as long as 30 years;

· Yet, we're being asked to appropriate another blank check – bringing the total to $890 million.

"The responsible thing for Congress to do is to withhold further funding for this program until it has been restructured to meet the changing mission profile, restructured to meet other necessary capital reinvestments, and restructured to minimize the procurement risk.

"Now, in light of these complaints, I know some will question my commitment to modernizing the Coast Guard's capital plant. Let me repeat what I have said for the past 4 years as Chairman and ranking member of this subcommittee: the Coast Guard needs to modernize or replace its aircraft, communications equipment, and especially its ships.

"Our goal with these procurements and the rest of the Coast Guard's capital budget must be to optimize the mix of tools in the hands of the men and women of the Coast Guard. I would think that we would take the extra time to get it right and to minimize the risk to the taxpayer and the Coast Guard's and the Department's other priorities.

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