Coast Guard takes lead of $24B modernization deal

Published 8:29 pm Wednesday, April 18, 2007

Lockheed Martin Corp. and Northrop Grumman Corp. will no longer manage a controversial $24 billion modernization program, the head of the U.S. Coast Guard said Tuesday.

The companies lengthened eight Florida-based cutters that now have to be decommissioned because they have structural problems, Coast Guard Commandant Adm. Thad Allen said in prepared remarks delivered to reporters.

“We’ve relied too much on contractors to do the work of government as a result of tightening budgets, a dearth of contracting expertise in the federal government, and a loss of focus on critical governmental roles and responsibilities in the management and oversight of acquisition programs,” Allen said.

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Under the revised plan, the Coast Guard will now take over the management role for the entire Deepwater program, which includes contracts to design and build 91 cutters, more than 100 small surface ships and 244 new or converted helicopters and airplanes.

Deepwater has been probed by recent investigations and on Capitol Hill for skyrocketing costs, design flaw and lax contract oversight.

Allen said numerous factors including failure to understand the needs of the industry and government, to predict and control costs and balancing competition and technology offerings from the private sector have been contributing factors.

The Coast Guard said it is decommissioning the eight 123-foot patrol boats converted under the Deepwater deal. They were based in Key West, Fla.

Any effort to repair these boats and return them to service would cost the agency more than $50 million, Allen said.

The agency is expected to have lost $30 million to $60 million on the program and will pursue all legal options to recoup funds.