advice from a fake consultant

out-of-the-box thinking about economics, politics, and more... 

Tuesday, June 15, 2010

On Poor Management, Or, Did You Know There Was Another Deepwater?

It is by now obvious that even after we stop the gentle trickle of oil that’s currently expressing itself into the Gulf of Mexico (thank you so much, BP) we are not going to be able to get that oil out of the water for some considerable length of time--and if you think it could take years, I wouldn’t bet against you.

While BP is the legally responsible party, out on the water it will be up to the Coast Guard to manage the Federal response, and to determine that BP is running things in a way that gets the work done not only correctly and safely, but, in a world of limited resources, efficiently.

Which brings us to the obvious question: can the Coast Guard manage such a complex undertaking?

While we hope they can, you need to know that the Coast Guard has been trying to manage the replacement of their fleet of ships and aircraft for about a decade now…and the results have been so stunningly bad that you and I are now the proud owners of a small flotilla of ships that can never be used, because if they go to sea, they might literally break into pieces.

It’s an awful story, and before we’re done you’ll understand why Deepwater was already an ugly word around Headquarters, years before that oil rig blew up.

“I am the very model of a modern Major-General,
I’ve information vegetable, animal, and mineral,
I know the kings of England, and I quote the fights historical
From Marathon to Waterloo, in order categorical;
I’m very well acquainted, too, with matters mathematical,
I understand equations, both the simple and quadratical,
About binomial theorem I’m teeming with a lot o’ news –
With many cheerful facts about the square of the hypotenuse.

--William S. Gilbert and Sir Arthur Sullivan, The Pirates of Penzance

We’re going to try to keep today’s story relatively short (we won’t succeed, I’m afraid), and that means I’ll be a bit tighter with words than I would be normally, so let’s get right to the heart of the matter:

The US Coast Guard (USCG) works its ships and aircraft too hard, with inadequate downtime; as a result an old fleet is even older than its years.

Just like an old car, you have to work harder at maintenance, but things keep breaking down, and the costs really start to add up.

It’s not entirely their fault: they have more and more to do, especially after September 11th; they’re also expected to operate farther from home, and the tours of duty are longer.

At the same time the money they get to do it all keeps going down.

This circle had to be squared.

A decision was made to begin planning for the modernization or replacement of pretty much everything USCG owns that operates out in the deep water (that’s more than 50 miles from shore), and that’s how the Deepwater program was born.

Total assets involved: roughly 90 large ships, over 100 small boats, about 250 aircraft, and not quite $25 billion dollars.

USCG was convinced that they did not have the ability to manage this sort of program on their own, and they decided to procure everything from one prime contractor, a Lockheed/Northrop Grumman partnership.

The idea was that they would tell the contractor what they wanted the finished product to be able to do (in this case, the product was a fleet of ships and aircraft that could interact as a system), and the contractor would determine how to manage the program to completion.

With the “management” part of the process out of USCG’s hands, all the Admirals would have to do was “supervise” the contractor to make sure things were on time and on budget.

They did that by creating teams that would each watch over a small portion of the bigger picture, coordinating with each other and USCG senior management.

The next step was to determine what ships and aircraft to build; today we’ll concentrate on just four elements of the system, which should be enough to make the picture clear.

--The Coast Guard owned a number of 110 foot patrol boats, and they decided to refurbish them, to provide new capabilities within a 13-foot longer hull. This required the ships to be cut apart, and then reassembled.

As it turned out, that idea sucked.

One way to interpret the results would be to say the first eight newly-delivered craft were so unseaworthy (the hulls of the “brand-new” ships were actually cracking), so full of electrical problems, and so unable to protect classified communications that they never entered service, and they will be scrapped.

Another view: for quite some time Baltimore was continuously guarded by eight Coast Guard vessels, and the city was incredibly safe—as long as none of them had to actually leave the pier or do anything.

The loss: about $100 million. USCG is trying to get the money back.

“It’s going to be difficult to counter the bad publicity we’ve had despite the best efforts of our communications team,” admitted J. Rocco Tomonelli, director of Coast Guard business development at Northrop Grumman.”

--From the article Coast Guard May Face Rough Seas as it Takes Control of Deepwater, National Defense Magazine, October 2007

--USCG needed a big ship with the ability to operate as far away as the Middle East, and the National Security Cutter was it.

The job required that the vessels delivered had to be structurally sound for use in the North Pacific’s very rough seas for 30 years. The contractor was convinced the ships were sound, the Coast Guard was not, and the Navy was brought in to settle the argument.

USCG won, the taxpayer, again, lost.

An odd, but not surprising, solution was found. If USCG would just agree to not ask that the ships be so annoyingly capable, everything would be fine…so they did; this was done by assuming the ships would be at sea fewer days every year.

We now know that USCG expected some of the ships’ structural components to only last three years in actual service.

In 2006 it was reported that the first two hulls may or may not be fixable, and may have to be scrapped.

The first ship delivered, the Cutter Bertholf, was not allowed to perform any missions for almost seven months after commissioning due to its own failure to perform as expected. In October 2008 Bertholf conducted its first “shakedown” cruise and officially entered operational service.

More of these ships are being built, with fixes hopefully in place. Two are in acceptance trials; a funding request exists that would expand the fleet to five.

Our cost?
At least $650 million per ship.

--USCG planned to buy a dozen Fast Response Cutters; the contractor wanted to use newfangled composite hulls, reportedly for longer life and less maintenance.

That idea also sucked.

Officially, and I quote: “…the cutter design satisfied contract terms but did not meet Deepwater mission needs.” The resulting ships were judged to be too heavy and lacking in performance.

It is suggested that the contractor wanted to build this type of hull because they had a new composite facility available and there was money to be made. We’ll discuss that in a minute.

The plan now is to build the ships with metal hulls.
USCG is not attempting to recover the lost money on this one.

--USCG wanted Unmanned Aerial Vehicles (UAV) for the new ships. A fancy-schmancy tilt-rotor design that was already somewhat developed had to be abandoned because they couldn’t afford to produce the thing.

Current thinking is to steal something from the Navy’s UAV development program, stick a USCG radar system on it, and call it good.

The GAO and the Congressional Research Service have been looking into all this, a lot; they feel USCG has failed to properly resource the teams that are supposed to be supervising this process.

Excessive workload, transferring people in and out, failing to put team members in locations that are close to other team members, and failing to fill leadership positions were all issues noted in the reports.

The idea that the contractor would “own” the whole process, might work against USCG interests, and that USCG would be at their mercy was also noted. (Remember those fiberglass hulls?)

We’re told that teams working on the National Security Cutter tried to warn USCG senior management about the problems with the first few ships, and that they were ignored.

Total cost of all the mistakes: more than $1.5 billion.

Frankly, this is all Admiral Stuff, and the Admirals at USCG have nothing to be proud of, based on this part of the record.

USCG is now trying to turn all this around by taking over management of the program themselves, and although there is reason to believe things may be somewhat better, even that “fix” is creating problems.

For example, it’s reported that USCG is moving ahead on acquisition decisions even though they haven’t fully decided what the designs should be.

At this point, however, USCG has little choice: they can’t wait several years to train up a new crew of contract managers, then design, then build.

That’s because, right now, things are very bad for the Fleet: of the first 12 ships USCG sent to help after the earthquake in Haiti…10 broke, at various times, and that kept them from conducting rescues until they were fixed. Two of those had to return to the US for major repairs.

And here’s where the circle closes.

Admiral Thad Allen, who’s running the show on the Gulf Coast, spent the past four years as Commandant of the Coast Guard, and before that as Coast Guard Chief of Staff…which means, for good or for ill, he’s covered in Deepwater all the way up to his Cutterman Insignia.

The question now is: was he the reformer who fixed this stuff when he finally got the chance, or was he part of the problem in the first place?

I could not get the answer to this most critical question, so all I can tell you is to watch very, very, carefully—and don’t be afraid to assume the worst, until we truly do know better.

No comments: