Waxman Sees Potential Coverup in Ship Contract
Faulting Program Managers, He Says Warnings About Design Deficiencies Were Hidden

By Spencer S. Hsu
Washington Post Staff Writer
Friday, February 9, 2007

Managers of the U.S. Coast Guard's $24 billion fleet-overhaul program appeared to cover up a Navy engineering report that highlighted design flaws in a new flagship cutter under scrutiny by government investigators, a senior House Democrat said yesterday.

Rep. Henry A. Waxman (D-Calif.), chairman of the House Oversight and Government Reform Committee, said the December 2005 report included "bottom-line" warnings in red ink on a pair of briefing slides that concluded the national security cutter, as it is known, would not last the required 30 years.

But the warnings were deleted in a copy of the report given by Coast Guard officials to Department of Homeland Security auditors and altered in an edited version included in a wider briefing on the $1 billion-a-year fleet-replacement program, known as Deepwater, to the Coast Guard's commanding officer at the time, Waxman said.

"Sugarcoating of the situation may have made life easier for the program management, but it certainly is a disservice to you, to the Coast Guard community and to the taxpayers of this country," Waxman told DHS Inspector General Richard L. Skinner in a hearing.

The accusations, under investigation but partly disputed by the Coast Guard commandant, Adm. Thad Allen, came as Waxman's oversight panel focused on two giant DHS contracts that give unusual leeway to private firms. The companies have been given the authority to plan, design and deliver an overhaul of the Coast Guard's ships, aircraft and systems, and, separately, to build a "virtual fence" at U.S. borders using a blend of surveillance technology and physical barriers.

Waxman challenged the deals, saying they gave contractors too much power and taxpayers too little oversight. As of December, he said, 65 of 98 people hired by DHS to oversee the border project, known as SBInet, were themselves contract employees. So were 76 of the 135 tracking Deepwater, reflecting a dearth of government specialists, he said.

"There seems to be no task too important to be outsourced to private contractors," Waxman said. Federal agencies "outsource thinking through what they even want, then they outsource doing it, then they outsource oversight."

Gregory L. Giddens, director of SBInet, acknowledged difficulty hiring federal contract managers but said contract staff members are support personnel who only gather and relay data. "Support contractors do not provide oversight for prime contracts. That is a government responsibility," he said.

On the Deepwater project, Skinner's office reported last month that the Coast Guard's failure to properly oversee contract team Northrop Grumman and Lockheed Martin led to problems with the new cutter. The flaws may reduce the cutter's operating days by as much as 20 percent and could help to potentially double the cost of completing the first two of eight planned vessels, Skinner said.

Skinner called Coast Guard officials' handling of the Navy report "highly troubling" and a sign that they wanted to conceal flaws because they had committed to construction.

Allen vowed to investigate, but he noted that information about a hull-fatigue problem came from an interim Navy report, and its data were included elsewhere in the later briefing to his predecessor.

He said the Coast Guard this week changed the contract to lower the cutter's required operating days by 20 percent, blaming the gap cited by Skinner on confusing terms in the original contract.

Allen said lead ships in new vessel programs typically experience problems. He said the Coast Guard needs to quickly replace aging vessels.

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