Correction to This Article
A March 25 article about the Coast Guard's Deepwater program incorrectly said that former homeland security secretary Tom Ridge declined to comment. Ridge said that when he joined the board of a company later bought by Lockheed Martin, the firm had no plans to sell and expected to grow as a stand-alone company.

Coast Guard's Purchasing Raises Conflict-of-Interest Flags

By Spencer S. Hsu and Renae Merle
Washington Post Staff Writers
Sunday, March 25, 2007

Four of the seven top U.S. Coast Guard officers who retired since 1998 took positions with private firms involved in the Coast Guard's troubled $24 billion fleet replacement program, an effort that government investigators have criticized for putting contractors' interests ahead of taxpayers'.

They weren't the only officials to oversee one of the federal government's most complex experiments at privatization, known as Deepwater, who had past or subsequent business ties to the contract consortium led by industry giants Northrop Grumman and Lockheed Martin.

The secretary of transportation, Norman Y. Mineta, whose department included the Coast Guard when the contract was awarded in 2002, was a former Lockheed executive. Two deputy secretaries of the Department of Homeland Security, which the Coast Guard became part of in 2003, were former Lockheed executives, and a third later served on its board.

Washington's revolving-door laws have long allowed officials from industry giants such as Lockheed, the nation's largest defense contractor, to spend parts of their careers working for U.S. security agencies that make huge purchases from those companies, though there are limits.

But Deepwater dramatizes a new concern, current and former U.S. officials said: how dwindling competition in the private sector, mushrooming federal defense spending and the government's diminished contract management skills raise the stakes for potential conflicts of interest.

Deepwater also illustrates how federal ethics rules carve out loopholes for senior policymakers to oversee decisions that may benefit former or prospective employers. These include outsourcing strategies under which taxpayers bear most of the risks for failure, analysts said.

There is no sign that any of the retired admirals or former Lockheed officials did anything illegal.

But the connections between the agencies and the contractors have drawn the attention of the DHS inspector general, Richard L. Skinner. "That is on our radar screen," he said. "It's something we are very sensitive to."

Skinner told House members last month that the Coast Guard -- acting "under the dominant influence" of haste and inadequate staffing -- signed a Deepwater contract in June 2002 that improperly turned over key design and oversight decisions to contractors.

The Coast Guard failed to hold them accountable and left its own commanders "reluctant . . . to exercise a sufficient degree of authority to influence the design and production" of its vessels, Skinner said.

So far, four major classes of ships planned or produced for Deepwater have design flaws that have limited their performance, raised costs or delayed production. The tab for eight dry-docked 123-foot patrol boats alone is $100 million and climbing, the Coast Guard commandant, Adm. Thad W. Allen, has said.

"The Treasury is being looted here. The taxpayer is being fleeced," Rep. Stephen F. Lynch (D-Mass.) said in a House hearing into Deepwater earlier this year.

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