Coast Guard Cancels Patrol Boat Contract
Service says it will manage FRC buys without Lockheed, Northrop Grumman

The Coast Guard announced Wednesday that it has canceled a contract for new patrol boats with Deepwater partners Lockheed Martin and Northrop Grumman and instead will manage the acquisition itself.

Citing anticipated cost-savings and on-time delivery as reasons for deciding to handle the purchase of 12 fast-response cutters in-house, officials said taxpayers would be “better-served” than buying the vessels through prime contractor Integrated Coast Guard Systems, a joint venture between Lockheed Martin and Northrop Grumman.

Officials said a business analysis done on the acquisition shows the Coast Guard might save enough money by eliminating the middle-man to buy 13 ships for the price of a dozen.

“It’s in the best interest of the taxpayer, the best value,” Commandant Adm. Thad Allen said Wednesday during a press conference.

Under the Deepwater program — a 25-year, $24 billion project to replace the service’s ships and aircraft — the Coast Guard originally planned to buy 58 FRCs.

The acquisition was to begin in 2018 and end by 2022. But troubles with the current fleet of 110-foot and 123-foot patrol boats prompted the service to accelerate its FRC purchase plans, with an aim to design and build the first ship starting in 2007.

At the request of the Coast Guard, ICGS began design work on the FRC. But that effort was suspended when questions arose about the design’s weight and performance capabilities.

After spending roughly $26.7 million on what promised to be an all-composite, state-of-the-art design for a new FRC, the Coast Guard, facing a shortfall in meeting its operational requirements for patrol boats, began exploring other options.

The service announced it would continue pursuing the design of an all-new FRC, which it now refers to as the FRC-A but also would solicit input from industry for an immediately available replacement, or FRC-B.

A request for information from industry on potential FRC-Bs garnered at least 26 patrol boat designs from 17 companies.

Buoyed by the response, the Coast Guard said Wednesday it will publish a request for proposal — an announcement soliciting contract bids — for the FRC-B in May.

The service estimates the contract is worth $592 million. It will be for the purchase and modification of at least a dozen patrol boats that will meet Coast Guard specifications and will be compatible with other Deepwater ships and aircraft.

The Deepwater contract was awarded in 2002 to ICGS, which, as prime contractor and systems integrator, is responsible for furnishing assets, including ships, aircraft and electronics, that work together to meet Coast Guard mission requirements and are compatible with other military assets, including the Navy's.

The acquisition program, once heralded as groundbreaking, has come under fire in the past two years from lawmakers and federal oversight agencies for mismanagement, questionable construction decisions and lack of oversight.

But Allen said the FRC-B cancellation is not a sign that the service is discontinuing its relationship with ICGS.

“We are not abandoning the idea of a system architecture. What we are doing is 15 different systems. These are individual acquisitions that support the system,” Allen said.

Under the contract, the Coast Guard maintained the right to award contracts outside ICGS. Rear Adm. Gary Blore, the Deepwater program executive officer, said the service will analyze all future acquisitions to determine whether assets should be acquired through ICGS or done in-house.

“For any new starts, we’ll do a business-case analysis and figure out what’s the best value for the government,” Blore said.

Communicating by e-mail after a grand opening ceremony for a new Deepwater shipboard operations training facility in Petaluma, Calif., ICGS spokeswoman Margaret Mitchell-Jones expressed support for the Coast Guard’s decision, yet at the same time, seemed flummoxed by it.

“It is difficult to comment as we have not seen their new program plan. Our plan included robust competition, over a robust requirement set in keeping with the program's system-of-systems strategy,” Mitchell-Jones said. “We also obtained a commitment from our Tier One supplier, Northrop Grumman Ship Systems, not to compete in order to ensure an open and unbiased competition.”

But, she added, “We will continue to provide any support we can to our Coast Guard customer as they further refine their requirements moving forward.”

The Coast Guard estimates that the first FRC-Bs will be delivered in 2010. Although the service plans to buy ready-made patrol boats, they will need modifications to meet Coast Guard requirements, officials said.

The FRC-B is likely to be between 120 and 160 feet long. It will be used for homeland security patrols, counterdrug operations, migrant interdiction and fisheries enforcement. FRC-Bs are expected to deploy up to five days at a time and travel at speeds of more than 28 knots.