Coast Guard Should Revisit Military Contract, Report Says

February 12th, 2007  
Team Infidel

Topic: Coast Guard Should Revisit Military Contract, Report Says

New York Times
February 12, 2007
Pg. 16

By Eric Lipton
WASHINGTON, Feb. 11 — The Coast Guard’s $24 billion ship- and plane-building deal with two of the nation’s biggest military contractors is fundamentally flawed, an independent Department of Defense assessment commissioned by the Coast Guard has concluded.
The report, by the Defense Acquisition University, does not explicitly recommend terminating the five-year-old deal with the contractors, Lockheed Martin and Northrop Grumman. But it says that if the arrangement is extended — negotiations are already under way — it should be redrafted so that it is no longer presumed that Lockheed and Northrop will play dual roles as program manager and primary builder.
The prime contractor “should be directed to consider the products and services of companies other than” those made by Lockheed and Northrop, said the report, a copy of which was given to The New York Times.
The project, known as Deepwater, is running way over budget. At the same time, all four major classes of ships that are planned or are in production have had significant problems, the report notes.
Under the current deal, the Coast Guard buys ships and planes from Lockheed and Northrop from a preset menu, with prices already negotiated. That approach should be discontinued, the report recommends, and instead, the Coast Guard should rely on a “government run, full and open competition” for purchases of at least some ships.
Even with the existing menu, Lockheed and Northrop can request higher prices for the ships, planes or electronics based on price escalation clauses “that are far broader than those allowed in major systems acquisition contracts” in the Defense Department, the report said.
Brendan McPherson, a Coast Guard spokesman, said the agency was still reviewing the report.
“Unfortunately we can’t change history,” Mr. McPherson said. “But we can look at where we are going with Deepwater, and figure out ways to make it better.”
The report will probably only intensify calls from Congress to radically change the terms of the deal.
“We’re looking for some real answers from the Coast Guard,” said Katharine Lister, a spokeswoman for Senator Maria Cantwell, Democrat of Washington and chairwoman of a Coast Guard oversight panel, which is holding a hearing on the program on Wednesday. “Shuffling management structures alone is not going to cut it.”
A spokeswoman for the partnership formed by Lockheed and Northrop did not respond to telephone and e-mail messages left on Sunday.

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