Shocker! Coasties Want Money Back for Crappy Ships (Updated)

It seems like less than a year ago that I was sitting in Northrop Grumman's exhibit area at the Euronaval trade show in Paris, listening to Coast Guard officials issue loving platitudes about their genius partners in industry. The Coast Guard's multi-billion dollar Deepwater modernization program -- despite a few hiccups -- was going swimmingly, they all told us.

Actually, it was less than a year ago. My how times flies. These days, the Coast Guard is less than happy with Integrated Coast Guard Systems, the industry consortium made up of Northrop Grumman Ship Systems and Lockheed Martin. Last week, as the Seattle Times reports, the Coast Guard took the "first legal step to recoup the $100 million loss of the eight cutters from the contractor. ICGS said it is evaluating the Coast Guard letter demanding a refund."

That's a very unusual move in the ordinarily-chummy military-industrial complex. Worse still, the Department of Homeland Security's Inspector General says that the companies aren't being cooperative with his investigation. As Defense Daily (subscription only) reports:

Richard Skinner, the IG, said his office is having difficulty getting accesses to people and records belonging to __Integrated Coast Guard Systems __(ICGS) during its investigation of the cutter program. For instance, Skinner said that ICGS wants a lawyer to be present whenever one of its employees meets with the IG, something that would jeopardize the confidentiality of the encounter.

This is something Skinner said he had never seen before as a government inspector.

Not all aspects of the program are a disaster, as David Axe has noted previously. But the current tensions between the industry team and Coast Guard continue. And they underscore just how bad things can get when you basically outsource oversight of big projects to the very companies that are supposed to be overseen.

UPDATE: 60 Minutes did Deepwater last night, saying that "the $24 billion project has turned into a fiasco that has set new standards for incompetence." (Here's the vid.)

*From the outset, the Coast Guard didn’t have the resources to run a $24
billion project. So it outsourced the entire program to the private sector—not just the construction—but the day-to-day management of the contract. It went to a company called Integrated Coast Guard Systems, a joint venture of Lockheed Martin and Northrop Grumman, that had been formed specifically for this job. Not surprisingly, the joint venture picked Lockheed Martin and Northrop Grumman to do the lion’s share of the work.

One of the first people to send up a warning flare about the contract was Captain Kevin Jarvis, who, until his retirement last fall, commanded of the Coast Guard’s Engineering and Logistics Center.

“People have told us, ‘Look, the people that were supposedly managing the contractors were, in many cases, the contractors themselves.’ The same companies. Correct?” Kroft asks.

“Correct. Correct. People say that this is like the fox watching the henhouse. And it's worse than that,” Capt. Jarvis says. “It's where the government asked the fox to develop the security system for the henhouse. Then told 'em, ‘You're gonna do it. You know, by the way, we'll give you the security code to the system and we'll tell you when we're on vacation.’ It was, in my opinion, it was that bad. And that's why we have some of the problems we have.” *

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* Coast Guard Sinking Even Faster

* Coast Guard Slams Contractors