How to Make USCG Modernization Unaffordable


07/08/2011 Recently on AOL Defense, Michael W. Jones argued that maintenance costs are eating the modernization budgets in DOD.  Jones argues that a key need to is to buy for affordability by “smart budgeting.”

Fortunately, there is a proven path forward for reducing ownership costs – while maintaining, if not expanding, overall effectiveness – but it’s one that requires a willingness to challenge well-entrenched assumptions about acquisitions.

It’s called design for affordability – and while its value has been proven, most notably in delivering multi-billion dollar savings to the Navy’s Virginia-class submarine program – it doesn’t always square with what many would term traditional budgeting and acquisition theory.

The “traditional” budgeting and acquisitions approach – and one that continues to play out, reflexively, today – might be summed up as: when required to cut spending, reduce or delay production units to fit within budget. When budgets are increased, and new acquisitions made possible, add back those cut or delayed units.

By contrast, design for affordability identifies savings from the program without cutting production units, and then reinvests those savings to further lower the total ownership cost of the platform. This in turn reduces the growing operational cost burden facing the armed services.

OK Mr. Jones, the Congress is doing exactly the opposite of what you suggest with the USCG and its cutter replacement strategy.  Our sources in Congress tell us that the FY12 funding for the sixth National Security Cutter is up in the air.  The Senate is forming their mark; the House mark dropped the long lead material, which makes FY13 the next year in which anything NSC is funded.

The problem becomes the inevitable associated cost increases which comes with delayed procurement. This will likely render the program unaffordable in the eyes of the Dept. of Homeland Security and the Hill. OMB has been a constant critic of USCG funding for new cutters, whether NSCs or OPCs.

This game needs to be called; we delay funding, the platform price goes up and our policy makers throw up their hands and argue that the asset costs too much.  It is a sort of funding Ponzi scheme, whereby policy makers can criticize the service that needs the platform now, and then harvesting the anger of taxpayers in a couple of years for the inevitable price hikes.

Such delays make acquiring core platforms more and more difficult in stringent budgetary environments.  Yet the absence of cutters simply means the lack of coverage by the USCG of the critical areas of operation in which the USCG provides for safety and security at sea.

By every analysis done since the early 1990s, the USCG needs at least 8 national security cutters and 25 Offshore Patrol Cutters.  Without these ships, critical law enforcement and environmental protection are simply lost.

If Congressmen are going to ravage procurement they need to give an honest policy statement in Congress of the implications of their actions.  Something like

Today I am standing before the House in support of significantly expanding the ability of the Chinese, Russians and others harvesting our fishing revenues.  I am in favor of increasing the ability of drug lords to ship their goods into the United States.  I am favor of leaving the sea-lanes of the United States exposed to threats and challenges.

Of course, no Congressman in his right mind would give such a speech. But pushing cutter funding into the future, which creates the reality of that speech, is OK.  And Mr. Jones when a service does what you suggest, their reward is to be further downsized.

For Dr. James Carafano’s comment see