What began as an ambitious but mostly overlooked scheme to modernize the Coast Guard’s entire fleet of ships and aircraft over a 20-year period has, just five years after conception, turned into one of the most troubled and criticized U.S. military programs.

The $24-billion Deepwater initiative was launched in 2002 with a contract naming Integrated Coast Guard Systems -- a partnership between electronics maker Lockheed Martin and shipbuilder Northrop Grumman -- the “lead systems integrator” for the program, meaning the firms, rather than the Coast Guard, would be responsible for selecting subcontractors to handle the aircraft, electronics and shipbuilding work.

Integrated Coast Guard Systems hailed the unusual arrangement as revolutionary -- and the best way to leverage the firms’ shared expertise. But the service has terminated the lead-systems-integrator relationship, citing shoddy work on a $100-million effort to stretch and modernize eight 110-foot patrol boats -- the first major shipbuilding portion of Deepwater. Those boats are being decommissioned due to hull buckling, leaving the Coast Guard with a 15-percent gap in its patrol boat force, Commandant Thad Allen said while announcing the decommissioning and the Deepwater changes on April 17. Earlier, Allen had cancelled the so-called Fast Response Cutter being designed from scratch by Integrated Coast Guard Systems to eventually fill that gap, instead expressing his intention to seek off-the-shelf boat designs.

The stretched boats also suffered from incomplete electronics integration and poor network security, according to Michael DeKort, a former Lockheed Martin engineer who worked on the boats but was fired, allegedly for challenging his bosses over the problems. Two weeks ago DeKort testified before a House committee investigating Deepwater. A Justice Department probe is also reportedly underway, following on the heels of several Coast Guard Inspector General reports that were critical of Deepwater.

The long-term consequences of the Deepwater shakeup are far from clear -- and it’s possible that Lockheed Martin and Northrop Grumman will still do much of the work on the program, albeit strictly as contractors. According to Allen, all aspects of Deepwater that are already far advanced -- including work on patrol planes, helicopters, short-range boats and several large cutters -- will remain intact. But overall management of the program will pass from industry to the Coast Guard. That means the service will need more officers with acquisitions experience.

“I have already begun building my organic staff in the fiscal year 2008 budget request, and will combine that with other government assets as we transition to this new role,” Allen said.

But this might take years, so in the meantime, the Coast Guard will bring in experts from the American Bureau of Shipping and other third parties “to increase assurances that Deepwater assets are properly designed,” Allen said.

The Coast Guard’s renewal of its acquisitions forces comes hot on the heels of a similar initiative in the Navy, which has seen the price of its warships climb steeply, owing in part to poor contractor performance.

--David Axe, cross-posted at War Is Boring