May 2024 Update to CRS Polar Security Cutter (PSC) Program Report
The May update to the Congressional Research Service (CRS) ongoing reporting on the PSC program mainly adds information provided during the recent House Subcommittee Hearing.
The Congressional Research (CRS) published the latest version of its report on the U.S. Coast Guard (USCG) PSC Program on May 22nd. This latest in a long series of reports by Ronald O’Rourke updates the previous version (published April 29th) to include information that came to light during the Congressional Subcommittee hearing on U.S. Coast Guard Acquisitions held on May 7th. If you missed the hearing, you can catch up by reading my reporting on it:
I wrote about the changes in O’Rourke’s previous (April) report here.
Summary of Changes in the May report:
Aiviq
Specifically names the Aiviq as the “Commercially Available Polar Icebreaker (CAPI)” that the U.S. Coat Guad intends to purchase. This change is in the summary (as quoted here) and throughout the report.
The ship the Coast Guard intends to purchase and modify is Aiviq, a U.S.-registered ship that was originally built to serve as an Arctic oil-exploration support ship, and which has an icebreaking capability sufficient for the ship to serve following modification as a Coast Guard medium polar icebreaker.
Great Lakes Icebreaker
Adds a section on a March 1, 2024 hearing related to the Great Lakes Icebreaker Program (page 17) in which Admiral Linda Fagan, Commandant of the Coast Guard, reports that according to a recent analysis, the USCG needs another heavy domestic icebreaker that is at least as capable as the Mackinaw, and has established a Great Lakes Icebreaking Program Management Office. (Note that a Great Lakes icebreaker is different in design and capability from the polar icebreakers that I am writing about.
Issues for Congress: PSC Program
O’Rourke reorganizes and updates the beginning of this section based on testimony given during the May 7 Subcommittee hearing. Here are some specifics:
PSC Program: Cost Growth
O’Rourke begins this section noting that the recent cost updates reported to CRS by the U.S. Coast Guard (and included in the April report) amount to a 39% increase since the April 2019 contract was awarded.
However, this could still be a significant underestimate. O’Rourke cites five factors that will likely drive the cost significantly higher:
• The actual PSC design is larger than the government’s indicative design….
• The Navy has frequently underestimated lead ship costs….
• Recent inflation in shipbuilding….
•Potential need for additional increases in worker wages and benefits….
• Labor hours and absorption of fixed overhead costs….
To read more of his description and analysis of these factors, click through to the report. I only listed the factor here in the interest of saving some space.
Considering only the first three factors could drive the cost up by as much as 80-95%:
A simple (not compounded) sum of the potential percentage cost increases described in the first three bullet points above (using the 25% and 40% figures from the second bullet) comes to a potential percentage cost increase, if all three factors were to come fully into play, of 80% to 95% above the March 2019 figures.
The 95% increase would bring the PSC more in line with recent shipbuilding programs:
Increasing the March 2019 figures by 95% would result in an estimated cost of $1,804 million to $1,833 million (i.e., about $1.8 billion) for the lead ship and $1,365 million (i.e., about $1.4 billion) each for the second and third ships, producing an estimated three-ship total of $4,534 million to $4,563 million (i.e., about $4.5 billion to $4.6 billion). This total is about 40% higher than the currently estimated total of $3,235 million.
.…
A procurement cost for the first PSC that is closer to $2 billion than to $1 billion would be comparable to the procurement cost of a Navy LPD-17 Flight II class amphibious ship, which is about $2.0 billion. The LPD-17 Flight II design a little larger than the PSC design and has more expensive combat system equipment than the PSC.
O’Rourke then cites the May 2024 Congressional Budget Office estimate that is in line with this analysis:
CBO May 2024 Cost Estimate
At a May 7, 2024, hearing on Coast Guard ship acquisition programs, particularly the PSC program, before the House Homeland Security Committee subcommittee on Transportation and Maritime Security, the Congressional Budget Office (CBO) estimated that, in constant FY2024 dollars, the procurement cost of the first PSC would be $1.9 billion, and the procurement costs of subsequent PSCs would be about $1.6 billion each. Given these estimates, CBO testified that “the procurement cost of three PSCs would be about $5.1 billion. That amount is 60 percent greater than the Coast Guard’s most recent publicly released estimate for the procurement cost of three heavy icebreakers, which was provided to CBO by the Coast Guard in March 2024.”
PSC Program: Schedule Delay
O’Rourke breaks schedule out separately, drawing on his recent congressional testimony. He cites the failure to achive PSC design maturity, despite being five years into the program. He compares this to the U.S. Navy’s Constellation class frigate program, in which the Navy just couldn’t resist making changes resulting in lengthy program delays despite the initial program goal to quickly build a proven design without significant modification.
Another oversight issue for Congress concerns schedule delay in the PSC program. The Coast Guard originally aimed to have the first PSC delivered in 2024, but the ship’s estimated delivery date has been delayed repeatedly and is now expected to occur no earlier than FY2029.
A principal cause of the delay has been the time needed to achieve design maturity (i.e., to complete the detail design of the ship). The parent design strategy used for the PSC program (i.e., the strategy of creating the PSC design by modifying the design of an existing polar-capable ship) was intended by the Coast Guard and Navy to reduce the PSC’s design time. Five years after contract award, the expected reduction in design time does not appear have been realized. The time needed to mature the PSC design suggests that the parent design used for the PSC program—the design for the new German polar icebreaker Polar Stern II—might now more closely resemble a parent design in name only (PDINO). In this regard, the PSC program appears somewhat similar to the Navy’s Constellation (FFG-62) class frigate program, which the Navy initiated as a program that would use a parent design, but which observers might now characterize as having moved over time toward a PDINO situation. Limited numbers of available naval architects and design engineers within the United States also appear to have contributed to delays in maturing the PSC design.
O’Rourke also discusses ways to more quickly reach the U.S. Coast Guard’s required number of 8-9 polar capable icebreakers:
One possible approach might be to introduce a second shipbuilder to build the fourth and fifth PSCs while Bollinger completes the first three. Another possible approach would be to have Bollinger build all four or five PSCs while accelerating the start date of the timeline for designing and building the medium polar icebreakers. This second approach could accelerate the date for completing the larger total of eight to nine heavy and medium polar icebreakers. These two alternatives are not the only possible approaches.
For now, I’ll leave this here with only one comment: perhaps there are other approaches that will yield capable icebreakers in a relatively short timeline. There are designers and shipbuilders that have a track record of being able to do just that, but it will require political will.
PSC Program: Technical Risk:
In this section, O’Rourke brings in testimony from the Government Accountability Office which faults the U.S. Coast Guard for ignoring best practices and previous recommendations while failing to properly assess risk:
Technology maturity and design stability.
The Coast Guard’s OPC and PSC programs did not follow shipbuilding leading practices with regards to conducting, demonstrating, and achieving technology readiness and design stability….
Years after we first identified these deficiencies with the OPC and PSC programs, the Coast Guard still has not gained the requisite knowledge for its technologies and designs:…
• PSC: In September 2018, we found that the Coast Guard did not conduct a technology readiness assessment of PSC’s key technologies, nor did it hold a preliminary design review, prior to approving its program baselines. Coast Guard officials said that a technology readiness assessment was not necessary because the technologies they plan to employ had been proven on other ships. However, according to leading practices, such technologies can still pose risks when applied to a different program or operational environment. The program subsequently conducted a technology readiness assessment and established revised baselines in May 2021 after holding its preliminary design review in response to our recommendations.
As of March 2023, the PSC program reported that the functional design was considerably below the desired levels that officials expect to inform a decision to proceed with construction. As of April 2023, program officials said they anticipate holding the production readiness reviews to evaluate design maturity by March 2024. However, since September 2021, with about 49 percent functional design completed, our analysis indicated that the shipyard is completing, on average, approximately three percent of functional design every 6 months. This means that it would take the shipyard approximately 8 years to complete 100 percent of functional design. Therefore, to reach the program’s goal of completing functional design completed prior to March 2024, the shipyard would need to increase its design completion rate significantly. Coast Guard officials said that design completion is further along than the metrics show because the metrics do not factor in progress made on design components that are not complete.
We also found that the program is experiencing challenges with the design. According to program officials, the design challenges are related to (1) U.S. industry’s general lack of experience designing and building icebreakers, (2) the complexity of PSC’s design, and (3) significant changes from the original design, among other things. Given that there are still portions of the design that are immature, we recommended that the Coast Guard complete functional design prior to approving construction for the lead ship, in line with our recommendation to OPC and Coast Guard policy, as a whole. The Coast Guard concurred with the recommendations, and we will monitor its progress in addressing them.
Cost. Both the OPC and PSC have incurred cost growth above their initial estimates, in part because the programs initially underestimated costs….
• PSC: From 2018 to 2021, the program’s total life-cycle cost estimate increased by about 35 percent, from $9.8 billion to $13.3 billion. Most of the cost increase was driven by increased operations and maintenance costs, resulting from the increased ship size and use of additional historical data to reevaluate projected annual maintenance costs in the later estimate. The program’s additional analysis of historical maintenance costs in its January 2021 cost estimate addressed, in part, a recommendation we made in 2018 to update the cost estimate in accordance with leading practices in cost estimating. Specifically, in September 2018, we found that the PSC’s life-cycle cost estimate that informed the program’s $9.8 billion cost baseline substantially met GAO’s leading practices for being comprehensive, well-documented, and accurate, but only partially met leading practices for being credible.15 The cost estimate did not quantify the range of possible costs over the entire life of the program. As a result, the cost estimate was not fully reliable and may have underestimated the cost. Consequently, the Coast Guard may have provided decision makers with incomplete data to make a decision on total funding needed for the program.
Schedule. The Coast Guard relied on optimistic schedules for both the PSC and OPC programs, and both have experienced schedule delays of 2 years or more…. The two programs’ schedule challenges have been exacerbated by a lack of reliable schedule data from the contractors responsible for building these ships….
• PSC: In September 2018, we found that the PSC’s planned delivery dates were not informed by a realistic assessment of shipbuilding activities. Instead, the schedule was driven by the potential gap in icebreaking capabilities once the Coast Guard’s only operating heavy polar icebreaker—the Polar Star—reaches the end of its service life. We recommended that the program develop a schedule in accordance with leading practices for project schedules to set realistic schedule goals for all three PSCs before the lead ship contract option was awarded. However, we closed the recommendation as not implemented because the program proceeded with the award in April 2019 without developing a realistic schedule. In July 2023, we found the program had yet to establish a realistic schedule.
Next time, please update the following:
Foreign icebreakers:
This report still includes to the out-of-date table listing polar icebreakers operated by foreign countries. The table used is still the one based on data provided by the USCG, as of April 4, 2022.
Making an apples-to-apples comparison of icebreakers is always challenging, but I question the methodology (unknown) of this particular table. It seems very similar to a previous chart that categorized icebreakers by horsepower. As such, it does not seem to effectively compare modern azimuth/dual acting icebreakers and traditional icebreakers (Table B-1, page 49).
Capabilities of foreign shipyards:
Glaringly, the report continues to ignore the capability of foreign shipyards. For example, on page 33-34, the report refers to two nuclear icebreakers that were built in Finland but had their reactors installed in Russia. The report then states that “All other Finnish-built icebreakers shown in Table B-1 (whether operated by Finland or other countries) could be considered, based on their brake horsepower (BHP), to be medium or light polar icebreakers.” BHP is an outdated measure of icebreaking capability, as modern icebreakers can do much more with significantly less power. For more info, see my recent report on Finland’s Icebreakers.
For the design and construction of the world’s most capably conventional icebreaker— more capable than the U.S. Coast Guard’s Polar Star—, read more about Le Commandant Charcot, designed by Aker Arctic (Finland) and built by Vard (Norwegian), at a cost of about $320M USD:
Despite countless visits by U.S. delegations to Finnish and other shipyards, recent and accurate information about building icebreakers overseas remains absent from this report and public discussion.
Summary:
The Polar Security is late and overbudget. It’s going to get worse, as the U.S. Coast Guard continues to not follow best practices and GAO recommendations. The program cost and timeline were based on needs and very optimistic assumptions and as such did not stand up to reality.
Yes, the U.S. Coast Guard (after years resisting the idea) wants to buy and convert a commercial icebreaker. The only one out there is the Aiviq, although it was designed and built as an offshore support vessel for oil exploration. Perhaps this willingness signals an opening for other ideas that the USCG has resisted in recent years.
There is still no serious consideration of the capabilities of foreign designers and shipyards to quickly build capable vessels to meet the U.S. Coast Guard’s needs
Concluding thoughts:
These reports continue to show that the program was built on hope- the delivery timeline was based not on an accurate assessment of the complexities of designing and building the vessel, but rather on the date the ship would be needed to replace the aging and ailing Polar Star. Despite five years on from contract award, design is still immature because of foreseeable circumstances, including a lack of experience by the U.S. Coast Guard and involved companies in designing and building icebreakers. As I’ve repeatedly written, these problems were easily anticipated, and were by many. Despite that, the U.S. Coast Guard chose a bid that had zero experience designing and building polar icebreakers. The other bidder, Aker/Vard/Fincantieri- recently designed and built Le Commandant Charcot, a vessel that is as capable as the Polar Star and has the advantage over the PSC of actually existing. It’s been breaking ice since 2021.
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Until next time.
All the Best,
PGR