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Will America go high tech on the high seas?

By James K. Glassman
web posted June 11, 2001

Does the government have something to learn from drug smugglers about balancing risks and benefits?

The thought struck me after reading two contrasting reports on the U.S. Coast Guard on the day after Mother's Day.

U.S. Coast Guard officers stand watch over some of the 13 tons of cocaine found stashed in secret compartments on a fishing boat (shown in background) off San Diego in the largest maritime cocaine bust in U.S. history
U.S. Coast Guard officers stand watch over some of the 13 tons of cocaine found stashed in secret compartments on a fishing boat (shown in background) off San Diego in the largest maritime cocaine bust in U.S. history

In the first, the Coast Guard reported making the biggest maritime drug seizure in U.S. history. Crewmen from the 210-foot cutter Active had boarded a Belize-flagged trawler in the Pacific on May 14. A thorough search turned up 26,800 pounds of cocaine, worth a half billion dollars. The trawler's two Russian and 10 Ukrainian crew members face 10 years in jail; the boat's owners, a $4 million fine.

In the second, the General Accounting Office (GAO) tackled a plan that the Coast Guard calls Deepwater, an innovative way to acquire new equipment over the long term. In the past, the Coast Guard -- the fifth branch of the military service, with responsibility for protecting 3.4 million square miles of the nation's coastal waters – would simply buy new vessels and aircraft separately, in common defense-acquisition practice. But Deepwater has a better idea: It integrates systems to meet specific performance goals. Those goals require both ships and planes (and other equipment, too), working together.

To that end, the Coast Guard has sought designs and from three private-sector teams, each under a lead contractor. The design phase is almost complete, and the Coast Guard will award the winner a contract next year. The cost: $500 million a year for 20 years, pocket change by most government programs, and, coincidentally, the same amount as the cash value of the drugs seized by the Active.

Such integrative management is becoming common in the private sector. But the approach has raised concerns among GAO's auditors, who worry that having only one integrating contractor, rather than competing ones after contracts are awarded, might lead to cost overruns.

As a fiscal conservative, I don't want to see government playing high-stakes games with untested systems. But, on the other hand, I would like to see government take some practical steps towards innovation, technological improvement, and private-sector management techniques. And the Coast Guard's Deepwater program fits that bill. It seems just the right size for a new idea of this sort, and the risks are actually low.

For one thing, the cost of replacing ships and aircraft on a one-for-one basis is about $500 million a year for 20 years, anyway. And there is no doubt that this recapitalization is needed. An interagency task force in 1999 reviewed the Coast Guard's burgeoning missions, and its fast-obsolescing fleet and said replacing old assets was a near-term national priority. From a technology standpoint, today's Coast Guard more resembles Horatio Hornblower than James Bond.

Capt. Richard Kelly, the Coast Guard's chief of requirements for Deepwater, has said his agency's ships "are basically blind, deaf and dumb." They still depend mostly on lookouts, rather than sophisticated sensing devices, to spot crash victims or refugees. And with an average age of 36 years, they are slower than most of the drug boats they are charged to interdict. The Coast Guard's aircraft are similarly relics of the past.

Age factors last August forced Congress to provide a $77 million supplemental appropriation to keep Coast Guard equipment running. And, still, the agency had to cut back on missions to save wear and tear both on equipment and its crewmembers.

Another factor favoring taking the plunge on Deepwater is that the Coast Guard has demonstrated a can-do spirit in the face of a cutback of 4,000 personnel during the Clinton years. It is one of only three federal agencies in the last three years to earn an overall "A" grade from the Federal Performance Project of George Washington University's School of Public Administration. Also, the GAO has given the Coast Guard high marks for its management of the design stage and of near-term risks so far. In private business, success like this earns both rewards and new responsibilities.

Finally, and perhaps most important, the Bush administration wisely wants all federal agencies to begin implementing performance-based budgeting for their contracts. The purpose is the same as that in private business: to tie such spending to achieving specific goals. The innovations in procurement pioneered by Deepwater could be applied to other government operations, particularly the Pentagon's moribund and costly acquisition programs.

All of these factors make Deepwater compelling. Success could lead to a new model for procuring much more expensive systems in the future, save taxpayers tens of billions of dollars, and even raising the risks for drug smuggling. Congress would be wise to set aside the anachronistic concerns of the GAO and fully fund Deepwater the way the Coast Guard designed it.

James K. Glassman is the co-author of Dow 36 000 and the host of Tech Central Station, the web site where free markets meet technology. Reprinted with the kind permission of TCS.




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