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Justice investigating Deepwater contract

The Justice Department is investigating the Coast Guard’s $24 billion Deepwater modernization program amid concerns that prime contractors Lockheed Martin and Northrop Grumman ignored potential problems and the Coast Guard neglected to exert proper oversight of the pair.

Congressional representatives and spokesmen from the defense companies said Wednesday that the department is examining the program, which has come under fire in the past two years for cost increases, delays, cancellations and design flaws.

“Justice is conducting its own inquiry into the matter,” House Transportation Committee chairman James Oberstar, D-Minn., said during a hearing.

Troy Scully, a Lockheed Martin spokesman, said the investigation will center on specific contract segments, including an effort to convert the Coast Guard’s 110-foot patrol boats to 123-foot cutters, construction of the national security cutter and installation of electronics packages on some vessels.

“We are cooperating with the Justice Department,” Scully said.

A spokeswoman for Integrated Coast Guard Systems, the joint venture between Lockheed Martin and Northrop Grumman that runs the Deepwater contract, said she could not confirm whether ICGS had received any subpoenas from the Justice Department. She later said that ICGS was told in December to safeguard Deepwater information.

“We’ve been told to preserve, and not destroy, any documents related to Deepwater,” Margaret Mitchell-Jones said.

It is not clear whether the Justice Department’s investigation is civil or criminal in nature. The department declined to comment.

Coast Guard officials said Tuesday they were unaware of any Justice Department investigation, but added they’d provide information if asked.

“We will cooperate fully, with full transparency,” Rear Adm. Gary Blore, the Coast Guard’s acquisition director said.

The Homeland Security Inspector General’s office also is continuing its examinations of Deepwater.

DHS IG spokeswoman Tamara Faulkner said her office is investigating actions taken by ICGS and the Coast Guard regarding the national security cutter, the 123-foot patrol boats and design of a fast response cutter at the request of Sens. Maria Cantwell, D-Wash., and Olympia Snowe, R-Maine.

“We have ongoing work involving Coast Guard issues,” Faulkner said.

Deepwater is a 25-year project to replace the Coast Guard’s aging fleet of offshore ships, aircraft and electronics equipment. In 2002, the service awarded a contract to ICGS for an indeterminable number of assets, as well as contract support and program management.

The initial “system-of-systems” contract was intended to save the government money, as ICGS was to provide acquisition, hardware and engineering expertise that the Coast Guard couldn’t support.

During a hearing Wednesday, House Transportation Committee members focused primarily on a Deepwater project to convert the Coast Guard’s 49 110-foot patrol boats to 123-foot vessels. The project was abandoned in 2005 after the hulls of the first eight converted ships cracked and warped.

In 2006, the same ships became the target of a DHS IG inquiry after a former Lockheed Martin employee, Michael De Kort, charged that his employer had cut corners while installing the vessels’ electronics equipment, putting the boats and their crews at risk.

On Tuesday, Coast Guard Commandant Adm. Thad Allen announced he was scrapping the eight ships. They cost $87 million and $94 million, total, to build.

The beleaguered 123 program isn’t the only Deepwater project experiencing problems and increased congressional scrutiny. Naval engineers have questioned the viability and hull strength of the national security cutter, as well as delays in the design work of the fast response cutter.

Many within Congress are calling for accountability.

“We expect [Deepwater] to produce boats that float, planes that fly, electronics systems that work,” said Rep. Elijah Cummings, D-Md., during the hearing Wednesday.

Coast Guard officials said Tuesday that they will strip the roles of lead systems integrator and integration logistics support from ICGS. They added, however, that the service would work with the consortium on current projects and will allow Lockheed Martin and Northrop Grumman to compete for individual contracts under the program.

“I believe the Deepwater program is our best strategy for building a 21st century Coast Guard,” Blore said during the hearing.

The Justice Department investigation comes as Lockheed Martin has suffered a number of professional setbacks: besides the Deepwater-related inquiries, the company lost business earlier this month with the Navy’s cancellation of the Littoral Combat Ship construction contract, and it received criticism last month from the Government Accountability Office for price overruns and weight increases on the US-101 presidential helicopter.

Problems also surround Northrop Grumman Ship Systems. In addition to questions surrounding the NSC and the 123s, which were built by NGSS subcontractor Halter-Bollinger Joint Venture, the NGSS-built San Antonio amphibious transport dock ship is experiencing troubles related to construction.

NGSS/Deepwater Vice President James Anton said the company will continue to support its customers’ needs and comply with any ongoing investigations.

“We need to determine the cause of the failure. When we determine cause of failure, we determine accountability and when we determine accountability, we’ll know who needs to stand up,” Anton said.

The Senate Commerce committee next week will consider a bill that presses for further reform of Deepwater, including additional analysis of the contract by a third party.

Meanwhile, members of the House Transportation Committee pledged to find out whether anyone involved in Deepwater has defrauded the government.

“I hope that if, through our dedication, we find that any of these acts were informed and deliberate … we will be providing all that to the Justice Department in the hopes that maybe those responsible would enjoy federal hospitality,” Rep. Pete DeFazio, D-Ore., said.