The Troubled Waters Of "Deepwater"

This segment was originally broadcast on May 17, 2007. It was updated on Aug. 14, 2007.

After 9/11, few government entities were as poorly prepared to take on an expanded role as the U.S. Coast Guard. Already charged with sea rescues, drug interdictions and immigration enforcement, the Coast Guard became the primary maritime force for homeland security, tasked with protecting 95,000 miles of coastline and 361 ports with an old and antiquated fleet.

So five years ago the Coast Guard undertook a massive modernization program called "Deepwater" and ended up way over its head. As correspondent Steve Kroft reports, the $24 billion project has turned into a fiasco that has set new standards for incompetence, and triggered a Justice Department investigation.

But five years into the program, the Coast Guard has fewer boats and ships now than it did before it started. Congressman Elijah Cummings, chairman of the Coast Guard oversight subcommittee calls the program, "a mess."

"Here it goes to the national security of this country," Rep. Cummings says. "That's serious business. Particularly after 9/11. And so, you know, it pains me. It really does."

Asked if he thinks the Coast Guard in worse shape now than it was before it began Deepwater, the congressman tells Kroft, "They say they're not. But I think they are."

You can begin with the fact that the Coast Guard spent nearly $100 million to ruin eight patrol boats. The plan was to take the aging workhorses of the fleet, the 110-foot Island Class patrol boats, and lengthen them by 13 feet, adding a launch ramp for small inflatable boats and expanding the superstructure. But something went drastically wrong at the Bollinger Shipyard near New Orleans, where the first eight boats were extended.

"What you see is a lot of buckling. In the floor. And spaces where you know something is bending that shouldn't be bending in other words it should be flat," Cummings recalls.

After just a few weeks on the water, all eight boats experienced severe structural problems and had to be pulled out of service. They are currently tied up at a pier at the Coast Guard's Baltimore yard waiting to be decommissioned. Their problems, the Coast Guard says, are too serious to be fixed.

Rep. Cummings wanted to show Kroft the cracks and buckling himself, but the Coast Guard refused to let him take 60 Minutes on its base.

"We should not allow situations to occur where you spend $14 million for a boat that doesn't float," Cummings says.

"You don't think it was seaworthy?" Kroft asks.

"No. And they don't either. That's why when I say 'they,' I'm referring to the Coast Guard," the congressman replies.

How does that happen?

Says Cummings, "I don't know. The thing I'll tell you and I think I know partly. It started with some people not either paying attention. Or people who didn't care. Or people who were greedy. Or people who were incompetent. Or people who lacked integrity. Or a combination of all."

That pretty much sums up the sentiments of just about every government organization that has taken the time to investigate Deepwater and its problems, which go far beyond the patrol boats.

And there has been no shortage of whistleblowers shouting "Mayday." Some of the blame can be traced to the original Deepwater contract.

From the outset, the Coast Guard didn't have the resources to run a $24 billion project. So it outsourced the entire program to the private sector--not just the construction--but the day-to-day management of the contract. It went to a company called Integrated Coast Guard Systems, a joint venture of Lockheed Martin and Northrop Grumman that had been formed specifically for this job. Not surprisingly, the joint venture picked Lockheed Martin and Northrop Grumman to do the lion's share of the work.

One of the first people to send up a warning flare about the contract was Captain Kevin Jarvis, who, until his retirement last fall, commanded of the Coast Guard's Engineering and Logistics Center.

"People have told us, 'Look, the people that were supposedly managing the contractors were, in many cases, the contractors themselves.' The same companies. Correct?" Kroft asks.

"Correct. Correct. People say that this is like the fox watching the henhouse. And it's worse than that," Capt. Jarvis says. "It's where the government asked the fox to develop the security system for the henhouse. Then told 'em, 'You're gonna do it. You know, by the way, we'll give you the security code to the system and we'll tell you when we're on vacation.'"

Captain Jarvis, one of the Coast Guard's top naval engineers, had questions about extending the patrol boats from the very beginning. But when he asked the Coast Guard and the contractors for the specifics of the plan, he got an e-mail from the Coast Guard acquisition team.

"The contractors' engineering work was good enough. We don't need to pursue this any further. It's gonna compromise the cost and the schedule so it's good enough. Thank you very much," Jarvis recalls.

"They weren't that interested in what you had to say?" Kroft asks.

"We were looked upon as being impediments to the progress of the contract," the captain replies.

Jarvis wasn't the only person frustrated with the failures of Deepwater; Michael DeKort was Lockheed Martin's lead engineer for electronics on the patrol boats.

"It may be very hard for you to believe that our government and the largest defense contractor in the world is capable of such alarming incompetence," DeKort said in a video. He was so angry, that last summer, while still employed by Lockheed, he made the video and posted it on YouTube.

DeKort acknowledges it is an unusual venue for a whisteblower. "I was trying to be resourceful and keep the issue going," he says.

Why not go to the press? DeKort says he did.

Their response? Says DeKort, "Because the press had told me they were not gonna print because they thought my allegations seemed a little too fantastic actually."

"To believe?" Kroft asks.

"To believe. Yes, sir," DeKort replies.

"What was so outlandish that they had trouble believing you?" Kroft asks.

"We actually ordered radios for the very small boats that go on the 123s that were not waterproof," DeKort says.

"That is hard to believe," Kroft remarks.

"Yes, sir," DeKort replies.

Asked if it was true, DeKort tells Kroft, "Yes, sir."

"Did you tell Lockheed Martin about this problem?" Kroft asks.

"Yes, sir. All the way through to the CEO and the board of directors," DeKort replies.

"How did the radios get changed?" Kroft asks.

"Because, coincidentally, one day during testing it rained and four of the radios failed," DeKort explains.

Asked if they offered him any apologies, DeKort says, "Oh, no. I was actually removed from the project shortly after that."

The radios, which were vital for communications with other boats and helicopters, weren't the only problem. DeKort says the antennas and electronics components on the exterior of the boat wouldn't survive in the extreme weather the Coast Guard has to operate in, a fact that was later backed up by the Department of Homeland Security's inspector general.

Even something as simple as the placement of security cameras made no sense.

"We installed the camera system with two very large blind spots that were directly over the bridge. About 15 feet wide on each side," DeKort explains.

"That's not an area you want a blind spot?" Kroft asks.

"No, I should think if one wanted a security system for their home, they might have a camera over their front door," DeKort says, laughing.

But no one's laughing about the boats' electronic communications systems, which failed to meet government security standards. Voice and data transmissions could leak out and be monitored by anyone, jeopardizing not only the Coast Guard's own secret messages, but those of every government agency the boats communicated with.

Asked how serious these communications problems were, Rep. Cummings tells Kroft, "Very serious. Very serious. ... What happens is if you don't do the wiring in a certain way countries like Cuba can eavesdrop on our communications. ... I mean, secret communications. I mean, and that's not good."

"So if you'd had an enemy ship, a terrorist ship that was trying to smuggle a dirty bomb into the United States. And they were able to listen to the Coast Guard traffic at the port. They could conceivably weave their way through the boats," Kroft asks.

"I would think so. Yes those are the kind of problems that we're talking about," Cummings says.

Once the Coast Guard decided to deep-six the extended patrol boats, it stepped up the schedule for its long-term replacement, the Fast Response Cutter. It was to be built at a Northrop Grumman facility in Gulfport, Miss. And instead of having a steel or aluminum hull, it would be made of a composite material, which made the cutters much heavier and required four engines instead of two.

"We used to call it a brick. It was just so heavy. And even a brick, if you put enough horsepower on it, you could make it plane on the water. Well, that's exactly what they did here," Capt. Jarvis explains.

Why did they decide to make it out of composite and not out of steel or aluminum?

Says Jarvis, "I really don't know that answer other than the fact that one day it was a traditional hull, and the next day it's gonna be composite."

"Do you think it had anything to do with the fact that the contractor had built this big, huge shipyard to do composite hulls?" Kroft asks.

"One could really make that inference. I don't know if that was part of the decision. But once can sure make that inference," Jarvis says.

Asked if one of those composite cutters was ever built, Jarvis says, "No. Thank goodness."

After tests showed technical and design problems, the Coast Guard finally pulled the plug, and another $38 million in developmental costs went down the drain.

But the huge National Security Cutter is still going full speed ahead. At 418 feet long, it is by far the largest ship the Coast Guard has ever had, and the most expensive. It's supposed to be able to monitor 56,000 square miles of ocean every day. The Coast Guard expects to accept delivery of the first one by this fall.

"This was like a Navy ship?" Kroft asks Jarvis.

"It's supposed to be able to run with the Navy battle groups," he replies.

Asked if it will be able to, Jarvis says, "In my opinion, no. Our models show it's not gonna meet the speed requirements. It's gonna miss."

"Is that a problem?" Kroft asks.

"It'll be good enough," Jarvis replies.

But speed wasn't the only problem for the National Security Cutter. Coast Guard engineers found serious flaws in the structural design that could lead to premature metal fatigue and even structural failure. A second opinion from the Navy's engineers concurred. But that didn't stop the Coast Guard from christening the first National Security Cutter last year. A second one is now being built. The cost, so far, is nearly $800 million.

This is a story the Coast Guard didn't want 60 Minutes to tell. It refused to make Commandant Thad Allen or any other officer available for an interview. The contractor, Integrated Coast Guard Systems, also declined.

They did, however have to appear before Congress. And Miss. Congressman Gene Taylor, who spent 12 years in the Coast Guard, wasn't much more successful than 60 Minutes was at getting answers, particularly when he asked the contractors about those eight patrol boats that proved to be un-seaworthy.

"So at what point does one of you step forward and say, 'We made a horrible mistake,'" the congressman asked.

The response? Dead silence.

"I think the stakes are pretty high, folks. I'm giving you an opportunity to tell me what went wrong and who's going to accept responsibility," Rep. Taylor said.

Eventually, James Anton, Northrop Grumman's Deepwater Vice President, spoke up. "We need to determine the cause of the failure, sir, and when we determine the cause of the failure, we'll determine accountability, and when we determine accountability, we'll know who needs to stand up," Anton said.

"How long does that take? What was it, two years ago?" Rep. Taylor replied.

Besides serving on the Coast Guard oversight subcommittee, Congressman Taylor knows a few things about extending the length of boats. He did it with an old shrimp boat in his hometown of Bay St. Louis.

"And I pretty well drew it out on the back of a napkin. Went and found some guys, some welders, and we did basically the same thing they did that Coast Guard, on a smaller scale," Taylor says. "My boat works fine. In their case, they didn't think it through."

Asked if these boats are good for anything, the congressman tells Kroft, "No. I've even asked if they could be used on river environments, if we couldn't give 'em to the Colombians or the Hondurans, just go use 'em for a river patrol boat. And they didn't have the confidence that the vessel could get down to Latin America to be given away."

"Has anybody been fired or demoted?" Kroft asks.

"To the absolute best of my knowledge, no one in the Coast Guard was demoted. No one was fired," Taylor says. "The taxpayers have not been given their money back, and of course, the ships haven't been fixed."

Earlier this month, Integrated received a nearly $600 million contract to complete the first two National Security Cutters and build a third one, some of that money will go to fix the cutters' structural design flaws. After this story had been completed, the Coast Guard finally offered to make Commandant Thad Allen available, but only for a live, unedited interview, which 60 Minutes declined to do.
Produced by L. Franklin Devine