WASHINGTON (Reuters) - The U.S. Coast Guard will beef up oversight of a $24 billion modernization project run by a Lockheed Martin Corp. (LMT.N) and Northrop Grumman Corp. (NOC.N) joint venture, amid mounting delays, soaring costs and design flaws, sources familiar with the move said on Monday.
The venture, Integrated Coast Guard Systems (ICGS), will continue work on the program to overhaul Coast Guard ships, helicopters, airplanes and communications, known as Deepwater.
But the Coast Guard will take over responsibility as the “lead integrator” or program manager, a move aimed at answering recent lawmaker demands.
The Coast Guard also plans to announce the permanent retirement of eight 123-foot patrol boats that were pulled from service late last year due to hull problems, the sources said.
The move was aimed at “clarifying” the roles of the Coast Guard and the Lockheed-Northrop joint venture in running the project, and was part of Coast Guard Commandant Thad Allen’s efforts to restructure the overall agency, said one Coast Guard source, speaking on condition of anonymity.
The Coast Guard is expected to renew its Deepwater contract with the venture in June, and ICGS will also retain oversight control over two national security cutters already in work, another source said.
Coast Guard officials had no immediate comment ahead of a media briefing planned on Tuesday.
Margaret Mitchell-Jones, spokeswoman for the joint venture, said ICGS was “ready to support the Coast Guard reorganization to assure the Deepwater contract meets their evolving needs and provides best value to the American taxpayer.”
She said the modernization program had already paid off in record-breaking illicit drug seizures, and discussions were continuing about a contract for the next phase of the program.
“Our contractual relationship has not changed as a result of this announcement,” she said.
A third source, who declined to be identified, said the aviation and communications pieces of the modernization were going well, while acknowledging the ships had run into some problems.
A month ago, the Coast Guard terminated the joint venture’s work on a dozen patrol boats that were part of the Deepwater project, a project valued at about $600 million, and said it would launch a fresh competition for the ships in May.
Just last week, the Navy terminated Lockheed’s work on a second shore-hugging Littoral Combat Ship because its costs had soared to about $350 million from initial estimates of $220 million.
Several U.S. lawmakers and watchdog groups have criticized management of the Deepwater program, saying it is nine years behind schedule and $7 billion over budget.
The Deepwater project includes plans to build 91 new ships, 124 small boats, 195 new or rebuilt helicopters and planes and dozens of unmanned aerial vehicles to help the Coast Guard keep up with expanded missions since the attacks of September 11, 2001.