WASHINGTON – Good morning, and thank you for being here today. I’d like to take the opportunity this morning to make three announcements regarding the Coast Guard’s Deepwater acquisition program:

First, I will announce the way ahead for our eight 123-foot patrol boats converted under the Deepwater program.

Next, I will outline six fundamental management principles we have begun to implement to change the course of Deepwater as a result of an agreement I reached recently with my counterparts from industry.

Finally, I will take a moment to go beyond the tyranny of the present to provide you with my vision of Deepwater three years from now as the Coast Guard begins to reinvent itself to remain “Always Ready” to conduct our many missions.

I will then be happy to take a few questions, after which our Deepwater program executive officer, Rear Adm. Gary Blore; assistant commandant for engineering and systems, Rear Adm. Dale Gabel; and deputy assistant commandant for acquisition, Mr. Joe Milligan, will be available for any additional questions.

A significant step in changing the course of Deepwater is resolving outstanding issues within the program, so let me begin this morning by announcing my decision to permanently decommission the eight 123' patrol boats converted under the Deepwater program.

Multiple extensive studies and analyses by both Coast Guard engineers and third-party naval architects and marine engineers over many months have described the failures in these vessels. They have been unable to determine a single definitive root cause for the 123-foot patrol boat structural problems.

We believe the design of the 123-foot patrol boat reduced the structural cross section necessary to support the added weight distribution following the conversion. Our analysis has been complicated, however, by the fact that we’ve observed permanent deformations of each hull in slightly different ways.

Based on this analysis, any strategy to permanently repair these cutters and return them to service would require an iterative, phased approach over a long period of time with uncertain costs and outcome. Initial estimates indicate it could cost well over $50 million.

The excessive cost and time associated with continuing to pursue an uncertain resolution to these structural problems has convinced me – with the recommendation of my chief engineer – that permanently removing these cutters from service while recouping any residual value and redirecting funds to other programs is in the best interest of the government.

We will continue to mitigate the loss of these patrol boat hours through our ongoing efforts and strategies (such as multi-crewing 110-foot patrol boats and an extension of the memorandum of understanding for three Navy 179-foot patrol craft) while we work toward acquiring a new platform as soon as we can to replace our entire fleet of 110-foot patrol boats.

We will pursue all viably available contractual, legal or other options for recouping any funds that might be owed the government as a result of the loss of these hulls.

I’m happy to answer your questions regarding this decision, but let me first discuss what I am doing now to help prevent similar occurrences in the future as we change the course of Deepwater.

As many of you know, I met with the Lockheed Martin CEO Robert Stevens and Northrop Grumman CEO Ronald Sugar in January to determine near and long-term objectives and goals for the Deepwater program. Since then we’ve spoken frequently, as both the Coast Guard and our industry partners have taken a number of steps to improve the management, oversight and performance of the Deepwater program. More recently, we reached agreement on six fundamental principles that we have begun implementing to ensure that the government’s interests are fully and fairly achieved in acquiring and fielding assets and capabilities being developed and produced under the Integrated Deepwater System.

These principles will guide us as we seek to obtain the best value for the government through robust competition and vigilant contract oversight and management.

Working together with industry, the Coast Guard will make the following six fundamental changes in the management of our Deepwater program:

The Coast Guard will assume the lead role as systems integrator for all Coast Guard Deepwater assets, as well as other major acquisitions as appropriate. I have already begun building my organic staff in the fiscal year 2008 budget request, and will combine that with other government assets as we transition to this new role.

The Coast Guard will take full responsibility for leading the management of all life cycle logistics functions within the Deepwater program under a an improved logistics architecture established with the new mission support organization.

The Coast Guard will expand the role of the American Bureau of Shipping, or other third-parties as appropriate, for Deepwater vessels to increase assurances that Deepwater assets are properly designed and constructed in accordance with established standards.

The Coast Guard will work collaboratively with Integrated Coast Guard Systems to identify and implement an expeditious resolution to all outstanding issues regarding the national security cutters.

The Coast Guard will consider placing contract responsibilities for continued production of an asset class on a case-by-case basis directly with the prime vendor consistent with competition requirements if: (1) deemed to be in the best interest of the government and (2) only after we verify lead asset performance with established mission requirements.

Finally, I will meet no less than quarterly with my counterparts from industry until any and all Deepwater program issues are fully adjudicated and resolved. Our next meeting is to be scheduled within a month.

These improvements in program management and oversight going forward will change the course of Deepwater.

By redefining our roles and responsibilities, redefining our relationships with our industry partners, and redefining how we assess the success of government and industry management and performance, the Deepwater program of tomorrow will be fundamentally better than the Deepwater program of today.

I’ve just outlined six fundamental improvements in how we intend to change the course of Deepwater. May 25th will mark the first year of my tenure as commandant. It is important to understand the course I set for our service then, where we are now and where we intend to be when I complete my watch three years from now.

Based on our experiences in the 9/11 response and Hurricane Katrina we now understand we live in an all hazards, all threats environment that requires an agile, flexible, adaptive Coast Guard to meet the needs of the nation.

Changes to Deepwater began when I assumed my duties and have been linked with other broader organizational changes in logistics, maintenance and financial management which will improve mission support. While we have been and will continue to be responsive to external oversight, it must be noted that these changes were initiated a year ago without prompting.

It is time to move forward and move beyond what has been the equivalent of an archaeological dig into Deepwater. Current and future performance is what we should be measured by.

We understand all too well what has been ailing us within Deepwater in the past 5 years:

We’ve relied too much on contractors to do the work of government as a result of tightening budgets, a dearth of contracting expertise in the federal government, and a loss of focus on critical governmental roles and responsibilities in the management and oversight of acquisition programs.

We struggle with balancing the benefits of innovation and technology offered through the private sector against the government’s fundamental reliance on robust competition. A useful balance can be achieved, but it requires due diligence on our part.

Both industry and government have failed to fully understand each other’s needs and requirements, all too often resulting in both organizations operating at counter-odds to one another that have benefited neither industry nor government. The future of shipbuilding in this country requires a frank an open dialogue. Moving forward I will be consulting with our Navy partners to identify opportunities for us to create a national fleet for the nation.

Finally, both industry and government have failed to accurately predict and control costs. We must improve.

We need to be about the business of looking forward – with binoculars even – as we seek to see what is out over the horizon so we can better prepare to anticipate challenges and develop solutions with full transparency and accountability.

That is the business of government. And it’s the same principle that needs to govern business as well.

I committed to reposition the Coast Guard to meet the challenges of our new operating environment. I intend to continue on that course through:

Enhanced management and oversight I outlined here today;

With changes we are making in the terms and conditions of the Deepwater contract;

And with changes we are making in our acquisition and logistics support systems throughout the Coast Guard.

At the end of my watch in 2010 we will have transitioned to a new mission support organization in the Coast Guard that provides seamless support … from the acquisition of new assets to a new integrated logistics and maintenance system.

I see the National Security Cutter and Maritime Patrol Aircraft in full production;

I see designs for a new class of Offshore Patrol Cutter;

I see a new fleet of Fast Response Cutters being built and deployed with plans for additional patrol boats to replace the remainder of our 110-foot patrol boat fleet;

I see an entire fleet of legacy cutters and aircraft modernized with new command and control systems and sensors needed to save lives, secure our borders and protect our maritime environment through the first half of the 21st century;

And I see a Coast Guard that is more ready and capable than it is today.

The Deepwater program of tomorrow will be fundamentally better than the Deepwater program of today. The United States Coast Guard will be fundamentally better as well.

The Coast Guard has a long history of exceptional stewardship of our resource – the storied history of the recently decommissioned Coast Guard cutter Storis after 64 years of service dating back to World War II – as you have seen a little here this morning – is a typical example of just that.

I am personally committed to ensuring Deepwater assets are capable of meeting mission requirements from the moment they enter service until they are taken out of service many, many years into the future.