The Coast Guard’s ill-fated “Deepwater” program to modernize its fleet is $3.8 billion over budget and years behind schedule, despite modest improvements in program management over the past three years, the Government Accountability Office (GAO) says.

The new GAO report, released just before a Center for Public Integrity story about a Coast Guard probe of whether haphazard firefighting helped sink BP’s offshore oil rig, revealed that the Deepwater program will now cost $28 billion to complete, a 16 percent increase from 2007 projections. And the report cautions that “further (cost) growth could occur.”

Between 2002 and 2008, the Coast Guard spent $1.8 billion on the Deepwater program to update existing air and sea vessels and replace an aging fleet with new equipment. Originally, much of the work was managed by Integrated Coast Guard Systems, a contractor formed by Lockheed Martin Corp. and Northrop Grumman Corp. specifically for the Deepwater project. After a series of blunders, including abandoning eight new 123-foot patrol cutters because of cracked hulls, the Coast Guard took back management of the project in 2007.

The GAO noted that the Coast Guard has “begun to develop better-informed cost, schedule, and performance baselines” for the program, including lowering the expected time of service for a ship, in some cases by 10 to 15 years. This means that the Coast Guard “may need to acquire new assets sooner than anticipated” in the 2007 plan, the GAO said. It also means that the scheduled delivery of some new Coast Guard equipment has been delayed by as much as five years.

In a June 2009 report, the Homeland Security Department inspector general warned the mismanagement of the modernization program was “creating or increasing gaps in the Coast Guard’s operational capacity to accomplish its offshore missions.”

The Coast Guard’s aircraft and vessels have already been dogged by equipment malfunctions affecting rescue and recovery efforts after the Haiti earthquake and the BP spill in the Gulf of Mexico . Commandant Thad Allen warned in a February speech that continued budget cuts and failures to upgrade the equipment would leave the Coast Guard a “hollow force, and said 83 percent of the service’s cutters used in Haiti had serious mechanical issues.

During the Coast Guard’s rescue missions immediately following the Deepwater Horizon offshore rig explosion, at least three of its aircraft and one cutter had malfunctions that delayed, cut short or aborted rescue missions. The Coast Guard averaged one problem for every seven rescue sorties it operated during the first three days of the oil spill crisis in April, according to service logs obtained by the Center.