In removing Lockheed Martin and Northrop Grumman as managers of a troubled $24 billion fleet modernization program, the Coast Guard on Tuesday signaled its intention to be the key player in overseeing the rest of the 25-year plan.

"We've relied too much on contractors to do the work of government," said Coast Guard Commandant Adm. Thad Allen.

Under the revised plan, the Coast Guard will take over the management, or "lead systems integrator," role for the entire Deepwater program, which includes contracts to design and build 91 cutters, more than 100 small surface ships and 244 new or converted helicopters and airplanes.

Analysts questioned the Coast Guard's decision at a time when the government lacks workers with the necessary engineering and integration skills to manage such a complex deal. Allen acknowledged that the Coast Guard's personnel challenge is to re-establish acquisition, program and financial management expertise.

"The Coast Guard gave up the integrator role because they couldn't do it so why are they taking it back?" said James Lewis, director of the technology and public policy program at the Center for Strategic and International Studies, a Washington think tank. "It turns out to be harder than people thought."

Lawmakers have pushed the Coast Guard to take the helm of the Deepwater contract, awarded in June 2002 to Integrated Coast Guard Systems, a joint venture of Lockheed Martin and Northrop Grumman. The deal has been the subject of numerous investigations and been skewered on Capitol Hill for skyrocketing costs, design flaws and lax oversight. At least $2.3 billion had been spent on the project through Dec. 31.

"Both industry and government have failed to fully understand each other's needs and requirements ... (and) have failed to accurately predict and control costs," Allen said.

Lewis said problems arose after the Coast Guard sought to change its original contract, but also that the private sector integrators tend to "bite off more than they can chew."

Lockheed Martin Corp. and Northrop Grumman Corp. will be able to bid for future contracts, and the Coast Guard expects to sign an agreement with ICGS in June to transition the agency into the lead management role, Allen said.

ICGS spokeswoman Margaret Mitchell-Jones said the financial impact of the Coast Guard's decision was "unknown and could be negligible, as we anticipate to continue to build ships, aircraft, communications systems and support logistics to whatever extent the Coast Guard determines."

Ronald O'Rourke, a national defense specialist at the nonpartisan Congressional Research Service, said the Coast Guard reversed a basic decision that guided its initial award to ICGS, which was based on the limitations of its own acquisition staff and to take advantage of commercially available technologies. Industry analysts could question "the government's willingness to use private-sector integrators on other large acquisition programs," he added.	The Coast Guard's decision is the latest blow for Lockheed Martin after the U.S. Navy last week canceled a contract for a next-generation combat ship. The Navy canceled work on building the start of the second ship in January after cost estimates on the nearly complete first one soared to at least $350 million from $270 million.

A spokesman for Bethesda, Md.-based Lockheed Martin, the nation's largest defense contractor, did not return a call for comment, but the company issued a press release Tuesday touting gains in Deepwater's aviation and IT systems.

The Coast Guard last month canceled a roughly $600 million Deepwater deal for 12 "fast-response cutters" about a year after work was suspended due to technical concerns about the original design.

The Coast Guard also is working with ICGS to fix the first two National Security Cutters, which have been hampered by design flaws and cost overruns. Allen said he is negotiating changes for the third cutter with ICGS and how to retrofit those onto the first two.

Even though additional cutters have yet to be bid, Rear Adm. Gary Blore, Deepwater's program executive officer, said it's likely that Northrop Grumman will build the next two.

A Northrop Grumman spokesman did not immediately return a call for comment.

The Coast Guard also is permanently decommissioning eight 123-foot patrol boats under the Deepwater deal because of structural problems. Losses total between $30 million and $60 million and the agency will pursue all legal options to recoup the funds, Allen said.

Mitchell-Jones said ICGS was working with the Coast Guard to determine the cause of the problems.