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Testimony before the Subcommittee on Strategic Forces, Senate Committee 
on Armed Services: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 3:30 p.m. EDT: 

Thursday, April 6, 2006: 

Space Acquisitions: 

Improvements Needed in Space Systems Acquisitions and Keys to Achieving 
Them: 

Statement of Cristina T. Chaplain, Acting Director, Acquisition and 
Sourcing Management Team: 

GAO-06-626T: 

GAO Highlights: 

Highlights of GAO-06-626T, a testimony before the Subcommittee on 
Strategic Forces, Senate Committee on Armed Services: 

Why GAO Did This Study: 

DOD’s space system acquisitions have experienced problems over the past 
several decades that have driven up costs by hundreds of millions, even 
billions of dollars, stretched schedules by years, and increased 
performance risks. GAO was asked to testify on its findings on space 
acquisition problems and steps needed to improve outcomes. 

What GAO Found: 

DOD’s space acquisition programs continue to face substantial cost and 
schedule overruns. At times, cost growth has come close to or exceeded 
100-percent, causing DOD to nearly double its investment in face of 
technical and other problems without realizing a better return on its 
investment. Along with the cost increases, many programs are 
experiencing significant schedule delays—as much as 6 years—postponing 
delivery of promised capabilities to the warfighter. Outcomes have been 
so disappointing in some cases that DOD has had to go back to the 
drawing board to consider new ways to achieve the same capability. 

These problems are having a dramatic effect on DOD’s space investment 
portfolio. Over the next 5 years, there will be about $12 billion less 
dollars available for new systems as well as for the discovery of 
promising new technologies because of cost growth. And while DOD is 
pushing to start new, highly ambitious programs such as the 
Transformational Satellite and Space Radar, broader analyses of the 
nation’s fiscal future indicate that spending for weapon systems may 
need to be reduced, rather than increased, to address growing deficits. 

GAO has identified a number of causes behind these problems, but 
several stand out. First, DOD starts more space and weapons programs 
than it can afford, which pressures programs to under estimate costs 
and over promise capabilities. Second, DOD starts its space programs 
too early, that is, before it is sure the capabilities it is pursuing 
can be achieved within available resources and time constraints. DOD 
has also allowed new requirements to be added well into the acquisition 
phase. 

DOD has appointed a new leadership to oversee space acquisitions who 
have committed to adopting practices GAO has recommended for improving 
outcomes. These include delegating the maturation of technologies to 
the S&T community; adopting an evolutionary development approach in 
which new systems would be developed in a series of discrete 
increments, or blocks; fund S&T appropriately so that significant 
technology breakthroughs can be continually pursued; and improving 
collaboration on requirements. 

Adopting best practices for space acquisitions will not be an easy 
undertaking. DOD, as a whole, still operates in an environment that 
encourages competition for funding, and thus, behaviors that have been 
detrimental to meeting cost and schedule goals. Moreover, the changes 
being proposed will require significant shifts in thinking about how 
space systems should be developed and changes in incentives. By 
establishing investment priorities, embedding best practices in policy, 
and addressing capacity shortfalls, DOD can mitigate these challenges 
and better position programs for success. 

What GAO Recommends: 

GAO does not make recommendations in this testimony. However, GAO 
testified that there are steps DOD can take to ensure better outcomes 
for its space acquisitions programs. They include developing an overall 
investment strategy for space acquisition programs; revising policies 
supporting space to incorporate best practices; and addressing human 
capital and other shortfalls in capacity. 

www.gao.gov/cgi-bin/getrpt?GAO-06-626T. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Cristina T. Chaplain at 
(202) 512-4841 or chaplainc@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the Department of Defense's 
(DOD) space acquisitions. Each year, DOD spends billions to acquire 
space-based capabilities to support current military and other 
government operations as well as to enable DOD to transform the way it 
collects and disseminates information, gathers data on its adversaries, 
and attacks targets. In fiscal year 2007 alone, DOD expects to spend 
almost $20 billion dollars to develop and procure satellites and other 
space systems, including nearly $7 billion on the major space 
systems.[Footnote 1] Despite its growing investment in space, however, 
DOD's space system acquisitions have experienced problems over the past 
several decades that have driven up costs by hundreds of millions, even 
billions of dollars, stretched schedules by years, and increased 
performance risks. In some cases, capabilities have not been delivered 
to the warfighter after decades of development. 

As a result of these problems, DOD is now contending with important 
trade-off decisions such as whether to continue investing in long 
beleaguered efforts or undertake more promising alternatives. At the 
same time, leadership now recognizes the need to substantially change 
DOD's current space acquisition approach and the value of adopting 
practices that will lay a better foundation for program execution. 
Within this context, I will discuss our findings on space acquisition 
problems, recent steps DOD has taken in an effort to address these 
problems, and the changes that still need to occur if DOD is to break 
the cycle of acquisition problems. 

Space Acquisition Problems Persist: 

The majority of satellite programs we have reviewed over the past 2 
decades experienced problems during their acquisition that drove up 
costs and schedules and increased technical risks. Several programs 
were restructured by DOD in the face of delays and cost growth. At 
times, cost growth has come close to or exceeded 100-percent, causing 
DOD to nearly double its investment in face of technical and other 
problems without realizing a better return on its investment. Along 
with the cost increases, many programs are experiencing significant 
schedule delays--as much as 6 years--postponing delivery of promised 
capabilities to the warfighter. Outcomes have been so disappointing in 
some cases that DOD has had to go back to the drawing board to consider 
new ways to achieve the same capability. It is in such a position 
today, with its Space-based Infrared System (SBIRS) High program and 
possibly its National Polar-orbiting Operational Environmental 
Satellite System (NPOESS) program, both of which have been mired in 
expanding cost and schedule setbacks. 

More specifically, DOD's investment in SBIRS High, a critical missile 
warning system, has been pushed to over $10.5 billion from the initial 
$4.1 billion estimate made over 9 years earlier. This 160-percent 
increase in estimated costs triggered a fourth Nunn-McCurdy[Footnote 2] 
breach (see 10 U.S.C. 2433), requiring a review by the Secretary of 
Defense and a report to Congress, and resulted in the program being 
restructured for a third time, in late 2005. With costs and timelines 
spiraling out of control, DOD reduced the number of satellites it plans 
to procure--pushing the average per unit procurement cost up to 224- 
percent above 2002 baseline costs--and is now pursuing an alternative 
to SBIRS High while it continues with the scaled back program. 

Initial cost and schedule estimates for NPOESS--a new satellite 
constellation intended to replace existing weather and environmental 
monitoring satellites--have also proven unreliable. NPOESS is managed 
by a tri-agency Integrated Program Office consisting of DOD, the 
National Oceanic and Atmospheric Administration, and National 
Aeronautics and Space Administration. In January 2006, the program 
reported a Nunn-McCurdy unit cost breach, at the 25-percent threshold, 
due to continuing technical problems, including problems with the 
development of key sensors. Specifically, in early 2005, DOD learned 
that a subcontractor could not meet cost and schedule targets due to 
significant technical issues on an imaging sensor known as the 
visible/infrared imager radiometer suite (VIIRS) sensor--including 
problems with the cryoradiator, excessive vibration of sensor parts, 
and errors in the sensor's solar calibration. These technical problems 
were further complicated by subcontractor management problems. To 
address these issues, DOD provided additional funds for VIIRS, capped 
development funding for other critical technologies, and revised its 
schedule to keep the program moving forward. We also reported that 
based on our own analysis of contractor trends, the program will most 
likely overrun costs by $1.4 billion.[Footnote 3] Given the challenges 
currently facing the program, the scheduled first launch date slipped 
17 months to September 2010. 

Another recent example of problems is evident in the Advanced Extremely 
High Frequency (AEHF) program. We reported in the past that this 
program experienced cost increases due to requirements changes, 
inadequate contract strategies, and funding shortfalls. We also 
reported that DOD had to cut back its planned purchase of satellites 
from five to three as a result. The outcome has been an 84-percent unit 
cost increase--each AEHF satellite is now estimated to cost about $2.1 
billion. More recently, we reported that scheduling delays and the late 
delivery of cryptographic equipment have culminated into nearly a 3- 
year delay in the launch of the first satellite and that the program 
still faces schedule risk due to the continued concurrent development 
of two critical path items managed and developed outside the program. 

Acquisition problems have not been limited to the development of home- 
grown systems. DOD's purchase of an ostensible commercial satellite for 
the use of communications, the Wideband Gapfiller Satellite (WGS), is 
experiencing about a 70-percent cost growth, due in part to the 
problems a subcontractor was experiencing in assembling the satellites. 
Improperly installed fasteners on the satellites' subcomponents have 
resulted in rework on the first satellite and extensive inspections of 
all three satellites currently being fabricated. The cost for WGS has 
increased about $746.3 million but DOD estimates that about $276.2 
million of this amount is largely due to cost growth associated with a 
production gap between satellites three and four. The launch of the 
first satellite has now been delayed for over 3 years and is currently 
scheduled for June 2007. The delay will increase program costs and add 
at least 22 months to the time it takes to obtain an initial 
operational capability from the system. 

Figure 1 shows that, overall for fiscal years 2006 through 2011, 
estimated costs for DOD's major space acquisition programs have 
increased a total of about $12.2 billion--or nearly 44-percent in 
total--above initial estimates. Figure 2 breaks out this trend among 
key major space acquisitions. 

Figure 1: Comparison between Original Cost Estimates and Current Cost 
Estimates for Major Space Acquisition Programs[A] for Fiscal Years 2006 
through 2011: 

[See PDF for image] 

[A] Includes: AEHF, Evolved Expendable Launch Vehicle, Global Broadcast 
Service, Global Positioning System II, Mobile User Objective System, 
NPOESS, SBIRS High, TSAT, and WGS. 

[End of figure] 

Figure 2: Cost Growth in Selected Current Space Programs in Base Year 
Dollars: 

[See PDF for image] 

Notes: Original AEHF cost was for five satellites; the latest estimate 
for AEHF is for three satellites. SBIRS High data is through the latest 
Selected Acquisition Report, dated September 2005. 

[End of figure] 

As both figures illustrate, cost increases have had a dramatic impact 
on DOD's overall space portfolio. To cover the added costs of poorly 
performing programs, DOD has shifted scarce resources away from other 
programs, creating a cascade of cost and schedule inefficiencies. For 
example, to fund other space programs, DOD has had to push off the 
start of a new version of the Global Positioning System (GPS), which 
has forced costs to increase for the current version under development. 
Meanwhile, DOD is also contending with cost increases within its 
Evolved Expendable Launch Vehicle (EELV) program. These are largely due 
to misjudgments about the extent to which DOD could rely on commercial 
demand to leverage its investment. Nevertheless, the resulting $12.6 
billion increase has added pressures to make tradeoffs. 

At the same time that DOD is juggling resources on existing programs, 
it is undertaking two new efforts--the Transformational Satellite 
Communications System (TSAT) program and Space Radar program--which are 
expected to be among the most ambitious, expensive, and complex space 
systems ever. Moreover, DOD is relying heavily on their planned 
capabilities to fundamentally enable DOD to transform how military 
operations are conducted. In fact, many other weapon systems will be 
interfaced with these satellites and highly dependent on them for their 
own success. Together, these systems have been preliminarily estimated 
to cost about $40 billion. While DOD is planning to undertake the new 
systems, broader analyses of the nation's fiscal future indicate that 
spending for weapon systems may need to be reduced, rather than 
increased, to address growing deficits. 

Underlying Causes of Acquisition Problems: 

Our reviews have identified a number of causes behind the problems just 
described, but several consistently stand out. First, on a broad scale, 
DOD starts more weapon programs than it can afford, creating a 
competition for funding which encourages low cost estimating, 
optimistic scheduling, over promising, suppressing bad news, and for 
space programs, forsaking the opportunity to identify and assess 
potentially better alternatives. Programs focus on advocacy at the 
expense of realism and sound management. Invariably, with too many 
programs in its portfolio, DOD and even Congress are forced to 
continually shift funds to and from programs--often undermining well- 
performing programs to pay for poorly performing ones. 

Second, DOD starts its space programs too early, that is, before it has 
assurance that the capabilities it is pursuing can be achieved within 
available resources and time constraints. This tendency is caused 
largely by the funding process, since acquisition programs attract more 
dollars than efforts concentrating solely on proving out technologies. 
Nevertheless, when DOD chooses to extend technology invention into 
acquisition, programs experience technical problems that have 
reverberating effects and require large amounts of time and money to 
fix. When programs have a large number of interdependencies, even minor 
"glitches" can cause disruptions. 

A companion problem for all weapon systems is that DOD allows new 
requirements to be added well into the acquisition phase. Many times, 
these significantly stretch the technology challenges (and 
consequently, budgets) the program is already facing. This was 
particularly evident in SBIRS High up until 2004. While experiences 
would caution DOD not to pile on new requirements, customers often 
demand them fearing there may not be another chance to get new 
capabilities since programs can take a decade or longer to complete. 

Third, space programs have historically attempted to satisfy all 
requirements in a single step, regardless of the design challenge or 
the maturity of the technologies to achieve the full capability. 
Increasingly, DOD has preferred to make fewer, but heavier, larger, and 
complex "Battlestar Galactica-like" satellites, that perform a 
multitude of missions rather than larger constellations of smaller, 
less complex satellites that gradually increase in sophistication. This 
has stretched technology challenges beyond the capability of many 
potential contractors and vastly increased the complexities related to 
software--a problem that affected SBIRS High and AEHF, for example. 

Our reviews have identified additional factors that contribute to space 
acquisition problems, though less directly affecting cost and schedule 
problems we have reported on. For example, consolidations within 
defense supplier base for space programs have made it more difficult 
for DOD to incorporate competition into acquisition strategies. Since 
1985, there were at least ten fully competent prime contractors 
competing for the large programs and a number that could compete for 
subcontracts. Arguably today, there are only two contractors that could 
handle DOD's most complex space programs. DOD has exacerbated this 
problem by not seeking opportunities to restructure its acquisitions to 
maximize competition, particularly for the small suppliers who have a 
high potential to introduce novel solutions and innovations into space 
acquisitions. In the 1990s, DOD also structured contracts in a way that 
reduced oversight and shifted key decisionmaking responsibility onto 
contractors. DOD later found that this approach--known as Total System 
Performance Responsibility, or TSPR--magnified problems related to 
requirements creep and poor contractor performance. 

Another factor contributing to problems is the diverse array of 
officials and organizations involved with a space program, which has 
made it even more difficult to pare back and control requirements. The 
Space Radar system, for example, is expected to play a major role in 
transforming military as well as intelligence-collecting operations and 
other critical governmental functions, such as homeland security. As a 
result, its constituency includes combatant commanders, all of the 
military services, intelligence agencies, and the Department of 
Homeland Security. The Global Positioning System not only serves the 
military, it provides critical services to civilian users, the 
transportation sector, the information technology sector, among many 
other industries. 

In addition, short tenures for top leadership and program managers 
within the Air Force and the Office of the Secretary of Defense has 
lessened the sense of accountability for acquisition problems and 
further encouraged a short-term view of success, according to officials 
we have interviewed. Though still in a pre-acquisition phase, TSAT and 
Space Radar have already had one program director each. The SBIRS High 
program, meanwhile, has seen at least three program directors. At the 
highest levels of leadership, for many years, DOD did not invest 
responsibilities for its space activities in any one individual-- 
leaving no one in charge of establishing an integrated vision for space 
or of mediating between competing demands. In 1994, it established such 
a position within the Office of the Secretary of Defense, but dissolved 
this position in 1998. In 2002, DOD established a space leadership 
position within the Under Secretary position in the Air Force, combined 
it with the directorship of the National Reconnaissance Office in order 
to better integrate DOD and intelligence space activities, and allowed 
the Under Secretary to have milestone decision authority for major 
space systems acquisitions. After the first Under Secretary of the Air 
Force in charge of space retired in 2005, DOD split these 
responsibilities and temporarily reclaimed milestone decision authority 
for all major space programs. Changes in leadership and reorganizations 
are common across DOD, but again, they make it more difficult to 
enforce accountability and maintain the right levels of support for 
acquisition programs. 

Lastly, there are capacity shortfalls that have constrained DOD's 
ability to optimize and oversee its space programs. These include: 
shortages in the pipeline of scientists and engineers, shortages of 
experts in systems and software engineering, and uneven levels of 
experience among program managers. Contractors are also facing 
workforce pressures similar to those experienced by the government, 
that is, not enough technical expertise to develop complex space 
systems. In addition, we have reported that there is a lack of low-cost 
launch opportunities, which are needed to increase the level of 
experimental testing in space. 

DOD Has Expressed Its Commitment to Improve Its Approach to Space 
Acquisitions: 

DOD has recently expressed a commitment to improve its approach to 
space acquisitions and embrace many of the recommendations we have made 
in the past. 

Our previous recommendations have been focused on providing a sound 
foundation for program execution. Namely, we have recommended that DOD 
separate technology discovery from acquisition, follow an incremental 
path toward meeting user needs, match resources and requirements at 
program start, and use quantifiable data and demonstrable knowledge to 
make decisions to move to next phases. In addition, we have called on 
DOD to develop an overall investment strategy for space in order to 
help DOD rebalance its investments in space acquisition programs as it 
continues to contend with cost increases from its programs. 

These recommendations are based on a body of work that we have 
undertaken over the last several years that examines weapon acquisition 
issues from a perspective that draws upon lessons learned from best 
product development practices. Leading commercial firms expect that 
their program managers will deliver high-quality products on time and 
within budget. Doing otherwise could result in the customer walking 
away. Thus, those firms have created an environment and adopted 
practices that put their program managers in a good position to succeed 
in meeting these expectations. Collectively, these practices comprise a 
process that is anchored in knowledge. It is a process in which 
technology development and product development are treated differently 
and managed separately. The process of developing technology culminates 
in discovery--the gathering of knowledge--and must, by its nature, 
allow room for unexpected results and delays. Leading firms do not ask 
their program or product managers to develop technology. Rather, they 
give responsibility for maturing technologies to science and technology 
organizations. The process of developing a product culminates in 
delivery and, therefore, gives great weight to design and production. 
The firms demand--and receive--specific knowledge about a new product 
before production begins. A program does not go forward unless a strong 
business case on which the program was originally justified continues 
to hold true. 

While the practices we have recommended represent commonly accepted 
sound business practices, until recently, they have not been accepted 
by DOD's space acquisition community for large space acquisitions. By 
contrast, these practices were implemented for the development of a 
small, experimental satellite, intended for direct use by a combatant 
command, (known as TacSat 1). We recently reported that by including 
only mature technologies and limiting new requirements, DOD was able to 
develop the satellite for less than $10 million (including surplus 
hardware valued at $5 million) and within 12 months. 

In disagreeing with our recommendations, DOD asserted its desire to 
push programs to advance technologies as far as possible. Other reasons 
that space officials have given for extending technology development 
into acquisition include the greater ability to secure funding for 
costly technology development within an acquisition program versus a 
science and technology program, a belief among the acquisition 
community that labs in charge of developing space technologies do not 
understand their needs, as well as communication gaps between the 
science and technology (S&T) and acquisition communities. 

Moreover, while DOD officials told us they were pursuing evolutionary 
development for space systems, we found that they were beginning 
programs by challenging programs managers to achieve significant leaps 
in capability with the intention of abandoning those efforts later in 
the development cycle should too many problems be encountered. This is 
not a true evolutionary approach, as it leaves DOD facing increased 
technical challenges at the beginning of a program and thus, increased 
risks, and it raises the expectations on the part of stakeholders who 
may be unwilling to accept less capability later on. Two of the systems 
we were most concerned about in this respect were and TSAT and Space 
Radar --they were already expected to cost about $40 billion. DOD was 
planning to start these acquisitions even when many of their critical 
technologies were still immature and it was pursuing a highly ambitious 
path in terms of the technology push. Given that these systems were 
among the most complex programs ever undertaken for space, they were 
being counted on to enable wider DOD transformation efforts, and DOD 
was already contending with highly problematic space efforts, we 
believed DOD could not afford to pursue such risky approaches for TSAT 
and Space Radar. 

Since we last testified before this subcommittee in July 2005, DOD has 
appointed a new Under Secretary of the Air Force to be in charge of 
space acquisitions, who, in turn, has embraced adopting best practices, 
or, as he terms it, "going back to the basics." Specifically, the Under 
Secretary has expressed a desire to: 

* Delegate the maturation of technologies--to the point of being tested 
in a relevant environment or operational environment, if appropriate-- 
to the S&T community. 

* Adopt an evolutionary development approach in which new systems would 
be developed in a series of increments, or blocks. Any desired 
technology that is not expected to be matured in time to start a new 
block would be assigned to a later block. Each block would have a 
discrete beginning and end point. 

* Fund S&T appropriately so that significant technology breakthroughs 
can be continually pursued. 

* Improve collaboration on requirements--consulting with warfighters on 
the content of each new block. 

In addition, the Under Secretary is focused on estimating cost and 
funding new acquisitions to an 80-percent confidence level; 
strengthening systems engineering and strengthening the acquisition 
workforce. 

Aspects of this approach have recently been incorporated in to DOD's 
TSAT program. For the first block, satellites 1 and 2, the Air Force 
has reduced its expectations in the level of sophistication of these 
satellites to increase the confidence in the schedule for launching the 
first satellite in 2014. Higher performing levels of the technologies 
to support laser communications and an Internet-like processor router 
will be pushed off to a subsequent block, along with the multi-access 
laser communications--a more robust laser capable of transmitting vast 
amounts of data within seconds. Program officials have also stated that 
the TSAT program will not enter into product development, that is, 
formal acquisition, until its critical technologies are proven. 

These are good steps when looking at TSAT as an individual program. It 
is important, however, that the Air Force ensure warfighters accept 
lower capability and that it makes sense to pursue the current approach 
versus the alternative of buying more AEHF or WGS satellites. 

Keys to Realizing DOD's New Goals for Space Acquisitions: 

DOD's desire to adopt best practices for space acquisition is a 
positive and necessary first step toward reform. However, these changes 
will not be easy to undertake. They require significant shifts in 
thinking about how space systems should be developed; changes in 
incentives and perceptions; as well as further policy and process 
changes. Moreover, they will need to be made within a larger 
acquisition environment that still encourages a competition for funding 
and consequently pressures programs to view success as the ability to 
secure the next installment rather than the end goal of delivering 
capabilities when and as promised. In addition, DOD's space leaders 
will be challenged to sustain a commitment to adopting best practices, 
given the myriad of missions and programs that compete for the 
attention of DOD's leadership and resources, frequent turnover in 
leadership positions, and potential resistance from the many diverse 
organizations involved with space acquisitions. 

There are steps, however, that DOD can take to substantially mitigate 
these challenges. 

* First, DOD can guide its decisions to start space acquisition 
programs with an overall investment strategy. More specifically, DOD 
could identify overall capabilities and how to achieve them, that is, 
what role space will play versus other air-, sea-, and land-based 
assets; identify priorities for funding space acquisitions; and 
implement mechanisms that would enforce the strategy and measure 
progress. Optimally, DOD would do this for its entire weapon system 
investment portfolio so that space systems that are expected to play a 
critical role in transformation could be prioritized along with other 
legacy and transformational systems and so that DOD could reduce 
pressures associated with competition for funding. But in the absence 
of a departmentwide strategy, DOD could reexamine and prioritize its 
space portfolio with an eye toward balancing investments between legacy 
programs and new programs as well as between S&T programs and 
acquisition programs. In addition, DOD could prioritize S&T 
investments. This is particularly important since DOD is undertaking a 
range of initiatives--collectively known as operationally responsive 
space (ORS)--designed to facilitate evolutionary development, more 
testing of technologies before acquisition, and ultimately enable DOD 
to deliver space-based capabilities to the warfighter much faster and 
quicker. While ORS investments hold great potential, there are other 
S&T projects competing for the same resources, including those focused 
on discovering and developing technologies and materials that could 
greatly enhance future capabilities, reduce costs, and maintain U.S. 
superiority in space. 

* Second, DOD could revise policies and processes supporting space as 
needed to adopt the best practices being embraced. For example, DOD's 
space acquisition policy could be further revised to ensure that a true 
evolutionary approach is being pursued and that blocks, or increments, 
will include only technologies that have been sufficiently matured. DOD 
could also implement processes and policies, as needed, that stabilize 
requirements, particularly for acquisitions that are being shared with 
other stakeholders, such as the intelligence community, and that ensure 
warfighters are bought into capabilities being pursued for each new 
system increment. In recent years, it has instituted processes for some 
individual systems, such as SBIRS High, that could serve as a model. 

* Third, DOD could continue to address other capacity shortfalls. These 
include shortages of staff with science and engineering backgrounds; 
shortages of experience within the program manager workforce; limited 
opportunities and funding for testing for space technologies; and the 
lack of low-cost launch vehicles. At the same time, DOD could continue 
to work toward strengthening relationships between the S&T and 
acquisition communities and coordination within the S&T community. The 
Under Secretary is uniquely positioned to do this given his previous 
position as DOD's Director of Defense Research and Engineering and his 
participation in previous efforts to develop a strategy for space S&T. 

* Fourth, we have recommended that DOD take steps departmentwide to 
hold people and programs accountable when best practices are not 
pursued. This will require DOD to empower program managers to make 
decisions related to funding, staffing, and moving into subsequent 
phases and to match program manager tenure with development or delivery 
of a product. It may also require DOD to tailor career paths and 
performance management systems to incentivize longer tenures. Until 
these actions have been taken, space leaders could take steps now to 
ensure space program managers have the right levels of experience to 
execute large programs and have sufficient authority so that they can 
be held accountable. Likewise, DOD's space leaders can take steps to 
hold its contractors accountable by structuring contracts so that 
incentives actually motivate contractors to achieve desired acquisition 
outcomes and withholding award fees when those goals are not met. 

In closing, we are encouraged with the acquisition approach being 
embraced by DOD's space leadership. It can enable DOD to begin to match 
resources to requirements before starting new programs and therefore, 
better position programs for success. Successful implementation, 
however, will hinge on the ability of DOD's current space leaders to 
instill and sustain commitment to adopting best practices over the 
short and long term. In doing so, best practice approaches should be 
reflected in policy and manifested in decisions on individual programs 
or reform will be blunted. They should also be accompanied by an 
investment strategy for space, and ultimately DOD, to separate wants 
from needs and to alleviate long-standing pressures associated with 
competition within DOD to win funding. By embracing a model that 
incorporates all these elements, DOD can achieve better outcomes for 
its space programs. 

Scope and Methodology: 

In preparing for this testimony, we relied on previously issued GAO 
reports on assessments of individual space programs, incentives and 
pressures that drive space system acquisition problems, common problems 
affecting space system acquisitions, space science and technology 
strategy, and DOD's space acquisition policy, as well as our reports on 
best practices for weapon systems development. We also analyzed DOD's 
Selected Acquisition Reports to assess cost increases and investment 
trends. In addition, we met with the Air Force Under Secretary to 
discuss his "back to basics" approach. We conducted our review between 
March 6 and April 3, 2006 in accordance with generally accepted 
government auditing standards. 

Contacts and Acknowledgments: 

For future information, please contact Cristina Chaplain at 202-512- 
4841 or chaplainc@gao.gov. Individuals making contributions to this 
testimony include, Art Gallegos, Robert Ackley, Maricela Cherveny, 
Sharron Candon, Jean Harker, Leslie Kaas Pollock, and Karen Sloan. 

Table 1 highlights recent findings from our reports on cost and 
schedule overruns for DOD's current and planned space programs. The 
table also notes that many programs are still addressing past mistakes 
in acquisition approaches and contractor oversight as well as 
technical, design, and manufacturing problems. 

Table 1: Highlights of Recent Findings for Current and Planned Space 
Programs: 

Description: Space Based Infrared System High (SBIRS High): Ballistic 
missile warning system being developed by the Air Force to replace its 
legacy warning system; Development; Start-October 1996; 
Recent Findings: With unit cost increases of more than 315-percent over 
the 1996 initial estimate, the program has undergone four Nunn-McCurdy 
unit cost breaches. Total program costs have increased from about $4 
billion to more than $10 billion. The launch schedule has slipped over 
6 years; the first satellite is currently scheduled to be delivered in 
September 2008. DOD officials recently called for initiating planning 
efforts for the development of a new missile warning system, parallel 
to SBIRS; it is unclear whether this program will replace or compete 
against SBIRS. 

Description: Global Broadcast Service (GBS): Part of the overall DOD 
military satellite communication architecture being developed by the 
Air Force for one-way transmission of video, imagery and other high- 
bandwidth information to the warfighter; Development; Start-November 
1997; 
Recent Findings: Total program costs have increased by 72-percent since 
the contract was awarded in 1997, largely due to the transition from a 
legacy system architecture to internet protocol, additional production 
quantities, and operation and maintenance tasks. In June 2005, a 
quarterly exception selected acquisition report was submitted to 
reflect initial operational capability delays of six months or more due 
to a delayed operational test schedule. GBS currently uses broadcast 
payloads on three Ultra-High Frequency Follow-on (UFO) satellites and 
will use broadcast payloads on up to five Wideband Gapfiller Satellites 
(WGS) satellites when they are launched. 

Description: Evolved Expendable Launch Vehicle (EELV): Acquisition of 
commercial launch services from two competitive families of launch 
vehicles; Development; Start-October 1998; 
Recent Findings: The program cost has risen over 81-percent, with a 
cost per unit increase of about 138-percent and triggered a Nunn-
McCurdy breach. A chief reason for cost increases is a decline in the 
commercial launch market upon which the program's business case was 
based. In 2005, the two primary contractors agreed to form a joint 
venture to combine production, engineering, test and launch operations 
for U.S. government launches that is under review by the Federal Trade 
Commission. 

Description: Navstar Global Positioning System (GPS) Modernization: A 
space-based radio-positioning system that nominally consists of 24- 
satellite constellation providing navigation and timing data to 
military and civilian users worldwide; Development; Start-February 
2000; 
Recent Findings: Total costs of the GPS II modernization program have 
increased by over 20-percent, largely due to DOD's decision to delay 
the start of the follow-on GPS III program, which will require DOD to 
buy additional GPS IIF satellites. The first GPS IIR-M satellite with 
the new military code capability was launched in September 2005. A 
total of 18 satellites with this code need to be on orbit to provide 
initial operational capability to the warfighter and this number is 
expected to be reached in fiscal year 2011. However, the software for 
the control system needed to support the operational capability of 
these satellites will not be operational until fiscal year 2012. Thus 
the satellites on orbit with the new military code will not be fully 
utilized. 

Description: Wideband Gapfiller Satellites (WGS): Satellites based 
almost exclusively on commercial parts being developed by the Air Force 
to provide interim communications support; Development; Start- November 
2000; 
Recent Findings: Total program costs increased about 70- percent from 
$1.06 billion in 2000 to $1.81 billion in 2005. The program office 
estimates an increase since last year of about $276.2 million for the 
program, largely due to cost growth resulting from a production gap 
between satellites three and four. Launch of the first satellite has 
now been delayed for over 3 years and is currently scheduled for June 
2007. The delay will increase costs and add at least 22 months to the 
time it takes to obtain an initial operational capability from the 
system. The contractor continues to experience problems assembling the 
satellites. 

Description: Advanced Extremely High Frequency (AEHF): Communications 
satellite system being developed by the Air Force to replace its legacy 
protected communications satellites; Development; Start-September 2001; 
Recent Findings: Unit cost has increased by about 84-percent. In 2004, 
the program experienced cost increases of more than 15-percent, which 
required a Nunn-McCurdy notification to Congress. The program was 
restructured in 2004 when key cryptographic equipment was not delivered 
to the payload contractor in time to meet the launch schedule. Current 
plans are to meet full operational capability with three AEHF 
satellites and the first Transformational Satellite Communication 
System (TSAT) satellite, but additional AEHF satellites may be acquired 
if there are deployment delays with TSAT. 

Description: Space Tracking and Surveillance System (STSS): Two 
satellites that are going to be launched in 2007 as technology 
demonstrations for missile defense tests to assess whether missiles can 
be effectively tracked from space; Development; Start-Restructured 
April 2002; 
Recent Findings: Total program costs have increased by about 35-percent 
due to the addition of funds for designing and developing the program's 
operational constellation. The initial increment of this program, which 
started in 2002, is composed of two demonstration satellites that were 
built under the previous Space Based Infrared System-Low (SBIRS Low) 
program. SBIRS Low had incurred cost increases and schedule delays and 
other problems that were so severe, DOD abandoned the effort. The STSS 
program has experienced system quality and system engineering problems 
with the payload, however, the program office still expects early 
delivery and launch of the satellites. 

Description: National Polar-orbiting Operational Environmental 
Satellite System (NPOESS): Weather and environmental monitoring 
satellites being developed by the National Oceanic and Atmospheric 
Administration, the National Aeronautics and Space Administration, and 
DOD to replace those in use by the agencies; Development; Start-August 
2002; 
Recent Findings: Unit costs increased by about 34-percent, triggering a 
Nunn-McCurdy review in January 2006. The launch of the first satellite 
has been delayed by at least 17 months (until September 2010) and could 
result in a gap in satellite coverage of at least 3 years. According to 
program officials, every aspect of the program is being evaluated by 
internal and external groups and several options are being reviewed for 
technical viability and cost effectiveness. The program office noted 
that any changes resulting from this process may produce substantial 
cost, schedule, and technical performance changes, such as removing a 
key sensor from the first satellite, delaying launches of the first two 
satellites, and not launching a preliminary risk-reduction satellite. 

Description: Transformational Satellite Communications System (TSAT): 
Communication satellites being developed by the Air Force to employ 
advanced technologies in support of DOD's future communication 
architecture; Program Initiation-January 2004; 
Recent Findings: Total program costs have increased about 3-percent 
from $15.5 billion in June 2004 to nearly $16 billion in December 2004, 
and the initial launch of the first TSAT satellite has slipped from 
2011 to 2014.The TSAT program is currently being restructured to follow 
an incremental development approach--an approach that is intended to 
help it stay within projected costs and provide capabilities to the war 
fighter sooner. 

Description: Mobile User Objective System (MUOS): Navy effort to 
develop a family of unprotected, narrow-band satellites that can 
support mobile and fixed-site users worldwide; Development; Start- 
September 2004; 
Recent Findings: This is a relatively new effort. In June 2004, DOD 
delayed the first MUOS satellite launch by one year to fiscal year 2010 
due to a delay in awarding the development contract and to mitigate 
schedule risk. We reported that early procurement of long lead items 
before achieving a stable design for this Navy communications system 
could lead to cost increases and the program's development schedule 
remains compressed--posing risks should software development or other 
technical or design problems be encountered. 

Planned Programs: 

Description: GPS III: Next generation of GPS being developed to add 
advanced jam resistant capabilities and provide higher quality and more 
secure navigational capabilities; Planned Development Start Date- Third 
quarter of fiscal year 2007; 
Recent Findings: This is a relatively new effort. Initial plans were to 
develop these satellites and begin launching them in 2012, but DOD has 
delayed the start of this program so the planned first satellite launch 
date is now 2013. Program officials intend to use an incremental 
development approach for acquiring these satellites. A recent Defense 
Science Board study recommended a 30 satellite, three plane 
constellation for GPS III instead of the current 24 satellite, six 
plane constellation. The same study also recommended that cost and 
weight be key parameters in the design of the GPS III satellites, and 
specifically recommended measures to limit GPS III weight so that two 
satellites could be launched aboard a medium-class launch vehicle. 

Description: Space Radar (SR): Reconnaissance satellites being 
developed by the Air Force to find, identify, track and monitor moving 
or stationary targets under all weather conditions; Planned Development 
Start Date -August 2008; 
Recent Findings: This is a relatively new effort with no reported cost 
increases or schedule delays. The planned cost estimate is about $23 
billion. A decision to develop on-orbit demonstration satellites to 
validate technology maturity and cost won't be made until 2007. The 
program is undergoing restructure, including a new Integrated Program 
Office, a new plan for risk reduction activities and revised cost 
estimates, and an acquisition strategy that calls for development of a 
smaller constellation of high performing, more affordable satellites. 

Source: GAO analysis of DOD data and previous GAO reports. 

[End of table] 

FOOTNOTES 

[1] Estimates of fiscal year 2007 spending are based on DOD's Fiscal 
Year 2006 Future Year Defense Program (FYDP) plan. The fiscal year 2007 
FYDP plan was not available to us at the time of this testimony. 

[2] 10 U.S.C. § 2433. This oversight mechanism originated with an 
amendment to the Department of Defense Authorization Act, 1982. It was 
made permanent in the following year's authorization act and has been 
amended several times. Generally, the law requires DOD to review 
programs and report to Congress whenever cost growth reaches specified 
thresholds. The statute is commonly known as the Nunn-McCurdy amendment 
based on the names of the sponsors of the original legislation. 

[3] GAO, Defense Acquisitions: Assessment of Selected Major Weapon 
Programs, GAO-06-391 (Washington, D.C.: March 31, 2006).