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Testimony: 

Before the Committee on the Budget, House of Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Wednesday, March 18, 2000: 

Defense Acquisitions: 

DOD Must Prioritize Its Weapon System Acquisitions and Balance Them 
with Available Resources: 

Statement of Statement of Michael J. Sullivan, Director: 
Acquisition and Sourcing Management: 

GAO-09-501T: 

GAO Highlights: 

Highlights of GAO-09-501T, a testimony before the Committee on the 
Budget, House of Representatives. 

Why GAO Did This Study: 

Since fiscal year 2000, the Department of Defense (DOD) has 
significantly increased the number of major defense acquisition 
programs and its overall investment in them. However, acquisition 
outcomes have not improved. Over the next 5 years, DOD expects to 
invest $357 billion on the development and procurement of major defense 
acquisition programs and billions more on their operation and 
maintenance. Last year, we reported that the total acquisition cost of 
DODís portfolio of major defense programs under development or in 
production has grown by $295 billion (in fiscal year 2008 dollars). In 
most cases, the programs we assessed failed to deliver capabilities 
when promisedóoften forcing warfighters to spend additional funds on 
maintaining legacy systems. Continued cost growth results in less 
funding being available for other DOD priorities and programs, while 
continued failure to deliver weapon systems on time delays providing 
critical capabilities to the warfighter. 

This testimony describes the systemic problems that have contributed to 
poor cost and schedule outcomes in DODís acquisition of major weapon 
systems; recent actions DOD has taken to address these problems; and 
steps that Congress and DOD need to take to improve the future 
performance of DODís major weapon programs. The testimony is drawn from 
GAOís body of work on DODís acquisition, requirements, and funding 
processes. 

What GAO Found: 

Since 1990, GAO has consistently designated DODís management of its 
major weapon acquisitions as a high-risk area. A broad consensus exists 
that weapon system problems are serious, but efforts at reform have had 
limited effect. For several years, GAOís work has highlighted a number 
of strategic- and program-level causes for cost, schedule, and 
performance problems in DODís weapon system programs. At the strategic 
level, DODís processes for identifying warfighter needs, allocating 
resources, and developing and procuring weapon systems, which together 
define the departmentís overall weapon system investment strategy, are 
fragmented. As a result, DOD fails to balance the competing needs of 
the services with those of the joint warfighter and commits to more 
programs than resources can support. At the program level, DOD allows 
programs to begin development without a full understanding of 
requirements and the resources needed to execute them. The lack of 
early systems engineering, acceptance of unreliable cost estimates 
based on overly optimistic assumptions, failure to commit full funding, 
and the addition of new requirements well into the acquisition cycle 
all contribute to poor outcomes. Moreover, DOD officials are rarely 
held accountable for poor decisions or poor program outcomes. 

Recent changes to the DOD acquisition system could begin to improve 
weapon program outcomes. However, DOD must take additional actions to 
reinforce the initiatives in practice including (1) making better 
decisions about which programs should be pursued or not pursued given 
existing and expected funding; (2) developing an analytical approach to 
better prioritize capability needs; (3) requiring new programs to have 
manageable development cycles; (4) requiring programs to establish 
knowledge-based cost and schedule estimates; and (5) requiring 
contractors to perform detailed systems engineering analysis before 
proceeding to system development. Recently proposed acquisition reform 
legislation addresses some of these areas. However, while legislation 
and policy revisions may lead to improvements, they will not be 
effective without changes to the overall acquisition environment. DOD 
has tough decisions to make about its weapon systems portfolio, and 
stakeholders, including the DOD Comptroller, the military services, 
industry, and Congress, have to play a constructive role in the process 
of bringing balance to it. 

Table: Analysis of DOD Major Defense Acquisition Program Portfolio 
(fiscal year 2008 dollars): 

Portfolio status: Number of programs; 
Fiscal year 2007 portfolio: 95. 

Portfolio status: Change in total research and development costs from 
first estimate; 
Fiscal year 2007 portfolio: 40 percent increase. 

Portfolio status: Change in total acquisition cost from first estimate; 
Fiscal year 2007 portfolio: 26 percent increase. 

Portfolio status: Estimated total acquisition cost growth from first 
estimate; 
Fiscal year 2007 portfolio: $295 billion. 

Portfolio status: Share of programs with 25 percent or more increase in 
program acquisition unit cost; 
Fiscal year 2007 portfolio: 44 percent. 

Portfolio status: Average schedule delay in delivering initial 
capabilities; 
Fiscal year 2007 portfolio: 21 months. 

Source: GAO analysis of DOD data. 

[End of table] 

View [hyperlink, http://www.gao.gov/products/GAO-09-501T] or key 
components. For more information, contact Michael J. Sullivan at (202) 
512-4841 or sullivanm@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Committee: 

I am pleased to be here today to discuss the Department of Defense's 
(DOD) fiscal year 2010 budget and its acquisition of major weapon 
systems. While the programmatic details of the President's Budget have 
not been released, its recognition of the need for reforming DOD weapon 
system acquisition is a positive first step. This area has been on 
GAO's high-risk list since 1990, however now there is momentum from the 
administration, including the Secretary of Defense, and key 
congressional committees to address this issue. While the combat 
effectiveness of DOD weapon systems is unparalleled, major weapon 
programs continue to cost more, take longer, and deliver fewer 
quantities and capabilities than originally planned. Last year we 
reported that the cumulative cost growth in DOD's portfolio of 95 major 
defense acquisition programs was $295 billion and the average delay in 
delivering promised capabilities to the warfighter was 21 months. 
Clearly, some problems are to be expected in developing weapon systems 
given the technical risks and complexities involved. However, all too 
often, we have found that cost and schedule problems are rooted in poor 
planning, execution, and oversight. 

DOD is entrusted with more taxpayer dollars than any other federal 
agency, representing the largest part of the discretionary spending in 
the U.S. budget. Congress provided DOD with about $512 billion in 
annual appropriations for fiscal year 2009 and the administration is 
requesting almost $534 billion for 2010. Effective management of this 
substantial investment is critical as competition for funding has 
increased dramatically within the department and across the government. 
DOD faces a number of fiscal pressures, such as the ongoing military 
campaigns in Afghanistan and Iraq, rising personnel costs, the 
rebuilding and modernization of the force, and cost overruns in its 
major defense acquisition programs. At a time when the federal budget 
is strained by spending needs for a growing number of national 
priorities, it is important that DOD get the best value for every 
dollar it invests in weapon system programs. Every dollar wasted during 
the development and acquisition of weapon systems is money not 
available for other priorities within DOD and elsewhere in the 
government. 

Today, I will discuss (1) the systemic problems that have contributed 
to poor cost and schedule outcomes in DOD's acquisition of major weapon 
systems, (2) recent actions DOD has taken to address these problems, 
and (3) steps that Congress and DOD need to take to improve the future 
performance of DOD's major weapon programs. The statement draws from 
our extensive body of work on DOD's acquisition of weapon systems. A 
list of our key products is provided at the end of this testimony. This 
work was conducted in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

Background: 

For almost two decades, we have reported on pervasive and long-standing 
weaknesses in DOD's business operations. In January 2009, we released 
our high-risk series update for the 111th Congress.[Footnote 1] This 
series emphasizes federal programs and operations that are at high risk 
because of vulnerabilities to fraud, waste, abuse, and mismanagement 
and has also evolved to draw attention to areas associated with broad- 
based transformation needed to achieve greater efficiency, 
effectiveness, and sustainability. Solutions to high-risk problems 
offer the potential to save billions of dollars, dramatically improve 
service to the public, strengthen confidence and trust in the 
performance and accountability of the U.S. government, and ensure the 
ability of government to deliver on its promises. Since our high-risk 
program began, the government has taken these problems seriously and 
has made progress toward correcting them. Of the 30 high-risk areas 
identified by GAO across the government, DOD bears sole responsibility 
for 8 high-risk areas, including weapon systems acquisition, and shares 
responsibility for 7 other high-risk areas (see table 1). 

Table 1: High-Risk Areas Involving the Department of Defense (DOD): 

Defense-specific: DOD Approach to Business Transformation; 
Governmentwide areas that apply to DOD: Strategic Human Capital 
Management. 

Defense-specific: DOD Weapon Systems Acquisition; 
Governmentwide areas that apply to DOD: Protecting the Federal 
Government's Information Systems and the Nation's Critical 
Infrastructures. 

Defense-specific: DOD Contract Management; 
Governmentwide areas that apply to DOD: Managing Federal Real Property. 

Defense-specific: DOD Supply Chain Management; 
Governmentwide areas that apply to DOD: Establishing Effective 
Mechanisms for Sharing Terrorism-Related Information to Protect the 
Homeland. 

Defense-specific: DOD Financial Management; 
Governmentwide areas that apply to DOD: Ensuring the Effective 
Protection of Technologies Critical to U.S. National Security 
Interests. 

Defense-specific: DOD Business Systems Modernization; 
Governmentwide areas that apply to DOD: Management of Interagency 
Contracting. 

Defense-specific: DOD Support Infrastructure Management; 
Governmentwide areas that apply to DOD: Improving and Modernizing 
Federal Disability Programs. 

Defense-specific: DOD Personnel Security Clearance Program; 
Governmentwide areas that apply to DOD: [Empty]. 

Source: GAO. 

[End of table] 

In addition to monitoring these high-risk areas, we also monitor 
actions that DOD has taken in response to our findings, conclusions, 
and recommendations. During fiscal years 2001 through 2007, we issued 
637 reports to DOD that included a total of 2,726 recommendations. In 
December 2008, we reported to this committee on the implementation 
status of these recommendations and related financial accomplishments. 
[Footnote 2] As of October 2008, 1,682 or 62 percent of the 
recommendations we made were reported as were closed and implemented, 
758 or 28 percent were open, and 286 or 10 percent were closed, but not 
implemented for a variety of reasons.[Footnote 3] Consistent with past 
experience that shows it takes agencies some time to implement 
recommendations, we found most recommendations from fiscal year 2001 
have been implemented while most recommendations from fiscal year 2007 
remain open. During this same period, we recorded over $89 billion in 
financial benefits associated with our work involving DOD. [Footnote 4] 
Besides financial accomplishments, our recommendations also produce 
many nonfinancial benefits and accomplishments, such as DOD actions 
taken to improve operations or management oversight. Both types of 
benefits result from our efforts to provide information to the Congress 
that helped to (1) change laws and regulations, (2) improve services to 
the public, and (3) promote sound agency and governmentwide management. 

For fiscal year 2007, 74 of our 313 recommendations to DOD were related 
to improving weapon system acquisition programs. In addition, for 
fiscal year 2007, we reported $2.6 billion in financial benefits 
related to weapon system acquisition programs. The financial benefits 
claimed result from the actions taken by Congress or DOD that are based 
on findings, conclusions, or recommendations contained in our products. 
Such actions include congressional reductions to the President's annual 
budget requests, cost reductions due to greater efficiency, or cost 
reductions due to program cancellations or program delays. For example, 
the fiscal year 2007 budget request for the Army's Future Combat System 
was reduced by $254 million based in part on our testimony about the 
program's development risks. Over the next 5 years, DOD plans to spend 
more than $357 billion on the development and procurement of major 
defense acquisition programs. We will continue to seek to improve the 
efficiency and effectiveness of DOD's weapon system investments through 
our work on individual programs and crosscutting areas that affect 
acquisition outcomes. 

Failure to Match Requirements with Technology and Other Resources 
Underlie Poor Weapon Program Outcomes and Undermine Accountability: 

Over the past several years our work has highlighted a number of 
underlying systemic causes for cost growth and schedule delays at both 
the strategic and program levels. At the strategic level, DOD's 
processes for identifying warfighter needs, allocating resources, and 
developing and procuring weapon systems--which together define DOD's 
overall weapon system investment strategy--are fragmented. As a result, 
DOD fails to effectively address joint warfighting needs and commits to 
more programs than it has resources for, thus creating unhealthy 
competition for funding. At the program level, a military service 
typically establishes and DOD approves a business case containing 
requirements that are not fully understood and cost and schedule 
estimates that are based on overly optimistic assumptions rather than 
on sufficient knowledge. Once a program begins, it too often moves 
forward with inadequate technology, design, testing, and manufacturing 
knowledge, making it impossible to successfully execute the program 
within established cost, schedule, and performance targets. 
Furthermore, DOD officials are rarely held accountable for poor 
decisions or poor program outcomes. 

DOD Lacks an Integrated Approach to Balance Weapon System Investments: 

At the strategic level, DOD largely continues to define warfighting 
needs and make investment decisions on a service-by-service and 
individual platform basis, using fragmented decision-making processes. 
This approach makes it difficult for the department to achieve a 
balanced mix of weapon systems that are affordable and feasible and 
that provide the best military value to the joint warfighter. In 
contrast, we have found that successful commercial enterprises use an 
integrated portfolio management approach to focus early investment 
decisions on products collectively at the enterprise level and ensure 
that there is a sound basis to justify the commitment of resources. 
[Footnote 5] By following a disciplined, integrated process--during 
which the relative pros and cons of competing product proposals are 
assessed based on strategic objectives, customer needs, and available 
resources, and where tough decisions about which investments to pursue 
and not to pursue are made--companies minimize duplication between 
business units, move away from organizational stovepipes, and 
effectively support each new development program. To be effective, 
integrated portfolio management must have strong, committed leadership; 
empowered portfolio managers; and accountability at all levels of the 
organization. 

DOD determines its capability needs through the Joint Capabilities and 
Integration Development System (JCIDS). While JCIDS provides a 
framework for reviewing and validating needs, it does not adequately 
prioritize those needs from a joint, departmentwide perspective and 
lacks the agility to meet changing warfighter demands. We recently 
reviewed JCIDS documentation related to new capability proposals and 
found that almost 70 percent were sponsored by the military services 
with little involvement from the joint community, including the 
combatant commands, which are responsible for planning and carrying out 
military operations.[Footnote 6] By continuing to rely on capability 
needs defined primarily by the services, DOD may be losing 
opportunities for improving joint warfighting capabilities and reducing 
the duplication of capabilities in some areas. The JCIDS process has 
also proven to be lengthy and cumbersome--taking on average up to 10 
months to validate a need--thus undermining the department's efforts to 
effectively respond to the needs of the warfighter, especially those 
needs that are near term. Furthermore, the vast majority of capability 
proposals that enter the JCIDS process are validated or approved 
without accounting for the resources or technologies that will be 
needed to acquire the desired capabilities. Ultimately, the process 
produces more demand for new weapon system programs than available 
resources can support. 

The funding of proposed programs takes place through a separate 
process, the department's Planning, Programming, Budgeting, and 
Execution (PPBE) system, which is not fully synchronized with JCIDS. 
While JCIDS is a continuous, need-driven process that unfolds in 
response to capability proposals as they are submitted by sponsors, 
PPBE is a calendar-driven process comprising phases occurring over a 2- 
year cycle, which can lead to resource decisions for proposed programs 
that may occur several years later. We recently reviewed the effect of 
the PPBE process on major defense acquisition programs and found that 
the process does not produce an accurate picture of the department's 
resource needs for weapon system programs.[Footnote 7] The cost of many 
of the programs we reviewed exceeded the funding levels planned for and 
reflected in the Future Years Defense Program (FYDP)--the department's 
long-term investment strategy (see fig. 1). Rather than limit the 
number and size of programs or adjust requirements, DOD opts to push 
the real costs of programs to the future. With too many programs under 
way for the available resources and high cost growth occurring in many 
programs, the department must make up for funding shortfalls by 
shifting funds from one program to pay for another, reducing system 
capabilities, cutting procurement quantities, or in rare cases 
terminating programs. Such actions not only create instability in DOD's 
weapon system portfolio, they further obscure the true future costs of 
current commitments, making it difficult to make informed investment 
decisions. 

Figure 1: Funding Shortfalls at the Start of Development for Five 
Weapon System Programs: 

[Refer to PDF for image: stacked horizontal bar graph] 

Program: MMA; 
Level of funding in the FYDP in the year the program was initiated: 
32%; 
Level of funding the program needed to be fully funded in the initial 
FYDP: 35%; 
Funding required beyond the initial FYDP to complete development: 33%. 

Program: WIN-T; 
Level of funding in the FYDP in the year the program was initiated: 
21%; 
Level of funding the program needed to be fully funded in the initial 
FYDP: 49%; 
Funding required beyond the initial FYDP to complete development: 30%. 

Program: FCS; 
Level of funding in the FYDP in the year the program was initiated: 
26%; 
Level of funding the program needed to be fully funded in the initial 
FYDP: 41%; 
Funding required beyond the initial FYDP to complete development: 33%. 

Program: JSF; 
Level of funding in the FYDP in the year the program was initiated: 
64%; 
Level of funding the program needed to be fully funded in the initial 
FYDP: 13%; 
Funding required beyond the initial FYDP to complete development: 23%. 

Program: Global Hawk; 
Level of funding in the FYDP in the year the program was initiated: 
31%; 
Level of funding the program needed to be fully funded in the initial 
FYDP: 48%; 
Funding required beyond the initial FYDP to complete development: 21%. 

Source: DOD (data); GAO (analysis and presentation). 

[End of figure] 

Initiating Programs with Inadequate Knowledge of Requirements and 
Resources Often Results in Poor Outcomes: 

At the program level, the key cause of poor outcomes is the approval of 
programs with business cases that contain inadequate knowledge about 
requirements and the resources--funding, time, technologies, and 
people--needed to execute them. Our work in best practices has found 
that an executable business case for a program demonstrated evidence 
that (1) the identified needs are real and necessary and that they can 
best be met with the chosen concept and (2) the chosen concept can be 
developed and produced within existing resources. Over the past several 
years, we have found no evidence of the widespread adoption of such an 
approach for major acquisition programs in the department. Our annual 
assessments of major weapon systems have consistently found that the 
vast majority of programs began system development without mature 
technologies and moved into system demonstration without design 
stability. 

The chief reason for these problems is the encouragement within the 
acquisition environment of overly ambitious and lengthy product 
developments that embody too many technical unknowns and not enough 
knowledge about the performance and production risks they entail. The 
knowledge gaps are largely the result of a lack of early and 
disciplined systems engineering analysis of a weapon system's 
requirements prior to beginning system development. Systems engineering 
translates customer needs into specific product requirements for which 
requisite technological, software, engineering, and production 
capabilities can be identified through requirements analysis, design, 
and testing. Early systems engineering provides the knowledge a product 
developer needs to identify and resolve performance and resource gaps 
before product development begins by either reducing requirements, 
deferring them to the future, or increasing the estimated cost for the 
weapon system's development. Because the government often does not 
perform the proper up-front requirements analysis to determine whether 
the program will meet its needs, significant contract cost increases 
can and do occur as the scope of the requirements changes or becomes 
better understood by the government and contractor. Not only does DOD 
not conduct disciplined systems engineering prior to the beginning of 
system development, it has allowed new requirements to be added well 
into the acquisition cycle. We have reported on the negative effect 
that poor systems engineering practices have had on several programs, 
such as the Global Hawk Unmanned Aircraft System, F-22A, Expeditionary 
Fighting Vehicle, and Joint Air-to-Surface Standoff Missile.[Footnote 
8] 

With high levels of uncertainty about requirements, technologies, and 
design, program cost estimates and related funding needs are often 
understated, effectively setting programs up for cost and schedule 
growth. We recently assessed the service and independent cost estimates 
for 20 major weapon system programs and found that while the 
independent estimates were somewhat higher, both estimates were too low 
in most cases.[Footnote 9] In some of the programs we reviewed, cost 
estimates have been off by billions of dollars. For example, the Army's 
initial cost estimate for the development of the Future Combat System 
(FCS) was about $20 billion, while DOD's Cost Analysis and Improvement 
Group's estimate was $27 billion. The department began the program 
using the $20 billion estimate, but development costs for the FCS are 
now estimated to be $28 billion and the program is still dealing with 
significant technical risk. Estimates this far off the mark do not 
provide the necessary foundation for sufficient funding commitments and 
realistic long-term planning. 

The programs we reviewed frequently lacked the knowledge needed to 
develop realistic cost estimates. For example, program Cost Analysis 
Requirements Description documents--used to build the program cost 
estimate--often lack sufficient detail about planned program content 
for developing sound cost estimates. Without this knowledge, cost 
estimators must rely heavily on parametric analysis and assumptions 
about system requirements, technologies, design maturity, and the time 
and funding needed. A cost estimate is then usually presented to 
decision makers as a single, or point, estimate that is expected to 
represent the most likely cost of the program but provides no 
information about the range of risk and uncertainty or level of 
confidence associated with the estimate. 

Lack of Accountability for Making Weapon System Decisions Hinders 
Achieving Successful Outcomes: 

DOD's requirements, resource allocation, and acquisition processes are 
led by different organizations, thus making it difficult to hold any 
one person or organization accountable for saying no to a proposed 
program or for ensuring that the department's portfolio of programs is 
balanced. DOD's 2006 Defense Acquisition Performance Assessment study 
observed that these processes are not connected organizationally at any 
level below the Deputy Secretary of Defense and concluded that this 
weak structure induces instability and inhibits accountability. 
Frequent turnover in leadership positions in the department exacerbates 
the problem. The average tenure, for example, of the Under Secretary of 
Defense for Acquisition, Technology and Logistics over the past 22 
years has been only about 20 months.[Footnote 10] 

When DOD's strategic processes fail to balance needs with resources and 
allow unsound, unexecutable programs to move forward, program managers 
cannot be held accountable when the programs they are handed already 
have a low probability of success. Program managers are also not 
empowered to make go or no-go decisions, have little control over 
funding, cannot veto new requirements, and have little authority over 
staffing. At the same time, program managers frequently change during a 
program's development, making it difficult to hold them accountable for 
the business cases that they are entrusted to manage and deliver. 

Recent DOD Policy Changes Could Improve Future Performance of Weapon 
System Programs: 

DOD understands many of the problems that affect acquisition programs 
and has recently taken steps to remedy them. It has revised its 
acquisition policy and introduced several initiatives based in part on 
direction from Congress and recommendations from GAO that could provide 
a foundation for establishing sound, knowledge-based business cases for 
individual acquisition programs. However, to improve outcomes, DOD must 
ensure that its policy changes are consistently implemented and 
reflected in decisions on individual programs--not only new program 
starts but also ongoing programs. In the past, inconsistent 
implementation of existing policy has hindered DOD's efforts to execute 
acquisition programs effectively. Moreover, while policy improvements 
are necessary, they may be insufficient unless the broader strategic 
issues associated with the department's fragmented approach to managing 
its portfolio of weapon system investments are also addressed. 

In December 2008, DOD revised its policy governing major defense 
acquisition programs in ways intended to provide key department leaders 
with the knowledge needed to make informed decisions before a program 
starts and to maintain disciplined development once it begins. The 
revised policy recommends the completion of key systems engineering 
activities before the start of development, includes a requirement for 
early prototyping, and establishes review boards to evaluate the effect 
of potential requirements changes on ongoing programs. The policy also 
establishes early reviews for programs going through the pre-systems 
acquisition phase. In the past, DOD's acquisition policy may have 
encouraged programs to rush into systems development without sufficient 
knowledge, in part because no formal milestone reviews were required 
before system development. If implemented, these policy changes could 
help programs replace risk with knowledge, thereby increasing the 
chances of developing weapon systems within cost and schedule targets 
while meeting user needs. 

As part of its strategy for enhancing the roles of program managers in 
major weapon system acquisitions, DOD has established a policy that 
requires formal agreements among program managers, their acquisition 
executives, and the user community setting forth common program goals. 
According to DOD, these agreements are intended to be binding and to 
detail the progress the program is expected to make during the year and 
the resources the program will be provided to reach these goals. DOD 
also requires program managers to sign tenure agreements so that their 
tenure will correspond to the next major milestone review closest to 4 
years. DOD acknowledges that any actions taken to improve 
accountability must be based on a foundation whereby program managers 
can launch and manage programs toward successful performance, rather 
than focusing on maintaining support and funding for individual 
programs. DOD acquisition leaders have also stated that any 
improvements to program managers' performance depend on the 
department's ability to promote requirements and resource stability 
over weapon system investments. 

Over the past few years, DOD has also been testing portfolio management 
approaches in selected capability areas--command and control, net- 
centric operations, battlespace awareness, and logistics--to facilitate 
more strategic choices for resource allocation across programs. The 
department recently formalized the concept of capability portfolio 
management, issuing a directive in 2008 that established policy and 
assigned responsibilities for portfolio management. The directive 
established nine joint capability-area portfolios, each to be managed 
by civilian and military coleads. While the portfolios have no 
independent decision-making authority over requirements determination 
and resource allocation, according to some DOD officials, they provided 
key input and recommendations in this year's budget process. However, 
without portfolios in which managers have authority and control over 
resources, the department is at risk of continuing to develop and 
acquire systems in a stovepiped manner and of not knowing if its 
systems are being developed within available resources. 

Concluding Observations on What Remains to Be Done: 

A broad consensus exists that weapon system problems are serious and 
that their resolution is overdue. With the federal budget under 
increasing strain from the nation's economic crisis and long-term 
fiscal challenges looming, the time for change is now. Achieving 
successful and lasting improvements in weapon program outcomes will 
require changes to the overall acquisition environment and the 
incentives that drive it. Acquisition problems are likely to persist 
until DOD's approach to managing its weapon system portfolio (1) 
prioritizes needs with available resources, thus eliminating unhealthy 
competition for funding and the incentives for making programs look 
affordable when they are not; (2) ensures that programs that are 
started can be executed by matching requirements with resources; and 
(3) balances the near-term needs of the joint warfighter with the long- 
term need to modernize the force. Establishing a single point of 
accountability for managing DOD's weapon system portfolio could help 
the department make these changes. Congress can also support change 
though its own decisions about whether to authorize and appropriate 
funds for individual weapon programs. 

From an acquisition policy perspective, DOD is off to a good start with 
its recent policy revisions. However, DOD could do more in this regard 
too by requiring new programs to have manageable development cycles, 
requiring programs to establish knowledge-based cost and schedule 
estimates, and requiring contractors to perform detailed systems 
engineering analysis before proceeding to system development. Limiting 
the length of development cycles would make it easier to more 
accurately estimate costs, predict the future funding needs, 
effectively allocate resources, and hold decision makers accountable. 
DOD's conventional acquisition process often requires as many as 10 or 
15 years to get from program start to production as programs strive to 
provide revolutionary capability. Constraining cycle times to 5 or 6 
years would force programs to adopt more realistic requirements and 
lend itself to fully funding programs to completion, thereby increasing 
stability and the likelihood that capability can be delivered to the 
warfighter within established time frames and available resources. 

Recently proposed acquisition reform legislation addresses some of 
these areas. Provisions increasing the emphasis on systems engineering, 
requiring early preliminary design reviews, and strengthening 
independent cost estimates and technology readiness assessments should 
make the critical front end of the acquisition process more 
disciplined. Establishing a termination criterion for critical cost 
breaches could help prevent the acceptance of unrealistic cost 
estimates at program initiation. Having greater combatant command 
involvement in determining requirements and greater consultation 
between the requirements, budget, and acquisition processes could help 
improve the department's efforts to balance its portfolio of weapon 
system programs. However, while legislation and policy revisions may 
lead to improvements, they will not be effective without changes to the 
overall acquisition environment. The department has tough decisions to 
make about its weapon systems and portfolio, and stakeholders, 
including the DOD Comptroller, military services, industry, and 
Congress, have to play a constructive role in the process toward 
change. It will also require strong leadership and accountability 
within the department. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 
answer any questions you may have at this time. 

Contacts and Acknowledgments: 

For further information about this statement, please contact Michael J. 
Sullivan at (202) 512-4841 or sullivanm@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this statement. Individuals who made key contributions 
to this statement include Ann Borseth, Dayna Foster, Matt Lea, Susan 
Neill, John Oppenheim, Ken Patton, Sharon Pickup, Ron Schwenn, Charlie 
Shivers, Bruce Thomas, and Alyssa Weir. 

[End of section] 

Related GAO Products: 

Defense Acquisitions: DOD Must Balance Its Needs with Available 
Resources and Follow an Incremental Approach to Acquiring Weapon 
Systems. [hyperlink, http://www.gao.gov/products/GAO-09-413T]. 
Washington, D.C.: March 3, 2009. 

Defense Acquisitions: Perspectives on Potential Changes to DOD's 
Acquisition Management Framework. [hyperlink, 
http://www.gao.gov/products/GAO-09-295R]. Washington, D.C.: February 
27, 2009. 

Defense Management: Actions Needed to Overcome Long-standing Challenges 
with Weapon Systems Acquisition and Service Contract Management. 
[hyperlink, http://www.gao.gov/products/GAO-09-362T]. Washington, D.C.: 
February 11, 2009. 

Status of Recommendations to the Department of Defense (Fiscal Years 
2001-2007). [hyperlink, http://www.gao.gov/products/GAO-09-201R]. 
Washington, D.C.: December 11, 2008. 

Defense Acquisitions: Fundamental Changes Are Needed to Improve Weapon 
Program Outcomes. [hyperlink, 
http://www.gao.gov/products/GAO-08-1159T]. Washington, D.C.: September 
25, 2008. 

Defense Acquisitions: DOD's Requirements Determination Process Has Not 
Been Effective in Prioritizing Joint Capabilities. [hyperlink, 
http://www.gao.gov/products/GAO-08-1060]. Washington, D.C.: September 
25, 2008. 

Defense Acquisitions: A Knowledge-Based Funding Approach Could Improve 
Major Weapon System Program Outcomes. [hyperlink, 
http://www.gao.gov/products/GAO-08-619]. Washington, D.C.: July 2, 
2008. 

Defense Acquisitions: Better Weapon Program Outcomes Require 
Discipline, Accountability, and Fundamental Changes in the Acquisition 
Environment. [hyperlink, http://www.gao.gov/products/GAO-08-782T]. 
Washington, D.C.: June 3, 2008. 

Defense Acquisitions: Assessments of Selected Weapon Programs. 
[hyperlink, http://www.gao.gov/products/GAO-08-467SP]. Washington, 
D.C.: March 31, 2008. 

Best Practices: Increased Focus on Requirements and Oversight Needed to 
Improve DOD's Acquisition Environment and Weapon System Quality. 
[hyperlink, http://www.gao.gov/products/GAO-08-294]. Washington, D.C.: 
February 1, 2008. 

Best Practices: An Integrated Portfolio Management Approach to Weapon 
System Investments Could Improve DOD's Acquisition Outcomes. 
[hyperlink, http://www.gao.gov/products/GAO-07-388]. Washington, D.C.: 
March 30, 2007. 

Defense Acquisitions: Major Weapon Systems Continue to Experience Cost 
and Schedule Problems under DOD's Revised Policy. [hyperlink, 
http://www.gao.gov/products/GAO-06-368]. Washington, D.C.: April 13, 
2006. 

Best Practices: Better Support of Weapon System Program Managers Needed 
to Improve Outcomes. [hyperlink, 
http://www.gao.gov/products/GAO-06-110]. Washington, D.C.: November 1, 
2005. 

[End of section] 

Footnotes: 

[1] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January 
2009). 

[2] GAO, Status of Recommendations to the Department of Defense (Fiscal 
Years 2001-2007), [hyperlink, http://www.gao.gov/products/GAO-09-201R] 
(Washington, D.C.: Dec. 11, 2008). 

[3] We consider a recommendation to be open when action has not been 
taken but may be taken in the future, action is in the planning stage, 
or action has been taken on only part of the recommendation. We 
consider a recommendation to be closed-implemented when the action is 
fully implemented or action has been taken that essentially meets the 
recommendation's intent, that is, the action meets the spirit--rather 
than the letter--of the recommendation, or all parts of the 
recommendation have been implemented. We consider a recommendation to 
be closed-not implemented if DOD has no intention of implementing the 
recommendation or circumstances have changed and the recommendation is 
no longer valid. 

[4] In many, but not all, cases our findings and recommendations 
produce measurable financial benefits for the federal government after 
Congress acts on or agencies such as DOD implement them and the funds 
are made available to reduce government expenditures or are reallocated 
to other areas. 

[5] GAO, Best Practices: An Integrated Portfolio Management Approach to 
Weapon System Investments Could Improve DOD's Acquisition Outcomes, 
[hyperlink, http://www.gao.gov/products/GAO-07-388] (Washington, D.C.: 
Mar. 30, 2007). 

[6] GAO, Defense Acquisitions: DOD's Requirements Determination Process 
Has Not Been Effective in Prioritizing Joint Capabilities, [hyperlink, 
http://www.gao.gov/products/GAO-08-1060] (Washington, D.C.: Sept. 25, 
2008). 

[7] GAO, Defense Acquisitions: A Knowledge-Based Funding Approach Could 
Improve Major Weapon System Program Outcomes, [hyperlink, 
http://www.gao.gov/products/GAO-08-619] (Washington, D.C.: July 2, 
2008). 

[8] GAO, Best Practices: Increased Focus on Requirements and Oversight 
Needed to Improve DOD's Acquisition Environment and Weapon System 
Quality, [hyperlink, http://www.gao.gov/products/GAO-08-294] 
(Washington, D.C.: Feb. 1, 2008). 

[9] GAO, Defense Acquisitions: A Knowledge-Based Funding Approach Could 
Improve Major Weapon System Program Outcomes, [hyperlink, 
http://www.gao.gov/products/GAO-08-619], (Washington, D.C.: July 2, 
2008). 

[10] The position of Under Secretary of Defense for Acquisition was 
established in 1986 and the title was subsequently changed to the Under 
Secretary of Defense for Acquisition, Technology, and Logistics in 
1999. Since 1986, there have been 11 under secretaries. 

[End of section] 

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