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Testimony: 

Before the Subcommittee on National Security and Foreign Affairs, 
Committee on Oversight and Government Reform, House of Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Wednesday, May 19, 2010: 

Defense Acquisitions: 

Observations on Weapon Program Performance and Acquisition Reforms: 

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

GAO-10-706T: 

GAO Highlights: 

Highlights of GAO-10-706T, a testimony to Subcommittee on National 
Security and Foreign Affairs, Committee on Oversight and Government 
Reform, House of Representatives. 

Why GAO Did This Study: 

The past two years have seen the Congress and DOD take meaningful 
steps towards addressing long-standing weapon acquisition issues—an 
area that has been on GAO’s high risk list since 1990. This testimony 
focuses on the progress DOD has made in improving the planning and 
execution of its weapon acquisition programs and the potential for 
recent acquisition reforms to improve program outcomes. 

The testimony includes observations about (1) DOD’s efforts to manage 
its portfolio of major defense acquisition programs, (2) the knowledge 
attained at key junctures of a subset of 42 weapon programs from the 
2009 portfolio, (3) other factors that can affect program execution, 
and (4) DOD’s implementation of recent acquisition reforms. The 
testimony is based on the results of our annual assessment of weapon 
programs. To conduct the assessment, GAO analyzed data on the 
composition of DOD’s portfolio of major defense acquisition programs. 
GAO also collected data from program offices on technology, design, 
and manufacturing knowledge, as well as on other factors that can 
affect program execution. 

GAO has made numerous recommendations on weapon system acquisition in 
prior work but is not making any new recommendations in this testimony. 

What GAO Found: 

While DOD still faces significant challenges in managing its weapon 
system programs, the current acquisition reform environment provides 
an opportunity to leverage the lessons of the past and manage risks 
differently. This environment is shaped by significant acquisition 
reform legislation, constructive changes in DOD’s acquisition policy, 
and initiatives by the administration, including making difficult 
decisions to terminate or trim numerous weapon systems. To sustain 
momentum and make the most of this opportunity, it will be essential 
that decisions to approve and fund acquisitions be consistent with the 
reforms and policies aimed at getting better outcomes. 

DOD has started to reprioritize and rebalance its weapon system 
investments. In 2009, the Secretary of Defense proposed canceling or 
significantly curtailing weapon programs with a projected cost of at 
least $126 billion that he characterized as too costly or no longer 
relevant for current operations, while increasing funding for others 
that he assessed as higher priorities. Congress supported several of 
the recommended terminations. DOD plans to replace several of the 
canceled programs in fiscal years 2010 and 2011, hopefully with new, 
knowledge-based acquisition strategies, because the warfighter need 
remains. The most significant of these will be the effort to 
restructure the Army’s terminated Future Combat System program. At the 
same time, however, DOD’s portfolio of major defense acquisition 
programs continues to grow. Between December 2007 and July 2009, the 
number of major defense acquisition programs grew from 96 to 102 
programs. GAO has previously reported that DOD should continue to work 
to balance its weapon system portfolio with available funding, which 
includes reducing the number or size of weapon system programs, or 
both, and assessing the affordability of new programs and capabilities 
in the context of overall defense spending. 

At the program level, our recent observations present a mixed picture 
of DOD’s adherence to a knowledge-based acquisition approach, which is 
a key for improving acquisition outcomes. For 42 programs GAO assessed 
in depth in 2010, there has been continued improvement in the 
technology, design, and manufacturing knowledge programs had at key 
points in the acquisition process. However, most programs are still 
proceeding with less knowledge than best practices suggest, putting 
them at higher risk for cost growth and schedule delays. A majority of 
programs have also experienced requirements changes, software 
development challenges, or workforce issues, or a combination, which 
can affect program stability and execution. DOD has begun to implement 
a revised acquisition policy and congressional reforms that address 
many of these areas. For example, eight programs we examined in the 
technology development phase plan to test competitive prototypes 
before starting system development and seven programs plan to hold 
early systems engineering reviews. If DOD consistently applies this 
policy, the number of programs adhering to a knowledge-based 
acquisition should increase and the outcomes for DOD programs should 
improve. 

View [hyperlink, http://www.gao.gov/products/GAO-10-706T] 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 Subcommittee: 

I am pleased to be here today to discuss the Department of Defense's 
(DOD) management of its acquisition of major weapons systems--an area 
that has been a part of GAO's high-risk list since 1990--and the 
potential for recent acquisition reforms to improve program outcomes. 
While DOD still faces significant challenges in managing its weapon 
system programs, the past two years have seen DOD and the Congress 
take meaningful steps towards addressing long-standing weapon 
acquisition issues. DOD made major revisions to its acquisition 
policies to place more emphasis on acquiring knowledge about 
requirements, technology, and design before programs start--thus 
putting them in a better position to field capabilities on-time and at 
the estimated cost. Congress strengthened DOD's acquisition policies 
and processes by passing the Weapon Systems Acquisition Reform Act of 
2009,[Footnote 1] which includes provisions to ensure programs are 
based on realistic cost estimates and to terminate programs that 
experience high levels of cost growth. The House Armed Services 
Committee Panel on Defense Acquisition Reform issued its final report 
and made recommendations on areas, such as assessing the performance 
of the defense acquisition system, that were incorporated into the 
proposed Implementing Management for Performance and Related Reforms 
to Obtain Value in Every Acquisition (IMPROVE) Act of 2010.[Footnote 
2] In addition, DOD has started to reprioritize and rebalance its 
weapon system investments. In DOD's fiscal year 2010 and 2011 budget 
requests, the Secretary of Defense proposed ending all or part of at 
least a half dozen major defense acquisition programs that were over 
cost, behind schedule, or no longer suited to meet the warfighters' 
current needs. Congress's support for several of the recommended 
terminations signaled a willingness to make difficult choices on 
individual weapon systems and DOD's weapon system investments as a 
whole. 

While DOD's acquisition policies and process may be headed in the 
right direction, fiscal pressures continue to build. Notwithstanding 
the federal government's long-term fiscal challenges, the Pentagon 
faces its own near-term and long-term fiscal pressures as it attempts 
to balance competing demands, including ongoing operations in 
Afghanistan and Iraq, initiatives to grow and modernize the force, and 
increasing personnel and health care costs. While DOD's fiscal year 
2010 budget request started the process of reprioritizing acquisition 
dollars to meet warfighters' most pressing needs, the department must 
still address the overall affordability of its weapon system 
investments. DOD should continue to work to balance its weapon system 
portfolio with available funding, which includes reducing the number 
or size of weapon system programs, or both, and assessing the 
affordability of new programs and capabilities in the context of 
overall defense spending. 

My statement focuses on the progress DOD has made in improving the 
planning and execution of its weapon acquisition programs and the 
potential for recent acquisition reforms to improve program outcomes. 
It includes observations about (1) DOD's efforts to manage its 
portfolio of major defense acquisition programs,[Footnote 3] (2) the 
knowledge attained at key junctures of a subset of 42 weapon programs 
from the 2009 portfolio, (3) other factors that can affect program 
execution, and (4) DOD's implementation of recent acquisition reforms. 
The testimony is based on the results of our recently issued annual 
assessment of weapon programs.[Footnote 4] To conduct the assessment, 
GAO analyzed data on the composition of DOD's portfolio of major 
defense acquisition programs. GAO also collected data from program 
offices on technology, design, and manufacturing knowledge, as well as 
on other factors that can affect program execution. That 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. 

Observations on DOD's 2009 Major Defense Acquisition Program Portfolio: 

In our 2010 assessment of weapon programs, we made several 
observations concerning DOD's management of its major defense 
acquisition portfolio. First, in DOD's fiscal year 2010 budget, the 
Secretary of Defense proposed canceling or significantly curtailing 
programs with projected total costs of at least $126 billion that he 
characterized as too costly or no longer relevant for current 
operations, while increasing funding for others that he assessed as 
higher priorities. Congress supported several of the recommended 
terminations (see table 1). 

Table 1: Secretary of Defense's Fiscal Year 2010 Budget 
Recommendations: 

Recommended termination: 

System: VH-71 Presidential Helicopter; 
Total estimated cost: $13; 
Secretary's comments: Plan to develop options for a new program; 
Congressional action: Conferees recommended $100 million for 
technology capture that DOD has budgeted for the VH-71 program. 

System: Combat Search and Rescue Helicopter; 
Total estimated cost (dollars in billions): Unspecified; 
Secretary's comments: Plan to reexamine requirements; 
Congressional action: Did not authorize appropriations for the program. 

System: Next-Generation Bomber; 
Total estimated cost: Unspecified; 
Secretary's comments: Will not initiate new development program 
without better understanding of the requirement and technology; 
Congressional action: Supported development of a Next-Generation 
Bomber Aircraft, but did not authorize appropriations. 

System: Future Combat System-Manned Ground Vehicles; 
Total estimated cost: $87 billion; 
Secretary's comments: Plan to reevaluate requirements, technology, and 
approach before relaunching and recompeting program; 
Congressional action: Directed Army to develop, test, and field an 
operationally effective and affordable next generation ground combat 
vehicle. Conferees recommended rescission of $26 million in existing 
funding. 

System: Transformational Satellite; 
Total estimated cost: $26 billion; 
Secretary's comments: Plan to buy two more AEHF satellites as 
alternative; 
Congressional action: Did not authorize appropriations for the program. 

System: Ballistic Missile Defense-Multiple Kill Vehicle; 
Total estimated cost: Unspecified; 
Secretary's comments: Plan to reexamine requirements; 
no mention of new program; 
Congressional action: Did not authorize appropriations for the program. 

Recommended end of production: 

System: C-17; 
Total estimated cost: Unspecified; 
Secretary's comments: Recommended ending production at 205 aircraft; 
Congressional action: Conferees recommended $2.5 billion for the 
procurement of 10 C-17 aircraft, associated spares, support equipment, 
and training equipment. 

System: DDG-1000; 
Total estimated cost: Unspecified; 
Secretary's comments: Recommended ending production at 3 ships; 
Congressional action: Did not fund additional ships. Appropriated $1.4 
billion for completion of third DDG-1000. 

System: F-22; 
Total estimated cost: Unspecified; 
Secretary's comments: Recommended ending production at 187 aircraft; 
Congressional action: Did not fund additional aircraft. Conferees 
recommended rescission of $383 million in existing funding. 

Total; 
Total estimated cost: $126 billion. 

Source: GAO analysis of Secretary's April 2009 statement on fiscal 
year 2010 budget and fiscal year 2010 DOD authorization and 
appropriations acts. 

[End of table] 

Second, DOD plans to replace several of the canceled programs in 
fiscal years 2010 and 2011, hopefully with new, knowledge-based 
acquisition strategies, because the warfighter need remains. The most 
significant of these new programs will be the effort to restructure 
the Army's Future Combat System program into several smaller, 
integrated programs. Third, DOD's portfolio of major defense 
acquisition programs grew to 102 programs in 2009--a net increase of 6 
since December 2007. Eighteen programs with an estimated cost of over 
$72 billion entered the portfolio.[Footnote 5] Not all of these 
programs entering the portfolio are new starts. For instance, the 
Airborne Signals Intelligence Payload, and the Reaper Unmanned 
Aircraft System are two programs that began as acquisition category II 
programs,[Footnote 6] but their total research and development or 
procurement costs now exceed the threshold for major defense 
acquisition programs. Twelve programs with an estimated cost of $48 
billion, including over $7 billion in cost growth, left the portfolio. 
[Footnote 7] These programs left the portfolio for a variety of 
reasons, including program restructure, termination, or completion. 
When the Future Combat System is added to the programs leaving the 
portfolio, the total cost of these programs increases to $179 billion, 
including over $47 billion in cost growth. 

Our 2010 assessment did not include an analysis of the cost and 
schedule performance of DOD's major defense acquisition program 
portfolio as a whole. In recent years, this analysis showed that the 
cumulative cost growth on DOD programs had reached $300 billion (in 
fiscal year 2010 dollars) and the average delay in delivering initial 
capabilities was 22 months. DOD did not issue timely or complete 
Selected Acquisition Reports for its major defense acquisition 
programs in fiscal year 2009 for the second consecutive presidential 
transition, which precluded an analysis of the performance of DOD's 
portfolio. We will resume our portfolio analysis in next year's 
assessment. 

Observations from Our Assessment of Knowledge Attained by Key 
Junctures in the Acquisition Process: 

At the program level, our recent observations present a mixed picture 
of DOD's adherence to a knowledge-based acquisition approach, which is 
key for improving acquisition outcomes. In our 2010 assessment of 
weapon programs, we assessed the knowledge attained by key junctures 
in the acquisition process for 42 individual weapon programs in DOD's 
2009 portfolio. While program knowledge is increasing, as in the past, 
none of the 42 programs we assessed have attained or are on track to 
attain all of the requisite amounts of technology, design, and 
production knowledge by each of the key junctures in the acquisition 
process.[Footnote 8] However, if DOD consistently implements its 
December 2008 policy revisions on new and ongoing programs, then DOD's 
performance in these areas, as well as its cost and schedule outcomes, 
should improve. Our analysis allows us to make five observations about 
DOD's management of technology, design, and manufacturing risks and 
its use of testing and early systems engineering to reduce these risks. 

* Newer programs are beginning with higher levels of technology 
maturity, but they are not taking other steps, such as holding early 
systems engineering reviews, to ensure there is a match between 
requirements and resources. Achieving a high level of technology 
maturity by the start of system development is an important indicator 
of whether a match between the warfighter's requirements and the 
available resources--knowledge, time, and money--has been 
made.[Footnote 9] Since 2006, there has been a significant increase in 
the percentage of technologies demonstrated in a relevant or realistic 
environment by the start of system development. This increase 
coincided with a change in statute. In 2006, the National Defense 
Authorization Act included a provision requiring all major defense 
acquisition programs seeking milestone B approval--entry into system 
development--to get a certification stating the program's technologies 
have been demonstrated in a relevant environment.[Footnote 10] While 
only one of the six programs that entered system development since 
2006 and provided data had fully mature critical technologies--that 
is, demonstrated in a realistic environment, according to our 
criteria--all the programs had critical technologies that had been at 
least demonstrated in a relevant environment. Overall, only 4 of the 
29 programs in our assessment that provided data on technical maturity 
at development start did so with fully mature critical technologies. 

While the technology levels of DOD programs entering system 
development have increased, these programs are still not regularly 
conducting early systems engineering reviews, which help ensure there 
is a match between requirements and resources. We have previously 
reported that before starting development, programs should hold 
systems engineering events, such as the preliminary design review, to 
ensure that requirements are defined and feasible and that the 
proposed design can meet those requirements within cost, schedule, and 
other system constraints. We have also found that programs conducting 
these events prior to development start experienced less research and 
development cost growth and shorter delays in the delivery of initial 
operational capabilities than programs that conducted these reviews 
after development start.[Footnote 11] Almost all nonship programs (37 
of 40 that provided data) in our latest assessment have held at least 
one of three key systems engineering reviews (system requirements 
review, system functional review, and preliminary design review). 
However, only 1 of 37 programs that held a preliminary design review 
did so before the start of system development. The remaining programs 
held the review, on average, 30 months after development start. The 
Weapon Systems Acquisition Reform Act of 2009 established a statutory 
requirement for programs to conduct a preliminary design review before 
milestone B, so we expect improvements in this area.[Footnote 12] 

* Programs that have held critical design reviews in recent years 
reported higher levels of design knowledge; however, few programs are 
demonstrating that the design is capable of meeting performance 
requirements by testing an integrated prototype. Knowing a product's 
design is stable before system demonstration reduces the risk of 
costly design changes occurring during the manufacturing of 
production--representative prototypes--when investments in 
acquisitions become more significant. The overall design knowledge 
that programs have demonstrated at their critical design reviews has 
increased since 2003. Programs in our assessment that held a critical 
design review between 2006 and 2009 had, on average, almost 70 percent 
of their design drawings releasable at the time of the review, which 
is a consistent upward trend since 2003. However, most designs are 
still not stable at this point. Of the 28 programs in our latest 
assessment that have held a system-level critical design review, only 
8 reported having a stable design. Only 2 of the 5 programs that held 
a critical design review in 2009 had a stable design at that point. 
The 5 programs reported that, on average, 83 percent of the total 
expected drawings were releasable. 

While the design knowledge of DOD programs at the system-level 
critical design review has increased since 2003, these programs are 
still not regularly demonstrating that these designs can meet 
performance requirements by testing integrated prototypes before the 
critical design review--a best practice. None of the 5 programs in our 
latest assessment that held their critical design review in 2009 and 
planned to test a prototype did so before the review. Of the 33 
programs that reported that they either had tested or were going to 
test an early system prototype and provided a critical design review 
date, only 4 did so before their critical design review.[Footnote 13] 
The Weapon Systems Acquisition Reform Act of 2009 requires that DOD 
policy ensure that the acquisition strategy for each major defense 
acquisition program provides for competitive prototypes before 
milestone B approval, unless a waiver is properly granted.[Footnote 
14] This requirement should increase the percentage of programs 
demonstrating that the system's design works as intended before the 
critical design review. 

* Some programs are taking steps to bring critical manufacturing 
processes into control, however many programs still rely on "after the 
fact" metrics. Capturing critical manufacturing knowledge before 
entering production helps ensure that a weapon system will work as 
intended and can be manufactured efficiently to meet cost, schedule, 
and quality targets. Identifying key product characteristics and the 
associated critical manufacturing processes is a key initial step to 
ensuring production elements are stable and in control. Seven programs 
in our latest assessment have identified their critical manufacturing 
processes, including four of the programs that entered production in 
2009. Three of those seven programs reported that their critical 
manufacturing processes were in control.[Footnote 15] It is generally 
less costly--in terms of time and money--to eliminate product 
variation by controlling manufacturing processes than to perform 
extensive inspection after a product is built. However, many DOD 
programs rely on inspecting produced components instead of using 
statistical process control data in order to assess the maturity of 
their production processes. For example, 12 programs in our assessment 
reported tracking defects in delivered units, nonconformances, or 
scrap/rework as a way to measure production process maturity. The use 
of "after the fact" metrics is a reactive approach towards managing 
manufacturing quality as opposed to a prevention-based approach. 

* Programs are still not regularly testing production representative 
prototypes before committing to production. We have previously 
reported that in addition to demonstrating that the system can be 
built efficiently, production and postproduction costs are minimized 
when a fully integrated, capable prototype is demonstrated to show 
that the system will work as intended and in a reliable manner. The 
benefits of testing are maximized when the tests are completed prior 
to a production decision because making design changes after 
production begins can be both costly and inefficient. However, of the 
32 programs in our assessment that could have tested a prototype 
before production, only 17 either tested or expect to test a fully 
configured, integrated, production-representative prototype before 
holding their production decision. In December 2008, DOD changed its 
policy to require programs to test production-representative articles 
before entering production. 

* More programs are using reliability growth curves before beginning 
production. Reliability growth testing provides visibility over how 
reliability is improving and uncovers design problems so fixes can be 
incorporated before production begins. According to DOD's acquisition 
policy, a major defense acquisition program may not proceed beyond low-
rate initial production until it has demonstrated acceptable 
reliability. Over half--22 of 40 programs that responded to our 
questionnaire--reported that they use a reliability growth curve, with 
18 of these programs reporting they are currently meeting their 
established goals. In addition, 12 of 19 programs that expect to hold 
their production decision in 2010 and beyond reported using 
reliability growth curves and most stated they are currently meeting 
their goals. This practice should help these programs begin production 
with a reliable product design. 

Observations on Other Factors That Can Affect Program Execution: 

Our 2010 assessment of weapon programs also included three 
observations on other areas related to DOD's management of its weapons 
programs, including requirements, software management, and program 
office staffing. We have previously identified requirements changes 
and increases in software lines of code as sources of program 
instability that can contribute to cost growth and schedule delays. We 
have also reported that workforce challenges can hinder program 
execution and negatively affect program management and oversight. 

* A majority of programs changed key systems requirements after 
development start. Of the 42 programs in our 2010 assessment that 
reported tracking requirements changes, 23 programs reported having 
had at least one change (addition, reduction, enhancement, or 
deferment) to a key performance parameter--a top-level requirement--
since development start. Further, nine programs experienced at least 
one change to a key system attribute--a lower level, but still a 
crucial requirement of the system. Eight programs reported major 
effects on the program as a result of these requirements changes, such 
as not meeting acquisition program baseline cost, schedule, and 
performance thresholds. DOD's revised December 2008 acquisition policy 
attempts to reduce potentially disruptive requirements changes by 
requiring programs to hold annual configuration steering board 
meetings to ensure that significant technical changes are not approved 
without considering their effect on cost and schedule. 

* Many programs are at risk for cost growth and schedule delays 
because of software development issues. Seventeen of the 28 programs 
in our 2010 assessment that reported data on software lines of code 
estimated that the number of lines of code required for the system to 
function has grown or will grow by 25 percent or more--a predictor of 
future cost and schedule growth. Overall, the average growth or 
expected growth in lines of code for the 28 programs was about 92 
percent. In addition to measuring growth in software lines of code, we 
have previously reported that collecting earned value management data 
for software development and tracking and containing software defects 
in phase are good management practices. Overall, 30 programs in our 
assessment reported collecting earned value management data to help 
manage software development. Thirty-two programs in our latest 
assessment also reported collecting some type of software defect data. 
For the 22 programs that responded a more specific question about 
defect correction, on average, only 69 percent of the defects were 
corrected in the phase of software development in which they occurred. 
Capturing software defects in phase is important because discovering 
defects out of phase can cause expensive rework later in programs. 

* Programs' reliance on nongovernment personnel continues to increase 
in order to make up for shortfalls in government personnel and 
capabilities. In recent years, Congress and DOD have taken steps to 
ensure the acquisition workforce has the capacity, personnel, and 
skills needed to properly perform its mission; however, programs 
continue to struggle to fill all staff positions authorized. Only 19 
of the 50 programs in our 2010 assessment that responded to our 
questions on staffing were able to fill all the positions they had 
been authorized. A commonly cited reason for not being able to fill 
positions was difficulty finding qualified candidates. As a result of 
staff shortfalls, program offices reported that program management and 
oversight has been degraded, contracting activities have been delayed, 
and program management costs have increased as contractors are used to 
fill the gap. Overall, 43 programs or 86 percent of those providing 
data reported utilizing support contractors to make up for shortfalls 
in government personnel and capabilities. 

In addition, for the first time since we began reporting on program 
office staffing in 2008, programs reported having more nongovernment 
than government staff working in program offices (see table 2). The 
greatest numbers of support contractors are in engineering and 
technical positions, but their participation has increased in all 
areas, from program management and contracting to administrative 
support and other business functions. 

Table 2: Program Office Composition for 50 DOD Programs: 

Percentage of staff: 

Military: 
Program management: 28%; 
Engineering and technical: 7%; 
Contracting: 6%; 
Other business functions: 3%; 
Administrative support: 2%; 
Other: 5%; 
Total: 8%. 

Civilian government: 
Program management: 40%; 
Engineering and technical: 41%; 
Contracting: 74%; 
Other business functions: 45%; 
Administrative support: 18%; 
Other: 24%; 
Total: 40%. 

Total government: 
Program management: 67%; 
Engineering and technical: 47%; 
Contracting: 80%; 
Other business functions: 48%; 
Administrative support: 20%; 
Other: 29%; 
Total: 49%. 

Support contractors: 
Program management: 32%; 
Engineering and technical: 43%; 
Contracting: 20%; 
Other business functions: 50%; 
Administrative support: 78%; 
Other: 70%; 
Total: 45%. 

Other nongovernment[A]: 
Program management: 0%; 
Engineering and technical: 9%; 
Contracting: 0%; 
Other business functions: 3%; 
Administrative support: 2%; 
Other: 1%; 
Total: 6%. 

Total nongovernment: 
Program management: 33%; 
Engineering and technical: 53%; 
Contracting: 20%; 
Other business functions: 52%; 
Administrative support: 80%; 
Other: 71%; 
Total: 51%. 

Source: GAO analysis of DOD data. 

Notes: Totals may not add due to rounding. 

[A] Other nongovernment includes federally funded research and 
development centers, universities, and affiliates. 

[End of table] 

Observations about DOD's Implementation of Acquisition Reforms: 

DOD has begun to incorporate acquisition reforms into the acquisition 
strategies for new programs. Both DOD's December 2008 acquisition 
policy revisions and the Weapon Systems Acquisition Reform Act of 2009 
require programs to invest more time and resources in the front end of 
the acquisition process--refining concepts through early systems 
engineering, developing technologies, and building prototypes before 
starting system development. In addition, DOD policy requires 
establishment of configuration steering boards that meet annually to 
review all program requirements changes as well as to make 
recommendations on proposed descoping options that could help keep a 
program within its established cost and schedule targets. These steps 
could provide a foundation for establishing sound, knowledge-based 
business cases for individual weapon programs and are consistent with 
many of our past recommendations; however, if reform is to succeed and 
weapon program outcomes are to improve, they must continue to be 
reinforced in practice through decisions on individual programs. 

Our analysis of the programs in our 2010 assessment allowed us to make 
two observations about the extent to which DOD is implementing recent 
acquisition reforms: 

* Most of the ten programs in our 2010 assessment that had not yet 
entered system development reported having acquisitions strategies 
consistent with both DOD's revised acquisition policy and the 
provisions of the Weapon Systems Acquisition Reform Act of 2009. 
Specifically, 8 programs in our assessment planned to develop 
competitive prototypes before milestone B.[Footnote 16] In addition, 7 
programs have already scheduled a preliminary design review before 
milestone B.[Footnote 17] 

* Only a few programs reported holding configuration steering boards 
to review requirements changes, significant technical changes, or de- 
scoping options in 2009. Seven programs in our assessment reported 
holding configuration steering boards in 2009. Under DOD's revised 
acquisition policy, ongoing acquisition category I and IA programs in 
development are required to conduct annual configuration steering 
boards to review requirements changes and significant technical 
configuration changes that have the potential to result in cost and 
schedule effects on the program. In addition, the program manager is 
expected to present de-scoping options to the board that could reduce 
program costs or moderate requirements. None of the programs reported 
that the boards that were held approved requirements changes or 
significant technical changes. One program--the P-8A Poseidon-- 
reported that it presented de-scoping options to decrease cost and 
schedule risk on the program and had those options approved. 

Concluding Observations on the Challenges to Achieving Lasting Reform: 

I would like to offer a few thoughts about other factors that should 
be considered so that we make the most out of today's opportunity for 
meaningful change. First, I think it is useful to think of the 
processes that affect weapon system outcomes (requirements, funding, 
and acquisition) as being in a state of equilibrium. Poor outcomes-- 
delays, cost growth, and reduced quantities--have been persistent for 
decades. If we think of these processes as merely "broken", then some 
targeted repairs should fix them. I think the challenge is greater 
than that. If we think of these processes as being in equilibrium, 
where their inefficiencies are implicitly accepted as the cost of 
doing business, then the challenge for getting better outcomes is 
greater. Seen in this light, it will take considerable and sustained 
effort to change the incentives and inertia that reinforce the status 
quo. 

Second, while actions taken and proposed by DOD and Congress are 
constructive and will serve to improve acquisition outcomes, one has 
to ask the question why extraordinary actions are needed to force 
practices that should occur normally. The answer to this question will 
shed light on the cultural or environmental forces that operate 
against sound management practices. For reforms to work, they will 
have to address these forces as well. For example, there have been a 
number of changes to make cost estimates more rigorous and realistic, 
but do these address all of the reasons why estimates are not already 
realistic? Clearly, more independence, methodological rigor, and 
better information about risk areas like technology will make 
estimates more realistic. On the other hand, realism is compromised as 
the competition for funding encourages programs to appear affordable. 
Also, when program sponsors present a program as more than a weapon 
system, but rather as essential to new fighting concepts, pressures 
exist to accept less than rigorous cost estimates. Reform must 
recognize and counteract these pressures as well. 

Third, decisions on individual systems must reinforce good practices. 
Programs that have pursued risky and unexecutable acquisition 
strategies have succeeded in winning approval and funding. If reform 
is to succeed, then programs that present realistic strategies and 
resource estimates must succeed in winning approval and funding. Those 
programs that continue past practices of pushing unexecutable 
strategies must be denied funding before they begin. This will require 
sustained leadership from the Secretary of Defense, the Under 
Secretary of Defense for Acquisition, Technology and Logistics, and 
the military services, and the cooperation and support of Congress. 

Fourth, consideration should be given to setting some limits on what 
is a reasonable length of time for developing a system. For example, 
if a program has to complete development within 5 or 6 years, this 
could serve as a basis to constrain requirements and exotic programs. 
It would also serve to get capability in the hands of the warfighter 
sooner. 

Fifth, the institutional resources we have must match the outcomes we 
desire. For example, if more work must be done to reduce technical 
risk before development start--milestone B--DOD needs to have the 
organizational, people, and financial resources to do so. Once a 
program is approved for development, program offices and testing 
organizations must have the workforce with the requisite skills to 
manage and oversee the effort. Contracting instruments must be used 
that match the needs of the acquisition and protect the government's 
interests. Finally, DOD must be judicious and consistent in how it 
relies on contractors. 

Mr. Chairman, this completes my prepared statement. I would be happy 
to respond to any questions you or other Members of the Subcommittee 
may have at this time. 

Contacts and Acknowledgments: 

For further information about this statement, please contact Michael 
J. Sullivan (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 Ronald E. Schwenn, Assistant 
Director, Kristine R. Hassinger, Carol T. Mebane, and Kenneth E. 
Patton. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 111-23. 

[2] H.R. 5013, 111th Cong. (as received from the House and referred to 
the S. Comm. on Armed Serv., Apr. 29, 2010). 

[3] Major defense acquisition programs (MDAP) are those identified by 
DOD that require eventual total research, development, test and 
evaluation (RDT&E), including all planned increments, expenditures of 
more than $365 million or procurement expenditures, including all 
planned increments , of more than $2.19 billion in fiscal year 2000 
constant dollars. 

[4] GAO, Defense Acquisitions: Assessments of Selected Weapon 
Programs, [hyperlink, http://www.gao.gov/products/GAO-10-388SP], 
Washington, D.C.: March 30, 2010. 

[5] Cost data was only available for 13 of the 18 newly designated 
major defense acquisition programs. 

[6] An acquisition category II program is defined as a program that 
does not meet the criteria for an acquisition category I program and 
is estimated to require eventual total RDT&E expenditures of more than 
$140 million or procurement expenditures of more than $660 million in 
fiscal year 2000 constant dollars. 

[7] The estimated cost for these 12 programs is based on DOD's 
December 2007 Selected Acquisition Reports. Cost growth was calculated 
from the programs' first cost estimate. 

[8] Not all programs provided information for every knowledge point or 
had reached all of the knowledge points--development start, design 
review, and production start. 

[9] The start of system development, as used here, indicates the point 
at which significant financial commitment is made to design, 
integrate, and demonstrate that the product will meet the user's 
requirements and can be manufactured on time, with high quality, and 
at a cost that provides an acceptable return on investment. Under the 
revised Department of Defense Instruction 5000.02, Operation of the 
Defense Acquisition System (Dec. 8, 2008), system development is now 
called engineering and manufacturing development. Engineering and 
manufacturing development follows materiel solution analysis and 
technology development. For shipbuilding programs, this point occurs 
when a program awards a detailed design and construction contract. 

[10] A major defense acquisition program may not receive milestone B 
approval until the milestone decision authority certifies that the 
technology in the program has been demonstrated in a relevant 
environment. National Defense Authorization Act for Fiscal Year 2006, 
Pub. L. No. 109-163, § 801 (codified at 10 U.S.C. § 2366b (a)(3)(D)). 

[11] GAO, Defense Acquisitions: Assessments of Selected Weapon 
Programs, [hyperlink, http://www.gao.gov/products/GAO-09-326SP], 
Washington, D.C.: March 30, 2009. 

[12] Under the Weapon Systems Acquisition Reform Act of 2009, a major 
defense acquisition program may not receive milestone B approval until 
the program has held a preliminary design review and the milestone 
decision authority has conducted a formal post-preliminary design 
review assessment and certified on the basis of such assessment that 
the program demonstrates a high likelihood of accomplishing its 
intended mission. Pub. L. No. 111-23, § 205(a)(3) (codified as amended 
at 10 U.S.C. § 2366b(a)(2)). 

[13] One program that held a critical design review in 2009 did not 
plan to test an early systems prototype. 

[14] Pub. L. No. 111-23, § 203. 

[15] DOD policy states that the knowledge required for a major defense 
acquisition program to proceed beyond low-rate initial production 
shall include demonstrated control of the manufacturing process and 
acceptable reliability, the collection of statistical process control 
data, and demonstrated control and capability of critical processes. 
Department of Defense Instruction 5000.02, Operation of the Defense 
Acquisition System, enclosure 2, paragraph 7.c.(2) (Dec. 8, 2008). We 
did not specifically assess compliance with this requirement. 

[16] The Weapon Systems Acquisition Reform Act of 2009 requires that 
DOD policy ensure that the acquisition strategy for each major defense 
acquisition program provides for competitive prototypes before 
milestone B approval, unless a waiver is properly granted. Pub. L. No. 
111-23, § 203(a). 

[17] The Weapon Systems Acquisition Reform Act of 2009 establishes a 
statutory requirement that a major defense acquisition program may not 
receive milestone B approval until the milestone decision authority 
has received a preliminary design review, conducted a formal post- 
preliminary design review assessment, and certified on the basis of 
such assessment that the program demonstrates a high likelihood of 
accomplishing its intended mission. Pub. L. No. 111-23, § 205(a)(3) 
(codified as amended at 10 U.S.C. § 2366b(a)(2)). 

[End of section] 

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