DOD Weapon Systems Acquisition
Congress and the Department of Defense (DOD) have long explored ways to improve the acquisition of major weapon systems, yet many DOD programs are still falling short of cost and schedule expectations. The results are unanticipated cost overruns, reduced buying power, and in some cases a reduction in the capability ultimately delivered to the warfighter. Over the next 5 years, DOD expects to invest more than $300 billion (fiscal year 2013 dollars) on the development and procurement of major defense acquisition programs. With the prospect of slowly growing or flat defense budgets for years to come, DOD must get better returns on its weapon system investments and find ways to deliver capability to the warfighter for less than it has in the past. GAO added this area to its High Risk List in 1990.
GAOs work continues to reveal significant cost and schedule growth in DODs portfolio of major defense acquisition programs. In 2012, GAO reported that the total acquisition cost of DODs fiscal year 2011 portfolio of 96 major defense acquisition programs grew by more than $74.4 billion, or 5 percent, in the past year. About $31.1 billion of that amount can be attributed to factors such as inefficiencies in production, $29.6 billion to quantity changes, and $13.7 billion to research and development cost growth. DODs largest weapon system acquisition programthe Joint Strike Fighter programaccounted for most of the cost growth, but it is not the only program to experience management and execution problems. As shown in figure 3, less than half of the programs in the 2011 portfolio met two of the three cost-growth targets GAO uses to measure DODs progress in the weapon system acquisition high-risk area. GAO also reported that a majority of programs lost buying power in the last year and planned to deliver capabilities at higher unit costs.
Figure 3: Percentage of Programs Meeting Total Acquisition Cost Growth Targets
The implementation of knowledge-based acquisition practices that might prevent or mitigate the potential for cost growth has been uneven across the portfolio. GAOs 2012 assessment of weapon programs found that programs are still proceeding through the acquisition process with high levels of technology, design, and manufacturing risks. Of the eight programs GAO assessed that had recently passed through one of three key decision points in the acquisition process, only one had implemented all of the applicable knowledge-based practices. The rest of these programs will carry technology, design, and production risks, as well as the resulting cost and schedule risks, into subsequent phases of the acquisition process.
DOD continues to demonstrate a strong commitment, at the highest levels, to improving the management of its weapon system acquisitions. Over the past 2 years, DOD has made progress in (1) addressing the prioritization of its weapon system investments through changes to its process for validating new requirements; (2) reinforcing the importance of cost estimating, systems engineering, and testing by implementing key tenets of the Weapon Systems Acquisition Reform Act of 2009; and (3) promoting affordability and increasing the productivity of defense spending through its Better Buying Power initiatives.
- Prioritizing weapon system investments. GAO has recommended that DOD assign priority levels to its capability needs and proposed weapon programs and align those priorities with available budgetary resources. In response, DOD revised the policy and guidance for its Joint Capabilities and Integration and Development System to require the prioritization of capability requirements within portfolios. In May 2012, the Joint Requirements Oversight Council also issued guidance to the military services and other stakeholders outlining areas that it assessed as priorities for additional investment and areas of lower priority where risk can be more easily accommodated. These efforts, if sustained, should help DOD shape a more affordable portfolio of weapon systems that balances risks and resources.
- Reinforcing the importance of cost estimating, systems engineering, and testing. In 2012, GAO reported that the Weapon Systems Acquisition Reform Act of 2009 has had a significant influence on programs in the 3 years since it was enacted, particularly in areas, such as (1) requirement setting, (2) cost and schedule estimating, (3) testing, and (4) system reliability planning, all of which have been sources of problems in the past. Moving forward, DOD faces challenges in extending the influence of the Weapons Systems Acquisition Reform Act. These challenges include: limited organizational capacity to support cost estimating, performance assessment, systems engineering, and developmental testing; lack of guidance in certain areas; limited dissemination of lessons learned related to systematic problems and best practices; and differences between the Office of the Secretary of Defense and the military services about what constitutes an appropriate level of risk and whether the benefits of certain reform provisions are worth the cost.
- Promoting affordability and productivity. In 2012, DOD unveiled its second set of Better Buying Power initiatives to improve the return on investment it receives from its weapon system spending. These initiatives include measures such as setting and enforcing affordability targets, instituting a long-term investment plan for portfolios of weapon systems, implementing should cost management, and eliminating redundancies within portfolios. These actions are consistent with GAOs past findings and recommendations. If these initiatives are going to have a lasting, positive effect, however, decision makers need to be held accountable for implementing them. GAOs recent work shows there is much ground yet to cover. In 2012, GAO reported that 4 of the 16 future and 19 of the 37 current major defense acquisition programs GAO assessed had established affordability targets. In addition, 6 of the 16 future and 23 of the 37 current major defense acquisition programs GAO assessed had completed should cost analyses as part of DODs first set of Better Buying Power initiatives.
DOD also plans to improve its ability to assess the root causes of poor weapon system acquisition outcomes and monitor the effectiveness of its actions to improve its management of weapon systems acquisition, in part as a result of congressional action. The fiscal year 2011 National Defense Authorization Act requires that DODs Office of Performance Assessment and Root Cause Analysis, among other offices, issue guidance to provide for periodic performance assessments of elements of the defense acquisition system. In 2012, DOD announced its plans to institute a system to measure the cost performance of programs and governmental and nongovernmental institutions, such as military departments and contractors, and assess the effectiveness of its acquisition policies. As part of this effort, DODs Office of Performance Assessment and Root Cause Analysis is examining a wide range of acquisition-related information from the past 40 years, such as contract type, stability of key performance requirements, and program manager tenure to determine if there is any statistical correlation between these factors and good or poor acquisition outcomes. DOD expects the first set of data derived from this initiative to be published in early 2013.
 In December 2008, DOD, GAO, and the Office of Management and Budget discussed a set of cost growth metrics and goals to evaluate DODs progress on improving program performance for purposes of GAOs high-risk report. These metrics were designed to capture total cost-growth performance over 1- and 5-year periods as well as from the original program estimate on a percentage basis as opposed to dollar amount to control for the disparity in the amount of funding among programs. DOD no longer supports the use of these metrics. GAO continues to believe that the current metrics have value.
In the past few years, a number of acquisition reforms have been introduced both through legislation and efforts undertaken by DOD, such as the Weapon Systems Acquisition Reform Act of 2009 and the Under Secretary of Defense for Acquisition, Technology and Logistics Better Buying Power initiatives. These reforms have the potential to improve outcomes on individual weapon system acquisition programs, as well as the affordability of DODs entire portfolio of weapon programs. They also demonstrate a commitment by Congress and DOD leadership to address long-standing problems with weapon system acquisition. However, DOD must still take actions to ensure it has developed adequate capacity to address weapon system acquisition issues; identified the right corrective actions to address the root causes of issues; and implemented mechanisms to monitor performance and demonstrate progress. Specifically, DOD needs to:
- ensure that key activities, such as cost estimating, program assessment, systems engineering, and developmental testing, are prioritized by the acquisition communities within DOD and the military services and that these entities have adequate capacity to perform their designated roles;
- follow through on its efforts to develop a system to measure the performance of programs and the effectiveness of its acquisition policies;
- set goals for and regularly report on the results of its Better Buying Power initiatives to track and assess their implementation;
- support well-planned programs by providing them the resources they need, while holding all programs accountable for policy implementation via milestone reviews, funding decisions, and performance metrics.