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Testimony: 

Before the Committee on Armed Services, House of Representatives: 

United States Government Accountability Office:
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Thursday, April 30, 2009: 

Defense Acquisitions: 

Charting a Course for Lasting Reform: 

Statement of Paul Francis, Managing Director:
Acquisition and Sourcing Management: 

GAO-09-663T: 

GAO Highlights: 

Highlights of GAO-09-663T, a testimony before the Committee on Armed 
Services, House of Representatives. 

Why GAO Did This Study: 

Since 1990, GAO has designated the Department of Defense’s (DOD) 
management of its major weapon acquisitions as a high-risk area; 
however DOD’s problems delivering weapon systems on time, at the 
estimated cost, in the planned amounts, and with the promised 
performance go back decades. Congress and DOD have continually explored 
ways to improve acquisition outcomes, yet problems persist. 

The committee asked GAO to testify on measures needed to reform the 
acquisition of major weapon systems and related legislative proposals. 
Specifically, this statement will describe the poor outcomes on weapon 
system investments that make reform imperative; attributes of the 
requirements, funding, and acquisition processes that will need to 
change for reform to be effective; and positive steps that Congress and 
DOD have taken to improve weapon program outcomes. The statement will 
also examine other factors that should be considered as the committee 
moves forward with its reform efforts. 

The testimony is drawn from GAO’s body of work on DOD’s requirements, 
funding, and acquisition processes. GAO has made numerous 
recommendations aimed at improving DOD’s management of its major weapon 
acquisitions, but it is not making any new recommendations in this 
testimony. 

What GAO Found: 

DOD must get a better return on investment from its weapon system 
programs. Since fiscal year 2003, DOD has increased the number of major 
defense acquisition programs and its overall investment in them. The 
cumulative cost growth for DOD’s programs is higher than it was 5 years 
ago, but at $296 billion (fiscal year 2009 dollars), it is less than 
last year when adjusted for inflation. For DOD’s 2008 portfolio of 
programs, research and development costs are now 42 percent higher than 
originally estimated and the average delay in delivering initial 
capabilities has increased to 22 months. 

Table: Analysis of DOD Major Defense Acquisition Program Portfolios 
(Fiscal Year 2009 Dollars): 

Portfolio status: Number of programs; 
Fiscal year 2003 portfolio: 77; 
Fiscal year 2007 portfolio: 95; 
Fiscal year 2008 portfolio: 96. 

Portfolio status: Total planned commitments; 
Fiscal year 2003 portfolio: $1.2 trillion; 
Fiscal year 2007 portfolio: $1.6 trillion; 
Fiscal year 2008 portfolio: $1.6 trillion. 

Portfolio status: Commitments outstanding; 
Fiscal year 2003 portfolio: $724 billion; 
Fiscal year 2007 portfolio: $875 billion; 
Fiscal year 2008 portfolio: $786 billion. 

Portfolio status: Change to total research and development costs from 
first estimate; 
Fiscal year 2003 portfolio: 37 percent; 
Fiscal year 2007 portfolio: 40 percent; 
Fiscal year 2008 portfolio: 42 percent. 

Portfolio status: Change in total acquisition cost from first estimate; 
Fiscal year 2003 portfolio: 19 percent; 
Fiscal year 2007 portfolio: 26 percent; 
Fiscal year 2008 portfolio: 25 percent; 

Portfolio status: Estimated total acquisition cost growth; 
Fiscal year 2003 portfolio: $183 billion; 
Fiscal year 2007 portfolio: $301 billion; 
Fiscal year 2008 portfolio: $296 billion. 

Portfolio status: Share of programs with 25 percent or more increase in 
program acquisition unit cost; 
Fiscal year 2003 portfolio: 41 percent; 
Fiscal year 2007 portfolio: 44 percent; 
Fiscal year 2008 portfolio: 42 percent. 

Portfolio status: Average delay in delivering initial capabilities; 
Fiscal year 2003 portfolio: 18 months; 
Fiscal year 2007 portfolio: 21 months; 
Fiscal year 2008 portfolio: 22 months. 

Source: GAO analysis of DOD data. 

[End of table] 

These problems have roots in not only the acquisition process, but also 
in the requirements and funding processes. Collectively, these 
processes create pressures to demand high performance, keep cost 
estimates low, and proceed with calendar-driven versus knowledge-driven 
schedules. These processes also do not adequately prioritize needs from 
a joint, departmentwide perspective, respond to changing warfighter 
demands, or constrain the number of programs to a level that is 
supportable by available resources. Programs are allowed to enter and 
proceed through the acquisition process with requirements that are not 
fully understood, cost and schedule estimates that are based on 
optimistic assumptions, and a lack of sufficient knowledge about 
technology, design, and manufacturing. 

Congressionally-mandated and DOD-initiated changes to the acquisition 
system could provide the basis for sounder programs and improved 
acquisition outcomes. The committee’s proposed legislation dealing with 
requirements, systems engineering, technology and integration risk 
assessment, and cost estimation—also address areas in need of reform. 
However, past reform efforts have failed to produce lasting change. To 
make the most out of this opportunity, the weapons acquisition 
environment and the incentives inherent within it will also have to be 
confronted and addressed. 

View [hyperlink, http://www.gao.gov/products/GAO-09-663T] or key 
components. For more information, contact Paul Francis at (202) 512-
4841 or francisp@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) acquisition of major weapon systems and the legislation that is 
being introduced by this committee. As you know, weapon systems 
acquisition has been on GAO's high risk list since 1990. Prior to and 
since that time, Congress and DOD have continually explored ways to 
improve acquisition outcomes, yet problems persist. The opportunity for 
meaningful change at this moment is significant, exemplified by the 
Defense Acquisition Reform Panel established by this committee; your 
recent legislative proposal to reform weapons acquisition; the Senate 
Armed Services Committee's acquisition reform legislation; the Senate's 
new Subcommittee on Contracting Oversight; DOD's revision of its 
acquisition policy for major defense acquisition programs; and the 
Secretary of Defense's recent call for acquisition reform and 
recommendations for the fiscal year 2010 budget that could end all or 
part of at least a half dozen major defense acquisition programs. Yet, 
we must be mindful that there have been missed opportunities in the 
past. The challenge today will be to address not only how to align 
DOD's requirements, funding, and acquisition processes to get better 
outcomes, but also how to confront the environment that has made the 
area resistant to reform. 

Today, I will discuss the (1) poor outcomes on weapon system 
investments that make reform imperative; (2) attributes of the 
requirements, funding, and acquisition processes that will need to 
change for reform to be effective; and (3) positive steps that Congress 
and DOD have taken to improve weapon program outcomes. The statement 
draws from our extensive body of work on DOD's acquisition of weapon 
systems. 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. 

The Case for Reform: 

There can be little doubt that we can--and must--get better outcomes 
from our weapon system investments. As can be seen in table 1 below, 
cost growth and schedule delays in DOD's portfolio of weapon systems 
have been significant. 

Table 1: Analysis of DOD Major Defense Acquisition Program Portfolios: 

Fiscal year 2009 dollars. 

Portfolio size: Number of programs; 
Fiscal Year: 2003: 77; 
Fiscal Year: 2007: 95; 
Fiscal Year: 2008: 96. 

Portfolio size: Total planned commitments; 
Fiscal Year: 2003: $1.2 trillion; 
Fiscal Year: 2007: $1.6 trillion; 
Fiscal Year: 2008: $1.6 trillion. 

Portfolio size: Commitments outstanding; 
Fiscal Year: 2003: $724.2 billion; 
Fiscal Year: 2007: $875.2 billion; 
Fiscal Year: 2008: $786.3 billion. 

Portfolio indicators: Change to total RDT&E costs from first estimate; 
Fiscal Year: 2003: 37 percent; 
Fiscal Year: 2007: 40 percent; 
Fiscal Year: 2008: 42 percent. 

Portfolio indicators: Change to total acquisition cost from first 
estimate; 
Fiscal Year: 2003: 19 percent; 
Fiscal Year: 2007: 26 percent; 
Fiscal Year: 2008: 25 percent. 

Portfolio indicators: Total acquisition cost growth; 
Fiscal Year: 2003: $183 billion; 
Fiscal Year: 2007: $301.3 billion[A]; 
Fiscal Year: 2008: $296.4 billion. 

Portfolio indicators: Share of programs with 25 percent increase in 
program acquisition unit cost growth; 
Fiscal Year: 2003: 41 percent; 
Fiscal Year: 2007: 44 percent; 
Fiscal Year: 2008: 42 percent. 

Portfolio indicators: Average schedule delay in delivering initial 
capabilities; 
Fiscal Year: 2003: 18 months; 
Fiscal Year: 2007: 21 months; 
Fiscal Year: 2008: 22 months. 

Source: GAO analysis of DOD data. 

Notes: Data were obtained from DOD's Selected Acquisition Reports (SAR) 
(dated December 2002, 2006, and 2007). In a few cases data were 
obtained directly from program offices. The number of programs reflects 
the programs with SARs; however, in our analysis we have broken a few 
SAR programs into smaller elements or programs. Not all programs had 
comparable cost and schedule data and these programs were excluded from 
the analysis where appropriate. Portfolio performance data do not 
include costs of developing Missile Defense Agency elements or the 
Defense Integrated Military Human Resources System (DIMHRS) program. 

[A] The total acquisition cost growth for the 2007 portfolio was $295 
billion in 2008 constant dollars. 

[End of table] 

Since 2003, DOD's portfolio of major defense acquisition programs has 
grown from 77 to 96 programs and its investment in those programs has 
grown from $1.2 trillion to $1.6 trillion (fiscal year 2009 dollars). 
[Footnote 1] The total cost growth for DOD's portfolio of major defense 
acquisition programs is higher than it was 5 years ago, but at $296 
billion, it is actually less than the 2007 portfolio's cost growth of 
$301 billion. For DOD's 2008 portfolio of programs, total research and 
development costs are 42 percent higher than originally estimated, and 
the average delay in delivering initial capabilities is 22 months. In 
addition, 42 percent of the programs reported a 25 percent or more 
increase in acquisition unit costs.[Footnote 2] DOD's performance in 
some of these areas is driven by older, underperforming programs as 
newer programs, on average, have not yet shown the same degree of cost 
and schedule growth. Of the programs in the 2008 portfolio that 
reported comparable cost data, 75 percent (69 programs) reported 
increases in research and development costs since their first estimate, 
and 69 percent (64 programs) reported increases in total acquisition 
costs. Quantities have been reduced by 25 percent or more for 15 of the 
programs in the 2008 portfolio. 

The overall performance of this portfolio is one indicator of how well 
DOD's acquisition system generates the return on investment it promises 
to the warfighter, Congress, and the taxpayer. Another is the effect 
cost increases have on DOD's buying power for individual systems, as 
demonstrated by changes in program acquisition unit costs. Some 
examples that illustrate the effect of lost buying power are shown in 
table 2 below. 

Table 2: Effect of Cost Increases on Buying Power: 

Program: Joint Strike Fighter; 
Total cost (fiscal year 2009 dollars in billions): First full estimate: 
206.4; 
Total cost (fiscal year 2009 dollars in billions): Current estimate: 
244.8; 
Total quantity: First full estimate: 2,866; 
Total quantity: Current estimate: 2,456; 
Acquisition unit cost: Percentage change: 38.4. 

Program: Future Combat System; 
Total cost (fiscal year 2009 dollars in billions): First full estimate: 
89.8; 
Total cost (fiscal year 2009 dollars in billions): Current estimate: 
129.7; 
Total quantity: First full estimate: 15; 
Total quantity: Current estimate: 15; 
Acquisition unit cost: Percentage change: 44.5. 

Program: Space Based Infrared System High; 
Total cost (fiscal year 2009 dollars in billions): First full estimate: 
4.4; 
Total cost (fiscal year 2009 dollars in billions): Current estimate: 
12.2; 
Total quantity: First full estimate: 5; 
Total quantity: Current estimate: 4; 
Acquisition unit cost: Percentage change: 244.7. 

Program: Expeditionary Fighting Vehicle; 
Total cost (fiscal year 2009 dollars in billions): First full estimate: 
8.8; 
Total cost (fiscal year 2009 dollars in billions): Current estimate: 
13.7; 
Total quantity: First full estimate: 1,025; 
Total quantity: Current estimate: 593; 
Acquisition unit cost: Percentage change: 167.5. 

Program: V-22 Joint Services Advanced Vertical Lift Aircraft; 
Total cost (fiscal year 2009 dollars in billions): First full estimate: 
38.7; 
Total cost (fiscal year 2009 dollars in billions): Current estimate: 
55.5; 
Total quantity: First full estimate: 913; 
Total quantity: Current estimate: 458; 
Acquisition unit cost: Percentage change: 185.9. 

Source: GAO analysis of DOD data. 

[End of table] 

There is no single measure that perfectly explains every variable 
behind cost and schedule changes in weapon systems. For example, the 
total cost of a weapon system can increase because more quantities are 
added, without necessarily being indicative of a problem. On the other 
hand, the total cost can stay the same while quantities are 
significantly reduced--a clear indication of a problem. While there can 
be legitimate debate over which set of measures are the best 
explanation of the problem, as table 1 shows, there can be no debate 
over the fact that the problem is significant and calls for action. 

What Needs to Change? 

DOD's key processes for setting requirements, providing funding, and 
managing acquisition programs have institutionalized some underlying 
causes for persistent problems in weapon system programs. As 
illustrated in figure 1 below, collectively, these processes create 
pressures to promise high performance, keep cost estimates low, and 
proceed with calendar-driven versus knowledge-driven schedules. 

Figure 1: Factors Influencing DOD's Ability to Manage Programs and 
Improve Outcomes: 

[Refer PDF for image: illustration] 

Factor: Requirements process; 
Pressure on decision makers to: promise high performance. 

Factor: Funding process; 
Pressure on decision makers to: promise low resource demands. 

Factor: Acquisition process; 
Pressure on decision makers to: move forward, get knowledge later. 

Source: DOD. 

[End of figure] 

DOD's processes for identifying warfighter needs, funding programs, and 
developing and procuring weapon systems--which collectively define 
DOD's overall weapon system investment strategy--do not work together 
to provide the best value to the warfighter and to the taxpayer. 
Instead, DOD largely continues to define warfighting needs and make 
investment decisions on a service-by-service and individual platform 
basis. As a result, DOD does not effectively address joint warfighting 
needs and commits to more programs than it has resources for, thus 
creating unhealthy competition for funding. At the individual 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 optimistic assumptions 
rather than on sufficient knowledge. This makes it impossible to 
successfully execute the program within established cost, schedule, and 
performance targets. Because DOD's requirements, funding, and 
acquisition processes are led by different organizations, it is 
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. Frequent turnover in leadership 
positions in the department exacerbates the problem. As of March 2009, 
the average tenure of the Under Secretary of Defense for Acquisition, 
Technology and Logistics over the past 22 years has been only about 20 
months.[Footnote 3] 

Requirements Process: 

DOD's requirements determination process--the Joint Capabilities and 
Integration Development System (JCIDS)--provides a framework for 
reviewing and validating needs. However, 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 most were sponsored by the military services with little 
involvement from the joint community, including the combatant 
commands.[Footnote 4] By continuing to primarily rely on stovepiped 
solutions to address capability needs, DOD may be losing opportunities 
to improve joint warfighting capabilities and reduce the duplication of 
capabilities in some areas. 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. As a result, the process 
produces more demand for new weapon system programs than available 
resources can support. 

Funding Process: 

The funding of proposed programs takes place through a separate 
process--the Planning, Programming, Budgeting, and Execution system, 
which is not synchronized with JCIDS. We recently reviewed the impact 
of the funding process on major defense acquisition programs and found 
that the process does not produce an accurate picture of DOD's resource 
needs for weapon system programs.[Footnote 5] The estimated cost of 
many of the programs we reviewed exceeded the funding levels planned 
for and reflected in the Future Years Defense Program--DOD's long-term 
investment strategy. Rather than limit the number and size of programs 
or adjust requirements, the funding process attempts to accommodate 
programs. This creates an unhealthy competition for funds that 
encourages sponsors of weapon system programs to pursue overly 
ambitious capabilities and to underestimate costs. With too many 
programs underway for the available resources and high cost growth 
occurring in many programs, DOD must make up for funding shortfalls by 
shifting funds from one program to pay for another, reducing system 
capabilities, cutting procurement quantities, stretching out programs, 
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. 

Acquisition Process: 

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. In a sense, the business cases are 
compromised to reconcile the disparate pressures imposed by the 
requirements and funding processes. We analyze the soundness of 
individual business cases at various points in the acquisition process 
through the lens of three knowledge points that are indicators of 
technology, design, and production maturity. These knowledge points are 
consistent with best practices for product development. Some key 
observations on each follow. 

Knowledge point 1: Resources and requirements match. Achieving a high 
level of technology maturity by the start of system development is an 
important indicator of whether this match has been made.[Footnote 6] 
This means that the technologies needed to meet essential product 
requirements have been demonstrated to work in their intended 
environment. In addition, the developer has completed a preliminary 
design of the product that shows the design is feasible. DOD's 
acquisition policy and statute both require that technologies should be 
demonstrated in a relevant environment prior to starting development--
a slightly lower standard than the best practice. Since 2003, there has 
been a significant increase in the technology maturity of DOD programs 
at the start of system development; however, few programs have met the 
best practices standard. In our most recent assessment, only 4 of the 
36 programs that provided data on technology maturity at development 
start did so with fully mature critical technologies.[Footnote 7] In 
addition, only 4 of the 36 programs that held a preliminary design 
review did so before development start; the remaining programs held the 
review, on average, 31 months after development began. 

Knowledge point 2: Product design is stable. This point occurs when a 
program determines that a product's design will meet customer 
requirements, as well as cost, schedule, and reliability targets. A 
best practice is to achieve design stability at the system-level 
critical design review, usually held midway through system development. 
Completion of at least 90 percent of engineering drawings at this point 
provides tangible evidence that the product's design is stable, and a 
prototype demonstration shows that the design is capable of meeting 
performance requirements. Of the 29 programs in our most recent 
assessment that have held a system-level critical design review, 7 
reported having a stable design. However, the level of design knowledge 
attained by the critical design review has been increasing over time. 

Knowledge point 3: Manufacturing processes are mature. This point is 
achieved when it has been demonstrated that the developer can 
manufacture the product within cost, schedule, and quality targets. A 
best practice is to ensure that all critical manufacturing processes 
are in statistical control--that is, they are repeatable, sustainable, 
and capable of consistently producing parts within the product's 
quality tolerances and standards--at the start of production. 
Identifying key product characteristics and the associated critical 
manufacturing processes is a key initial step to ensuring production 
elements are stable and in control. In our most recent assessment, only 
4 of the 23 programs that had made a production decision identified key 
product characteristics or associated critical manufacturing 
processes. However, it should also be noted that 4 of the 17 programs 
that are scheduled to make a production decision in the next 3 years 
have already identified key product characteristics or associated 
critical manufacturing processes. 

When programs do not follow a knowledge-based approach to acquisition, 
high levels of uncertainty about requirements, technologies, and design 
often exist at the start of a development program. As a result, cost 
estimates and related funding needs are often understated. Our analysis 
of service and independent cost estimates for 20 major weapon system 
programs shows that while the independent estimates were somewhat 
higher, both estimates were too low in most cases.[Footnote 8] The 
programs we reviewed frequently lacked sufficient knowledge and detail 
about planned program content for developing sound cost estimates. 
Without this knowledge, cost estimators must rely heavily on parametric 
analysis and assumptions. 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. Second, the basic principles 
of systems engineering are not being followed when preliminary and 
critical design reviews are not conducted on time or with insufficient 
information. Further, testing a fully integrated, capable, production-
representative prototype is essential to confirm the maturity of the 
design and to minimize cost growth in production. Yet of the 33 
programs in our most recent assessment that reported they plan to test 
such prototypes, only 17 planned to do so before the production 
decision. 

Recent and Proposed Reform Efforts Could Improve Weapon Programs: 

There is widespread recognition of the problems that affect the 
acquisition system and DOD and the Congress have taken and proposed 
several steps to remedy them. Changes have been introduced to improve 
the department's processes for determining warfighter needs and funding 
programs, establish sound business cases for starting acquisition 
programs, and execute programs more effectively. 

Efforts to Prioritize Needs and Manage Resources: 

DOD has recently implemented measures to better address the needs of 
the joint warfighter and align the demand for weapon systems with 
available resources. The Joint Requirements and Oversight Council, for 
example, has been doing more to seek out and consider input from the 
combatant commands (COCOMs)--the principal joint warfighting customer 
in DOD--through regular trips and meetings to discuss capability needs 
and resource issues. This may help alleviate concerns that the COCOMs 
have raised in the past that their needs have not been adequately 
addressed through the department's requirements process. In addition, 
DOD has taken action over the past few years to field capabilities that 
are urgently needed for Iraq and Afghanistan, such as Unmanned Aerial 
Systems and Mine Resistant Ambush Protected vehicles. While these 
efforts have helped DOD meet the needs of the warfighter, Secretary 
Gates noted earlier this year that the department must figure out how 
to institutionalize the acquisition of urgently-needed capabilities 
rather than having to do so, on an ad hoc basis. Having greater 
combatant command involvement in determining requirements, as 
emphasized in the House and Senate Armed Services Committees' proposed 
acquisition reform legislation, would help to ensure that near-term 
needs are addressed. We have recommended additional actions that DOD 
should take to balance the needs of the military services, COCOMs, and 
other defense components, including establishing an analytic approach 
to determine the relative importance of capabilities and providing the 
COCOMs with additional resources to establish robust analytical 
capabilities for identifying and assessing their warfighting needs. 

DOD has also recently established a capability portfolio management 
framework to facilitate more strategic choices for allocating resources 
through the funding process. Capability portfolios have been set up to 
advise the department on how to optimize investments within individual 
capability areas, but portfolio managers do no have independent 
decision-making authority over determining requirements and funding. 
Although it is too soon to assess the impact of the portfolios, 
according to some DOD officials, portfolio managers have provided key 
input and recommendations during the budget process this year. However, 
while these portfolio managers may improve the management of individual 
capability areas, there still needs to be higher level DOD attention to 
improving the match between the number of major defense acquisition 
programs and available funding. The Secretary of Defense recently 
recommended the termination of several major weapon programs, which 
will help bring the portfolio into balance better and prioritize 
capability needs. Sustaining a balance over the long term will require 
DOD to improve the way it makes decisions about which programs to 
pursue or not pursue. Legislative proposals to promote greater 
consideration of trade-offs in the cost, schedule, and performance of 
individual programs and the development of better mechanisms to ensure 
this happens before a program begins could help make such decisions 
part of a disciplined process versus the product of extraordinary 
action. 

Efforts to Establish Sound Programs: 

Recognizing the need for more discipline and accountability in the 
acquisition process, Congress and DOD have recently introduced several 
initiatives that could provide a foundation for establishing sound, 
knowledge-based business cases for individual weapon programs. These 
initiatives require programs to invest more time and resources in the 
front-end of the acquisition process--refining weapon system concepts 
through early systems engineering, developing technologies, and 
building prototypes--before starting system development. In the past, 
weapon programs often rushed into systems development before they were 
ready, in part because the department's acquisition process did not 
require early formal milestone reviews and programs would rarely be 
terminated once underway. If implemented, these 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. However, DOD must ensure that these changes to the 
acquisition process are consistently implemented and reflected in 
decisions on individual programs. Several of the provisions in the 
proposed House and Senate legislation will codify DOD policies that are 
not yet being implemented consistently in weapon programs. Some of the 
key changes being introduced by DOD and the Congress to establish 
knowledge-based business cases for weapon programs include: 

* Increased emphasis on early systems engineering activities and the 
enhancement of systems engineering capabilities within the department; 

* A requirement for competitive prototyping of a proposed weapon system 
or key system elements during the technology development phase; 

* Certification that critical technologies have been demonstrated in a 
relevant environment before the start of system development, employing 
independent technology readiness assessments to make these 
determinations; 

* Early milestone reviews for programs going through the pre-systems 
acquisition phase; 

* Conducting preliminary design reviews before starting system 
development; 

* Requiring early cost estimates for the milestone decision to move 
into technology development phase; and: 

* Elevating the role of independent cost estimates in the acquisition 
process, by establishing a director or principal advisor for cost 
estimating who reports to the Secretary of Defense and the Congress. 

Efforts to Improve Program Execution: 

There have also been several policy and legislative provisions 
introduced to improve the execution of weapon system programs. For 
example, to address the problem of requirements creep that has often 
plagued programs in the past, review boards are being established to 
identify and mitigate technical risks and evaluate the impact of any 
potential requirements changes on ongoing programs. In addition, to 
improve accountability in managing programs, DOD has established a 
policy instituting formal agreements among program managers, their 
acquisition executives, and the user community setting forth common 
program goals and the resources that will be provided to reach these 
goals. Further, DOD acquisition policy now incorporates a requirement 
that program managers sign tenure agreements so that their tenure will 
correspond to the next major acquisition milestone review closest to 4 
years. The House and Senate reform legislation introduces a number of 
steps to monitor and oversee the progress of existing programs that 
started before the recent certification requirements were put in place 
for gaining approval to enter system development, and programs where 
DOD waived the certification requirements for one reason or another. 
The House proposal also includes establishing a principal advisor for 
performance assessment--a position that will focus primarily on program 
execution. In addition, requiring any program that the department 
determines must be continued following a Nunn-McCurdy breach, to go 
back through a major milestone review, should help ensure that programs 
with significant cost problems are not allowed to continue without a 
sound business case. 

Concluding Observations on 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 are a number of 
proposals 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 take the 
cooperative efforts of DOD and 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 concludes my prepared statement. I would be happy to 
answer any questions you may have at this time. 

[End of section] 

Footnotes: 

[1] All dollars amounts used in this statement are in fiscal year 2009 
constant dollars unless otherwise noted. 

[2] The program acquisition unit cost is the total cost for development 
and procurement of, and system-specific military construction for, the 
acquisition program divided by the number of fully-configured end items 
to be produced. 10 USC § 2432 (a)(1). 

[3] 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. As of March 2009, there have been 11 under secretaries. 

[4] 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). 

[5] 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). 

[6] 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 5000 
series, this phase is now called engineering and manufacturing 
development and begins at milestone B. Engineering and manufacturing 
development follows the materiel solution analysis and technology 
development. 

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

[8] [hyperlink, http://www.gao.gov/products/GAO-08-619]. 

[End of section] 

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