Defense Acquisitions:

Improved Business Case Key for Future Combat System's Success

GAO-06-564T: Published: Apr 4, 2006. Publicly Released: Apr 4, 2006.

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The Future Combat System (FCS) is a networked family of weapons and other systems in the forefront of efforts by the Army to become a lighter, more agile, and more capable combat force. When considering complementary programs, projected investment costs for FCS are estimated to be on the order of $200 billion. FCS's cost is of concern given that developing and producing new weapon systems is among the largest investments the government makes, and FCS adds significantly to that total. Over the last 5 years, the Department of Defense (DOD) doubled its planned investments in such systems from $700 billion in 2001 to $1.4 trillion in 2006. At the same time, research and development costs on new weapons continue to grow on the order of 30 to 40 percent. FCS will be competing for significant funds at a time when federal fiscal imbalances are exerting great pressures on discretionary spending. In the absence of more money being available, FCS and other programs must be executable within projected resources. Today, I would like to discuss (1) the business case needed for FCS to be successful and (2) our recent recommendations to DOD and matters for congressional consideration regarding the FCS program.

There are a number of compelling aspects of the FCS program, and it is hard to argue with the program's goals. However, the elements of a sound business case for such an acquisition program--firm requirements, mature technologies, a knowledge-based acquisition strategy, a realistic cost estimate, and sufficient funding--are not yet present. FCS began product development prematurely in 2003. Since then, the Army has made several changes to improve its approach for acquiring FCS. Yet today, the program remains a long way from having the level of knowledge it should have had before starting product development. FCS has all the markers for risks that would be difficult to accept for any single system, much less a complex, multiprogram effort. These challenges are even more daunting in the case of FCS not only because there are so many of them but because FCS represents a new concept of operations that is predicated on technological breakthroughs. Thus, technical problems, which accompany immaturity, not only pose traditional risks to cost, schedule, and performance; they pose risks to the new fighting concepts envisioned by the Army. Last month, we made recommendations to the Secretary of Defense to take several actions, prior to DOD's long-term commitment to the program, to improve the FCS business case and establish knowledge-based measures to guide oversight of FCS progress. These recommendations detailed specific steps DOD should take leading up to a major milestone review of the program in 2008 when the program is expected to have achieved the level of knowledge it should have had in 2003. We believe it is at this point the program should be reviewed as to whether it has established enough of a solid business case to continue. While DOD concurred with the intent of our recommendations, it did not agree to limit its commitment to the FCS program or to do much beyond what it had already planned to do. This concerns us. As a result, we have also raised to Congress several matters for consideration to ensure that FCS has a sound business case before future funding commitments are made. We believe the actions we have recommended to DOD and the matters for consideration we have presented to Congress are necessary to improve the prospects for FCS success and to protect the government's ability to change course if the program does not progress as the Army plans.

Matters for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: There is no reference to the May 2006 Defense Acquisition Board review in any of the FY2007 authorization or appropriations language. Consequently, it appears that Congress elected not to implement this recommendation.

    Matter: Based on DOD's response to our report, it did not appear that DOD planned to assess the FCS business case against best practices or its own policies. Nor did DOD agree to hold a go/no-go milestone review in 2008 based on the preliminary design review. Congress will likely be asked to approve fiscal years 2008 and 2009 funding requests before the FCS business case is adequately demonstrated. In light of DOD's response, Congress may wish to consider directing the Secretary of Defense to report on the results of the May 2006 Defense Acquisition Board's review of the FCS program business case in the areas of requirements, technologies, acquisition strategy, cost, and funding.

  2. Status: Closed - Implemented

    Comments: In the FY 2007 National Defense Authorization Conference Report, section 214, Congress directed the Secretary of Defense to carry out a Defense Acquisition Board milestone review of the Future Combat Systems program. Per the report, this milestone review is to happen not later than 120 days after the preliminary design review. Further, the Secretary was directed to make a determination as to whether the program should continue (i.e., a go/no-go decision). The supporting language of that section details the criteria for such a review and reflects the business case conditions we outlined in our testimony.

    Matter: Based on DOD's response to our report, it did not appear that DOD planned to assess the FCS business case against best practices or its own policies. Nor did DOD agree to hold a go/no-go milestone review in 2008 based on the preliminary design review. Congress will likely be asked to approve fiscal years 2008 and 2009 funding requests before the FCS business case is adequately demonstrated. In light of DOD's response, Congress may wish to consider directing the Secretary of Defense to direct DOD to conduct and report the results of a milestone review in 2008, following the preliminary design review, that will be a go/no-go review of the FCS program based on its demonstration of a sound business case.

  3. Status: Closed - Implemented

    Comments: In the FY 2007 National Defense Authorization Act Conference Report, section 214, Congress states that, beginning in 2009, the Secretary of Defense may not obligate any funds for procurement of the Future Combat Systems program until the secretary submits to Congress a report of the Defense Acquisition Board's milestone review that is scheduled to occur no more than 120 days after the program's preliminary design review. The contents of this report, as directed by Congress, reflect the knowledge-based acquisition criteria outlined in our testimony.

    Matter: Congress may also wish to consider restricting annual appropriations for fiscal years 2008 and 2009 for the FCS program until definitive progress in establishing a sound business case is demonstrated in terms of firm requirements, mature technologies, a knowledge-based acquisition strategy, a realistic cost estimate, and sufficient funding. Most important, the Army must provide sufficient evidence FCS will work.

 

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