Defense Acquisitions:

Missile Defense Acquisition Strategy Generates Results but Delivers Less at a Higher Cost

GAO-07-387: Published: Mar 15, 2007. Publicly Released: Mar 15, 2007.

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Over the next 5 years, the Missile Defense Agency (MDA) expects to invest $49 billion in the BMD system's development and fielding. MDA's strategy is to field new capabilities in 2-year blocks. In January 2006, MDA initiated its second block--Block 2006--to protect against attacks from North Korea and the Middle East. Congress requires GAO to assess MDA's progress annually. This year's report addresses MDA's progress during fiscal year 2006 and follows up on program oversight issues and the current status of MDA's quality assurance program. GAO assessed the progress of each element being developed by MDA, examined acquisition laws applicable to major acquisition programs, and reviewed the impact of implemented quality initiatives.

During fiscal year 2006, MDA fielded additional assets for the Ballistic Missile Defense System (BMDS), enhanced the capability of some assets, and realized several noteworthy testing achievements. For example, the Ground-based Midcourse Defense (GMD) element successfully conducted its first end-to-end test of one engagement scenario, the element's first successful intercept test since 2002. However, MDA will not meet its original Block 2006 cost, fielding, or performance goals because the agency has revised those goals. In March 2006, MDA: reduced its goal for fielded assets to provide funds for technical problems and new and increased operations and sustainment requirements; increased its cost goal by about $1 billion--from $19.3 to $20.3 billion; and reduced its performance goal commensurate with the reduction of assets. MDA may also reduce the scope of the block further by deferring other work until a future block because four elements incurred about $478 million in fiscal year 2006 budget overruns. With the possible exception of GMD interceptors, MDA is generally on track to meet its revised quantity goals. But the deferral of work, both into and out of Block 2006, and inconsistent reporting of costs by some BMDS elements, makes the actual cost of Block 2006 difficult to determine. In addition, GAO cannot assess whether the block will meet its revised performance goals until MDA's models and simulations are anchored by sufficient flight tests to have confidence that predictions of performance are reliable. Because MDA has not entered the Department of Defense (DOD) acquisition cycle, it is not yet required to apply certain laws intended to hold major defense acquisition programs accountable for their planned outcomes and cost, give decision makers a means to conduct oversight, and ensure some level of independent program review. MDA is more agile in its decision-making because it does not have to wait for outside reviews or obtain higher-level approvals of its goals or changes to those goals. Because MDA can revise its baseline, it has the ability to field fewer assets than planned, defer work to a future block, and increase planned cost. All of this makes it hard to reconcile cost and outcomes against original goals and to determine the value of the work accomplished. Also, using research and development funds to purchase operational assets allows costs to be spread over 2 or more years, which makes costs harder to track and commits future budgets. MDA continues to identify quality assurance weaknesses, but the agency's corrective measures are beginning to produce results. Quality deficiencies are declining as MDA implements corrective actions, such as a teaming approach, designed to restore the reliability of key suppliers.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Fiscal Year 2008 National Defense Authorization Act includes language directing the MDA, starting in fiscal year 2009, to submit the budget request using regular budget categories (research and development, procurement, operation and maintenance, and military construction). Additionally, the Fiscal Year 2008 National Defense Authorization Act includes language directing the MDA to submit, no later than March 1, 2008, to the Committee on Armed Services of the Senate and the Committee on Armed Services of the House of Representatives, a plan for transitioning the Missile Defense Agency from using research, development, test, and evaluation funds for missile defense fielding activities to using procurement funds for those activities, where practicable. In the 2010 President's budget, MDA requested procurement funding for Terminal High Altitude Area Defense (THAAD) and Aegis Ballistic Missile Defense assets.

    Recommendation: To increase transparency in the missile defense program, the Secretary of Defense should request and use procurement funds, rather than research, development, test, and evaluation funds, to acquire fielded assets.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Missile Defense Agency (MDA) did not agree with this recommendation, but modified its biennial block approach in December 2007 to include only those elements that will be fielded during each block.

    Recommendation: To increase transparency in the missile defense program, the Secretary of Defense should include in blocks only those elements that will field capabilities during the block period and develop a firm cost, schedule, and performance baseline for that block capability including the unit cost of its assets.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The Missile Defense Agency (MDA) is providing additional information to Congress to promote accountability, consistency, and transparency while (1) preserving the MDA Director's flexibility to make decisions and (2) continuing to emphasize its single, integrated program of development. In addition, the Fiscal Year 2008 National Defense Authorization Act Report directed MDA to establish acquisition baselines for cost, schedule, and performance for those missile defense elements far enough along to be in system development and demonstration, and that the agency provide unit cost data, and other information that would help improve accountability. Also, in its June 2010 BMDS Accountability Report, MDA reported program acquisition unit costs, which includes research and development funding, for MDA program elements that produce countable weapons, sensors, launch systems, and fire control systems.

    Recommendation: To increase transparency in the missile defense program, the Secretary of Defense should propose an approach for those same elements that provides information consistent with the acquisition laws that govern baselines and unit cost reporting, independent cost estimates, and operational test and evaluation for major DOD programs. Such an approach could provide necessary information while preserving the MDA Director's flexibility to make decisions.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: In December 2007, the Missile Defense Agency (MDA) modified its approach used to define its cost, schedule, and performance baselines. In addition, the Fiscal Year 2008 National Defense Authorization Act included language that directs MDA to establish a number of specific acquisition improvements, including acquisition baselines for cost, schedule, and performance for those missile defense elements that have either entered the equivalent of the System Development and Demonstration phase of acquisition, or are being produced and fielded for operational use. In addition, in a 2010 Senate Report, the committee noted that GAO had recommended numerous times that MDA develop and use acquisition baselines for cost, schedule, and performance in order to permit objective assessments of their progress on missile defense programs. In light of GAO's recommendations, the committee further noted that it believed that it was important to require such baselines in law to ensure that they will be an enduring feature of MDA program management and oversight in the future. Consequently, in December 2010, Congress established new requirements for missile defense baselines in the National Defense Authorization Act for Fiscal Year 2011. The Ike Skelton National Defense Authorization Act for Fiscal Year 2011, required the Secretary of Defense to ensure that MDA establishes and maintains an acquisition baseline for each program element of the BMDS. This law detailed specific requirements for the contents of the acquisition baseline, including a comprehensive schedule, a detailed technical description, a cost estimate (including life cycle cost estimate), and a test baseline. Annually, MDA is to submit a report on the baselines to the congressional defense committees. After the first such report, each subsequent report shall identify the significant changes or variances, if any, in any baseline from any earlier report.

    Recommendation: To increase transparency in the missile defense program, the Secretary of Defense should develop a firm cost, schedule, and performance baseline for those elements considered far enough along to be in system development and demonstration, and report against that baseline.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: The Missile Defense Agency terminated the Airborne Laser and Kinetic Energy Interceptor programs citing affordability, feasibility, and technical issues as justification.

    Recommendation: To increase transparency in the missile defense program, the Secretary of Defense should conduct an independent evaluation of the Airborne Laser and Kinetic Energy Interceptor after key demonstrations, now scheduled for 2008 and 2009, to inform decisions on the future of the two programs.

    Agency Affected: Department of Defense

 

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