U.S.-Israel Arrow/Aces Program:

Cost, Technical, Proliferation, and Management Concerns

NSIAD-93-254: Published: Aug 23, 1993. Publicly Released: Aug 23, 1993.

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Pursuant to a congressional request, GAO reviewed the U.S.-Israel Arrow/Arrow Continuation Experiments (ACES) missile program, focusing on: (1) whether Israel's ballistic missile defense needs will be met considering the program's cost, schedule, and technical risks; (2) whether Israel's unauthorized sales of U.S.-origin defense articles and technologies and involvement in missile proliferation activities affected the decision to extend the Arrow program into the ACES phase; and (3) U.S. efforts to monitor the use of program technologies and funds.

GAO found that: (1) Israel's estimate for additional funds needed to develop, produce, deploy, and support a completed Arrow missile defense system could be understated due to schedule and technical risks; (2) the United States could not determine whether the ACES program would be the most effective method to meet Israel's missile defense needs because the Department of Defense (DOD) has not applied acquisition policies and procedures, independently assessed ACES program baseline data, or analyzed cost-effective alternatives that could meet missile defense needs; (3) the United States could be responsible for providing the majority of the funds needed to complete the development and implementation of the Arrow program due to increasing demands from the Israeli government; (4) DOD and Department of State classified information regarding Israel's unauthorized sales of U.S. defense articles and technologies and missile proliferation activities affected the ACES decision; (5) U.S. agencies have not verified Israel's compliance with Arrow licensing agreements; and (6) the United States does not have adequate controls to effectively monitor potential technology transfer or funds mismanagement.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Ballistic Missile Defense Organization (BMDO) has completed an investigation of Israeli background data claims and signed an agreement with the Israeli government cataloging the investigation's results.

    Recommendation: To ensure that U.S. national interests and technologies are protected and proliferation concerns are addressed, the Secretary of Defense should work with the Secretaries of State and Commerce and other relevant agencies to continue investigating Israel's claims on background data used in the Arrow and ACES contracts. This effort should be completed before each contract is closed out and should include investigation of related U.S.-Israel manufacturing and technical assistance agreements approved before the commencement of the Arrow program. Verified claims should be incorporated into the respective contracts and provided to each of the participating agencies.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: DOD has no plans to have DCAA conduct complete audits of the Arrow and ACES contracts.

    Recommendation: The Secretary of Defense should ensure that no additional Arrow/ACES or related contracts are signed until the Defense Contract Audit Agency conducts complete audits of both contracts as authorized by the amended or restructured contracts.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: DOD did not agree that the Arrow and ACES contracts should be amended to provide additional audit authority to the Defense Contract Audit Agency (DCAA) to conduct complete audits of both contracts. DOD believed that DCAA's existing audit authority was adequate.

    Recommendation: The Secretary of Defense should ensure that no additional Arrow/ACES or related contracts are signed until the Arrow and ACES contracts are amended or restructured as necessary to authorize the Defense Contract Audit Agency to conduct complete audits of both contracts to ensure that incurred costs are commensurate with technical performance and that charges have been reasonable. Such audits could also: (1) encourage accountability; and (2) as a side benefit, provide assurance that funds are not used to support other Israeli programs. The amendments to the contracts should cover the full period of both contracts. In the case of ACES, the contract should be amended to provide appropriate incentives for efficient and effective contractor performance.

    Agency Affected: Department of Defense

  4. Status: Closed - Not Implemented

    Comments: DCMC's role in the program remains unchanged. DOD classified its official written response to this recommendation.

    Recommendation: The Secretary of Defense should ensure that no additional Arrow/ACES or related contracts are signed until DCMC begins to administer and monitor the contracts by performing the functions contained in the Federal Acquisition Regulation 42.302, particularly: (1) engineering surveillance to assess compliance with contractual terms for schedule, cost, and technical performance in the areas of design, development, and production; and (2) production support, surveillance, and status reporting, including timely reporting of potential and actual slippages in contract delivery schedules.

    Agency Affected: Department of Defense

  5. Status: Closed - Not Implemented

    Comments: DOD classified its written response to this recommendation.

    Recommendation: The Secretary of Defense should ensure that no additional Arrow/ACES or related contracts are signed until it initiates a process for the establishment of a central repository for recording and maintaining information on all U.S. Arrow/ACES-related licenses applications.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: According to DOD, no new Arrow/ACES or related contracts have been awarded. The Department of State performed end-use checks on selected U.S. Arrow/ACES hardware and technologies supplied to Israel, including focal plane arrays.

    Recommendation: The Secretary of Defense should ensure that no additional Arrow/ACES or related contracts are signed until the State Department's Bureau of Politico-Military Affairs performs end-use checks on selected U.S.-supplied Arrow/ACES hardware and technologies, to include focal plane arrays.

    Agency Affected: Department of Defense

  7. Status: Closed - Implemented

    Comments: According to DOD officials, no new Arrow/ACES contracts have been awarded. However, DOD signed a follow-on contract in March 1995 for the Israeli theater missile defense test bed program. DOD classified its official, written response to this recommendation. A DCAA official stated that DCAA is working to obtain improved access to the program. The State Department stated that it was supportive of the recommendation but did not indicate if any actions had been taken to improve U.S. access. An ACDA official said ACDA would not participate in any inter-agency discussions concerning access to the Arrow/ACES program until it was called upon to comment on the Memorandum of Understanding for the follow-on Arrow Deployability Initiative. DCMC officials said their agency has not been involved in access discussions.

    Recommendation: The Secretary of Defense should ensure that no additional Arrow/ACES or related contracts are signed until adequate access, as determined by DOD, the Defense Contract Audit Agency, the Defense Contract Management Command (DCMC), the Arms Control and Disarmament Agency, and the State Department's Bureau of Politico-Military Affairs, is granted by Israel to U.S. officials for the thorough monitoring of U.S. Arrow/ACES defense articles, technologies, and funds.

    Agency Affected: Department of Defense

  8. Status: Closed - Implemented

    Comments: In response to section 239 of the fiscal year 1994 National Defense Authorization Act, the Ballistic Missile Defense Organization (BMDO) submitted an April 1994 report to Congress on the Arrow Tactical Anti-Missile system. The report provided information on the Arrow system's schedule, cost, and technical performance; analyses of the cost-effectiveness of U.S. alternatives to the Arrow for meeting Israel's ballistic missile defense needs; and the technology transfer and missile proliferation implications of providing alternative U.S. systems to Israel.

    Recommendation: Before additional U.S. funds are committed for the development, production, or deployment of an Arrow anti-tactical ballistic missile system for Israel, the Secretary of Defense should develop accurate baselines for the complete Arrow anti-tactical ballistic missile system's cost, schedule, and technical performance. The Secretary should use these baselines to thoroughly assess the cost-effectiveness of U.S. alternatives to Arrow for meeting Israel's ballistic missile defense needs. The analysis should fully consider the technology transfer and missile proliferation implications of providing alternative U.S. systems to Israel and potential Israeli industrial participation. The Secretary should report the results of these studies to the House and Senate Committees on Armed Services and Appropriations as expeditiously as possible.

    Agency Affected: Department of Defense

  9. Status: Closed - Implemented

    Comments: The Department of State performed end-use checks on selected U.S.-supplied Arrow/ACES hardware and technologies supplied to Israel, including focal plane arrays.

    Recommendation: To improve oversight of U.S. Arrow and ACES export licenses and items, the Secretary of State should direct the Bureau of Politico-Military Affairs to perform end-use checks on selected U.S.-supplied Arrow/ACES hardware and technologies, to include focal plane arrays.

    Agency Affected: Department of State

 

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