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Before the Committee on Armed Services, U.S. Senate: 

United States Government Accountability Office: 

For Release on Delivery: 
Expected at 9:30 a.m. EST:
Tuesday, March 3, 2009: 

Defense Acquisitions: 

DOD Must Balance Its Needs with Available Resources and Follow an 
Incremental Approach to Acquiring Weapon Systems: 

Statement of Michael J. Sullivan, Director: Acquisition and Sourcing 


GAO Highlights: 

Highlights of GAO-09-431T, a testimony before the Committee on Armed 
Services, U.S. Senate. 

Why GAO Did This Study: 

Since 1990, GAO has consistently designated the Department of Defense’s 
(DOD) management of its major weapon acquisitions as a high-risk area. 
A broad consensus exists that weapon system problems are serious, but 
efforts at reform have had limited impact. Last year, GAO reported that 
DOD’s portfolio of weapon programs experienced cost growth of $295 
billion from first estimates, were delayed by an average of 21 months, 
and delivered fewer quantities and capabilities to the warfighter than 
originally planned. 

At a time when DOD faces increased fiscal pressures from ongoing 
operations in Iraq and Afghanistan, and the federal budget is strained 
by a growing number of priorities, it is critical that the department 
effectively manage its substantial investment in weapon system 
programs. Every dollar wasted or used inefficiently on acquiring weapon 
systems means that less money is available for the government’s other 
important budgetary demands. 

This testimony describes the systemic problems that contribute to the 
cost, schedule, and performance problems in weapon system programs, 
recent actions that DOD has taken to address these problems, proposed 
reform legislation that the committee recently introduced, and 
additional steps needed to improve future performance of acquisition 
programs. The testimony is drawn from GAO’s body of work on DOD’s 
acquisition, requirements, and funding processes. 

What GAO Found: 

For several years, GAO’s work has highlighted a number of strategic- 
and program-level causes for cost, schedule, and performance problems 
in DOD’s weapon system programs. At the strategic level, DOD’s 
processes for identifying warfighter needs, allocating resources, and 
developing and procuring weapon systems, which together define the 
department’s overall weapon system investment strategy, are fragmented. 
As a result, DOD fails to balance the competing needs of the services 
with those of the joint warfighter and commits to more programs than 
resources can support. At the program level, DOD allows programs to 
begin development without a full understanding of requirements and the 
resources needed to execute them. The lack of early systems 
engineering, acceptance of unreliable cost estimates based on overly 
optimistic assumptions, failure to commit full funding, and the 
addition of new requirements well into the acquisition cycle all 
contribute to poor outcomes. Moreover, DOD officials are rarely held 
accountable for poor decisions or poor program outcomes. 

Recognizing the need for more discipline in weapon systems acquisition 
and to implement Congressional direction, DOD recently revised its 
policy and introduced several initiatives. The revised policy, if 
implemented properly, could provide a foundation for developing 
individual acquisition programs with sound, knowledge-based business 
cases. The policy recommends the completion of key systems engineering 
activities, establishes early milestone reviews, requires competitive 
prototyping, and establishes review boards to manage potential 
requirements changes to ongoing programs. 

The committee’s proposed reform legislation should lead to further 
improvements in outcomes. Improved systems engineering, early 
preliminary design reviews, and strengthened independent cost estimates 
and technology readiness assessments should make the critical front end 
of the acquisition process more disciplined. Establishing a termination 
criterion for critical cost breaches could help prevent the acceptance 
of unrealistic cost estimates at program initiation. Having greater 
combatant command involvement in determining requirements and greater 
consultation between the requirements, budget, and acquisition 
processes could help improve the department’s efforts to balance its 
portfolio of weapon system programs. 

Legislation and policy revisions may lead to improvements but cannot 
work effectively without changes to the overall acquisition environment 
and the incentives that drive it. Resisting the urge to achieve 
revolutionary but unachievable capabilities, allowing technologies to 
mature in the technology base before bringing them onto programs, 
ensuring requirements are well-defined and doable, and instituting 
shorter development cycles would all make it easier to estimate costs 
accurately, and then predict funding needs and allocate resources 
effectively. These measures will only succeed if the department 
balances its portfolio and adopts an incremental approach to developing 
and procuring weapon systems. 

View [hyperlink,] or key 
components. For more information, contact Michael J. Sullivan at (202) 
512-4841 or 

[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) management of its major weapon system acquisitions--an area that 
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 without significant results. While the 
technological sophistication of DOD weapon systems is unparalleled, 
major weapon programs continue to cost more, take longer to complete, 
and deliver fewer quantities and capabilities than originally planned. 
Last year we reported that the cumulative cost growth in DOD's 
portfolio of 95 major defense acquisition programs was $295 billion 
from first estimates and the average delay in delivering promised 
capabilities to the warfighter was 21 months. Clearly, some problems 
are to be expected in developing weapon systems given the technical 
risks and complexities involved. However, all too often we have found 
that cost and schedule problems are rooted in poor planning, execution, 
and oversight. 

Investment in weapon systems is now at its highest level in two 
decades, and DOD plans to spend more than $357 billion over the next 5 
years on major defense acquisition programs. Effective management of 
this substantial investment is critical as competition for funding has 
increased dramatically within the department and across the government. 
DOD faces a number of fiscal pressures: the ongoing military campaigns 
in Afghanistan and Iraq, rising personnel costs, and the rebuilding and 
modernization of the force. In addition, the economic and fiscal crises 
now facing the nation have required unprecedented spending by the 
federal government, and budget deficits are projected to remain high 
for many years to come. At a time when the federal budget is strained 
by spending needs for a growing number of national priorities, it is 
imperative that DOD get the best value for every dollar it invests in 
weapon system programs. Every dollar wasted during the development and 
acquisition of weapon systems is money not available for other 
priorities within DOD and elsewhere in the government. 

Today, I will discuss (1) the systemic problems that have contributed 
to cost, schedule, and performance problems in DOD's acquisition of 
major weapon systems; (2) recent actions the department has taken to 
address these problems; (3) our observations on the committee's 
proposed acquisition reform legislation; and (4) steps that Congress 
and the department need to take to improve the future performance of 
acquisition programs. The statement includes findings from our July 
2008 report on a knowledge-based funding approach and February 2009 
report on potential changes to DOD's acquisition management framework. 
[Footnote 1] It also draws from our extensive body of work on DOD's 
acquisition of weapon systems. A list of our key products is provided 
at the end of this statement. 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. 

Fragmented Investment Decision Making, Unexecutable Programs, and Lack 
of Accountability Underlie Poor Acquisition Outcomes: 

Over the past several years our work has highlighted a number of 
underlying systemic causes for cost growth and schedule delays at both 
the strategic and program levels. At the strategic level, DOD's 
processes for identifying warfighter needs, allocating resources, and 
developing and procuring weapon systems--which together define DOD's 
overall weapon system investment strategy--are fragmented. As a result, 
DOD fails to effectively address joint warfighting needs and commits to 
more programs than it has resources for, thus creating unhealthy 
competition for funding. At the 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 overly optimistic assumptions rather than 
on sufficient knowledge. Once a program begins, it too often moves 
forward with inadequate technology, design, testing, and manufacturing 
knowledge, making it impossible to successfully execute the program 
within established cost, schedule, and performance targets. 
Furthermore, DOD officials are rarely held accountable for poor 
decisions or poor program outcomes. 

DOD Lacks an Integrated Approach to Balance Weapon System Investments: 

At the strategic level, DOD largely continues to define warfighting 
needs and make investment decisions on a service-by-service and 
individual platform basis, using fragmented decision-making processes. 
This approach makes it difficult for the department to achieve a 
balanced mix of weapon systems that are affordable and feasible and 
that provide the best military value to the joint warfighter. In 
contrast, we have found that successful commercial enterprises use an 
integrated portfolio management approach to focus early investment 
decisions on products collectively at the enterprise level and ensure 
that there is a sound basis to justify the commitment of resources. 
[Footnote 2] By following a disciplined, integrated process-
-during which the relative pros and cons of competing product proposals 
are assessed based on strategic objectives, customer needs, and 
available resources, and where tough decisions about which investments 
to pursue and not to pursue are made--companies minimize duplication 
between business units, move away from organizational stovepipes, and 
effectively support each new development program they commit to. To be 
effective, integrated portfolio management must have strong, committed 
leadership; empowered portfolio managers; and accountability at all 
levels of the organization. 

DOD determines its capability needs through the Joint Capabilities and 
Integration Development System (JCIDS). While JCIDS provides a 
framework for reviewing and validating needs, it does not adequately 
prioritize those needs from a joint, departmentwide perspective; lacks 
the agility to meet changing warfighter demands; and validates almost 
all of the capability proposals that are submitted. We recently 
reviewed JCIDS documentation related to new capability proposals and 
found that most--almost 70 percent--were sponsored by the military 
services with little involvement from the joint community, including 
the combatant commands, which are responsible for planning and carrying 
out military operations.[Footnote 3] Because DOD also lacks an analytic 
approach to determining the relative importance of the capabilities 
needed for joint warfighting, all proposals appear to be treated as 
equal priorities within the JCIDS process. By continuing to rely on 
capability needs defined primarily by the services, DOD may be losing 
opportunities for improving joint warfighting capabilities and reducing 
the duplication of capabilities in some areas. The JCIDS process has 
also proven to be lengthy and cumbersome--taking on average up to 10 
months to validate a need--thus undermining the department's efforts to 
effectively respond to the needs of the warfighter, especially those 
needs that are near term. 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. Ultimately, the process 
produces more demand for new weapon system programs than available 
resources can support. 

The funding of proposed programs takes place through a separate 
process, the department's Planning, Programming, Budgeting, and 
Execution (PPBE) system, which is not synchronized with JCIDS. While 
JCIDS is a continuous, need-driven process that unfolds in response to 
capability proposals as they are submitted by sponsors, PPBE is a 
calendar-driven process comprising phases occurring over a 2-year 
cycle, which can lead to resource decisions for proposed programs that 
may occur several years later. In addition, because PPBE is structured 
by military service and defense programs and not by the joint 
capability areas being used in JCIDS, it is difficult to link resources 
to capabilities. The PPBE process also largely allocates resources 
based on historical trends rather than on a strategic basis. Service 
shares of the overall budget have remained relatively static for 
decades, even though DOD's strategic environment and warfighting needs 
have changed dramatically in recent years. Because DOD's programming 
and budgeting reviews occur at the back end of the PPBE process--after 
the services have developed their budgets--it is difficult and 
disruptive to make changes, such as terminating programs to pay for 
new, higher-priority programs. 

We recently reviewed the impact of the PPBE process on major defense 
acquisition programs and found that the process does not produce an 
accurate picture of the department's resource needs for weapon system 
programs, in large part because it allows too many programs to go 
forward with unreliable cost estimates and without a commitment to 
fully fund them.[Footnote 4] The cost of many of the programs we 
reviewed exceeded the funding levels planned for and reflected in the 
Future Years Defense Program (FYDP)--the department's long-term 
investment strategy (see figure 1). DOD's failure to balance its needs 
with available resources promotes an unhealthy competition for funding 
that encourages sponsors of weapon system programs to pursue overly 
ambitious capabilities and underestimate costs to appear affordable. 
Rather than limit the number and size of programs or adjust 
requirements, DOD opts to push the real costs of programs to the 
future. With too many programs under way for the available resources 
and high cost growth occurring in many programs, the department must 
make up for funding shortfalls by shifting funds from one program to 
pay for another, reducing system capabilities, cutting procurement 
quantities, 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. 

Figure 1: Funding Shortfalls at the Start of Development for Five Major 
Weapon System Programs[A]: 

[Refer to PDF for image: horizontal bar graph] 

Program: MMA; 
Level of funding in the FYDP in the year the program was initiated: 
Level of funding the program needed to be fully funded in the initial 
FYDP: 35%; 	
Funding required beyond the initial FYDP to complete development: 33%. 

Program: WIN-T; 
Level of funding in the FYDP in the year the program was initiated: 
Level of funding the program needed to be fully funded in the initial 
FYDP: 49%; 	
Funding required beyond the initial FYDP to complete development: 30%. 

Program: FCS; 
Level of funding in the FYDP in the year the program was initiated: 
Level of funding the program needed to be fully funded in the initial 
FYDP: 41%; 	
Funding required beyond the initial FYDP to complete development: 33%. 

Program: JSF; 
Level of funding in the FYDP in the year the program was initiated: 
Level of funding the program needed to be fully funded in the initial 
FYDP: 13%; 	
Funding required beyond the initial FYDP to complete development: 23%. 

Program: Global Hawk; 
Level of funding in the FYDP in the year the program was initiated: 
Level of funding the program needed to be fully funded in the initial 
FYDP: 48%; 	
Funding required beyond the initial FYDP to complete development: 21%. 

Source: DOD (data); GAO (analysis and presentation). 

[A] Multi-Mission Maritime Aircraft (MMA), Warfighter Information 
Network--Tactical (WIN-T), Future Combat Systems (FCS), Joint Strike 
Fighter (JSF), and Global Hawk. 

[End of figure] 

Initiating Programs with Inadequate Knowledge of Requirements and 
Resources Often Results in Poor Outcomes: 

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. Our work in best practices has found 
that an executable business case for a program demonstrated evidence 
that (1) the identified needs are real and necessary and that they can 
best be met with the chosen concept and (2) the chosen concept can be 
developed and produced within existing resources. Over the past several 
years, we have found no evidence of the widespread adoption of such an 
approach for major acquisition programs in the department. Our annual 
assessments of major weapon systems have consistently found that the 
vast majority of programs began system development without mature 
technologies and moved into system demonstration without design 

The chief reason for these problems is the encouragement within the 
acquisition environment of overly ambitious and lengthy product 
developments--sometimes referred to as revolutionary or big bang 
acquisition programs--that embody too many technical unknowns and not 
enough knowledge about the performance and production risks they 
entail. The knowledge gaps are largely the result of a lack of early 
and disciplined systems engineering analysis of a weapon system's 
requirements prior to beginning system development. Systems engineering 
translates customer needs into specific product requirements for which 
requisite technological, software, engineering, and production 
capabilities can be identified through requirements analysis, design, 
and testing. Early systems engineering provides the knowledge a product 
developer needs to identify and resolve performance and resource gaps 
before product development begins by either reducing requirements, 
deferring them to the future, or increasing the estimated cost for the 
weapon system's development. Because the government often does not 
perform the proper up-front requirements analysis to determine whether 
the program will meet its needs, significant contract cost increases 
can and do occur as the scope of the requirements changes or becomes 
better understood by the government and contractor. Not only does DOD 
not conduct disciplined systems engineering prior to the beginning of 
system development, it has allowed new requirements to be added well 
into the acquisition cycle. We have reported on the negative impact 
that poor systems engineering practices have had on several programs, 
such as the Global Hawk Unmanned Aircraft System, F-22A, Expeditionary 
Fighting Vehicle, and Joint Air-to-Surface Standoff Missile.[Footnote 

With high levels of uncertainty about requirements, technologies, and 
design, program cost estimates and related funding needs are often 
understated, effectively setting programs up for cost and schedule 
growth. We recently assessed the service and independent cost estimates 
for 20 major weapon system programs and found that while the 
independent estimates were somewhat higher, both estimates were too low 
in most cases.[Footnote 6] In some of the programs we reviewed, cost 
estimates have been off by billions of dollars. For example, the 
initial service estimate for the development of the Marines' 
Expeditionary Fighting Vehicle was about $1.1 billion. The department's 
Cost Analysis and Improvement Group (CAIG) estimated the development 
cost of the program to be $1.4 billion, but development costs for the 
program are now expected to be close to $3.6 billion. In the case of 
the Future Combat System (FCS), the Army's initial estimate for the 
development cost was about $20 billion, while CAIG's estimate was $27 
billion. The department began the program using the program office's 
estimate of $20 billion, but development costs for the FCS are now 
estimated to be $28 billion and the program is still dealing with 
significant technical risk. Estimates this far off the mark do not 
provide the necessary foundation for sufficient funding commitments and 
realistic long-term planning. 

The programs we reviewed frequently lacked the knowledge needed to 
develop realistic cost estimates. For example, program Cost Analysis 
Requirements Description documents--used to build the program cost 
estimate--often lack sufficient detail about planned program content 
for developing sound cost estimates. Without this knowledge, cost 
estimators must rely heavily on parametric analysis and assumptions 
about system requirements, technologies, design maturity, and the time 
and funding needed. 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. 

Lack of Accountability for Making Weapon System Decisions Hinders 
Achieving Successful Outcomes: 

DOD's requirements, resource allocation, and acquisition processes are 
led by different organizations, thus making it 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. DOD's 2006 Defense Acquisition Performance Assessment study 
observed that these processes are not connected organizationally at any 
level below the Deputy Secretary of Defense and concluded that this 
weak structure induces instability and inhibits accountability. 
Furthermore, a former Under Secretary of Defense for Acquisitions, 
Technology and Logistics has stated that weapon system investment 
decisions are a shared responsibility in the department and, therefore, 
no one individual is accountable for these decisions. Frequent turnover 
in leadership positions in the department exacerbates the problem. The 
average tenure, for example, of the Under Secretary of Defense for 
Acquisition, Technology and Logistics over the past 22 years has been 
only about 20 months.[Footnote 7] 

When DOD's strategic processes fail to balance needs with resources and 
allow unsound, unexecutable programs to move forward, program managers 
cannot be held accountable when the programs they are handed already 
have a low probability of success. Program managers are also not 
empowered to make go or no-go decisions, have little control over 
funding, cannot veto new requirements, and have little authority over 
staffing. At the same time, program managers frequently change during a 
program's development, making it difficult to hold them accountable for 
the business cases that they are entrusted to manage and deliver. 

The government's lack of control over and accountability for decision 
making is further complicated by DOD's growing reliance on technical, 
business, and procurement expertise supplied by contractors. This 
reliance may reach the point where the foundation upon which decisions 
are based may be largely crafted by individuals who are not employed by 
the government, who are not bound by the same rules governing their 
conduct, and who are not required to disclose any financial or other 
personal interests they may have that conflict with the 
responsibilities they have performing contract tasks for DOD. For 
example, while the total planned commitments to major acquisition 
programs have doubled over recent years, the size of the department's 
systems engineering workforce has remained relatively stable, leading 
program offices to rely more on contractors for systems engineering 
support. Further, in systems development, DOD typically uses cost- 
reimbursement contracts in which it generally pays the reasonable, 
allocable, and allowable costs incurred for the contractor's best 
efforts, to the extent provided by the contract. The use of these 
contracts may contribute to the perpetuation of an acquisition 
environment that lacks incentives for contractors to follow best 
practices and keep costs and schedules in check. 

Recent DOD Policy Changes Could Improve Future Performance of Weapon 
System Programs: 

The department understands many of the problems that affect acquisition 
programs and has recently taken steps to remedy them. It has revised 
its acquisition policy and introduced several initiatives based in part 
on direction from Congress and recommendations from GAO that could 
provide a foundation for establishing sound, knowledge-based business 
cases for individual acquisition programs. However, to improve 
outcomes, DOD must ensure that its policy changes are consistently 
implemented and reflected in decisions on individual programs--not only 
new program starts but also ongoing programs as well. In the past, 
inconsistent implementation of existing policy has hindered DOD's 
efforts to execute acquisition programs effectively. Moreover, while 
policy improvements are necessary, they may be insufficient unless the 
broader strategic issues associated with the department's fragmented 
approach to managing its portfolio of weapon system investments are 
also addressed. 

In December 2008, DOD revised its policy governing major defense 
acquisition programs in ways intended to provide key department leaders 
with the knowledge needed to make informed decisions before a program 
starts and to maintain disciplined development once it begins. The 
revised policy recommends the completion of key systems engineering 
activities before the start of development, includes a requirement for 
early prototyping, establishes review boards to identify and mitigate 
technical risks and evaluate the impact of potential requirements 
changes on ongoing programs, and incorporates program manager 
agreements to increase leadership stability and management 
accountability. The policy also establishes early milestone reviews for 
programs going through the pre-systems acquisition phase. In the past, 
DOD's acquisition policy may have encouraged programs to rush into 
systems development without sufficient knowledge, in part, because no 
formal milestone reviews were required before system development. If 
implemented, these policy 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. Some aspects 
of the policy were first pilot-tested on selected programs, such as the 
Joint Light Tactical Vehicle program, and indications are that these 
programs are in the process of acquiring the requisite knowledge before 
the start of systems development. Some key elements of the department's 
new acquisition policy include: 

* a new materiel development decision as a starting point for all 
programs regardless of where they are intended to enter the acquisition 

* a more robust Analysis of Alternatives (AOA) to assess potential 
materiel solutions that address a capability need validated through 

* a cost estimate for the proposed solution identified by the AOA, 

* early program support reviews by systems engineering teams, 

* competitive prototyping of the proposed system or key system elements 
as part of the technology development phase, 

* certifications for entry into the technology development and system 
development phases (as required by congressional legislation), 

* preliminary design review that may be conducted before the start of 
systems development, and: 

* configuration steering boards to review all requirements and 
technical changes that have potential to affect cost and schedule. 

As part of its strategy for enhancing the roles of program managers in 
major weapon system acquisitions, the department has established a 
policy that requires formal agreements among program managers, their 
acquisition executives, and the user community setting forth common 
program goals. These agreements are intended to be binding and to 
detail the progress the program is expected to make during the year and 
the resources the program will be provided to reach these goals. DOD 
also requires program managers to sign tenure agreements so that their 
tenure will correspond to the next major milestone review closest to 4 
years. The department acknowledges that any actions taken to improve 
accountability must be based on a foundation whereby program managers 
can launch and manage programs toward successful performance, rather 
than focusing on maintaining support and funding for individual 
programs. DOD acquisition leaders have also stated that any 
improvements to program managers' performance depend on the 
department's ability to promote requirements and resource stability 
over weapon system investments. 

Over the past few years, DOD has also been testing portfolio management 
approaches in selected capability areas--command and control, net- 
centric operations, battlespace awareness, and logistics--to facilitate 
more strategic choices for resource allocation across programs. The 
department recently formalized the concept of capability portfolio 
management, issuing a directive in 2008 that established policy and 
assigned responsibilities for portfolio management. The directive 
established nine joint capability area portfolios, each to be managed 
by civilian and military co-leads. While the portfolios have no 
independent decision-making authority over requirements determination 
and resource allocation, according to some DOD officials, they provided 
key input and recommendations in this year's budget process. However, 
without portfolios in which managers have authority and control over 
resources, the department is at risk of continuing to develop and 
acquire systems in a stovepiped manner and of not knowing if its 
systems are being developed within available resources. 

Observations on Proposed Acquisition Reform Legislation: 

Overall, we believe that the legislative initiatives being proposed by 
the committee have the potential, if implemented, to lead to 
significant improvements in DOD's management of weapon system programs. 
Several of the initiatives--including the increased emphasis on systems 
engineering and developmental testing, the requirement for earlier 
preliminary design reviews, and the strengthening of independent cost 
estimates and technology readiness assessments--could instill more 
discipline into the front end of the acquisition process when it is 
critical for programs to gain knowledge. Establishing a termination 
criterion for Nunn-McCurdy cost breaches could help prevent the 
acceptance of unrealistic cost estimates as a foundation for starting 
programs.[Footnote 8] Having greater involvement by the combatant 
commands in determining requirements and requiring greater consultation 
between the requirements, budget, and acquisition processes could help 
improve the department's efforts to balance its portfolio of weapon 
system programs. In addition, several of the proposals as currently 
drafted will codify what DOD policy already calls for, but are not 
being implemented consistently in weapon programs. 

Section 101: Systems Engineering Capabilities: 

Requires DOD to (1) assess the extent to which the department has in 
place the systems engineering capabilities needed to ensure that key 
acquisition decisions are supported by a rigorous systems analysis and 
systems engineering process and (2) establish organizations and develop 
skilled employees to fill any gaps in such capabilities. 

The lack of disciplined systems engineering analysis conducted prior to 
starting system development has been a key factor contributing to poor 
acquisition outcomes. Systems engineering activities--requirements 
analysis, design, and testing--are needed to ensure that a weapon 
system program's requirements are achievable and designable given 
available resources, such as technologies. In recent years, DOD has 
taken steps to improve its systems engineering capabilities by 
establishing a Systems and Software Engineering Center of Excellence 
and publishing guidance to assist the acquisition workforce in the 
development of systems engineering plans, education, and training. 
However, as the National Research Council recently reported, DOD's 
systems engineering capabilities have declined over time and shifted 
increasingly to outside contractors.[Footnote 9] A comprehensive 
assessment to determine what systems engineering capabilities are in 
place and what capabilities are needed, as recommended in the proposed 
legislation, is a critical first step in enhancing the function of 
systems engineering in DOD acquisitions. At the same time, it will be 
important for DOD to implement steps to ensure systems engineering is 
applied in the right way and at the right time. 

Section 102: Developmental Testing: 

Requires DOD to reestablish the position of Director of Developmental 
Test and Evaluation and requires the services to assess and address any 
shortcomings in their developmental testing organizations and 

Robust developmental testing efforts are an integral part of the 
systems development process. They help to identify, evaluate, and 
reduce technical risks, and indicate whether the design solution is on 
track to satisfy the desired capabilities. As the Defense Science Board 
reported in 2008, developmental testing in weapon system programs needs 
to be improved.[Footnote 10] We believe that developmental testing 
would be strengthened by a formal elevation of its role in the 
acquisition process and the reestablishment of a Director of 
Developmental Test and Evaluation position. Furthermore, requiring the 
Director to prepare an annual report for Congress summarizing DOD's 
developmental test and evaluation activities would provide more 
accountability. We also agree that the military services should be 
required to assess their respective developmental testing entities and 
address any shortcomings. This action would help ensure that the 
services have the knowledge and capacity for effective developmental 
test efforts. 

Section 103: Technological Maturity Assessments: 

Makes it the responsibility of the Director of Defense Research and 
Engineering (DDR&E) to periodically review and assess the technological 
maturity of critical technologies used in major defense acquisition 

Ensuring that programs have mature technology before starting systems 
development is critical to avoiding cost and schedule problems, yet for 
many years we have reported that a majority of programs go forward with 
immature technologies and experience significant cost growth. 
Legislation enacted by Congress in 2006, requiring DOD to certify that 
the technology in a program has been demonstrated in a relevant 
environment before it receives approval to start system development, 
has begun to help address this problem. Since the legislation was 
enacted, DOD has asked the DDR&E to conduct independent reviews of 
technology readiness assessments for system development milestone 
decisions. Although DDR&E reviews are advisory in nature, we have seen 
reviews that have pushed programs to do more to demonstrate technology 
maturity. The improvements that this proposed legislation, as currently 
written, is intended to bring about may already be occurring in DOD. 
Congress, however, may wish to consider requiring the DDR&E to conduct 
technology readiness reviews not just periodically, but for all major 
defense acquisition programs, and whether or not DDR&E has the capacity 
and resources to effectively conduct technology assessments. 

Section 104: Independent Cost Assessment: 

Establish a Director of Independent Cost Assessment to ensure that cost 
estimates for major defense acquisition programs are fair, reliable, 
and unbiased. 

Within DOD, the Cost Analysis Improvement Group (CAIG) is the 
organization responsible for conducting independent costs estimates for 
major defense acquisition programs. The CAIG reports to the 
department's Director of Program Analysis and Evaluation, but its 
principal customer is the Under Secretary of Defense for Acquisition, 
Technology and Logistics. We believe that establishing an independent 
assessment office that reports directly to the Secretary or Deputy 
Secretary of Defense and to Congress--similar to the Office of the 
Director of Operation Test and Evaluation--would more fully integrate 
cost estimating with the acquisition management framework and provide 
an increased level of accountability. We see no reason why CAIG should 
not form the basis of the proposed organization. Congress may also wish 
to consider appointing the Director for a time-certain term and making 
the Director responsible for prescribing cost-estimating policy and 
guidance and for preparing an annual report summarizing cost estimates 
for major acquisition programs. Ultimately, however, improved cost 
estimating will only occur if there is a better foundation for planning 
and acquiring weapon system programs--one that promotes well-defined 
requirements, is knowledge-based and informed by disciplined systems 
engineering, requires mature technology, and adheres to shorter 
development cycle times. 

Section 105: Role of Combatant Commanders: 

Requires the Joint Requirements Oversight Council (JROC) to seek and 
consider input from the commanders of the combatant commands in 
identifying joint military requirements. 

Requirements determination in DOD, particularly for major weapon system 
programs, continues to be driven largely by the military services. 
Studies by the Defense Science Board, Center for Strategic and 
International Studies, and others have revealed that although the 
combatant commands--which are responsible for planning and executing 
military missions--are the principal joint warfighting customer in DOD, 
they have played a limited role in determining requirements. Currently, 
the JROC is doing more to seek out and consider input from the 
combatant commands through regular trips and meetings to discuss 
capability needs and resourcing issues. However, many of the combatant 
commands do not believe that their needs, which are reflected through 
the Integrated Priority List process, are sufficiently addressed 
through the department's JCIDS process. For the combatant commands to 
meet this proposed legislative mandate and have more influence in 
establishing requirements, DOD should consider providing the combatant 
commands with additional resources to establish robust analytical 
capabilities for identifying and assessing their capability needs. 
Ultimately, the department must better prioritize and balance the needs 
of the military services, combatant commands, and other defense 
components, and be more agile in responding to near-term capability 

Section 201: Trade-offs of Cost, Schedule, and Performance: 

Requires consultation between the budget, requirements, and acquisition 
processes to ensure the consideration of trade-offs between cost, 
schedule, and performance early in the process of developing major 
weapon systems. 

As currently structured, DOD's budget, requirements, and acquisition 
processes do not operate in an integrated manner. The function and 
timing of the processes are not sufficiently synchronized, and the 
decision makers for each process are motivated by different incentives. 
These weaknesses have contributed to the development of a portfolio 
with more programs than available resources can support and programs 
that launch into system development without executable business cases. 
We have recommended that the department establish an enterprisewide 
portfolio management approach to weapon system investment decisions 
that integrates the determination of joint warfighting needs with the 
allocation of resources, and cuts across the services by functional or 
capability area.[Footnote 11] To ensure the success of such an 
approach, we believe that the department should establish a single 
point of accountability with the authority, responsibility, and tools 
to implement portfolio management effectively. 

Section 202: Preliminary Design Review: 

Require the completion of a Preliminary Design Review (PDR) and a 
formal post-PDR assessment before a major defense acquisition program 
receives approval to start system development. 

We have found that a key deliverable in a knowledge-based acquisition 
process is the preliminary design of the proposed solution based on a 
robust systems engineering assessment prior to making a large financial 
commitment to system development. Early systems engineering provides 
the knowledge needed by a developer to identify and resolve gaps, such 
as overly optimistic requirements that cannot be met with current 
resources, before product development begins. Consequently, DOD would 
have more confidence that a particular system could successfully 
proceed into a detailed system development phase and meet stated 
performance requirements within cost, schedule, risk, and other 
relevant constraints. The recently revised DOD acquisition policy 
places an increased emphasis on programs planning for preliminary 
design review prior to the start of system development but does not go 
as far as making it a requirement to do so. We support any effort to 
add controls to the acquisition process to ensure that timely and 
robust systems engineering is conducted before major investment 
decisions, such as the approval to start system development, are made. 

Section 203: Life-Cycle Competition: 

Require DOD to adopt measures recommended by the 2008 Defense Science 
Board Task Force on Defense Industrial Structure for Transformation-- 
such as competitive prototyping, dual sourcing, open architectures, 
periodic competitions for subsystem upgrades, and licensing of 
additional suppliers--to maximize competition throughout the life of a 

We have reported in the past on the problem of diminishing competition 
and the potential benefits of more competition.[Footnote 12] In 
discussing the environment that leads to poor acquisition outcomes, we 
have noted that changes within the defense supplier base have added 
pressure to this environment. We noted that in 2006, a DOD-commissioned 
study found that the number of fully competent prime contractors 
competing for programs had fallen from more than 20 in 1985 to only 6, 
and that this has limited DOD's ability to maximize competition in 
order to reduce costs and encourage innovation. However, avenues exist 
for reducing costs through competition. For example, we reported that 
although continuing an alternate engine program for the Joint Strike 
Fighter would cost significantly more in development costs than a sole- 
source program, it could, in the long run, reduce overall life cycle 
costs and bring other benefits. 

Section 204: Nunn-McCurdy Breaches: 

Requires that a major defense acquisition program that experiences a 
critical Nunn-McCurdy cost breach be terminated unless the Secretary of 
Defense certifies that (1) continuing the program is essential to 
national security and the program can be modified to proceed in a cost- 
effective manner and (2) the program receives a new milestone approval 
prior to the award of any new or modified contract extending the scope 
of the program. 

In order for DOD to improve its program outcomes, realistic cost 
estimates must be required when programs are approved for development 
initiation. DOD often underestimates costs in large part because of a 
lack of knowledge and overly optimistic assumptions about requirements 
and critical technologies. This underestimation is also influenced by 
DOD's continuing failure to balance its needs with available resources, 
which promotes unhealthy competition among programs and encourages 
programs to overpromise on performance capabilities and underestimate 
cost. This false optimism is reinforced by an acquisition environment 
in which there are few ramifications for cost growth and delays. Only 
in very rare instances have programs been terminated for poor 
performance. When DOD consistently allows unsound, unexecutable 
programs to begin with few negative ramifications for poor outcomes, 
accountability suffers. As section 204 proposes, the strengthening of 
the Nunn-McCurdy provision--by including the potential termination of 
programs that experience critical cost growth--could facilitate a 
change in DOD's behavior by preventing the acceptance of unrealistic 
cost estimates as a foundation for program initiation and placing more 
accountability on senior DOD leadership for justifying program 
continuation. Programs may thus be forced to be more candid and up 
front about potential costs, risks, and funding needs, and the 
likelihood of delivering a successful capability to the warfighter at 
the cost and in the time promised may grow. 

Section 205: Organizational Conflicts of Interest: 

Prohibits systems engineering contractors from participating in the 
development or construction of major weapon systems on which they are 
advising DOD, and requires tightened oversight of organizational 
conflicts of interest by contractors in the acquisition of major weapon 

The defense industry has undergone significant consolidation in recent 
years which has resulted in a few large, vertically integrated prime 
contractors. This consolidation creates the potential for 
organizational conflicts of interest where, for example, one business 
unit of a large company may be asked to provide systems engineering 
work on a system being produced by another unit of the same company. As 
the Defense Science Board has recognized, these conflicts of interest 
may lead to impaired objectivity, which may not be mitigated 
effectively through techniques such as erecting a firewall between the 
employees of the two units. While the Federal Acquisition Regulation 
currently covers some cases of potential organizational conflicts of 
interest involving the systems engineering function, there may be a 
need for additional coverage in this area. In general, we would support 
efforts to enhance the oversight of potential organizational conflicts 
of interest, particularly in the current environment of a heavily 
consolidated defense industry. 

Section 206: Acquisition Excellence: 

Establishes an annual awards program to recognize individuals and teams 
that make significant contributions to the improved cost, schedule, and 
performance of defense acquisition programs: 

We support the creation of an annual awards program to recognize 
individuals and teams for improving the cost, schedule, and performance 
of defense acquisition programs. We have reported that meaningful and 
lasting reform will not be achieved until the right incentives are 
established and accountability is bolstered at all levels of the 
acquisition process. The need for incentives emerged as a significant 
issue in our recent discussions with acquisition experts examining 
potential changes to the acquisition processes enumerated in last 
year's defense authorization act. The discussions revealed that those 
changes may not achieve the desired improvement in acquisition outcomes 
unless they are accompanied by changes in the overall acquisition 
environment and culture, and the incentives they provide for success. 

Concluding Observations on What Remains to Be Done: 

A broad consensus exists that weapon system problems are serious and 
that their resolution is overdue. With the federal budget under 
increasing strain from the nation's economic crisis, the time for 
change is now. DOD is off to a good start with the recent revisions to 
its acquisition policy, which, if implemented properly, should provide 
a foundation for establishing sound, knowledge-based business cases 
before launching into development and for maintaining discipline after 
initiation. The new policy will not work effectively, however, without 
changes to the overall acquisition environment. Resisting the urge to 
achieve the revolutionary but unachievable capability, allowing 
technologies to mature in the science and technology base before 
bringing them onto programs, ensuring that requirements are well- 
defined and doable, and instituting shorter development cycles would 
all make it easier to estimate costs accurately, and then predict 
funding needs and allocate resources effectively. But these measures 
will succeed only if the department uses an incremental approach. 
Constraining development cycle times to 5 or 6 years will force more 
manageable commitments, make costs and schedules more predictable, and 
facilitate the delivery of capabilities in a timely manner. 

Acquisition problems are also likely to continue until DOD's approach 
to managing its weapon system portfolio (1) prioritizes needs with 
available resources, thus eliminating unhealthy competition for funding 
and the incentives for making programs look affordable when they are 
not; (2) facilitates better decisions about which programs to pursue 
and which not to pursue given existing and expected funding; and (3) 
balances the near-term needs of the joint warfighter with the long-term 
need to modernize the force. Achieving this affordable portfolio will 
require strong leadership and accountability. Establishing a single 
point of accountability could help the department align competing needs 
with available resources. 

The department has tough decisions to make about its weapon systems and 
portfolio, and stakeholders, including military services, industry, and 
Congress, have to play a constructive role in the process toward 
change. Reform will not be achieved until DOD changes its acquisition 
environment and the incentives that drive the behavior of its decision 
makers, the military services, program managers, and the defense 

Mr. Chairman, this concludes my prepared statement. I would be happy to 
answer any questions you may have at this time. 

Contacts and Acknowledgements: 

For further information about this statement, please contact Michael J. 
Sullivan (202) 512-4841 or Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this statement. Individuals who made key contributions 
to this statement include John Oppenheim, Charlie Shivers, Dayna 
Foster, Matt Lea, Susan Neill, Ron Schwenn, and Bruce Thomas. 

[End of section] 

Related GAO Products: 

Defense Acquisitions: Perspectives on Potential Changes to DOD's 
Acquisition Management Framework. [hyperlink,]. Washington, D.C.: February 
27, 2009. 

Defense Management: Actions Needed to Overcome Long-standing Challenges 
with Weapon Systems Acquisition and Service Contract Management. 
[hyperlink,]. Washington, D.C.: 
February 11, 2009. 

Defense Acquisitions: Fundamental Changes Are Needed to Improve Weapon 
Program Outcomes. [hyperlink,
1159T]. Washington, D.C.: September 25, 2008. 

Defense Acquisitions: DOD's Requirements Determination Process Has Not 
Been Effective in Prioritizing Joint Capabilities. [hyperlink,]. Washington, D.C.: September 
25, 2008. 

Defense Acquisitions: A Knowledge-Based Funding Approach Could Improve 
Major Weapon System Program Outcomes. [hyperlink,]. Washington, D.C.: July 2, 

Defense Acquisitions: Better Weapon Program Outcomes Require 
Discipline, Accountability, and Fundamental Changes in the Acquisition 
Environment. [hyperlink,]. 
Washington, D.C.: June 3, 2008. 

Defense Acquisitions: Assessments of Selected Weapon Programs. 
[hyperlink,]. Washington, 
D.C.: March 31, 2008. 

Best Practices: Increased Focus on Requirements and Oversight Needed to 
Improve DOD's Acquisition Environment and Weapon System Quality. 
[hyperlink,]. Washington, D.C.: 
February 1, 2008. 

Cost Assessment Guide: Best Practices for Estimating and Managing 
Program Costs. [hyperlink,]. 
Washington, D.C.: July 2007. 

Defense Acquisitions: Assessments of Selected Weapon Programs. 
[hyperlink,]. Washington, 
D.C.: March 30, 2007. 

Best Practices: An Integrated Portfolio Management Approach to Weapon 
System Investments Could Improve DOD's Acquisition Outcomes. 
[hyperlink,]. Washington, D.C.: 
March 30, 2007. 

Defense Acquisitions: Major Weapon Systems Continue to Experience Cost 
and Schedule Problems under DOD's Revised Policy. [hyperlink,]. Washington, D.C.: April 13, 

DOD Acquisition Outcomes: A Case for Change. [hyperlink,]. Washington, D.C.: November 
15, 2005. 

Best Practices: Better Support of Weapon System Program Managers Needed 
to Improve Outcomes. [hyperlink,]. Washington, D.C.: November 1, 

Defense Acquisitions: Stronger Management Practices Are Needed to 
Improve DOD's Software-Intensive Weapon Acquisitions. [hyperlink,]. Washington, D.C.: March 1, 

Best Practices: Setting Requirements Differently Could Reduce Weapon 
Systems' Total Ownership Costs. [hyperlink,]. Washington, D.C.: February 11, 

Defense Acquisitions: Factors Affecting Outcomes of Advanced Concept 
Technology Demonstration. [hyperlink,]. Washington, D.C.: December 2, 

Best Practices: Capturing Design and Manufacturing Knowledge Early 
Improves Acquisition Outcomes. [hyperlink,]. Washington, D.C.: July 15, 

Defense Acquisitions: DOD Faces Challenges in Implementing Best 
Practices. [hyperlink,]. 
Washington, D.C.: February 27, 2002. 

[End of section] 


[1] GAO, Defense Acquisitions: A Knowledge-Based Funding Approach Could 
Improve Major Weapon System Program Outcomes, [hyperlink,] (Washington, D.C.: July 2, 
2008), and Defense Acquisitions: Perspectives on Potential Changes to 
DOD's Acquisition Management Framework, [hyperlink,] (Washington, D.C.: Feb. 27, 

[2] GAO, Best Practices: An Integrated Portfolio Management Approach to 
Weapon System Investments Could Improve DOD's Acquisition Outcomes, 
[hyperlink,] (Washington, D.C.: 
Mar. 30, 2007). 

[3] GAO, Defense Acquisitions: DOD's Requirements Determination Process 
Has Not Been Effective in Prioritizing Joint Capabilities, [hyperlink,] (Washington, D.C.: Sept. 25, 

[4] [hyperlink,]. 

[5] GAO, Best Practices: Increased Focus on Requirements and Oversight 
Needed to Improve DOD's Acquisition Environment and Weapon System 
Quality, [hyperlink,] 
(Washington, D.C.: Feb. 1, 2008). 

[6] [hyperlink,]. 

[7] 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 2000. 
Since 1986, there have been 11 under secretaries. 

[8] 10 U.S.C. § 2433 (a) (5) requires the Secretary of Defense to 
report to Congress when a program's acquisition unit cost increases by 
at least 25 percent over the current baseline estimate or increases by 
at least 50 percent over the original baseline estimate. 

[9] National Research Council, Pre-Milestone A and Early-Phase Systems 
Engineering: A Retrospective Review and Benefits for Future Air Force 
Systems Acquisition (Washington, D.C.: February 2008). 

[10] Defense Science Board, Report on Developmental Test & Evaluation 
(Washington, D.C.: May 2008). 

[11] [hyperlink,]. 

[12] GAO, Defense Acquisitions: Better Weapon Program Outcomes Require 
Discipline, Accountability, and Fundamental Changes in the Acquisition 
Environment, [hyperlink,] 
(Washington, D.C.: June 3, 2008). 

[End of section] 

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