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Missile Defense: Addressing Cost Estimating and Reporting Shortfalls Could Improve Insight into Full Costs of Programs and Flight Tests

GAO-22-104344 Published: Feb 02, 2022. Publicly Released: Feb 02, 2022.
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Fast Facts

Since 2002, the Missile Defense Agency has received over $174 billion to develop systems that detect, track, and defeat enemy missiles.

However, we found that the agency's cost estimates for these systems are incomplete. For instance, they don't include full life-cycle cost estimates for programs or regularly update flight test cost estimates with actual costs. Incomplete cost estimates limit Congress's insight into agency spending and annual budget requests.

We made 6 recommendations, including that the Missile Defense Agency regularly update flight test cost estimates with actual costs.

A Terminal High Altitude Area Defense, or THAAD, weapon system

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Highlights

What GAO Found

The Department of Defense's (DOD) Missile Defense Agency (MDA) is continuing efforts to deliver systems to the warfighter that will protect against enemy missiles. However, shortfalls persist with MDA's program and flight test cost estimates and reporting.

Program cost estimates. MDA continues to omit the military services' operations and sustainment costs from the program life-cycle cost estimates, as depicted below. By omitting these costs, MDA limits decision-makers' insight into the full financial commitments needed for affordability and funding determinations. In the report, GAO outlines actions MDA can take to account for these costs consistent with a 2013 recommendation with which DOD partially concurred.

Flight test cost estimates. Accuracy issues linger with MDA's flight test cost estimates that could skew the agency's annual $1.3 billion funding request, such as not being regularly updated with actual costs. However, MDA is taking steps to improve these cost estimates by using a new cost model, among other things.

Some MDA Program and Flight Test Costs Are Unreported

Some MDA Program and Flight Test Costs Are Unreported

Program cost reporting. MDA continues to adjust program baselines without clear traceability over time. MDA also forgoes recurrent comparisons to the original baseline. Such adjustments and omissions impede decision-makers' awareness of each program's cost performance and total system cost. In the report, GAO notes actions MDA can take to address the traceability of program baselines consistent with a 2013 recommendation with which DOD concurred.

Flight test cost reporting. Congress required MDA to report on flight test costs, but we found the information lacking due to the agency's reporting methodology. MDA only accounted for about $1.3 billion of at least $3.5 billion in funding the agency requested for flight testing between March 2017 and September 2020. Moreover, the reporting requirement ended in December 2021. Without further reporting on complete flight test costs, Congress does not have information needed to facilitate holding the agency accountable for its spending.

Why GAO Did This Study

Since 2002, MDA received over $174 billion to develop a system-of-systems known as the Missile Defense System to detect, track, and defeat enemy missiles. GAO has long reported on MDA's progress in working to improve the system's costs, schedules, and performance.

Congress included provisions in legislation for GAO to assess MDA's progress toward meeting its acquisition goals. This report assesses the extent to which MDA's program and flight test cost (1) estimates align with GAO's leading practices for cost estimating and (2) information is transparent and traceable when reported to Congress. GAO reviewed MDA's cost estimates and baseline reporting for the seven most recently established programs, seven flight test cost estimates prepared under the newly established cost model, and flight test information in mandated reports to Congress. GAO also interviewed officials within DOD, MDA, and the military services.

Recommendations

Congress should consider reviving MDA's semiannual requirement to report on flight test costs, and consider requiring clarification on MDA's flight test reporting methodology. GAO is making six new recommendations to DOD to help improve the completeness and accuracy of MDA's program and flight test cost estimates and reporting. DOD concurred with four recommendations but did not concur with two recommendations. GAO continues to believe the recommendations are valid, as discussed in the report.

Matter for Congressional Consideration

Matter Status Comments
Congress should consider reviving the Director of MDA's semiannual requirement to report on flight test costs. (Matter for Consideration 1)
Closed – Implemented
In the 2022 National Defense Authorization Act, Congress revived the Director of MDA's semiannual requirement to report on flight test costs for an additional five years and provided clarifications of methodological aspects. This extended and clarified reporting should provide Congress more completed insight into MDA's flight test costs.
Congress should consider requiring the Director of MDA to clarify the appropriate flight test plan to be used in the agency's methodology for semiannually reporting on flight test costs, and that both up-to-date planned and actual costs are to be cited regardless of a flight test's execution status. (Matter for Consideration 2)
Closed – Implemented
In the 2022 National Defense Authorization Act, Congress clarified and extended the Director of MDA's semiannual reporting requirement on flight test costs. For the next 5 years of required reporting, Congress specified that both up-to-date planned and actual costs are to be cited regardless of a flight test's execution status (e.g., conducted, delayed, canceled) and pinpointed the test plan that MDA should use when identifying the tests included in each semiannual report. Congress also outlined reporting requirements for ground and cybersecurity tests. This clarified and extended reporting should provide Congress more complete insight into MDA's flight test costs.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense The Director of MDA should enforce existing policy to ensure all programs with a designated lead military service are covered by a dedicated Joint Cost Estimate (JCE) or a system-level JCE that is promptly updated with any new program's costs. (Recommendation 1)
Closed – Implemented
In June 2023, DOD provided MDA's updated policy that specifies that all programs with a designated lead military service will have a dedicated or system-level JCE that will be promptly updated. Also, DOD highlighted that between July 2021 and January 2022, MDA updated existing JCEs for specific programs, to include the Army Navy/Transportable Radar Surveillance and Control - Model 2, Long Range Discrimination Radar, Sea-Based X-Band Radar, and Terminal High Altitude Area Defense. DOD also noted that MDA is working to establish JCEs for the remaining applicable programs by July 2024, to include the Aegis Ashore sites (Poland and Romania), Aegis Weapon System software spirals (4.0, 5.0, and 6.0), Ground-based Midcourse Defense, and Upgraded Early Warning Radar.
Department of Defense The Director of MDA should update existing policy to specify that independent verification by DOD's office of Cost Assessment and Program Evaluation is required to be obtained for each Joint Cost Estimate. (Recommendation 2)
Closed – Implemented
In June 2023, DOD provided MDA's updated policy that specifies for DOD's office of Cost Assessment and Program Evaluation (CAPE) to independently verify each joint cost estimate prepared by MDA and a military service to capture their respective costs for a weapon system. Also, MDA has submitted a request for CAPE to independently verify all existing joint cost estimates and will coordinate similarly for all future joint cost estimates. Therefore, we believe that this action sufficiently addresses our recommendation.
Department of Defense The Director of MDA should explore potential causes for work breakdown structure (WBS) inconsistencies and implement corrective actions to ensure each program has a WBS that is aligned with the contractor WBS, and includes a WBS dictionary. (Recommendation 3)
Closed – Implemented
In June 2023, DOD noted that MDA had revised its Cost Estimating and Analysis Handbook in July 2021 to ensure close alignment between the program and contractor WBS and that each WBS has a WBS dictionary. Additionally, in February 2023 MDA updated its review procedures for cost estimates to include a quality check for alignment between the program WBS and contractor WBS. We believe these actions sufficiently address our recommendation.
Department of Defense The Director of MDA should update its Cost Estimating and Analysis Handbook and other relevant policies and guidance to specify that actual costs for flight tests be regularly incorporated, as they become available, into the agency's flight test cost estimates. (Recommendation 4)
Closed – Implemented
In June 2023, DOD noted that MDA had revised its Cost Estimating and Analysis Handbook in July 2021 to require cost estimates to be regularly updated with actual costs. MDA also provided several cost estimates for flight tests that had been updated with actuals. Therefore, we are closing this recommendation as implemented.
Department of Defense The Director of MDA should update relevant policies and processes to require the inclusion of a comparison against the original program cost baseline in each iteration of the agency's baseline reporting. (Recommendation 5)
Open
In August 2023, DOD notified us of MDA's intent to begin including recurring comparisons to the original baseline for each program in its next baseline report-planned to be issued in early calendar year 2024. Recurring comparisons to the original baseline show decision makers how the expected investment in a program has evolved, thereby enabling them to adjust priorities and funding as needed, or to cancel a program in the event that costs become untenable. We will continue to monitor the agency's progress on including such comparisons, in line with our recommendation and provisions in law.
Department of Defense The Director of MDA should update relevant policies and processes to track each system's costs—the combined total of all programs that comprise the system—in its annual baseline reporting. (Recommendation 6)
Open – Partially Addressed
In August 2023, DOD highlighted that MDA had begun reporting some additional information on costs in its annual baseline reporting, such as the military services' operations and sustainment costs over the future-years defense program-budget year and subsequent 4 years. MDA also expressed its intent to begin reporting total system costs-the combined costs from closed, canceled, and active baselines, and costs shifted to or under the responsibility of a military service or other DOD entity-in its next annual baseline reporting. Reporting total system costs, as we recommended and was subsequently required by law, will ensure that decision makers have insight into the full costs of MDA's systems needed for investment and funding determinations. We will continue to monitor the agency's progress.

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Topics

Actual costsBallistic missile defenseBudget requestsBudget submissionsCost and schedule performanceCost assessmentsCost estimatesDefense budgetsLife cycle costsProgram transparencyWeapon systems