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entitled 'Defense Acquisition: Advanced SEAL Deliver System Program 
Needs Increased Oversight' which was released on March 31, 2003.



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Report to the Committee on Armed Services, U.S. Senate:



United States General Accounting Office:



GAO:



March 2003:



Defense Acquisitions:



Advanced SEAL Delivery System Program Needs Increased Oversight:



Defense Acquisitions:



GAO-03-442:



GAO Highlights:



Highlights of GAO-03-442, a report to the Committee on Armed Services, 

U.S. Senate



Why GAO Did This Study:



The Advanced SEAL Delivery System (ASDS) is a mini-submarine that is 

one of the U.S. Special Operations Commands largest investments. The 

program is approaching the end of a difficult development and must 

undergo key testing before decisions are made to proceed beyond the 

first boat. Over the past several years, the Congress has raised 

concerns about technical difficulties, schedule delays, cost growth, 

and management oversight. The Senate Armed Services Committee requested 

that GAO review the status and problems facing the program. 

Specifically, this report examines the ASDS programs (1) progress 

towards meeting requirements and technical challenges, (2) ability to 

meet schedule and cost projections, and (3) underlying factors 

contributing to program problems.



What GAO Found:



While progress has been made in addressing technical difficulties with 

the first boat, some problems must yet be solved and other capabilities 

demonstrated before the ASDS can meet all of its key performance 

requirements. For example, the Navy has not yet been able to develop 

an adequate propulsion battery. In addition, the ASDS final design 

will remain uncertain until technical problems are solved and testing 

is completed. The degree of uncertainty will be important as the U.S. 

Special Operations Command could decide that the ASDS is ready to 

conduct missions and commit to buying more boats after the operational 

evaluation scheduled for April 2003.



The ability of the ASDS to meet cost and schedule projections is 

problematic. The program has experienced major schedule delays and cost 

increases. The program is 6 years behind its original schedule, and, by 

GAOs estimates, costs have more than tripled. Cost and schedule 

estimates were being formally revised at the time of this report, but 

even their accuracy will be uncertain because of unresolved, known 

problems; the potential for discovering new problems in upcoming 

testing; and the difficulty of estimating costs for future boats based 

on the first boats aging data.



Several underlying factors have contributed to the ASDS difficult 

development. In retrospect, the capabilities required of the boat 

outstripped the developers resources in terms of technical knowledge, 

time, and money. Key problems, such as the battery and the propeller, 

were discovered latein testing on the first boatrather than in 

component or subsystem level testing. Finally, the program suffered 

from insufficient management attention on the part of both the 

government and the contractor, which led to missed opportunities for 

righting the program as it proceeded. Moreover, the management 

attention that was exercised has been hampered by outdated information.



What GAO Recommends:



GAO is recommending that, before the operational evaluation is held, 

DOD ensure that the overall ASDS test and evaluation master plan and 

the specific test plan for the operational evaluation are both 

sufficient in scope and approved. GAO is also recommending that DOD 

elevate the level of management attention and hold a formal milestone 

review before buying additional boats. DOD concurred with most of GAOs 

recommendations.



www.gao.gov/cgi-bin/getrpt?GAO-03-442.



To view the full report, including the scope and methodology, click on 

the link above. For more information, contact Paul Francis at (202) 

512-4841 or francisp@gao.gov.



[End of section]



Contents:



Letter:



Results in Brief:



Background:



Progress Made in Meeting System Requirements and Resolving Technical 

Problems, but Difficulties Remain:



Difficulties Remain in Making Credible Schedule and Cost Projections:



Several Underlying Factors Contributed to the ASDSs Difficult 

Development:



Conclusions:



Recommendations for Executive Action:



Agency Comments and Our Evaluation:



Scope and Methodology:



Appendix I: Comments from the Department of Defense:



Tables:



Table 1: Status of the ASDS Key Performance Parameters, Boat 1:



Table 2: ASDS Program Costs for Six Boats and Two Facilities:



Figure:



Figure 1: Estimated Delivery of the First Boat:



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United States General Accounting Office:



Washington, DC 20548:



March 31, 2003:



The Honorable John Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate:



Key decisions lie ahead for the Advanced SEAL Delivery System (ASDS), a 

mini-submarine that is one of the U.S. Special Operations Commands 

largest investments. The Department of Defense (DOD) is increasingly 

relying on special operations forces to accomplish its missions, 

especially in the current national security environment of the fight 

against terrorism. The ASDS, with a potential cost on the order of $2 

billion, is a major development effort to enhance the capabilities of 

the U.S. Special Operations Commands naval special forces. The mini-

submarine is designed for clandestine delivery and extraction of Navy 

SEAL teams and equipment performing operational missions in high-threat 

environments. The program, which is being managed by the Navy, is 

approaching the end of a difficult development and the first boat must 

undergo key testing before a decision is made to proceed with 

additional boats.



During the past several years, the Congress has raised concerns about 

the technical difficulties, schedule delays, cost growth, and 

management oversight of the ASDS program. Senate Report 107-62, which 

accompanied the National Defense Authorization Act for Fiscal Year 

2002, called for us to review the status and problems facing the 

program. We briefed the defense committees in April and May 2002 on the 

results of our review. At that time, you asked us to continue reviewing 

the programs progress. Accordingly, this report examines the ASDS 

programs (1) progress towards meeting requirements and technical 

challenges, (2) ability to meet schedule and cost projections, and (3) 

underlying factors that have contributed to program problems.



Results in Brief:



While progress has been made in addressing technical difficulties with 

the first boat, some problems must yet be solved and other capabilities 

demonstrated before the ASDS can meet all of its key performance 

requirements. For example, the Navy has not yet been able to develop an 

adequate propulsion battery and the first boat is not quiet enough to 

meet acoustic stealth requirements. In addition to solving known 

technical problems, the potential for discovering new ones is 

significant because the first boat is slated to begin operational 

evaluation in April 2003. The ASDSs final design will remain uncertain 

until technical problems are solved and testing is completed. The 

degree of uncertainty will be important because the U.S. Special 

Operations Command could, following the operational evaluation, decide 

that the ASDS is ready to conduct missions and commit to buying more 

boats.



The ability of the ASDS to meet schedule and cost projections is 

problematic. The program has experienced major schedule and cost 

increases since it was started, and these increases have continued 

since our April 2002 briefing. The program is 6 years behind its 

original schedule, and, by our estimates, costs have more than tripled. 

Current schedule and cost estimates have not been updated since 1999. 

These estimates were being formally revised at the time of this report, 

but they will be subject to change because of unresolved, known 

problems; the potential for discovering new problems in upcoming 

testing; and the difficulty of estimating costs for future boats based 

on the first boats aging data.



Several underlying factors have contributed to the ASDSs difficult 

development. In retrospect, the capabilities required of the boat 

outstripped the developers resources in terms of technical knowledge, 

time, and money. Key technical problems, such as the battery and the 

propeller, were discovered late--during testing on the first boat--

rather than in component or subsystem level testing. Finally, the 

program suffered from insufficient management attention on the part of 

both the government and the contractor, which led to missed 

opportunities for righting the program as it proceeded. Moreover, the 

management attention that was given has been hampered by outdated 

information.



We are making recommendations aimed at improving the quality of 

information available and enhancing DODs oversight of the ASDS 

program. In its comments on a draft of this report, DOD concurred with 

two of our recommendations and partially concurred with our 

recommendation to elevate the level of management attention. 

Specifically, DOD concurred with all but a part of one of the 

particulars of this recommendation concerning the development of an 

independent cost estimate.



Background:



The ASDS is a battery-powered mini-submarine about 65 feet long and 8 

feet in diameter with a dry interior. It is operated by a two-person 

crew and can carry equipment and SEAL personnel. The vehicle has a 

hyperbaric recompression chamber with a lower hatch that can be opened 

and closed underwater to allow divers to exit and reenter the vehicle 

(referred to as lock in/lock out) at various depths.[Footnote 1] The 

ASDS is expected to have increased range, speed, and capacity over the 

current underwater SEAL delivery vehicle, which is an open, wet 

submersible that transports SEALs wearing scuba gear and thus exposes 

them to ocean water temperatures. The ASDSs main advantage over 

existing SEAL delivery systems is its ability to transport forces in a 

dry environment, which reduces the SEALs exposure to cold-water as 

well as their physical and mental fatigue. Use of the ASDS is not 

limited to delivery of Navy SEALs. It can be used for intelligence 

collection, surveillance and reconnaissance, combat search and rescue, 

sabotage and diversionary attacks, forward observation for fire 

direction, underwater ship attack, and offensive mine operations.



Several organizations are involved with the ASDS program. The U.S. 

Special Operations Command is funding the program, and its Naval 

Special Warfare Command set the requirements and will be the user of 

the system. The Assistant Secretary of the Navy for Research, 

Development, and Acquisition is responsible for approving each phase of 

the ASDS acquisition process. The Naval Sea Systems Command is the 

acquisition program manager and is responsible for overseeing the prime 

contractor, Northrop Grumman.



The programs last official baseline--from 1999--calls for building six 

boats and two facilities. The plans also include the ability to 

transport the ASDS boat using a variety of methods, including undersea 

(piggy-back on a 688-class attack submarine), by air (aboard C-5 

aircraft), and by road (on a large flat-bed trailer). The Naval Sea 

Systems Command awarded a contract to Northrop Grumman for detailed 

design and manufacturing development in September 1994.[Footnote 2] In 

August 2001, the Navy program office took what it calls conditional 

preliminary acceptance of the first boat from Northrop Grumman under an 

agreement that all contractual requirements needed for final government 

acceptance would be completed within 1 year. However, Navy officials 

told us that the contractor has not satisfactorily completed the 

contract requirements within this period, and the first boat is still 

not ready for final government acceptance.



The first ASDS boat is scheduled to undergo an operational evaluation 

in April 2003. An operational evaluation is a field test conducted by 

the war fighter under realistic conditions for the purpose of 

determining the effectiveness and suitability of the boat for use in 

combat. The operational evaluation will be a major factor in deciding 

whether or not to declare an initial operating capability--the point at 

which the first boat can be used to conduct missions.



Progress Made in Meeting System Requirements and Resolving Technical 

Problems, but Difficulties Remain:



During the past year, the ASDS program has made considerable progress 

in addressing technical difficulties. However, the first boat has not 

yet demonstrated that it can meet all key requirements. Several 

technical challenges still need to be addressed, and further technical 

and operational testing is required before all key performance 

requirements can be demonstrated and the first boat can be considered 

fully operational.



The ASDS Has Not Met All Requirements:



The first boat produced has not demonstrated the ability to meet all of 

the programs key performance parameters. Key performance parameters 

represent those critical performance parameters so significant that a 

failure to meet a minimum value of performance can call into question a 

systems ability to perform missions. Each key performance parameter is 

made up of individual subordinate requirements that must be met to 

demonstrate the parameter.[Footnote 3] At the time of our review, Naval 

Sea Systems Command officials judged that 11 of the first boats 16 key 

performance parameters had been met, 4 were still in process, and 1 

required action. However, the status of the subordinate requirements, 

as shown in table 1, makes the assessment of the key performance 

parameters less clear.



Table 1: Status of the ASDS Key Performance Parameters, Boat 1:



Key performance parameter number: 1; Key performance parameter: Maximum 

combat range; Status: Demonstrated, all subordinate requirements met: 

[Empty]; Status: Demonstrated, some subordinate requirements 

not met: Yes; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 2; Key performance parameter: Maximum 

cruise speed; Status: Demonstrated, all subordinate requirements met: 

[Empty]; Status: Demonstrated, some subordinate requirements 

not met: Yes; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 3; Key performance parameter: 

Transport depth (submarine host); Status: Demonstrated, all subordinate 

requirements met: [Empty]; Status: Demonstrated, some subordinate 

requirements 

not met: Yes; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 4; Key performance parameter: 

Transport speed (submarine host); Status: Demonstrated, all subordinate 

requirements met: [Empty]; Status: Demonstrated, some subordinate 

requirements 

not met: Yes; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 5; Key performance parameter: 

Concurrent lock in/lock out; Status: Demonstrated, all subordinate 

requirements met: [Empty]; Status: Demonstrated, some subordinate 

requirements 

not met: Yes; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 6; Key performance parameter: 

Operating temperature; Status: Demonstrated, all subordinate 

requirements met: [Empty]; Status: Demonstrated, some subordinate 

requirements 

not met: [Empty]; Status: In process: Yes; Status: Action required: 

[Empty].



Key performance parameter number: 7; Key performance parameter: Storage 

temperature; Status: Demonstrated, all subordinate requirements met: 

Yes; Status: Demonstrated, some subordinate requirements 

not met: [Empty]; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 8; Key performance parameter: 

Survivability; Status: Demonstrated, all subordinate requirements met: 

[Empty]; Status: Demonstrated, some subordinate requirements 

not met: [Empty]; Status: In process: Yes; Status: Action required: 

[Empty].



Key performance parameter number: 9; Key performance parameter: 

Vibration; Status: Demonstrated, all subordinate requirements met: 

[Empty]; Status: Demonstrated, some subordinate requirements 

not met: Yes; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 10; Key performance parameter: Crew; 

Status: Demonstrated, all subordinate requirements met: Yes; Status: 

Demonstrated, some subordinate requirements 

not met: [Empty]; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 11; Key performance parameter: 

Passengers; Status: Demonstrated, all subordinate requirements met: 
Yes; 

Status: Demonstrated, some subordinate requirements 

not met: [Empty]; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 12; Key performance parameter: 

Endurance; Status: Demonstrated, all subordinate requirements met: 

[Empty]; Status: Demonstrated, some subordinate requirements 

not met: Yes; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 13; Key performance parameter: 

External payload; Status: Demonstrated, all subordinate requirements 

met: [Empty]; Status: Demonstrated, some subordinate requirements 

not met: [Empty]; Status: In process: Yes; Status: Action required: 

[Empty].



Key performance parameter number: 14; Key performance parameter: 

Transportability; Status: Demonstrated, all subordinate requirements 

met: [Empty]; Status: Demonstrated, some subordinate requirements 

not met: Yes; Status: In process: [Empty]; Status: Action required: 

[Empty].



Key performance parameter number: 15; Key performance parameter: 

Vehicle signatures; Status: Demonstrated, all subordinate requirements 

met: [Empty]; Status: Demonstrated, some subordinate requirements 

not met: [Empty]; Status: In process: [Empty]; Status: Action required: 

Yes.



Key performance parameter number: 16; Key performance parameter: 

Interoperability; Status: Demonstrated, all subordinate requirements 

met: [Empty]; Status: Demonstrated, some subordinate requirements 

not met: [Empty]; Status: In process: Yes; Status: Action required: 

[Empty].



Key performance parameter number: Total; Key performance parameter: 

[Empty]; Status: Demonstrated, all subordinate requirements met: 3; 

Status: Demonstrated, some subordinate requirements 

not met: 8; Status: In process: 4; Status: Action required: 1.



Source: U.S. Navy.



Note: Naval Sea Systems Command, ASDS Top Level Requirement 

Verification Matrix, January 2003.



[End of table]



As indicated in table 1, all subordinate requirements for the first 

boat have not been met for eight key performance parameters that were 

judged as demonstrated. For example, the third parameter--transport 

depth (attached to the submarine host)--has three subordinate 

requirements. One has been demonstrated, but two are still in process. 

Similarly, the fifth parameter--concurrent lock in/lock out--has 12 

subordinate requirements. Four have been demonstrated, but five are 

still in process and three require action.



Some requirements have also been delayed, reduced, and eliminated by 

the U.S. Special Operations Command. For example, the acoustic, or 

noise level, requirement, which is part of the vehicle signatures key 

performance parameter, has been deferred until the second boat. The 

transportability parameter--although now considered demonstrated by 

the Naval Sea Systems Command--was also reduced. It no longer includes 

transport by C-17 aircraft, amphibious ships, and the SSN-21 submarine. 

Also, a degaussing system needed to lower the vehicles magnetic 

signature has been delayed and designated as a preplanned product 

improvement.[Footnote 4] Although a degaussing system was originally 

included in the ASDS design, the program used the funds for this system 

to cover other program expenses. If the vehicle has a large magnetic 

signature, it will have increased vulnerability to mines. Nonetheless, 

even with these reduced requirements, Navy and U.S. Special Operations 

Command officials believe that the ASDS is still a cost-effective 

capability that provides an improvement over existing vehicles.



Problems in Critical Components Remain Unsolved:



In the past year, the ASDS program has made progress in resolving 

technical issues. Achievements include a successful new anchor design, 

improved battery design, sonar systems upgrades, improvements in 

configuration management control, renewed focus on ASDS logistics 

needs, completion of safety-critical software testing, and substantial 

progress in developing engineering drawings. For example, the original 

anchors have been redesigned and tested successfully to hold the ASDS 

level enough to provide a stable dive platform during ocean swells. The 

program has also succeeded in decreasing the operating temperatures of 

the silver-zinc batteries, which has reduced the frequency of 

electrical shorts and improved the batteries performance.



Nonetheless, there are still unresolved issues that prevent the vehicle 

from meeting its operational requirements. Battery reliability and 

acoustics are currently the most critical issues facing the program. 

The silver-zinc propulsion battery has limited the performance of the 

ASDS system. The first attempts to use silver-zinc batteries in the 

ASDS resulted in unexpected shorting and premature failure. One of the 

key reasons for the battery shorting was because of the high-

temperature environment in which the battery operates. Through ongoing 

assessment and modifications, the Navy has been able to extend the 

endurance of a fully charged battery. Program officials have not 

determined whether the batterys endurance can be extended to support 

all missions. In addition, the batterys demonstrated life--the number 

of times it can be recharged before requiring replacement--is much 

shorter than expected. Currently, the battery can only be recharged two 

to three times before failing, whereas 20 recharge cycles were 

expected. If the battery cannot last through the expected recharge 

cycles, the impact on the submarines availability and operation and 

support costs will be significant because replacing the battery 

requires the boat to return to its base facility, be taken out of the 

water, and partially dismantled.



Although the Navy continues to mature the silver-zinc battery for the 

first boat, it is developing a lithium-ion battery as a replacement on 

the first boat and any additional boats. Program officials expect the 

lithium-ion battery to be developed by the summer of 2004. Lithium-ion 

battery technology, like silver-zinc, is not new; however, the 

challenge lies in adapting the technology to ASDSs size and 

environment.



To meet the acoustics portion of the vehicle signatures key performance 

parameter, the boat must be quiet enough to (1) evade detection while 

performing its mission of inserting SEALs into hostile territory and 

(2) not give away the location of the host submarine. However, the 

first boat makes too much noise and does not meet this acoustic 

requirement. The most significant noise offender at this point is the 

propeller. The program manager assembled a team of government and 

private experts to redesign the propeller by March 2003 in preparation 

for the operational evaluation in April 2003. However, more propeller 

work may be needed, and other acoustic problems may have to be 

addressed in order to meet the requirement. Therefore, the U.S. Special 

Operations Command deferred the acoustic requirement until delivery of 

the second boat--in several years--and will accept the noise level that 

the first boat achieves.



Design and Test Challenges Remain:



The final design of the boat is still evolving, pending the resolution 

of existing problems and remaining testing--notably the operational 

evaluation. The program has made some progress in finalizing the 

drawings of the boat by catching up on engineering drawing updates. As 

of January 2003, the program had completed about 76 percent of 

approximately 12,000 revisions to the engineering drawings. Program 

officials expect to eliminate the remaining backlog of 2,846 revisions 

by August 2003.



Unresolved technical problems could have implications for the design of 

the ASDS and require further revisions to the boats engineering 

drawings. The ASDS boat includes an outer shell, or exostructure, and 

an inner, or pressure, hull. Many of the boats critical systems, 

such as the battery system, sonars, and anchors, are located between 

the outer shell and the inner hull. Future changes to any of these 

systems may require modifications to the design of the outer shell or 

inner hull. For example, the battery system is mounted to the inner 

hull. Replacing the silver-zinc battery system with a lithium-ion 

battery system will likely require modifications to the boats design.



Another factor that may affect the design of the ASDS is the statutory 

requirement to conduct realistic survivability testing. A key element 

of survivability is live-fire testing, which evaluates how vulnerable 

the boats design is to the shock of being under fire and assesses crew 

safety. These tests will need to be conducted both on the first boat 

alone and while the boat is attached to the host submarine. However, 

the program office has requested that the Director, Operational Test 

and Evaluation, waive full-up, system-level live-fire testing of the 

first boat. The law allows an alternative approach to full-up, system-

level live-fire testing if it is impractical or overly costly, which is 

typically the case on submarines because live-fire testing would 

significantly damage or possibly destroy the boat. To date, an 

alternative approach has not been approved. Until the ASDS is tested in 

some manner to satisfy the live-fire requirement, the possibility of 

discovering the need for design modifications and upgrades will 

continue.



Difficulties Remain in Making Credible Schedule and Cost Projections:



Consistent and substantial schedule delays and cost increases have 

characterized the ASDS program since its beginning. The program 

originally projected that the first boat could be delivered in fewer 

than 3 years; 9 years later, the first boat is still not fully 

operational. A variety of technical challenges and problems have 

contributed to these delays. In addition, according to the initial 

approved program baseline, adjusted to reflect six boats and two 

facilities, the program would cost $527 million in fiscal year 2003 

dollars. Currently, we project that the program will cost over $2 

billion. Continuing technical problems, obsolete estimates, and 

upcoming tests and demonstrations make it difficult to assess 

conclusively whether or not the ASDS program is stable or will incur 

additional delays and cost increases.



Schedule Delays and Cost Increases:



Delivery of the first boat is now 6 years behind schedule, as shown in 

figure 1.



Figure 1: Estimated Delivery of the First Boat:



[See PDF for image]



[End of figure]



The original program schedule called for delivery of the first boat in 

July 1997. The 1999 schedule called for delivery of the first boat in 

February 2000, almost 3 years late. This last program schedule has not 

been revised since June 1999.[Footnote 5] Although the first boat was 

conditionally accepted in August 2001, Navy officials now expect 

delivery of a fully acceptable boat from the contractor in June 2003, 

pending the completion of operational evaluation.



As shown in table 2, the ASDSs cost increases essentially parallel the 

schedule delays.



Table 2: ASDS Program Costs for Six Boats and Two Facilities:



Fiscal year 2003 dollars in millions.



Research, development, test and evaluation; 

Development baseline (Oct. 1994)[B]: $131.4;  

First rebaseline (Sept. 1998): $244.2;  

Last acquisition program rebaseline (June 1999): $310.8; 

GAO projection[C] (April 2002): $437.6; 

GAO projection[D] (January 2003): 

$467.7.



Procurement; Development baseline (Oct. 1994)[B]: $362.7;  

First rebaseline (Sept. 1998): $452.2;  

Last acquisition program rebaseline (June 1999): $675.0; 

GAO projection[C] (April 2002): $1,258.6; 

GAO projection[D] (January 2003): $1,823.7.



Military construction;  

Development baseline (Oct. 1994)[B]: $33.0;  

First rebaseline (Sept. 1998): $37.4;  

Last acquisition program rebaseline (June 1999): $36.8; 

GAO projection[C] (April 2002): $51.7; 

GAO projection[D] (January 2003): $51.7.



Total[A];  Development baseline 

(Oct. 1994)[B]: $527.1;  First rebaseline (Sept. 1998): $733.7;  

Last acquisition program rebaseline (June 1999): $1,022.6; 

 GAO projection[C] (April 2002): $1,747.8; 

 GAO projection[D] (January 2003): 

$2,343.0.



Source: U.S. Navy and U.S. Special Operations Command.



Note: GAO analysis of Navy and U.S. Special Operations Command data.



[A] Totals may not add due to rounding.



[B] The development baseline was for 3 boats and 1 facility. To put 

this estimate on the same footing as the 1998 and 1999 estimates, GAO 

projected what the development baseline would equal for 6 ASDS and 2 

facilities.



[C] GAO projected the acquisition costs based on the U.S. Special 

Operations Commands actual funding for ASDS through fiscal year 2001 

and projections through fiscal year 2007. Our projections are straight-

line estimates and do not include any learning curve, economies of 

scale, or nonrecurring cost effects.



[D] GAO projected the acquisition costs based on the U.S. Special 

Operations Commands actual funding for ASDS through fiscal year 2002 

and projections through fiscal year 2009. Our projections are straight-

line estimates and do not include any learning curve, economies of 

scale, or nonrecurring cost effects.



[End of table]



By the last approved acquisition program baseline in June 1999, total 

costs had almost doubled, and research, development, test and 

evaluation costs had more than doubled. The June 1999 program baseline 

has not been updated since, and updated cost estimates are not 

available.[Footnote 6] However, at the time of our briefing in April 

2002, we projected that both of these costs had more than tripled.



Several Factors Make Future Cost and Schedule Performance Uncertain:



Uncertainties about the schedule and cost of the ASDS program remain, 

making it difficult to predict future performance. The program faces 

additional cost and schedule risks as outlined below:



* The program has experienced continual delays in preparing and getting 

estimates approved. Specifically, none of the following has been 

finalized or approved: the acquisition program baseline, the test and 

evaluation master plan, the test plan for the operational evaluation, 

or the cost estimate.



* The solutions to several known technical problems need to be 

demonstrated through testing, and the results of this testing may 

reveal the need for additional changes.



* The operational evaluation could expose new problems, which may 

require redesign and other solutions. Further, if the operational 

evaluation is not rigorous enough, or the scope is too narrow, the 

program risks missing problems. For instance, any requirements deferred 

to the second boat will not be included in the operational evaluation. 

Some scope reduction has already occurred with the deferral of the 

propeller and the degaussing system. Moreover, we could not determine 

the rigor and scope of the operational evaluation due to the lack of an 

approved test plan.



* The wide, but now necessary, gap between the construction of the 

first two boats makes cost projections for the second and future boats 

more difficult due to loss of production base as well as obsolescence 

of certain technologies and systems that have been incorporated into 

the first boat.



Several Underlying Factors Contributed to the ASDSs Difficult 

Development:



Developing the ASDS was clearly a difficult undertaking--a challenge 

under any circumstances. However, several factors either made the 

development effort more difficult than necessary or limited 

opportunities for responding to problems early. These include discovery 

of problems in system-level testing, a mismatch between requirements 

and resources at program start, and insufficient management attention. 

In retrospect, some of the ASDSs difficulties could have been foreseen 

and their effect lessened.



Discovery of Key Problems in System-Level Testing:



While technical challenges, such as the battery and propeller, have 

caused schedule delays and cost increases, the effect of technical 

challenges and problems has been magnified because critical problems 

were not discovered until tests of the full ASDS system. Ideally, 

system-level testing occurs after components have successfully 

completed laboratory and subsystem testing. In a 2000 report on test 

and evaluation, we found that a best practice was to expose problems 

early in component and subsystem level tests so that they could be 

corrected for less cost.[Footnote 7] Conversely, we found that when 

tests of a full system became the vehicle for discovering problems that 

could have been found out earlier, additional--and unanticipated--time, 

money, and effort had to be expended to overcome the problems. One firm 

referred to this phenomenon as late cycle churn.:



It appears that the ASDS program is experiencing late cycle churn with 

the battery and acoustics problems. Early silver-zinc battery tests 

were performed under very limited, unrealistic environmental 

conditions. Consequently, the problems with the battery were not 

discovered until shortly after the first set of batteries was installed 

on the boat in December 2000. Similarly, acoustic tests of the 

propeller were not performed until February 2002--again, on the first 

boat. Had the battery and propeller acoustics problems been discovered 

earlier in more realistic component or subsystem level testing, their 

effect on schedule and costs might have been minimized.



Mismatched Requirements and Resources at Program Start:



It is now clear that when the ASDS program began, the capabilities 

required of the boat outstripped the developers resources in terms of 

technical knowledge, time, and money. Our work on best practices has 

shown that when such a mismatch occurs at the outset of product 

development, a program is put in a poor position to succeed.[Footnote 

8] Cost increases, schedule delays, and performance shortfalls are the 

typical consequences of such a mismatch.



Before product development begins, successful programs achieve a match 

between the product performance desired by the customer and the ability 

of the developer to marshal the resources necessary to develop such a 

product. It is essential that both parties understand the demands that 

the customer is making of the product and the challenges these pose for 

the developer before the parties commit to product development. 

Importantly, achieving this match is a managed outcome--on successful 

programs, it is done deliberately, using metrics for assessing 

technology and design risks. In particular, the maturity of technology 

is an important weathervane for achieving a match between requirements 

and resources. On successful product development programs, developers 

will not allow immature technologies--those that require further 

development--to be included in the product design. Immature 

technologies make it very difficult to estimate a product developments 

schedule and cost accurately.



If the developer does not have the requisite technologies, engineering 

and design knowledge, and sufficient time and money to deliver the 

desired product when it is needed, tradeoffs must be made. These 

include 

(1) lowering product requirements to match the developers resources or 

(2) deferring the program until the developer can make the additional 

investments to meet the customers requirements. When a match between 

requirements and resources is not achieved at the outset of product 

development, the ensuing program is much more susceptible to 

performance shortfalls, cost increases, and schedule delays. The 

competition for funds often makes the situation worse by enticing 

managers to be optimistic about the time and money needed to complete 

development.



The ASDSs experience, as detailed in the preceding sections, has 

followed this path. Product requirements have been lowered, dropped, or 

deferred in an effort to match what the developer could deliver--

tradeoffs that could perhaps have been made before product development 

began. Cost increases and schedule delays evidence the struggle of the 

developer to mature key technologies, such as the battery, and solve 

design problems, such as the propeller, while producing the first boat. 

The experience of the ASDS underscores the need for nascent and future 

weapon system programs to manage customer needs and developer resources 

so that a match is achieved before product development is approved.



Management Attention Has Been Insufficient:



Weaknesses in the ASDSs management compounded the problems resulting 

from the mismatch between user requirements and the developers 

resources. Management of the program on the part of both the government 

and the contractor has been insufficient; consequently, early 

opportunities to act on problems were missed. Moreover, direction by 

the Congress to elevate the oversight of the program to include a 

higher level of DOD review has not been followed fully, although the 

program has received heightened managerial attention. Recent steps 

taken to improve management of the program will help, but they have 

come very late in the product development process.



In August 1994, before the ASDS began product development, the DOD 

Inspector General reported serious problems with the program, including 

noncompliance with mandatory DOD acquisition guidance, and recommended 

increased senior-level DOD oversight and better coordination with the 

Joint Staff, the services, and defense agencies. However, the 

acquisition executive at the time disagreed, based on input from other 

sources, including the Naval Sea Systems Commands assessment that the 

program was technically sound and executable. Consequently, the Navy 

began product development with the award of the engineering and 

manufacturing development contract to Northrop Grumman as planned on 

September 29, 1994.[Footnote 9]



In 1997 and 1999, two Navy independent review teams identified 

continuing problems with the ASDS program, including cost growth, 

schedule delays, and--perhaps most importantly--a lapse in effective 

program management by both the government and the contractor. 

Collectively, these problems necessitated developing a new baseline. 

Navy reviews identified several causes for the lapse in effective 

program management. These included:



* a lack of contractor experience in submarine design and construction;



* the governments lack of influence or visibility into problems 

between the contractor and the subcontractors;



* a focus on technical rather than management aspects of the program by 

both the program office and the contractor;



* ineffective oversight by the program office and little attention to 

the financial performance of the contractor; and:



* frequent changes in the contractors project management team.



As a result, the Navy created a management integrated product team 

comprised of the Naval Sea Systems Commands Program Manager for the 

Deep Submergence Program Office; a Northrop Grumman Senior Vice 

President; the U.S. Special Operations Commands Program Executive 

Officer, Maritime and Rotary Wing; and the Naval Special Warfare 

Commands Assistant Chief of Staff for Resources, Requirements, and 

Assessments to help deal with ASDS program problems.



In August 1999,[Footnote 10] the Congress expressed its continuing 

concern over cost growth, development and testing activities, and level 

of oversight. It established the ASDS as an item of special interest 

that it would monitor closely. It also requested that--although ASDS 

may not meet the normal dollar threshold for automatic elevation to a 

major defense acquisition program (acquisition category I)--the program 

be elevated to an equivalent level of DOD review because of the 

troubled history and concern that this program may not be out of 

difficulty yet.[Footnote 11] Programs designated as acquisition 

category I programs must meet certain statutory and DOD requirements 

applicable to such programs, including regular reporting to Congress; 

establishment of a firm baseline for measuring the program; a mechanism 

for addressing cost and schedule variances; establishment of cost, 

schedule, and performance goals; development of an independent life-

cycle cost estimate by the Secretary of Defenses Cost Analysis 

Improvement Group; and an independent operational test and evaluation. 

Further, elevation of the program to this higher acquisition category 

would result in a more disciplined program management approach under 

DODs acquisition system guidance, including following a prescribed 

process for making major decisions, providing documentation such as 

test results for those decisions, and holding formal reviews before 

making those decisions. This process, while intended to facilitate the 

management of major programs, also provides the mechanisms and 

opportunities for exercising oversight. In early 2001, the U.S. Special 

Operations Command informed the Navy that ASDS cost projections were 

approaching the acquisition category I program threshold and proposed 

elevating the status of the program.



In both instances, DOD declined to designate the ASDS as a major 

defense acquisition program. Rather, to increase management attention, 

DOD established new top-level overarching integrated product team 

reviews and placed the program on the oversight list of the Director, 

Operational Test and Evaluation. In fact, however, while the top-level 

overarching integrated product team was slated to meet twice each year 

to review the ASDSs progress, it has only met two times, and has not 

met since May 2001. The lower-level integrating team has met more 

often. In any event, the program office has not developed a new program 

baseline, including an updated cost estimate, since 1999, which denied 

the teams current information even if they had made a more rigorous 

attempt to provide oversight.



Despite these and the earlier attempts at improving management 

attention, lapses in effective program management have continued. Most 

recently, Navy officials informed us that they have had to require the 

contractor to redo all of the required safety-critical software testing 

because the contractor did not provide documentation that this testing 

had been performed. This rework has contributed to recent schedule 

delays and cost increases. Program officials also informed us that in 

early 2002 they had to hire another contractor to investigate and 

develop solutions for the battery problems. This also has contributed 

to recent schedule delays and cost increases.



In November 2002, Congress directed the Secretary of Defense to conduct 

a complete review of the requirements, mission, management, and cost 

structure of the ASDS program and report to the congressional defense 

committees before obligating more than 50 percent of fiscal year 2003 

ASDS procurement funding.[Footnote 12] This review is in progress, and 

results are expected by late March 2003. Congress again intervened 

during the fiscal year 2003 congressional budget review. As a result of 

the review, DOD agreed that the first boat should be fully operational 

and meet the users requirements before it commenced with the 

procurement of additional boats. Under the condition that the U.S. 

Special Operations Command would agree to resolve the technical issues 

with the first boat before declaring initial operational capability, 

Congress approved additional funding for the program.



At the program level, several management improvements have been made 

recently. While they will not necessarily address oversight, they 

should facilitate solving technical problems and improve the quality of 

program information. The program office and the U.S. Special Operations 

Command augmented their staffs and expertise in 2002 to meet the needs 

of the ASDS program. In addition, the ASDS program manager has enlisted 

outside experts from Battelle and Penn State University to investigate 

technical problems with the battery, sonars, and the propeller. The 

program office is also revising the Acquisition Strategy, the Approved 

Program Baseline, and the Test and Evaluation Master Plan. According to 

program officials, the new baseline will allow for more testing and 

information to be gathered before commitments are made to purchase 

additional boats.



Conclusions:



After a troubled history, the ASDS program has made tangible progress, 

particularly in resolving technical problems. Nevertheless, as the 

program prepares to begin the April 2003 operational evaluation of the 

first boat, the ASDS still has not met all key performance requirements 

and must still solve significant technical problems. The challenge in 

solving known problems, coupled with the possibility of discovering new 

ones in upcoming tests, pose risks for achieving initial operational 

capability as planned and for having sound cost and schedule estimates. 

While every reasonable effort should be made to overcome the first 

boats shortfalls and have a successful operational evaluation, 

decisions on investing in additional boats must be based on both sound 

information and a sound process for decision making.



The information decision makers will need includes demonstrable 

knowledge that (1) key design problems have been resolved, (2) the 

resulting mission performance of the ASDS is worthwhile, and (3) 

credible cost and schedule estimates for building follow-on boats, 

facilities, and operations and support are developed. It is important 

that the activities that will provide this information, such as 

improvements to the battery and propeller and the operational 

evaluation of the first boat, have sufficient scope and take place 

before key decisions are made. Good information, when it becomes 

available, must be used effectively. Thus, it is equally important that 

a formal process be followed for evaluating this information and making 

decisions. In particular, DOD decision makers should have the benefit 

of a formal, informed, transparent decision meeting before proceeding 

with purchases of additional boats.



Recommendations for Executive Action:



Before the operational evaluation is held, we recommend that the 

Secretary of Defense ensure that the overall ASDS test and evaluation 

master plan and the specific test plan for the operational evaluation 

are both sufficient in scope and approved.



Before a decision to purchase additional boats is made, we recommend 

that the Secretary of Defense ensure that:



* the ASDS operational evaluation is completed as planned;



* solutions to key technical and performance problems are demonstrated;



* the most likely performance of the ASDS is reassessed on the basis of 

the operational evaluation and demonstrated solutions to problems;



* the ASDS program is designated a major defense acquisition program 

(acquisition category I);



* a formal milestone C decision, in accordance with DOD acquisition 

guidance, is held;



* the Cost Analysis Improvement Group develops an independent cost 

estimate for milestone C, based on the acquisition plan and planned 

product improvements;



* the program is funded to the level of the independent cost estimate; 

and:



* the worthiness of proceeding with additional purchases is assessed 

against both (1) the ability of the ASDS to perform missions and be 

sustained and (2) the opportunity costs of investing in the ASDS versus 

other special operations needs.



If a decision to proceed with the purchase of additional boats is 

warranted, we recommend that the Secretary of Defense ensure that a 

follow-on test and evaluation of the second boat is planned and funded 

to demonstrate that remaining deficiencies have been corrected.



Agency Comments and Our Evaluation:



DOD provided us with written comments on a draft of this report. The 

comments, along with our responses, appear in appendix I.



DOD concurred with our recommendation that, before an operational 

evaluation is held, DOD should ensure that the overall ASDS test and 

evaluation master plan and the specific test plan for the operational 

evaluation are both sufficient in scope and approved. DOD also 

concurred with our recommendation that, if a decision is made to 

purchase additional boats, a follow-on test and evaluation of the 

second boat is planned and funded to demonstrate that remaining 

deficiencies have been corrected. DOD partially concurred with our 

recommendation to elevate the level of management attention. 

Specifically, DOD concurred with all but a part of one of the 

particulars of this recommendation; that is, DOD has not yet determined 

the level of Cost Analysis Improvement Group involvement necessary for 

developing an independent cost estimate for milestone C.



DOD provided several comments that offered a more optimistic view of 

ASDSs status than we reported. Specifically, DOD commented that 

(1) while management attention had been lacking in the early part of 

the program, it has improved in recent years; (2) program cost and 

schedule performance have stabilized; and (3) 14 of 16 key performance 

parameters have been achieved.



We agree that management attention on the program has improved and 

noted this in the draft report. However, the difficulties the program 

has continued to experience in recent years, including the 

unavailability of current cost and schedule estimates, warrant 

increased attention. We do not share DODs view that cost and schedule 

performance have stabilized. New estimates appear imminent for the 

first time since 1999, but their release alone will not provide 

stability--this will come from demonstrating that key requirements have 

been met and problems have been overcome. Regarding the achievement of 

14 requirements, it is possible that DOD has completed more test 

reports since our draft report, but it has not provided such evidence.



DOD also provided technical comments, which we have incorporated as 

appropriate.



Scope and Methodology:



During our review, we met with officials from the U.S. Special 

Operations Command; the Naval Sea Systems Command; the Naval Special 

Warfare Command, Navy SEAL Delivery Vehicle Team One; Submarine Force, 

U.S. Pacific Fleet; the Assistant Secretary of the Navys Office of 

Research, Development, and Acquisition; the Office of the Under 

Secretary of Defense, Acquisition, Technology & Logistics, Naval 

Warfare; and the Office of the Director, Operational Test and 

Evaluation.



To determine the progress toward meeting requirements and technical 

challenges, we examined the Operational Requirements Document, the 

Acquisition Program Baseline, the ASDS Acquisition Strategy, program 

status documents, test results, and technical reports. We also 

discussed requirements and mission needs with the former Commander, 

Naval Special Warfare Command, and other key Navy and U.S. Special 

Operations Command officials.



To determine the ASDS programs ability to meet schedule and cost 

projections, we examined the U.S. Special Operations Commands budget 

requests, ASDS funding profiles, and other ASDS cost data. We compared 

the amounts that DOD requested in its budget submissions with amounts 

approved by Congress. We reviewed documents from two Independent Review 

Team assessments, internal Naval Sea Systems Command Reports, 

legislative actions, contract documents, ASDS program status briefs, 

and presentations and responses to congressional staff.



To determine the underlying factors contributing to program problems, 

we reviewed numerous historical documents, including a 1994 DOD 

Inspector General report, and the 1997 and 1999 Independent Review Team 

assessments. We also drew upon our previous work on best practices for 

developing products.



We conducted our review from May 2002 to January 2003 in accordance 

with generally accepted government auditing standards.



We are sending copies of this report to the Secretary of Defense; the 

Secretary of the Navy; the Commander, U.S. Special Operations Command; 

the Director of the Office of Management and Budget; and interested 

congressional committees. We will also make copies available to others 

upon request. In addition, the report will be available at no charge on 

the GAO Web site at http://www.gao.gov. Major contributors to this 

report were Catherine Baltzell, Mary Quinlan, Charles Cannon, Robin 

Eddington, Gary Middleton, Charles Perdue, and Adam Vodroska. If you 

have any questions regarding this report, please call me at (202) 512-

4841.



Paul L. Francis

Director

Acquisition and Sourcing Management:



Signed by Paul L. Francis:



[End of section]



Appendix I: Comments from the Department of Defense:



Note: GAO comments supplementing those in the report text appear at the 

end of this appendix.



OFFICE OF THE UNDER SECRETARY OF DEFENSE:



3000 DEFENSE PENTAGON WASHINGTON, DC 20301-3000:



ACQUISITION, TECHNOLOGY AND LOGISTICS:



Mr. Paul Francis Director, Acquisition and Sourcing Management, U.S. 

General Accounting Office Washington, D.C. 20548:



Dear Mr. Francis:



This is the Department of Defense (DoD) response to the General 

Accounting Office (GAO) draft report, DEFENSE ACQUISITIONS: Advanced 

SEAL Delivery System Program Needs Increased Oversight, dated February 

21, 2003 (GAO Code 1201551GAO-03-442). The Department partially concurs 

with the statements in the draft report and partially concurs with the 

GAO recommendations.



The Department acknowledges the cost increases and schedule delays 

associated with this program and the lack of management attention 

during the early part of the program. Management attention has improved 

in recent years; and, since the inception of increased OSD oversight in 

summer 2000, Integrating Integrated Product Teams and Overarching 

Integrated Product Teams have reviewed this program more often than a 

majority of the Departments Major Defense Acquisition Programs. 

Additionally, program cost and schedule performance have stabilized.



During developmental testing, the ASDS vehicle (ASDS-1) achieved 

Operational Requirements Document (ORD) threshold levels for 14 of its 

16 required Key Performance Parameters (KPPs). The Survivability KPP 

(all systems meet Mil-S-901C shock requirements) will be met by April 

2003. The Vehicle Signature KPP is required by the ORD to be met on the 

second vehicle. These results will be reviewed by the Program Executive 

(Submarines) at an Operational Test Readiness Review; and, if 

satisfactory, he will certify the program to begin operational 

evaluation in spring 2003. Given the capabilities of the vehicle with 

the new propeller installed, U.S. Special Operations Command believes 

that ASDS-1 provides significant operational capability. While we 

acknowledge the need for design changes to address the existing 

technical issues (i.e., battery reliability and vehicle radiated 

noise), there are funded plans in place to accomplish these changes. 

The degree of uncertainty at this point in the program is comparable to 

other first-of-class systems.



The Department will designate ASDS as an Acquisition Category I program 

and reinstate Milestone C as a condition for buying additional 

vehicles. An independent cost estimate will be performed to support a 

Milestone C decision; however, the Director, Defense Systems has not 

yet determined the level of CAIG involvement necessary. The DoD will 

ensure approval of a Test and Evaluation Master Plan before the start 

of operational evaluation, and, if necessary, will plan and fund a 

Follow-on Test and Evaluation.



The detailed comments to the report statements and recommendations are 

provided in the enclosure. Suggested technical changes have been 

provided separately.



The Department appreciates the opportunity to comment on the draft 

report.



Sincerely,



Glenn F. Lamartin:



Director Defense Systems:



Signed by Glenn F. Lamartin:



Enclosure:



GAO DRAFT REPORT - DATED FEBRUARY 21, 2003 GAO CODE 1201551GAO-03-442:



DEFENSE ACQUISITIONS: Advanced SEAL Delivery System Program Needs 

Increased Oversight:



DEPARTMENT OF DEFENSE COMMENTS TO THE GAO STATEMENTS AND 

RECOMMENDATIONS:



GAO STATEMENTS:



GAO STATEMENT A: The Advanced SEAL Delivery System (ASDS) has not met 

all requirements. (pgs. 3-5/GAO Draft Report):



DOD COMMENTS: During developmental testing, the ASDS vehicle (ASDS-1) 

achieved Operational Requirements Document (ORD) threshold levels for 

14 of its 16 required Key Performance Parameters (KPPs). These results 

will be reviewed at an Operational Test Readiness Review; and, if 

satisfactory, the program will be certified to begin operational 

evaluation in spring 2003. The Survivability KPP (all systems meet Mil-

S-901C shock requirements) will be met by April 2003. The Vehicle 

Signature KPP is required by the ORD to be met on the second vehicle.



The GAO concludes that requirements are not met since some subordinate 

requirements have; not been demonstrated. The outstanding subordinate 

requirements either exceed ORD threshold values or apply to future host 

platforms. For example, the Transport Depth (submarine host) KPP has 

been demonstrated to the ORD objective level for all ships currently 

configured to carry ASDS. The subordinate requirements for SSN 21 Class 

submarines, cited in the report, have not been demonstrated since SSN 

23 (the designated SSN 21 Class host) is still under construction.



Given the capabilities of the vehicle with the new propeller installed, 

U.S. Special Operation; Command believes that ASDS provides significant 

operational utility.



GAO STATEMENT B: GAO stated that there are still serious unresolved 

issues that prevent the vehicle from meeting its operational 

requirements. Battery reliability and acoustics are currently the most 

critical technology issues facing the program. (pgs. 5-6/GAG, Draft 

Report):



DOD COMMENTS: The silver-zinc propulsion battery does not provide the 

projected number of re-charge cycles, which limits the number of 

missions before the battery must be replaced. The battery satisfies the 

Maximum Combat Range and Endurance KPPs, but at an increased logistics 

cost. The Department is continuing to develop improvements to the 

existing silver-zinc battery. These improvements have already improved 

battery performance, however, additional work is continuing. In 

addition, the Department is developing a Lithium Ion battery 

replacement as an alternate solution. The incorporation of this battery 

is planned and will not have a significant impact on vehicle design.



Radiated noise measurements made during developmental testing revealed 

that the propeller was the biggest noise contributor. A composite 

propeller was designed based on an existing validated model. This model 

provides engineering confidence that the new propeller will resolve the 

propeller noise problems without further modifications up to a 

specified speed. The new propeller will be installed and acoustically 

monitored during operational evaluation. Other noise sources will be 

corrected as necessary.



U.S. Special Operations Command has stated that the deficiencies noted 

above do not preclude operational use of the first vehicle.



GAO STATEMENT C: Difficulties remain in making credible schedule and 

cost projections. (pgs. 6-9/GAO Draft Report):



DOD COMMENTS: Program cost and schedule performance has stabilized and 

has been on track during the past year. The degree of design 

uncertainty at this point in the program is comparable to other first-

of-class systems; and, the Department believes credible projections are 

now possible. The Navy recently completed a credible independent cost 

estimate, which was provided to GAO. The cost estimate considered the 

current technical challenges and projected engineering changes.



GAO STATEMENT D: Management attention has been insufficient. (pgs.10-

131GAO Draft Report):



DOD COMMENTS: Since the inception of increased OSD oversight in summer 

2000, this program has been reviewed at the Integrating Integrated 

Product Team and Overarching Integrated Product Team levels more often 

than a majority the Departments ACAT I programs.



GAO RECOMMENDATIONS:



RECOMMENDATION 1: Before beginning the operational evaluation, the GAO 

recommended that the Secretary of Defense ensure that the overall ASDS 

test and evaluation master plan and the specific test plan for the 

operational evaluation are both sufficient in scope and approved. (p. 

131GAO Draft Report):



DOD RESPONSE: Concur. Departmental policy for all programs that are on 

the Department of Defense Test and Evaluation oversight list requires 

approval of these plans prior to operational evaluation. For ASDS, the 

Director, Operational Test and Evaluation:



will approve the Test and Evaluation Master Plan and Commander 

Operational Test and Evaluation Force Operational Test Plan before the 

start of operational evaluation.



RECOMMENDATION 2: Before a decision to purchase additional boats is 

made, the GAO recommended that the Secretary of Defense ensure that:



* the ASDS operational evaluation is completed as planned;



* solutions to key technical and performance problems are demonstrated;



* the most likely performance of the ASDS is reassessed on the basis of 

the operational evaluation and demonstrated solutions to problems;



* the ASDS program is designated a category I major defense acquisition 

program;



* a formal Milestone C decision, in accordance with DoD acquisition 

guidance, is held; 



* the Cost Analysis Improvement Group develops an independent cost 

estimate for Milestone C, based on the acquisition plan and planned 

product improvements; 



* the program is funded to the level of the independent cost estimate; 

and:



* the worthiness of proceeding with additional purchases is assessed 

against both (1) the ability of the ASDS to perform missions and be 

sustained and (2) the opportunity costs of investing in the ASDS versus 

other special operations needs. (pgs.13-14/GAO Draft Report):



DOD RESPONSE: Partially Concur. ASDS has exceeded the Major Defense 

Acquisition Program threshold for RDT&E expenditures. The Department in 

turn will designate it as an Acquisition Category (ACAT) I program. A 

Milestone C decision will be reinstated in the program, and will 

address ASDS affordability and effectiveness. An independent cost 

estimate will be performed to support a Milestone C decision; however, 

the Director, Defense Systems has not yet determined the level of CAIG 

involvement necessary. The other recommendations will be incorporated 

as a matter of policy for ACAT I programs.



RECOMMENDATION 3: If a decision to proceed with the purchase of 

additional boats is warranted, the GAO recommended that the Secretary 

of Defense ensure that a follow-on test and evaluation of the second 

boat is planned and funded to demonstrate correction of remaining 

deficiencies. (p.14/GAO Draft Report):



DOD RESPONSE: Concur. Departmental policy for all programs on the 

Department of Defense Test and Evaluation oversight list requires 

assessment of the need for further testing following the completion of 

operational evaluation. The operational evaluation test results will be 

reviewed at Milestone C, and, if necessary, a follow-on test and 

evaluation program will be planned and funded.



The following are GAOs comments on the Department of Defenses letter 

dated March 10, 2003.



GAO Comments:



1. DOD did not provide any new evidence that 14 of ASDSs 16 key 

performance parameters have been met. As we discussed in our report, 

program officials had earlier judged that 11 of the first boats key 

performance parameters had been met, 4 were still in process, and 1 

required action. We did not count those in process as being met, 

because test reports were not yet completed. It is possible that some 

of these reports have since been completed, but DOD has not provided 

this information.



DOD also did not provide any new evidence that outstanding subordinate 

requirements either exceed required values or apply only in the future. 

As we discuss in our report, as of January 30, 2003, DOD documentation 

showed that numerous subordinate requirements for the first boat--which 

must be met to demonstrate the key performance parameters--had not yet 

been fully demonstrated. We have noted that in some instances, future 

requirements were actually planned for the first boat, but deferred.



2. We continue to believe that uncertainties about the schedule and 

cost of the ASDS program remain and make it difficult to develop 

credible projections. As we discuss in this report, progress has been 

made in correcting various technical problems with the ASDS. However, 

serious technical problems and significant uncertainty remain. 

Operational testing has not yet begun and may reveal additional 

problems, which could require redesign and other solutions. In 

addition, the program has experienced continual delays in preparing and 

getting schedule and cost estimates approved. While officials have told 

us that the acquisition program baseline with an updated schedule is 

currently being revised, the baseline has not yet been completed and 

approved. The ASDS program is still operating with the June 1999 

acquisition program baseline, which is now considerably out of date. 

Consequently, credible criteria for measuring program cost and schedule 

stability--and whether or not the program is on track--are still 

lacking. Finally, the problems of loss of production base and 

obsolescence of certain technologies remain for the second boat.



The Navy did recently provide GAO with several briefing slides that 

were based on an independent cost estimate, but they are not the actual 

estimate. Specifically, the briefing slides show some--but not all--

costs for the second boat only. They did not provide details about 

estimation methodology or about what costs are included and excluded.



3. As we discuss in this report, we recognize that management attention 

has increased in recent years. Nevertheless, we continue to believe 

that the ASDS program needs additional management attention, 

particularly at higher DOD levels. Our conclusion is based on the 

current status of the ASDS program itself, including the challenges and 

risks it faces, and the significant investment it now represents. DODs 

statement that the ASDS program has been reviewed more often than a 

majority of acquisition category I programs is difficult to evaluate 

without seeing evidence. Nonetheless, the number of times a program is 

reviewed does not necessarily equate to the right kind of management 

attention.



FOOTNOTES



[1] A chamber used to treat divers suffering from decompression 

sickness, which can be caused by descending below sea level.



[2] The contract was originally awarded to Westinghouse Electric 

Corporation, which was subsequently bought by Northrop Grumman in 1996.



[3] These subordinate individual requirements are specified in the 

contract and the users Operational Requirements Document. 



[4] Degaussing cables and other elements of a degaussing system were 

installed and electrical hull penetrators were added during 

construction of the first ASDS vehicle to shorten the time needed to 

create a functional degaussing system in the future. A power supply is 

the major part of the degaussing system that needs to be created.



[5] Navy officials informed us that a revised program schedule was 

recently drafted and is being reviewed by DOD officials.



[6] Navy officials informed us that the acquisition program baseline 

was being revised.



[7] U.S. General Accounting Office, Best Practices: A More Constructive 

Test Approach Is Key to Better Weapon System Outcomes, GAO/NSIAD-00-199 

(Washington, D.C.: July 31, 2000).



[8] U.S. General Accounting Office, Best Practices: Better Matching of 

Needs and Resources Will Lead to Better Weapon System Outcomes, 

GAO-01-288 (Washington, D.C.: Mar. 8, 2001).



[9] The contract was originally awarded to Westinghouse Electric 

Corporation, which was subsequently bought by Northrop Grumman in 1996.



[10] House of Representatives Conference Report 106-301, pages 585-586, 

accompanying the National Defense Authorization Act for Fiscal Year 

2000. 



[11] The conferees presumably intended for DOD to designate the program 

as a major defense acquisition program, known as acquisition category 

I. A program is considered to be a major defense acquisition program if 

its total research and development expenditures are estimated to be at 

least $365 million (in constant fiscal year 2000 dollars). In addition 

to the monetary threshold, programs can also be designated as category 

I under the discretion of the Secretary of Defense (for example, 

because of congressional interest).



[12] House of Representatives Conference Report 107-772, page 436, 

accompanying the National Defense Authorization Act for Fiscal Year 

2003.



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