Report to the Subcommittee on 

Strategic Forces, Committee on Armed 

Services, House of Representatives 

United States Government Accountability Office

GAO

September 2005 DEFENSE 

ACQUISITIONS 

Actions Needed to 

Ensure Adequate 

Funding for Operation 

and Sustainment of 

the Ballistic Missile 

Defense System 

GAO-05-817 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-817.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Robert E. Levin 

at (202) 512-4841 or levinr@gao.gov. 

Highlights of GAO-05-817, a report to the 

Subcommittee on Strategic Forces, 

Committee on Armed Services, House of 

Representatives 

September 2005

DEFENSE ACQUISITIONS 

Actions Needed to Ensure Adequate 

Funding for Operation and Sustainment 

of the Ballistic Missile Defense System 

There is currently uncertainty as to which assets may eventually be 

transferred to each military service and under what conditions those 

transfers should occur. This uncertainty makes it difficult for the services to 

plan to address the requirements of DOD acquisition regulations and realign 

their budgets to support the missile defense mission. According to MDA and 

other DOD officials, when transfer criteria were established in 2002, the 

Department did not fully understand the complexity of the BMDS and how it 

could affect transfer decisions. For example, it has been difficult to 

determine whether MDA or a military service will be responsible for 

managing and funding some assets, such as stand-alone missile defense 

radars, because these assets are not integrated on service platforms or do 

not perform core service missions. MDA officials suggested that these 

components could be operated by either contractors or military personnel 

and MDA might fund their operation and sustainment. A team that includes 

representatives from the military services, the combatant commands, MDA, 

and other DOD offices was established early this year to address transfer 

issues. However, because MDA and the services have been unable to reach 

agreement on the transfer of some missile defense assets, a unit under the 

Joint Chiefs of Staff was tasked in July 2005 with recommending revisions to 

the existing transfer criteria. 

MDA budgeted $1.5 billion of its fiscal year 2005 research and development 

funds to acquire interceptors and radars and upgrade various BMDS 

components. It expects to continue to acquire and upgrade BMDS assets 

through 2011 and beyond. However, MDA and the services disagree as to 

who should pay for operating and sustaining the initial defensive capability 

after fiscal year 2005. Additionally, although DOD has budgeted $68.5 billion 

to develop, procure, operate, and sustain a missile defense capability 

between 2005 and 2011, it has not completely determined whether additional 

operation and sustainment funds will be needed, and it has not included all 

known operation and sustainment costs in its budget. Until DOD decides 

who will fund these costs, the services will likely continue to provide only 

the funding that they have been directed to provide. As a result, some 

needs—for which neither MDA nor the services have planned—will go 

unfunded. Additionally, if the funds budgeted for some purposes, such as 

logistical support for the BMDS, turn out to be insufficient, DOD will either 

have to take funds from other programs or spend less on missile defense. 

In 2002, the Department of Defense 

(DOD) implemented a new 

acquisition model to develop a 

Ballistic Missile Defense System 

(BMDS) that included all major 

missile defense acquisitions, some 

of which were being developed by 

the military services. The model 

called for the management and 

funding responsibility for 

production, operation, and 

sustainment of a capability to be 

transferred to a military service 

when a BMDS element or major 

component is technically mature 

and plans for production are well 

developed. 

The Missile Defense Agency (MDA) 

was given responsibility for 

developing the BMDS and 

recommending the transfer of 

management and funding 

responsibilities to the services. In 

2004, MDA emplaced an initial 

missile defense capability, but DOD 

did not transfer management and 

funding responsibility for that 

capability. Because a formal 

transfer did not occur, GAO was 

asked to (1) identify DOD’s criteria 

for deciding when a missile defense 

capability should be transferred to 

a service and (2) determine how 

DOD is managing the costs of 

fielding a BMDS capability. 

What GAO Recommends

GAO is making recommendations 

that will assist in clarifying MDA 

and military service roles and 

responsibilities for missile defense 

assets. DOD agreed to implement 

these recommendations. 
Page i GAO-05-817 Defense Acquisitions 

Letter 1

Results in Brief 2 

Background 3 

DOD Established Transfer Criteria But Changes Are Being 

Considered 8 

MDA and the Military Services Disagree on Funding 

Responsibilities 13 

Conclusions 21 

Recommendations 22 

Agency Comments and Our Evaluation 22 

Appendix I Air Force Officials Concerned with Some MDA 

Funding Plans 24 

Air Force Believes Radar Test Equipment Is Needed 24 

Appendix II MDA and the Air Force Disagree as to Which Should 

Pay Eareckson Support Costs 26 

Appendix III Comments from the Department of Defense 28 

Appendix IV GAO Contacts and Staff Acknowledgments 31 

Tables 

Table 1: Total Planned Expenditures for Missile Defense, Fiscal 

Years 2005-2011 14 

Table 2: Research, Development, and Test Funds Devoted to 

Acquiring Missile Defense Capabilities 14 

Table 3: Elements or Components MDA Plans to Acquire or 

Upgrade for Fielding between 2004 and 2011 15 

Table 4: The Fiscal Year 2005 Cost of MDA’s Support Agreements 20 

Figures 

Figure 1: Examples of Missile Defense Systems for which MDA 

Became Fully Responsible 4 

Contents 
Page ii GAO-05-817 Defense Acquisitions 

Figure 2: Intended Model for Each Acquisition Phase 6 

Abbreviations 

BMDS Ballistic Missile Defense System 

DOD Department of Defense 

MDA Missile Defense Agency 

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Page 1 GAO-05-817 Defense Acquisitions 

September 6, 2005 

The Honorable Terry Everett 

Chairman 

The Honorable Silvestre Reyes 

Ranking Minority Member 

Subcommittee on Strategic Forces 

Committee on Armed Services 

House of Representatives 

In 2002, the Secretary of Defense directed the Department of Defense 

(DOD) to adopt a new acquisition model for acquiring a missile defense 

capability.1

 This model, which is intended to more quickly place a 

capability in the hands of the warfighter, gives the Missile Defense Agency 

(MDA) responsibility for developing the Ballistic Missile Defense System 

(BMDS), a system that includes all major missile defense acquisitions, 

some of which were being developed by the military services. Once 

capabilities useful to the warfighter are developed, the management and 

funding responsibility for production, operation, and sustainment of the 

capability is to be transferred to a military service.2

In 2004, MDA emplaced an initial missile defense capability, but it did not 

transfer management and funding responsibility for that capability, or any 

element or major component of that capability, to a military service. 

Because a formal transfer did not occur,3

 you asked that we determine 

(1) the criteria that DOD is using to decide when a missile defense 

capability should be transferred to a military service and (2) how DOD is 

allocating the cost of fielding a BMDS capability in fiscal years 2005 

through 2011, if fielding costs have been fully identified, and if all costs 

expected to be incurred between 2006 and 2011 are included in DOD’s 

budget. 

 1

Secretary of Defense Memorandum, Missile Defense Program Direction, January 2, 2002. 

2

Sustainment costs include all costs incurred from initial system deployment through the 

end of system operations, including the costs of operating, maintaining, and supporting a 

fielded system. 

3

A formal transfer decision is made when MDA recommends and DOD’s Senior Executive 

Council approves the transfer of acquisition responsibility for an element or major 

component from MDA to a military service. 

United States Government Accountability Office

Washington, DC 20548 
Page 2 GAO-05-817 Defense Acquisitions 

To conduct our work, we examined relevant documents, such as 

directives issued by the Secretary of Defense and the Under Secretary of 

Defense for Acquisition, Technology and Logistics; installation support 

and services agreements between MDA and the Army and the Air Force; 

Integrated Product Team briefing charts and minutes; and fiscal year 2006 

budget documents. We also held discussions with the Office of the Under 

Secretary of Defense for Acquisition, Technology and Logistics; Office of 

the Under Secretary of Defense for Policy; Office of the Under Secretary of 

Defense (Comptroller); the Joint Theater Air and Missile Defense 

Organization; the Missile Defense Agency; and the Departments of the 

Army, Air Force, and Navy. We conducted our review from October 2004 

to August 2005 in accordance with generally accepted government 

auditing standards. 

DOD is in the process of considering revisions to the criteria that it will 

use to decide when and under what conditions elements and components 

will be transferred from MDA to the military services. Criteria established 

by the Under Secretary of Defense for Acquisition, Technology and 

Logistics in December 2002 called for a transfer when an element or 

component was technically mature, plans for production were well 

developed, and funds had been allocated to carry out the production plans. 

However, officials across the department now recognize that the transfer 

criteria are neither complete nor clear given the BMDS’s complexity. For 

example, it has been difficult to determine whether MDA or a military 

service will be responsible for managing and funding some assets, such as 

stand-alone missile defense radars, because these assets are not integrated 

on service platforms or do not perform core service missions. MDA 

officials suggested that these components could be operated by either 

contractors or military personnel and MDA might fund their operation and 

sustainment. Early this year, a team that includes representatives from the 

Missile Defense Agency, the Office of the Secretary of Defense, the 

military services, and the U.S. Strategic and Northern Commands was 

established to develop individual transfer plans for each BMDS element or 

major component. However, because MDA and the services have been 

unable to reach agreement on the transfer of some missile defense assets, 

a unit under the Joint Chiefs of Staff was tasked in July 2005 with 

recommending revisions to the existing transfer criteria. 

In providing direction on the implementation of the 2002 acquisition 

model, the Secretary of Defense directed the military services to budget 

the resources to procure and operate the planned force structure for 

fielding the BMDS. However, MDA and the military services continue to 

disagree as to which organization should pay for operating and sustaining 

Results in Brief 
Page 3 GAO-05-817 Defense Acquisitions 

the initial missile defense capability, which remains under MDA’s 

management, after fiscal year 2005. Additionally, DOD has not yet 

determined the full cost of procuring, operating, and sustaining the initial 

capability from 2006 through 2011, and it has not included all known costs 

in its budget. While the military services do not object to funding the 

operation and sustainment costs of elements or major components 

transferred to them, the military services do not believe that they should 

pay these costs for developmental assets even though the assets may be 

available for operational use. It is likely that until DOD decides which 

organization will fund these costs, the military services will continue to 

provide only the funding that they were directed to provide in a 2003 

Program Decision Memorandum and some needs, for which neither MDA 

nor the military services have planned, will go unfunded. Additionally, if 

the funds budgeted for some purposes, such as logistical support for the 

BMDS, turn out to be insufficient, DOD will either have to take funds from 

other programs or spend less on missile defense. 

We are making recommendations to DOD that will assist in clarifying the 

roles and responsibilities of MDA and the military services for managing 

and funding missile defense assets. In commenting on a draft of this 

report, DOD agreed to implement our recommendations. 

In 2001, DOD conducted missile defense reviews to determine how best to 

fulfill the nation’s need to defend the United States, deployed forces, allies, 

and friends from ballistic missile attacks. The findings of these reviews led 

the Secretary of Defense to declare the need for a new strategy to acquire 

and deploy missile defenses and to issue direction in January 2002 to 

improve the leadership, management, and organization of missile defense 

activities. 

Specifically, the Secretary delegated to MDA the authority to manage all 

ballistic missile defense systems under development and shifted programs 

being executed or developed by the military services to MDA. Figure 1 

below describes some of the missile defense programs whose execution or 

development was transferred from the military services into MDA. 

Background 
Page 4 GAO-05-817 Defense Acquisitions 

Figure 1: Examples of Missile Defense Systems for which MDA Became Fully 

Responsible 

The Secretary also instructed MDA to develop a single integrated system, 

to be called the Ballistic Missile Defense System, capable of intercepting 

enemy missiles launched from all ranges and in all phases of their flight. 

The systems transferred from or executed by the services and new 

systems whose development MDA initiates are considered to be elements 

of the BMDS and are managed by MDA. In 2002, drawing on research and 

development efforts that were ongoing for years, MDA established the 

Command, Control, Battle Management, and Communications system as 

an element to provide connectivity between other BMDS elements and to 

manage their operation as an integrated, layered missile defense system. 

In his direction to MDA and the military services, the Secretary called for a 

capabilities-based requirements process and an evolutionary development 

program. In a capabilities-based program, the system developer—MDA—

designs a system based on the technology available, rather than designing 

a system to meet requirements established by those that will use the 

system. Additionally, in an evolutionary program, a baseline capability is 

developed that is improved over time. Therefore, the BMDS has no fixed 

design or final architecture. Each evolution, or block, as MDA calls such 

increments, is meant to take advantage of advancing technology so that 

·

·

·

·

·

National Missile Defense-a system now known as Ground-based Midcourse 

Defense that is designed to protect the U.S. homeland by destroying 

intercontinental ballistic missiles. The program was originally executed by the 

Army. 

Terminal High Altitude Area Defense-a ground-based system designed to 

intercept short- and medium-range ballistic missiles. The program was formerly 

executed by the Army.

Aegis Ballistic Missile Defense-a ship-based system designed to intercept 

short- and medium-range ballistic missiles. The program was formerly executed 

by the Navy.

Airborne Laser-an air-based system designed to intercept ballistic missiles 

early in their flight through directed-energy (laser) intercepts. The program 

transferred into MDA from the Air Force.

Space Tracking and Surveillance System-a constellation of low-orbiting 

satellites designed to track missiles throughout their entire flight. The program 

transferred from the Air Force.

Source: GAO.
Page 5 GAO-05-817 Defense Acquisitions 

over time the BMDS is enhanced. MDA’s capabilities-based evolutionary 

approach to development is meant to provide a capability to the users as 

quickly as possible while also maintaining flexibility. MDA is in the 

process of developing the first BMDS block, which is known as Block 

2004. This block consists of the Ground-Based Midcourse Defense, Aegis 

Ballistic Missile Defense, Patriot Advanced Capability–3, and Command, 

Control, Battle Management, and Communications elements, as well as the 

Forward-Based X-Band Radar.4

The Secretary also established a procedure for making developmental 

assets available for operational use. On the basis of assessments of the 

BMDS’s military utility, progress in development, and a recommendation 

by the Director, MDA, and the military services, the Secretary, with input 

from the DOD Senior Executive Council, decides whether assets whose 

development is ongoing should be fielded.5

 When such a decision is made, 

the Secretary directed that the military departments provide forces to 

support the early fielding and budget resources to procure and operate the 

planned force structure. In December 2002, the President directed DOD to 

begin fielding an initial set of missile defense capabilities to meet the nearterm ballistic missile threat to our nation. MDA responded by emplacing 

Block 2004 developmental assets for use against limited attacks. However, 

the Secretary has not yet activated this capability by placing it on alert. 

The Secretary’s 2002 direction intended that acquisition of missile defense 

elements and components be completed in three phases. In the first phase, 

MDA develops ballistic missile defense elements and components using 

research, development, test, and evaluation funds. When appropriate, the 

MDA Director recommends and the Senior Executive Council approves 

the entry of an element or major component into the second phase, known 

as the transition phase. This phase allows the military services to prepare 

for the element’s or component’s transfer. During the third phase, a 

military service—using procurement, operation and maintenance, and 

personnel funds—procures, operates, and sustains the element or 

component. Figure 2 includes some of the activities, such as those carried 

 4

Block 2004 began in January 2004 and ends in December 2005. 

5

The Senior Executive Council is a committee established at the direction of the Secretary 

of Defense to provide policy, planning, and programming guidance; oversee DOD’s missile 

defense activities; and approve BMDS fielding recommendations. The council is chaired by 

the Deputy Secretary of Defense. 
Page 6 GAO-05-817 Defense Acquisitions 

out by the Joint Air and Missile Defense Organization (JTAMDO) 6 that 

DOD envisioned taking place during each of the three phases. 

Figure 2: Intended Model for Each Acquisition Phase 

Finally, the Secretary’s 2002 direction effectively allowed MDA to defer 

application of many of the requirements that are generally applied to the 

development of major systems under DOD’s traditional acquisition system 

regulations.7

 For example, the requirements for acquisition program 

baselines and independent cost estimates, generally applicable by statute 

to major defense acquisition programs and implemented by the DOD 

regulations, will not be applied until a BMDS element or component is 

 6

The Joint Air and Missile Defense Organization, which reports to the Joint Chiefs of Staff, 

is chartered to plan, coordinate, and oversee Joint Air and Missile Defense requirements, 

joint operational concepts, and operational architectures. 

7

DOD Directive 5000.1, The Defense Acquisition System; DOD Instruction 5000.2, 

Operation of the Defense Acquisition System, May 12, 2003. 

Technology/product 

research and development

·

·

·

·

MDA develops BMDS.

The Joint Air and Missile 

Defense Organization with 

Combatant Commanders and 

military services develops 

operational concepts and 

architecture.

The Joint Air and Missile 

Defense Organization leads 

effort to determine capability, 

suitability, and supportability 

features.

Military services begin 

coordination of production 

quantities and operational force 

levels.

Transition

·

·

·

·

Military services formalize 

capability-based Operational 

Requirements Document for 

element/component being 

transferred.

Military services lead effort to 

assess element's operational 

suitability. 

MDA and user community 

address logistics and 

maintenance support.

Military services support 

operational test and evaluation.

Procurement, operations,

and sustainment

·

·

·

·

Military services begin full-scale 

production. 

Military services operate and 

maintain element or major 

component. 

Combatant Commanders 

conduct and assess BMDS 

exercises. 

Combatant Commanders and 

military services identify desired 

operational capabilities for future 

increments.

Source: GAO.
Page 7 GAO-05-817 Defense Acquisitions 

transferred to a military service concurrent with Milestone C.8 Milestone C, 

the point at which a decision is made to begin initial production, is the 

point at which the service is to assume management and funding 

responsibility for an element or component of the BMDS. 

Once elements or components are transferred, the Secretary directed MDA 

to continue to fund modifications to fielded systems and to manage 

development activities for new missile defense capabilities.9

 The Secretary 

also gave MDA approval authority over any engineering changes that the 

military services might want to make to transferred BMDS elements. This 

process, known as configuration control, is meant to ensure that changes 

do not degrade the interoperability of the BMDS. 

MDA has recommended and DOD approved the transfer of one missile 

defense element to a military service since 2002. DOD transferred the 

Patriot Advanced Capability–3 program to the Army in 2003. MDA 

continues to exercise configuration control and provide funding for the 

development of Patriot Advanced Capability-3 missile defense-related 

upgrades.10

 8

Baseline descriptions and independent cost estimates, as well as other management and 

oversight requirements, are normally first required for Milestone B, the decision to enter 

system development and demonstration. However, because BMDS elements will not enter 

DOD’s acquisition cycle until Milestone C, these requirements may not be applied to the 

BMDS until the transition phase that leads to the transfer to a military service. We note that 

in the absence of the baselines required by DOD’s acquisition system regulations, Congress 

has required MDA to separately establish cost, schedule, and performance baselines for 

each block of the BMDS being fielded, including full life cycle costs. Ronald W. Reagan 

National Defense Authorization Act for Fiscal Year 2005 (P.L 108-375), sec. 234(e). 

9

MDA Business Management officials told us that MDA only expects to fund modifications 

that are directly attributable to the missile defense mission. 

10MDA is required by Section 232 of the 2005 Defense Authorization Act to maintain 

configuration control of the Patriot Advanced Capability-3/Medium Extended Air Defense 

System program as an element of the BMDS. 
Page 8 GAO-05-817 Defense Acquisitions 

In December 2002, the Under Secretary of Defense for Acquisition, 

Technology and Logistics established criteria for deciding when to transfer 

acquisition responsibility from MDA to the military services. The specified 

criteria are (1) testing demonstrates that an element or component is 

mature, (2) plans and resources are in place to ensure that facilities are 

available to support production, and (3) funds are programmed in DOD’s 

Future Years Defense Program to carry out production plans.11 After the 

Under Secretary established these criteria, one BMDS element—the 

Patriot Advanced Capability-3—was transferred to a military service. 

However, officials across DOD now recognize that the transfer criteria are 

neither complete nor clear and believe that revised criteria are needed for 

deciding to move an element or component into the transition phase. 

These officials told us that when the Under Secretary established transfer 

criteria in 2002, DOD did not fully understand the complexity of the BMDS 

and how it could affect transfer decisions. 

MDA’s Director testified earlier this year that MDA will use several models 

to transfer system elements to the military services and that it may not be 

appropriate to transfer some elements or components.12 In such cases, he 

envisions the services and MDA sharing responsibilities for the assets. 

Further, he said that MDA will continue to work with the Secretary of 

Defense, the military services, and the Combatant Commanders to arrange 

appropriate transfers on a case-by-case basis. 

There is currently uncertainty as to when and under what conditions DOD 

will transfer management and funding responsibility for elements and 

major components from MDA to the military services. The acquisition 

model directed by the Secretary in 2002 is now viewed by many in DOD as 

 11DOD’s Future Years Defense Program is a massive DOD database and internal accounting 

system that summarizes forces and resources associated with programs approved by the 

Secretary of Defense. The program is required by statute to be submitted to Congress each 

year with the President’s budget. It reflects the estimated expenditures and proposed 

appropriations included in that budget and also covers at least the four succeeding fiscal 

years. 

12Lieutenant General Henry A. Obering III, USAF, Director, Missile Defense Agency, 

presented this information in his statement before the Senate Committee on 

Appropriations, Subcommittee on Defense, regarding the Fiscal Year 2006 Defense 

Appropriations for Ballistic Missile Defense, May 11, 2005. 

DOD Established 

Transfer Criteria But 

Changes Are Being 

Considered 

MDA Contemplates a 

Revised Acquisition Model 
Page 9 GAO-05-817 Defense Acquisitions 

needing modifications to meet the evolving needs of a complex ballistic 

missile defense system. 

Although MDA began to emplace Block 2004 developmental assets for the 

warfighters’ potential use, it is not ready to transfer management 

responsibility for some of these assets to the military services. According 

to officials in MDA’s Business Management Office, continued management 

of some system elements and components by MDA may be necessary to 

fully develop the overall effectiveness of the BMDS. For example, if the 

missile-tracking capability of the Space Tracking and Surveillance System 

is going to be added to the BMDS, MDA will need to test it with other 

BMDS elements to determine how to make all elements work together 

most effectively. To do this, MDA believes it must have the authority to 

pull back elements or components that are fielded so that the elements 

and components can be utilized in developmental efforts. 

The MDA officials also indicated that full transfer of elements and 

components could threaten the priority that the President and DOD have 

given to missile defense. The officials told us that the military services 

could subordinate missile defense missions to service missions, funding 

service programs at the expense of the missile defense program. Service 

acquisition officials and officials in the Office of the Secretary of Defense 

agreed that the military services have many competing priorities and that 

should missile defense programs be transferred to a service, those 

programs would likely have to compete with service programs for 

procurement, operations, and sustainment funds. 

Officials in MDA’s transition office offered examples of how management 

and funding responsibility of elements and components currently in 

development might be handled. 

• Management responsibility for some elements and components might 

never be transferred to a military service because these assets are not 

integrated on service platforms or do not perform core service missions. 

Examples include the Cobra Dane radar, the Forward-Based X-Band 

radars, and the Sea-Based X-Band radar. MDA officials suggested that 

these components could be operated by either contractors or military 

personnel,13 and MDA might fund their operation and sustainment. 

 13We did not discuss with these officials potential legal issues associated with contractor 

operation of a component of a deployed weapons system. 
Page 10 GAO-05-817 Defense Acquisitions 

However, discussions are still ongoing as to whether these components 

will eventually be transferred to the military services. 

• MDA and a military service might be collaboratively involved in the 

management of other assets, such as the Airborne Laser, the Kinetic 

Energy Interceptor, the Space Tracking and Surveillance System, and 

Terminal High Altitude Area Defense because these elements are not yet 

technically mature and MDA needs to manage their development.14 The 

services will remain closely involved to provide feedback on the 

development process. As the capability of these elements is ready to be 

demonstrated, MDA will acquire them in limited quantities. For example, 

MDA plans to acquire two Terminal High Altitude Area Defense fire units, 

which include 48 missiles. If early tests are successful, MDA will turn the 

first fire unit over to the Army in 2009. The Army will operate it and 

provide feedback on its performance. Once any of these assets are 

available for operational use, MDA believes that the services should accept 

some responsibility for funding their operation and sustainment costs. 

Officials in MDA’s transition office told us that management responsibility 

for assets in this group may eventually be handed over to a military 

service. The officials said that the transition status of an element is a 

function of technical maturity, programmatic achievement, time, and 

relative stakeholder involvement. 

• Management and funding responsibility for other systems already have or 

likely will be transitioned to a military service because they have reached 

or are nearing technical maturity. As mentioned above, MDA transferred 

responsibility for the Patriot Advanced Capability-3 to the Army in 2003, 

and it is likely that in the future MDA will transfer responsibility for Aegis 

Ballistic Missile Defense to the Navy. Officials in MDA’s transition office 

told us that Aegis Ballistic Missile Defense is reaching technical maturity, 

as demonstrated by its being fielded operationally on Navy ships. The 

Navy is almost certain to accept responsibility for the Aegis missile 

defense capability because it is mounted on the Aegis ships. 

 14MDA initiated development of the Kinetic Energy Interceptor element in fiscal year 2003. 

It is being designed to attack ballistic missiles in the boost phase of their flight, while their 

motors are thrusting. 
Page 11 GAO-05-817 Defense Acquisitions 

Service acquisition officials told us that they need sufficient notice to 

prepare for a transfer and enough time to ensure that funds are available 

to produce, operate, and sustain the system. Several things have to be 

done for a service to operate and maintain a system. For example, 

personnel have to be assigned and trained, a command structure has to be 

organized, and facilities may have to be provided for the system and its 

operators. Also, because transferred elements of the BMDS will enter 

DOD’s acquisition cycle at Milestone C, other activities have to be 

completed in advance of the milestone to ensure compliance with DOD 

acquisition regulations. For example, the documentation required by the 

Chairman of the Joint Chiefs of Staff Capabilities Integration and 

Development System must be completed and an independent cost 

estimate must be obtained. Service officials estimated that it takes at least 

a year and a half to complete all of the tasks needed to meet Milestone C 

requirements of the DOD acquisition regulations. 

Sufficient advance notice is also needed for budgeting purposes. One DOD 

official said that until responsibilities are established and transition plans 

are in place, it is difficult for the services to plan their budgets. If transfers 

take place with little advance notice, DOD will either have to provide the 

services with additional funds for the production, operation, and 

sustainment of BMDS elements or direct the services to support the BMDS 

assets with funds reserved for service missions. In written comments on a 

draft of this report, DOD said that there is no basis to presume that 

programs will transfer from MDA to the services with insufficient notice 

because of the process established by the Secretary and described above. 

Early in 2005, an Integrated Product Team was established to develop 

transition plans. The team’s mission is to 

• specify management and funding responsibilities for MDA and the military 

services; 

• work out a strategy for establishing doctrine, planning an organizational 

structure and its leadership, developing training and materiel, and 

providing personnel and facilities; 

• provide appropriate notification for service budget requirements; 

• establish configuration control procedures; and 

• ensure mission success. 

Service Officials 

Emphasize Need for 

Sufficient Advance Notice 

of Transfers 

Work Begun to Develop 

Transfer Plans and Revise 

Criteria 
Page 12 GAO-05-817 Defense Acquisitions 

The team has conducted three meetings to date at the colonel and captain 

level and two at the general officer level. The inaugural meeting of 

colonels and captains was held on January 21, 2005. It was attended by 

almost 80 people who represented MDA, the Office of the Secretary of 

Defense, the military services, the U.S. Strategic Command, and the U.S. 

Northern Command. An MDA executive official chairs the team. Two more 

meetings (one at each level) are planned, along with numerous meetings 

of support working groups. 

Officials in MDA’s transition office told us that the team will draw up a 

broad plan, but it will include annexes tailored for each individual element 

or component. These annexes will specify the likely date that the element 

or component under consideration will be transferred; identify how MDA, 

the affected military service, and the combatant commander will share 

responsibilities; provide the status of existing contracts; identify funding 

requirements; and lay out tasks and milestones in the transfer process. 

MDA transition office officials also told us that the annexes may propose 

handovers from MDA to the services that are not as formal as the transfers 

originally envisioned by the Secretary of Defense. 

Each individual transition plan will be cosigned by MDA’s Director and a 

military service representative. However, DOD officials noted that the 

team will likely have disputes that can only be decided by officials in the 

Office of the Secretary of Defense. DOD and service acquisition officials 

expressed concern that although the Integrated Product Team members 

may be able to plan transition details, they likely will not be empowered to 

make major decisions or resolve major impasses. However, MDA 

transition office officials told us that the team’s objective is to secure 

agreement of transition and transfer plans at the lowest level possible. 

The Deputy for Ballistic Missile Defense, Missile Warfare Division, within 

the Office of the Under Secretary of Defense for Acquisition, Technology 

and Logistics, said that the current plan is to have the Missile Defense 

Support Group recommend solutions for impasses to the Under Secretary 

of Defense for Acquisition, Technology and Logistics. 15 The Under 

Secretary would then consider the support group’s recommendations, 

 15The Missile Defense Support Group includes representatives from the Joint Air and 

Missile Defense Organization; the DOD Comptroller’s Office; the Office of the Director, 

Operational Test and Evaluation; and other units across DOD. Its purpose is to advise 

MDA’s Director on such subjects as policy, operations, testing, acquisition, and resources. 
Page 13 GAO-05-817 Defense Acquisitions 

make any needed changes, and forward all transition/transfer plans to the 

Secretary of Defense for approval. According to the Deputy, the goal is to 

have DOD approve all transfer plans by December 31, 2005, so that 

direction is available to the appropriate DOD components as they begin 

preparing their 2008-2013 budgets. 

In July 2005, the Director, Joint Staff, directed the Joint Staff’s Deputy for 

Force Protection to establish a team to recommend revised criteria for 

making transfer decisions. The team members told us that the impetus for 

their study was the Integrated Product Team’s difficulties in determining 

when and under what conditions military services should take 

responsibility for some BMDS components. They said that the military 

services are not eager to receive components, such as the Sea-Based XBand Radar, Forward-Based X-Band Radar, and the Cobra Dane Radar, 

that do not provide a capability that furthers the military services’ core 

missions. The team, which expects to complete its work by December 31, 

2005, expects to work with the Integrated Product Team and the Missile 

Defense Support Group. 

In 2002, the Secretary of Defense directed the military services to budget 

the resources to procure and operate the planned force structure for an 

early missile defense capability. However, MDA and the military services 

continue to disagree as to which organization should pay, after 2005, for 

operating and sustaining developmental assets even though the assets may 

be available for operational use. Additionally, DOD has not yet determined 

the full cost of procuring, operating, and sustaining the BMDS from 2006 

through 2011, and it has not included all known costs in its budget. Until 

DOD decides which organization will fund these costs, the services will 

likely continue to provide only the funding that they are directed to make 

available, and some needs, which neither MDA nor the services have 

planned for, will probably go unfunded. Additionally, if the funds budgeted 

for some purposes, such as logistical support for the BMDS, turn out to be 

insufficient, DOD will either have to take funds from other programs or 

spend less on missile defense. 

DOD reports that it will spend $68.5 billion between fiscal years 2005 and 

2011 to develop, acquire, and support missile defense capabilities, 

including an initial capability emplaced in 2004-2005 that can be used in 

the event of an emergency. MDA has been authorized by statute to use 

research and development funds for this purpose. Table 1 identifies the 

MDA and the Military 

Services Disagree on 

Funding 

Responsibilities 
Page 14 GAO-05-817 Defense Acquisitions 

DOD components that have budgeted funds for missile defense activities 

through 2011. 

Table 1: Total Planned Expenditures for Missile Defense, Fiscal Years 2005-2011 

In millions of then-year dollars 

DOD component 

Research, 

development,test 

& evaluation Procurement

Operation and 

maintenance

Military 

construction 

Military

personnel Total

MDA $66,458 $69 $66,527

Air Force $59 $174 $46 $279

Army $475 $475

Army National Guard $941 $165 $1,106

Navy $144 $144

Total $66,458 $59 $1,734 $69 $211 $68,531

Source: DOD Fiscal Year 2006/2007 Budget Estimates, Research, Development, Test, and Evaluation, Defense-Wide, Volume 2, 

Missile Defense Agency. 

In fiscal year 2005, MDA budgeted $1.5 billion of its research and 

development funds to acquire interceptors and radars and to upgrade 

various BMDS elements or components. It expects to continue to acquire 

and upgrade BMDS assets through 2011. Table 2 shows planned funding by 

fiscal year. 

Table 2: Research, Development, and Test Funds Devoted to Acquiring Missile Defense Capabilities 

In billions of then-year dollars

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Total

$1.055 $1.754 $2.490 $2.085 $1.987 $1.201 $10.572

Source: MDA, Fiscal Year 2006 Staffer Day Overview. 

A complete list of all assets that MDA is acquiring during Block 2004 and 

plans to acquire or enhance from 2006-2011 is provided in table 3. 

MDA Is Using RDT&E 

Funds to Acquire BMDS 

Components 
Page 15 GAO-05-817 Defense Acquisitions 

Table 3: Elements or Components MDA Plans to Acquire or Upgrade for Fielding between 2004 and 2011 

Element or component being acquired or 

upgraded for fielding 

Quantity to be acquired or upgraded 

for fielding during Block 2004

Quantity to be acquired or upgraded for 

fielding from 2006 to 2011

Terminal High Altitude Area Defense Element 0 2 fire units, each with an inventory of 24 

missiles

Aegis Ballistic Missile Defense’s Standard 

Missile-3 

 8 93 missiles

Ground-Based Midcourse Defense Element’s 

Interceptor 

14 30 interceptors 

Sea-Based X-Band Radar 1 0

Forward-Based X-Band Radar 1 3

Upgrades to Early Warning Radar located at 

various sites 

 2 1

Discrimination X-Band Radar 0 3

Upgrade of Aegis Cruiser to allow 

engagement of ballistic missiles 

 2 1

Upgrade of Aegis Destroyers to allow 

engagement of ballistic missiles 

 0 15

Source: MDA and the military services. 

Although the elements or components shown in table 3 will be available to 

provide an increased missile defense capability, officials within MDA’s 

transition office told us that responsibility for acquiring them will not be 

transferred to a military service. For example, MDA is acquiring two 

Terminal High Altitude Area Defense fire units, including 48 missiles. The 

fire units will be made available to the Army so that soldiers can operate 

Terminal High Altitude Area Defense to provide feedback on its 

development and to defend against short- and medium-range ballistic 

missiles in the event of an emergency. Should the Army, or any other 

military service that has received a developmental asset, need additional 

units of an element or larger quantities of some components—for 

example, should the Army need more Terminal High Altitude Area Defense 

fire units or missiles—the officials suggested that the military service 

should be responsible for acquiring them. In addition, MDA would expect 

the services to budget funds for any common support equipment required 

for the elements that MDA is acquiring. For example, according to MDA’s 

Terminal High Altitude Area Defense Program Office, it expects the Army 

to purchase trucks needed to move the two Terminal High Altitude Area 

Defense fire units’ radar, launchers, and generators. 

However, no military service has budgeted funds for procurement of 

elements or components, and only the Air Force has included funds in its 
Page 16 GAO-05-817 Defense Acquisitions 

budget for support equipment. An official in the Air Force’s Missile 

Warning and Defense Office within the Office of the Deputy Chief of Staff 

for Air and Space Operations told us that the Air Force included 

approximately $59 million in its fiscal year 2006-2011 budgets to acquire 

and sustain devices that detect incursions at Vandenberg Air Force Base 

and to improve test equipment for upgraded early-warning radars located 

at Beale (California) Air Force Base and at Fylingdales Air Force Station in 

the United Kingdom. However, the official told us that the cost of 

acquiring and sustaining the detection devices and the test equipment is 

expected to exceed planned funding. Further information on Air Force 

officials’ concerns with MDA’s plan for funding procurements is discussed 

in appendix 1. 

While the Army has not budgeted funds for support equipment, it has 

provided equipment from inventory to support the Ground-based 

Midcourse Defense element that MDA has emplaced at Fort Greely. An 

official from the Army’s Air and Missile Defense/Space Division within the 

Office of the Assistant Secretary for Acquisition, Logistics and Technology 

told us that the Army, Army National Guard, and National Guard Bureau 

provided equipment, such as trucks, radios, and machine guns, from 

inventory to support the Ground-Based Midcourse Defense element. 

Additionally, pending Terminal High Altitude Area Defense test results and 

Senior Executive Council decisions, the official told us that the Army 

expects to include funds in its fiscal year 2008-2013 budgets for Terminal 

High Altitude Area Defense common support equipment. 

The military services are currently paying for most of the personnel who 

operate the missile defense assets. For example, an Army National Guard 

unit operates Ground-Based Midcourse Defense components located at 

Fort Greely, and Navy sailors operate the Aegis Ballistic Missile Defense 

element. The cost to the military services of operating these missile 

defense elements is not easily discernable because it is intermingled with 

other operation and sustainment costs. However, Army officials told us 

that the Army is providing about $2.4 million for missile defense 

operations in fiscal year 2005 and expects to incur an additional cost of 

$23.3 million for this purpose between fiscal years 2006 and 2011. Navy 

officials told us that at this time the missile defense mission does not 

create additional personnel cost because the same sailors who stand 

watch in the combat information center to support conventional anti-air 

warfare missions also support the ballistic missile defense mission. 

Additionally, the Air Force has not identified any additional personnel cost 

Military Services Fund 

Costs for Most Personnel 

Operating BMDS Assets 
Page 17 GAO-05-817 Defense Acquisitions 

between 2006 and 2011 to operate upgraded early warning radar for the 

missile defense mission. 

Officials in MDA’s transition office told us that in the future MDA may use 

some of its research and development funds to operate major components 

that are bought in small quantities. The officials suggested that 

components such as the Forward-Based X-Band and Sea-Based X-Band 

radar, which may never be transferred to a military service, could be 

operated by contractor personnel who, at least through 2011, would be 

paid from funds set aside for contractor logistics support. 

In fiscal year 2005, MDA and the military services shared sustainment 

costs. These costs are incurred for (1) logistics support, which includes 

the services and materiel needed to support the fielded BMDS; 

(2) installation support and services costs, which are all of the additional 

costs incurred by an installation (or base) to support a resident tenant; and 

(3) other supplies, such as fuel and lubricants. 

Sustainment costs are generally one of the largest contributors to a 

weapon’s life-cycle cost because weapon systems are usually in the field 

for years and require support during this time. Together, operation, 

maintenance, and disposal costs typically account for about 72 percent of 

the total cost of a weapon system.16 However, MDA does not believe that 

this percentage can be used to estimate the sustainment cost of BMDS 

elements or components because MDA Program Officials expect fielded 

assets will be updated and improved more quickly than standard DOD 

weapon systems. If this proves true, an element or component may be in 

the field for only a few years before it is replaced with an enhanced 

configuration. But regardless of the length of time each configuration is in 

use, DOD will incur sustainment cost because each configuration must be 

sustained. 

In December 2003, DOD’s Program Decision Memorandum III directed 

MDA to assume all fiscal year 2005 and 2006 costs for materials and 

services needed to support the operation of primary BMDS mission 

equipment, critical spares, and standard military equipment. MDA is 

paying prime contractors, who are developing the elements that will be 

 16GAO, Best Practices: Setting Requirements Differently Could Reduce Weapon Systems’ 

Total Ownership Costs, GAO-03-57 (Washington, D.C.: Feb. 11, 2003). 

MDA and Military Services 

Are Presently Sharing 

Sustainment Costs 

Contractors to Provide 

Logistics Support 
Page 18 GAO-05-817 Defense Acquisitions 

available for limited use, to provide this support in fiscal year 2005. For 

example, MDA has contracted with the Boeing Company to provide 

logistics support for the Ground-Based Midcourse Defense element. 

Transition office officials told us that they plan to continue this 

arrangement through 2011. 

However, MDA cannot be sure that the funds set aside for logistics 

support will provide all of the material and services needed. Reliability and 

maintainability are key factors in the design of affordable and supportable 

systems. Generally reliability growth is the result of an iterative design, 

build, test, analyze, and fix process.17 However, officials in MDA’s Business 

Management Office told us that because they have limited experience with 

the systems being fielded, they cannot estimate how often parts will break 

or how much repairs will cost. Additionally, as noted in table 3, MDA plans 

to add assets to its limited capability during this time frame, and as the 

quantity of assets increases, the cost of logistics support can be expected 

to grow. 

By 2007, MDA hopes to better understand the cost of logistics support. To 

gain this understanding, MDA has directed the contractors to collect and 

report reliability data, including data on the frequency of breakdowns and 

the cost of repairs. 

In fiscal year 2005, MDA and the military services are sharing the 

additional cost that the military services are incurring because BMDS 

elements or components and the personnel who work with them have 

been placed on military bases. Generally, a tenant on a military base is 

expected to reimburse its host (the military service whose base the tenant 

is occupying) for additional base support costs incurred because the 

tenant is in residence.18 For example, the tenant is expected to reimburse 

the host for the additional cost of communications services, lodging, and 

utilities. However, DOD’s Program Decision Memorandum III directed the 

Army and Air Force to assume some installation costs related to missile 

defense. The Memorandum directed the Army to provide funds for Fort 

 17GAO, Best Practices: Capturing Design and Manufacturing Knowledge Early Improves 

Acquisition Outcomes, GAO-02-701 (Washington, D.C.: July 15, 2002). 

18DOD Instruction 4000.19 provides that a DOD activity requesting support from an 

interservice host reimburse the host for the incremental direct cost of the services 

provided. 

MDA and the Services Are 

Jointly Funding Installation 

Support and Services Costs 
Page 19 GAO-05-817 Defense Acquisitions 

Greely installation costs and training, and the Air Force to fund additional 

security forces and infrastructure at Vandenberg Air Force Base.19

To address the DOD memorandum’s directions, the Army is supporting 

soldiers stationed at Fort Greely to operate deployed missile defense 

assets. This support includes providing mail services, health and food 

services, and chaplain services. The Army budgeted $42 million in fiscal 

year 2005 for these purposes and estimates that it will need about 

$402.7 million more between fiscal years 2006 and 2011. 

According to an official in the Air Force Missile Warning and Defense 

Office, the Air Force included some funds in its fiscal year 2006 budget to 

procure and install detection devices at Vandenberg Air Force Base as 

directed by the memorandum. The official said funds were also included in 

the budgets for the following fiscal years (2007-2011) to sustain the 

devices. However, the official told us that a new cost estimate shows that 

it is likely to cost more to procure and install the devices than first 

estimated. Without the detection devices, Air Force officials estimate that 

additional security personnel will be needed, but funds for these personnel 

are not included in the Air Force’s budget. Because the Air Force has not 

added all security forces needed, the security at Vandenberg is not at the 

level directed by U.S. Strategic Command. Additionally, because the Air 

Force had no funds set aside in fiscal year 2005 for missile defense active 

duty security personnel, the Air Force is mostly relying upon Air Reserve 

volunteers to provide some additional security for missile defense assets 

located at Vandenberg and Schriever Air Force Bases.20

MDA is paying for other installation services and support costs that the 

DOD memorandum did not direct the military services to fund. 

Agreements have been finalized with the Army for installation services and 

support at Fort Greely and with the Air Force for services and support at 

Vandenberg and Schriever Air Force Bases and Eareckson Air Station. 

Table 4 exhibits the costs MDA has agreed to pay at each of the bases in 

fiscal year 2005. 

 19Program Decision Memorandum III also directed the Navy to provide funds for additional 

ship operations, training, and contractor support. The Navy addressed the Memorandum’s 

direction by programming funds for maintenance of missile defense software and the ships’ 

fuel when it conducts missile defense missions. It is also conducting training to certify 

crews for this new mission. 

20Schriever Air Force Base houses a missile defense command and control suite. 

MDA Pays Most Installation 

Services and Support Costs in 

2005 
Page 20 GAO-05-817 Defense Acquisitions 

Table 4: The Fiscal Year 2005 Cost of MDA’s Support Agreements 

Dollars in millions 

Installation Host 

Cost to be recovered 

from MDA 

Fort Greely Army $5.53

Vandenberg Air Force Base Air Force $1.89

Eareckson Air Station Air Force $9.80a

Other Air Force facilities Air Force $2.21

Source: MDA. 

a

Appendix II provides information on the disagreement between MDA and the Air Force as to which 

organization should pay support costs at Eareckson Air Station. 

The 2003 Program Decision Memorandum directed the military services, 

combatant commands, and MDA to continue to refine fiscal years 2006-

2011 missile defense operation and support requirements and costs. The 

memorandum also directed MDA and the military services to budget for 

those costs, but it did not clarify which costs would be assumed by each 

organization. An official in MDA’s transition office told us that MDA 

included funds in its 2006-2011 budgets for costs similar to those paid in 

fiscal year 2005. However, the official pointed out that the Military Service 

Deputies for Operations are examining whether MDA should pay any 

operations and sustainment costs, other than contractor logistics costs, 

after fiscal year 2005. Additionally, MDA proposes that the military 

services assume contractor logistics costs beginning in 2012. 

However, in February 2005, the Deputies for Operations from the three 

military services involved met to develop a coordinated position on the 

services’ roles and missions for missile defense. The Deputies concluded 

that the services should not incur operation and support costs for fielded 

missile defense elements or components until a transition plan for those 

elements or components is successfully executed. 

We talked to acquisition officials in each of the three services involved in 

operating the BMDS about their services’ views on paying future operation 

and sustainment costs for assets that have not been transferred. 

• Navy officials believe that ongoing transition discussions will determine 

which Aegis Ballistic Missile Defense components are sufficiently mature 

for the Navy to assume the cost of their operation and sustainment. The 

officials pointed out that the Navy addressed the Program Decision 

Memorandum III. However, it is the Navy’s position that a transfer 

decision should precede the Navy’s assumption of future operation and 

MDA and the Services Disagree 

On Responsibility for Operation 

and Sustainment Costs 
Page 21 GAO-05-817 Defense Acquisitions 

sustainment costs. The Navy expects MDA to maintain the Standard 

Missile-3 until it is transferred to the Navy and to procure all Aegis 

Ballistic Missile Defense equipment, including any support equipment, 

through 2011. Additionally, the officials told us that the Navy does not 

expect to incur any support costs for the Sea-Based X-Band radar that will 

support the Ground-Based Midcourse Defense element when it is fielded. 

• Air Force officials told us that the Air Force should not incur any 

operation and sustainment costs after 2005 unless a decision is made to 

transfer an element or component to the Air Force. An official in the Air 

Force’s Missile Warning and Defense Office said that only MDA, which is 

developing and deploying the elements and components, can control or 

plan for operations and sustainment costs. Furthermore, the official said 

that transition plans can best be made after assets have been deployed, 

costs are known, military utility is verified, and capabilities have been 

evaluated. He told us that this approach would provide programming 

structure and cost transparency. 

• The Army is willing to assume some costs associated with supporting the 

initial missile defense capability. An official in the Army’s Air and Missile 

Defense/Space Division told us that the Army is willing to continue to 

budget for the cost of operating this capability, supporting soldiers that 

perform a missile defense mission, and for common support equipment for 

fielded assets. However, the official said that the Army would not want to 

assume the maintenance costs of elements or major components until 

those assets are transferred to the Army. The official said that the Army 

usually maintains its own equipment and that as long as an asset is in 

development the Army would not have an inventory of spare parts to make 

repairs. Neither would it have engineers, or maintenance personnel with 

an equivalent level of expertise, to make the repairs. 

The military services are uncertain as to which missile defense assets may 

eventually be transferred to them and under what conditions those 

transfers may occur. This uncertainty makes it difficult for the services to 

plan the activities that are necessary to apply the requirements of DOD 

acquisition system regulations and to consider how to best realign their 

budgets to support the missile defense mission. DOD needs to establish 

clear and complete transfer criteria to better guide those making the 

difficult decisions for allocating management and funding responsibilities 

for missile defense assets. 

DOD also needs to clarify whether MDA or the services will be responsible 

for sustaining missile defense capabilities that have not been transferred 

Conclusions 
Page 22 GAO-05-817 Defense Acquisitions 

to the services. The Secretary’s direction did not clearly spell out whether 

MDA or the military departments would be responsible for sustaining the 

early capability, and it is this cost that has become most contentious. If 

sustainment costs are much higher than expected and the number of 

assets being made available to the warfighter grows, as MDA expects, the 

use of research and development dollars to procure and sustain a missile 

defense capability will begin to affect MDA’s primary mission of 

developing new capabilities and enhancing existing ones. On the other 

hand, the military services will not want to fund the operation and 

sustainment of a missile defense capability if its cost cannot be accurately 

estimated. Nor will they want to fund the capability if they are not given 

the time to determine how to do so with the least impact on service 

missions. While the team established by MDA to develop transition plans 

includes working-level representatives from MDA, the military services, 

and the combatant commands, it will be difficult to reach full agreement 

as to who should pay sustainment costs for these assets because the 

representatives do not have the authority to make binding financial 

decisions for their organizations. MDA and the services may continue to 

disagree as to which component will bear sustainment costs for the early 

capability until DOD directs one or the other to do so. Because the 

services and MDA will begin to plan their 2008-2013 budgets in 2006, a 

decision as to who will fund these costs should be made in time for the 

budget deliberations. 

We recommend that the Under Secretary of Defense for Acquisition, 

Technology and Logistics revise the criteria for deciding when 

management and funding responsibility for missile defense assets should 

be transferred from MDA to a military service so that those criteria are 

clear and complete. 

We also recommend that the Secretary of Defense ensure that a decision is 

made as to which DOD organization will fund the operation and 

sustainment of missile defense assets that are part of the initial defensive 

capability but have not been transferred from MDA to a military service 

and direct that organization, or those organizations, to budget for those 

costs. 

In written comments on a draft of this report (see app. III), DOD agreed 

that the criteria for making decisions to transfer missile defense assets 

from MDA to the services must be clear. Our draft report had 

recommended that the Secretary of Defense direct the Under Secretary of 

Recommendations 

Agency Comments 

and Our Evaluation 
Page 23 GAO-05-817 Defense Acquisitions 

Defense for Acquisition, Technology, and Logistics to revise the criteria. In 

its comments, DOD stated that the Secretary of Defense did not need to 

provide additional direction to the Under Secretary. We accepted this view 

and, accordingly, revised the recommendation’s wording in the final 

report. 

DOD also agreed with the need to settle, as soon as possible, the issue as 

to which component will fund the operation and sustainment of missile 

defense assets that are part of the initial defensive capability. DOD said 

this issue would soon be resolved without the Secretary taking additional 

action. We continued to address our final report’s recommendation to the 

Secretary because if the services and MDA can not agree about which 

organization(s) should pay for these costs, the decision may have to be 

elevated to the Secretary’s level. 

We are sending copies of this report to the Chairmen and Ranking 

Minority Members of the Senate Committee on Armed Services; the Senate 

Committee on Appropriations, Subcommittee on Defense; the House 

Committee on Armed Services; and the House Committee on 

Appropriations, Subcommittee on Defense; the Secretary of Defense; and 

the Director, Missile Defense Agency. We will 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. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-4841 or levinr@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix IV. 

Robert E. Levin 

Director, Acquisition and 

 Sourcing Management 
Appendix I: Air Force Officials Concerned 

with Some MDA Funding Plans 

Page 24 GAO-05-817 Defense Acquisitions 

Air Force Space Command officials are concerned that the Missile Defense 

Agency (MDA) is not providing funds to purchase test equipment for 

upgraded early-warning radars. According to the officials, without the test 

equipment, the operation of upgraded early-warning radars could be 

degraded. 

Air Force Space Command officials told us that a system programming 

agency is needed to support software and hardware changes to the Beale 

and Fylingdales early-warning radars once they are upgraded. A system 

programming agency consists of multiple strings of computers and 

peripherals that can emulate the unique aspects of the radar’s operating 

system and is used to maintain, modify, and test software and hardware 

changes prior to those changes being made to the operational radar. The 

Air Force currently has a system programming agency in place to support 

hardware and software development for the early-warning radar. 

However, neither MDA nor the Air Force has included funds in their 

budgets to establish a system programming agency for the upgraded Beale 

and Fylingdales radars. 

Space Command officials told us that a system programming agency is of 

particular importance because the upgraded early-warning radar is very 

dependent on commercial off-the-shelf equipment that often has a short 

life cycle. If a computer or radar replacement part is needed, there is no 

certainty that the part available will be compatible with other parts 

installed in the radar or its operating system. The officials said that if a 

replacement part operates nanoseconds faster or slower than the old part, 

the radar could fail or possibly generate false missile reports. 

An official in the Air Force’s Missile Warning and Defense Office told us 

that the Air Force included funds in its 2008-2011 budgets to upgrade the 

system programming agency so that its hardware and software would 

always be identical to the software and hardware in the operational radar. 

However, the official said that the Air Force believed that MDA planned to 

pay for the system programming agency’s development cost and that the 

funds budgeted by the Air Force are not sufficient to both create and 

sustain an upgraded early-warning radar system programming agency. 

Space Command officials told us that the system programming agency 

could cost as much as $88 million. Without the system programming 

agency, the officials said changes will be made directly to the operational 

radar, decreasing its operational availability and increasing operational 

risks. In a written response to a draft of this report, MDA officials said that 

Appendix I: Air Force Officials Concerned 

with Some MDA Funding Plans 

Air Force Believes 

Radar Test Equipment 

Is Needed 
Appendix I: Air Force Officials Concerned 

with Some MDA Funding Plans 

Page 25 GAO-05-817 Defense Acquisitions 

MDA has not agreed to fund a system programming agency for upgraded 

early-warning radar as the Air Force has requested. 
Appendix II: MDA and the Air Force Disagree 

as to Which Should Pay Eareckson Support 

Costs 

Page 26 GAO-05-817 Defense Acquisitions 

During much of fiscal year 2005, MDA and the Air Force disagreed as to 

which organization should pay the additional costs being incurred at 

Eareckson Air Station in support of the missile defense mission. While 

MDA eventually agreed to pay all fiscal year 2005 costs, no agreement has 

been reached for subsequent fiscal years. Both MDA and the Air Force 

predict that costs at Eareckson will again be a contentious issue in fiscal 

year 2006. 

The Air Force maintains that Program Decision Memorandum III did not 

direct the Air Force to provide security forces and infrastructure for the 

missile defense mission at Eareckson. Therefore, the Air Force’s position 

is that the additional costs being incurred at Eareckson should be paid by 

MDA. Officials in the Air Force’s Missile Warning and Defense Office told 

us that Eareckson is populated entirely with contractor personnel who 

operate and maintain the Cobra Dane radar in its intelligence-gathering 

role. The Air Force maintains a small diversionary air strip at the base, but 

it does not have any military personnel located there. The officials said 

that the Air Force is the administrator for the Eareckson Air Station 

contract, but the intelligence community reimburses the Air Force for the 

station’s operations costs. The officials said that MDA should pay the costs 

incurred at Eareckson that are directly attributable to the missile defense 

mission, just as the intelligence community pays all costs attributable to its 

mission. 

Conversely, MDA maintains that omitting Eareckson from the Program 

Decision Memorandum was an oversight. However, an official in the 

Department of Defense’s (DOD) Comptroller’s Office told us that DOD 

always intended that MDA pay normal installation support and services 

cost at Eareckson. DOD recognized that Eareckson is an unusual base 

because the Air Force does not maintain a presence there. For the first 

two quarters of fiscal year 2005, MDA paid the additional costs that the Air 

Force incurred because missile defense contract personnel were located 

on the base and because the number of security personnel was increased 

to protect the missile defense mission. However, for the first 7 months of 

fiscal year 2005, MDA and the Air Force continued to disagree as to which 

party would pay installation support and services cost for the last two 

quarters of fiscal year 2005. In May 2005, MDA agreed to assume these 

costs. MDA transition office officials said that the issue of Eareckson 

support costs would be raised again in fiscal year 2006. 

MDA officials told us that Eareckson installation support and services cost 

will continue to be an issue because MDA is being asked to pay costs that 

are normally paid by the installation’s host and that MDA is not paying at 

Appendix II: MDA and the Air Force Disagree 

as to Which Should Pay Eareckson Support 

Costs 
Appendix II: MDA and the Air Force Disagree 

as to Which Should Pay Eareckson Support 

Costs 

Page 27 GAO-05-817 Defense Acquisitions 

other bases with which it has agreements. For example, the host typically 

provides fire protection for the base and the tenant would only pay the 

additional cost created by the tenant’s residency. However, at Eareckson, 

MDA is being asked to pay a portion of the cost that the Air Force is 

incurring to provide a basic fire protection capability. The officials said 

that they fear the Eareckson installation support and services agreement 

could establish a precedent that the military services could insist on 

following at other bases where missile defense assets are located. Should 

this happen, MDA officials contend that MDA would, in effect, be 

supplementing the military services’ operation and maintenance budget. 
Appendix III: Comments from the Department 

of Defense 

Page 28 GAO-05-817 Defense Acquisitions 

Appendix III: Comments from the 

Department of Defense 
Appendix III: Comments from the Department 

of Defense 

Page 29 GAO-05-817 Defense Acquisitions 
Appendix III: Comments from the Department 

of Defense 

Page 30 GAO-05-817 Defense Acquisitions 
Appendix IV: GAO Contacts and Staff 

Acknowledgments 

Page 31 GAO-05-817 Defense Acquisitions 

Robert E. Levin (202) 512-4841 or levinr@gao.gov 

In addition to the contact named above, Barbara Haynes, Assistant 

Director; David Hand; Mary Quinlan; Adam Vodraska, and Karen Sloan 

made key contributions to this report. 

Appendix IV: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Acknowledgments 

(120379) 
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