United States Government Accountability Office

GAO Testimony 

Before the Committee on Armed 

Services, U.S. Senate

DEFENSE ACQUISITIONS

Better Weapon Program 

Outcomes Require 

Discipline, Accountability, 

and Fundamental Changes 

in the Acquisition 

Environment 

Statement of Katherine V. Schinasi, Managing Director 

Acquisition and Sourcing Management 

For Release on Delivery

Expected at 9:30 a.m. EDT

Tuesday, June 3, 2008

 

GAO-08-782T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 3, 2008

DEFENSE ACQUISITIONS

Better Weapon Program Outcomes Require 

Discipline, Accountability, and Fundamental Changes

Highlights of GAO-08-782T, a testimony in the Acquisition Environment 

before the Committee on Armed Services, 

U.S. Senate 

Since 1990, GAO has designated the 

Department of Defense’s (DOD)

management of major weapon 

system acquisitions a high risk 

area. DOD has taken some action

to improve acquisition outcomes, 

but its weapon programs continue 

to take longer, cost more, and 

deliver fewer capabilities than

originally planned. These persistent

problems—coupled with current 

operational demands—have 

impelled DOD to work outside of

its traditional acquisition process 

to acquire equipment that meet

urgent warfighter needs.

Poor outcomes in DOD’s weapon

system programs reverberate 

across the entire federal

government. Over the next 5 years, 

DOD plans to invest about

$900 billion to develop and procure

weapon systems—the highest level

of investment in two decades. 

Every dollar wasted on acquiring 

weapon systems is less money 

available for other priorities. 

This testimony describes DOD’s 

current weapon system investment

portfolio, the problems that 

contribute to cost and schedule 

increases, and the potential

impacts of recent legislative 

initiatives and DOD actions aimed 

at improving outcomes. It also 

provides some observations about

what is needed for DOD to achieve

lasting reform. The testimony is 

drawn from GAO’s body of work on

DOD’s acquisition, requirements, 

and funding processes, as well as

its most recent annual assessment

of selected DOD weapon programs. 

DOD’s portfolio of weapon system programs has grown at a pace that far 

exceeds available resources. From 1992 to 2007, the estimated acquisition 

costs remaining for major weapons programs increased almost 120 percent, 

while the annual funding provided for these programs only increased 57 

percent. Current programs are experiencing, on average, a 21-month delay in 

delivering initial capabilities to the warfighter—often forcing DOD to spend 

additional funds on maintaining legacy systems. 

Systemic problems both at the strategic and at the program level underlie cost 

growth and schedule delays. At the strategic level, DOD’s processes for 

identifying warfighter needs, allocating resources, and developing and 

procuring weapon systems—which together define DOD’s overall weapon 

system investment strategy—are fragmented and broken. At the program 

level, weapon system programs are initiated without sufficient knowledge 

about system requirements, technology, and design maturity. Lacking such 

knowledge, managers rely on assumptions that are consistently too optimistic, 

exposing programs to significant and unnecessary risks and ultimately cost 

growth and schedule delays. At the same time, frequent turnover of program 

managers and an increased reliance on contractors increases the 

government’s risk of losing accountability. 

Recognizing the need for more discipline and accountability in the acquisition 

process, Congress recently enacted legislation part of which requires decisionmakers to certify that programs meet specific criteria at key decision points 

early in the acquisition process. Likewise, DOD has recently begun to develop

several initiatives that are based in part on congressional direction and GAO 

recommendations. If adopted and implemented properly, these measures 

could provide a foundation for establishing a well balanced investment 

strategy, sound business cases for major weapon system acquisition 

programs, and a better chance to spend resources wisely. 

While legislation and policy revisions can help guide change, DOD must begin

making better choices that reflect joint capability needs and match 

requirements with resources or the department will continue to

experience poor acquisition outcomes. DOD investment decisions continue 

to be dictated by the services who propose programs that overpromise 

capabilities and underestimate costs to capture the funding needed to start 

and sustain development programs. The transitory nature of leadership 

further undermines successful reform. To better ensure warfighter 

capabilities are delivered when needed and as promised, incentives must 

encourage a disciplined, knowledge-based approach, and a true partnership 

with shared goals must be developed among the department, the military 

services, the Congress, and the defense industry. 

To view the full product, including the scope 

and methodology, click on GAO-08-782T. 

For more information, contact Katherine V. 

Schinasi at (202) 512-4841 or 

schinasik@gao.gov. 
Mr. Chairman and Members of the Committee: 

I am pleased to be here today to discuss the Department of Defense’s 

(DOD) management of its major weapon system acquisitions—an area that 

has been on GAO’s high risk list since 1990. Prior to and since that time, 

Congress and DOD have continually explored ways to improve acquisition 

outcomes without much to show for their efforts. DOD’s major weapon 

system programs continue to take longer, cost more, and deliver fewer 

quantities and capabilities than originally planned. Current operational 

demands have highlighted the impact of these persistent problems as DOD 

has been forced to work outside of its traditional acquisition process to 

acquire equipment that meet warfighter needs. 

Investment in weapons acquisition programs is now at its highest level in

two decades. The department expects to invest about $900 billion (fiscal 

year 2008 dollars) over the next 5 years on development and procurement 

with more than $335 billion invested specifically in major defense 

acquisition programs. Given the size of this investment, poor outcomes in 

DOD’s weapon system programs reverberate across the entire federal 

government. Every dollar wasted during the development and acquisition 

of weapon systems is money not available for other internal and external

budget priorities—such as the war on terror and mandatory payments to 

growing entitlement programs. 

My statement today is drawn from our body of work on DOD’s acquisition, 

requirements, and funding processes, as well as our annual assessment of 

selected DOD weapon programs. As you requested, I will focus on 

(1) the performance of DOD’s major defense acquisition program 

portfolio; (2) the underlying systemic problems that contribute to poor 

cost and schedule outcomes; (3) recent legislative initiatives and DOD 

actions aimed at addressing these problems; and (4) the extent to which 

those initiatives and actions can be expected to improve the future 

performance of DOD’s major defense acquisition programs. Our work was 

conducted in May 2008 in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives. 

Page 1 GAO-08-782T 
Since fiscal year 2000, DOD significantly increased the number of major 

defense acquisition programs and its overall investment in them. During 

this same time period, acquisition outcomes have not improved. Based on

our analysis, total acquisition costs for the fiscal year 2007 portfolio of 

major defense acquisition programs increased 26 percent and

development costs increased by 40 percent from first estimates—both of 

which are higher than the corresponding increases in DOD’s fiscal year 

2000 portfolio. In most cases, the programs we assessed failed to deliver 

capabilities when promised—often forcing warfighters to spend additional 

funds on maintaining legacy systems. Our analysis shows that current 

programs are experiencing, on average, a 21-month delay in delivering 

initial capabilities to the warfighter, a 5-month increase over fiscal year 

2000 programs. 

Summary 

Several underlying systemic problems at the strategic level and at the 

program level continue to contribute to poor weapon system program 

outcomes. At the strategic level, DOD does not prioritize weapon system 

investments and the department’s processes for matching warfighter 

needs with resources are fragmented and broken. Furthermore, the 

requirements and acquisition processes are not agile enough to support 

programs that can meet current operational requirements. At the program 

level, programs are started without knowing what resources will truly be 

needed and are managed with lower levels of product knowledge at 

critical junctures than expected under best practices standards. In the 

absence of such knowledge, managers rely heavily on assumptions about 

system requirements, technology, and design maturity, which are 

consistently too optimistic. This exposes programs to significant and

unnecessary technology, design, and production risks, and ultimately 

damaging cost growth and schedule delays. DOD officials are rarely held 

accountable for these poor outcomes and the acquisition environment 

does not provide the appropriate incentives for contractors to stay within 

cost and schedule targets, making them a strong enabler of the status quo.

Recent congressionally mandated changes to the DOD acquisition system, 

as well as initiatives being pursued by the department, include elements 

that could improve DOD’s overall investment strategy and the soundness 

of the programs it allows to move forward. However, it is still too early to

determine the impact those changes have had on programs. Recognizing 

the need for more discipline and accountability in the acquisition process, 

Congress enacted legislation that requires decision-makers to certify that 

programs meet specific criteria at key decision points early in the 

acquisition process, and are measured against their original baseline 

estimates for the purpose of assessing and reporting unit cost growth. 

Page 2 GAO-08-782T 
Recent legislation also requires DOD to report on its strategies for 

balancing the allocation of funds and other resources among major 

defense acquisition programs and to identify strategies for enhancing the 

role of program managers in carrying out acquisition programs. DOD has 

begun several policy initiatives including a new concept decision review 

initiative, acquisition approaches with shorter and more certain delivery

time frames, a requirement for more prototyping early in programs, and 

the establishment of review boards to monitor weapon system 

configuration changes, which are designed to enable key department 

leaders to make informed decisions before a program starts and maintain

discipline once it begins. 

While legislation and policy revisions can help guide change, DOD must 

begin making better choices that reflect joint capability needs and match 

requirements with resources or the department will continue to

experience poor acquisition outcomes. DOD and the military services 

cannot continue to view success through the prism of securing the funding

needed to start and sustain new programs. Sound programs should be the 

natural outgrowth of a disciplined knowledge-based process. DOD’s policy 

emphasizes the importance of a knowledge-based approach, but practice 

does not always follow policy. The transitory nature of leadership and the

stovepiped process further undermines successful reform. Meaningful and 

lasting reform will not be achieved until the right incentives are 

established and accountability is bolstered at all levels of the acquisition 

process—both within the department and in the defense industry. Finally,

unless all of the players involved with acquisitions—the Congress, DOD, 

and perhaps most importantly, the military services—have unified goals, 

outcomes are not likely to improve. 

DOD’s portfolio of major acquisition programs has grown at a pace that far 

exceeds available resources. From 1992 to 2007, the estimated acquisition 

costs needed to complete the major acquisition programs in DOD’s 

portfolio increased almost 120 percent, while the funding provided for 

these programs only increased 57 percent, creating a fiscal bow wave that 

may be unsustainable (see fig. 1). 

DOD Has Too Many 

Acquisition Programs 

Competing for 

Limited Resources, 

while Program Costs 

and Schedules 

Continue To Increase 

Page 3 GAO-08-782T 
Figure 1: Costs Remaining Versus Annual Appropriations for Major Defense Acquisitions 

Dollars (in billions)

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

Fiscal year

Costs Remaining for Major Defense Acquisitions

Annual RDTE and Procurement Appropriations

0

100

200

300

400

500

600

700

800

900

1,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

The total acquisition cost of DOD’s 2007 portfolio of major programs 

under development or in production has grown by nearly $300 billion over 

initial estimates. While DOD is committing substantially more investment 

dollars to develop and procure new weapon systems, our analysis shows 

that the 2007 portfolio is experiencing greater cost growth and schedule 

delays than the fiscal years 2000 and 2005 portfolios (see table 1). 1 For 

example, total acquisition costs for programs in DOD’s fiscal year 2007 

portfolio have increased 26 percent from first estimates—compared to a 

6-percent increase for programs in its fiscal year 2000 portfolio. We found 

a similar trend for total RDT&E costs and unit costs. 

 1

 Our analysis in this area reflects comparisons of performance for programs meeting 

DOD’s criteria for being a major defense acquisition program in fiscal year 2007 and 

programs meeting the same criteria in fiscal years 2005 and 2000. The analysis does not

include all the same systems in all 3 years. 

Page 4 GAO-08-782T 
Table 1: Analysis of DOD Major Defense Acquisition Program Portfolios

Fiscal year 2008 dollars

Fiscal year 

2000 portfolio 2005 portfolio 2007 portfolio

Portfolio size 

Number of programs 75 91 95

Total planned commitments $790 Billion $1.5 Trillion $1.6 Trillion

Commitments outstanding $380 Billion $887 Billion $858 Billion

Portfolio performance 

Change to total RDT&E costs from first estimate 27 percent 33 percent 40 percent

Change in total acquisition cost from first estimate 6 percent 18 percent 26 percent

Estimated total acquisition cost growth $42 Billion $202 Billion $295 Billion

Share of programs with 25 percent or more increase in program acquisition unit cost 37 percent 44 percent 44 percent

Average schedule delay in delivering initial capabilities 16 months 17 months 21 months

Source: GAO analysis of DOD data. 

Note: Data were obtained from DOD’s Selected Acquisition Reports (dated December 1999, 2004, 

and 2006) or, in a few cases, data were obtained directly from program offices. Number of programs

reflects the programs with Selected Acquisition Reports. In our analysis we have broken a few 

Selected Acquisition Report programs (such as Missile Defense Agency systems) into smaller

elements or programs. Not all programs had comparative cost and schedule data, and these 

programs were excluded from the analysis where appropriate. Also, data do not include full costs of 

developing Missile Defense Agency systems. 

Continued cost growth results in less funding being available for other 

DOD priorities and programs, while continued failure to deliver weapon 

systems on time delays providing critical capabilities to the warfighter. Put 

simply, cost growth reduces DOD’s buying power. As program costs 

increase, DOD must request more funding to cover the overruns, make 

trade-offs with existing programs, delay the start of new programs, or take 

funds from other accounts. Delays in providing capabilities to the 

warfighter result in the need to operate costly legacy systems longer than

expected, find alternatives to fill capability gaps, or go without the 

capability. The warfighter’s urgent need for the new weapon system is 

often cited when the case is first made for developing and producing the 

system. However, DOD has already missed fielding dates for many 

programs and many others are behind schedule. On average, the current 

portfolio of programs has experienced a 21-month delay in delivering 

initial operational capability to the warfighter, and 14 percent are more 

than 4 years late. 

Page 5 GAO-08-782T 
Poor program execution contributes to and flows from shortfalls in DOD’s 

requirements and resource allocation processes. Over the past several 

years our work has highlighted a number of underlying systemic causes 

for cost growth and schedule delays both at the strategic and at the 

program level. At the strategic level, DOD’s processes for identifying 

warfighter needs, allocating resources, and developing and procuring 

weapon systems—which together define DOD’s overall weapon system 

investment strategy—are fragmented and broken. At the program level, 

the military services propose and DOD approves programs without 

adequate knowledge about requirements and the resources needed to

successfully execute the program within cost, schedule, and performance 

targets. In addition, DOD officials are rarely held accountable for poor 

decisions or poor program outcomes. 

Fragmented 

Processes, 

Unexecutable 

Business Cases, and 

Limited 

Accountability 

Underlie Poor 

Acquisition Outcomes 

Key Acquisition Support 

Processes Are Fragmented 

and Result in Unsound 

Programs 

DOD largely continues to define war fighting needs and make investment 

decisions on a service-by-service basis, and assess these requirements and 

their funding implications under separate decision-making processes. 

While DOD’s requirements process provides a framework for reviewing 

and validating needs, it does not adequately prioritize those needs and is

not agile enough to meet changing warfighter demands. A senior Army 

acquisition official recently testified before Congress that because the 

process can take more than a year, it is not suitable for meeting urgent 

needs related to ongoing operations; and a recent study by the Center for 

Strategic and International Studies indicates that the process is unwieldy 

and officials are now trying to find ways to work around it. Ultimately, the 

process produces more demand for new programs than available 

resources can support. This imbalance promotes an unhealthy competition 

for funds that encourages programs to pursue overly ambitious 

capabilities, develop unrealistically low cost estimates and optimistic 

schedules, and to suppress bad news. Similarly, DOD’s funding process 

does not produce an accurate picture of the department’s future resource 

needs for individual programs—in large part because it allows programs to 

go forward with unreliable cost estimates and lengthy development 

cycles—not a sound basis for allocating resources and ensuring program 

stability. Invariably, DOD and the Congress end up continually shifting 

funds to and from programs—undermining well-performing programs to 

pay for poorly performing ones. 

Page 6 GAO-08-782T 
Initiating Programs with 

Unexecutable Business 

Cases Sets Them Up to 

Fail 

At the program level, the key cause of poor outcomes is the consistent 

lack of disciplined analysis that would provide an understanding of what it

would take to field a weapon system before system development. Our 

body of work in best practices has found that an executable business case 

is one that provides demonstrated evidence that (1) the identified needs 

are real and necessary and that they can best be met with the chosen 

concept and (2) the chosen concept can be developed and produced 

within existing resources—including technologies, funding, time, and 

management capacity. Although DOD has taken steps to revise its 

acquisition policies and guidance to reflect the benefits of a knowledgebased approach, we have found no evidence of widespread adoption of 

such an approach in the department. Our most recent assessment of major 

weapon systems found that the vast majority of programs began 

development with unexecutable business cases, and did not attain, or plan 

to achieve, adequate levels of knowledge before reaching design review 

and production start—the two key junctures in the process following 

development start (see figure 2). 

Figure 2: Knowledge Achievement for Weapon System Programs in 2008

Assessment at Key Junctures 

Source: GAO analysis of DOD data.

Key 

junctures

Best 

practices

DOD 

outcomesa 12 percent 

of programs

Development start

Knowledge point 1

Mature all critical 

technologies

Knowledge point 2

Achieve knowledge point 

1 on time and complete 

90 percent of engineering 

drawings

Knowledge point 3

Achieve knowledge points

1 and 2 on time, and have all 

critical processes under 

statistical control

Design review Production start

4 percent of 

programs

0 percent of 

programsb

a

Not all programs provided information for each knowledge point or had passed through all three key

junctures. 

b

In our assessment of two programs, the Light Utility Helicopter and the Joint Cargo Aircraft, are 

depicted as meeting all three knowledge points when they began at production start. We excluded 

these two programs from our analysis because they were based on commercially available products

and we did not assess their knowledge attainment with our best practices metrics. 

Knowledge gaps are largely the result of a lack of disciplined systems 

engineering analysis prior to beginning system development. Systems 

Page 7 GAO-08-782T 
engineering translates customer needs into specific product requirements 

for which requisite technological, software, engineering, and production 

capabilities can be identified through requirements analysis, design, and 

testing. Early systems engineering provides knowledge that enables a 

developer to identify and resolve gaps before product development begins. 

Because the government often does not perform the proper up-front 

analysis to determine whether its needs can be met, significant contract 

cost increases can occur as the scope of the requirements change or 

become better understood by the government and contractor. Not only 

does DOD not typically conduct disciplined systems engineering prior to 

beginning system development, it has allowed new requirements to be 

added well into the acquisition cycle. The acquisition environment 

encourages launching ambitious product developments that embody more 

technical unknowns and less knowledge about the performance and 

production risks they entail. A new weapon system is not likely to be 

approved unless it promises the best capability and appears affordable 

within forecasted available funding levels. We have recently reported on 

the negative impact that poor systems engineering practices have had on 

several programs such as the Global Hawk Unmanned Aircraft System, 

F-22A, Expeditionary Fighting Vehicle, Joint Air-to-Surface Standoff 

Missile and others.2

With high levels of uncertainty about technologies, design, and 

requirements, program cost estimates and related funding needs are often 

understated, effectively setting programs up for failure. We recently 

assessed the service and independent cost estimates for 20 major weapon 

system programs and found that the independent estimate was higher in 

nearly every case, but the difference between the estimates was typically

not significant. We also found that both estimates were too low in most 

cases, and the knowledge needed to develop realistic cost estimates was 

often lacking. For example, program Cost Analysis Requirements 

Description documents—used to build the program cost estimate—are not 

typically based on demonstrated knowledge and therefore provide a shaky 

foundation for estimating costs. Cost estimates have proven to be off by 

billions of dollars in some of the programs we reviewed. For example, the 

initial Cost Analysis Improvement Group estimate for the Expeditionary 

Fighting Vehicle program was about $1.4 billion compared to a service 

 2

GAO, Best Practices: Increased Focus on Requirements and Oversight Needed to 

Improve DOD’s Acquisition Environment and Weapon System Quality, GAO-08-294 

(Washington, D.C.: Feb. 1, 2008). 

Page 8 GAO-08-782T 
estimate of about $1.1 billion, but development costs for the system are 

now expected to be close to $3.6 billion. Estimates this far off the mark do 

not provide the necessary foundation for sufficient funding commitments 

and realistic long-term planning. 

Constraining development cycles would make it easier to more accurately

estimate costs, and as a result, predict the future funding needs and 

effectively allocate resources. We have consistently emphasized the need 

for DOD’s weapon programs to establish shorter development cycles. 

DOD’s conventional acquisition process often requires as many as 10 or 15 

years to get from program start to production. Such lengthy cycle times 

promote program funding instability—especially when considering DOD’s 

tendency to change requirements and funding as well as frequent changes 

in leadership. Constraining cycle times to 5 or 6 years would force 

programs to conduct more detailed systems engineering analyses, lend 

itself to fully funding programs to completion, and thereby increase the 

likelihood that their requirements can be met within established time 

frames and available resources. An assessment of DOD’s acquisition 

system commissioned by the Deputy Secretary of Defense in 2006 similarly 

found that programs should be time-constrained to reduce pressure on 

investment accounts and increase funding stability for all programs. 

Accountability Suffers 

When Program Managers 

Lack the Authority to 

Shape Programs 

When DOD consistently allows unsound, unexecutable programs to pass 

through the requirements, funding, and acquisition processes, 

accountability suffers. Program managers cannot be held accountable 

when the programs they are handed already have a low probability of 

success. In addition, program managers are not empowered to make go or

no-go decisions, have little control over funding, cannot veto new 

requirements, and have little authority over staffing. At the same time, 

program managers frequently change during a program’s development. 

Our analysis indicates that the average tenure for managers on 39 major 

acquisition programs started since March 2001 was about 17 months—less 

than half the length of the average system development cycle time of 37 

months. Such frequent turnover makes it difficult to hold program 

managers accountable for the business cases that they are entrusted to 

manage and deliver. 

The government’s control over and accountability for decisions is 

complicated by DOD’s growing reliance on technical, business, and 

procurement expertise supplied by contractors. This reliance can reach a 

point where the foundation on which decisions are based may be largely 

crafted by individuals who are not employed by the government, who are 

Page 9 GAO-08-782T 
not bound by the same rules governing their conduct, and who are not 

required to disclose whether they have financial or other personal 

interests that conflict with the responsibilities they have performing 

contract tasks for DOD. Further, in systems development, DOD typically 

uses cost-reimbursement contracts, in which DOD generally pays the 

allowable costs incurred for the contractor’s best efforts, to the extent 

provided by the contract. This may contribute to an acquisition 

environment that is not conducive for incentivizing contractors to follow 

best practices and keep cost and schedule in check. 

Recognizing the need for more discipline and accountability in the 

acquisition process, Congress recently enacted legislation that, if followed, 

could result in a better chance to spend resources wisely. Likewise, DOD 

has recently begun to develop several initiatives, based in part on 

congressional direction and GAO recommendations that, if implemented 

properly, could also provide a foundation for establishing a well balanced 

investment strategy and sound, knowledge-based business cases for 

individual acquisition programs. 

Recent Congressional 

Initiatives and DOD 

Actions Aim to 

Promote a More 

Disciplined, 

Knowledge-Based 

Acquisition Approach 

Legislation Could Have a 

Positive Impact on 

Acquisition Outcomes 

Over the past 3 years, Congress has enacted legislation that requires DOD 

to take certain actions which, if followed, could instill more discipline into

the front-end of the acquisition process when key knowledge is gained and 

ultimately improve acquisition outcomes. For example, 2006 and 2008

legislation require decision-makers to certify that specific levels of 

knowledge have been demonstrated at key decision points early in the 

acquisition process before programs can enter the technology 

development phase or the system development phase. The 2006 legislation 

also requires programs to use their original baseline estimates—and not 

only their most recent estimates—when reporting unit cost threshold 

breaches. It also requires an additional assessment of the program if 

certain thresholds are reached. Other key legislation requires DOD to 

report on the department’s strategies for balancing the allocation of funds 

and other resources among major defense acquisition programs, and to 

identify strategies for enhancing the role of program managers in carrying

out acquisition programs. (For more detailed description of recent 

legislation, see appendix I). 

Page 10 GAO-08-782T 
DOD has initiated actions aimed at improving investment decisions and 

weapon system acquisition outcomes, based in part on congressional 

direction and GAO recommendations. Each of the initiatives is designed to

enable more informed decisions by key department leaders well ahead of a 

program’s start, decisions that provide a closer match between each 

program’s requirements and the department’s resources. For example: 

Recent DOD Actions 

Provide Opportunities for 

Improvement 

• DOD is experimenting with a new concept decision review, different 

acquisition approaches according to expected fielding times, and panels to 

review weapon system configuration changes that could adversely affect 

program cost and schedule. 

• DOD is also testing portfolio management approaches in selected 

capability areas to facilitate more strategic choices about how to allocate 

resources across programs and also testing the use of capital budgeting as 

a potential means to stabilize program funding. 

• In September 2007, the Office of the Under Secretary of Defense for 

Acquisition, Technology and Logistics issued a policy memorandum to 

ensure weapons acquisition programs were able to demonstrate key 

knowledge elements that could inform future development and budget 

decisions. This policy directed pending and future programs to include 

acquisition strategies and funding that provide for contractors to develop 

technically mature prototypes prior to initiating system development, with 

the hope of reducing technical risk, validating designs and cost estimates, 

evaluating manufacturing processes, and refining requirements. 

• DOD also plans to implement new practices that reflect past GAO 

recommendations intended to provide program managers more incentives, 

support, and stability. The department acknowledges that any actions 

taken to improve accountability must be based on a foundation whereby 

program managers can launch and manage programs toward greater 

performance, rather than focusing on maintaining support and funding for 

individual programs. DOD acquisition leaders have told us that any 

improvements to program managers’ performance hinge on the success of

these departmental initiatives. 

• In addition, DOD has taken actions to strengthen the link between award 

and incentive fees with desired program outcomes, which has the 

potential to increase the accountability of DOD programs for fees paid and 

of contractors for results achieved. 

If adopted and implemented properly these actions could provide a 

foundation for establishing sound, knowledge-based business cases for 

Page 11 GAO-08-782T 
individual acquisition programs, and the means for executing those 

programs within established cost, schedule, and performance goals. 

DOD understands what it needs to do at the strategic and at the program 

level to improve acquisition outcomes. The strategic vision of the current 

Under Secretary of Defense for Acquisition, Technology and Logistics 

acknowledges the need to create a high-performing, boundary-less 

organization—one that seeks out new ideas and new ways of doing 

business and is prepared to question requirements and traditional 

processes. Past efforts have had similar goals, yet we continue to find all

too often that DOD’s investment decisions are service- and programcentric and that the military services overpromise capabilities and 

underestimate costs to capture the funding needed to start and sustain 

development programs. This acquisition environment has been 

characterized in many different ways. For example, some have described it

as a “conspiracy of hope,” in which industry is encouraged to propose 

unrealistic cost estimates, optimistic performance, and understated 

technical risks during the proposal process and DOD is encouraged to 

accept these proposals as the foundation for new programs. Either way, it 

is clear that DOD’s implied definition of success is to attract funds for new 

programs and to keep funds for ongoing programs, no matter what the 

impact. DOD and the military services cannot continue to view success 

through this prism. Adding pressure to this environment are changes that

have occurred within the defense supplier base. In 2006, a DODcommissioned study found that the number of fully competent prime 

contractors competing for programs had been reduced from more than 20 

in 1985 to only 6. This limits DOD’s ability to maximize competition to 

reduce costs and encourage innovation. 

More legislation can be enacted and policies can be written, but until DOD 

begins making better choices that reflect joint capability needs and 

matches requirements with resources, the acquisition environment will 

continue to produce poor outcomes. It should not be necessary to take 

extraordinary steps to ensure needed capabilities are delivered to the 

warfighter on time and within costs. Executable programs should be the 

natural outgrowth of a disciplined, knowledge-based process. While DOD’s 

current policy supports a knowledge-based, evolutionary approach to 

acquiring new weapons, in practice decisions made on individual 

programs often sacrifice knowledge and realism in favor of revolutionary 

solutions. Meaningful and lasting reform will not be achieved until DOD 

changes the acquisition environment and the incentives that drive the 

behavior of DOD decision-makers, the military services, program 

Concluding 

Observations on 

Achieving Successful 

and Lasting Reform 

Page 12 GAO-08-782T 
managers, and the defense industry. Finally, no real reform can be 

achieved without a true partnership among all these players and the 

Congress. 

Mr. Chairman, this concludes my prepared statement. I would be happy to

answer any questions you may have at this time. 

For further information about this statement, please contact Katherine V.

Schinasi at (202) 512-4841 or schinasik@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this testimony. Individuals who made key contributions to this 

statement include Michael J. Sullivan, Director; Ronald E. Schwenn, 

Assistant Director; Megan Hill; Travis J. Masters; Karen Sloan; and Alyssa 

B. Weir. 

Contacts and Staff 

Acknowledgments 

Page 13 GAO-08-782T 
Appendix I: Recent Legislative Initiatives 

Page 14 GAO-08-782T 

Legislation Major Components 

Section 801 

National Defense 

Authorization Act for 

Fiscal Year 2006 

Pub. L. No. 109-163 

10 U.S.C. § 2366a (as amended) - Milestone B Certification

Before a major defense program can receive approval to start system development, the Milestone 

Decision Authority (MDA) must certify that, for example-- 

• the program is affordable when considering DOD’s ability to accomplish the program’s mission using 

alternative systems and the per unit and total acquisition costs in the context of the Future Year 

Defense Plan; 

• reasonable cost and schedule estimates have been developed for system development and 

production; 

• appropriate market research has been conducted prior to technology development to reduce 

duplication of existing technology and products; and 

• the technology in the program has been demonstrated in a relevant environment. 

MDA may waive one or more requirements if the MDA determines that without a waiver, DOD would be 

unable to meet critical national security objectives. 

Section 802 

National Defense 

Authorization Act for 

Fiscal Year 2006 

Pub. L. No. 109-163 

10 U.S.C. § 2433 (as amended) - Unit Cost Reports 

Amended reporting and certification requirements for major defense programs that exceed baseline 

costs, by: 

• creating two types of growth thresholds--“significant cost growth” and “critical cost growth”; 

• basing new thresholds on the percentage increases in both the original and current baseline estimate 

for the program; 

• incorporating these thresholds into existing unit cost reporting requirements; and 

• requiring that in the event of a breach of the critical cost growth threshold, the Secretary of Defense, 

in coordination with the Joint Requirements Oversight Council, to (1) assess the reasons for the cost 

growth, the projected cost to either complete the program with current or reasonably modified 

requirements, and the rough order of magnitude costs for a reasonable alternative system or 

capability and (2) certify that the program is essential to national security; no less costly, equally 

capable alternatives exist; new cost estimates are reasonable; and an adequate management 

structure is in place to control costs. 

Section 853 

John Warner National 

Defense Authorization Act 

for Fiscal Year 2007 

Pub. L. No. 109-364 

Program Manager Empowerment and Accountability 

Required the Secretary of Defense to develop a strategy for enhancing the role of DOD program 

managers in developing and carrying out defense acquisition programs that addressed matters such as:

• enhanced training; 

• improved career paths and opportunities; 

• incentives for recruitment and retention of highly qualified individuals; 

• improved resources and support; 

• increased accountability; 

• enhanced monetary and non-monetary awards for successful accomplishment of program objectives;

Required that DOD guidance for major defense programs be revised to address program manager 

qualifications, resources, responsibilities, tenure and accountability. Guidance for taking programs from 

development to production was to address matters such as: 

• the need for performance agreements between program managers and MDAs that set forth expected 

parameters for cost, schedule and performance and include commitments by both parties to ensure

parameters are met and 

• the extent to which a program manager should continue in the position without interruption until the 

delivery of the first production units. 

Appendix I: Recent Legislative Initiatives 
Appendix I: Recent Legislative Initiatives 

Legislation Major Components 

Section 817 

National Defense 

Authorization Act for Fiscal 

Year 2008 

Pub. L. No. 110-181 

Investment Strategy for Major Defense Acquisition Programs

Required the Secretary of Defense to submit to the congressional defense committees a report on 

DOD’s strategies for balancing the allocation of funds and other resources among major defense 

acquisition programs. The report was to address topics such as DOD’s ability to: 

• establish priorities among needed capabilities and assess resources needed to achieve such 

capabilities and

• balance costs, schedule and requirements of major defense programs to ensure the most efficient 

use of resources. 

The report also was to address the role of a Tri-Chair Committee comprised of the Under Secretary of 

Defense for Acquisition, Technology, and Logistics; the Vice Chairman of the Joint Chiefs of Staff; and 

the director of Program Analysis and Evaluation, among others; in the resource allocation process. 

Section 943 

National Defense 

Authorization Act for Fiscal 

Year 2008 

Pub. L. No. 110-181 

10 U.S.C. § 2366b Milestone A Certification 

Before a major defense program can receive approval to begin technology development, the MDA must, 

after consulting with the Joint Requirements Oversight Council (JROC) on matters related to program 

requirements and military needs, certify that, for example: 

• the system fulfills an approved initial capabilities document; 

• the system is necessary and appropriate if it duplicates a capability already provided by an existing 

system; and 

• the cost estimate for the system has been submitted and the level of resources required to develop 

and procure the system is consistent with the priority level assigned by the JROC. 

If a milestone A certified major defense program exceeds the cost estimate for the system submitted at 

the time of certification by at least 25 percent prior to milestone B approval, the MDA and JROC shall 

determine whether the level of resources required to develop and procure the system remains

consistent with the priority level assigned. 

The Secretary of Defense was also asked to review guidance and take steps to ensure that DOD does

not initiate a technology development program for a major weapon system without milestone A 

approval. 

Source: GAO.

Page 15 GAO-08-782T 
Related GAO Products 

Page 16 GAO-08-782T 

Related GAO Products 

Defense Acquisitions: Assessments of Selected Weapon Programs. 

GAO-08-467SP. Washington, D.C.: March 31, 2008.

Best Practices: Increased Focus on Requirements and Oversight Needed

to Improve DOD’s Acquisition Environment and Weapon System 

Quality. GAO-08-294. Washington, D.C.: Feb. 1, 2008. 

Cost Assessment Guide: Best Practices for Estimating and Managing 

Program Costs. GAO-07-1134SP, Washington, D.C.: July 2007.

Defense Acquisitions: Assessments of Selected Weapon Programs. GAO07-406SP. Washington, D.C.: March 30, 2007. 

Best Practices: An Integrated Portfolio Management Approach to Weapon 

System Investments Could Improve DOD’s Acquisition Outcomes. 

GAO-07-388, Washington, D.C.: March 30, 2007.

Best Practices: Stronger Practices Needed to Improve DOD Technology 

Transition Processes. GAO-06-883. Washington, D.C.: September 14, 2006. 

Best Practices: Better Support of Weapon System Program Managers 

Needed to Improve Outcomes. GAO-06-110. Washington, D.C.: November 

1, 2005. 

Defense Acquisitions: Major Weapon Systems Continue to Experience 

Cost and Schedule Problems under DOD’s Revised Policy. GAO-06-368. 

Washington, D.C.: April 13, 2006. 

DOD Acquisition Outcomes: A Case for Change. GAO-06-257T. 

Washington, D.C.: November 15, 2005. 

Defense Acquisitions: Stronger Management Practices Are Needed to 

Improve DOD’s Software-Intensive Weapon Acquisitions. GAO-04-393. 

Washington, D.C.: March 1, 2004. 

Best Practices: Setting Requirements Differently Could Reduce Weapon 

Systems’ Total Ownership Costs. GAO-03-57. Washington, D.C.: February 

11, 2003. 

Defense Acquisitions: Factors Affecting Outcomes of Advanced Concept 

Technology Demonstration. GAO-03-52. Washington, D.C.: December 2, 

2002. 
Related GAO Products 

Best Practices: Capturing Design and Manufacturing Knowledge Early 

Improves Acquisition Outcomes. GAO-02-701. Washington, D.C.: July 15, 

2002. 

Defense Acquisitions: DOD Faces Challenges in Implementing Best 

Practices. GAO-02-469T. Washington, D.C.: February 27, 2002. 

Best Practices: Better Matching of Needs and Resources Will Lead to 

Better Weapon System Outcomes. GAO-01-288. Washington, D.C.: March 8, 

2001. 

Best Practices: A More Constructive Test Approach Is Key to Better 

Weapon System Outcomes. GAO/NSIAD-00-199. Washington, D.C.: July 31, 

2000. 

Defense Acquisition: Employing Best Practices Can Shape Better 

Weapon System Decisions. GAO/T-NSIAD-00-137. Washington, D.C.: April 

26, 2000. 

Best Practices: DOD Training Can Do More to Help Weapon System 

Programs Implement Best Practices. GAO/NSIAD-99-206. Washington,

D.C.: August 16, 1999. 

Best Practices: Better Management of Technology Development Can 

Improve Weapon System Outcomes. GAO/NSIAD-99-162. Washington, 

D.C.: July 30, 1999. 

Defense Acquisitions: Best Commercial Practices Can Improve Program 

Outcomes. GAO/T-NSIAD-99-116. Washington, D.C.: March 17, 1999. 

Defense Acquisitions: Improved Program Outcomes Are Possible. GAO/TNSIAD-98-123. Washington, D.C.: March 17, 1998. 

Best Practices: Successful Application to Weapon Acquisition Requires

Changes in DOD’s Environment. GAO/NSIAD-98-56. Washington, D.C.: 

February 24, 1998. 

Best Practices: Commercial Quality Assurance Practices Offer 

Improvements for DOD. GAO/NSIAD-96-162. Washington, D.C.: August 26, 

1996. 

Page 17 GAO-08-782T (120758) 
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