United States General Accounting Office

GAO Report to Congressional Committees

December 1998 UNMANNED AERIAL

VEHICLES

Progress Toward

Meeting High Altitude

Endurance Aircraft

Price Goals

GAO/NSIAD-99-29

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-280126 

December 15, 1998

Congressional Committees

Section 216 of the National Defense Authorization Act for Fiscal Year 1998

directed us to review the Department of Defense’s (DOD) High Altitude

Endurance (HAE) Unmanned Aerial Vehicle (UAV) program to determine

whether the average flyaway cost for the Global Hawk and DarkStar HAE

air vehicles will be within DOD’s cost goal of $10 million.1 As agreed with

your office, this report addresses the status of DOD’s progress toward

meeting its goal as the HAE program proceeds through its ongoing

demonstration phase.

Results in Brief DOD does not expect to be able to produce DarkStar or Global Hawk HAE

vehicles within its goal of $10 million per unit in fiscal year 1994 dollars.

DOD’s price projections, which updated the original estimates of

$10 million, are currently $13.7 million for DarkStar and $14.8 million for

Global Hawk. In addition, these projections may understate the actual

amount by which the UAV’s unit price will exceed $10 million because in

their agreements with the HAE contractors, program officials used a

definition of unit flyaway price that excludes several cost categories that

are traditionally included in determining unit flyaway cost. Including these

costs will increase the average unit price of each air vehicle.

Background DOD’s HAE program, originally managed by the Defense Advanced Research

Projects Agency (DARPA), is currently managed by the Air Force.2

 Two

types of HAE vehicles are being developed, Global Hawk and DarkStar, as

advanced concept technology demonstration projects rather than as a

traditional defense acquisition program.3

 Global Hawk is a conventional

1

As provided for in the legislation, the term “flyaway cost” refers to a firm unit cost. Though not

defined in the legislation, the standard definition of unit flyaway cost used by DOD is found in the DOD

Financial Management Regulations. However, for purposes of this program, DOD has established what

it calls a unit flyaway price, which is defined in its agreements with the Global Hawk and DarkStar

HAE contractors. As provided in those agreements, flyaway price includes some, but not all, of the

cost categories included in the standard definition of unit flyaway cost, plus the contractor’s fee.

DOD’s goal is stated as a $10 million average unit flyaway price in fiscal year 1994 dollars for

(1) DarkStar vehicles numbered 11 through 20 and (2) the first production lot of 10 Global Hawk air

vehicles. Thus, for purposes of our reporting, we have used DOD’s stated goal as criteria.

2

The Air Force assumed program management responsibility from DARPA on October 1, 1998.

3

An advanced concept technology demonstration program does not follow DOD’s formal approval

process for its acquisition programs. It is designed to enhance the military’s capability by successfully

demonstrating mature and cost-effective technologies to the user before a formal decision to acquire

them is made.

Page 1 GAO/NSIAD-99-29 Unmanned Aerial Vehicles
B-280126 

aircraft design and DarkStar is a “stealth,” or low observable, design. Both

are projected to augment DOD’s current high altitude manned

reconnaissance aircraft, the U-2.

DOD is currently building nine prototype HAE aircraft, five Global Hawks

and four DarkStars, for use in an HAE military utility assessment scheduled

to begin in April 1999.4

 In March 2000, military users are scheduled to

complete their assessment report of the prototype aircraft. At that time,

the Air Combat Command, the operating command, expects to have its

HAE operational requirements document approved. With the performance

data available, DOD will then determine if these vehicles satisfy the user’s

requirements and decide whether it should acquire production versions of

one or both aircraft. In a preliminary assessment made in October 1996,

the Command concluded that it would require 20 Global Hawks and 7

DarkStar vehicles, plus an undetermined number for backup and attrition.

Global Hawk is being designed by Teledyne Ryan Aeronautical to fly 3,000

nautical miles, conduct reconnaissance for 24 hours, and return to base.

Because of its conventional design (i.e., large radar cross-section), Global

Hawk will operate in areas where the enemy threat is considered low to

medium. DarkStar, with its stealth design (i.e., small radar cross-section),

will operate in high-threat areas. It is being designed by Lockheed Martin

to fly over 500 nautical miles, conduct reconnaissance during an 8-hour

period, and return to base.

HAE Aircraft as

Currently Designed

Will Exceed Price

Goal

DOD estimates indicate that, as currently designed and configured,

production versions of its DarkStar and Global Hawk prototype aircraft

will exceed DOD’s $10 million unit flyaway price goal. Furthermore, DOD’s

price estimates do not include estimates of system modification costs to

the aircraft that are typically included in traditional acquisition programs.

DOD-Developed Price

Projections for HAE

Vehicles Exceed $10

Million Unit Flyaway Price

Goal

DOD has not yet requested authority to build HAE production vehicles. The

decision to begin production will be based on the results of the ongoing

HAE demonstration effort that will be reported in March 2000. For planning

purposes, though, DARPA HAE program officials developed price projections

using current vehicle designs and configurations to update the original

program estimates. Based on these price projections, DOD does not expect

to be able to produce DarkStar or Global Hawk HAE vehicles within the

4

Public Law 103-160, section 845, provides DOD with the authority to enter into transactions, other

than procurement contracts, to acquire prototypes without requiring compliance with all elements of

federal acquisition regulations. Both the Global Hawk and DarkStar efforts are using this authority.

Page 2 GAO/NSIAD-99-29 Unmanned Aerial Vehicles
B-280126 

$10 million goal (fiscal year 1994 dollars). These updated estimates

indicate that the first 10 production Global Hawk vehicles and DarkStar

unmanned aerial vehicles 11 through 20, as currently designed and

configured, will be priced at $14.8 million and $13.7 million, respectively.

The original and updated estimates (as of July 1998) for the average unit

flyaway prices for the first 10 Global Hawk production vehicles and

vehicles 11 through 20 for DarkStar are shown in tables 1 and 2. The single

largest increase for Global Hawk, $3.5 million per unit, is in the aircraft

structure, with $1.9 million of that due to modifying the wings to provide

the lift needed to meet range and endurance goals. The largest increases

for DarkStar are in the areas of avionics - $1.3 million, and payloads -

$1.2 million.

Table 1: Original and Updated

Estimates for Average Unit Flyaway

Price for Global Hawk Production

Vehicles Numbered 1 to 10 (FY 94

Millions of Dollars)

Category Original estimate Updated estimate Difference

Structure $2.6 $ 6.1 $3.5

Avionics 0.4 0.5 0.1

Payloads 4.1 5.2 1.1

Propulsion 1.6 1.6 0.0

Fee 1.3 1.4 0.1

Total $10.0 $14.8 $4.8

Source: DARPA HAE Program Office.

Table 2: Original and Updated

Estimates for Average Unit Flyaway

Price for Darkstar Vehicles Numbered

11 to 20 (FY 94 Millions of Dollars)

Category Original estimate Updated estimate Difference

Structure $ 4.8 $ 5.5 $ 0.7

Avionics 2.8 4.1 1.3

Payloads 1.2 2.4 1.2

Propulsion 0.5 0.6 0.1

Fee 0.8 1.1 0.3

Total $10.1 $13.7 $ 3.6

Source: DARPA HAE Program Office.

DOD and the HAE contractors are continuing to try to identify ways to

reduce the costs of producing HAE vehicles in the event they are eventually

authorized to build them. According to HAE program officials, however,

DOD will not consider failure to meet the $10 million unit flyaway price goal

an automatic failure of its HAE efforts. As of November 1998, two Global

Page 3 GAO/NSIAD-99-29 Unmanned Aerial Vehicles
B-280126 

Hawks and two DarkStars had been completed. One DarkStar was

destroyed in a crash during its second flight.

Definition of Unit Flyaway

Cost Used by DOD

The standard definition of aircraft unit flyaway cost is found in the DOD

Financial Management Regulations.5 Standard unit flyaway cost elements

include the costs of procuring airframes; engines; avionics; armaments;

engineering change orders; nonrecurring costs including production

tooling, software, and other costs (if funded from aircraft procurement

appropriations); divided by the procurement quantity. Flyaway cost does

not include research and development, support equipment, training

equipment, technical data, or spares.

DARPA, in its HAE agreements, incorporated a definition of unit flyaway

price that included some, but not all, of the standard elements described

above plus the contractors’ fees. (See tables 1 and 2.) DARPA officials did so

because they assumed the future production units would be identical to

the prototype units being built in the demonstration phase. The cost

categories they did not include are associated with system modifications,

which they reasoned would not be incurred if the vehicles were the same.

Cost categories not included in the HAE agreements that are otherwise

typically included are costs such as engineering change orders, software

changes, system test, and nonrecurring costs, including tooling costs.

Because projections of what these other costs might be were not

calculated by DARPA when it developed the original estimates for average

unit flyaway price, the updated estimates shown in tables 1 and 2 also do

not include these other cost categories. The Air Force program office, in

order to have a realistic assessment of this newly transitioned program, is

developing total program production cost estimates that include these

costs. The addition of these cost categories will increase the unit flyaway

price for the Global Hawk and Dark Star above the DARPA updated

estimates of $14.8 million and $13.7 million, respectively.

Agency Comments In commenting on a draft of this report, DOD concurred with our findings.

Technical comments have been incorporated as appropriate. DOD’s

comments are reprinted in appendix I.

5

Volume 2B, Chapter 4 - Procurement Appropriations, Exhibit P-5 - Cost Analysis.

Page 4 GAO/NSIAD-99-29 Unmanned Aerial Vehicles
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Scope and

Methodology

To determine DOD’s progress toward its price goal, we met with DOD, DARPA

and contractor officials, and analyzed HAE program and cost data. To

determine whether DOD used a standard definition for unit flyaway cost,

we compared cost categories included in DARPA’s analysis for its HAE

vehicles to those included in DOD’s Financial Management Regulations and

weapon system management regulations. We conducted our work at the

Defense Airborne Reconnaissance Office (now the Division of Intelligence,

Surveillance, and Reconnaissance Systems), Office of the Secretary of

Defense, Washington, D.C.; the Defense Advanced Research Projects

Agency, Arlington, Virginia; and the Air Force Reconnaissance Mission

Area Group, Wright-Patterson Air Force Base, Ohio.

We conducted our work from May 1998 through November 1998 in

accordance with generally accepted government auditing standards.

We are sending copies of this report to the Secretaries of Defense and the

Air Force, and the Director of the Office of Management and Budget. We

will also provide copies to others upon request.

If you or your staff have any questions, please contact me at

(202) 512-4841. Principal contributors to this report were Stephanie May,

Richard Strittmatter, and Charles Ward.

Sincerely yours,

Louis J. Rodrigues

Director, Defense Acquisitions Issues

Page 5 GAO/NSIAD-99-29 Unmanned Aerial Vehicles
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List of Congressional Committees

The Honorable Strom Thurmond

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Richard C. Shelby

Chairman

The Honorable Robert Kerrey

Ranking Minority Member

Select Committee on Intelligence

United States Senate

The Honorable Floyd D. Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on National Security

House of Representatives

The Honorable Porter J. Goss

Chairman

The Honorable Norman Dicks

Ranking Minority Member

Permanent Select Committee on Intelligence

House of Representatives

Page 6 GAO/NSIAD-99-29 Unmanned Aerial Vehicles
B-280126 

Page 7 GAO/NSIAD-99-29 Unmanned Aerial Vehicles
Appendix I 

Comments From the Department of Defense

See comment 1.

Page 8 GAO/NSIAD-99-29 Unmanned Aerial Vehicles
Appendix I 

Comments From the Department of Defense

The following is GAO’s comment on the Department of Defense’s letter

dated December 8, 1998.

GAO Comment To more clearly reflect the objective of our work, we have modified the

report title.

(707340) Page 9 GAO/NSIAD-99-29 Unmanned Aerial Vehicles
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