United States General Accounting Office

GAO Report to Congressional Committees

July 1996 BALLISTIC MISSILE

DEFENSE

Issues Concerning

Acquisition of THAAD

Prototype System

G O A

years

1921 - 1996

GAO/NSIAD-96-136

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-271560 

July 9, 1996

Congressional Committees

The Ballistic Missile Defense Organization and the Army plan to acquire a

Theater High Altitude Area Defense (THAAD) User Operational Evaluation

System (UOES)—an early prototype version of the final THAAD system. UOES

is intended to (1) allow military users to influence the THAAD system

design, (2) permit an early operational assessment of the system’s

capabilities, and (3) provide a system that could be deployed in a national

emergency. UOES will consist primarily of refurbished components

acquired for the system’s demonstration and validation phase, although

the Army plans to purchase 40 UOES interceptors to provide the deployable

system capability.

Pursuant to our basic legislative responsibilities, we reviewed the THAAD

UOES program to determine whether planned testing would reasonably

demonstrate the capabilities of UOES as an interim system before funds are

committed to interceptor production. We are addressing this report to the

committees of jurisdiction because it identifies problems and calls for

corrective action that the Department of Defense (DOD) has indicated an

unwillingness to take. We are suggesting that the Congress may wish to

take the necessary action to ensure that DOD addresses the problems we

have identified. This report does not address the overall value of the THAAD

system.

Background THAAD is a ground-based weapon system being developed by the Ballistic

Missile Defense Organization and the Army to defeat theater ballistic

missiles by colliding with them while in flight. The system supports the

national objective of protecting U.S. and allied deployed forces, population

centers, and industrial facilities from theater missile attacks.

The total estimated cost for THAAD is $16.7 billion, and the system is

currently in an early phase of development called demonstration and

validation. A decision on whether to proceed into the engineering and

manufacturing development phase is scheduled for March 1997. A

production decision is planned for early 2003, and initial fielding is

currently scheduled for 2006. DOD’s budget submission for fiscal year 1997

requests $481.8 million for the program.

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The fiscal year 1996 National Defense Authorization Act requires a

contingency capability—THAAD UOES—by fiscal year 1998. UOES will consist

of 40 interceptors; 4 launchers; 2 radars; 2 battle management/command,

control, and intelligence units; and associated support equipment. Except

for the 40 interceptors, these components have already been acquired

under the existing THAAD demonstration and validation contract. The

components are to be refurbished for use in the UOES system. The

40 interceptors are yet to be acquired under an option to the

demonstration and validation contract. Figure 1 shows the principal UOES

components.

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Figure 1: THAAD—UOES

Launcher

Launcher

Launcher

10 Interceptors


Per Launcher

Battle Management/Command,


Control, and Intelligence Unit

Theater Missile Defense


Ground-Based Radar

Theater Missile Defense


Ground-Based Radar

Launcher

Results in Brief Current plans require the Army to commit funds for producing 40 UOES

interceptors well before testing provides assurance of the UOES system’s

capabilities, even though the THAAD program has already experienced

significant cost, schedule, and technical performance problems. According

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to the Army, sufficient data for a limited assessment of UOES operational

effectiveness1

 will not be available until limited user tests are completed in

early 1998. As a result, DOD’s plan to commit funds in 1996 in order to meet

an operational THAAD UOES capability requirement by fiscal year 1998 risks

acquiring a system that might not be capable enough to warrant its

deployment in an emergency.

Our review indicated that (1) the contractor’s cost estimate for the THAAD

UOES interceptors has more than doubled since 1992 and is likely to

increase further and (2) test schedule slippage, increased delivery lead

times, and funding limitations have delayed the availability of UOES

interceptors by about 2 years. Further, airborne deployment of the THAAD

UOES may be difficult since it is ultimately contingent upon successfully

competing with other military hardware for scarce airlift resources.

Primary Purpose of

Interceptors Is

Deployment

Capability

Initially, the Army had no specific plans to test the 40 UOES interceptors.

However, in 1995, the Ballistic Missile Defense Organization’s general

counsel ruled that use of research, development, test, and evaluation

funding to acquire the interceptors would be justified only if (1) there

were a planned intent to use them in early testing, (2) they were not

principally intended for operational purposes, and (3) they were necessary

to provide an adequate number for testing. In response to this ruling, the

THAAD Project Office developed a test plan for the interceptors, but

recommended that it not be implemented. The Ballistic Missile Defense

Organization instructed the Project Office to implement the test plan.

Since that time, circumstances have changed. Part of the test plan has

become obsolete, and other parts can be accomplished with equipment

other than the 40 UOES interceptors. Five of the UOES interceptors were to

serve as backups in tests that have now been canceled; another four

interceptors were planned as backups for engineering and manufacturing

development tests; and one was planned as a backup to a limited user test.

As a result of changes in planned demonstration and validation phase

testing, it now appears that an adequate number of backup interceptors

will be available for engineering and manufacturing development and

1

DOD defines “operational effectiveness” as the overall degree of mission accomplishment of a system

when used by representative personnel in the environment planned or expected for operational

employment of the system considering organization, doctrine, tactics, survivability, vulnerability, and

threat.

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limited user tests without the UOES interceptors.2 The remaining 30 UOES

interceptors were to be used in operational suitability tests that did not

involve firing interceptors. However, the purposes of those tests can be

accomplished with training rounds or with the backup demonstration and

validation phase interceptors.

UOES Funding Will

Be Committed Before

System Capabilities

Are Known

The Army anticipates exercising the contract option for the UOES

interceptors in the 3rd quarter of 1996 based on the results of only the first

7 of 14 scheduled demonstration and validation flight tests. The Under

Secretary of Defense (Acquisition and Technology) established one

successful intercept of a target while using the THAAD radar to guide the

interceptor as minimum criteria for exercising the contract option for UOES

interceptors. Test flight 7, currently scheduled for about July 1996, will be

the first intercept attempt using the THAAD radar. Through May 1996, the

Army had conducted five flight tests. Only two of the five tests were

designed to intercept a target and both intercept attempts failed.

According to the Ballistic Missile Defense Organization and the Army,

seven tests will not be sufficient to characterize operational effectiveness

in such areas as mission performance and supportability.

The Army also plans to conduct a 7-week limited user test after completing

the 14 demonstration and validation flight tests. The limited user test will

build on the results of the demonstration and validation flight tests and

focus on operational effectiveness and suitability issues, including mission

performance and system supportability. The primary events to be

conducted during the limited user test will be field training exercises,

command post exercises, modeling and simulations, and a flight test using

an interceptor already under contract. Results from the limited user test

are not scheduled to be available until early 1998.

According to DOD’s Joint Staff, information currently available is not

sufficient to characterize UOES operational effectiveness. Representatives

of the Joint Staff told us that if a national emergency occurred, the

national command authority would decide whether to deploy THAAD UOES

based on the threat at that time and whatever data was known about UOES

effectiveness. They agreed, however, that better data for making a

deployment decision would be available at the completion of the limited

user tests. The Joint Staff representatives also told us that some theater

2

The Army purchased 20 interceptors for demonstration and validation flight tests, but now plans to

use only 14 in these tests. Of the remaining six interceptors, one is scheduled for a flight test during the

limited user test and the remaining five can be used as backup to the four engineering and

manufacturing development tests and the limited user test.

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commanders place a high priority on THAAD’s intended capabilities. The

Joint Staff expect that at the completion of the demonstration and

validation flight tests and the limited user tests, sufficient information will

be available to characterize UOES operational effectiveness. However,

under the current plan, results from the limited user tests are not

scheduled to be available until about 1-1/2 years after the Army exercises

the contract option for the 40 UOES interceptors.

Airlift for UOES Will

Be Scarce

The airlift requirement for UOES will be significant. The Army estimates

that to transport the full system with 40 interceptors from the United

States to a theater of operation will require up to 18 C-5, 26 C-17, or 40

C-141 flights. The Army estimates that a UOES initial force, or “minimum

launch capability,” including 1 radar, 2 launchers, and 20 interceptors,

could be deployed with 7 C-5, 9 C-17, or 13 C-141 flights. However,

whether for a complete UOES deployment, or a minimum launch capability,

the necessary flights may not be available unless UOES is afforded a high

priority. In September 1995, the Ballistic Missile Defense Organization’s

Annual Report to the Congress stated that deciding what assets should be

transported in the crucial first days of an overseas campaign will present a

critical challenge and that the need to transport large inventories of

equipment to regional theaters of operations will stress airlift capabilities.

Representatives from the Joint Staff told us that THAAD UOES would likely

have a high priority for airlift resources. However, other systems may also

have a high priority. For example, the Army plans to begin fielding 1,200

Patriot Advanced Capability-3 interceptors in 1999, which could compete

with the 40-interceptor THAAD UOES for airlift resources.

Cost Estimate Has

Increased

Since September 1992, when the THAAD demonstration and validation

contract was awarded, the contractor’s cost estimate for the 40 UOES

interceptors has increased by over 100 percent—from $80 million to

$165 million. According to THAAD project officials, the contractor’s

estimate is likely to increase further because funding for the interceptors

has been stretched out over a 4-year period and the delivery period has

been extended from 29 months to 34 months. The estimated cost for

spares, support equipment, and contractor support increases the estimated

total cost of a UOES deployment option by another $55 million—to a total

of $220 million.

At our request, THAAD project officials categorized the interceptor cost

increase. They stated that the increase in interceptor cost is due to

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technical, estimating, and schedule changes. Technical cost increases

result from design changes to the interceptor’s seeker, booster, and divert

and attitude control system. Estimating cost increases result from

correcting errors in the initial cost estimate and shifting other costs from

the contractor to the government. Schedule cost increases occurred

because the time from exercising the contract option to final delivery grew

from 18 to 29 months.

Availability of the

UOES Interceptors

Has Been Delayed

Final delivery of the 40 UOES interceptors has been delayed about 

2 years—from the 2nd quarter of 1997 until the 2nd quarter of 1999. Under

the current schedule, UOES interceptor deliveries would begin in 1998. At

the end of fiscal year 1998 when the 1996 Defense Authorization Act

requires the UOES capability, only 14 interceptors will be available.

Exercising the option for the UOES interceptors has been delayed about

10 months, from October 1995 until about August 1996, and the time from

exercising the option to final delivery has increased 16 months.

The 10-month delay results from slips in the demonstration and validation

flight test schedule. These slips occurred largely because of scheduling

difficulties at the test range and the failure to intercept the target during

test flights 4 and 5—the first two tests designed for target intercept. The

Army maintains that a successful intercept using a test range radar to

guide the interceptor should occur before attempting an intercept with the

THAAD radar. The Under Secretary of Defense (Acquisition and

Technology) is requiring the Army to conduct a successful intercept using

the THAAD radar before it can exercise the option for UOES interceptors. The

first intercept attempt relying on the THAAD radar is now planned during

test flight 7 in the July 1996 time frame.

The 16-month delay in delivery results from (1) extended lead times—from

18 to 29 months—in delivery of some interceptor components and

(2) reduced fiscal year 1997 funding that further extended final deliveries

from 29 to 34 months.

Conclusion and

Recommendation

The current plan for acquiring THAAD UOES interceptors commits funds for

interceptor production in about August 1996, well before testing in early

1998 provides some assurance of the system’s effectiveness. In view of the

risks associated with producing UOES interceptors before testing, we

believe the Army should delay contracting for them until the testing is

completed. Using 34 months as the time required from contract award to

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final interceptor delivery, UOES would still be available as an interim

system in late 2000. This is about 1-1/2 years later than currently planned

but well before fielding of the final THAAD begins in the 2006 time frame.

Accordingly, to avoid committing over $200 million for a system that may

not have adequate operational effectiveness, we recommend that the

Secretary of Defense (1) restrict obligational authority for UOES

interceptors until the Chairman of the Joint Chiefs of Staff certifies that

UOES has adequate effectiveness to merit deployment as an interim system

and (2) seek legislative relief from the requirements of the 1996 National

Defense Authorization Act in regards to acquiring THAAD UOES by fiscal year

1998.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, DOD disagreed with our

recommendations, stating that THAAD UOES will serve three functions in

priority order: (1) providing soldiers an opportunity to influence the

system’s design; (2) conducting early operational assessments of the

system; and (3) if directed by the National Command Authority, providing

a theater commander in chief with a limited missile defense capability. We

do not disagree with these purposes and would point out that the two

primary purposes of UOES set forth by DOD—early user influence on the

design and system operation assessment—can be accomplished without

contracting for the 40 interceptors. Moreover, the thrust of our report

deals with the risks inherent in the Army’s accelerated approach of

contracting for interceptors to be deployed before testing provides

assurance of the interceptor’s effectiveness.

DOD stated that the requirement for successful hardware-in-the-loop testing

of kill vehicle subsystems and one successful intercept using the THAAD

radar will reduce the risk associated with contracting for the 

40 interceptors. However, we note that these minimal criteria are even less

than the three successful intercepts required for entering the engineering

and manufacturing development phase. Our work has repeatedly shown

that when production of weapon systems began on the basis of schedule

or other considerations rather than on the basis of technical maturity,

major design changes were often needed to correct problems. The design

changes frequently led to additional testing and costly retrofit of units

already produced.3

3

See Weapons Acquisition: Low-Rate Initial Production Used to Buy Weapon Systems Prematurely

(GAO/NSIAD-95-18, Nov. 21, 1994).

Page 8 GAO/NSIAD-96-136 Prototype THAAD System
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DOD stated that implementing our recommendation would cause a gap in

production of interceptors between demonstration and validation and

engineering and manufacturing development. However, DOD failed to point

out that the current schedule already includes a production gap between

demonstration and validation and engineering development and an even

larger gap between completing production of interceptors for engineering

development tests and the beginning of low-rate initial production.

Implementing our recommendation would widen the gap between

demonstration and validation and engineering development but decrease

the gap between engineering development and low-rate initial production.

DOD also stated that implementing our recommendation would permit a

UOES capability no sooner than fiscal year 2000, 2 years later than required

by law. We recognize that implementing our recommendation would not

allow DOD to provide a THAAD UOES capability by fiscal year 1998 as required

by the 1996 National Defense Authorization Act. For that reason, we

recommended that the Secretary of Defense seek relief from the act’s

requirement. However, under the current THAAD schedule, only

14 interceptors will be available at the end of fiscal year 1998. The Army’s

definition of “minimum launch capability” includes 20 interceptors or 

6 more than will be available in fiscal year 1998. The full 40-interceptor

capability will not be available until the 3rd quarter of fiscal year 1999,

even if no additional schedule slips occur.

Matters for

Congressional

Consideration

Because DOD has clearly indicated its intention to commit over

$200 million for UOES interceptors that may have inadequate operational

effectiveness and because the current schedule will provide only 14 of the

40 interceptors by fiscal year 1998, the Congress may wish to consider

delaying the timetable for acquiring THAAD UOES set forth in the 1996

Defense Authorization Act. The Congress may also wish to restrict

obligational authority for acquiring UOES until the Secretary of Defense

certifies that the system has adequate operational effectiveness to merit its

deployment in a national emergency.

Scope and

Methodology

We performed our work at the Office of the Chairman of the Joint Chiefs

of Staff, Office of the Secretary of Defense, Headquarters of the Ballistic

Missile Defense Organization; the Department of the Army in Washington,

D.C.; and the THAAD Project Office in Huntsville, Alabama. At these

locations, we interviewed responsible agency officials and analyzed

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pertinent documents. We obtained comments on a draft of this report from

DOD. Those comments are discussed above and reprinted in appendix I.

We conducted our work from June 1995 to May 1996 in accordance with

generally accepted government auditing standards.

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

Army; the Director of the Ballistic Missile Defense Organization; and the

Director, Office of Management and Budget. We will make copies available

to others upon request.

This report was prepared under the direction of Thomas J. Schulz,

Associate Director, Defense Acquisitions Issues. If you or your staff have

any questions concerning the observations expressed in this report, please

contact him on (202) 512-4841. Major contributors to this report were

Lee Edwards, Leon Gill, Stan Lipscomb, and J. Klein Spencer.

Henry L. Hinton, Jr.

Assistant Comptroller General

Page 10 GAO/NSIAD-96-136 Prototype THAAD System
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List of Congressional Committees

The Honorable Strom Thurmond

Chairman

The Honorable Sam Nunn

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Ted Stevens

Chairman

The Honorable Daniel K. Inouye

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Floyd D. Spence

Chairman

The Honorable Ronald V. Dellums

Ranking Minority Member

Committee on National Security

House of Representatives

The Honorable C.W. Bill Young

Chairman

The Honorable John P. Murtha

Ranking Minority Member

Subcommittee on National Security

Committee on Appropriations

House of Representatives

Page 11 GAO/NSIAD-96-136 Prototype THAAD System
Appendix I 

Comments From the Department of Defense

Note: GAO comments

supplementing those in the

report text appear at the

end of this appendix.

Page 12 GAO/NSIAD-96-136 Prototype THAAD System
Appendix I 

Comments From the Department of Defense

Page 13 GAO/NSIAD-96-136 Prototype THAAD System
Appendix I 

Comments From the Department of Defense

See comment 1.

Page 14 GAO/NSIAD-96-136 Prototype THAAD System
Appendix I 

Comments From the Department of Defense

See comment 2.

Page 15 GAO/NSIAD-96-136 Prototype THAAD System
Appendix I 

Comments From the Department of Defense

The following are GAO’s comments on the Department of Defense’s (DOD)

letter dated May 13, 1996.

GAO’s Comments 1. We recognize that the Theater High Altitude Area Defense (THAAD) User

Operational Evaluation System (UOES) has three purposes—(1) providing

soldiers an opportunity to influence the system’s design; (2) conducting

early operational assessments of the system; and (3) if directed by the

National Command Authority, providing a theater commander in chief

with a more robust theater missile defense architecture than exists today.

The two primary purposes of UOES set forth by DOD—early user influence

on the design and system operation assessment—can be accomplished

without contracting for the 40 interceptors. The thrust of our report deals

with the risks inherent in the Army’s accelerated approach of contracting

for interceptors to be deployed before testing provides assurance of the

system’s effectiveness.

2. The current THAAD UOES schedule provides only 14 of the 

40 interceptors by fiscal year 1998—the date the 1996 Defense

Authorization Act calls for a UOES capability. Delivery of the

40 interceptors will not be completed until the 3rd quarter of fiscal year

1999.

(707114) Page 16 GAO/NSIAD-96-136 Prototype THAAD System
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