GAO

United States General Accounting Office

Report to the Chairman, Subcommittee 

on Defense, Committee on 

Appropriations, House of 

Representatives

June 1999 MISSILE DEFENSE

THAAD Restructure 

Addresses Problems 

But Limits Early 

Capability

GAO/NSIAD-99-142

Page 1 GAO/NSIAD-99-142 THAAD Program Restructure

United States General Accounting Office

Washington, D.C. 20548 Letr

National Security and

International Affairs Division

B-280755 Letter

June 30, 1999

The Honorable Jerry Lewis 

Chairman, Subcommittee on Defense

Committee on Appropriations

House of Representatives

Dear Mr. Chairman:

The Ballistic Missile Defense Organization and the Army are developing the 

$15.4 billion Theater High Altitude Area Defense (THAAD) system to defeat 

theater ballistic missiles. Because of the Subcommittee’s concerns about 

repeated test failures and the Department of Defense’s (DOD) restructuring 

of the program, the former Chairman of the Subcommittee requested that 

we review the status of the THAAD program. Specifically, we (1) identified 

the underlying problems in the program that led to the test failures, 

(2) assessed whether program restructuring efforts address these 

underlying problems, and (3) determined how this restructuring will affect 

THAAD’s User Operational Evaluation System.1

Results in Brief Studies conducted by both DOD and independent sources identified the 

following underlying problems in the THAAD program:

• The program’s compressed flight-test schedule did not allow for 

adequate ground testing, and as a result officials could not detect 

problems prior to flight tests. The schedule also left insufficient time for 

preflight testing, postflight analysis, and corrective actions.

• The requirement to be able to quickly deploy an early prototype system 

diverted the contractor and government project management’s attention 

away from the normal interceptor development process and resulted in 

interceptors that were not equipped with sufficient instruments to 

provide optimum test data.

• Quality assurance received insufficient emphasis and resources during 

the time of component production, resulting in unreliable components.

1

Initially, the THAAD program included plans for an early prototype system, called the User Operational 

Evaluation System, that could be used in a national emergency.

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• The contract for developing the interceptor was a cost-plus-fixed-fee 

contract, a contract type that placed all of the program’s financial risk 

on the government and did not include provisions that could be used to 

hold the contractor accountable for less than optimum performance.

Flight-test failures have been caused primarily by manufacturing defects 

rather than problems with advanced technology. These failures have 

prevented the Army from demonstrating that it can reliably employ the 

“hit-to-kill” technology critical to THAAD’s success.2

The restructured program addresses each of the program’s four underlying 

problems. It

• lengthens the flight-test schedule and increases ground testing;

• removes the requirement for the deployable, early prototype 

interceptors;

• increases the contractor’s quality emphasis, including its commitment, 

leadership, and quality assurance staffing; and

• modifies the cost-plus-fixed-fee contract to provide performance-based 

incentives and penalties and introduces a degree of competition into the 

program.

Despite these changes, the reliability of the remaining flight-test 

interceptors remains a concern because most components were produced 

when the contractor’s quality assurance system was inadequate.

The program restructuring puts into question the need to retain a fully 

staffed User Operational Evaluation System battalion. The battalion will 

have little or no capability to intercept ballistic missiles because 

interceptors will not be available for the prototype system unless 

interceptors intended for tests are diverted to the battalion. According to 

the Army Training and Doctrine Command’s system manager for THAAD, 

the THAAD radar could be used for predicting the launch and impact points 

of enemy missiles, but no requirement exists for THAAD to perform that 

mission and no independent assessment of the prototype radar’s 

capabilities is planned. The User Operational Evaluation System battalion 

provides input to system designers, but according to the THAAD project 

2“Hit-to-kill” technology allows an interceptor to destroy an attacking missile by colliding with it.

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manager, this input could be provided with significantly fewer soldiers than 

the 295 currently authorized.

We provide recommendations in this report for the Secretary of Defense 

concerning (1) the need for and capabilities of the User Operational 

Evaluation System and (2) the minimum essential military personnel and 

equipment required to fulfill the defined mission.

Background When operational, THAAD will support the national objective of protecting 

U.S. and allied deployed forces, population centers, and industrial facilities 

from theater missile attacks. The THAAD system consists of four major 

components: (1) truck-mounted launchers; (2) interceptor missiles; 

(3) a radar; and (4) the battle management/command, control, 

communications, computers, and intelligence system. The launcher is 

intended to provide rapid reloading of interceptors. Each interceptor 

consists of a single-stage booster and a kill vehicle that is designed to 

autonomously home on an enemy missile during the last phase of 

interceptor flight and destroy the missile by colliding with it, a concept 

called “hit-to-kill.” The radar is designed to support the full range of 

surveillance, target tracking, and fire control functions and to provide a 

communications link with THAAD interceptors in flight. The battle 

management/command, control, communications, computers, and 

intelligence system is designed to manage and integrate all THAAD 

components and link the THAAD system to other missile defense systems 

to support an interoperable theater missile defense architecture.

THAAD is currently in the program definition and risk reduction phase.3

Through March 1999, the system had failed in the first six attempts to 

intercept a target. In June 1999, THAAD successfully intercepted its target 

during the seventh intercept flight test. DOD plans to continue THAAD 

testing and make a decision in the second quarter of 2000 on whether to 

proceed into the next acquisition phase—engineering and manufacturing 

development. A low rate initial production decision for the system is 

planned for the third quarter of 2005, and initial fielding is currently 

scheduled for the third quarter of 2007. DOD’s budget submission for fiscal 

year 2000 requests $611.6 million for the program. Primarily because 

restructuring extended THAAD’s development schedule by 21 months, the 

3

DOD’s acquisition phases are (1) concept exploration, (2) program definition and risk reduction, 

(3) engineering and manufacturing development, and (4) production.
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program’s estimated acquisition cost increased to $15.4 billion, an increase 

of $1.3 billion over the December 1997 estimate. Through April 1999, DOD 

spent about $3.3 billion on the THAAD program.

The Army established a THAAD User Operational Evaluation System 

battalion at Fort Bliss, Texas, in 1995. The User Operational Evaluation 

System—an early prototype version of the final THAAD system—was 

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. The 

initial plan called for the prototype system to have 40 interceptors; 

4 launchers; 2 radars; 2 battle management/command, control, 

communications, computers, and intelligence units; and associated support 

equipment. Except for the interceptors, these components were acquired 

and delivered to the THAAD battalion under the existing program 

definition and risk reduction contract at little or no additional cost. Under 

the initial plan, the 40 interceptors were to be produced after the first 

successful intercept test at an estimated cost of $225 million.

Underlying Reasons for 

Past Intercept Failures 

Several quality assurance audits and other independent reviews have 

highlighted problem areas in the THAAD program. In our review of these 

studies, we identified four underlying reasons for the program’s difficulties. 

First, a compressed flight-test schedule and inadequate ground testing 

delayed the program and failed to detect problems prior to flight tests. 

Second, the requirement for a high priority but high risk User Operational 

Evaluation System capability using an early prototype interceptor design 

diverted the attention of the contractor and government project 

management and limited the ability to more fully test the interceptor. Third, 

an inadequate quality assurance system failed to detect defective 

components. Fourth, the cost-plus-fixed-fee contract did not include 

provisions to hold the contractor fully accountable or provide the 

government with the ability to directly influence the contractor’s efforts. 

Early flight-test failures have prevented the Army from determining 

whether it can reliably employ the “hit-to-kill” technology essential to 

THAAD’s success.
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Compressed Flight-Test 

Schedule and Inadequate 

Ground Testing 

According to Army officials, DOD accepted an ambitious flight-test 

schedule with a reduced emphasis on ground testing because of the urgent 

need for improved missile defenses. Several studies identified this schedule 

as a source of the program’s problems. In September 1994, for example, an 

independent contractor reported that the program’s initial schedule—

which allowed only 30 days between each of the last seven flight tests—did 

not permit adequate time for failure analysis, corrective actions, and 

retest.4 In July 1996, another independent panel reported that insufficient 

time to perform ground testing between flights represented an 

unacceptable technical risk.5 Also, according to this panel, problems 

discovered in one flight test were not fully understood before conducting 

the next test and the number of problems being experienced may have 

indicated a process breakdown caused by schedule pressures. According 

to DOD’s Director of Operational Test and Evaluation, testing through 

March 1997 emphasized schedule over success. The aggressive flight-test 

schedule proved to be overly ambitious; technical problems encountered 

during testing resulted in program delays.

In its February 1998 report, the Panel on Reducing Risk in Ballistic Missile 

Defense Flight Test Programs labeled THAAD’s aggressive schedule and 

insufficient attention to flight-test failures a “rush to failure.”6

 This group, 

which had been chartered to study risk in the flight testing of Ballistic 

Missile Defense Organization programs, pointed out that THAAD’s flight 

tests were conducted without complete component qualification and 

ground testing.

THAAD program officials agree that the initial schedule was overly 

optimistic. The contractor’s chief engineer for the THAAD program told us 

that if the schedule had allowed for better ground testing of the interceptor, 

at least some of the problems that caused flight-test failures would have 

been caught. The Army’s initial plans allowed only 1 month between flight 

tests. In hindsight, according to the program manager, additional time to 

test components might have prevented some flight-test failures.

4

THAAD Independent Program Assessment, Final Report, Garber International Associates, Inc., 

September 30, 1994.

5Final Report, THAAD Independent Review Panel, July 29, 1996.

6

Report of the Panel on Reducing Risk in Ballistic Missile Defense Flight Test Programs , Institute for 

Defense Analyses, February 27, 1998.
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User Operational Evaluation 

System Requirement 

Diverted Attention and 

Limited Ability to Test 

Interceptor

The User Operational Evaluation System was intended, in part, to provide 

an interim defense capability that could be used until the final system was 

ready. However, the planning and implementation of the User Operational 

Evaluation System diverted THAAD program management to some extent 

from its primary task of developing the interceptor and resulted in an 

interceptor designed more for deployment than for testing.

According to the Panel on Reducing Risk in Ballistic Missile Defense Flight 

Test Programs, the requirement for an early prototype system capability led 

program management to focus some of its attention on operational issues 

(such as training soldiers) rather than concentrating solely on developing 

and testing the interceptors. The User Operational Evaluation System 

requirement essentially demanded an operational capability before the 

interceptor was fully designed. This resulted in interceptors built for 

wartime use rather than equipped with sufficient instruments to provide 

optimum test data. According to the panel’s report, because of the 

requirement for a User Operational Evaluation System, the program used 

parallel testing to save time rather than best practices, such as a sequential 

find-and-fix approach. The panel recommended eliminating the 

requirement for deployable prototype interceptors because acquiring such 

an early operational capability was inconsistent with the complexity of the 

task of developing the THAAD system.

THAAD program management agreed that the requirement for a User 

Operational Evaluation System was a distraction and reduced its ability to 

test the interceptor. The contractor’s THAAD chief engineer told us that 

because of the requirement, the developmental interceptors were designed 

with fewer ways to test components and subsystems on the ground and the 

ground tests were made more difficult because test points were less 

accessible. The THAAD project manager also acknowledged that planning 

for User Operational Evaluation System interceptors had been a distraction 

to his team.

Inadequate Quality 

Assurance 

Inadequate quality assurance allowed problems to go undetected, and test 

analyses show that those problems caused most, if not all, of THAAD’s six 

failures to intercept a target. According to DOD’s Director of Operational 

Test and Evaluation, for example, quality control deficiencies in the 

manufacturing of the interceptors were a major factor in all but one of the 
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first five flight-test failures.7 Some of the failures were caused by debris 

that was allowed to get into components during the manufacturing process. 

A better quality assurance system could have prevented or caught these 

problems.

Although the government identified inadequacies in the contractor’s quality 

assurance system, the contractor did not make improvements in a timely 

manner. As early as February 1994, the Army’s first quality assurance audit 

of the THAAD contractor cited 11 areas in which the contractor did not 

comply with the quality assurance provisions of the contract. These 

included findings that the contractor had not performed internal audits or 

followed approved procedures. In addition, the audit team reported that 

the approved reliability program had not been fully implemented. The 

auditors noted that these deficiencies could result in flight-test failures, test 

program delays, and lower hardware reliability. Over 2 years later, in 

August 1996, another quality assurance audit showed that problems had 

not been resolved. That audit report cited quality system weaknesses, 

including a lack of quality assurance resources, and an inadequate system 

for reporting problems and related corrections. Between contract award in 

September 1992 and July 1995, the contractor reduced the number of staff 

performing quality assurance functions by two thirds. The audit report 

recommended a rededication and commitment by contractor management 

to the concept of quality.

According to some analyses, the contractor’s management was not 

sufficiently committed to the program and did not provide the leadership to 

correct the problems and ensure the program’s success. For example, 

following the 1996 quality assurance audit, the THAAD project manager 

expressed concerns about the contractor’s leadership and management. He 

wrote that (1) the failure reporting and corrective action system was 

neither timely nor effective, (2) acceptance test plans and procedures were 

not defined, and (3) both the quality and quantity of quality assurance 

personnel were insufficient. The project manager concluded that the 

contractor’s approach to quality assurance was not working and that a 

basic change in the contractor’s management philosophy was required. The 

contractor responded with a detailed resolution plan in September 1996, 

but flight-test failures caused by quality problems continued. In May 1998, 

following the fifth intercept failure, the government’s contracting officer

7According to DOD’s Director of Operational Test and Evaluation, a software processing error caused 

the other test failure.
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notified the contractor that its failure to achieve an intercept was 

endangering the contract. Subsequent agreements between the Army and 

the contractor addressing project office concerns were incorporated into 

the restructured THAAD program.

Inappropriate Contract Type THAAD’s cost-plus-fixed-fee type contract placed all of the program’s 

financial risk on the government and, short of terminating the contract, did 

not include provisions that could be used to hold the contractor 

accountable for less than optimum performance. According to the May 

1992 THAAD acquisition strategy report, a fixed-fee contract was used 

because of the potential for cost increases. The THAAD project manager 

told us that, at the time of the development contract award, the risks of 

schedule slips and cost increases were considered high, reducing the 

likelihood that a contractor would accept an incentive fee arrangement. No 

incentive on technical performance was believed to be necessary because 

technical risks were considered to be low. Under the cost-plus-fixed-fee 

arrangement, the government agreed to reimburse all of the contractor’s 

allowable costs and pay a fixed fee. Because the contractor’s fee was fixed 

at the beginning, it was not tied to accomplishment of cost, schedule, and 

performance objectives.

In November 1993, the Army Audit Agency cited THAAD as an example of 

an acquisition that did not use the proper contract type and did not provide 

appropriate incentives.8

 The audit pointed out that the Army structured 

contracts for the THAAD system’s radar and interceptor differently. 

Although both components were in the program definition and risk 

reduction phase, the radar contract included both award and incentive 

fees, while the interceptor contract did not make use of incentives. The 

audit agency’s report concluded that the approach taken in regard to the 

THAAD interceptor contract did not comply with sound contracting 

principles because it did not tie financial incentives to cost, schedule, and 

performance goals.

The THAAD project office expressed concern that the contractor was not 

taking the lead in identifying and fixing problems. The purpose of including

8Research and Development Contracting, U.S. Army Audit Agency Report No. 94-700, November 20, 

1993.
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Page 9 GAO/NSIAD-99-142 THAAD Program Restructure

incentives and/or penalty provisions is to provide a means of motivating the 

contractor to proactively identify and fix problems. Award fee contracts, 

for example, provide the government more control in terms of directly 

influencing the contractor’s efforts.

Army Has Not 

Demonstrated Reliability of 

THAAD Hit-to-Kill 

Technology

To date, THAAD test failures have been caused primarily by manufacturing 

defects rather than advanced technology problems. For example, a short in 

an electrical circuit caused one failure. Other failures resulted because 

debris was allowed to contaminate components such as infrared seeker 

parts during the manufacturing process. Despite the flight-test failures, 

independent reviews have concluded that the interceptor design should be 

capable of accomplishing its mission. However, according to the 

independent Panel on Reducing Risk in Ballistic Missile Defense Flight Test 

Programs, DOD initially underestimated the difficulty of performing 

“hit-to-kill” intercepts. Only 8 of the 24 hit-to-kill intercept attempts 

conducted since the early 1980s in various missile defense programs have 

been successful. Although the Army demonstrated THAAD’s ability to hit 

another missile in June 1999, it has not shown that this technology can be 

reliably employed under all necessary conditions. For example, THAAD is 

required to intercept targets both inside and outside the atmosphere and 

under a variety of conditions, such as when targets employ 

countermeasures. The June 1999 intercept was in the higher regions of the 

atmosphere and the target did not use countermeasures. Future tests are 

planned for intercepts lower in the atmosphere and outside the 

atmosphere. Each region presents unique challenges; for instance, it may 

be more difficult for THAAD to distinguish between attacking warheads 

and debris and other objects during intercept attempts outside the 

atmosphere.

Restructured Program 

Addresses Underlying 

Problems, but 

Reliability Remains a 

Concern 

After the fifth successive test failure in May 1998, DOD restructured the 

THAAD program. The restructured program addresses each of the four 

underlying problems. However, because most interceptor components 

were produced before DOD restructured the program, their reliability 

remains a concern for future tests. 
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Restructured Program 

Addresses Underlying 

Problems

THAAD’s compressed flight-test schedule and inadequate ground testing 

were addressed by extending the schedule for the current phase of flight 

testing and adding ground tests. The THAAD project office allowed about 

10 months between the fifth intercept failure in May 1998 and the sixth 

attempt in March 1999 in order to retest and recertify components. In 

addition, more extensive interceptor ground testing was implemented at 

the assembly facility prior to shipment to the test range and at the test 

range just prior to flight testing. Following these actions, THAAD failed its 

sixth intercept attempt in March 1999, but it successfully intercepted the 

target in its seventh attempt in June 1999. The remaining three flights of the 

current test phase are scheduled through December 1999 using the retested components. If two of the three intercept attempts are successful, 

THAAD will enter the engineering and manufacturing development 

acquisition phase; in this phase, flight tests are scheduled about 3 months 

apart to allow sufficient time for preflight testing, postflight analysis, and 

corrective actions.

Under the restructured program, the Army no longer plans to produce 

THAAD User Operational Evaluation System interceptors. As indicated 

previously, the requirement for these interceptors distracted contractor 

and government program management from its primary tasks of developing 

and testing the interceptor and resulted in a less testable design. Removing 

the requirement should eliminate this distraction, but because the design of 

the interceptor currently being flight-tested is little changed, limits remain 

on the ability to test it. 

THAAD’s restructuring also improved the quality assurance program. In 

September 1996, prior to the restructuring, the contractor issued a detailed 

plan to resolve concerns about its quality assurance program. That plan 

called for improvements such as (1) implementing a system for auditing 

and evaluating the effectiveness and performance of quality assurance 

contractual requirements, (2) dedicating personnel to support failure 

reporting analysis and corrective actions, and (3) performing all 

component acceptance procedures with trained quality assurance 

representatives. Under restructuring, the contractor reorganized and added 

a Vice President for THAAD Flight Testing, who, according to the THAAD 

project manager, has provided the leadership and commitment that was 

lacking. In April 1999, this official became responsible for the contractor’s 

entire THAAD program. In addition, as shown in figure 1, the contractor 

has significantly increased the quality assurance staffing levels. Defense 

Contract Management Command representatives told us that, in their view, 

the contractor’s current quality assurance staffing is sufficient.
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Figure 1: Contractor Staffing Levels Dedicated to THAAD Quality Assurance 

Source: THAAD Project Office.

The restructuring also added financial incentives to the development 

contract and introduced a degree of competition into the program, which 

may provide even more incentive for a successful program. As part of the 

THAAD restructuring, the Army and the contractor signed a contract 

modification in July 1998 that provides cost-plus-incentive-fee and awardfee elements to the original cost-plus-fixed-fee contract. The incentive 

provisions require the contractor to absorb up to $75 million of 

development costs based on flight-test results. The contractor incurred the 

first $15 million penalty following the failed intercept attempt on March 29, 

1999. Under the remaining incentive-fee provisions, the contractor would 

also absorb (1) $20 million if two intercepts have not occurred by July 16, 

1999;9 (2) $20 million more if three intercepts have not occurred by October 

16, 1999; and (3) yet another $20 million if three intercepts have not 

occurred by January 16, 2000. However, if the contractor incurs initial 

penalties followed by successful intercepts, some of the penalties could be 

reimbursed. The contractor can be reimbursed up to $35 million for three 

successful intercepts by January 16, 2000. In addition, the contractor could 

be awarded up to an additional $20 million in reimbursement based on the 

contracting officer’s subjective determination of the contractor’s cost 

performance.

9

One of the two intercepts was successfully conducted on June 10, 1999.

0

10

20

30

40

50

Start July-95 July-96 July-97 Jan.-98

Staffing levels
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DOD also introduced a degree of competition into the restructured 

program. DOD has proposed that THAAD and the Navy’s Theater Wide 

system10 compete for funding beginning in fiscal year 2002.11 In December 

2000, the Ballistic Missile Defense Organization plans to review the two 

programs in terms of cost, schedule, performance, and risk. It then plans to 

select one of the systems for enhanced funding in order to field that system 

by fiscal year 2007. The other program would continue in development, but 

at a slower pace. Regardless of which is chosen, the Army would continue 

development of the THAAD radar and battle management/command, 

control, communications, computers, and intelligence system for use in the 

overall theater air and missile defense mission.

Reliability Remains a 

Concern

The reliability of the interceptors that are planned for use during the 

current phase of flight-testing is an ongoing concern because most 

components were produced under inadequate quality assurance 

conditions. With the exception of the seeker (the component that locates 

and tracks the target and provides that information to the interceptor’s 

computer), all components and subsystems were produced by 1996, before 

quality assurance improvements were made.

After the fifth failed intercept attempt in May 1998, all existing interceptor 

components were subjected to reevaluation and/or retesting. However, 

according to DOD’s Director of Operational Test and Evaluation, retesting 

is not a substitute for initial production under adequate quality assurance 

processes. The Director also observed that hardware for the remaining 

THAAD interceptors was built several years ago, and only minor changes 

or upgrades can be made to this existing hardware.12According to the 

Director, until new hardware is built that incorporates improved 

manufacturing, quality assurance, and test processes, there is no reason to 

expect any significant improvement in the THAAD interceptor’s

10The sea-based Navy Theater Wide system is being designed to complement THAAD and help protect 

U.S. and allied forces against medium- to long-range theater ballistic missiles.

11The Senate’s version of the fiscal year 2000 Defense Authorization Act (Senate bill 1059, section 221) 

if enacted into law would effectively bar this planned competition by requiring that the Secretary of 

Defense establish an acquisition strategy that bases funding and schedule decisions on the performance 

of each system independent of the other system.

12Fiscal Year 1998 Annual Report, Director, Operational Test and Evaluation, February 1999.
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performance. After extensive review, however, DOD decided to continue 

the current test program. THAAD failed its sixth intercept attempt in March 

1999 because of an unreliable component, but it successfully intercepted 

the target during its seventh attempt in June 1999. The restructured 

program also provides for redesigning the interceptor with a view toward 

producing 20 interceptors for testing early in the engineering and 

manufacturing development phase.

Restructured Program 

Significantly Alters 

User Operational 

Evaluation System 

Concept and 

Capabilities

Because the restructured THAAD program does not include prototype 

interceptors intended for early deployment, the THAAD User Operational 

Evaluation System battalion will have little or no capability for intercepting 

enemy theater ballistic missiles. The restructured program includes a plan 

to produce 20 redesigned interceptors, called “risk reduction/contingency” 

interceptors, but unlike the 40 interceptors initially planned for the User 

Operational Evaluation System, all 20 of these interceptors are planned for 

testing in THAAD’s next development phase. The risk reduction/

contingency interceptors will (1) be designed to incorporate lessons 

learned from the current development phase, (2) have improved test 

instrumentation, and (3) consist of all new hardware to improve reliability 

and performance. Under the restructured THAAD program, the first of 

these interceptors would be delivered in 2003.

In addition to an interim system that could be deployed to intercept theater 

ballistic missiles, the User Operational Evaluation System was originally 

intended to (1) allow military users to influence the system design and 

(2) permit an early operational assessment of the system’s capabilities. The 

THAAD battalion has provided feedback to influence the system’s design, 

but according to the THAAD project manager, the battalion could 

accomplish this objective with significantly fewer soldiers than the 

295 currently authorized. Restructuring the THAAD program removed the 

requirement for an early operational assessment of the User Operational 

Evaluation System.

The Army Training and Doctrine Command’s system manager for THAAD 

has identified two potential military capabilities of the User Operational 

Evaluation System that might be of value to U. S. warfighters. First, risk 

reduction/contingency program interceptors planned for testing could be 

diverted to the User Operational Evaluation System battalion if military 

operations commence. However, the first of the risk reduction/contingency 

interceptors will not be available until 2003. Because most, if not all, risk 

reduction/contingency interceptors will be consumed soon after delivery 
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by ground- and flight-testing, few, if any, of them would be available for 

contingency deployment. Up to 18 months could be needed to produce 

additional interceptors in excess of the 20 currently planned.

The second use postulated for the THAAD battalion is to use the THAAD 

radars to predict the launch and impact point of enemy missiles. However, 

DOD has not established a formal requirement for the THAAD radars to 

perform launch and impact point predictions. Also, DOD does not plan an 

independent assessment of the radar’s operational capabilities for this 

mission. Both a formal requirement and an assessment of capabilities 

would be needed for a decision to deploy the User Operational Evaluation 

System radars because a wartime commander would have to use five or six 

C-5 aircraft that might be needed for other purposes.13

Conclusions The restructured program addresses each of the THAAD program’s four 

underlying problems. However, the reliability of current flight-test 

interceptors remains a concern because most components were produced 

when the contractor’s quality assurance system was inadequate. Test 

failures caused primarily by manufacturing defects, rather than advanced 

technology problems, have prevented the Army from demonstrating that 

THAAD can reliably intercept targets in all required regions.

The restructuring of the THAAD program raises the issue of what the 

purpose of the User Operational Evaluation System battalion at Fort Bliss 

should now be. Whether all or only part of the battalion would warrant 

deployment for contingency operations would depend on the capabilities it 

could provide to warfighters and the priority of the need for one or more of 

those capabilities. However, there would be little basis for making a 

deployment determination because DOD does not plan to conduct an 

operational assessment of the User Operational Evaluation System. 

Recommendations We recommend that the Secretary of Defense determine and define which, 

if any, potential capabilities of the restructured THAAD User Operational 

Evaluation System are needed by the warfighter community. If warranted 

by that determination, we further recommend that the Secretary (1) direct

13The Army estimates that 25 C-5, 37 C-17, or 67 C-141 fights would be needed to deploy the entire 

battalion, including launchers and missiles.
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that an independent operational assessment of the needed THAAD User 

Operational Evaluation System capabilities be conducted and (2) require 

the Army to determine the minimum essential military personnel and 

equipment required to fulfill the defined mission.

Agency Comments and 

Our Evaluation

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

recommendations. DOD said that the Army is currently assessing how the 

User Operational Evaluation System’s capabilities can help meet near-term 

warfighting requirements. According to DOD, this review might change the 

battalion’s force structure because interceptor missiles for test or possible 

deployment will not be available until fiscal year 2003. Until then, THAAD’s 

potential contribution will be limited to enhancing surveillance and launch 

and ground impact point predictions and to providing data to other missile 

defense systems. The Army is working to determine the minimum number 

of military personnel and equipment needed to support the User 

Operational Evaluation System until interceptors are available. DOD also 

said that it will conduct an early operational assessment of the User 

Operational Evaluation System’s capabilities before beginning THAAD 

engineering and manufacturing development in fiscal year 2000. 

DOD also provided additional technical comments and suggested changes, 

which we incorporated. DOD’s comments are included in appendix I.

Scope and 

Methodology

To identify underlying reasons for the program’s difficulties, we reviewed 

pertinent government and contractor documentation, including contract 

files, audit reports, schedules, briefings, cost reports, integrated product 

team minutes, and contractor resolution plans and training plans. We also 

reviewed independent studies and discussed the studies’ findings with 

knowledgeable officials. We compared the results of our review to the 

findings of the independent studies.

To assess the latest plans for restructuring the program and the impact of 

the restructuring on problems identified earlier, we reviewed revised 

program plans, integrated product team meeting minutes, and other 

planning documents. We also discussed elements of the restructured 

program with THAAD program officials, contractor representatives, 

representatives of the Army’s user element, and independent test officials. 
B-280755

Page 16 GAO/NSIAD-99-142 THAAD Program Restructure

To determine the impact of changes on the THAAD User Operational 

Evaluation System, we interviewed appropriate government and contractor 

officials (including user representatives) and reviewed pertinent contractor 

documents and government planning documents. We analyzed how the 

changes would affect the project office and potential users.

In Washington, D.C., we interviewed representatives from the Office of the 

Secretary of Defense; Joint Staff; Office of the Director, Operational, Test, 

and Evaluation, Ballistic Missile Defense Organization; and the Office of 

the Army’s Deputy Chief of Staff for Operations. We also interviewed 

representatives from THAAD Battalion and Air Defense Artillery School,

Fort Bliss, Texas; Raytheon Corporation and THAAD Battalion, White 

Sands Missile Range, New Mexico; Lockheed Martin Missiles and Space 

and Defense Contract Management Command, Sunnyvale, California; and 

THAAD project office and U.S. Army Space and Missile Defense Command, 

Huntsville, Alabama.

We conducted our work from August 1998 to June 1999 in accordance with 

generally accepted government auditing standards. At the end of our 

review, we updated our work to reflect the successful intercept test on 

June 10, 1999.

As arranged with your staff, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days from its 

issue date. At that time, we plan to provide copies of this report to the 

Honorable William Cohen, Secretary of Defense; the Honorable Lewis 

Caldera, Secretary of the Army; Lieutenant General Lester Lyles, Director, 

Ballistic Missile Defense Organization; the Honorable Jacob Lew, Director, 

Office of Management and Budget; and key committees of the Congress. 

We will make copies available to others upon request.
B-280755

Page 17 GAO/NSIAD-99-142 THAAD Program Restructure

If you or your staff have questions concerning this report, please contact 

me at (202) 512-4841. The major contributors to this report were Lee 

Edwards, Stan Lipscomb, and Tom Gordon.

Sincerely yours,

Allen Li

Associate Director, 

Defense Acquisitions Issues
Page 18 GAO/NSIAD-99-142 THAAD Program Restructure

Appendix I

Comments From the Department of Defense ApeInxdi
Appendix I

Comments From the Department of Defense

Page 19 GAO/NSIAD-99-142 THAAD Program Restructure

Now on pp. 3 and 14.

Now on pp. 3 and 14.

(707376) Lret
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