United States General Accounting Office

GAO Report to the Secretary of Defense

November 1997 BALLISTIC MISSILE

DEFENSE

Improvements Needed

in Navy Area

Acquisition Planning

GAO/NSIAD-98-34

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-274679 

November 14, 1997

The Honorable William S. Cohen

The Secretary of Defense

Dear Mr. Secretary:

We reviewed the Navy Area Theater Ballistic Missile Defense program to

determine whether (1) the program has met its milestones to date and its

remaining schedule appears realistic and (2) the tests being conducted or

planned will be adequate to demonstrate the system’s capabilities before

production begins. We are addressing this report to you at this time

because the program is now entering the phase during which

developmental and operational testing is conducted and low-rate initial

production is to begin.

Background The Area program is a sea-based weapon system being developed by the

Ballistic Missile Defense Organization (BMDO) and the Navy to defeat

theater ballistic missiles. The system is considered a high-priority “core”

theater missile defense program by BMDO and the Congress. It supports the

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

centers, and industrial facilities from theater missile attacks.

The mission of the Navy Area program is to provide a near-term,

short-range tactical ballistic missile defense capability until ground forces,

including other ballistic missile defense systems, can be set up. The Navy

Area system is part of a “family of missile defense systems” that also

includes the Army’s Patriot PAC-3 system to help defend against

short-range missiles and the Navy’s Theater-wide and the Army’s Theater

High Altitude Area Defense systems for defending against long-range

missiles.

According to proponents, the advantages of Navy missile defense systems

over ground-based systems are that Navy ships (1) are likely to be

relatively close to any areas of potential conflict and (2) do not require

host nation agreement to be deployed to the area. As a result, the Navy

systems can be deployed more readily than other systems.

According to the Navy, its Area program also takes advantage of existing

infrastructure. It is to be incorporated into existing AEGIS weapon

Page 1 GAO/NSIAD-98-34 Navy Area TBMD Program
B-274679 

systems1 and consists of a modified AEGIS combat system and modified

Navy command and control systems to enable detection, tracking, and

engagement of theater ballistic missiles. Changes needed to give the AEGIS

system ballistic missile defense capabilities primarily involve software

changes and increased computer capability. Modifications are also to be

made to the existing Standard Missile-2, Block IV, and are to include

adding an infrared seeker and a radio-frequency adjunct sensor to enable

the missile to home and fuze on attacking ballistic missiles. This modified

missile is designated as the Standard Missile-2, Block IVA. Modifications

are also to be made to the ship’s vertical launching system. These

modifications are intended to provide AEGIS ships with a theater ballistic

missile defense capability while allowing them to maintain their ability to

conduct anti-air warfare against aircraft and cruise missiles.

To equip 57 AEGIS destroyers and 22 AEGIS cruisers with theater missile

defense capability between fiscal year 1998 and 2011, the Navy plans to

buy 1,500 Standard Missile-2, Block IVAs. The Navy also plans to field a

prototype system—the User Operational Evaluation System

(UOES)—beginning in September 1999. UOES provides for an interim

ballistic missile defense capability and allows for fleet personnel to

evaluate the system. The Navy plans to equip 2 cruisers with a total of 

35 UOES missiles available for testing and/or use in a national emergency.

The total cost of the Navy Area program is projected to be $8.98 billion,

including $2.05 billion for development, $4.18 billion for procurement, and

$2.76 billion for operation and support. As of the end of fiscal year 1997,

more than $900 million has been appropriated for system development.

The Department of Defense (DOD) requested about $283 million in fiscal

year 1998—$267.8 million for development and $15.4 million for

production.

Figure 1 shows the concept of the Navy Area program.

1

The AEGIS weapon system allows the ship to perform search, track, and missile guidance functions

using (1) the SPY-1 radar, which is an advanced, automatic, detection and track, multi-function,

phased-array radar; (2) computer equipment; and (3) advanced software.

Page 2 GAO/NSIAD-98-34 Navy Area TBMD Program
B-274679 

Figure 1: Navy Area Program

Source: U.S. Navy.

Results in Brief The Area program has experienced schedule slips totaling about 

14 months due to several reasons, including technical problems in the two

flight tests conducted prior to the engineering and manufacturing

development phase. Our review indicates that further schedule slips are

possible because of the acquisition plan’s highly optimistic schedule for

conducting operational tests. Slippages in completing these tests could

result in the system remaining in a low-rate production phase longer than

currently planned.

The Navy plans to begin production of Area program missiles before

conducting any operational tests of the system. According to the Navy, it

needs to begin low-rate initial production of the missiles in June 2000—

5 months before system level developmental and operational tests are

Page 3 GAO/NSIAD-98-34 Navy Area TBMD Program
B-274679 

scheduled to begin—because of the urgent need for the system and to

maintain an efficient flow in missile production. In our opinion, two

factors raise some questions about the Navy’s rationale for the criticality

of initiating low-rate initial production, namely (1) a prototype system

capability consisting of two cruisers equipped with UOES missiles will be in

service at that time and (2) an earlier version of the Standard missile will

still be in production, diminishing the need for low-rate production of the

Block IVA missile to avoid a production gap.

Schedule Slips Have

Occurred and the

Planned Test Schedule

Is Optimistic

The Area program entered the engineering and manufacturing

development phase of the DOD weapon systems acquisition process earlier

this year, but the activities that had to be accomplished before the

engineering and manufacturing development phase could begin took about

14 months longer than expected. The initial Area program schedule

projected that the engineering and manufacturing development phase

would begin in December 1995 and that full-rate production would begin

in September 1999. Engineering and manufacturing development actually

began in February 1997 and the current schedule shows that full-rate

production will begin in August 2001. According to program officials, this

delay was due to the following reasons:

• The Standard Missile Company—a joint venture between the Raytheon

Company and the Hughes Missile Systems Company—took longer than

expected to establish, which delayed the Area program in obtaining test

missiles.

• A congressional budget cut for fiscal year 1995 and DOD accounting

changes slowed the progress of the program.

• Technical problems that occurred in the two flight tests prior to the

engineering and manufacturing development phase caused about a

6-month delay.2

• Concurrent with the flight test delay, there was also a delay related to the

completion of the Standard missile preliminary design, due to additional

time being required to complete cost performance tradeoffs.

The Area program acquisition plan has an optimistic schedule for

conducting operational tests, which could result in the system remaining

in a low-rate initial production phase longer than currently planned if the

2

The delay was due to two test issues. Neither of these test issues was related to the Block IVA missile

design. The first was the failure of an electronic component in the booster. The booster was designed

as part of the Block IV program and is a nondevelopmental item for Block IVA development. The

second test issue resulted from a telemetry problem resulting in range control personnel not being able

to receive target data.

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B-274679 

test program experiences serious problems. Between November 2000 and

March 2001, the Navy plans to conduct developmental and operational

tests at the Pacific Missile Range Facility that will involve intercept

attempts with a total of 32 missiles, an average rate of about 8 test firings a

month.

Program officials told us that such a test schedule is not unusual in Navy

testing, which is typically conducted based upon range availability and

ship operational commitments. According to these officials, test programs

for earlier versions of the Standard missile were also compressed. For

example, they indicated that the Block IIIB program conducted 

14 operational test intercepts in 3 days and the Block IV program

conducted 7 developmental/operational intercept tests in 2 days. However,

according to DOD officials, these tests were anti-air warfare tests, with

which the Navy has a great deal of experience, and not theater missile

defense tests. Navy test officials agreed that the Area system’s test

schedule is ambitious, but said that it was “doable.” They said that some of

the testing will involve multiple simultaneous engagements, which will use

several missiles in a brief period of time.

Despite the program office’s optimism, some DOD testing and program

analysis officials expressed skepticism that the Navy could complete the

planned test program on schedule. One DOD official said that it was not

realistic for the Navy to maintain this test schedule, citing delays with

other test programs such as tests of the Army’s Patriot PAC-3 system as

well as problems with the Area system’s earlier flight demonstration tests.

An internal DOD analysis noted that DOD “has yet to demonstrate the

feasibility of such an aggressive test schedule for a [theater ballistic

missile defense] program.” According to the analysis, the best

demonstrated program schedule experience to date was about 11 weeks

between successful intercepts of theater ballistic missile targets. Testing

officials agreed that if the test program experiences serious problems, it

will cause schedule delays.

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B-274679 

Navy Plans to Begin

Low-Rate Initial

Production Before

Conducting Realistic

Testing

The Navy plans to begin low-rate initial production of Area program

missiles in June 2000 before conducting any operational tests of the

system. The combined developmental and operational tests3

 scheduled to

begin in November 2000 are the first fully integrated shipboard system

tests planned for this program. Figure 2 displays the current testing and

production schedule.

Figure 2: Schedule of Navy Area System Operational Testing and Production

White Sands

Developmental

Test and

Operational

Assessment

Developmental

and Operational

Testing

Full-Rate

Production

Decision

Low-rate Initial

Production

Decision

1

2

3

4

ID Task Name

1997 1998 1999 2000 2001

Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3

The Navy indicated that it intends to use the results of the operational

assessment in the June 2000 decision to begin low-rate production of the

missiles. However, operational assessments will be based on

developmental tests conducted by the contractor at White Sands Missile

Range rather than on the results of realistic field testing. It will not provide

a comparable quality of information for decisionmakers that can be

obtained from independent operational tests. For example, according to

the Area program’s Test and Evaluation Master Plan, “no critical

operational issues will be resolved” during the White Sands testing.

According to Navy test officials, critical operational issues can only be

resolved during tests at sea such as the operational tests to be conducted

3

Developmental tests are conducted by program officials with the help of contractors. Operational

tests are conducted by an independent Navy testing organization, without contractors present, in

conditions that simulate actual operational conditions.

Page 6 GAO/NSIAD-98-34 Navy Area TBMD Program
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at the Pacific Missile Range Facility between November 2000 and

March 2001. Tests at White Sands are limited because the system is not

subjected to conditions found at sea such as salt water and the movement

of the ship and because they will not use the AEGIS SPY-1 radar.

According to Navy officials, the program needs to begin low-rate

production in June 2000—5 months before system level developmental

and operational tests are scheduled to begin—because of the urgent need

for the system and to maintain an efficient flow in Standard missile

production.

Our review indicated that the following two factors raise some question

about the criticality that the Navy attributes to initiating low-rate initial

production.

• The Navy’s stated urgent need for the Area program may be met in part by

the UOES system. The UOES prototype system is scheduled to be available in

September 1999. If the UOES meets it objectives, it will provide some

operational capability until the more capable system is available. The Navy

plans to provide two cruisers with a UOES capability, and the ships are to

be initially equipped with a total of 35 UOES missiles. Although many of

these missiles are to be expended in tests, a small number will remain.

• The need to maintain Standard missile production is not solely dependent

on the initial production of missiles for the Area program. Even without

low-rate production of the Area program’s Block IVA missile, Standard

missile production will continue. Production of an earlier version of the

missile—the Block IIIB—began in fiscal year 1997 and is scheduled to

continue at least through fiscal year 2003. Navy officials acknowledge that

even though the configurations of the Block IIIB and Block IVA missiles

are different, a high degree of commonality exists between the missiles

both at the section level and at lower assembly levels. The Navy and the

Standard Missile Company have identified minimum sustaining rates for

major sections of the Standard missile. In most of the cases we examined,

the minimum sustaining rate is met or almost met without production of

the Block IVA low-rate initial production missiles. For example, the

minimum sustaining rate for the warhead in fiscal year 1999 is 96 units.

Total production that year is expected to be 251 units, of which only 34 are

Block IVA units. The primary exception is the Block IVA booster, which is

not a component of the Block IIIB missile, and thus cannot meet its

minimum sustaining rate without Block IVA units.

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Figure 3 shows planned production of the various configurations of the

Standard missile.

Figure 3: Standard Missile Production

1997 1998 1999 2000 2001 2002 2003

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IIIB IV IVA 

The Navy plans to produce 185 Block IVA missiles—12 percent of its total

planned production quantity—during low-rate production. The estimated

cost for these 185 missiles is $568.2 million. Scheduling low-rate initial

production concurrent with testing increases risk. A DOD analysis

concluded that planning low-rate production concurrent with the Navy

Area test program was risky, noting that if problems are uncovered during

the test phase, the program may need to acquire additional hardware and

incur redesign costs. Testing problems could also cause the missile to

remain in low-rate production longer than currently planned.

Page 8 GAO/NSIAD-98-34 Navy Area TBMD Program
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Conclusions and

Recommendations

Slippage in the development of the Navy Area program has already

occurred and the planned test schedule is optimistic. Unless the

acquisition plan and/or the testing schedule is revised, the Navy will not

have reasonable assurance that the system will adequately perform before

the Navy commits itself to the production of the Block IVA interceptor

missiles.

The Navy currently plans to contract for the low-rate initial production of

185 Block IVA missiles, at an estimated cost of about $568.2 million, prior

to the completion of any realistic operational testing. The Navy intends to

rely on assessments that do not provide the quality of data that realistic

field testing provides. We are concerned that the Navy will make a

premature commitment to the production of unproven missiles.

The Navy acknowledges that risks are involved but believes it must

maintain the existing schedule because of the urgent need for the system

and to maintain an efficient flow in Standard missile production. Our

review indicates that if the initial production decision on the Block IVA

was delayed, the contractor could still generally maintain minimum

sustaining rates of production by continuing to work on an earlier version

of the Standard missile that will still be in production and has a high

degree of commonality with the Block IVA missile. Moreover, the Navy

would also have UOES to provide some intercept capability until the fully

operational Navy Area program demonstrates its expected capability.

Therefore, we recommend that you direct BMDO to revise the Navy Area

Theater Ballistic Missile Defense program’s acquisition plan and/or its

operational testing schedule to ensure that the low-rate initial production

decision on the 185 Block IVA missiles is made contingent on the Director,

Operational Test and Evaluation, certifying, based on sufficient

independent testing in an operational environment, that the system has the

potential to meet its key performance requirements.

Agency Comments

and Our Evaluation

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

recommendation. First, DOD stated that postponing acquisition is contrary

to the purpose of low-rate initial production as codified in title 10 of the

U.S. Code. Second, DOD said that complying with our recommendation

would cause a delay in low-rate initial production missile deliveries,

resulting in an inventory of seven UOES missiles—too few to respond to any

contingency. Third, DOD said implementing our recommendation would

Page 9 GAO/NSIAD-98-34 Navy Area TBMD Program
B-274679 

impact the production of key Standard missile components, resulting in

substantial restart costs and risks.

We recognize that title 10 specifies the purposes for low-rate initial

production. The statutes, however, do not include specific standards on

when programs should begin low-rate initial production, or the type and

amount of testing to be done before production begins. The thrust of our

recommendation is that conducting realistic testing prior to the

production of system components reduces risk and minimizes the

procurement of unproven equipment. Further, implementing our

recommendation could also reduce the number of Area systems that may

have to be modified based on the results of operational testing.

DOD also says that delaying low-rate initial production missile deliveries

beyond operational testing would result in an inventory of seven UOES

missiles—too few to respond to any contingency. DOD’s comments suggest

that implementing our recommendation would mean delaying low-rate

initial production until all operational testing is completed in March 2001.

We are not suggesting such a delay in the program schedule, but rather

that the schedule be adjusted so that some operational testing be

conducted prior to the low-rate initial production decision currently

planned for June 2000. While DOD says that a delay could reduce the

number of missiles available for contingency operations for a short period,

the current schedule already includes a period of reduced availability.

Under the current schedule, only seven missiles will be available for

contingency operations from the completion of operational testing in

March 2001 until the first low-rate initial production missile delivery

begins in June 2001. In addition, under the current schedule, by the time

operational testing begins in November 2000, the Navy will have already

committed to low-rate initial production at a cost of $568.2 million.

Furthermore, DOD notes that the low-rate initial production missiles are

required to respond to a national emergency. Therefore, we believe it is

important that the Navy be able to demonstrate the missile system’s

operational capability to respond in such an emergency.

DOD also notes that Block IIIB missile production will not meet minimum

sustaining rate quantities for all components. According to DOD, delaying

low-rate initial production of Block IVA missiles would shut down booster

production and cause the guidance section to fall below minimum

sustaining rates for a 2-year period. DOD’s comments indicate that restart

costs and risks associated with restarting would be substantial.

Page 10 GAO/NSIAD-98-34 Navy Area TBMD Program
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We recognize that the minimum sustaining rate for the booster will not be

met without production of boosters for the Block IVA missile. However,

even without the Block IVA missile, expected production of the guidance

section would equal 96 percent of the minimum sustaining rate in both

fiscal years 1999 and 2000. We asked Navy officials for an estimate of the

restart costs and they told us that a minimum of $9.1 million in restart

costs would be incurred for the booster and a component of the guidance

section. According to these officials, cost risks associated with

requalification of unique Block IVA component sub-vendors are not

included in this estimate. Given that each Block IVA missile is expected to

cost an average of about $2 million, it could easily cost more to fix already

produced missiles if problems are revealed during subsequent testing, than

it could cost to restart production. We believe it may be more

cost-effective to incur some restart costs, rather than enter production

without adequate testing. Consequently, we believe our recommendation

is still appropriate.

DOD’s comments are reprinted in appendix I. We have incorporated DOD’s

technical comments as appropriate.

Scope and

Methodology

To determine whether the Navy Area Theater Ballistic Missile Defense

program has met its milestones to date and its remaining schedule appears

realistic, we interviewed agency officials and analyzed pertinent program

cost, schedule, and requirements documentation. We analyzed the status

of the program, the various factors that led to the 2-year slippage in the

program schedule, and the technical risks that remain.

To determine whether the tests being conducted or planned will be

adequate to demonstrate the system’s capabilities before production

begins, we interviewed agency officials and analyzed pertinent test plans

and schedules. We examined how many flight tests will be conducted

before deployment of the UOES system, whether planned tests would

realistically measure the system’s performance, the risks associated with a

compressed operational test schedule, and the risks associated with

beginning low-rate initial production before conducting any system level

operational tests.

We interviewed responsible agency officials at the following locations: the

Office of the Secretary of Defense, Headquarters, BMDO, and the Office of

the Director, Operational Test and Evaluation, in Washington, D.C.; the

Navy’s Program Executive Office (Theater Air Defense), Program Office

Page 11 GAO/NSIAD-98-34 Navy Area TBMD Program
B-274679 

for Standard Missile and Vertical Launching Systems, and Program Office

for the AEGIS Weapon System, in Washington, D.C.; and the Navy’s

Operational Test and Evaluation Force in Norfolk, Virginia.

We conducted our work from September 1996 to August 1997 in

accordance with generally accepted government auditing standards.

As you know, the head of a federal agency is required by 31 U.S.C. 720 to

submit a written statement of actions taken on our recommendations to

the Senate Committee on Governmental Affairs and the House Committee

on Government Reform and Oversight not later than 60 days after the date

of this report. A written statement also must be submitted to the Senate

and House Committees on Appropriations with the agency’s first request

for appropriations made more than 60 days after the date of the report.

We are sending copies of this report to appropriate congressional

committees; the Director of the BMDO; and the Secretaries of the Army, the

Navy, and the Air Force. We will also make copies available to others on

request.

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

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

Schulz, Lee Edwards, David Hand, and Judy Lasley.

Sincerely yours,

Allen Li

Associate Director, Defense Acquisitions Issues

Page 12 GAO/NSIAD-98-34 Navy Area TBMD Program
Page 13 GAO/NSIAD-98-34 Navy Area TBMD Program
Appendix I 

Comments From the Department of Defense

Page 14 GAO/NSIAD-98-34 Navy Area TBMD Program
Appendix I 

Comments From the Department of Defense

Page 15 GAO/NSIAD-98-34 Navy Area TBMD Program
Appendix I 

Comments From the Department of Defense

(707197) Page 16 GAO/NSIAD-98-34 Navy Area TBMD Program
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