Page 1 GAO-13-313R CRH Prototyping Waiver

United States Government Accountability Office

Washington, DC 20548

March 7, 2013

Congressional Committees 

Subject: Department of Defense’s Waiver of Competitive Prototyping Requirement for Combat 

Rescue Helicopter Program

The Weapon Systems Acquisition Reform Act of 2009, as amended (WSARA), requires the 

Secretary of Defense to modify guidance to ensure that the acquisition strategy for each major 

defense acquisition program provides for competitive prototypes before Milestone B approval—

which authorizes entry into system development—unless the Milestone Decision Authority 

waives the requirement.1 Competitive prototyping, which involves commercial, government, or 

academic sources producing early prototypes of weapon systems or critical subsystems, can 

help Department of Defense (DOD) programs reduce technical risk, refine requirements, 

validate designs and cost estimates, and evaluate manufacturing processes prior to making 

major commitments of resources. It can also help reduce the time it takes to field a system, and 

as a result, reduce its acquisition cost. WSARA states that the Milestone Decision Authority may 

waive the competitive prototyping requirement only on the basis that (1) the cost of producing 

competitive prototypes exceeds the expected life-cycle benefits (in constant dollars) of 

producing such prototypes, including the benefits of improved performance and increased 

technological and design maturity that may be achieved through competitive prototyping; or (2)

but for such a waiver, DOD would be unable to meet critical national security objectives.

WSARA also provides that whenever a Milestone Decision Authority authorizes a waiver of the 

competitive prototyping requirement on the basis of what WSARA describes as “excessive 

cost,” the Milestone Decision Authority is required to submit notification of the waiver, together 

with the rationale, to the Comptroller General of the United States at the same time it is 

submitted to the congressional defense committees. WSARA further provides that no later than 

60 days after receipt of a notification of a waiver, we are to review the rationale for the waiver 

and submit a written assessment of that rationale to the congressional defense committees.

2

On November 27, 2012, we received notice from DOD that it had waived the competitive 

prototyping requirement for the Combat Rescue Helicopter (CRH). The Air Force’s CRH 

 

1

Pub. L. No. 111-23, § 203(a), as amended by the Ike Skelton National Defense Authorization Act for Fiscal Year 

2011, Pub. L. No. 111-383, § 813. DOD modified its guidance related to the operation of its acquisition system 

through Directive-Type Memorandum (DTM) 09-027, “Implementation of Weapon System Acquisition Reform Act of 

2009 (Dec. 4, 2009, incorporating Change 3, Dec. 9, 2011). Major defense acquisition programs are those estimated 

by DOD to require an eventual total expenditure for research, development, test, and evaluation of more than $365 

million, or for procurement, including all planned increments or spirals, of more than $2.19 billion in fiscal year 2000 

constant dollars. The Milestone Decision Authority for major defense acquisition programs is the Under Secretary of 

Defense for Acquisition, Technology and Logistics; the head of a DOD component; or if delegated the component 

acquisition executive.

2

Pub. L. No. 111-23 § 203(b)(2). 
Page 2 GAO-13-313R CRH Prototyping Waiver

program, formerly called HH-60 Recapitalization, is an effort to replace aging HH-60G Pave 

Hawk helicopters. The CRH’s primary mission is to recover personnel from hostile or denied 

territory. It will also conduct humanitarian, civil search and rescue, disaster relief, and noncombatant evacuation missions. The program is the Air Force’s second effort to replace the HH60G. The first effort, the Combat Search and Rescue Replacement Vehicle (CSAR-X), was 

canceled in 2009. Since then, the Air Force has reduced the helicopter’s combat radius, 

survivability, cabin space, payload, and airspeed requirements to lower the program’s cost and 

ensure that no technology development was needed to satisfy these requirements. 

In this report, we assess DOD’s rationale for waiving the competitive prototyping requirement for 

CRH and the analysis used to support it. To conduct our assessment, we compared the 

rationale in the waiver to the WSARA requirement to determine the extent to which the waiver is 

consistent with the statute. In addition, we reviewed the Air Force’s cost-benefit analysis, which 

provides the data and assumptions on which the waiver is based, the acquisition strategy, and 

other relevant documentation. We also submitted written questions to and interviewed DOD, Air 

Force, and CRH program officials to clarify information in this documentation, as necessary.

We conducted this performance audit from December 2012 to March 2013 in accordance with 

generally accepted government auditing standards. These standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives.

Results in Brief

DOD’s rationale for waiving WSARA’s competitive prototyping requirement for CRH addresses

one of the two bases provided in the statute; namely that the cost of producing competitive 

prototypes exceeds the expected life-cycle benefits (in constant dollars) of producing the 

prototypes. The CRH program’s acquisition strategy, which anticipates integrating an existing, 

in-production and flight-proven aircraft with technologically mature subsystems, is consistent 

with this rationale. The Air Force believes that any technology risk reduction associated with, or 

potentially benefitting, the CRH program has already occurred during the efforts to develop 

these in-production aircraft. This includes any risk reduction that could be achieved through 

competitive prototyping. In granting the waiver, DOD also found reasonable the Air Force’s 

conclusion that the estimated $725 million cost of conducting competitive prototyping exceeded 

the maximum expected life-cycle benefits of $12 million. However, the Air Force only evaluated 

one potential approach to implementing competitive prototyping, which involved funding two 

contractors for much of the program’s system development. This resulted in a high cost 

estimate for competitive prototyping that is more than 10 times greater than the target unit cost 

of the helicopter. DOD’s policy on economic analysis states that each feasible alternative for 

meeting an objective must be considered, and its life-cycle costs and benefits evaluated. The 

Air Force could have more fully evaluated the cost and benefits of additional prototyping 

strategies, including more limited approaches that are mentioned in WSARA or DOD’s 

implementing memorandum, such as producing a single prototype or prototyping critical 

subsystems before Milestone B. The potential cost and benefits of these strategies were not 

included in the Air Force’s supporting analysis. While there are questions about the 

methodology the Air Force used to evaluate the cost and benefits of competitive prototyping for 

the CRH program, the decision to not pursue prototyping may still be sound given the other 

actions that the Air Force has taken to reduce cost and risk on the program.
Page 3 GAO-13-313R CRH Prototyping Waiver

Waiver Rationale Is Consistent with WSARA, but Supporting Analysis Could Have More 

Fully Evaluated Additional Prototyping Strategies

DOD’s rationale for waiving WSARA’s competitive prototyping requirement for CRH addressed 

one of the two bases provided for a waiver in the statute, namely that the cost of producing 

competitive prototypes exceeds the expected life-cycle benefits, including the benefits of 

improved performance and increased technological and design maturity that may be achieved 

through competitive prototyping.

3 The CRH program’s acquisition strategy and market research 

are consistent with this rationale. According to the waiver, there is no technology development 

anticipated for the CRH program and the required capability can be met by modifying existing, 

in-production, and flight-proven aircraft. The Air Force believes that any technology risk 

reduction associated with, or potentially benefitting, the CRH program has already occurred 

during the efforts to develop these aircraft. This includes any risk reduction that could be 

achieved through competitive prototyping. According to the program office’s market research, 

several mature aircraft and subsystems that are being used operationally could meet CRH 

requirements. All the aircraft would require modifications to integrate various subsystems, 

although the program expects the integration risks to be low to moderate. The CRH acquisition 

strategy anticipates the use of a fixed-price incentive contract for engineering and 

manufacturing development, which is consistent with this level of risk. The Air Force will not be 

able to completely validate the market research used to support the prototyping waiver until it 

completes the ongoing competition for the CRH development and production contract and holds 

key systems engineering reviews, which will not occur until after it receives Milestone B 

approval.

In the waiver, DOD found reasonable the Air Force’s cost-benefit analysis, which concluded that 

competitively prototyping the CRH would increase development costs by approximately $725 

million (base year 2012 constant dollars) and yield life-cycle cost benefits of $12 million or less

(base year 2012 constant dollars). However, the Air Force only evaluated one potential 

approach to implementing competitive prototyping. Specifically, the Air Force estimated the 

costs and benefits of funding and managing a second contractor from Milestone B through most 

of system development and nearly up to the program’s initial production decision by which point 

each contactor would have produced two test aircraft, developed software, and conducted the 

systems engineering efforts necessary to get through both a preliminary and critical design 

review. This results in a high cost estimate for competitive prototyping that is more than 10 

times greater than the target unit cost of the helicopter in procurement. The Air Force could 

have more fully evaluated the cost and benefits of additional prototyping strategies, including 

more limited approaches that are mentioned in WSARA or DOD’s implementing memorandum, 

such as producing a single prototype or prototyping critical subsystems before Milestone B. 

DOD’s policy on economic analysis states that each feasible alternative for meeting an objective 

must be considered, and its life-cycle costs and benefits evaluated.4

 

3

In the waiver, DOD also stated that the cost of producing a single prototype of the CRH or its critical subsystems 

before Milestone B exceeded the expected life-cycle benefits. WSARA provides that whenever a Milestone Decision 

Authority authorizes a competitive prototyping waiver, the program is still required to produce a prototype prior to 

Milestone B approval if the expected life-cycle benefits (in constant dollars) of producing such prototype exceed its 

cost and its production is consistent with achieving critical national security objectives. Pub. L. No. 111-23 

§ 203(a)(3)(A). 

According to the Air 

Force’s waiver request, awarding contracts before Milestone B for competitive prototypes, or 

requiring the program to produce a prototype before Milestone B approval, would significantly 

alter the program’s acquisition strategy and delay program execution. It did not provide any 

4

DOD Instruction 7041.3, Economic Analysis for Decisionmaking (Nov. 7, 1995). 
Page 4 GAO-13-313R CRH Prototyping Waiver

other information on the potential cost and benefits of these strategies in its waiver request.

The Air Force could have also considered a wider range of benefits in its analysis, including 

those related to maintaining competition. The life-cycle cost benefits in the Air Force’s analysis 

were based on potential reductions in the program’s systems integration and software 

development risk. The Air Force concluded that if the program was able to eliminate this risk 

through competitive prototyping, the estimated cost benefits would be $12 million or less. It 

assumed these risk reduction benefits would only be realized after prototyping was completed. 

The Air Force also assumed that there would be little to no additional benefits associated with 

the competitive prototyping strategy it outlined in its analysis, which included maintaining 

competition beyond Milestone B. The CRH program office does not believe that competitive 

prototyping would result in lower production costs than its current strategy, which involves 

conducting a full and open competition for a single CRH development and production contract. 

In addition, according to the Air Force, the program’s strategy of conducting only modest system

and subsystem development and minimal hardware and software integration limits opportunities 

for contractors to develop changes that increase reliability, improve fuel efficiency, or otherwise 

reduce life-cycle costs, especially for systems, subsystems, and components that are in 

production and flight proven. While these assumptions may turn out to be valid for the CRH 

program, we have previously reported that maintaining competition may result in reduced costs 

or other positive outcomes to a program over time, including better performance, increased 

reliability, and improved contractor responsiveness.5

The Air Force did incorporate lessons learned from the Enhanced Polar System (EPS)

competitive prototyping waiver—DOD’s first—to improve certain aspects of the CRH costbenefit analysis. In 2012, we reported the rationale for the EPS waiver was consistent with 

WSARA, but the cost-benefit analysis supporting it was incomplete.6 That analysis failed to 

include a specific dollar value or range of values for the estimated life-cycle benefits of 

competitive prototyping. In the absence of an estimated life-cycle benefit, we stated that the Air 

Force could not conclusively determine whether the costs of competitive prototyping outweighed

the benefits. We also noted in our EPS waiver assessment that the Air Force’s estimate of the 

cost of competitive prototyping was prepared by the program office and not independently 

estimated or reviewed by other DOD cost estimating organizations. According to our best 

practices criteria, an independent cost estimate is considered one of the best and most reliable 

resource estimate validation methods because it provides an independent view of expected 

program costs that tests the program office estimate for reasonableness. The CRH cost-benefit 

analysis addressed both of these points. For example, the Air Force Cost Analysis Agency 

performed a cost assessment that validated the CRH program office estimate from which the 

cost-benefit analysis was derived. DOD’s Office of Cost Assessment and Program Evaluation 

also reviewed the data and estimating methodology used to develop the overall CRH program 

office cost estimate and considered them reasonable. 

 

5

GAO, Defense Acquisitions: Analysis of Costs for the Joint Strike Fighter Engine Program, GAO-07-656T 

(Washington, D.C.: Mar. 22, 2007).

6

GAO, Department of Defense’s Waiver of Competitive Prototyping Requirements for Enhanced Polar System 

Program, GAO-12-983R (Washington, D.C.: Aug. 23, 2012).
Page 5 GAO-13-313R CRH Prototyping Waiver

Concluding Observations

While there are questions about the methodology the Air Force used to evaluate the cost and 

benefits of competitive prototyping for the CRH program, the decision not to pursue prototyping 

may still be sound. Recognizing that the intent of competitive prototyping is to reduce cost and 

risk, other actions taken by the Air Force have arguably achieved these goals. Specifically, its 

decision to significantly lower requirements, use an existing aircraft, competitively award the 

development and production contract, and employ fixed-price contracts are all material steps to 

reducing cost and risk on the CRH program.

Agency Comments and Our Evaluation

We provided a draft of this report to DOD for comment. In its written comments, reproduced in 

the enclosure, DOD appreciated our conclusion that the rationale in the CRH competitive 

prototype waiver was consistent with WSARA. DOD agreed that its policy on economic analysis 

requires each feasible alternative to be considered, and its life-cycle costs be evaluated, but 

noted that WSARA does not specifically require detailed consideration of every possible 

prototyping strategy. Further, it stated that each competitive prototype waiver should be tailored 

for each specific program without causing undue burden to the program and service. In the case 

of the CRH, DOD believes the business case analysis was sufficient to meet the WSARA 

requirements and it was not in the best interest of the program or the Air Force to expend 

additional resources on an expanded analysis of alternatives that were infeasible and 

unwarranted given the technical maturity of the program. We agree that DOD should be able to 

tailor its competitive prototype waivers and supporting business case analyses for each specific 

program and the waiver process should not cause undue burden. However, in this case, the Air 

Force only evaluated one high-cost approach to implementing competitive prototyping, which 

involved funding two contractors for much of the program’s system development. We believe 

that DOD, consistent with its policy on economic analysis, could have considered other lowercost options for prototyping, which have the potential to increase DOD’s knowledge and reduce 

risk prior to beginning system development. Considering even one such alternative may not 

have changed DOD’s decision to waive the competitive prototyping requirement for the CRH 

program, but it would have provided a firmer basis for doing so.

- - - - - - 

We are sending copies of this report to interested congressional committees, the Secretary of 

Defense, and the Secretary of the Air Force. In addition, the report will be available at no charge 

on the GAO website at http://www.gao.gov. 
Page 6 GAO-13-313R CRH Prototyping Waiver

If you or your staff have any questions, please contact me at (202) 512-4841 or 

sullivanm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs 

may be found on the last page of this report. GAO staff who made key contributions to this 

report were Ron Schwenn, Assistant Director; J. Andrew Walker; Marie P. Ahearn; Kenneth E. 

Patton; and Carol Petersen. 

Michael J. Sullivan

Director, Acquisition and Sourcing Management

Enclosure
Page 7 GAO-13-313R CRH Prototyping Waiver

List of Committees

The Honorable Carl Levin

Chairman

The Honorable James Inhofe

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Richard J. Durbin

Chairman

The Honorable Thad Cochran

Ranking Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Howard P. “Buck” McKeon

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

The Honorable C.W. Bill Young

Chairman

The Honorable Pete Visclosky

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Enclosure

Page 1 GAO-13-313R CRH Prototyping Waiver

Comments from the Department of Defense

(121113)
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