1 GAO-14-521R AMPV Prototyping Waiver

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April 25, 2014

Congressional Committees

Department of Defense’s Waiver of Competitive Prototyping Requirement for the Army’s 

Armored Multi-Purpose Vehicle 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 mandated to review the rationale for 

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

committees.

2

 

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 Systems Acquisition Reform Act of 

2009,” (Dec. 4, 2009, incorporating Change 4, Jan. 11, 2013). This DTM also defined major defense acquisition 

programs as those estimated by DOD to require an eventual total expenditure for research, development, test, and 

evaluation or for procurement--including all planned increments-- of more than $365 million or more than $2.19 billion, 

respectively, in fiscal year 2000 constant dollars. DOD issued an Interim Instruction 5000.02, “Operation of the 

Defense Acquisition System,” on November 25, 2013 which cancelled DTM 09-027 and modified the thresholds for 

major defense acquisition programs. However for purposes of this report we used DTM 09-027 because the 

competitive prototyping waiver for the Armored Multi-Purpose Vehicle program was completed prior to issuance of 

the Interim DOD Instruction. 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)(1) & (2). 
2 GAO-14-521R AMPV Prototyping Waiver

On November 12, 2013, we received notice from DOD that it had waived the competitive 

prototyping requirement for the Army’s Armored Multi-Purpose Vehicle (AMPV) program. The 

Army’s AMPV fleet is the proposed replacement to the M113 family of vehicles in the armored 

brigade combat team. The AMPV is a family of vehicles and will consist of five variants to 

replace the M113 in the following mission roles: general purpose, medical evacuation, medical 

treatment, mortar carrier and mission command. The Army has determined that development of 

the AMPV is necessary due to mobility, survivability, and force protection deficiencies identified 

in the M113, as well as space, weight, power and cooling limitations that prevent the 

incorporation of future technologies. The AMPV program's acquisition strategy is based on 

modifying an existing and operationally proven military vehicle that is currently in production. 

The Army plans to bypass technology development and begin in system development. The 

Army modified or eliminated a number of AMPV requirements related to force protection, 

external fuel tank protection, fuel efficiency, redundant medical data storage devices, and 

medical refrigeration, to ensure that no technology development was needed for the AMPV.

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

the AMPV program 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 Army’s cost-benefit 

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

strategy, and other relevant documentation. We did not independently verify the Army’s data on 

cost and benefits. We also submitted written questions to Army and AMPV program officials to 

clarify information in program documentation, as necessary. 

We conducted this performance audit from March 2014 to April 2014 in accordance with 

generally accepted government auditing standards. Those 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 AMPV 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. According to the waiver, AMPV requirements can be met by modifying an existing 

military vehicle with mature government-defined mission systems, which obviates the need for 

prototyping the vehicle. In addition, the program plans to use mission equipment packages for 

each variant that are already fielded and will not change during system development. The Army 

expects the risks of integrating the mission equipment and vehicle to be low to moderate. In the 

waiver, DOD also concluded that the Army’s cost-benefit analysis, which examined acquisition 

strategies with system level prototypes of all five AMPV variants from one or two contractors, 

was reasonable. The Army’s analysis stated that these strategies would increase program costs 

by $198 million and $341 million (in base year 2013 dollars) and add 19 months and 31 months 

to the program’s schedule, respectively. These costs include not only the cost of developing and 

producing prototypes, but also government program management and testing costs. The AMPV 

program office also estimated $0 in life cycle benefits from both prototyping strategies. 

However, unlike the Air Force’s Combat Rescue Helicopter prototyping waiver, the Army did not 

include any potential benefits associated with reducing development risks. While the Army could 

have more fully evaluated these potential benefits, its decision not to pursue prototyping for the 
3 GAO-14-521R AMPV Prototyping Waiver

AMPV program appears sound. Recognizing that the intent of competitive prototyping is 

generally to reduce cost and risk, the Army has taken other actions that could achieve these 

goals, including reducing requirements to ensure no technology development was needed and 

basing its acquisition strategy on modifying an existing combat vehicle and using existing 

mission equipment.

Waiver Rationale Is Consistent with WSARA but Supporting Analysis Could Have 

Included a More Complete Estimate of Potential Benefits

DOD’s rationale for waiving WSARA’s competitive prototyping requirement for AMPV 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. In the waiver, DOD also stated that the cost of producing a 

single prototype of the AMPV or its critical subsystems before Milestone B exceeded the 

expected life-cycle benefits.3 DOD and the Army reached this conclusion, in part, based on

market research, which found that the requirements for the AMPV can be met by modifying 

existing combat-proven military vehicles with mature government-defined mission systems or 

mission equipment packages. According to the Army, these mission equipment packages have 

already been developed and prototyped, fielded in an operational environment, and will not be 

changed during the development of the AMPV. The Army also expects the risk of integrating 

this equipment with vehicles to be low to moderate. Given this acquisition strategy, DOD and 

the Army concluded that neither the life-cycle benefits, nor the benefits of improved 

performance and increased technical and design maturity from competitive or single prototypes 

justified the cost of producing such prototypes. We also noted that the Army plans to use a costtype contract for system development, which, according to DOD acquisition regulations, 

requires a written determination by the Milestone Decision Authority that a program is so 

complex and technically challenging that it would not be practicable to reduce program risk to a 

level that would permit the use of a fixed-price type contract.4 According to the AMPV 

acquisition strategy, a cost-type contract will give the program the most flexibility to support a 

development effort.

In the waiver, DOD also concluded that the Army’s cost-benefit analysis, which examined 

acquisition strategies with system level prototypes of all five AMPV variants from one or two 

contractors, was reasonable. The Army’s analysis stated that these strategies would increase 

program costs by $198 million and $341 million (in base year 2013 dollars) and add 19 months 

and 31 months to the program’s schedule, respectively, with $0 in estimated life cycle benefits. 

The additional 12-months required for the competitive prototyping strategy is the length of time 

needed to conduct two competitive source selections – one for prototyping and one for system 

development. In the competitive prototyping scenario, the Army estimated the costs of funding 

and managing two contractors up through critical design review and initial testing with each 

 

3

WSARA provides that whenever a Milestone Decision Authority authorizes a competitive prototyping waiver, the 

program is 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). 

4

Defense Federal Acquisition Regulation Supplement § 234.004(2)(i)(C)(1) . Cost-reimbursement contracts, also 

known as cost-type contracts, provide for payment of allowable incurred costs, to the extent prescribed in the 

contract. This contract type places most of the risk on the government, which may pay more than budgeted should 

incurred costs be more than expected when the contract is signed.
4 GAO-14-521R AMPV Prototyping Waiver

contactor producing six prototype vehicles - one of each variant and one live fire test vehicle. 

The Army’s estimated costs for competitive prototyping include not only the cost of developing 

and producing prototypes, but also systems engineering, government program management, 

and testing costs. Table 1 includes a breakdown of the additional cost the Army estimated it 

would incur by competitively prototyping the AMPV pre-Milestone B versus starting the program 

with one contractor at Milestone B. The Army conducted a similar analysis for the single 

prototype scenario and concluded that due to the maturity of available systems to meet program 

requirements, neither of the prototyping strategies yielded additional life-cycle benefits, either in 

terms of improved performance or increased technological and design maturity, which would 

justify the costs.

Table 1: Breakdown of Army’s Estimated Cost of Competitively Prototyping AMPV

Research, Development, Test and 

Evaluation Cost Element

Additional cost for competitive 

prototyping (in base year 2013 millions)

Development engineering $99.65

Prototype manufacturing $27.35

Systems engineering / program 

management

$107.39

System test and evaluation $69.45

Other RDT&E (contractor fee, 

general and administrative expenses)

$25.27

Other RDT&E $11.51

Total $340.63

Source: AMPV Program Office.

Note: Costs include two contractors producing a total of six prototype vehicles – one of each of the five AMPV 

variants and one live-fire test vehicle.

The Army’s approach to its cost-benefit analysis was consistent with certain key principles in 

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

objective and its life cycle cost must be considered; however, the Army could have improved its 

application of another key principle related to life cycle benefits by including a more complete 

estimate of potential benefits in its analysis.

5 In its cost-benefit analysis, the Army evaluated all 

three prototyping scenarios mentioned in WSARA or DOD’s implementing memorandum, 

producing system-level competitive prototypes, a single system-level prototype, or critical 

subsystem prototypes before Milestone B. However, DOD and the Army did not evaluate 

whether to prototype specific AMPV variants. According to the Army, the mortar carrier and 

medical transport variants will require a more complicated design effort and prototyping these 

two variants could have reduced risk in meeting variant specific requirements. The AMPV 

program office also estimated $0 in life cycle benefits from producing system-level competitive 

prototypes, a single system-level prototype, or critical subsystem prototypes before Milestone B. 

However, unlike the prototyping waiver for the Combat Rescue Helicopter, the Army did not 

include any potential benefits associated with reducing development cost risks.6 According to 

the Army, three of the main areas of cost risk in the AMPV life-cycle estimate are production 

prove out testing, prototype hull and integration development efforts, and manufacturing cost. 

These risks could potentially be reduced, or at least better understood, through pre-Milestone B 

prototyping, but these benefits were not evaluated in the Army’s cost-benefit analysis. While the 

Army could have more fully evaluated these potential benefits, its decision not to pursue 

 

5

DOD Instruction 7041.3, Economic Analysis for Decisionmaking, Encl. 3, para. E3.1.1 (Nov. 7, 1995).

6

See GAO, Department of Defense’s Waiver of Competitive Prototyping Requirements for Combat Rescue Helicopter 

Program, GAO-13-313R (Washington, D.C.: Mar. 7, 2013).
5 GAO-14-521R AMPV Prototyping Waiver

prototyping for the AMPV program appears sound. Recognizing that the intent of competitive 

prototyping is generally to reduce cost and risk, the Army has taken other actions that could 

achieve these goals, including reducing requirements to ensure no technology development 

was needed and basing its acquisition strategy on modifying an existing combat vehicle and 

using existing mission equipment.

Agency Comments and Our Evaluation

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

reprinted in the enclosure, DOD agreed with our assessment of the AMPV competitive 

prototyping waiver.

- - - - - - 

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

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

the GAO website at http://www.gao.gov. 

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; Andrea M. Bivens; Kristine R. Hassinger; 

Kenneth E. Patton; and Carol Petersen.

Michael J. Sullivan

Director, Acquisition and Sourcing Management

Enclosure
6 GAO-14-521R AMPV Prototyping Waiver

List of Committees

The Honorable Carl Levin

Chairman

The Honorable James M. 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 Rodney Frelinghuysen

Chairman

The Honorable Pete Visclosky 

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Enclosure

Page 7 GAO-14-521R Prototyping Waiver

Comments from the Department of Defense

121205
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