Defense Acquisitions: Assessment of DOD Efforts to Enhance Missile Defense Capabilities and Oversight
Published: 2008-02-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Funded at $8 billion to $10 billion per year, the Missile Defense Agency's (MDA) effort to develop and field a Ballistic Missile Defense System (BMDS) is the largest research and development program in the Department of Defense (DOD). The program has been managed in 2-year increments, known as blocks. Block 2006, the second BMDS block, was completed in December 2007. By law, GAO annually assesses MDA's progress. This testimony is based on GAO's assessment of MDA's progress in (1) meeting Block 2006 goals for fielding assets, completing work within estimated cost, conducting tests, and demonstrating the performance of the overall system in the field, and (2) making managerial improvements to transparency, accountability, and oversight. In conducting the assessment, GAO reviewed the assets fielded; contractor cost, schedule, and performance; and tests completed during 2007. GAO also reviewed pertinent sections of the U.S. code, acquisition policy, and the charter of a new missile defense board. We have previously made recommendations to improve oversight in the areas that MDA has recently taken action. We also have a draft report that is currently with DOD for comment that includes additional recommendations.
section_title: What GAO Found
paragraphs: In the past year, MDA has fielded additional and new assets, enhanced the capability of some existing assets, and achieved most test objectives. However, MDA did not meet the goals it originally set for the block. Ultimately, MDA fielded fewer assets, increased costs by about $1 billion and conducted fewer tests. Even with the cost increase, MDA deferred work to keep costs from increasing further, as some contractors overran their fiscal year 2007 budgets. Deferring work obscures the cost of the block because such work is no longer counted as part of Block 2006. The cost of the block may have been further obscured by a way of planning work used by several contractors that could underestimate the actual work completed. If more work has to be done, MDA could incur additional costs that are not yet recognized. MDA also sets goals for determining the overall performance of the BMDS. Similar to other DOD programs, MDA uses models and simulations to predict BMDS performance. We were unable to assess whether MDA met its overall performance goal because there have not been enough flight tests to provide a high confidence that the models and simulations accurately predict BMDS performance. Moreover, the tests done to date have been developmental in nature, and do not provide sufficient realism for DOD's test and evaluation Director to determine whether BMDS is suitable and effective for battle. GAO has previously reported that MDA has been given unprecedented funding and decision-making flexibility. While this flexibility has expedited BMDS fielding, it has also made MDA less accountable and transparent in its decisions than other major programs, making oversight more challenging. MDA, with some direction from Congress, has taken significant steps to address these concerns. MDA implemented a new way of defining blocks--its construct for developing and fielding BMDS increments--that should make costs more transparent. For example, under the newly-defined blocks, MDA will no longer defer work from one block to another. Accountability should also be improved as MDA will for the first time estimate unit costs for selected assets and report variances from those estimates. DOD also chartered a new executive board with more BMDS oversight responsibility than its predecessor. Finally, MDA will begin buying certain assets with procurement funds like other programs. This will benefit transparency and accountability, because to use procurement funding generally means that assets must be fully paid for in the year they are bought. Previously, MDA has been able to pay for assets incrementally using research and development funds. Some oversight concerns remain, however. For example, MDA does not plan to estimate the total cost of a block, nor to have a block's costs independently verified--actions required of other programs to inform decisions about affordability and investment choices. Also, the executive board faces a challenge in overseeing MDA's large technology development efforts and does not have approval authority for some key decisions made by MDA.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Missile Defense Agency’s  (MDA’s) strategy for acquiring a Ballistic Missile Defense System (BMDS)  and its progress in fielding Block 2006– its second increment of capability.
MDA has been charged with developing and fielding the Ballistic Missile  Defense System (BMDS), a system expected to be capable of defending  the United States, deployed troops, friends, and allies against ballistic  missiles of all ranges in all phases of flight. In fulfilling this charge, MDA  placed an initial set of missile defense components in the field in  December 2005. These components are collectively referred to as Block  2004. Recently, MDA delivered its second increment of capability—Block  2006—which includes additional components as well as performance  enhancements.
The National Defense Authorization Acts for fiscal years 2002 and 2006  mandated that we prepare annual assessments of MDA’s ongoing cost,  schedule, testing, and performance progress. In March 2008, we plan to  issue our report covering MDA’s progress toward achieving Block 2006  goals during fiscal year 2007 as well as its efforts to improve transparency,  accountability, and oversight. My statement today will focus on the issues  covered in that report. We conducted this performance audit from May  2007 to March 2008 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.
subsections: section_title: Background
paragraphs: Funded at $8 billion to nearly $10 billion annually, MDA’s BMDS is the  largest research development program in the Department of Defense’s  budget. Since the 1980s, DOD has spent more that $100 billion on the  development and early fielding of this system and it estimates that  continued development will require an additional $50 billion between  fiscal years 2008 and 2013.
Since 2002, MDA has worked to fulfill its mission through its development  and fielding of a diverse collection of land-, air-, sea-, and space-based  assets. These assets are developed and fielded through nine BMDS  elements and include the Airborne Laser (ABL); Aegis Ballistic Missile  Defense (Aegis BMD); BMDS Sensors; Command, Control, Battle  Management, and Communications (C2BMC); Ground-based Midcourse  Defense (GMD); Kinetic Energy Interceptors (KEI); Multiple Kill Vehicles  (MKV); Space Tracking and Surveillance System (STSS); and Terminal  High Altitude Area Defense (THAAD).
To develop a system capable of carrying out its mission, MDA, until  December 2007, executed an acquisition strategy in which the  development of missile defense capabilities was organized in 2-year  increments known as blocks. Each block was intended to provide the  BMDS with capabilities that enhanced the development and overall  performance of the system. The first 2-year block, known as Block 2004,  fielded a limited initial capability that included early versions of the GMD,  Aegis BMD, Patriot Advanced Capability-3, and C2BMC elements. The  agency’s second 2-year block– Block 2006– culminated on December 31,  2007 and fielded additional BMDS assets. This block also provided  improved GMD interceptors, enhanced Aegis BMD missiles, upgraded  Aegis BMD ships, a Forward-Based X-Band-Transportable radar, and  enhancements to C2BMC software. On December 7, 2007, MDA’s Director  approved a new block construct that will be the basis for all future  development and fielding, which I will discuss in more detail shortly.
To assess progress during Block 2006, we examined the accomplishments  of nine BMDS elements that MDA is developing and fielding. Our work  included examining documents such as Program Execution Reviews, test  plans and reports, production plans, and Contract Performance Reports.  We also interviewed officials within each element program office and  within MDA functional directorates. In addition, we discussed each  element’s test program and its results with DOD’s Office of the Director,  Operational Test and Evaluation. In following up on transparency,  accountability, and oversight issues raised in our March 2007 report, we  held discussions with officials in MDA’s Directorate of Business  Operations to determine whether its new block structure improved  accountability and transparency of the BMDS. In addition, we reviewed  pertinent sections of the U.S. Code to compare MDA’s current level of  accountability with federal acquisition laws. We also interviewed officials  from the Office of the Under Secretary of Defense for Acquisition,  Technology, and Logistics and DOD’s Joint Staff to discuss the oversight  role of the new Missile Defense Executive Board (MDEB). Additionally,  we reviewed the MDEB charter to identify the oversight responsibility of  the board.
section_title: Fielded Capability Increased, but Less than Planned at Higher Cost
paragraphs: MDA made progress in developing and fielding the BMDS during 2007.  Additional assets were fielded and/or upgraded, several tests met planned  objectives, and other development activities were conducted. On the other  hand, fewer assets were fielded than originally planned, some tests were  delayed, and the cost of the block increased by approximately $1 billion.  To stay within the revised budget despite increasing contractor costs,  MDA deferred some budgeted work to future blocks.  Such deferrals,  coupled with a planning methodology used by some contractors that could  obscure cost reporting, prevent us from determining the full cost of Block  2006.  MDA was able to meet most test objectives despite delays in several  elements’ test schedules.  Neither we nor DOD could evaluate the  aggregate performance of fielded assets because flight testing to date has  not generated sufficient data. An evaluation of aggregate performance  would also have to consider that (1) some parts in fielded interceptors  identified as potentially problematic have not been replaced yet, and (2)  tests done to date have been developmental in nature and do not provide  sufficient realism for DOD to determine if the BMDS is suitable and  effective for battle.
subsections: section_title: Fielding of Assets and Cost
paragraphs: During Block 2006, MDA increased its inventory of BMDS assets while  enhancing the system’s performance. It fielded 14 additional Ground-based  interceptors, 12 Aegis BMD missiles designed to engage more advanced  threats, 4 new Aegis BMD destroyers, 1 new Aegis BMD cruiser, and 8 Web  browsers and 1 software suite for C2BMC. In addition, MDA upgraded half  of its Aegis BMD ship fleet, successfully conducted four Aegis BMD and  two GMD intercept tests, and completed a number of ground tests to  demonstrate the capability of BMDS components.
Although MDA fielded an increased capability, it was unable to deliver all  assets originally planned for Block 2006. The Sensors element was the  only Block 2006 element to meet all of its original goals set in March 2005  while the remaining elements––GMD, Aegis BMD, C2BMC––were unable  to meet all of their original quantity goals. Sensors delivered a second  FBX-T in January 2007 while the GMD element fielded 14 of 15 Ground- Based interceptors originally planned during Block 2006. Last year, we  reported that MDA delayed the partial upgrade of the Thule early warning  radar—one of GMD’s original goals-- until a full upgrade could be  accomplished.  Additionally, the Aegis BMD element delivered 4 additional  Destroyers and 1 new Cruiser as originally planned, but did not meet its  original goal for missile deliveries––delivering 12 of 19 SM-3 missiles  planned for the block. C2BMC also did not deliver two of the three  software suites originally planned for Block 2006.
MDA’s Block 2006 program of work culminated with higher than  anticipated costs. In March 2007, we reported that MDA’s cost goal for  Block 2006 increased by approximately $1 billion because of greater than  expected GMD operations and sustainment costs and technical problems.  If the contractors continue to perform as they did in fiscal year 2007, we  estimate that at completion, the cumulative overrun in the contracts could  be between about $1.9 billion and $2.8 billion. To stay within its revised  budget, MDA deferred some work it expected to accomplish during the  block. When work is deferred, its costs are no longer accounted for in the  original block.  In other words, if work planned and budgeted for Block  2006 was deferred to Block 2008, that work would be counted as a Block  2008 cost. Because MDA did not track the cost of the deferred work, the  agency could not make an adjustment that would have matched the cost  with the correct block.  Consequently, we were unable to determine the  full cost of Block 2006.
Another reason why it is difficult to determine the actual cost of Block  2006 is a planning methodology employed by MDA prime contractors that  can obscure the full cost of work. Contractors typically divide the total  work of a contract into small efforts in order to define them more clearly  and to ensure proper oversight. Work is planned into types of work  packages including: (1) level of effort– work that contains tasks of a  general or supportive nature and does not produce a definite end product  and (2) discrete—work that has a definable end product or event.  When  work is discrete, delivery of the end product provides a sound basis for  determining actual contractor performance. When discrete work is instead  planned as level of effort, the contractor’s performance becomes less  transparent because work is considered complete when the time planned  for it has expired, whether or not the intended product has been  completed.  Earned value management does not recognize such variances  in completing scheduled work and to the extent more work has to be done  to complete the product, additional costs could be incurred that are not  yet recognized.  Many of MDA’s prime contractors plan a large percentage  of their work as level of effort.  MDA officials agree that its contractors  have improperly planned discrete work as level of effort, and are taking  steps to remedy the situation.
We also observed that while several contractors had difficulty with  controlling costs, during fiscal year 2007, MDA awarded approximately 90  percent or $579 million of available award fee to its prime contractors.  In  particular, contractors developing the ABL and Aegis BMD Weapon  System were rated as performing very well in the cost and/or program  management elements and received commensurate fees, even though  earned value management data showed that their cost and schedule  performance was declining. Although DOD guidance discourages the use  of earned value performance metrics in award fee criteria, MDA includes  this––one of many factors for consideration in rating contractors’  performance––in several of its award fee plans. The agency recognizes  that there is not always a good link between its intentions for award fees  and the amount of fee being earned by its contractors. In an effort to  rectify this problem, the agency has begun to revise its award fee policy to  align agency practices more closely with DOD’s current policy that better  links performance with award fees.
section_title: Testing and Performance of Fielded Capability
paragraphs: Most test objectives were achieved during 2007, although several BMDS  programs experienced setbacks in their test schedules. The MKV, KEI, and  Sensors elements were able to execute all scheduled activities as planned.  The Aegis BMD, THAAD, ABL, STSS, and C2BMC elements experienced  test delays, but all were able to achieve their primary test objectives. GMD  successfully completed an intercept with an operationally representative  interceptor and a radar characterization test.  A second intercept test  employing the SBX radar has been delayed because a target malfunction  delayed the execution of the first intercept test. The SBX capability is  important as it is a primary sensor to be used to engage ballistic missiles in  the midcourse phase of flight. As of yet, this capability has not been  verified through flight testing.
As we reported in March 2007, MDA altered its original Block 2006  performance goals commensurate with the agency’s reductions in the  delivery of fielded assets.  For several reasons, information is not  sufficient to assess whether MDA achieved its revised performance goals.  First, MDA uses a combination of simulations and flight tests to determine  whether performance goals are met. However, too few flight tests have  been completed to ensure the accuracy of the models and simulations  predictions. Second, confidence in the performance of the BMDS is  reduced because of unresolved technical and quality issues in the GMD  element. For example, the GMD element has experienced the same  anomaly during each of its flight tests since 2001. This anomaly has not yet  prevented the program from achieving any of its primary test objectives,  but to date neither its source nor solution has been clearly identified.  Program officials plan to continue their assessment of test data to  determine the anomaly’s root cause. The performance of some fielded  GMD assets is also questionable because they contain parts identified by  auditors in MDA’s Office of Quality, Safety, and Mission Assurance as less  reliable or inappropriate for use in space that have not yet been replaced.  MDA has begun to replace the questionable parts in the manufacturing  process and to purchase the parts for retrofit into fielded interceptors.  However, it will not complete the retrofit effort until 2012.
Finally, tests of the GMD element have been of a developmental nature,  and have not included operationally representative test geometries in  which GMD will perform its mission. MDA has added operational test  objectives to its developmental test program, but the objectives are mostly  aimed at proving that military personnel can operate the equipment. The  lack of data has limited the operational test and evaluation Director’s  annual BMDS assessment to commenting on aspects of tests that were  operationally realistic and thus has prevented the Director from  determining whether the system is suitable and effective for the  battlefield.
section_title: Key Steps Taken to Enhance BMDS Oversight, But More Can Be Done
paragraphs: Since its initiation in 2002, MDA has been given a significant amount of  flexibility. While this flexibility allows agile decision making, it lessens the  transparency of MDA’s acquisition processes, making it difficult to  conduct oversight and hold the agency accountable for its planned  outcomes and costs. As we reported in March 2007, MDA operates with  considerable autonomy to change goals and plans, which makes it difficult  to reconcile outcomes with original expectations and to determine the  actual cost of each block and of individual operational assets. In the past  year, MDA has begun implementing two initiatives—a new block construct  and a new executive board—to improve transparency, accountability, and  oversight. These initiatives represent improvements over current  practices, although we see additional improvements MDA can make. In  addition, Congress has directed that MDA begin buying certain assets with  procurement funds like other programs, which should promote  accountability for and transparency of the BMDS.
subsections: section_title: New Block Structure Offers Improvements, but Does Not Resolve All Issues
paragraphs: In 2007, MDA redefined its block construct to better communicate its  plans and goals to Congress. The agency’s new construct is based on  fielding capabilities that address particular threats as opposed to the  previous biennial time periods. MDA’s new block construct makes many  positive changes. These include establishing unit cost for selected block  assets, incorporating into a block only those elements or components that  will be fielded during the block, and abandoning the practice of deferring  work from block to block.
These changes should improve the transparency of the BMDS program  and make MDA more accountable for the investment being made in  missile defense. For example, the actual cost of each block can be tracked  because MDA will no longer defer work planned for one block, along with  its cost, to a future block. In addition, MDA plans to develop unit cost for  selected BMDS assets–– such as THAAD interceptors–– so that cost  growth of those assets can be monitored. In addition, the agency plans to  request an independent verification of these unit costs and report  significant cost growth to Congress. However, MDA has not yet  determined all of the assets that will report a unit cost or how much a unit  cost must increase before it is reported to Congress.
Although improvements are inherent in MDA’s proposed block construct,  the new construct does not resolve all transparency and accountability  issues. For example, MDA officials told us that the agency does not plan to  estimate the full cost of a block. Instead, the cost baseline reported to  Congress will include all prior costs of the block and the expected budget  for the block for the 6 years included in DOD’s Future Years Defense Plan.  Costs beyond the 6th year of the plan will not be estimated. Once baselined,  if the budget for a block changes, MDA plans to report and explain those  variations to Congress.  Because the full cost of each block will not be  known, it will be difficult for decision makers to compare the value of  investing in each block to the value of investing in other DOD programs or  to determine whether a block is affordable over the long term. Other DOD  programs are required to provide the full cost estimate of developing and  producing their weapon system, even if the costs extend beyond the  Future Years Defense Plan.
Another issue yet to be addressed is whether the concurrent development  and fielding of BMDS assets will continue. Fully developing an asset and  demonstrating its capability prior to production increases the likelihood  that the product will perform as designed and can be produced at the cost  estimated. To field an initial capability quickly, MDA accepted the risk of  concurrent development and fielding during Block 2004. It continued to do  so during Block 2006 as it fielded assets before they were fully tested. For  example, by the end of Block 2004, the agency realized that the  performance of some ground-based interceptors could be degraded  because the interceptors included inappropriate or potentially unreliable  parts. As noted earlier, MDA has begun the process of retrofitting these  interceptors, but work will not be completed until 2012. Meanwhile, there  is a risk that some interceptors might not perform as designed. MDA has  not addressed whether it will accept similar performance risks under its  new block construct or whether it will fully develop and demonstrate all  elements/components prior to fielding.
MDA has not addressed whether it will transfer assets produced during a  block to a military service for production and operation at the block’s  completion. Officials representing multiple DOD organizations recognize  that transfer criteria are neither complete nor clear given the BMDS’s  complexity. Without clear transfer criteria, MDA has transferred the  management of only one element—the Patriot Advanced Capability-3—to  the military for production and operation. For other elements, MDA and  the military services have been negotiating the transition of  responsibilities for the sustainment of fielded elements—a task that has  proven to be time consuming. Although MDA documents show that under  its new block construct the agency should be ready to deliver BMDS  components that are fully mission-capable, MDA officials could not tell us  whether at the end of a block MDA’s Director will recommend when  management of components, including production responsibilities, will be  transferred to the military.
section_title: New Executive Board Offers Improved, but Not Full, Oversight
paragraphs: Oversight improvement initiatives are also underway for MDA. In March  2007, the Deputy Secretary of Defense established a Missile Defense  Executive Board (MDEB) to recommend and oversee implementation of  strategic policies and plans, program priorities, and investment options for  protecting the United States and its allies from missile attacks. The MDEB  is also to replace existing groups and structures, such as the Missile  Defense Support Group.
The MDEB appears to be vested with more authority than the Missile  Defense Support Group. When the Support Group was chartered in 2002, it  was to provide constructive advice to MDA’s Director. However, the  Director was not required to follow the advice of the group. According to a  DOD official, although the Support Group met many times initially, it did  not meet after June 2005. This led to the formation of the MDEB.  Its  mission is to review and make recommendations on MDA’s  comprehensive acquisition strategy to the Deputy Secretary of Defense. It  is also to provide the Under Secretary of Defense for Acquisition,  Technology and Logistics, with a recommended strategic program plan  and a feasible funding strategy based on business case analysis that  considers the best approach to fielding integrated missile defense  capabilities in support of joint MDA and warfighter objectives. The MDEB  will be assisted by four standing committees. These committees, who are  chaired by senior-level officials from the Office of the Secretary of Defense  and the Joint Staff, could play an important oversight role as they are  expected to make recommendations to the MDEB, which in turn, will  recommend courses of action to the Under Secretary of Defense and the  Director, MDA as appropriate.
Although the MDEB is expected to exercise some oversight of MDA, it will  not have access to all the information normally available to DOD oversight  bodies. For other major defense acquisition programs, the Defense  Acquisition Board has access to critical information because before a  program can enter the System Development and Demonstration phase of  the acquisition cycle, statute requires that certain information be  developed.  However, in 2002, the Secretary of Defense deferred  application of DOD policy that, among other things, require major defense  programs to obtain approval before advancing from one phase of the  acquisition cycle to another. Because MDA does not yet follow this cycle,  and has not yet entered System Development and Demonstration, it has  not triggered certain statutes requiring the development of information  that the Defense Acquisition Board uses to inform its decisions. For  example, most major defense acquisition programs are required by statute  to obtain an independent verification of life-cycle cost estimates prior to  beginning system development and demonstration, and/or production and  deployment. Independent life-cycle cost estimates provide confidence that  a program is executable within estimated cost. Although MDA plans to  develop unit cost for selected block assets and to request that DOD’s Cost  Analysis Improvement Group verify the unit costs, the agency does not yet  plan to do so for a block cost estimate.
Statute also requires an independent verification of a system’s suitability  for and effectiveness on the battlefield through operational testing before  a program can proceed beyond low-rate initial production. After testing is  completed, the Director for Operational Test and Evaluation assesses  whether the test was adequate to support an evaluation of the system’s  suitability and effectiveness for the battlefield, whether the test showed  the system to be acceptable, and whether any limitations in suitability and  effectiveness were noted. However, a comparable assessment of the  BMDS assets being fielded will not be available to the MDEB as MDA  conducts primarily developmental tests of its assets with some operational  test objectives. As noted earlier, developmental tests do not provide  sufficient data for operational test officials to make such an assessment of  BMDS.
MDA will also make some decisions without needing approval from the  MDEB or any higher level official. Although the charter of the MDEB  includes the mission to make recommendations to MDA and the Under  Secretary of Defense for Acquisition, Technology and Logistics on  investment options, program priorities, and MDA’s strategy for developing  and fielding an operational missile defense capability, the MDEB will not  necessarily have the opportunity to review and recommend changes to  BMDS blocks. MDA documents show that the agency plans to continue to  define each block of development without requiring input from the MDEB.  According to a briefing on the business rules and processes for MDA’s new  block structure, the decision to initiate a new block of BMDS capability  will be made by MDA’s Director. Also cost, schedule, and performance  parameters will be established by MDA when technologies that the block  depends upon are mature, a credible cost estimate can be developed,  funding is available, and the threat is both imminent and severe. The  Director will inform the MDEB as well as Congress when a new block is  initiated, but he will not seek the approval of either.
Finally, there will be parts of the BMDS program that the MDEB will have  difficulty overseeing because of the nature of the work being performed.  MDA plans to place any program that is developing technology in a  category known as Capability Development. These programs, such as ABL,  KEI, and MKV, will not have a firm cost, schedule, or performance  baseline. This is generally true for technology development programs in  DOD because they are in a period of discovery, which makes schedule and  cost difficult to estimate. On the other hand, the scale of the technology  development in BMDS is unusually large, ranging from $2 billion to about  $5 billion dollars a year—eventually comprising nearly half of MDA’s  budget by fiscal year 2012. The MDEB will have access to the budgets  planned for these programs over the next five or six years, each program’s  focus, and whether the technology is meeting short term key events or  knowledge points. But without some kind of baseline for gauging progress  in these programs, the MDEB will not know how much more time or  money will be needed to complete technology maturation. MDA’s  experience with the ABL program provides a good example of the  difficulty in estimating the cost and schedule of technology development.  In 1996, the ABL program believed that all ABL technology could be  demonstrated by 2001 at a cost of about $1 billion. However, MDA now  projects that this technology will not be demonstrated until 2009 and its  cost has grown to over $5 billion.
section_title: MDA Directed to Use Procurement Funding
paragraphs: In an effort to further improve the transparency of MDA’s acquisition  processes, Congress has directed that MDA’s budget materials delineate  between funds needed for research, development, test and evaluation;  procurement; operations and maintenance; and military construction.  Congress gave MDA the flexibility to field certain assets using research,  development, test and evaluation funding which allowed MDA to fund the  purchase of assets over multiple years. Congress recently restricted MDA’s  authority and required MDA to purchase certain assets with procurement  funds. Using procurement funds will mean that MDA will be required to  ensure that assets are fully funded in the year of their purchase, rather  than incrementally funded over several years. Additionally, our analysis of  MDA data shows that incremental funding is usually more expensive than  full-funding, in part, because inflation decreases the buying power of the  dollar each year. For example, after reviewing MDA’s incremental funding  plan for THAAD fire units and Aegis BMD missiles, we analyzed the effect  of fully funding these assets and found that the agency could save about  $125 million by fully funding their purchase and purchasing them in an  economical manner.
section_title: Upcoming Report
paragraphs: Our annual report on missile defense is in draft and with DOD for  comment.  It will be issued in final by March 15, 2008.  In that report, we  are recommending additional steps that could build on efforts to further  improve the transparency, accountability, and oversight of the missile  defense program.  Our recommendations include actions needed to  improve cost reporting as well as testing and evaluation. DOD is in the  process of preparing a formal response to the report and its  recommendations.
Mr. Chairman, this concludes my statement. I would be pleased to respond  to any questions you or members of the subcommittee may have.
section_title: Contacts and Staff Acknowledgments
paragraphs: For questions about this statement, please contact me at (202) 512-4841 or  Francisp@gao.gov. Individuals making key contributions to this statement  include David Best, Assistant Director; LaTonya D. Miller; Steven B. Stern;  Meredith Allen Kimmett; Kenneth E. Patton; and Alyssa Weir.
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