Missile Defense: Opportunity Exists to Strengthen Acquisitions by Reducing Concurrency
Published: 2012-04-20T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: MDA has spent more than $80 billion since its initiation in 2002 and plans to spend $44 billion more by 2016 to develop, produce, and field a complex integrated system of land-, sea-, and space-based sensors, interceptors, and battle management, known as the BMDS.
Since 2002, National Defense Authorization Acts have mandated that GAO prepare annual assessments of MDAs ongoing cost, schedule, testing, and performance progress. This report assesses that progress in fiscal year 2011. To do this, GAO examined the accomplishments of the BMDS elements and supporting efforts and reviewed individual element responses to GAO data collection instruments. GAO also reviewed pertinent Department of Defense (DOD) policies and reports, and interviewed a wide range of DOD, MDA, and BMDS officials.
section_title: What GAO Found
paragraphs: In fiscal year 2011, the Missile Defense Agency (MDA) experienced mixed results in executing its development goals and Ballistic Missile Defense System (BMDS) tests. For the first time in 5 years, GAO found that all of the targets used in this years tests were delivered and performed as expected. None of the programs GAO assessed were able to fully accomplish their asset delivery and capability goals for the year. Flight test failures, an anomaly, and delays disrupted the development of several components and models and simulations challenges remain. Flight test failures forced MDA to suspend or slow production of three out of four interceptors currently being manufactured while failure review boards investigated their test problems.
To meet the presidential 2002 direction to initially rapidly field and update missile defense capabilities as well as the 2009 announcement to deploy missile defenses in Europe, MDA has undertaken and continues to undertake highly concurrent acquisitions. Concurrency is broadly defined as the overlap between technology development and product development or between product development and production. While some concurrency is understandable, committing to product development before requirements are understood and technologies mature or committing to production and fielding before development is complete is a high-risk strategy that often results in performance shortfalls, unexpected cost increases, schedule delays, and test problems. It can also create pressure to keep producing to avoid work stoppages. In contrast, as shown in the notional graphic below, successful programs that deliver promised capabilities for the estimated cost and schedule use a disciplined knowledge-based approach.
High levels of concurrency were present in MDAs initial efforts and are present in current efforts, though the agency has begun emphasizing the need to follow knowledge-based development practices. During 2011, the Ground-based Midcourse Defense, the Aegis Standard Missile 3 Block IB, and the Terminal High Altitude Area Defense experienced significant ill effects from concurrency. For example, MDAs discovery of a design problem in a new variant of the Ground-based Midcourse Defense programs interceptors while production was underway increased costs, may require retrofit of fielded equipment, and delayed delivery. Flight test cost to confirm its capability has increased from $236 million to about $1 billion. Because MDA continues to employ concurrent strategies, it is likely that it will continue to experience these kinds of acquisition problems.
section_title: What GAO Recommends
paragraphs: GAO makes seven recommendations to the Secretary of Defense to reduce concurrency and strengthen MDAs near- and long-term acquisition prospects. DOD concurred with six recommendations and partially concurred with one related to reporting on the cause of the Aegis BMD Standard Missile-3 Block IB test failure before committing to additional purchases. DOD did not agree to tie additional purchases to reporting the cause of the failure. DODs stated actions were generally responsive to problems already at hand, but did not consistently address implications for concurrency in the future, as discussed more fully in the report.

section_title: Letter
paragraphs: The Missile Defense Agency (MDA) has developed and deployed an  initial integrated and layered Ballistic Missile Defense System (BMDS) to  defend the United States, our deployed forces, allies, and friends, and is  continuing development and production of additional capabilities. Since  2002, MDA has spent more than $80 billion and plans to spend an  additional $44 billion through 2016 to develop a highly complex system of  systems—land-, sea-, and space-based sensors, interceptors and battle  management. To rapidly field missile defense capabilities, MDA has  concurrently developed, produced, and fielded a variety of systems. While  this approach has helped MDA to rapidly deploy initial capabilities, it also  has meant that it has fielded some assets whose capabilities are  uncertain or impaired. In addition, there has been limited transparency  and accountability for the acquisitions, particularly limited understanding  of the costs, schedules, requirements, and system effectiveness. As the  United States government seeks to address growing fiscal pressures,  investments in new weapon systems, like the BMDS, will face increasing  scrutiny to ensure that they are providing the best value for the  increasingly limited resources available.
Since 2002, National Defense Authorization Acts have mandated that we  prepare annual assessments of MDA’s ongoing cost, schedule, testing,  and performance progress. To date, we have delivered assessments of  MDA’s progress covering fiscal years 2003 through 2010 and are  currently mandated to continue delivering assessments through fiscal  year 2016.fiscal year 2011. Specifically, it highlights (1) progress and challenges in  delivery of assets for key programs, or elements; (2) progress in  developing models and simulations needed to assess BMDS  performance; and (3) challenges related to MDA’s use of highly  concurrent acquisition strategies. In terms of costs, we report on the cost  effects MDA experienced or is likely to experience for individual systems  as a result of its past, ongoing, and planned acquisition practices. We will  not be able to assess aggregate cost reporting until corrective actions we  recommended are implemented and substantial improvements are made  to MDA’s cost estimates. According to MDA senior-level officials, the  agency has taken several actions in response to our recommendations.  Finally, we will be issuing a separate report assessing MDA’s progress in  adopting best practices for developing project schedules as well as  broader progress in enhancing and enabling Department of Defense  (DOD) and congressional oversight for MDA.
This report provides our assessment of MDA’s progress in  To assess MDA’s progress, we examined the accomplishments of eight  BMDS elements and supporting efforts that MDA is currently developing  and fielding: the Aegis Ballistic Missile Defense (Aegis BMD) with  Standard Missile-3 Block IA and Block IB; Aegis Ashore; Aegis BMD  Standard Missile-3 Block IIA, Aegis BMD Standard Missile-3 Block IIB;  Ground-based Midcourse Defense (GMD); Precision Tracking and Space  System (PTSS); Targets and Countermeasures; and Terminal High  Altitude Area Defense (THAAD). We reviewed individual element  responses to GAO data collection instruments, which detailed key  accomplishments for fiscal year 2011. The results of these reviews are  presented in detail in appendixes to this report and are also integrated as  appropriate in our findings related to progress in delivering assets and  capabilities. For more details on our scope and methodology, see  appendix I.
We conducted this performance audit from April 2011 to April 2012 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: MDA’s BMDS is being designed to counter ballistic missiles of all  ranges—short, medium, intermediate, and intercontinental.ballistic missiles have different ranges, speeds, sizes, and performance  characteristics, MDA is developing multiple systems that when integrated,  provide multiple opportunities to destroy ballistic missiles before they can  reach their targets. The system includes space-based sensors as well as  ground- and sea-based radars, ground- and sea-based interceptor  missiles, and a command and control, battle management, and  communications system providing the warfighter with the necessary  communication links to the sensors and interceptor missiles. A typical  engagement scenario to defend against an intercontinental ballistic  missile would occur as follows:   Since  Infrared sensors aboard early-warning satellites detect the hot plume  of a missile launch and alert the command authority of a possible  attack.
Upon receiving the cue, land- or sea-based radars are directed to  track the various objects released from the missile and, if so  designed, to identify the warhead from among spent rocket motors,  decoys, and debris.
When the trajectory of the missile’s warhead has been adequately  established, an interceptor—consisting of a kill vehicle mounted atop  a booster—is launched to engage the threat. The interceptor boosts  itself toward a predicted intercept point and releases the kill vehicle.
The kill vehicle uses its onboard sensors and divert thrusters to  detect, identify, and steer itself into the warhead. With a combined  closing speed of up to 10 kilometers per second (22,000 miles per  hour), the warhead is destroyed above the atmosphere through a “hit  to kill” collision with the kill vehicle.
Inside the atmosphere, interceptors kill the ballistic missile using a  range of mechanisms such as direct collision between the interceptor  missile and the inbound ballistic missile or killing it with the combined  effects of a blast fragmentation warhead (heat, pressure, and  grains/shrapnel) in cases where a direct hit does not occur.
Table 1 provides a brief description of eight BMDS elements and  supporting efforts currently under development by MDA.
In 2009, DOD altered its approach to European defense, which originally  focused on ground-based interceptors from the GMD element and a large  fixed radar as well as transportable X-Band radars, in order to provide  defenses against long-range threats to the United States and short-,  medium-, and intermediate-range Iranian threats to Europe. This new  approach, referred to as the European Phased Adaptive Approach (PAA),  consists primarily of Aegis BMD sea-based and land-based systems and  interceptors, as well as various sensors to be deployed over time as the  various capabilities are matured.
The European PAA policy announced by the President articulates a  schedule for delivering four phases of capability to defend Europe and  augment current protection of the U.S. homeland in the following time  frames: Phase 1 in 2011, Phase 2 in 2015, Phase 3 in 2018, and Phase 4  in 2020. DOD’s schedule for the European PAA comprises multiple  elements and interceptors to provide an increasingly integrated ballistic  missile defense capability. It is projected that each successive phase will  deliver additional capability with respect to both threat missile range and  raid size.
Table 2 outlines the plans and estimated delivery time frames associated  with each European PAA phase.
section_title: Mixed Progress in Development and Delivery Efforts
paragraphs: MDA experienced mixed results in executing its fiscal year 2011  development goals and BMDS tests. For the first time in 5 years, we are  able to report that all of the targets used in fiscal year 2011 test events  were delivered as planned and performed as expected. Moreover, the  Aegis BMD program demonstrated the capability to intercept an  intermediate-range target for the first time. Also, the THAAD program  successfully conducted its first operational flight test in October 2011.
However, none of the programs we assessed were able to fully  accomplish their asset delivery and capability goals for the year. At the  same time, several critical test failures as well as a test anomaly and  delays disrupted MDA’s flight test plan and the acquisition strategies of  several components. Overall, flight test failures and an anomaly forced  MDA to suspend or slow production of three out of four interceptors  currently being manufactured. The GMD program, in particular, has been  disrupted by two recent failures, which forced MDA to halt flight testing  and restructure its multi-year flight test program, halt production of the  interceptors, and redirect resources to return-to-flight activities.  Production issues forced MDA to slow production of the THAAD  interceptors, the fourth missile being manufactured.
Table 3 presents a summary of selected MDA goals for fiscal year 2011  that details how well these goals were accomplished. Appendixes IV  through XI further detail MDA’s progress in each of the major programs.
Highlights of progress and challenges this year include the following:
Targets: In prior years, we reported that problems with availability and  reliability of targets had caused delays in MDA’s test program;  however, in fiscal year 2011, MDA delivered 11 short- or intermediate- range targets, and all performed successfully. The targets launched  during the year supported tests of several different BMDS elements,  including Aegis BMD, GMD, and Patriot systems without causing  major delays or failures in flight tests. Among these successful flights  was FTX-17, the return-to-flight of MDA’s short-range air-launched  target in July 2011. This was the target’s first launch since an  essential mechanism that releases it from the aircraft failed in a  December 2009 THAAD flight test. After the failure, the agency  identified shortcomings in the contractor’s internal processes that had  to be fixed before air-launched targets could be used again in BMDS  flight tests. Nineteen months later, these deficiencies appeared to be  overcome when the target missile was successfully air-launched in  FTX-17. To reduce risk, the flight was not planned as an intercept  mission but as a target of opportunity for several emerging missile  defense technologies including the Space Tracking Surveillance  System.
Aegis BMD: In April 2011, the Aegis BMD program demonstrated  capability for the first time to intercept an intermediate-range target,  used remote tracking data provided by an Army/Navy Transportable  Radar Surveillance – Model- 2 radar, and demonstrated support for  European PAA Phase I. While the Aegis BMD program successfully  conducted this test, there was an anomaly in a critical component of  the SM-3 Block IA interceptor. Despite the anomaly, the interceptor  was able to successfully intercept the target. In September 2011, the  Aegis BMD program failed in its first attempted intercept of its SM-3  Block IB missile. During this test—named FTM-16 Event 2—a  problem occurred in the interceptor and it failed to intercept the target.  The Aegis program has had to add an additional flight test and delay  multiple additional flight tests. Program management officials stated  the SM-3 Block IA deliveries were suspended and the SM-3 Block IB  production was slowed while the failure reviews are conducted.
THAAD: The THAAD program also had some noteworthy testing  accomplishments in 2011, successfully conducting its first operational  flight test in October 2011. This test was a significant event for the  program as it was designed to be representative of the fielded system  with soldiers conducting the engagement. During the test, the THAAD  system engaged and nearly simultaneously intercepted two short- range ballistic missile targets. However, THAAD also experienced a  delay in its planned flight test schedule for fiscal year 2011. A flight  test originally scheduled for the second quarter of fiscal year 2011  was delayed until fiscal year 2012 due to the availability of air- launched targets and then subsequently was canceled altogether.  This cancellation has delayed verification of THAAD’s capability  against a medium-range target.
GMD: As has been the case since 2005, testing failures continue to  affect the GMD program in fiscal year 2011. Specifically, as a result of  the failed flight test in January 2010, MDA added a retest designated  as FTG-06a. However, this retest also failed in December 2010 due to  a failure in a key component of the kill vehicle. The GMD program has  added two additional flight tests in order to demonstrate the Capability  Enhancement II (CE-II) interceptor. However, since fiscal year 2009  MDA has already manufactured and delivered 12 interceptors, 2 of  which have been used in flight tests, prior to halting further deliveries.  The manufacture of components related to the failure and delivery of  interceptors has been halted while the failure review and resolution  actions are ongoing. MDA conducted a failure review investigation  throughout fiscal year 2011 and concluded that the CE-II interceptor  design does not work as intended and therefore required redesign  and additional development. MDA is currently undergoing an  extensive effort to overcome the design problem and return to  intercept flight tests.
According to a GMD program official, the program has already  conducted over 50 component and subcomponent tests to develop a  fix and verify the design. MDA also realigned resources from planned  2011 testing activities to fund the investigation and fund return-to- intercept activities including redesign efforts. For example, the  program delayed funding the rotation of older fielded interceptors into  flight test assets, delayed funding interceptor manufacturing, and  delayed purchasing ground-based interceptor (GBI) upgrade kits.  However, the agency did continue its efforts to increase reliability of  the interceptors through upgrades and its repair of five interceptors to  help mitigate the effects on the production line. MDA is planning on  upgrading 15 interceptors between fiscal years 2013 to 2017.  Additionally, MDA plans to refurbish five older interceptors between  2014 and 2017 to support flight tests.
SM-3 Block IIA: MDA recognized that the program’s schedule  included elevated acquisition risks and, as such, took actions in fiscal  year 2011 to reduce those risks as well as potential future cost  growth. The program planned to hold its system preliminary design  review (PDR)—at which it would demonstrate that the technologies  and resources available for the SM-3 Block IIA would result in a  product that matched its requirements—but subsystem review  problems for key components meant the system review had to be  adjusted by 1 year. The program appropriately added time and money  to its program by revising its schedule to relieve schedule  compression between its subsystem and system-level design reviews  and incorporated lessons learned from other SM-3 variants into its  development to further mitigate production unit costs. The program  still expects to meet the 2018 time frame for European PAA Phase 3.
section_title: Limited Progress in Developing Models and Simulations; Much More Remains to Be Done
paragraphs: Models and simulations are critical to understanding BMDS capabilities.  The complex nature of the BMDS, with its wide range of connected  elements, requires integrated system-level models and simulations to  assess its performance in a range of system configurations and  engagement conditions. Assessing BMDS performance through flight  tests alone is prohibitively expensive and faces safety and test range  limitations that can best be dealt with through sound, realistic models and  simulations.
Ensuring that the models and simulations are sound and realistic requires  a rigorous process to accomplish two main tasks: (1) developing  individual system models and realistically linking those models and  simulations and (2) gathering data from MDA’s ground and flight tests to  feed into the models. MDA attempts to confirm that the models re-create  the actual performance found in BMDS test events. The Operational Test  Agency (OTA) independently assesses how realistic the models are in a  formal process called accreditation. When a model is accredited it means  that it can be trusted to produce high-confidence results for its intended  use, and the limitations of the model are known. The development of  reliable MDA models depends upon the collection of test data upon which  to anchor the models. Because MDA had made very limited progress in  identifying and collecting needed data, MDA’s test program was  reoriented beginning in 2010 to enable the collection of data to support  the development of BMDS models.
With hardware-in-the-loop models, simulations are conducted with actual mission  components/hardware in a laboratory environment, and the physical  environment/conditions are simulated, under the control of computer equipment.
MDA officials highlight that the framework is being used to evaluate  BMDS performance in increasingly complex and realistic scenarios,  employing greater numbers of BMDS assets.
The process of developing and linking these models is extremely complex  and difficult and will take many years to accomplish. In August 2009, the  U.S. Strategic Command and OTA jointly informed MDA of 39 system- level limitations in MDA’s models and simulations program that adversely  affect their ability to assess BMDS performance. Resolution of these 39  limitations, OTA maintains, would permit MDA’s models and simulations  to provide more realistic representations of BMDS performance using the  full complement of fielded BMDS assets. OTA officials have noted that  since August 2009, MDA has partially or fully resolved 7 of these issues  and identified technical solutions for 15 more. According to OTA officials,  most of the resolved limitations are issues that are more easily  addressed, such as the installation of improved communications systems  and the provision of separate workstations for simulation controllers. No  technical solutions have yet been identified for the remaining 17 of the 39  issues and OTA officials maintain that they are still awaiting an MDA  timeline for the complete resolution of these remaining limitations.
We reported, in 2009, problems with MDA’s model development and the  lack of flight test data. In 2009, MDA undertook a new approach to test  planning to focus the test program on gathering critical test data needed  for modeling and simulation. Since 2009, MDA has bolstered efforts to  collect test data for the BMDS model and simulation program; however,  considerable effort and time are required to address all known shortfalls.  Through its ongoing test data collection activities, MDA has collected 309  critical variables since 2009; however, those represent only 15 percent of  the total needed. Flight test failures, anomalies and delays have reduced  the amount of real-world data MDA expected. Additionally, some required  data are difficult to collect, posing challenges even when a flight test is  properly executed. When tests are carried out, considerable post-test  data analysis is required for model development. Under the current plan,  MDA does not foresee complete collection of data on these critical  variables until sometime between 2017 and 2022.
MDA has also made some limited progress in achieving partial  accreditation for some BMDS models—ensuring that they are realistic  and can be trusted and that their limitations are known. MDA models are  accredited for specific functions for which they are to be employed. Over  the past few years, OTA officials have performed assessments of MDA’s  models and simulations and have noted that, amongst the element-level  models, those for THAAD and Aegis BMD are farthest along. While MDA  has made some progress toward accreditation of element models for  specific functional areas, MDA has not yet achieved OTA accreditation in  other key areas, such as any of the 18 environmental models. See  appendix III for further details on MDA’s modeling and simulation efforts.
section_title: MDA’s Highly Concurrent Acquisition Strategy Magnifies the Effects of Tests and Other Problems
paragraphs: To meet the 2002 presidential direction to initially rapidly field and update  missile defense capabilities as well as the 2009 presidential  announcement to deploy missile defenses in Europe, MDA has  undertaken and continues to undertake highly concurrent acquisitions.  For example, large-scale acquisition efforts were initiated before critical  technologies were fully understood and programs were allowed to move  forward into production without having tests completed to verify  performance. Such practices enabled MDA to quickly ramp up efforts in  order to meet tight presidential deadlines, but they were high risk and  resulted in problems that required extensive retrofits, redesigns, delays,  and cost increases. A program with high levels of concurrency   (1) proceeds into product development before technologies are mature or  appropriate system engineering has been completed or (2) proceeds into  production before a significant amount of independent testing is  conducted to confirm that the product works as intended. High levels of  concurrency were present in MDA’s initial efforts and are present in  current efforts.
Recently, the agency has begun emphasizing the need to follow  knowledge-based development practices, which encourage accumulating  more technical knowledge before program commitments are made and  conducting more testing before production is initiated. Developmental  challenges and delays are to be expected in complex acquisitions, such  as those for missile defense. However, when concurrency is built into  acquisition plans, any developmental challenges or delays that do occur  exacerbate the cost, schedule, and performance effects of those  problems, particularly when production lines are disrupted or assets have  already been manufactured and must be retrofitted. In 2009, we  recommended that MDA synchronize the development, manufacturing,  and fielding schedules of BMDS assets with the testing and validation  schedules to ensure that items are not manufactured for fielding before  their performance has been validated through testing. In response, DOD  partially concurred with our recommendation, maintaining that MDA was  pursuing synchronization of development, manufacturing, and fielding of  BMDS assets with its established testing and validation requirements.  However, because MDA continues to employ concurrent strategies, it is  likely that it will continue to experience these types of acquisition  problems.
subsections: section_title: Highly Concurrent Acquisition Strategies Often Lead to Cost, Schedule, and Performance Consequences
paragraphs: Concurrency is broadly defined as the overlap between technology  development and product development or between product development  and production of a system. The stated rationale for concurrency is to  introduce systems in a timelier manner, to fulfill an urgent need, to avoid  technology obsolescence and to maintain an efficient industrial  development and production workforce. While some concurrency is  understandable, committing to product development before requirements  are understood and technologies mature as well as committing to  production and fielding before development is complete is a high-risk  strategy that often results in performance shortfalls, unexpected cost  increases, schedule delays, and test problems. At the very least, a  highly concurrent strategy forces decision makers to make key decisions  without adequate information about the weapon’s demonstrated  operational effectiveness, reliability, logistic supportability, and readiness  for production. Also, starting production before critical tests have been  successfully completed has resulted in the purchase of systems that do  not perform as intended. These premature commitments mean that a  substantial commitment to production has been made before the results  of testing are available to decision makers. Accordingly, they create  pressure to keep producing to avoid work stoppages even when problems  are discovered in testing. These premature purchases have affected the  operational readiness of our forces and quite often have led to expensive  modifications.
In contrast, successful programs that deliver promised capabilities for the  estimated cost and schedule follow a systematic and disciplined  knowledge-based approach. This approach recognizes that development  programs require an appropriate balance between schedule and risk and,  in practice, programs can be executed successfully with some level of  concurrency.  For example, it is appropriate to order long-lead production  material in advance of the production decision, with the pre-requisite that  developmental testing is substantially accomplished and the design  confirmed to work as intended. We have found that, in this approach, high  levels of product knowledge are demonstrated at critical points in  development. This approach is not unduly concurrent because  programs take steps to gather knowledge that demonstrates that their  technologies are mature, their designs are stable, and their production  processes are in control before transitioning between acquisition phases.  This knowledge helps programs identify risks early and address them  before they become problems. It is a process in which technology  development and product development are treated differently and  managed separately. The process of technology development culminates  in discovery—the gathering of knowledge—and must, by its very nature,  allow room for unexpected results and delays. The process of developing  a product culminates in delivery and therefore gives great weight to  design and production. If a program is falling short in technology maturity,  it is harder to achieve design stability and almost impossible to achieve  production maturity. It is therefore key to separate technology from  product development and product development from production—in other  words, it is key to avoid concurrency when these transitions are made.  The result of a knowledge-based approach is a product delivered on time,  within budget, and with the promised capabilities.
See figure 1 for depictions of a concurrent schedule and a schedule that  uses a knowledge-based approach.
In fiscal year 2011, due to flight test failures and a flight test anomaly,  MDA suspended production of two interceptors—one in the GMD  program and one in the Aegis BMD program—and slowed production of a  third—in the Aegis BMD program. In addition, development problems with  a key THAAD component disrupted that program’s interceptor production.
MDA undertook a highly concurrent acquisition strategy to meet the  President’s 2002 directive to deploy an initial set of missile defense  capabilities by 2004. To do so, the GMD element concurrently matured  technology, designed the system, tested the design, and produced and  fielded a system. While this approach allowed GMD to rapidly field a  limited defense that consisted of five CE-I interceptors and a fire control  system, the concurrency resulted in unexpected cost increases, schedule  delays, test problems, and performance shortfalls. Since then, MDA has  produced and emplaced all of its planned CE-I interceptors. To address  issues with the CE-I interceptors, MDA has undertaken an extensive  retrofit and refurbishment program.
Prior to MDA fully completing development and demonstrating the  capability of the initial interceptor, MDA committed in 2004 to another  highly concurrent development, production, and fielding strategy for an  enhanced version of the interceptor—CE-II—as shown in figure 2.
MDA proceeded to concurrently develop, manufacture, and deliver 12 of  these interceptors before halting manufacture of components and delivery  of interceptors in 2011 due to the failure in FTG-06a.had not successfully tested this interceptor, failing in both its attempts, it  manufactured and delivered 12 of these interceptors.
The discovery of the design problem while production is under way has  increased MDA costs, led to a production break, may require retrofit of  fielded equipment, delayed delivery of capability to the war-fighter, and  altered the flight test plan. For example, the flight testing cost to confirm  the CE-II capability has increased from $236 million to about $1 billion.
In addition, the program will have to undertake another retrofit program,  for the 10 CE-II interceptors that have already been manufactured.  According to a GMD program official, although the full cost is currently  unknown, he expects the cost to retrofit the CE-II interceptors to be  around $18 million each or about $180 million for all 10. Intended to be  ready for operational use in fiscal year 2009, it will now be at least fiscal  year 2013 before the warfighter will have the information needed to  determine whether to declare the variant operational.
The GMD flight test program has been disrupted by the two back to back  failures. For example, MDA has restructured the planned multiyear flight  test program in order to test the new design prior to an intercept attempt.  MDA currently plans to test the new design in a nonintercept test in fiscal  year 2012.
Because MDA prematurely committed to production before the results of  testing were available, it has had to take steps to mitigate the resulting  production break, such as accelerating retrofits to 5 of the CE-I  interceptors. Program officials have stated that if the test confirms that the  cause of the failure has been resolved, the program will restart the  manufacturing and integration of the CE-II interceptors. According to  MDA, because of the steps taken to develop and confirm the design  change, a restart of the CE-II production line at that time will be low risk.  However, while MDA has established a rigorous test plan to confirm that  the design problem has been overcome, the confirmation that the design  works as intended through all phases of flight, including the actual  intercept, will not occur until an intercept test—FTG-06b—currently  scheduled for the end of fiscal year 2012 or the beginning of fiscal year  2013.
High levels of concurrency will continue for the GMD program even if the  next two flight tests are successful. GMD will continue its developmental  flight testing until at least 2022, well after production of the interceptors  are scheduled to be completed. MDA is accepting the risk that these  developmental flight tests may discover issues that require costly design  changes and retrofit programs to resolve. As we previously reported, to  date all GMD flight tests have revealed issues that led to either a  hardware or software change to the ground-based interceptors.appendix VIII for more details on the GMD program.
The SM-3 Block IB program, the second version of the SM-3 interceptor,  is facing both developmental and production challenges that are  exacerbated by its concurrent schedule, as shown in figure 3. This  interceptor shares many components with the SM-3 Block IA, but the  kinetic warhead is new technology that is being developed. The need to  meet the presidential directive to field the Aegis BMD 4.0.1/SM-3 Block IB  by the 2015 time frame for European missile defense is a key driver for  the high levels of concurrency.
In response to previous developmental problems and to prevent a  production break, MDA has twice had to purchase additional SM-3 Block  IA interceptors and faces a similar decision in fiscal year 2012. According  to MDA, the additional SM-3 Block IA missiles were purchased to avoid a  production gap as well as to keep suppliers active, and to meet  combatant command SM-3 missile quantity requirements. The program,  according to program management officials, was scheduled to purchase  the last SM-3 Block IA in fiscal year 2010 and transition to procurement  production of the SM-3 Block IB missiles in fiscal year 2011.
MDA began purchasing the SM-3 Block IB in 2009 beyond the numbers  needed for flight testing while a critical maneuvering technology was  immature and prior to a successful flight test. According to the Director,  MDA these missiles support development and operational testing; prove  out manufacturing processes; provide information on reliability,  maintainability and supportability; verify and refine cost estimates; and  ensure that the missile will meet its performance requirements on a  repeatable basis. MDA has determined that 18 of the 25 SM-3 Block IB  missiles ordered are to be used for developmental testing; the remaining  7 interceptors are currently unassigned for tests and may be available for  operational use. According to program management officials, these  unassigned rounds represent a small portion of the total planned  purchases.
MDA is also planning to purchase 46 additional SM-3 Block IB missiles in  fiscal year 2012. Meanwhile, testing has yet to validate the missile’s  performance, the cause of the test failures is not yet determined, and  remaining tests may not be completed until 2013. Consequently,  purchasing additional interceptors beyond those needed for development  remains premature. The first SM-3 Block IB developmental flight test  failed in September 2011, and an anomaly occurred in an April 2011 flight  test of the SM-3 Block IA. The flight test failure and the test anomaly  occurred in components that are shared between the SM-3 Block IA and  IB. Program officials are still investigating the reason for these failures.  The program was unable to validate initial SM-3 Block IB capability during  the failed September test, and program officials hope to conduct a series  of three intercept tests in fiscal year 2012 needed to validate SM-3 Block  IB capability. Depending on the timing and content of the failure review  board results, this schedule could change further.
Any SM-3 Block IB missiles ordered in fiscal year 2012 before mitigations  for the anomaly and the failure, if needed, are determined and before the  three flight tests confirm the design works as intended would be at higher  risk of cost growth and schedule delays. In addition, SM-3 Block IB  missiles already manufactured but not delivered also are at higher risk of  requiring a redesign depending on the results of the failure review.  Program management officials stated MDA has slowed SM-3 Block IB  manufacturing until the outcome of the failure review board is known. It  remains unclear whether the additional 46 missiles will be ordered before  the failure reviews are complete and the interceptor is able to  demonstrate that it works as intended. Recognizing the critical importance  of the completing the planned fiscal year 2012 intercept tests, the  operational need for SM-3 missiles, the relative success of the SM-3  Block IA, as well as the potential for a production break, the Senate  Committee on Appropriations directed MDA to use the fiscal year 2012  SM-3 Block IB funds for additional Block IA missiles should the test and  acquisition schedule require any adjustments during fiscal year 2012.  However, a decision to purchase additional SM-3 Block IA missiles in  fiscal year 2012 to help avoid a production break may be affected by the  SM-3 Block IA failure investigation that has not yet been completed.  Program management officials stated most deliveries of the SM-3 Block  IA have been suspended pending the results of the failure review.
See appendix IV for more details on the Aegis BMD SM-3 Block IB  program.
MDA awarded a contract to produce THAAD’s first two operational  batteries in December 2006 before its design was stable and  developmental testing of all critical components was complete. As a  result, the THAAD program has experienced unexpected cost increases,  schedule delays, test problems, and performance shortfalls. At that time,  MDA’s first THAAD battery, consisting of 24 interceptors, 3 launchers,  and other associated assets, was to be delivered to the Army as early as  2009. In response to pressure to accelerate fielding the capability,  THAAD adopted a highly concurrent development, testing, and production  effort that has increased program costs and delayed fielding of the first  THAAD battery until early fiscal year 2012. (See fig. 4.)
Problems encountered while THAAD was concurrently designing and  producing assets increased costs by $40 million and caused slower  delivery rates of both the first and second THAAD batteries. These  batteries are not projected to be complete before July 2012—16 months  after the original estimate of March 2011. While all assets except the  interceptors were complete in 2010, the first operational interceptor for  the first THAAD battery was not produced until the second quarter of  fiscal year 2011. At the same time, MDA committed to purchasing more  assets by signing a production contract for two additional THAAD  batteries, despite incomplete testing and qualification of a safety device  on the interceptor. During fiscal year 2011, after several production start- up issues, 11 of the expected 50 operational interceptors were   Consequently, the first battery of 24 interceptors was not  delivered.complete and available for fielding until the first quarter of fiscal year  2012—more than 2 years later than originally planned. The same issues  have delayed the second battery as well. Although the launchers and  other components for the second battery were completed in 2010, the full  50 interceptors necessary for both batteries are not expected to be  delivered until July 2012.
section_title: Newer Programs Continue High Levels of Concurrency
paragraphs: MDA has taken steps to incorporate some acquisition best practices in its  newer programs, such as increasing competition and partnering with  laboratories to build prototypes. However, the SM-3 Block IIB, Aegis  Ashore, and the PTSS program acquisition strategies still include high or  elevated levels of concurrency that set the programs up for increased  acquisition risk, including cost growth, schedule delays, and performance  shortfalls.
SM-3 Block IIB: The program has high levels of concurrency because  it plans to commit to product development prior to holding a PDR, as  depicted in figure 5.
The need to meet the 2020 time frame announced by the President to  field the SM-3 Block IIB for European PAA Phase IV is a key driver for  the high levels of concurrency. The program is following some sound  acquisition practices by awarding competitive contracts to multiple  contractors to develop options for missile configurations and mature  key technologies as well as planning to compete the product  development contract. However, while the program is holding a series  of reviews that will provide engineering insight into the SM-3 Block IIB  design, we have previously reported that before starting development,  programs should hold key system engineering events, culminating in  the PDR, to ensure that requirements are defined and feasible and  that the proposed design can meet those requirements within cost,   In addition, based on the  schedule, and other system constraints.initial schedule developed by the program and prior history of SM-3  interceptor development, the SM-3 Block IIB program will need to  commit to building the first flight test vehicle prior to holding the PDR  in order to remain on the planned test schedule. According to MDA,  this approach is a low risk development if the program is funded at  requested levels. The agency stated that the achievement of an initial  operating capability will be based on technical progress and execution  of a “fly before buy” approach.
Aegis Ashore: The program initiated product development and  established a cost, schedule, and performance baseline early;  included high levels of concurrency in its construction and  procurement plan; and has not aligned its flight testing schedule with  construction and component procurement decisions. The need to  meet the 2015 time frame announced by the President to field the  Aegis Ashore for European PAA Phase II is a key driver for the high  levels of concurrency. The high levels of concurrency are depicted in  figure 6.
Aegis Ashore began product development and set the acquisition  baseline before completing the PDR. This sequencing increased  technical risks and the possibility of cost growth by committing to  product development with less technical knowledge than  recommended by acquisition best practices and without ensuring that  requirements were defined, feasible, and achievable within cost and  schedule constraints.
The program has initiated procurement of components for the  installation and plans to start fabricating two enclosures called  deckhouses—one for operational use at the Romanian Aegis Ashore  installation and one for testing at the Pacific Missile Range Facility—in  fiscal year 2012, but does not plan to conduct the first intercept test of  an integrated Aegis Ashore installation until fiscal year 2014. Further,  the program plans to build the operational deckhouse first, meaning  any design modification identified through system testing in the test  deckhouse or the intercept test will need to be made on an existing  deckhouse and equipment. As we have previously reported, such  modifications on an existing fabrication may be costly.
According to the Director of MDA, Aegis Ashore is a land adaptation  of the Aegis weapons system sharing identical components. However,  we previously have reported on the modifications to existing Aegis  BMD technology that must be made to operate in a new land  environment. In addition, some of the planned components for Aegis  Ashore are being developed for future Aegis weapon system  upgrades and are still undergoing development. Aegis BMD program  management officials stated that the risks of concurrency in the  program schedule are low due to the program’s reliance on existing  technology and the ground testing that will be completed prior to the  first intercept test. Nevertheless, the program has a limited ability to  accommodate delays in construction or testing.
PTSS: MDA approved a new acquisition strategy for PTSS in January  2012 that acknowledges some concurrency, but program officials  stated that they have taken steps to mitigate the acquisitions risks and  have worked to incorporate several aspects of acquisition best  practices into the strategy. MDA plans to develop and acquire the  satellites in three phases. First, a laboratory-led contractor team will  build two lab development satellites. Second, an industry team,  selected through open competition while the laboratory team is still in  a development phase, will develop and produce two engineering and  manufacturing development satellites. The two laboratory-built and  the two industry-built development satellites are planned to be  operational. Third, there will be a follow-on decision for the industry  team to produce additional satellites in a production phase.
While the strategy incorporates several important aspects of sound  acquisition practices, such as competition and short development time  frames, there remains elevated acquisition risks tied to the  concurrency between the lab- and industry-built developmental  satellites, as shown in figure 7.
Because the industry-built developmental satellites will be under contract  and under construction before on-orbit testing of the lab-built satellites,  the strategy may not enable decision makers to fully benefit from the  knowledge about the design to be gained from that on-orbit testing before  making major commitments.
See appendixes for more details on each program.
section_title: Conclusions
paragraphs: MDA has a long history of pursuing highly concurrent acquisitions in order  to meet challenging deadlines set by the administration. Concurrency can  enable rapid acquisition of critical capabilities but at a high risk,  particularly if technologies are not well understood at the outset of a  program, requirements are not firm, and decisions are made to keep  moving a program forward without sufficient knowledge about issues,  such as design, performance, and producibility. In MDA's case, many of  its highly concurrent acquisition programs began with many critical  unknowns. While the developmental problems that have been discovered  in these acquisitions are inherent in complex and highly technical efforts,  the effects were considerably magnified due to the high levels of  concurrency, including questions about the performance of fielded assets,  significant disruptions to production, and expensive retrofits. While MDA  has embraced the value of reducing unknowns before making key  decisions in some of its newer programs, such as the SM-3 Block IIA, and  adopted good practices, such as awarding competitive contracts to  multiple contractors in the SM-3 Block IIB program, it has continued to  plan and implement highly concurrent approaches in others. In fact,  today, MDA is still operating at a fast pace, as production and fielding of  assets remains, in many cases, ahead of the ability to test and validate  them.
As we recommended in 2009, these disruptions can only be avoided  when the development, manufacture, and fielding schedules of BMDS  assets are synchronized with the testing and validation schedules to  ensure that items are not approved to be manufactured for fielding before  their performance has been validated through testing. Moreover, as we  have concluded for several years, while concurrency was likely the only  option to meet the tight deadlines MDA has been directed to work under,  having an initial capability in place should now allow the agency to  construct acquisition approaches that are less risky from a cost, schedule  and performance perspective. Near-term steps MDA can take to reduce  cost, schedule, and performance risks include actions such as  demonstrating the second GMD interceptor can work as intended before  resuming production and verifying that the SM-3 Block IB completes  developmental flight tests before committing to additional production.  Longer-term solutions require the Office of the Secretary of Defense to  assess the level of concurrency that currently exists within MDA programs  and where that concurrency can be reduced. Moreover, while missile  defense capabilities play a vital role in the United States' national security  and international relationships, decisions about deadlines for delivering  capabilities need to be weighed against the costs and risks of highly  concurrent approaches.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense take the following seven  actions to reduce concurrency and strengthen MDA’s near- and long-term  acquisition prospects. To strengthen MDA’s near-term acquisition  prospects, we recommend that the Secretary of Defense:  For the GMD program, direct MDA to  1)  demonstrate that the new CE-II interceptor design works as  intended through a successful intercept flight test in the  operational environment—FTG-06b—prior to making the  commitment to restart integration and production efforts and  2)  take appropriate steps to mitigate the effect of delaying the CE-II  production restart until a successful intercept occurs. Specific  consideration should be given by MDA to accelerating additional  needed CE-I refurbishments.
For the Aegis BMD program, direct MDA to  3)  verify the SM-3 Block IB engagement capability through the  planned three developmental flight tests before committing to  additional production beyond those needed for developmental  testing and  4)  report to the Office of the Secretary of Defense and to Congress  the root cause of the SM-3 Block IB developmental flight test  failure, path forward for future development, and the plans to  bridge production from the SM-3 Block IA to the SM-3 Block IB  before committing to additional purchases of the SM-3 Block IB.
For the SM-3 Block IIB program, direct MDA to  5)  ensure that the SM-3 Block IIB requirements are defined and  feasible and that the proposed design can meet those  requirements within cost, schedule, and other system constraints  by delaying the commitment to product development until the  program completes a successful preliminary design review.
To strengthen MDA’s longer-term acquisition prospects, we recommend  that the Secretary of Defense:  6)  Direct the Office of the Under Secretary of Defense for  Acquisition, Technology and Logistics to review all MDA  acquisitions for concurrency, and determine whether the proper  balance has been struck between the planned deployment dates  and the concurrency risks taken to achieve those dates.  7)  Direct the Office of the Under Secretary of Defense for  Acquisition, Technology and Logistics to review and report to the  Secretary of Defense the extent to which the capability delivery  dates announced by the President in 2009 are contributing to  concurrency in missile defense acquisitions and recommend  schedule adjustments where significant benefits can be obtained  by reducing concurrency.
section_title: Agency Comments and Our Evaluation
paragraphs: DOD provided written comments on a draft of this report. These  comments are reprinted in appendix II. DOD also provided technical  comments, which were incorporated as appropriate.
In responding to a draft of this report, DOD concurred with six of our  seven recommendations and commented on actions in process or  planned in response. In some cases, these actions are responsive to  immediate problems, but do not appear to consistently address the  implications for concurrency in the future.
DOD concurred with our recommendation for the GMD program to  demonstrate that the new CE-II interceptor design works as intended  through a successful intercept flight test in the operational environment— FTG-06b—prior to making the commitment to restart integration and  production efforts. In response to this recommendation, DOD stated that  the program plans to restart the CE-II manufacturing upon successful  completion of the FTG-06b flight test. This decision will reduce the risk of  prematurely restarting CE-II production.
DOD also concurred with our recommendation for the Aegis BMD  program to verify the SM-3 Block IB engagement capability through the  planned three developmental flight tests before committing to additional  production, stating that the final decision to purchase SM-3 Block IB  missiles with DOD-wide procurement funding will be made after the next  three planned flight tests. We remain concerned that MDA is planning to  purchase 46 additional SM-3 Block IB missiles prematurely using  research, development, test, and evaluation funds in fiscal year 2012  before validating the performance of the missile and before determining  the root cause of test failures—risking disrupting the supply chain if  testing reveals the need to make design changes. We continue to believe  that the program should not purchase any additional missiles, regardless  of the type of funding used to purchase them, until the SM-3 Block IB’s  engagement capability has been verified through the three developmental  flight tests currently planned for the program. We have modified the  recommendation to focus on verifying the capability before committing to  additional production beyond the missiles needed for developmental  testing.
DOD concurred with our recommendation to direct the Office of the Under  Secretary of Defense for Acquisition, Technology and Logistics to review  all MDA acquisitions for concurrency, and determine whether the proper  balance has been struck between the planned deployment dates and the  concurrency risks taken to achieve those dates. In its response, DOD  stated that it will wait until fielding dates are established to undertake  concurrency assessments, and in the interim it will ensure that knowledge  is gained to support capability deliveries. However, we remain concerned  that DOD continues to focus on gaining key acquisition knowledge much  later than needed. DOD’s approach is to understand the extent to which  the design works as intended after committing to production—a high-risk  strategy—rather than before committing to production. The assessment of  concurrency should precede and should inform the setting of fielding  dates. If the department waits until fielding dates are set to assess  concurrency in the BMDS, it will miss the opportunity and accept the  performance, cost, and schedule consequences. Our position is not  unique in this regard. In recent testimony, the Acting Under Secretary of  Defense for Acquisition, Technology and Logistics confirmed that  excessive concurrency can drive cost growth and result in major schedule  disruptions that produce further inefficiency. Noting that the acceptable  degree of concurrency between development and production depends on  a range of factors, including the risk associated with the development  phase, the urgency of the need, and the likely impact on cost and  schedule of realizing that risk, he stated that the Office of the Secretary of  Defense intends to assess the levels of concurrency within programs, as  our report recommends should be done for missile defense elements.
DOD also concurred with our recommendation to direct the Office of the  Under Secretary of Defense for Acquisition, Technology and Logistics to  review and report to Secretary of Defense the extent to which the  presidentially announced capability delivery dates are contributing to  concurrency in missile defense acquisitions and recommend schedule  adjustments where significant benefits can be obtained by reducing  concurrency. DOD stated that the current missile defense program is  structured to develop and field capabilities at the earliest opportunity while  taking into account prudent risk management practices and executing a  thorough test and evaluation program. The department further noted that  when fielding dates are established, the Office of the Under Secretary of  Defense for Acquisition, Technology and Logistics will review and report  to the Secretary of Defense the extent to which presidentially announced  capability dates may be contributing to concurrency in missile defense  acquisitions and recommend schedule adjustments if significant benefits  can be obtained by reducing concurrency. Given the amount of  concurrency we have found in our reviews of the BMDS, we believe that  significant benefits can be reaped if concurrency is assessed sooner  rather than later.
DOD partially concurred with our recommendation to report to the Office  of the Secretary of Defense and to Congress the root cause of the SM-3  Block IB developmental flight test failure, path forward for future  development, and the plans to bridge production from the SM-3 Block IA  to the SM-3 Block IB before committing to additional purchases of the  SM-3 Block IB. DOD commented that MDA will report the root cause of  the SM-3 Block IB test failure and the path forward for future development  to the Office of the Secretary of Defense and to Congress upon  completion of the failure review in the third quarter of fiscal year 2012.  However, DOD makes no reference to delaying additional purchases until  the recommended actions are completed, instead stating that MDA is  balancing the need to demonstrate technical achievement and also  ensure that the system is thoroughly tested before fielding with the need  to keep the industrial base and supply chain healthy to ensure that  production transitions as quickly as possible. We believe that an  appropriate balance between schedule and risk is necessary for  development programs. However, our analysis has shown that MDA  undertakes acquisition strategies of accelerated development and  production that have led to disruptions in the supply chain and have  increased costs to develop some BMDS assets. We maintain our position  that MDA should take the recommended actions before committing to  additional purchases of the SM-3 Block IB.
We are sending copies of this report to the Secretary of Defense and to  the Director of MDA. In addition, the report is available at no charge on  the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or chaplainc@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 are listed in appendix XII.
section_title: Appendix I: Scope and Methodology
paragraphs: To assess the Missile Defense Agency’s (MDA) cost, schedule, testing  and performance progress, we reviewed the accomplishments of eight  Ballistic Missile Defense System (BMDS) elements that MDA is currently  developing and fielding: the Aegis Ballistic Missile Defense (Aegis BMD)  with Standard Missile-3 Block IA and Block IB; Aegis Ashore; Aegis BMD  Standard Missile-3 Block IIA; Aegis BMD Standard Missile-3 Block IIB;  Ground-based Midcourse Defense (GMD); Precision Tracking and Space  System (PTSS); Targets and Countermeasures; and Terminal High  Altitude Area Defense (THAAD). We developed data collection  instruments (DCI) that were completed by the elements’ program offices  and reviewed the individual element responses. These instruments  collected detailed information on schedule, cost and budget, contracts,  testing and performance, and noteworthy progress during the fiscal year.  We also examined the cost and resource, schedule, and test baselines as  presented in the BMDS Accountability Report (BAR), Baseline and  Program Execution Reviews, test schedules and reports, and production  plans. The results of these reviews are presented in detail in the element  appendixes of this report and are also integrated as appropriate in our  findings. We also interviewed officials within program offices and within  MDA functional directorates, such as the Directorates for Engineering and  Testing. We discussed the elements’ test programs and test results with  the BMDS Operational Test Agency and the Department of Defense’s  Office of the Director, Operational Test and Evaluation.
To assess whether MDA elements delivered assets and achieved self- identified capability goals as planned in fiscal year 2011, we examined  the 2011 BAR, and compared it to the 2010 and 2009 versions, looking  for similarities and differences between the three. We also reviewed MDA  briefings to congressional staffers from March 2011 and responses to our  DCIs, which detailed key accomplishments and asset deliveries for fiscal  year 2011. To assess progress on MDA’s development of models and  simulations, we held discussions with officials at the Missile Defense  Integration and Operations Center, and the Operational Test Agency, and  reviewed budget documents and MDA’s directive on modeling and  simulation verification, validation, and accreditation.
Our work was performed at MDA headquarters in Fort Belvoir, Virginia,  and in Dahlgren, Virginia; Alexandria, Virginia; Falls Church, Virginia;  Annapolis, Maryland; Colorado Springs, Colorado; Arlington, Virginia; and  at various program offices and contractor facilities located in Huntsville,  Alabama, and Tucson, Arizona. In Fort Belvoir, we met with officials from  the GMD program office and the Advanced Technology Directorate who  manage the Aegis BMD Standard-Missile 3 Block IIB program. In  Dahlgren, we met with officials from the Aegis BMD program office, the  Aegis Ashore program office, and the Aegis Standard-Missile 3 Block IIA  program office. In Alexandria, we met with the Director, Operational Test  and Evaluation, and officials from the Institute for Defense Analysis. In  Falls Church, we met with officials from the PTSS program office. In  Arlington, we met with the Director, Developmental Test and Evaluation,  the Missile Defense Executive Board, officials in the Pentagon Office of  Strategic Warfare, and the Cost Analysis and Program Evaluation group.  In Annapolis, we met with officials from the Defense Spectrum  Organization/Joint Spectrum Center.
In Huntsville, we interviewed officials from the Airborne Infrared program  office; the Terminal High Altitude Area Defense project office; the Targets  and Countermeasures program office; and MDA’s Acquisitions  Directorate, Programs and Integration Directorate, Engineering  Directorate, Test Directorate, Cost Directorate, and Advanced  Technologies Directorate. We also met with Boeing officials in Huntsville  to discuss the failure review investigation for the FTG-06a failure, and  their plan to resolve the resulting manufacturing stop. In addition, we met  with officials from the Operation Test Agency in Huntsville to discuss  MDA’s performance assessment, as well as models and simulations.
In Colorado Springs, we met with officials from U.S. Northern Command,  the Joint Functional Component Command for Integrated Missile  Defense, and the Missile Defense Integration and Operations Center. We  met with Raytheon and Defense Contract Management Agency officials in  Tucson to discuss the manufacturing of the exoatmospheric kill vehicle  and schedule issues for GMD, respectively.
We conducted this performance audit from April 2011 to April 2012 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.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: BMDS Models and Simulations Progress
subsections: section_title: Background and Overview
paragraphs: Models and simulations are critical to understanding how capable the  Ballistic Missile Defense System (BMDS) is and how well it can function.  The complex nature of the BMDS, with its wide range of connected  elements, requires integrated system-level models and simulations to  assess its performance. Assessing BMDS performance through flight  tests alone cannot be done, for it is prohibitively expensive and faces  safety and test range limitations that can best be dealt with through  sound, realistic models and simulations.
Ensuring models and simulations that are sound and realistic requires a  rigorous process to accomplish two main tasks—(1) developing individual  element models and realistically linking those models and simulations and  (2) gathering data from the Missile Defense Agency’s (MDA) ground and  flight tests to feed into the models. The BMDS Operational Test Agency  (OTA), an independent multi-service organization, then assesses how  realistic the BMDS models are in order to accredit the models for use in  simulating various levels of system performance.accredited it means that it can be reliably trusted to produce high- confidence results for its intended use and the limitations of the model are  known. Since developing reliable MDA models depends upon the   When a model is  collection of test data upon which to anchor them, MDA’s test programplays a crucial role in model development and BMDS performance  assessments.
section_title: MDA Has Made Progress in Developing a Strategic Framework for Improving the Models and Simulations Program
paragraphs: MDA’s models and simulations development effort is making progress in  developing top-level planning documents, but two are not yet final. Two  MDA planning documents, the Integrated Master Assessment Plan and  the Integrated Models and Simulations Master Plan, are being developed  to better focus and link the testing and assessment efforts. According to  OTA officials, the Integrated Master Assessment Plan is based on sound  methodology, which should improve MDA’s models and simulations  program, in part by elevating BMDS evaluation and assessment  requirements as the key driver of test design. OTA officials noted that the  Integrated Models and Simulations Master Plan should also lead to a  greater emphasis on model development needs in driving the design of  MDA’s test events.
section_title: Model and Simulation Development Is Challenging, and Much Remains to Be Done
paragraphs: The task of developing and linking the element-level models and  simulations together into an integrated BMDS model is extremely  complex and difficult and will take years to accomplish. Last year, we  reported that the overall performance of the BMDS could not be assessed  because MDA models and simulations had not matured sufficiently and  may not be fully mature until 2017. Since that time, there has been limited  progress in resolving model issues that would provide more realistic  representations of BMDS performance.
In August 2009, U.S. Strategic Command and OTA jointly informed MDA  of 39 system-level limitations in MDA’s models and simulations program  that adversely affect their ability to assess BMDS performance. Resolving  these limitations, OTA maintains, would permit MDA’s models and  simulations to provide more realistic representations of BMDS  performance using the full complement of fielded BMDS assets. MDA  officials have noted that since August 2009, MDA has fully resolved or is  in the process of resolving 7 of these issues and has identified technical  solutions for 15 more. According to OTA officials, most of the limitations  resolved are issues that are more easily addressed, such as installing  improved communications systems and providing separate workstations  for simulation controllers. No technical solutions have yet been identified  for the remaining 17 issues, and OTA officials maintain that they are still  awaiting an MDA timeline for the complete resolution of these remaining  limitations. Among the remainder are some critical model deficiency  issues, which result in modeled performance that does not reflect realistic  operation and conditions. For instance, models for certain radars have  artificial limitations constraining data processing, so that a simulation  involving high debris levels would effectively shut down the model.  Another model limitation is the need for accurate interceptor modeling for  all BMDS weapon systems in system-level assessments, the absence of  which prevents a determination of engagement success in such  simulations.
MDA has made some progress in developing a single, integrated model  and simulation approach for the BMDS. Originally, MDA’s models were  developed for use by each element and not for integrated assessments.  Since fiscal year 2010, MDA has made progress in creating a common  framework, whereby the various BMDS element-level hardware-in-the- loop (HWIL)  models are subjected to a common and consistent scene  and environment during test events. MDA is now using this framework,  known as the Single Stimulation Framework, in assessing BMDS  performance, and MDA officials maintain that progress achieved in  developing it has facilitated MDA’s efforts to resolve some of the 39  limitations. MDA officials further highlight that the framework is being  used to evaluate BMDS performance in increasingly complex and realistic  scenarios, employing greater numbers of BMDS assets.
With HWIL models, closed loop simulations are conducted with actual mission  components/hardware in a laboratory environment, and the physical  environment/conditions are simulated, under the control of computer equipment. which was carried out in 2009. MDA officials have noted a downward  trend in simulation trouble or incident reports for both the Single  Stimulation Framework and the digital model.
MDA plans to integrate these two efforts into a single Objective  Simulation Framework (OSF). OSF is planned as an end-to-end  representation of the BMDS in support of testing, training, exercises, and  system development. OSF is scheduled to go online in the second  quarter of fiscal year 2014, with the current digital simulation architecture  phased out by fiscal year 2016. According to OTA officials, the common  BMDS-level test framework that OSF is intended to provide has multiple  advantages, such as the provision of a single tool with which to conduct  data verification cross-checks. Additionally, this tool could serve to fill  gaps that currently exist in the hardware-based models.
section_title: Test Delays and an Anomaly Have Limited Progress in Gathering Needed Data
paragraphs: MDA’s difficulty in executing the test plan has limited the progress of  modeling and simulations. The agency has refocused the design of its  test program on collection of test data to strengthen the development of  the models. As we reported in 2010, MDA revised its testing approach in  response to GAO and Department of Defense concerns and began to  base test scenarios on identified modeling and simulation data needs. In  order to collect data required to fill certain model data gaps, MDA had  increased planned testing in certain areas, such as ground testing.  However, according to OTA officials, MDA has had difficulty conducting  its test plan, since actual test events are not always carried out in  accordance with the schedule. We have also reported consistent  problems in conducting tests over the past few years. Test schedule  disruptions delay not only the MDA test schedule, but also the models  and simulations’ efforts that depend on the test data.
Despite MDA’s increased efforts to collect test data for the BMDS model  and simulation program, it will take considerable effort and time to fill all  knowledge gaps. MDA has succeeded in collecting some 309 critical  variables since 2009; but, by the end of fiscal year 2011, those  represented only 15 percent of the required total identified by MDA.  Under the current plan, MDA does not foresee complete collection of  these data until sometime between 2017 and 2022.
Limited test data is a significant challenge MDA faces in developing  accredited models. Flight test failures, an anomaly, and delays in fiscal  year 2011 have reduced the amount of data MDA expected to have  available to support the anchoring of its models and simulations. MDA  officials also maintain that some required data are difficult to collect and  are challenging to obtain even when a flight test is properly executed.  When tests are carried out, considerable post-test data analysis is  required for model development, MDA officials maintain. However, MDA  officials indicated that MDA must often limit the scope of its analysis to  discrete model development objectives. Because of the challenges in  carrying out the full range of testing required to collect the anchoring data  to develop models, MDA is concurrently exploring alternative methods for  model development, such as greater use of subject matter experts.  According to OTA officials, the subject matter experts focus MDA’s efforts  toward scenario factors that are most important for actual and likely  BMDS operation, thereby reducing the amount of testing data required.
section_title: Limited Progress Made in Accrediting Element Models
paragraphs: MDA has also made some limited progress in achieving partial  accreditation for some BMDS models. MDA models may be partially  accredited for some, but not all, intended functions due to limitations in  the models or gaps in the data. Over the past few years, BMDS OTA  officials have assessed MDA’s models and simulations in an effort to fully  understand the performance of the current BMDS configuration, and have  noted that among the element-level BMDS models, those for Terminal  High Altitude Area Defense (THAAD) and Aegis Ballistic Missile Defense  (Aegis BMD) are farthest along developmentally. In an April 2011  accreditation report, independent assessors from the Johns Hopkins  University Applied Physics Laboratory found improvements in five of six  functional areas for a key THAAD modeling tool, noting that available  data permitted accreditation for three areas. The report also noted  progress with two key Aegis BMD models, each of which was assessed  for limited accreditation in two of four BMDS target negation areas. MDA  officials have also noted significant progress in the development of a key  model for the Command, Control, Battle Management, and  Communications element of the BMDS. MDA has made some progress  toward accreditation of BMDS element models for specific functional  areas, but MDA officials acknowledged that the agency has not yet  achieved OTA accreditation in other key areas, such as any of the 18  environmental models.
While MDA has progressed in its use of simulated BMDS assessments,  there are risks inherent in collecting information from unaccredited  sources. Currently, both of the BMDS modeling and simulation  frameworks rely on currently unaccredited models, despite the  improvements that MDA has noted in the results of such assessments.  OTA officials expressed lowered confidence in the data collected from  such simulated assessments. The reliance on unaccredited models could  result in poorly crafted tactics, techniques, and procedures and in the  production and fielding of a system that is not able to actually counter  real-world threats. As the BMDS matures and the number of fielded  assets increases, modeling and simulation capabilities and laboratory  representations of BMDS assets must keep pace to maintain operational  realism.
section_title: Appendix IV: Aegis Ballistic Missile Defense (Aegis BMD) with Standard Missile-3 (SM-3) Block IA and Block IB
subsections: section_title: Aegis BMD Achieved Some Significant Accomplishments in Fiscal Year 2011
paragraphs: Aegis BMD made several significant accomplishments in fiscal year 2011.  The Aegis BMD 4.0.1/SM-3 Block IB program successfully conducted  simulated flight test FTM-16 E1 in March 2011, delivered the SM-3 Block  IB pathfinder round to hold FTM-16 E2, and gained sufficient data in  FTM-16 E2 in September 2011 to support certification of the Aegis BMD  4.0.1 weapon system, planned in the second quarter of fiscal year 2012.
As for the Block IA interceptor, DOD fielded the Aegis BMD 3.6.1/SM-3  Block IA-equipped ship, U.S.S. Monterey, for Phase I of the European  PAA in April 2011, meeting the 2011 time frame for deployment. During  the fiscal year, MDA also installed one Aegis BMD 3.6.1 weapon system  on a ship. In addition, the Aegis BMD program conducted a successful  flight test of the Aegis BMD SM-3 Block IA, referred to as FTM-15,  despite experiencing an anomaly during the test. The Aegis BMD SM-3  Block IA was also used in a Japanese flight test—JFTM-4—in which two  U.S. Aegis BMD ships cooperated to detect, track, and conduct a  simulated intercept engagement against the same target.
Overall, the Aegis BMD 3.6.1/SM-3 Block IA program has had eight out of  nine successful flight tests. In addition, Japanese Aegis BMD has  conducted three out of four successful intercepts using SM-3 Block IA   The Aegis BMD 3.6.1 weapon system was the first MDA  interceptors.element to be assessed as operationally effective and suitable for combat  by independent test officials, with limitations.
section_title: SM-3 Block IB’s Concurrent Schedule Overlaps Development and Production
paragraphs: Problems with concurrency are affecting the production of SM-3 Block IB  interceptors and delaying the phaseout of the SM-3 Block IA production.  The acquisition plan for the SM-3 Block IB interceptor includes high levels  of concurrency—buying weapon systems before they demonstrate,  through testing, that they perform as required—between development  and production. Specifically, the program purchased interceptors before  confirming that the design works as intended by completing  developmental tests and prior to ensuring that a key subcomponent has  overcome prior developmental problems. The need to field the Aegis  BMD 4.0.1/SM-3 Block IB by the 2015 time frame for European PAA  Phase II announced by the President is a key driver for the high levels of  concurrency. According to MDA, the program is purchasing interceptors  for a variety of reasons, including in support of developmental and  operational testing, proving the manufacturing process, and ensuring the  missile will meet its performance requirements on a repeatable basis. See  figure 8 for a depiction of the SM-3 Block IB’s concurrent schedule.
The SM-3 Block IB’s acquisition plan includes high levels of concurrency.  We reported in February 2010 that planned interceptor production would  precede knowledge of interceptor performance, and recommended that  MDA delay a decision to produce interceptors to follow successful  completion of developmental testing, a flight test, and manufacturing  readiness review. In March 2010, we reported that the Aegis BMD  program is putting the SM-3 Block IB at risk for cost growth and schedule  delays by planning to begin manufacturing in 2010 before its critical  technologies have been demonstrated in a realistic environment. We  also reported in December 2010 that the SM-3 Block IB test schedule  was not synchronized with planned production and financial   Finally, in March 2011, we reported that the schedule had  commitments.become even more compressed due to the redesign and requalification of  a missile component, and in response, MDA deferred key program  milestones so that it would have better informed production decisions.
The program began production of SM-3 IB interceptors before resolving  development issues with the TDACS, a key interceptor component that  maneuvers the kill vehicle during the later stages of flight. The TDACS  failed qualification testing in early 2010 and required a redesigned  propellant moisture protection system. In order to hold the first SM-3  Block IB developmental flight test, FTM-16 Event 2, in September 2011  as scheduled, MDA only partially completed TDACS qualification testing  and the version used in the failed flight test was not identical with the  approved production design. The TDACS is expected to complete  qualification testing in 2012; however, any additional issues discovered  during qualification testing or developmental flight testing may require  additional redesigns.
The commitment to produce SM-3 Block IB interceptors beyond those  needed for developmental testing was made before the program had a  sufficient level of knowledge about the missile’s technology maturity and  performance. MDA has determined that 18 of the 25 SM-3 Block IB  missiles ordered are to be used for developmental testing. The remaining  7 interceptors are currently unassigned for tests and may be available for  operational use.
According to MDA, these interceptors will be used to support  developmental and operational testing; to prove out the manufacturing  processes; to provide information about reliability, maintainability, and  supportability; to verify and refine cost estimates; and to ensure that the  missile meets performance requirements. MDA officials acknowledged  that missiles not consumed by testing could be used operationally.  Program management officials stated that the unassigned missiles  represent a very small portion of the total number of interceptors they  plan to purchase, representing less than 5 percent of the total 472  interceptors that the program plans to purchase through fiscal year 2020.  MDA decided that the risk was low given that many of the SM-3 Block IB  critical technologies were based on critical technologies that were tested  and used successfully by the SM-3 Block IA.
MDA is also planning to purchase 46 additional SM-3 Block IB missiles in  fiscal year 2012. However, there are two failure investigations ongoing  that affect SM-3 Block IB production that could delay three planned  developmental flight tests that need to occur to validate SM-3 Block IB  capability. It therefore remains unclear whether the additional 46 missiles  will be ordered before the failure reviews are complete and the interceptor  is able to demonstrate that it works as intended through these flight tests.
The program’s highly concurrent schedule is shaped primarily by the  need to achieve initial capability for the fielding of Phase II of the  European PAA by the 2015 time frame announced by the President. In  addition, the program must be ready to participate in the second BMDS  operational test in 2015. Program officials report that they are on track to  achieve these time frames. However, until development is complete, any  additional issues could lead to additional cost growth or schedule delays.
section_title: Failure in SM-3 Block IB’s First Flight Test Led to Cost Growth and Schedule Delays
paragraphs: The SM-3 Block IB failed its first developmental flight test, FTM-16 E2,  leading to cost growth and schedule delays compounded by the  disruption to ongoing production, the full extent of which has yet to be  determined. During the flight test, the SM-3 Block IB experienced an  unexpected energetic event in the third-stage rocket motor and failed to  intercept a short-range ballistic missile target. Following the flight test, the  program convened a failure review board to determine the root cause of  the failure, modified the missile production contract, restructured the flight  test program, and delayed key production decisions. While the failure  review board is still investigating the flight test, MDA slowed production of  SM-3 Block IB interceptors. The program had planned to deliver an  additional three SM-3 Block IB missiles for flight testing in fiscal year  2011. However, the delivery of the remaining three has been delayed until  spring 2012.
Program officials estimate that the flight test failure—including the failure  investigation, design modifications, testing, and requalification for return  to flight—may cost approximately $187 million in fiscal year 2012. In  addition, because officials are still investigating the cause of the flight test  failure and how many already-produced missiles may have to be  retrofitted, they do not yet know how much the retrofits, if required, will  cost. At this point, the program does not have an approved plan to avoid  an SM-3 production gap.
The flight test failure also had several other consequences. The SM-3  Block IB manufacturing readiness review has been delayed from the  second quarter of fiscal year 2011 to the third quarter of fiscal year 2012,  and the procurement production decision for additional SM-3 Block IB  missiles was moved from fourth quarter of fiscal year 2011 to the fourth  quarter of fiscal year 2013. The failed flight test will be re-conducted in  mid-2012, which may delay additional developmental flight testing.
section_title: The Transition to the SM-3 Block IB from the SM-3 Block IA Has Been Repeatedly Disrupted
paragraphs: Aegis BMD’s transition to the SM-3 Block IB has been repeatedly  disrupted because the transition was risky given the technology maturity  of components developed for the SM-3 Block IB and the program’s  concurrent schedule. Originally, MDA planned that production of SM-3  Block IA interceptors would end in fiscal year 2009 as production of SM-3  Block IB interceptors began. However, due to developmental issues with  the SM-3 Block IB, MDA twice had to extend SM-3 Block IA production— in 2010 and 2011—to cover emerging production gaps with the SM-3  Block IB. To date, MDA has contracted for 41 more SM-3 Block IA  missiles than originally planned in order to bridge the production gaps.  Now, following the September 2011 flight test failure, MDA is facing  another production gap. It is extending production once again—it  purchased 23 SM-3 Block IA missiles in fiscal year 2011 and is  considering whether to purchase additional SM-3 Block IA missiles in  fiscal year 2012.
In addition, the program has twice had to adjust the procurement of SM-3  Block IB missiles. Instead of purchasing 24 SM-3 Block IB missiles as  planned in 2010, it purchased 18 SM-3 Block IA missiles and it did not  procure 8 SM-3 Block IB missiles in 2011 as planned. To free up funding  needed to improve TDACS operational suitability, MDA reduced the  planned SM-3 Block IB missiles from 34 to 25 in fiscal year 2011. Thus  far, the program has purchased 41 fewer missiles than previously  planned. Due to the FTM-16 E2 developmental flight test failure, delivery  of these SM-3 Block IB missiles is now being slowed until the failure  review board completes its investigation and any possible retrofits are  made. Despite the test failure and delivery hold, MDA is considering  purchasing 46 SM-3 Block IB interceptors in fiscal year 2012 and 29 SM- 3 Block IB interceptors in fiscal year 2013. Recognizing the critical  importance of the completing the planned fiscal year 2012 intercept tests,  the operational need for SM-3 missiles, the relative success of the SM-3  Block IA, as well as the potential for a production break, the Senate  Committee on Appropriations directed MDA to use the fiscal year 2012  SM-3 Block IB funds for additional Block IA missiles should the test and  acquisition schedule require any adjustments during fiscal year 2012.
section_title: SM-3 Block IA Deliveries Are on Hold While the April 2011 Flight Test Anomaly Is Being Investigated
paragraphs: As a result of an anomaly in the latest SM-3 Block IA flight test—FTM-15  in April 2011—MDA halted acceptance of SM-3 Block IA deliveries.  During the April 2011 flight test, MDA demonstrated the Aegis BMD 3.6.1  weapon system’s ability to launch the SM-3 Block IA interceptor using  data from a remote sensor against a separating intermediate-range  ballistic missile target and the capability of the interceptor to engage  threat missiles in the range expected for Phase I of the European PAA.  However, although the SM-3 Block IA interceptor intercepted the target, it  experienced an anomaly. The anomaly occurred in a component also  used in the SM-3 Block IB.
At the time of our review, the program had not completed its investigation  into the cause of the anomaly or decided how it will address the issue.  The program convened a failure review board, which has not yet  completed its investigation of the root cause of the anomaly. Twelve  assembled SM-3 Block IA missiles are not being accepted for delivery  and are being held at the production factory until the investigation of the  anomaly is complete and any possible refurbishments are made. This  represents about 10 percent of the population of SM-3 Block IA missiles.  Program management officials report that thus far seven missiles will  need to be refurbished. Because the failure review board has not yet  completed its investigation, an unknown quantity of additional SM-3 Block  IA missiles may need to be refurbished due to the anomaly. At the time of  our review, the program did not have an approved plan for how it will  refurbish the affected missiles. Despite these issues, MDA purchased 23  SM-3 Block IA missiles in September 2011 and is considering whether to  purchase additional missiles in 2012 to avoid production gaps and to  keep SM-3 suppliers active.
section_title: Appendix V: Aegis Ballistic Missile Defense (Aegis BMD) Standard Missile-3 (SM-3) Block IIA
subsections: section_title: Background and Overview
paragraphs: The SM-3 Block IIA is the third SM-3 version to be developed for use with  the sea-based and future land-based Aegis BMD. This interceptor is  planned to have increased velocity and range compared to earlier SM-3s  due to a larger 21-inch diameter, more sensitive seeker technology, and  an advanced kinetic warhead.will differ from the versions used in the SM-3 Block IB, so technology has  to be developed for the majority of the SM-3 IIA components. The SM-3  Block IIA is expected to defend against short-, medium-, and  intermediate-range ballistic missiles.
Most of the SM-3 Block IIA components  Initiated in 2006 as a cooperative development program with Japan, the  SM-3 Block IIA program was added to the European Phased Adaptive  Approach (PAA) in 2009. As part of European PAA Phase III, the SM-3  Block IIA is planned to be fielded with Aegis Weapons System 5.1 by the  2018 time frame and is expected to provide engage on remote capability,  in which data from off-board sensors is used to engage a target, and  expand the range available to intercept a ballistic missile. The program is  managing both the development of the SM-3 Block IIA and its integration  with Aegis Weapons System 5.1, which also is still under development. In  this appendix, we evaluate only the SM-3 Block IIA.
section_title: Design Review Problems in Fiscal Year 2011 Led to a Program Restructuring and Likely Increased Current Costs
paragraphs: The program planned to hold its system preliminary design review  (PDR)—at which it would demonstrate that the technologies and  resources available for the SM-3 Block IIA would result in a product that  matched its requirements—but problems with the reviews of key  components meant the system review had to be adjusted by 1 year. To  prepare for the system review, the program held 60 subsystem reviews,  for its components to ensure that they were feasible given the technology  and resources available. Two components—divert and attitude control  system (DACS) and DACS propellant—failed their subsystem reviews  and two components—nosecone and third stage rocket motor (TSRM)— had their reviews suspended, indicating that the technological capability  of these critical components and SM-3 Block IIA requirements were  mismatched. The program took steps to resolve each of the four  subsystem review problems, including restructuring the program to  reduce future acquisition risk.
The DACS, used to adjust the course of the kinetic warhead, failed its  subsystem review because it was not meeting weight and divert  acceleration requirements, which the program resolved by reviewing and  rebalancing subsystem requirements. The system-level DACS  requirements did not change. The DACS propellant that failed the  subsystem review was susceptible to a moisture problem, and the  program selected a different propellant. The nosecone, which encloses  the kinetic warhead, was overweight and could become more so, and the  mitigation plan for the weight issue was insufficient. To resolve these  issues, the program evaluated weight reduction opportunities and risks.  The TSRM, used to lift the missile out of the atmosphere and direct the  kinetic warhead to the target, was also not meeting weight requirements,  and one of its components, the attitude control system, was not meeting  thrust accuracy and alignment requirements. To resolve this issue, the  program rebalanced subsystem requirements, but did not change system-  level TSRM requirements.
The subsystem review issues also required program schedule changes,  which included the following:
Adjusting the system PDR from January 2011 to March 2012.
Splitting in two the critical design review (CDR), at which the program  will determine that the product’s design matches the SM-3 Block IIA  requirements and cost, schedule, and reliability goals. This led to  schedule adjustments of 13 and 19 months, respectively, for each of  the CDRs.
Adjusting the interceptor flight test schedule. The program previously  planned to hold its first intercept tests in fiscal years 2014 and 2015  as part of the co-development with Japan, but with the schedule  adjustment, it will now have these tests in calendar year 2016.The  United States and Japan finalized the development program  restructuring on September 30, 2011. Despite this adjustment, the  interceptor remains aligned with European PAA Phase III in the 2018  time frame.
Aegis BMD program management officials stated that the subsystem  PDR problems and subsequent program restructure may increase current  program costs, but they are not certain how much because the  completion contract, which will run through fiscal year 2017, was still  being negotiated as of December 2011.
section_title: Program Actions in Fiscal Year 2011 Reduced Acquisition Risk and Potential Future Cost Growth
paragraphs: The SM-3 Block IIA program took actions in 2011 that could reduce  acquisition risk and mitigate future cost growth. Its previous schedule was  compressed, which raised acquisition risk. For example, there was limited  recovery time to investigate and resolve potential problems between  program reviews as well as flight tests. The new schedule, made final in  September 2011, relieves some compression concerns and adjusts to the  subsystem review issues by adding time between the subsystem reviews  and the system review to ensure that the technology issues are resolved.  We have previously reported that reconciling gaps between requirements  and resources before product development begins makes it more likely  that a program will meet cost, scheduling, and performance targets, and  programs that commit to product development with less technical  knowledge and without ensuring that requirements are defined, feasible,  and achievable within cost, schedule, and other system constraints face  increased technical risks and possibility of cost growth. The new SM-3  Block IIA schedule allows the program to have more knowledge before  committing to product development in the second quarter of fiscal year  2014, a strategy that may reduce future cost growth and development  risks. The new schedule also adds flexibility in the test schedule by  adding an option for a third controlled test vehicle flight if needed. If the  first two test vehicles prove to be successful and a third is not needed,  this test can be converted into the first intercept test of the SM-3 Block  IIA.
In addition to the schedule change, in fiscal year 2011 the program  identified some steps to avoid the difficulties that affected SM-3 Block IB  component production. For example, it found that using proven materials,  standardizing inspections with vendors, and ensuring that designs  included reasonable tolerances were practices to follow based on lessons  learned from the SM-3 Block IB experience.
Finally, the SM-3 Block IIA program identified alternatives to one  advanced seeker component that it had identified, based on the  experience of the SM-3 Block IB, as potentially increasing production unit  costs by 5 percent. Program management officials stated that they  identified a viable alternative for this component and worked with the SM- 3 Block IIB program to further develop manufacturing improvements for  this technology.
section_title: Despite Positive Changes in Overall Program Schedule, Technology Development Concerns Remain
paragraphs: The program still faces significant technology development challenges.  While the SM-3 Block IIA is a variant of the SM-3 missile, the majority of  its components will change from their SM-3 Block IB configuration. The  program must develop these components, some of which have  consistently been technologically challenging for SM-3 development. In  addition, two technology maturity challenges have emerged. Two critical  technologies, the second and third stage rocket motors, experienced  problems during testing that may require redesign and a potential CDR  rescheduling. The program was investigating the problems and potential  effects at the end of fiscal year 2011. In addition, following the subsystem  review failure and selection of an alternate propellant, analysis of the  DACS propellant performance showed that there may be a shortfall in  divert performance for some missions. As of the end of fiscal year 2011,  the program was still determining the extent of this issue.
section_title: Appendix VI: Aegis Ballistic Missile Defense (Aegis BMD) Standard Missile-3 (SM-3) Block IIB
subsections: section_title: Background and Overview
paragraphs: The SM-3 Block IIB is a planned interceptor for the Aegis BMD program  that is intended to contribute to U.S. homeland defense by providing early  intercept capabilities against some intercontinental ballistic missiles and  regional defense against medium- and intermediate-range ballistic  missiles. This interceptor has been described by the Missile Defense  Agency (MDA) as critical to the Ballistic Missile Defense System (BMDS)  and developing solutions to future BMDS capability shortfalls. The SM-3  Block IIB program began in June 2010 and entered the technology  development phase in July 2011. Given its early stage of development,  the SM-3 Block IIB does not have cost, schedule or performance  baselines and is not managed within the Aegis BMD program office.  Instead, this program has a tentative schedule and is being managed  within MDA’s Advanced Technology office until a planned 2013 transition  to the Aegis BMD program office. The SM-3 Block IIB is planned to be  fielded by the 2020 time frame as part of the European Phased Adaptive  Approach Phase IV.
The program received a significant funding reduction in the fiscal year  2012 budget and, as of January 2012, was determining how to adjust its  tentative schedule and future program plans. The program’s fiscal year  2012 budget request was reduced by $110 million to $13 million.
section_title: Program Awarded Initial Contracts to Develop Schedule, Design Options, and Crosscutting Technology
paragraphs: The SM-3 Block IIB program is following a two-pronged development  strategy. First, program officials have awarded competitive contracts to  generate options for missile configurations and development plans.  Second, in a separate effort, they are using multiple contractors to reduce  risks by developing technologies that may be used in the SM-3 Block IIB  and other SM-3 variants. The program awarded three concept definition  and program planning contracts to define and assess viable missile  configurations, conduct trade studies, and define a development plan.  The contractors will develop alternative missile concepts, technologies  and schedule for interceptor development beyond 2013. According to the  program, the purpose of this competition is to minimize cost, schedule,  and technical risks. There will be another competition to select one  contractor for the product development phase in 2013. We have reported  previously that competition among contractors can result in increased  technological innovation that leads to better and more reliable products.
section_title: Current Program Plan Includes High Levels of Concurrency and Acquisition Risk
paragraphs: Program management officials have issued a tentative schedule beyond  the technology development phase, but this plan, if implemented,  includes high levels of concurrency and acquisition risk. We have  previously reported the following:
Concurrency leads to major problems being discovered in production,  when it is either too late or very costly to correct them.
The focal plane array is a component of the seeker.
Before starting product development, programs should hold key  engineering reviews, culminating in the preliminary design review  (PDR), to ensure that the proposed design can meet defined, feasible  requirements within cost, schedule, and other system constraints.
Committing to production and fielding before development is complete  is a high-risk strategy that often results in unexpected cost increases,  schedule delays, test problems, and performance shortfalls.
Successful defense programs ensure that their acquisitions begin with  realistic plans and baselines before the start of their development.  According to the tentative SM-3 Block IIB schedule, the product  development decision will occur before the March 2015 PDR. As a result,  MDA is planning to commit to developing a product with less technical  knowledge than our prior work has shown is needed and without fully  ensuring that requirements are defined, feasible, and achievable within  cost, schedule, and other system constraints. This sequencing increases   In addition, the  both technical risks and the possibility of cost growth.program will not have a stable design when it must commit to building  flight test vehicles. According to acquisition best practices, a design is  considered stable when the technologies are mature and the critical  design review (CDR) confirms that at least 90 percent of the drawings are  releasable for manufacturing. Based on the experience of other SM-3  interceptors, the program must commit to produce flight test interceptors  2 years before the March 2016 first flight. However, this timeline means  the commitment to a flight test vehicle would occur a year before the SM- 3 Block IIB PDR has confirmed that the design is feasible and more than  a year and a half before CDR has confirmed that the design is stable. See  figure 9 for a depiction of the tentative SM-3 Block IIB schedule.
Program management officials stated that they have taken steps in the  tentative schedule that reduce acquisition risk. According to SM-3 Block  IIB program information, the tentative schedule is based on the  experience of programs with similar magnitude and complexity, and the  concept definition and program planning contractors will develop detailed  product development schedules that will help refine the program  schedule. Further, activities during the technology development phase,  such as evaluating the performance of multiple contractor concepts,  simulations conducted by the contractors, and affordability assessments,  are designed to reduce risk in SM-3 Block IIB development. In addition,  while the program plans to hold its production development decision prior  to the PDR, it will hold a series of reviews with the concept definition  contractors to receive engineering insight into each contractor’s plans.  Program management officials told us they also plan to hold a  government-only system requirements review prior to the initiating the  product development contract competition. This review is planned to  confirm that SM-3 Block IIB has specific technical requirements that the  developer can use to establish a product baseline as well as conduct a  risk and technology readiness assessment.
Another key step for successful programs is ensuring that only mature  technologies are brought into product development. MDA has identified  technologies that are important for SM-3 variants and is investing in these  technologies, particularly the less mature technologies, to facilitate SM-3  Block IIB development. However, as of October 2011, the program had  not named specific critical technologies for the SM-3 Block IIB. Program  officials stated that they do not plan to do so until the product  development decision. The concept definition contractors are required to  identify technology investments to increase the maturity of the  technologies by demonstrating them in a relevant environment by the end  of fiscal year 2013, which coincides with the product development  decision. MDA, however, does not require that a program mature  technologies to this level by this decision. Without knowing the specific  critical technologies, it is not possible to identify the risk of including them  in the product development phase. As we have previously reported,  including immature technologies in product development can lead to  delays and contribute to cost increases.
section_title: Full Program Acquisition Costs Not Developed Given Early Stage of the Program
paragraphs: While the program has proposed that $1.673 billion in research and  development funding is needed from fiscal years 2012 to 2016, a full  program acquisition cost has not yet been developed. Given the early  stage of the program, and that key decisions about requirements and the  missile configuration have not been made, a full acquisition cost estimate  is not currently feasible. According to MDA, the program plans to  complete a detailed cost estimate prior to entering product development.
A cost estimate cannot be developed until key acquisition decisions are  made. Program management officials stated that warfighter and system  requirements for the SM-3 Block IIB have not been set, and discussions  about the delivery schedule beyond the initial capability are ongoing.  Further, whether the propellant will be liquid or solid, the SM-3 Block IIB’s  diameter, and whether modifications must be made to a vertical launch  system are not yet known given the early stage of the program. In  addition, as there is not yet a final schedule, the currently proposed  funding is not informed by a complete post-product development decision  schedule. Program management officials note that these key decisions  are being informed by activities occurring during the technology  development phase, such as trade studies involving the propulsion and  missile diameter, and they are updating current cost estimates as they  receive information from contractors as well as working on developing  detailed cost estimates.
section_title: Benefits of Early Intercept Capability Are Unclear and the Lack of Analysis of Alternatives May Result in Warfighter Needs Not Being Met within Resource Constraints
paragraphs: MDA determined that a key goal for the SM-3 Block IIB is to provide an  early intercept capability. However, a recent Defense Science Board  study suggested that other capabilities are more important than early  intercept. The study concluded that early intercept capability is not useful  for regional missile defense. Further, while early intercept with shoot-look- shoot capability could be part of a cost-effective defense of the U.S.  homeland if a sufficiently fast missile was available, the size of the  battlespace and not early intercept capability is the key driver of cost- effectiveness. In addition, it is unclear if early intercept is possible for  defense of the U.S. homeland due to the velocity required for an early  intercept of an intercontinental ballistic missile aimed at the United States  and the state of current missile technology. Finally, the value of a shoot- look-shoot capability relies on a robust ability to determine if the first  missile was successful, often called kill assessment, but this ability has  not been established. In response, MDA stated that the Defense  Science Board study had used a limited definition of early intercept and  ignored significant benefits of the strategy that stem from decreasing the  time available to the adversary to deploy countermeasures. Such benefits  include providing a longer viewing time of deployment maneuvers for  forward-based sensors, reducing the flight time of the interceptor, and  increasing the complexity to the attacker of deploying countermeasures.
The program office did not conduct a formal analysis of alternatives to  compare the operational effectiveness, cost, and risks of a number of  alternative potential solutions to address valid needs and shortfalls in  operational capability prior to embarking on the technology development  phase. The program did assess some missile concepts for early intercept  capability in a review that was not a formal analysis of alternatives. The  program currently plans to conduct engineering and trade studies— including cost trades—that will be completed in the fourth quarter of fiscal  year 2012 and review additional alternative concepts as part of the  concept definition process. While MDA programs are not required to  conduct an analysis of alternatives, we have previously reported that it is  key to planning and establishing a sound business case. Specifically, an  analysis of alternatives provides a foundation for developing and refining  the operational requirements for a weapons system program and  provides insight into the technical feasibility and costs of alternatives.  Further, without a full exploration of alternatives, the program may not  achieve an optimal concept that satisfies the warfighter’s needs within   Without this sound basis for program  available resource constraints.initiation, the SM-3 Block IIB is at risk for cost and schedule growth as  well as not meeting the warfighter’s needs with the resources available.
section_title: Appendix VII: Aegis Ashore
subsections: section_title: Concurrent Development and Production Schedule Increase Potential for Cost Growth and Schedule Delays
paragraphs: Given the commitment to field Aegis Ashore by the 2015 time frame, the  program’s schedule contains a high level of concurrency—buying weapon  systems before they demonstrate, through testing, that they perform as  required—between development and production. The program began  product development early, included high levels of concurrency in its  construction and procurement plan, and has not aligned its testing  schedule with component procurement and construction. As we have  reported previously, an acquisition strategy for accelerated fielding, such  as that of Aegis Ashore, will likely accept higher risk primarily through  concurrent development and production.problems are more likely to be discovered in production, when it is either  too late or very costly to correct them.
Under such a strategy, major  The program began product development and established the Aegis  Ashore cost, schedule, and performance baseline in June 2010, which  was 14 months before completing its preliminary design review. This  concurrent sequencing can increase technical risks and the possibility of  cost growth by committing to product development with less technical  knowledge than needed by acquisition best practices and without  ensuring that requirements are defined, feasible, and achievable within  cost and schedule constraints. In addition, the program has a concurrent  schedule for constructing deckhouses and procuring Aegis Ashore  components. Since committing to product development and establishing  the product development baseline, the acquisition strategy for deckhouse  construction has been revised twice. The current plan, called the dual  deckhouse plan, is to construct two deckhouses—first, an operational  deckhouse planned for installation in Romania and a second for  developmental testing in Hawaii. The test deckhouse will begin  construction a quarter later than the operational deckhouse and will be  installed for testing at the Pacific Missile Range Facility in Hawaii. Aegis  BMD program management officials stated that a third deckhouse, for the  Aegis Ashore installation in Poland, will be constructed at a later date to  be set based on funding availability. The program also has initiated  procurement of equipment, such as the VLS and SPY-1 radar that are  needed for the Aegis Ashore installations.
This plan means that knowledge gained from testing the Hawaiian  installation cannot be used to guide the construction of the Romanian  deckhouse or procurement of components for operational use. Any  design changes that arise from testing in Hawaii will have to occur on a  complete deckhouse and on already procured components intended for  operational use. As we have previously reported, rework on an existing  fabrication is costly. Aegis Ashore is currently scheduled to participate in  four flight tests, three of which are intercepts, with the first intercept flight  test scheduled for the second half of fiscal year 2014, at which point two  of the three deckhouses will be completed and Aegis Ashore site  construction and interceptor production will be well under way. The final  flight test is planned for the fourth quarter of fiscal year 2015. See figure  10 for a depiction of Aegis Ashore’s concurrent schedule.
However, Aegis BMD program management officials state that Aegis  Ashore has taken steps to lower the acquisition risks. First, the officials  note that the program is using components already in use aboard Aegis  BMD ships, reducing the technical risk of the program. The Director of  MDA has stated that the sea-based system and Aegis Ashore will share  identical components. According to program documentation, the dual  deckhouse plan reduces risk and creates fabrication and construction  efficiencies. Aegis BMD program management officials noted that the  dual deckhouse plan has significant advantages over prior plans, all of  which had the operational deckhouse built before the test deckhouse. For  example, they noted that prior Aegis Ashore deckhouse construction  plans required testing a different deckhouse design in Hawaii than the  one that would be used at the operational sites. Constructing two  deckhouses concurrently provides for greater efficiency in purchasing  material and equipment and allows for one contractor to build both  deckhouses. The Director of MDA stated that the deckhouse construction  methodology is the most cost effective and efficient under the program’s  time constraints. In addition, the program expects to be able to modify the  operational deckhouse prior to its installation in Romania if flight tests  reveal that a modification is needed. The program management officials  also stated that the dual deckhouse plan provides more time for testing  the equipment that goes in the deckhouse. Aegis BMD program  management officials stated that this plan allows them to test the  electrical system in the Romanian deckhouse and to complete these tests  more than 1 year earlier than previously scheduled. Finally, they noted  that constructing two deckhouses also facilitates testing, including  conducting Aegis Light Off events that consist of preflight test verification  of the integration of Aegis Ashore components.
Aegis BMD program management officials told us that the schedule does  contain more risk before the first controlled test vehicle flight test, which is  the first time all of the Aegis Ashore components will be integrated, and  less risk between that test and the fielding in Romania. They stated that  they decided to increase the risk at the start of the schedule in order to  meet the presidentially announced date of 2015 for the first Aegis Ashore  installation.
While Aegis BMD program management officials are confident that the  risks of a concurrent schedule are low given the nature of the Aegis  Ashore program, the short time frame for integrating and fielding Aegis  Ashore could magnify the effects of any problems that may arise.  Program documentation states that there is limited to no margin in the  schedule to deal with possible delays in fabrication or system testing, and  as this effort is the first time a land-based deckhouse has been  constructed, there is no prior experience on which to draw to alleviate any  schedule delays.
section_title: Various Aegis Ashore Components Require Modification for a Land- Based Configuration, and Development Uncertainties Remain
paragraphs: While Aegis Ashore will use components already developed and used  operationally in the sea-based Aegis BMD, key components—the VLS  and radar—will be modified for use on land. In addition, the multimission  signal processor, a key component for both the sea-based and land- based system that processes radar inputs from ballistic and cruise missile  targets, is still under development and behind schedule. The first time all  of the Aegis Ashore components are expected to be integrated and flight  tested will be in fiscal year 2014. Given the concurrent schedule for the  program, any difficulties with the modified components or partly  developed components may affect the overall schedule, potentially  leading to cost growth or an installation not meeting expectations  because a needed modification was discovered too late.
The Aegis Ashore installations will include a VLS currently used on Aegis  BMD ships, but it is planned to be located at a greater distance from the  deckhouse. The communications system between the deckhouse and the  VLS will require modification because of this increased distance. In  addition, the VLS is planned to be surrounded by an environmental  enclosure at Aegis Ashore installations. Aegis BMD program  management officials stated that this enclosure will include the heating  and cooling system and provide power to the launcher. Testing of this  modification is planned for fiscal year 2014.
Aegis Ashore’s SPY-1 radar likely will face challenges related to the  radio-frequency spectrum, which is used to provide an array of wireless  communications services, such as mobile voice and data services, radio  and television broadcasting, radar, and satellite-based services. The  radar might need to be modified if the performance of wireless devices in  Romania is degraded by the SPY-1. Furthermore, Romania’s future use  of the radio-frequency spectrum is unknown but could allow more  domestic wireless communications services to operate in or near the  radar’s operating frequency. Consequently, the Aegis Ashore site may  need modifications to resolve this potential issue, or alternatively,  Romanian wireless broadband devices may need to be modified. An  initial analysis of radio-frequency spectrum use in Romania by the  Defense Spectrum Organization, DOD’s organization that provides  information and assistance on radio frequency analysis, planning, and  support, recommended to MDA that additional study of Romanian radio- frequency spectrum use occur. Aegis BMD management officials told us  that they recognize the risks associated with operating the SPY-1 radar  on land and that MDA plans additional study in fiscal year 2012 to better  understand Romanian spectrum use and the potential effect of the SPY-1  radar on land, including study of existing land-based SPY-1 radars. There  may be modifications to the SPY-1 radar to mitigate this potential issue,  but the officials told us they do not currently know what modifications  could be required to mitigate any frequency issues because of this need  for further study. Depending on spectrum policy and usage in the host  nation, this issue may be a long-term challenge over the life of the Aegis  Ashore installations regardless of where they are fielded.
In addition, urban clutter—which could affect the ability to acquire,  maintain track, and perform imaging on long-range targets—could affect  the SPY-1 radar. Program documentation states that both the Romanian  and Polish Aegis Ashore sites have clutter from urban structures and  wind farms. Urban clutter may require modifications of the radar, such as  software modifications, or may require additional testing or affect  operations of the Aegis Ashore installation.
In addition to the aforementioned VLS and radar issues, developmental  uncertainties also exist for the multimission signal processor. We have  previously reported that it is behind schedule, with a significant  percentage of its software increments still needing to be integrated.component of Aegis Ashore was unable to demonstrate planned  functionality for a radar test event in December 2010, and the Defense  Contract Management Agency has identified the multimission signal  processor schedule as high risk.
As we have reported previously, Aegis Ashore is dependent upon next  generation versions of Aegis systems—Aegis 4.0.1 and Aegis 5.0—as  well as the SM-3 Block IB interceptor, all of which are still under  development.
section_title: Unstable Aegis Ashore Program Content, Affecting Both the Resource Baseline and Cost Estimates, Reduces Transparency and Impedes Oversight and Accountability
paragraphs: Aegis Ashore’s requirements, acquisition strategy and overall program  content were not stable when the resource baseline—the expected  investment in the development and delivery of a product—was  established, and subsequent program changes obscure the assessment  of program progress. MDA’s acquisition directive states that baselines are  used to assess programs and program maturity. We have previously  reported that baselines provide the best basis for transparency over  actual program performance, giving decision makers key information  about program progress and cost. Baseline variances give management  information about where corrective action may be needed to bring the  program back on track. Variation from the baseline can provide valuable  insight into program risk and its causes and can empower management  to make decisions about how to best handle risks. However, this  transparency is limited if the initial baseline is not sound or if the reporting  of progress against the baseline obscures actual program cost or  performance.
Aegis Ashore’s resource baseline, established at the developmental  baseline review on June 22, 2010, was initially $813 million. The initial  resource baseline established the resources needed to develop and build  two Aegis Ashore systems—one test and one operational— and deploy  them in the 2015 time frame. In the June 25, 2010 BMDS Accountability  Report (BAR) submitted to Congress 3 days after the review, MDA  reported a revised resource baseline of $966 million, an increase of   $153 million or 19 percent. According to information provided by the  program, the reason for the increase was a refinement of the program  requirements and a review of resource estimates provided earlier in fiscal  year 2010.
Beyond this resource baseline adjustment, the anticipated cost of the  program has grown as program plans have developed. By February  2012, program management officials provided information that the  program was reporting a cost growth of $622 million over the 2010  baseline for a total cost estimate of $1.6 billion. Aegis BMD management  officials provided information attributing the cost growth to changes in the  deckhouse fabrication plans, an increase in the cost of the Aegis  Weapons system, and a refinement of equipment needs. In addition, the  program has adjusted the calculations for the average procurement unit  cost (APUC), or the ratio of procurement costs to the number of  operational units, across the life of the program. At the developmental  baseline review in June 2010, the APUC was based on the test  installation in Hawaii. By June 2011, the program included two  installations—for Romania and Poland—in the APUC. However, at the  end of fiscal year 2011, the program changed the quantity to one Aegis  Ashore installation. Information provided by the program office states that  the increase to two installations occurred due to the addition of all  European PAA phases to the program during the year and that the fiscal  year 2012 BAR will include only one installation to be consistent with the  2011 BAR. The current estimate for the APUC also has changed. The  baseline for the average procurement cost is $272 million for each Aegis  Ashore system. Program management officials reported that by February  2012, the estimate for the APUC was $380 million, a 40 percent increase  over the baseline unit cost.
section_title: Appendix VIII: Ground-based Midcourse Defense (GMD)
paragraphs: Appendix VIII: Ground-based Midcourse  Defense (GMD)
subsections: section_title: GMD Has Not Been Able to Verify the Capability of the CE-II EKV Interceptor
paragraphs: MDA has not successfully demonstrated the ability of the CE-II to  intercept a target. The first two attempts failed—the first in January 2010  due to a quality control issue and the second in December 2010 due to a  design issue. During this second attempted test, MDA launched an  intermediate-range target with a simulated reentry vehicle and associated  objects. A forward-based radar provided acquisition and track data to the  GMD system. In addition, the Sea-based X-band radar provided  discrimination data to the GMD system. The GMD interceptor was  launched from a silo at Vandenberg Air Force Base, flew as expected to  its designated point, and deployed the CE-II EKV, which reached the  target and identified the most lethal object but failed to intercept it.
After this failure, the Director, MDA, testified that the agency’s top priority  was to confirm the root cause, fix it, and successfully repeat the previous  flight test. Accordingly, MDA undertook an extensive and rigorous effort  to determine the root cause of the failure and develop design solutions to  resolve the failure. The investigation concluded the following: (1) ground  testing cannot replicate the environment in which the kill vehicle operates  and (2) the CE-II EKV, specifically the inertial measurement unit, requires  redesign and additional development, which MDA has undertaken. For  example, according to a GMD program official, the program has  conducted over 50 component and subcomponent failure investigation  and resolution tests. Additionally, the program has developed new testing  techniques and special instrumentation to provide additional data in future  flight tests.
MDA realigned resources from planned 2011 activities to fund the  investigation and fund return-to-intercept activities including redesign  efforts. For example, the program delayed funding the rotation of older  fielded interceptors into flight test assets, delayed funding interceptor  manufacturing, and delayed purchasing GBI upgrade kits. However, the  agency did continue its efforts to increase reliability of the interceptors  through upgrades and repair of five interceptors although the  refurbishments conducted to date do not fix all known issues or provide a  guarantee of reliability.
section_title: MDA’s Cost to Demonstrate the CE-II Initial Capability through Flight Testing Has Grown Significantly
paragraphs: The cost to confirm the CE-II capability through flight testing has  increased from $236 million to about $1 billion dollars due to the flight test  failures as noted in table 4. In addition to the costs of the actual flight  tests, the total cost for determining the root cause and developing the  design changes has not been fully developed.
While the cost incurred by MDA to verify the CE-II variant through flight  testing, as noted above, is about $1 billion, it does not reflect the costs  already expended during development of the interceptor and target. For  example, the cost of the flight test excludes nonrecurring development  costs, such as the development costs for the interceptor or target and its  support as well as those for systems engineering and test and evaluation,  among others. Often these are costs that were incurred many years  before the flight test was conducted. MDA has not separately reported the  nonrecurring development costs for the CE-II interceptor, but instead  reports the program acquisition unit costs (which are the development,  production, deployment, and military construction costs divided by the  total number of operationally configured units) for the combined CE-I and  CE-II interceptor effort. For these interceptors, the program acquisition  unit costs are reported to be $421 million as of February 2011 and are  likely increasing to address the flight test failure. MDA reports the  nonrecurring costs for the targets used in these flight test as $141 million  each. Consequently, including nonrecurring development costs for both  the CE-II and the targets would substantially increase the costs for each  flight test and the overall costs outlined in table 4.
section_title: MDA Has Pursued a Highly Concurrent Acquisition Strategy for GMD That Allowed for Rapid Fielding, but with Increased Risks
paragraphs: To meet a 2002 presidential directive to deploy an initial missile defense  capability by 2004, MDA concurrently matured technology, designed the  element, tested the design and produced and fielded an initial capability.  A 2008 MDA briefing acknowledged that fielding while still in the  development and test phase led to very risky decisions regarding  schedule, product quality, and program cost. For example, the EKV team  focused on technical aspects of design instead of also ensuring that the  design could be produced, which led to a lack of production control and  near continuous engineering changes. While this approach did lead to the  rapid fielding of a limited defense, it also resulted in schedule delays,  unexpected cost increases, a refurbishment program, and a reduced  knowledge of system reliability necessary for program sustainment, as  well as variations between delivered CE-I EKVs. (See fig. 11.)
MDA emplaced its first GBI in 2004, although it had little of the data, such  as interceptor reliability, that it would normally have had before fielding a  system. Accordingly, the Director, MDA, testified on March 2011 that  GMD put interceptors “that are more akin to prototypes than production  representative missiles in the field.” Additionally, interceptors were  emplaced in silos before successfully conducting a flight test of this  configuration.
In 2004, MDA committed to another highly concurrent development,  production, and fielding strategy for the new CE-II interceptor, approving  the production before completing development of the prior version or flight  testing the new components. MDA proceeded to concurrently develop,  manufacture, and deliver 12 of these interceptors even though MDA has  not yet successfully tested this new version.
section_title: Consequences of MDA’s Highly Concurrent Acquisition Strategy Include Schedule Delays, Cost Growth, and Reduced Understanding of System Performance
paragraphs: MDA’s concurrent approach to developing and fielding assets has  disrupted its acquisition efforts, resulted in cost growth and expensive  retrofits, and reduced the planned knowledge of the system’s capabilities  and limitations. In response to the failure of FTG-06a in December 2010,  MDA restructured its fiscal year 2011 manufacturing plan by halting  deliveries of remaining CE-II EKVs until the completion of the failure  review and a nonintercept attempt in fiscal year 2012.
To help mitigate the affect of the production halt, the GMD program  planned to perform five limited upgrades to previously manufactured CE-I  interceptors. According to contractor officials, in order to keep the  production line viable, they were directed to complete five limited  interceptor upgrades; however, the program was only able to complete  three and expects to complete the other two in fiscal year 2012. As we  previously reported, in 2007 MDA began a refurbishment and retrofit  program of the CE-I interceptors to replace questionable parts identified  in developmental testing and manufacturing.develop an overall plan to address known hardware upgrades and service  life limitations, issues discovered since the interceptors were emplaced.  However, MDA has yet to complete all planned refurbishments of CE-I  EKVs, and program officials discovered additional problems during early  refurbishments causing MDA to expand this effort. Consequently,  refurbishments are planned to continue for many more years and the cost  to refurbish each CE-I interceptor could range from $14 million to   $24 million.
Additionally, MDA will have to undertake a major retrofit program for the  CE-II EKVs that have already been manufactured and delivered in  addition to the retrofit program for the CE-I GBIs that is already underway.  According to GMD program management officials, the final cost for this  effort has not been determined, but they expect the effort to cost about  $18 million per EKV, resulting in an additional cost of about $180 million  for 10 interceptors.
The agency has also had to restructure its flight test program, adding two  tests that were not previously planned before the failure. To verify the  new design of the kill vehicle, MDA inserted a nonintercept test scheduled  for the third quarter of fiscal year 2012. This test is designed to exercise  as many CE-II EKV functions as possible that have not been  demonstrated in either FTG-06 or FTG-06a. Performing the nonintercept  mission, using an upgraded inertial measurement unit, provides the  benefit of scripting the test in order to best stress the EKV design and to  fully demonstrate the resolution of the failure in FTG-06a. MDA officials  have stated that if the test confirms that the cause of the failure has been  resolved, the program will restart the manufacturing and integration of the  CE-II EKVs.
However, successfully completing an intercept that demonstrates the full  functionality of the kill vehicle is necessary to validate that the new design  works as intended. MDA added a new intercept flight test (FTG-06b) in  the fourth quarter of fiscal year 2012, however due to further  developmental challenges with the EKV, it has been delayed until at least  the second quarter fiscal year 2013 to demonstrate CE-II intercept  capability and achieve the unmet objectives of the two previous tests  (FTG-06 and FTG-06a). As a result, confirmation that the design works  as intended will take place more than 9 years after the decision to begin  production and more than 4 years after the first planned test.
Lastly, MDA’s continued inability to conduct the GMD developmental flight  testing has resulted in less knowledge of the fielded systems capabilities  and limitations than planned. For example, GMD has been only able to  successfully conduct two intercept tests since 2006—the last successful   Additionally, GMD has yet  intercept being conducted December 2008. to conduct a salvo test. As we reported in our last assessment, GMD  cancelled its planned 2011 salvo test due to the failure in the January  2010 flight test and scheduled a salvo test for fiscal year 2015.
GMD conducted FTG-03a in September 2007 and FTG-05 in December 2008.
Consequently, neither the CE-I nor CE-II variant capability is fully  understood and according to the Director, Operational Test and  Evaluation’s fiscal year 2010 assessment, the continuing evolution of the  interceptor design has resulted in multiple interceptor configurations  among the fielded interceptors and test assets. These configuration  differences complicate assessment of operational capability.
GMD’s acquisition strategy will continue its high levels of concurrency.  Developmental flight testing will continue through 2022, well after the  currently planned completion of production. In following this concurrent  acquisition strategy, the Department of Defense is accepting the risk that  these later flight tests may discover issues that require costly design  changes and retrofit programs to resolve.
section_title: Appendix IX: Precision Tracking Space System (PTSS)
paragraphs: Appendix IX: Precision Tracking Space System  (PTSS)
subsections: section_title: Background and Overview
paragraphs: The Missile Defense Agency’s (MDA) PTSS is being developed as a  space-based infrared sensor system to provide persistent overhead  tracking of ballistic missiles after boost and through the midcourse phase  of flight. Being a space-based sensor system, PTSS is not constrained by  geographical considerations that affect the placement of ground-, air-,  and sea-based radar systems. While the number of PTSS satellites to  make up the constellation has not yet been determined, the system is  expected to expand the Ballistic Missile Defense System’s (BMDS) ability  to track ballistic missiles in the post-boost phase and plans to fill coverage  gaps existing within the current BMDS radar configuration. According to  PTSS officials, the constellation will provide coverage of some 70 percent  of the earth’s surface with a minimum of six satellites. Furthermore, the  enhanced coverage planned for PTSS would help increase the size of the  missile raids that the BMDS can track and respond to. The PTSS  program plans to launch its first two development satellites in the fourth  quarter of fiscal year 2017 and to increase the constellation to nine  satellites by 2022.
The PTSS program plans to create a satellite constellation that can  accommodate subsequent configuration adjustments. The program  intends to create a flexible on-orbit and ground architecture that could  accommodate such changes as an increase to the constellation size or  changes to the communications infrastructure. This flexibility would permit  the system to evolve in response to changes in the threat environment.
section_title: PTSS Is Just Beginning the Early Acquisition Phases
paragraphs: The PTSS program officially began as a new program in the second  quarter of fiscal year 2011. Johns Hopkins University’s Applied Physics  Laboratory (APL) is the lead system developer for PTSS. In this capacity,  APL advises the PTSS program office on systems engineering and  integration issues, while leading the other laboratories involved in the  development effort. In early 2011, APL awarded six integrated system  engineering team subcontracts to industry partners to provide  manufacturing and producibility recommendations for the development of  the PTSS initial article satellites: Raytheon, Northrop Grumman,  Lockheed Martin, Ball Aerospace, Orbital Science, and Boeing. MDA’s  decision to involve the laboratories in initial development work is an action  that we have previously recommended for other space acquisition  programs.
During the course of 2011, the PTSS program made several schedule  changes, in part due to budgetary issues. PTSS was scheduled to begin  the Technology Development Phase in the fourth quarter of fiscal year  2011, but delayed it until the fourth quarter of fiscal year 2012. One of the  key early analytical knowledge points, the establishment of mass raid  engagement time windows, was also delayed from the fourth quarter of  fiscal year 2011 to the first quarter of fiscal year 2012. Finally, the  planned launch date for the first two initial satellites was delayed from the  fourth quarter of fiscal year 2015 and is now planned for the fourth quarter  of fiscal year 2017. The PTSS program also delayed the projected launch  dates of production satellites for the PTSS constellation.
section_title: PTSS Revised Its Acquisition Strategy in February 2012; It Includes Some Acquisition Best Practices but Also Elevated Levels of Concurrency
paragraphs: According to the acquisition strategy report signed in January 2012, MDA  plans to develop and acquire the satellites in three phases. First, the APL- led laboratory team will produce two lab-built development satellites.  Second, an industry team, selected through open competition while the  APL-led laboratory team is still in a development phase, will develop and  produce two industry-built engineering and manufacturing development  satellites. Third, there will be a follow-on decision for the industry team to  produce additional satellites in a production phase. (See fig. 12.)
The strategy acknowledges some concurrency but maintains that there  are benefits to this approach. Under the plan, the industry team will be  approved for production of long-lead items for the two development  satellites, while the laboratory team is still working to complete the first  two development satellites. The program intends that by engaging  industry concurrently at this development stage, industry can influence  the selection of parts and subsystems in a manner that will minimize the  need for system design changes between the two laboratory development  satellites and the two initial industry satellites. The program intends to  conduct on-orbit checkout and testing of the two laboratory-produced  development satellites prior to the decision to complete the assembly of  the two industry-built development satellites.
According to MDA, the approach aligns with several aspects of GAO’s  acquisition best practices. The program will establish firm requirements  before committing to production, it will ensure full and open competition,  the development cycle will be less than 5 years, it has a simple payload  design and can deploy larger numbers in the constellation and it is  deferring advanced capabilities until a second spiral thereby limiting the  technological development challenge for the initial satellites.
According to program management officials, they have taken steps  intended to mitigate cost, schedule, and performance risks. PTSS is  being designed strictly for BMDS use, so the satellite payload is geared  toward the BMDS missile tracking mission, with the objective of keeping  the design as simple and stable as possible. Additionally, the acquisition  strategy stipulates that PTSS will not duplicate functions found elsewhere  in the BMDS, but instead will remain focused on the specific function for  which it is being designed. The program aims to shorten its development  schedule through the use of proven technologies with high technology  readiness levels. According to PTSS program management officials, the  use of currently available technologies helps to keep the PTSS design  cost-effective. In addition, according to those officials, the government  intends to acquire unlimited data rights, government purpose data rights,  or both for the duration of the program, so that the government is not  locked in with any particular contractor.
Because the PTSS acquisition strategy was only recently developed, we  had limited time to assess the strategy for this review. We intend to  review this new strategy next year. Building developmental and  engineering and manufacturing development satellites is a positive step.  However, the strategy may enable decision makers to fully benefit from  the knowledge to be gained and the risk reduction opportunity afforded  through on-orbit testing of the lab-built satellites before committing to the  industry-built developmental satellites. The industry-built development  satellites will be under contract and under construction before on-orbit  testing of the first two lab-built satellites can confirm that the design works  as intended.
section_title: Projected Size and Cost of the Entire PTSS Constellation Are Unknown
paragraphs: Currently, the PTSS program office has not determined how many  satellites will make up the PTSS constellation, though the program is  progressing with a flexible approach toward the number of satellites in the  constellation. The size of a full PTSS constellation would depend on  factors that have yet to be determined, most specifically, the size of  missile raid that the system would be expected to track. In fiscal year  2011, the program conducted physics-based analysis to demonstrate the  system’s performance within the BMDS in handling a range of raid  scenarios. The satellites for the PTSS constellation are expected to have  a 5-year design life, though officials stated that they expect the  operational life will exceed the 5 years. Relative to other military space  programs, the PTSS satellite is intended to be a low-cost unit, which can  be readily replaced as on-orbit units degrade over time. However, the full  cost of development has not yet been determined, and it is currently  unclear how many satellites will need to be replaced annually, as this will  be determined by such factors as design life and the total number on  orbit. The cost to launch a satellite into orbit can be very expensive,  sometime exceeding $100 million or more. Because the full size of the  constellation has also not yet been determined, the PTSS program is  unable to estimate the anticipated full costs of the acquisition and  operation of the system.
section_title: While Many Technologies Are Well Developed, Technology Maturation of Key Components Is Still Needed
paragraphs: In leveraging proven technologies with high technology readiness, many  of the system’s technologies are in relatively high states of maturity for a  program in this early stage of development. The program office has  identified two PTSS critical technologies: the optical payload and the  communications payload. Many of the underlying components for the  optical and communications payloads have been demonstrated in an  environment relevant to the conditions under which they will be employed  in the PTSS satellites. However, certain key components of these critical  technologies require further development to reach maturity, and until  these key components mature, they reduce the overall technological  maturity of the payloads. Program management officials stated that they  plan to have both critical technologies in functional form by the time of the  preliminary design review, which is scheduled for the end of fiscal year  2013.
The high radiation environment in which the PTSS satellites will operate  creates technical challenges for the development effort. The PTSS  program has instituted risk reduction measures to address radiation risks  pertinent to two technologies. For risk issues pertaining to the focal plane  array, the PTSS’s risk mitigation efforts are on schedule, with two  contracts having been awarded to explore manufacturing processes to  address radiation hardness requirements for the satellites’ anticipated on- orbit environment. Radiation mitigation efforts are also required for the  satellite’s star tracker, a component of the system’s guidance and control  subsystem. The PTSS program plans to award contracts to several  vendors in 2012 to evaluate options to address this concern.
section_title: PTSS Concept Development Benefits from STSS Testing
paragraphs: The PTSS development effort is benefiting from MDA’s two operational  Space Tracking and Surveillance System (STSS) satellites, which were  launched into orbit in 2009. BMDS test events involving STSS have been  useful in providing key information to the PTSS program. According to  PTSS officials, the success of STSS in the FTM-15 flight test conducted  in 2011 served as a “proof of principle” for PTSS, as the event  demonstrated multiple aspects of the PTSS concept of operations, such  as the ability to provide data from which interceptor missiles could be  remotely launched and directed toward a missile threat. The FTM-12 flight  test in late 2011 repeated the positive results noted in FTM-15, with  tracking sensors locking onto targets and successfully providing direction  for the fired interceptors. The STSS tests are assisting the PTSS program  office as it develops the system’s concept of operations.
section_title: Appendix X: Targets and Countermeasures
subsections: section_title: Background and Overview
paragraphs: The Missile Defense Agency’s (MDA) Targets and Countermeasures  program designs, develops, produces and procures missiles serving as  targets for testing missile defense systems. The targets program involves  multiple acquisitions covering the full spectrum of threat missile  capabilities (separating and nonseparating reentry vehicles, varying radar  cross sections, countermeasures, etc.) and ranges.have been used by MDA’s test program for years while others have been  recently or are now being developed and can represent more complex  threats. increased capability. At that time, MDA began work on the 72-inch  diameter launch vehicle (LV)-2 target and the 52-inch diameter targets.  When this approach proved more costly and less timely than expected,  MDA suspended the 52-inch effort, focusing on the LV-2. Responding to  congressional concern about these problems and our 2008  recommendations, MDA revised its acquisition approach in 2009, seeking  to increase competition by returning to a multiple contract strategy with  four separate target classes and a potential of four prime contractors.  MDA completed the intermediate-range target contract award, which  reduced target costs. However, as proposals for the new medium-range  ballistic missile (MRBM) contract were submitted, the program  determined that costs associated with this approach were higher than  anticipated. Solicitations for the medium-range and the intercontinental  classes of targets were then canceled, and MDA began the process of  revising its acquisition strategy for the third time.
section_title: Targets Were Not a Source of Testing Problems in Fiscal Year 2011
paragraphs: In the past, we have reported that availability and reliability of targets  caused delays in MDA’s testing of Ballistic Missile Defense System  (BMDS) elements. However, in fiscal year 2011, MDA delivered 11  targets, all of which were successfully launched and did not negatively  affect the test program. The targets launched during the year supported  tests of several different BMDS elements, including Ground-based  Midcourse Defense (GMD), Aegis Ballistic Missile Defense, and Patriot  systems. these deficiencies were satisfactorily addressed when the target missile  was successfully extracted from the rear of the C-17 aircraft in FTX-17.  To reduce risk, the flight was not planned as an intercept mission but as a  target of opportunity for several emerging missile defense technologies,  including Space Tracking Surveillance System.
section_title: Availability of Targets Increasing Risk for First BMDS Operational Flight Test and Affecting Other Planned Tests
paragraphs: According to MDA and Director, Operational Test & Evaluation test  officials, the availability of targets has affected planned future flight tests.  MDA has scheduled the first two extended medium-range ballistic  missiles (eMRBM) to launch in a crucial operational flight test (FTO-01)  by the end of 2012, which is the first system-level test of the BMDS. On a  tight schedule to meet this deadline, MDA is accepting higher risk that  target issues could affect this test by launching the first two of the new  targets in this operational test, rather than conducting a risk reduction  flight first. Risk reduction flight tests are conducted the first time a system  is tested in order to confirm that it works before adding other test  objectives. The lack of such a test was one factor that delayed a previous  GMD flight test (FTG-06) in 2010. While the target, the LV-2, was  successfully flown in that flight test, aspects of its performance were not  properly understood and lack of modeling data prior to the test  contributed to significant delays in the test program.
In addition, the next air-launched target test was scheduled to use the  new medium-range extended air launched target in 2012, but the flight  test—FTT-13—was cancelled because of budgetary concerns and test  efficiency. As a result, the first flight test using this target is not planned  until the third quarter of fiscal year 2014, though it may be available for  use as early as the fourth quarter of fiscal year 2012. Since the short- range air-launched target was successfully launched in July 2011, MDA  now plans to continue acquisition of the one short-range and the two  extended air-launched targets that are currently under contract through  fiscal year 2014.
section_title: MDA Slowly Building Inventory of Targets and Implementing Backup Strategy
paragraphs: from inventory and used for an earlier test and be replaced by newer  missiles.
section_title: Significant Decisions Cancel or Defer Competition and Consolidate New Work with the Prime Contractor
paragraphs: The Targets and Countermeasures program made several key decisions  in fiscal year 2011 that will shape future target acquisition. Two key  contracts were definitized in 2011; the eMRBM contract in October 2011,  and an intermediate-range ballistic missile (IRBM) target contract in  March 2011. MDA realigned funding planned for the medium-range  competition, which was canceled in 2010, to manufacture additional IRBM  targets. MDA canceled the planned intercontinental ballistic missile  (ICBM) competition because the new test plan delays the need for the  first ICBM target by several years. Finally, MDA issued an undefinitized  contract action to the prime contractor for reentry vehicles. One overall  consequence of these decisions has been a consolidation of work with  the prime contractor. (See table 5.)
An agreement on price was reached for the production of five eMRBM  targets in September 2011. MDA began developing the eMRBM for  operational use in 2003 as part of the Flexible Target Family when it was  referred to as the 52-inch target. Though development and production  had been on hold since 2008 because of continuing cost and schedule  problems, MDA resumed acquisition of eMRBMs through the existing  prime contractor due to a target failure. The production contract was  definitized in October 2011 after being undefinitized for about 540 days.  The Defense Federal Acquisition Regulation states that undefinitized  contract actions shall provide for definitization by the earlier of either, 180  days after issuance of the action or the date on which more than 50  percent of the not-to-exceed price has been obligated. The 180-day  threshold may be extended but may not exceed the date that is 180 days  after the contractor submits a qualifying proposal. MDA program officials  stated that because MDA continued to change the requirements on the  undefinitized contract action, the contractor did not submit a qualifying  proposal until March 2011. MDA definitized the contract approximately  194 days after receiving the proposal. During the 18-month delay, while  the contract was being negotiated and requirements continued to change,  the contractor spent over $82 million, the quantity of targets under  contract increased, and some capability was deferred to later years. The  final negotiated price at completion was $321 million, $175 million less  than the previously expected price ceiling. MDA contracting officials  acknowledged that undefinitized contract actions can lead to undefined  costs, but believe they are a good tool to use to meet urgent  requirements. accelerated in the test plan to the first quarter of fiscal year 2014. T3s  are unique targets designed for more specialized maneuvers in their  respective ranges.
Second, an action for a foreign military asset target to meet a fourth  quarter of fiscal year 2012 requirement.
Third, an action for eight common reentry vehicles, which will replace  earlier ones.
MDA set up a common components project office to manage the  acquisition strategy for the reentry vehicles, which are intended for flight  tests in mid-2014. They have the potential to fly on any target launch  vehicle, but the program is still developing more specific acquisition plans.
In 2011, MDA began implementing its third acquisition strategy for targets  by acquiring common reentry vehicles from a single source, a significant  change in the acquisition strategy for the program office. Reentry vehicles  for targets were previously acquired separately, were more specifically  tailored to the target launch vehicle, and were procured from more than  one contractor. The single-source strategy implemented with the 2011  undefinitized contract action is intended to maximize commonality and  could reduce costs through purchasing larger numbers. Through 2013,  the single source will be the targets prime contractor. MDA plans to  decide in the second quarter of fiscal year 2012 whether to issue a  competitive solicitation for a new provider.
section_title: Appendix XI: Terminal High Altitude Area Defense (THAAD)
paragraphs: Appendix XI: Terminal High Altitude Area  Defense (THAAD)
subsections: section_title: Background and Overview
paragraphs: THAAD is a rapidly deployable ground-based system designed to defend  against short- and medium-range ballistic missile attacks during their late  midcourse and terminal stages. A THAAD battery consists of interceptor  missiles, six launchers, a radar, a fire control and communications  system, and other support equipment. The program is producing batteries  for initial operational use for conditional materiel release to the Army. For  this to occur, the Army must certify that the batteries are safe, suitable,  and logistically supported. The date for full materiel release has not yet  been determined because the program is still conducting flight tests to  prove out the system, and production rates have been slower than  planned.
section_title: Army and Department of Defense Test Organizations Successfully Conducted the First THAAD Operational Flight Test
paragraphs: Appendix XI: Terminal High Altitude Area  Defense (THAAD) assessment of the THAAD system. In addition, the Director, Operational  Test and Evaluation, will also independently evaluate the operational  effectiveness of the system. The assessment of this event will support  upcoming production and fielding decisions.
section_title: THAAD’s Highly Concurrent Acquisition Strategy Led to Delayed Delivery of THAAD Batteries
paragraphs: The Missile Defense Agency (MDA) awarded a contract for THAAD’s first  two operational batteries in December 2006, before its design was mature  and developmental testing of all critical components was complete. At  that time, MDA’s first THAAD battery, consisting of 24 interceptors, 3  launchers, and other associated assets, was to be delivered to the Army  as early as 2009. While some assets were delivered by this time, the  interceptors were delayed because of issues with components that had  not passed all required testing. In response to pressure to accelerate  fielding the capability, THAAD adopted a highly concurrent development,  testing, and production effort, as shown in figure 13, that has increased  program costs and delayed fielding of the first THAAD battery until early  fiscal year 2012.
Appendix XI: Terminal High Altitude Area  Defense (THAAD)
Appendix XI: Terminal High Altitude Area  Defense (THAAD)
section_title: Requirements and Design Were Not Stable before THAAD Interceptor Production Began
paragraphs: A production contract was signed in 2006 before the requirements or  design for a required safety device called an optical block was complete.  Housed in the flight sequencing assembly, an optical block is an ignition  safety device designed to prevent inadvertent launches of the missile.  The program experienced design and qualification issues with this  component until testing was complete in the fourth quarter of fiscal year  2011. Incorporating an optical block device into the THAAD interceptor  has been a primary driver of design, qualification, and production delays  for the program since as early as 2003, shortly after the Army issued a  standard requirement for this type of safety device on munitions ignition  systems. The original THAAD design did not have an optical block device,  and MDA did not modify the development contract to include this  requirement until 2006. Program management officials explained that the  military standard is primarily written for smaller, more typical, munitions’  fuses, not systems as technically complex as THAAD.
According to program management officials, THAAD has worked with the  Army to tailor requirements and associated testing required of the optical  block device during the past few years. The part failed initial qualification  testing in early fiscal year 2010 and was not fully qualified until that  September. Also, in May 2010, the Army added requirements to test the  flight sequencing assembly during exposure to electrical stress and other  environments, such as extreme temperature, shock, humidity, and  vibration. Testing failures led THAAD to make minor design changes and  extensive manufacturing process changes, which required requalification  of the optical block and delayed production of the interceptors.  Environmental testing was complete in March 2011, but the stress test  was not completed until September 2011—after the first interceptor was  produced.
As recently as fiscal year 2011, the program was considering further  design changes to the optical block to make it more producible; however,  the program estimated that the cost to make the needed design changes  would be $150 million, an investment that could not be easily recouped in  production savings in the near future. Program mangers decided not to  make those changes because of improved flight sequencing assembly  and optical block manufacturing performance, and program funding  constraints. The current design was also successfully demonstrated in the  recent flight test and in the other testing in support of conditional materiel  release. Therefore, the program determined that the benefits of  continuing the redesign no longer justified the cost.
Appendix XI: Terminal High Altitude Area  Defense (THAAD)
section_title: THAAD Interceptor Production Issues Delay Deliveries and Increase Program Costs
paragraphs: Production issues have collectively delayed interceptor delivery by 18  months and are projected to cost the program almost $40 million. While  issues with the flight sequencing assembly have been the most costly,  three production start-up issues emerged in fiscal year 2011 that also  caused delays. First, the program encountered problems with the  availability of a solution containing nitrogen needed for production.  Program management officials explained that since all of the liquid could  not be extracted out of a newly designed bottle, due to unanticipated  design changes in the delivery mechanism, more had to be ordered  before production could continue, which caused the delay. Another  production delay of over a month took place because of debris found in a  transistor on the interceptor. Program management officials explained  that a root cause analysis determined that the part had not undergone  proper testing, which would have detected such debris. The transistors  had to be replaced with properly tested parts. A third delay occurred  because ragged, raised edges were discovered inside several of the fuel  tanks. According to program management officials, in the unlikely event  that a small metal edge broke off during pressurization of the fuel tank, it  could cause an interceptor failure. They said that after conducting a risk  analysis, the program decided to remove the rough edges on future  procurements, but not on the first 50 interceptors, since the possibility of  such risk was low.
The interceptor’s flight sequencing assembly is currently being produced  at or above the expected rate of about four per month. Due to start-up  issues, which are common to new production lines, interceptor production  rates have fluctuated, ranging anywhere from 0 to 5 in recent months.  Also, some recent production rates could be artificially high as delays with  some components have allowed others more time than usual to stockpile  for future production. These stockpiles are projected to help with  production through the second battery. The program needs to achieve a  steady production rate in order to deliver the second THAAD battery by  July 2012. After this date, the contractor is scheduled to return to a rate of  3 interceptors per month.
section_title: THAAD Achieved Conditional Materiel Release in 2012; Full Materiel Release Date Not Yet Known
paragraphs: Appendix XI: Terminal High Altitude Area  Defense (THAAD) that three flight sequencing assembly units complete a series of tests to  evaluate the interceptor in various electrical and other stressing  environments. By the end of fiscal year 2011, all these tests had been  successfully completed. While THAAD has performed all test events  required for conditional materiel release, including its most recent flight  test (FTT-12), analysis of data is ongoing and the Army is still refining its  requirements for full materiel release. Program management officials  expect the gap in knowledge between conditional materiel release and full  materiel release to be defined in second quarter of fiscal year 2012 as  well. At that time, they explained, the Army will have developed a list of  the remaining conditions that the program must address in order to  receive full materiel release.
One of the conditions that must be met to achieve full materiel release of  THAAD to the Army is the incorporation of the required Thermally Initiated  Venting System, a safety feature of the interceptor that prevents the boost  motor from becoming propulsive or throwing debris beyond a set distance  in the event that the canister holding the interceptor heats up to a certain  temperature. Development and testing of this system has been done  concurrently with production of fielded interceptors. Even if the latest  design and near-term testing is successful, the system will be approved  too late to be incorporated in the first 50 interceptors. Although the  system is not required for conditional materiel release, the program  expects it to be required for full materiel release, unless the Army grants a  waiver. Since the last two developmental tests of this safety feature have  failed, THAAD is at risk of not complying with the requirement. The next  test is scheduled for the second quarter of fiscal year 2012. According to  program management officials, if it fails, the program will be forced to  seek a waiver for the current design and accept the risk of not having the  design on the interceptors. Program management officials explained that  the requirement for a Thermally Initiated Venting System is primarily  written for smaller-scale systems, not for a system as large as THAAD.  Although officials said they are working to comply with the requirement,  the technology may not be available to make it work. At best, the program  could not incorporate the safety system into the interceptor until  production of the third battery. The Army has approved fielding the first 48  interceptors configured without the safety system based on available  testing and it has chosen to accept the associated risk.
Appendix XI: Terminal High Altitude Area  Defense (THAAD)
section_title: Ongoing Concurrency Increases Acquisition Risks until Developmental Testing Is Complete
paragraphs: While MDA is committed to producing four THAAD batteries, more flight  tests are needed to achieve two remaining MDA developmental  knowledge points set for the program. Both are tied to flight tests that  were, at one time, planned for fiscal year 2011 but were delayed into later  fiscal years. MDA’s knowledge points identify information required to  make key decisions throughout the program and are typically defined  early in the acquisition phase to manage program risks. Although success  of the first operational test increases confidence in THAAD, we have  reported that good acquisition outcomes require high levels of knowledge  before significant decisions are made. The building of knowledge consists  of information that should be gathered at critical points over the course of  a program before committing to production.
To achieve the first remaining MDA knowledge point, THAAD must  conduct an integrated flight test against a medium-range ballistic missile  target. This test was originally scheduled for the second quarter of fiscal  year 2011, but after an air-launched target failure in December 2009 and  subsequent target availability issues, the agency moved the test to the  third quarter of fiscal year 2012. Later in fiscal year 2011, the test was  cancelled altogether because of budgetary concerns and test efficiency.  The agency now plans to test the objective in the first BMDS operational  test (FTO-01) in late fiscal year 2012. This test is not only planned as the  first against a medium-range target for THAAD, but it will also be the first  flight of the newly developed extended medium-range ballistic missile  target. Assuming several new “firsts” during this high-level operational  test poses significant additional risk for the agency and for achieving the  knowledge point.
The second knowledge point is to demonstrate THAAD’s Army Navy  /Transportable Radar Surveillance - Model-2 radar advanced  discrimination in terminal mode. This knowledge point was delayed from  the first quarter of fiscal year 2010 into the fourth quarter of fiscal year  2011 because of the same 2009 target issue. However, this knowledge  point was not accomplished in 2011 either. Additional changes to the  flight test plan in 2011 moved this objective to a flight test scheduled for  the third quarter of fiscal year 2013. As THAAD continues to gather data  from these developmental flight tests, the program continues to  concurrently produce interceptors, launchers, and associated equipment  for operational use. As a result, the program is at risk for discovering new  information that could lead to costly design changes and a need to retrofit  missiles either already in the production process or in inventory.
section_title: Appendix XII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, David B. Best, Assistant Director;  Letisha J. Antone; Ivy Hübler; LaTonya Miller; Jonathan A. Mulcare;  Kenneth E. Patton; John H. Pendleton; Karen Richey; Ann Rivlin; Luis E.  Rodriguez; Steven Stern; Robert Swierczek; Hai V. Tran; and Alyssa Weir  made key contributions to this report.