Missile Defense: Actions Needed to Improve Transparency and Accountability
Published: 2011-04-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In order to meet its mission, the Missile Defense Agency (MDA) is developing a highly complex system of systems--land-, sea-, and spacebased sensors, interceptors, and battle management. Since its initiation in 2002, MDA has been given a significant amount of flexibility in executing the development and fielding of the ballistic missile defense system. GAO was asked to testify on its annual review of MDA and on progress made to improve transparency and accountability. This statement is based on our March 2011 report.
section_title: What GAO Found
paragraphs: When MDA was established in 2002, it was granted exceptional flexibility in setting requirements and managing the acquisition, in order to meet a Presidential directive to deliver an initial defensive capability in 2004. However, the flexibility also came at the expense of transparency and accountability. For example, unlike certain other Department of Defense (DOD) major defense acquisition programs, a cost, schedule, and performance baseline does not have to be established or approved outside MDA. In addition, while most major defense acquisition programs are required by statute to obtain an independent verification of cost estimates, MDA has only recently developed cost estimates for selected assets and plans to work with DOD's Office of the Director for Cost Assessment and Program Evaluation to develop independent cost estimates for more MDA elements. Further, assessments of a system's suitability and effectiveness in combat have only been accomplished, with limitations, for the currently deployed Aegis Ballistic Missile Defense weapon system. Since its inception, MDA has employed at least three different strategies to acquire and deploy missile defense systems. Because these changes involved different structures for reporting cost, schedule, and performance data, they have exacerbated transparency and accountability challenges--each time a strategy changes, the connection between the old and new strategy planned scope and resources is obscured. In 2010, MDA made significant progress in addressing previously reported concerns about transparency and accountability. Specifically, MDA : (1) Established resource, schedule, test, operational capacity, technical, and contract baselines for several missile defense systems. It reported these to Congress in its June 2010 BMDS Accountability Report. (2) Identified three phases of development where baselines are approved-- technology development, product development, and initial production phases--and specified the key knowledge that is needed at each phase. (3) Established processes for reviewing baselines and approving product development and initial production jointly with the military services that will ultimately be responsible for those assets. GAO also reported last year that MDA extensively revised the test plan to increase its robustness and ability to inform models and simulations for assessing missile defense performance. While it is clear that progress has been made in terms of implementing new acquisition reviews and reporting detailed baselines, there remain critical gaps in the material reported, particularly the quality of the underlying cost estimates needed to establish baselines. Moreover, GAO still has concerns about realism in test planning and acquisition risks associated with the rapid pace of fielding assets. These risks are particularly evident in MDA's efforts to develop systems to support a new approach for missile defense in Europe as well as the Ground-based Midcourse Defense system. GAO does not make new recommendations in this testimony but emphasizes the importance of implementing past recommendations, including: (1) Establishing and reporting complete, accurate, reliable cost information. (2) Strengthening test planning and resourcing. (3) Following knowledge-based acquisition practices that ensure sufficient knowledge is attained on requirements, technology maturity, design maturity, production maturity and costs before moving programs into more complex and costly phases of development. DOD has committed to take action on many of our recommendations.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the transparency and  accountability progress made by the Department of Defense’s (DOD)  Missile Defense Agency (MDA). MDA has been charged with developing  and fielding the Ballistic Missile Defense System (BMDS), a system  expected to be capable of defending the United States, deployed troops,  friends, and allies against ballistic missiles of all ranges in all phases of  flight. The BMDS is DOD’s single largest acquisition program—spending  between approximately $7 billion to $9.5 billion per year – to develop and  field nine elements and supporting efforts. The system’s architecture  includes space-based and airborne 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 to provide  the warfighter with the necessary communication links to the sensors and  interceptor missiles.
In fulfilling this charge, MDA began delivering an initial defensive  capability in 2004. In meeting this challenge, MDA was afforded much  more flexibility than DOD’s other major weapons programs. However, this  flexibility also introduced transparency and accountability challenges that  persisted after the 2004 date for initial capability. Today, I will highlight  significant progress that MDA has recently made to strengthen  accountability and transparency and also the shortfalls that still need to be  addressed in order to further strengthen MDA’s oversight posture and  ensure new capabilities are fiscally sustainable for the long term.
Since 2002, the National Defense Authorization Acts have mandated that  we prepare annual assessments of MDA’s ongoing cost, schedule, testing,  and performance progress. In March 2011, we issued our report covering  MDA’s progress toward achieving its goals during fiscal year 2010 as well  as its efforts to improve transparency, accountability, and oversight. My  statement today will focus on the issues covered in that report. We  conducted this performance audit from March 2010 to March 2011 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. Additional information on our scope and  methodology is available in the issued report.
subsections: section_title: Acquisition Flexibility Given to MDA has Downsides for Oversight and Accountability
paragraphs: MDA is a unique agency with extraordinary acquisition flexibility and a  challenging mission, however while that flexibility has helped it to rapidly  field systems, it has also hampered oversight and accountability.
Over the years, Congress has created a framework of laws that makes  major defense acquisition programs accountable for their planned  outcomes and cost, gives decision makers a means to conduct oversight,  and ensures some level of independent program review.  Application of  many of these laws is triggered by the phases of the Department of  Defense’s acquisition cycle, such as entry into engineering and  manufacturing development. Specifically, major defense acquisition  programs are generally required by law and policy to do the following:     Document program parameters in an acquisition program baseline  that, as implemented by DOD, has been approved by the Milestone  Decision Authority, a higher-level DOD official prior to the  program’s entry into the engineering and manufacturing  development phase. The baseline provides decision makers with  the program’s best estimate of the program’s total cost for an  increment of work, average unit costs for assets to be delivered,  the date that an operational capability will be fielded, and the  weapon’s intended performance parameters.     Once approved, measure the program against the baseline, which  is the program’s initial business case, or obtain the approval of a  higher-level acquisition executive before making changes.     Obtain an independent life-cycle cost estimate prior to beginning  engineering and manufacturing development, and/or production  and deployment. Independent life-cycle cost estimates provide  confidence that a program is executable within estimated cost.    Regularly provide detailed program status information to Congress,  including information on cost, in Selected Acquisition Reports.     Report certain increases in unit cost measured from the original or  current program baseline.    Covered major defense acquisition programs and subprograms are  required to complete initial operation test and evaluation before  proceeding beyond low-rate initial production. After testing is  completed, the Director for Operational Test and Evaluation  assesses whether the results of the test confirm that the system or  components are effective and suitable for combat.
When MDA was established in 2002, it was granted exceptional flexibility  in setting requirements and managing the acquisition, in order that its  BMDS be developed as a single program, using a capabilities-based, spiral  upgrade approach to quickly deliver a set of integrated defensive  capabilities. This decision deferred application of DOD acquisition policy  to BMDS until a mature capability is ready to be handed over to a military  service for production and operation. Because the BMDS program has not  formally entered the DOD acquisition cycle, application of laws that are  designed to facilitate oversight and accountability of DOD acquisition  programs and that are triggered by phases of this cycle, such as the  engineering and manufacturing development phase, has also effectively  been deferred. This gives MDA unique latitude to manage the BMDS and it  enabled MDA to begin delivering an initial defensive capability in 2004.  However, the flexibility also came at the expense of transparency and  accountability.
Specifically, a BMDS cost, schedule, and performance baseline does not  have to be established or approved by anyone outside MDA. Recent laws  have created some baseline-related requirements for parts of the BMDS.  In addition, while most major defense acquisition programs are required  by statute to obtain an independent verification of cost estimates, MDA  has only recently developed cost estimates for selected assets and plans to  work with the DOD Office of the Director for Cost Assessment and  Program Evaluation to develop independent cost estimates for more MDA  elements.  Further, assessments of a system’s suitability and effectiveness  in combat have only been accomplished, with limitations, for the currently  deployed Aegis BMD weapon system. The limited amount of testing  completed, which has been primarily developmental in nature, and the  lack of verified, validated, and accredited models and simulations prevent  the Director of Operational Test and Evaluation from fully assessing the  effectiveness, suitability, and survivability of the BMDS in annual  assessments. MDA has agreed to conduct an operational flight test in 2012.
As we concluded in a prior report, having less transparency and  accountability than is normally present in a major weapon program has  had consequences.  The lack of baselines for the BMDS along with high  levels of uncertainty about requirements and program cost estimates  effectively set the missile defense program on a path to an undefined  destination at an unknown cost. Across the agency, these practices left  programs with limited knowledge and few opportunities for crucial  management oversight and decision making concerning the agency’s  investment and the warfighter’s continuing needs. At the program level,  these practices contributed to quality problems affecting targets  acquisitions, which in turn, hampered MDA’s ability to conduct tests as  planned.
section_title: Numerous Strategy Changes Have Exacerbated Transparency and Accountability Challenges
paragraphs: MDA has employed at least three strategies to acquire and deploy missile  defense systems, which has exacerbated transparency and accountability  challenges. From its inception in 2002 through 2007, MDA developed  missile defense capability in 2-year increments, known as blocks, each  built on preceding blocks intended to enhance the development and  capability of the BMDS. However, there was little visibility into baseline  costs and schedules associated with the systems that comprised the  blocks or how the blocks addressed particular threats.
In response to our recommendations, in December 2007, MDA announced  a new capabilities-based block structure intended to improve the  program’s transparency, accountability, and oversight. Instead of being  based on 2-year time periods, the new blocks focused on fielding  capabilities that addressed particular threats. Because the new block  structure was not aligned to regular time periods, multiple blocks were  under way concurrently. This approach included several positive changes,  including a DOD commitment to establish total acquisition costs and unit  costs for selected block assets, including only those elements or  components of elements in a block that would be fielded during the block  and abandoning deferrals of work from one block to another.
MDA was still transitioning to this new capabilities-based block approach  when the Director, MDA terminated it in June 2009. According to MDA,  this was done in order to address congressional concerns regarding how  to structure MDA’s budget justification materials. This termination marked  the third acquisition management strategy for the BMDS in the prior 3  years and effectively reduced transparency and accountability for the  agency. The agency then began to manage BMDS as a single integrated  program but planned to report on cost, schedule, and performance issues  by each element within the program.
Changing the acquisition strategy is problematic because each time it is  changed, the connection is obscured between the old strategies’ scope and  resources and the new strategy’s rearranged scope and resources. This  makes it difficult for decision makers to hold MDA accountable for  expected outcomes and clouds transparency of the agency’s efforts.
We also reported in December 2010 that the adoption of the European  Phase Adaptive Approach (PAA) for deploying missile defense assets has  limitations in transparency and accountability. Specifically, we reported  that DOD made progress in acquisition planning for technology  development and systems engineering and testing and partial progress in  defining requirements and identifying stakeholders but had not yet  developed a European PAA acquisition decision schedule or an overall  European PAA investment cost. We found that the limited visibility into  the costs and schedule for the European PAA and the lack of some key  acquisition management processes reflect the oversight challenges with  the acquisition of missile defense capabilities that we have previously  reported. We concluded that for the European PAA, the flexibility desired  by DOD is not incompatible with appropriate visibility into key aspects of  acquisition management.  Moreover, as DOD proceeds with the European  PAA acquisition activities, it is important for Congress and the President to  have assurance that the European PAA policy is working as intended and  that acquisition activities are cost-effective. We made recommendations  also in January 2011 regarding the development of life-cycle cost estimates  and an integrated schedule for the acquisition, infrastructure and  personnel activities to help identify European PAA implementation risks.  DOD partially concurred with the first recommendation and fully  concurred with the second.
section_title: Prior GAO Recommendations and Congressional Actions to Improve Transparency and Accountability
paragraphs: Congress has taken action to address concerns regarding the acquisition  management strategy, accountability, and oversight of MDA. For example,  in the National Defense Authorization Act for Fiscal Year 2008, Congress  required MDA to establish acquisition cost, schedule, and performance  baselines for each system element that has entered the equivalent of the  engineering and manufacturing development phase of acquisition or is  being produced or acquired for operational fielding. Most recently, the  Ike Skelton National Defense Authorization Act for Fiscal Year 2011  requires the Secretary of Defense to ensure that MDA establishes and  maintains an acquisition baseline for each program element of the BMDS.
Since our first MDA report in 2004, we have made a series of  recommendations to improve transparency and accountability, many of  which are designed to adapt the key transparency and accountability  features already embedded in the DOD acquisition regulation and apply  them to MDA. Some of our key recommendations include:    Establishing and reporting to Congress costs and unit costs, including  development costs in unit costs, including sunk costs in cost estimates,  reporting top-level test goals, obtaining independent cost  and taking steps to ensure the underlying cost estimates are high  quality, reliable, and documented reporting variances.
Improving transparency by requesting and using procur instead of research, development, testing and evaluation funds to  acquire fielded assets.
Strengthening the test program by establishing baselines for each new  class of target in development, including sufficient schedule and  resource margin, including spare test assets and targets, and  strengthening the role of the Director, Operational Test and Evaluation  in assessing missile defense progress.
Implementing a knowledge-based acquisition strategy consistent with  DOD acquisition regulations, and ensure that items are not  manufactured for fielding before their performance has been validated  through testing.
DOD has committed to take action on many of these recommenda While agreeing with our recommendations to enhance baseline reporting,  there are differences in MDA’s perspectives on such issues as sunk costs  and changes in unit cost. tions.
section_title: MDA Has Recently Made Significant Progress in Increasing Transparency and Accountability
paragraphs: In 2010, MDA made significant progress in implementing some of these  recommendations by finalizing a new baseline phase review process in  which the agency set detailed baselines for several BMDS elements, or  portions of elements, for the first time. Specifically, MDA established  resource, schedule, test, operational capacity, technical, and contract  baselines for several BMDS components. It reported these to Congress in  its June 2010 BMDS Accountability Report.
MDA also identified three phases of development where baselines are  approved—technology development, product development, and initial  production phases—and specified the key knowledge that is needed at  each phase. MDA officials stated that they expect that aligning the  development efforts with the phases will help to ensure that the  appropriate level of knowledge is obtained before the acquisitions move  from one phase to the next.
In another key step, approval of the product development and initial  production baselines will be jointly reviewed by the Director of MDA and  the respective service acquisition executive, as a number of missile  defense systems are expected to eventually transition to the military  services for operation. In addition, in regard to these new phases, the  agency established a process for approving baselines. As a result of MDA’s  new baseline phase review process, its 2010 BMDS Accountability Report  is more comprehensive than its 2009 report. program and that its test and targets program needed to be managed  way that fully supported high-priority near-term programs.
We reported last year that MDA extensively revised the test plan to  address these concerns. MDA’s new approach now bases test scenari os  r  on modeling and simulation needs and extends the test baseline to cove the Future Years Defense Program which allows for better estimation of  art of its new  target needs, range requirements, and test assets. Also, as p test plan, MDA scheduled dedicated periods of developmental and  operational testing, during which the system configuration will rema fixed to allow the warfighter to carry out training, tactics, techniques, and procedures for developmental and operational evaluation. Additionally,  the new test plan is expected to provide sufficient time after test events to conduct a full post-test analysis. As we reported last year, these  improvements are important because BMDS performance cannot be assessed until models and simulations are accredited and validated and the test program cannot be executed without meeting its target needs.
Our assessment of the schedule baselines determined that we could  not compare the asset delivery schedule to the prior year’s baseline  because MDA has stopped reporting a comprehensive list of planned  asset deliveries.
Finally, we found the test baseline to be well documented. However,  because it is success oriented, any problems encountered in executin the plan can cause ripple effects throughout remaining test events. Th frequent changes that continue to occur undermine the value of the  test baseline as an oversight tool.
section_title: Rapid Pace of Fielding Assets Makes Transparency and Accountability Even More Important
paragraphs: Ove suc ens to t c consistent lack of disciplined analysis that would provide an  understanding of what it would take to field a weapon system before  system development begins. We have reported that there is a clear set of  prerequisites that must be met by each program’s acquisition strategy t o  realize successful outcomes.   These prerequisites include establishin g a  clear, knowledge-based, executable business case for the product.  An  executable business case is one that provides demonstrated evidence  (1) the identified needs are real and necessary and can best be met with  the chosen concept and (2) the chosen concept can be developed and  produced within existing resources—including technologies, funding,  time, and management capacity. Knowledge-based acquisition principle and business cases combined are necessary to establish realistic cost,  schedule and performance baselines. Without documented realistic  baselines there is no foundation to accurately measure program progre Our work has shown that when agencies do not follow a knowledge-ba approach to acquisition, high levels of uncertainty about requirements,  technologies, and design often exist at the start of development program As a result, cost estimates and related funding needs are often  understated.    r the past 10 years, we have conducted extensive research on  cessful programs and have found that successful defense programs  ure that their acquisitions begin with realistic plans and baselines pri he start of development. We have previously reported that ause of poor weapon system outcomes, at the program level, is the  s.
Aegis Ashore program and the Ground-based Midcourse Defense (GMD)  program.    Testing and Targets:  As in previous years, failures and delays in  testing have continued to delay the validation of models and  simulations used to assess BMDS performance. Target availability  was a significant, though not the only, driver to the test plan  delays. Since 2006, we have reported that target availability has  delayed and prompted modifications to planned test objective s.  This trend continued in 2010. We reported this year that five tests  scheduled for fiscal year 2010 were canceled because of a  moratorium on air launches of targets. The moratorium was  imposed following the failure of an air launched target  participating in MDA’s December 2009 Theater High Altitude Area  Defense (THAAD) flight test. A failure review board investi identified the rigging of cables to the missile in the aircraft as immediate cause of the failure and shortcomings in inte processes at the contractor as the underlying cause. Additionally,  target shortfalls contributed to delays in flight tests, reduced the  number of flight tests, and altered flight test objectives.
December 2009 THAAD flight test failure. The extended use of  undefinitized contract actions has previously been identified by  GAO and others as risky to the government.  Because co officers normally reimburse contractors for all allowable co incur before definitization, contractors bear less risk and have l incentive to control costs during this period. The government als risks incurring unnecessary costs as requirements may change  before the contract is definitized.
Aegis Ashore: the ship-based Aegis BMD. It is expected to track and intercept  ballistic missiles in their midcourse phase of flight using Standard  Missile-3 (SM-3) interceptor variants as they become available.  However, while Aegis BMD has demonstrated performance at sea,  these demonstrations used the currently fielded 3.6.1 version of  Aegis BMD with the SM-3 IA interceptor, not the newer variant of  re  the Aegis operating system and new interceptor that Aegis Asho will use. Aegis Ashore is dependent on next-generation versions of  -3  Aegis systems—Aegis 4.0.1 and Aegis 5.0—as well as the new SM IB interceptor, all of which are currently under development.  Moreover, a series of changes are required to further modify these  new variants of Aegis BMD for use on land with Aegis Ashore.  These modifications include changes to the Vertical Launching  System; suppression or disabling of certain features used at se design, integration, and fabrication of a new deckhouse enclosure  for the radar, and potential changes to the SM-3 IB interceptor.  Changes to those existing Aegis BMD components that will be  reused for Aegis Ashore may reduce their maturity in the context of the new Aegis Ashore program, and new features will require     Aegis Ashore is MDA’s future land-based variant of  testing and assessment to demonstrate their performance. MDA is  plans to make production decisions for the first operational Aeg Ashore before conducting both ground and flight tests.  We  concluded in this year’s report that it is a highly concurrent effor with significant cost, schedule and performance risk.    Ground-based Midcourse Defense: GMD is a ground-based d system designed to provide combatant commanders the capability  to defend the homeland against a limited attack from intermediate,  and intercontinental-range ballistic missiles during the midcourse  phase of flight. The GMD consists of a ground-based interceptor—a  booster with an Exoatmospheric Kill Vehicle on top—and a fire  control system that receives target information from sensors in  order to formulate a battle plan. GMD continues to deliver assets  before testing has fully determined their capabilities and  limitations. The Director, MDA testified on March 31, 2011 that he  considers the GMD interceptors essentially prototypes. In the  urgency to deploy assets to meet the Presidential directive to field  an initial capability by 2004, assets were built and deployed before  developmental testing was completed. During the ongoing  developmental testing, issues were found that led to a need for  retrofits. GMD intercept tests conducted to date have already led  to major hardware or software changes to the interceptors—not all of which have been verified through flight testing. In addition,  manufacturing of a new variant called the Capability Enhancement  II is well underway and more than half of those variants have  already been delivered although their capability has not been  validated through developmental flight tests. To date, the two f tests utilizing this variant have both failed to intercept the target.  According to MDA, as a result of the most recent failure in  December 2010, deliveries of this variant have been halted. Again,  because of the urgency to deploy some capability, limited work  was undertaken on long-term sustainment for the system which is  critical to ensure the system remains effective through 2032. In  September 2010, MDA finalized the GMD Stockpile Reliability  Program Plan, a key step in developing the knowledge needed to  determine the sustainment needs of the GMD system.
section_title: Concluding Observations
paragraphs: Chairman Nelson, Ranking Member Sessions, and Members of the  Subcommittee, this completes my prepared statement. I would be  respond to any questions you may have at this time.
section_title: Contact and Staff Acknowledgments
paragraphs: For questions about this statement, 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  statement. Individuals making key contributions to this statement include  David Best, Assistant Director; LaTonya Miller; Steven Stern; Meredith  Allen Kimmett; Letisha Antone; Gwyneth Woolwine; Teague Lyons;  Kenneth E. Patton; Robert Swierczek; and Alyssa Weir.
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