Defense Acquisitions: Status of Ballistic Missile Defense Program in 2004
Published: 2005-03-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since 1985, the Department of Defense (DOD) has invested $85 billion in ballistic missile defense programs, with $66.5 billion more anticipated over the next 7 years through 2011. As a major result of this investment, the Department is on the verge of activating our nation's first missile defense system for protecting the United States from intercontinental ballistic missile attacks out of Northeast Asia. This initial capability--referred to as Limited Defensive Operations (LDO)--is the first step of a national priority to develop, field, and evolve over time an overarching ballistic missile defense system (BMDS). To fulfill a congressional mandate, GAO assessed how well the Missile Defense Agency (MDA) met its cost, schedule, testing, and performance goals during fiscal year 2004. GAO assessed the program last year and will continue to provide assessments of MDA progress through 2006.
section_title: What GAO Found
paragraphs: By the end of fiscal year 2004, MDA carried out activities needed to field an initial missile defense capability, as planned. These included delivery and emplacement of Ground-based Midcourse Defense interceptors; upgrades of ground-based radars; enhancements to Aegis Navy ships for improved surveillance and tracking; development of command and control software for system operation; and tests to verify that components of this initial capability can communicate as part of an integrated whole. However, the performance of the system remains uncertain and unverified, because a number of flight tests slipped into fiscal year 2005 and MDA has not successfully conducted an end-to-end flight test using operationally-representative hardware and software. Additionally, based on our analysis of prime contractor cost and schedule performance, the development of BMDS elements cost approximately $370 million more than planned during fiscal year 2004. To cover much of this cost overrun, MDA deferred work planned for fiscal year 2004, redirected funds earmarked for other programs, and requested additional funds in its fiscal year 2005 budget to cover the cost of deferred work. In the future, MDA will likely face increased funding risks. MDA plans to request about $10 billion annually from DOD for BMDS development, procurement, and sustainment. However, DOD's acquisition programs are likely to be competing for a decreasing share of the total federal budget and MDA's programs are competing against hundreds of other DOD programs. Also, MDA continues to budget for unanticipated cost growth. For example, the Airborne Laser program plans to spend an additional $1.5 billion to develop and demonstrate a prototype aircraft. Furthermore, procurement and sustainment will demand increased funding as more missile defense components are fielded over time. MDA policy defines a block as an integrated set of capabilities fielded during the 2-year block cycle, but we observed that MDA's fielding goals do not consistently match its cost goals. For example, Block 2004 funds are used to procure 32 Aegis Ballistic Missile Defense missiles, but of these missiles, 11 will be delivered in 2004-2005 and the remaining missiles will be delivered during 2006-2007. MDA officials intend to clarify the block policy in the near future to better align the cost and fielding goals.

section_title: Letter
paragraphs: Our nation’s first missile defense system for protecting the United States  from intercontinental ballistic missile (ICBM) attacks is expected to be  activated for defensive operations in the coming months. This initial  capability is the culmination of efforts on the part of the Missile Defense  Agency (MDA) and other Department of Defense (DOD) components in  response to the President’s December 2002 directive to begin fielding an  initial set of missile defense capabilities to meet the near-term ballistic  missile threat to our nation. It also represents a major result of the $85  billion invested in ballistic missile defense programs since fiscal year 1985.  DOD’s investment in missile defense continues, as indicated by proposed  budgets for the next few years. The Department estimates MDA will need  $66.5 billion between fiscal years 2005 and 2011 to continue work in this  area, with fiscal year 2005 appropriations of $8.8 billion accounting for 13  percent of DOD’s total research and development budget.
The initial capability, which DOD refers to as Limited Defensive  Operations (LDO), is the first step of a national priority to develop, field,  and evolve over time an overarching Ballistic Missile Defense System  (BMDS). While DOD envisions a BMDS capable of protecting the United  States, deployed forces, friends, and allies from ballistic missile attacks of  all ranges, the LDO capability is primarily designed to provide some  protection of the United States against long-range ballistic missile attacks  out of Northeast Asia.
In developing the BMDS, MDA is attempting to follow an evolutionary  acquisition strategy in which the development and fielding of capabilities  is pursued in 2-year blocks. The configuration of a given block builds on  the work completed in previous blocks. Block 2004, being deployed during  the calendar years 2004-2005, is the first biennial increment of the BMDS  to provide an integrated set of capabilities. LDO represents an interim  capability on the path to full Block 2004 fielding.
The National Defense Authorization Act for Fiscal Year 2002 directed DOD  to establish schedule, testing, performance, and cost goals for its ballistic  missile defense programs. As established by DOD, the goals highlight, by  block, overall cost, schedule, and performance objectives for BMDS  development and specify the quantities and locations of specific BMDS  components planned for operational use. The act also directed us to  assess, at the conclusion of each of fiscal years 2002 and 2003, the extent  to which MDA achieved the goals it established. We delivered an  assessment covering fiscal year 2003 to Congress in April 2004.
Congress has since continued to require our assessment through fiscal  year 2006. To fulfill this mandate, we examined the progress that MDA  made in fiscal year 2004 toward its stated goals. For example, many  activities completed in fiscal year 2004 by the various element programs  pertain to the completion of the LDO capability, which is an integral part  of the Block 2004 goals. While conducting this review, we identified issues  associated with MDA’s ability to fund future development and fielding of  its missile defense capabilities and with MDA’s application of the block  approach. Our report includes these observations.
The accomplishment of MDA program goals is ultimately achieved through  the efforts of individual BMDS elements, such as Ground-based Midcourse  Defense and Airborne Laser. Therefore, we based our assessment on the  progress made in fiscal year 2004 by those elements that are under the  management of MDA and that are being developed as part of a block  capability. The elements we reviewed accounted for 72 percent of MDA’s  fiscal year 2004 research and development budget. Details of our scope  and methodology can be found in appendix X.
subsections: section_title: Background
paragraphs: Ballistic missile defense is a challenging mission for DOD, requiring a  unique combination of defensive components—space-based sensors,  surveillance and tracking radars, advanced interceptors, command and  control, and reliable communications—working together as an integrated  system. A typical scenario to engage an ICBM is expected to unfold as  follows:    Overhead satellites detect a missile launch and alert the command  authority of a possible attack.
Upon receiving the alert, the BMDS directs its land- and sea-based  radars to track the missile complex and (if so designed) to identify the  warhead from decoys and associated objects.
Based on accurate track data, an interceptor—consisting of a “kill  vehicle” mounted atop a booster—is launched. The interceptor boosts  itself toward the predicted intercept point and releases its kill vehicle  to engage the threat.
The kill vehicle uses its onboard sensors and divert thrusters to  acquire, identify, and steer itself into the warhead. With a combined  closing speed on the order of 10 kilometers per second (22,000 miles  per hour), the warhead is destroyed through a “hit-to-kill” collision with  the kill vehicle.
To meet this challenge, DOD intends to develop and field a ballistic missile  defense system capable of defeating ballistic missiles during all phases of  flight (see fig. 1).
Under the evolutionary, capabilities-based acquisition strategy being  pursued by DOD, the BMDS has no fixed design or final architecture, and  there are no firm requirements. According to DOD, this approach gives  MDA increased flexibility to develop a system that can more readily  respond to a changing threat and more easily insert new technologies for  enhancing system performance.
The missile defense capability of Block 2004 is primarily one for defending  the United States against ICBM attacks from Northeast Asia and the  Middle East. It is built around the Ground-based Midcourse Defense  (GMD) element, augmented by shipboard Aegis Ballistic Missile Defense  (Aegis BMD) radars, and integrated by the Command, Control, Battle  Management, and Communications (C2BMC) element. The Block 2004  BMDS also includes the Army’s Patriot element for point defense of  deployed U.S. forces against short- and medium-range ballistic missiles.  The Block 2006 program builds directly upon Block 2004. It continues  element development and funds the next increment of fielding that adds  interceptors, new radars, and enhanced battle management capabilities.
MDA is also carrying out an extensive research and development effort to  expand its current operational capability into future blocks. During fiscal  year 2004, MDA funded the development of four other major BMDS  elements—Airborne Laser (ABL), Kinetic Energy Interceptors (KEI),  Space Tracking and Surveillance System (STSS), and Terminal High  Altitude Area Defense (THAAD)—in addition to those elements  comprising the Block 2004 defensive capability. MDA intends to integrate  these elements, when ready, into future BMDS blocks. Table 1 provides a  brief description of these elements, and more information about them is  provided in appendixes II through VIII of this report.
As part of MDA’s planning process, MDA defines overarching program  goals for the development and fielding of BMDS block configurations. The  goals describe the composition of a block (components and elements  under development and planned for fielding), provide the costs and  schedules associated with element development and fielding, and  summarize performance capabilities at the component and system levels.  A block’s cost goal is the portion of MDA’s budget dedicated to  development and fielding activities associated with the block.
MDA has established Block 2004 and 2006 “Development Goals” for the  continued development and testing of six BMDS elements—ABL, Aegis  BMD, C2BMC, GMD, STSS, and THAAD—and stand-alone components  such as forward-deployed radars. These goals identify the developmental  areas MDA is funding as part of the Block 2004 and 2006 programs. The  associated cost goals, which are the planned budgets for these activities,  are approximately $5.7 billion and $12.2 billion for Block 2004 and 2006,  respectively.
MDA also established a complementary set of goals—referred to as  “Fielded Configuration” Goals—in response to the President’s December  2002 direction to begin fielding a limited ballistic missile defense  capability. The fielding goals build directly upon the Development Goals  but aim to deliver an operational missile defense capability during a given  block’s time frame. For example, Block 2004 goals identify the  components of the BMDS available for defensive operations by the end of  December 2005. MDA states that the cost goals associated with the Block  2004 and 2006 fieldings are $1.7 billion and $3.8 billion, respectively.  Therefore, the total cost goals for Block 2004 and 2006 are $7.4 billion and  $16.0 billion, respectively.
Figure 2 depicts MDA’s total budget between fiscal years 2005 and 2011  broken out by block. As illustrated, funding for a given block spans more  than the 2-year period. For example, MDA estimates it will need about  $12.0 billion to fund Block 2008 activities over the next 7 years through  2011.
Many activities completed in fiscal year 2004 by the various element  programs pertain to the completion of the LDO capability—the initial  capability fielded by MDA. Although LDO is not formally listed by MDA as  a Block 2004 goal, it does include the delivery of a capability on the path to  meeting the fielding goals. Table 2 summarizes MDA’s fielding goals.
section_title: Assessment of Scheduled Activities in Fiscal Year 2004
paragraphs: The GMD, Aegis BMD, and C2BMC programs completed scheduled  activities in fiscal year 2004 necessary to support the fielding of LDO, an  integral part of Block 2004. Most notably, the GMD program completed  construction activities at GMD sites, delivered and emplaced five GMD  interceptors in their silos at Fort Greely, Alaska, and completed the  upgrade of the Cobra Dane radar. The Aegis BMD program upgraded three  destroyers for the long-range surveillance and tracking mission that  supports homeland defense against ICBMs. In addition, the C2BMC  program completed software development, activated control centers, and  worked to integrate elements of the system.
These programs also continued developmental and fielding activities in  early fiscal year 2005 to enhance LDO so that the full Block 2004 capability  could be realized by the end of calendar year 2005. For example, the GMD  program delivered a sixth interceptor at Fort Greely in October and two  interceptors at Vandenberg Air Force Base in December, completed the  upgrade of the Beale early warning radar, and initiated the upgrade of the  Fylingdales early warning radar. In addition, the Aegis BMD program  completed the assembly of five missiles and continued with software  development in the upgrade of its cruisers and destroyers. Similarly, the  C2BMC program continued with software development and testing leading  to the final Block 2004 version.
Progress made toward achieving program goals relative to the fielding of  the LDO and Block 2004 capabilities is summarized in tables 3 and 4,  respectively. Detailed evaluations of activities completed in fiscal year  2004 by all BMDS elements are given in appendices II through VIII of this  report.
DOD did not activate the LDO capability MDA developed and fielded.  Although the LDO capability was expected to be placed on alert by the end  of September 2004, officials from the office of the Commander of U.S.  Strategic Command (USSTRATCOM) told us that September 30, 2004, was  a planning date rather than a “hard date.” The officials indicated that the  system had not been put on alert for the following reasons:    Shakedown. Since October 2004, the system has been undergoing a  “shakedown”—a necessary transition phase between development and  operations. During this time, the system is exercised as though an  attack is under way. It enables the warfighter to become familiar with  the system and, importantly, to plan for unexpected failures.
Training. While initial training of operators has been completed, more  is needed. For weapon systems in general, the warfighter does not have  a military capability without trained operators, and training cannot  begin until a weapon system is delivered (or at least far along in  development).
Policy. USSTRATCOM must receive an Execution Order from the  Secretary of Defense before the LDO capability is declared operational.  This order, which would reflect DOD policy, is to include a clear  identification of command and control relationships. USSTRATCOM  plans to advise the Secretary of Defense on the military utility of the  system and could advise against declaring the system operational if, for  example, more testing were needed to increase the command’s  confidence in the system’s effectiveness. Also, the concept of  operations (CONOPS) was not finalized, and issues such as the  integration of defensive and offensive operations still had to be worked  out.
USSTRATCOM officials further explained that the declaration of LDO may  or may not mean the system is “on alert” for defensive operations—LDO  operation is more complicated than “being on” or “being off” alert. For  example, the system could be in “developmental mode” when operated by  MDA for testing but capable of being transitioned to an “operational  mode” for defensive operations given sufficient time. As of March 2005,  DOD had not announced a specific date for activating the initial missile  defense capability.
section_title: Assessment of Testing in Fiscal Year 2004
paragraphs: MDA completed a number of ground tests and exercises in fiscal year  2004, but key flight tests using LDO-configured components were delayed.  For example, MDA verified integration and connectivity between its GMD,  Aegis BMD, and C2BMC elements, and the warfighter participated in  several missile defense exercises (wargames) as part of their training to  understand and operate the system. However, the GMD program office  conducted two booster tests (non-intercept attempts) in fiscal year 2004  even though six flight tests were planned. As a result, GMD interceptors  were emplaced in silos before flight testing was completed to verify that  LDO hardware and software could function in an operational environment.
subsections: section_title: Significant Testing Was Completed
paragraphs: A summary of significant testing completed during fiscal year 2004 by each  of the respective element programs is presented in table 5. More thorough  discussions of element testing are given in appendices II through VIII of  this report.
section_title: Delays and Cancellations of GMD Flight Tests Slow Attainment of Knowledge
paragraphs: The GMD program conducts integrated flight tests (IFT) to realistically  demonstrate element operation using actual hardware and software. MDA  planned to conduct several flight tests during fiscal year 2004 to gain  knowledge about the element’s effectiveness and operation under real- world conditions. However, only two of six flight tests scheduled to occur  in fiscal year 2004 were conducted. As noted in table 5, these were non- intercept tests of the Lockheed and OSC boosters. A second Lockheed  booster test (IFT-13A) was deferred indefinitely; two intercept attempts  utilizing LDO-configured hardware and software (IFT-14 and -15) were  either delayed or cancelled; and, IFT-13C, the first flight test in 2 years  with the potential for an intercept, was delayed 9 months. When IFT-13C  was conducted in December 2004, the interceptor failed to launch, which  precluded the fulfillment of key test objectives associated with the LDO- configured interceptor.
IFT-13C was of particular significance because it was to have  demonstrated operational aspects of the LDO capability for the first time  in a flight test environment. For example:  IFT-13C was the first flight test to utilize LDO hardware and software.  Previous intercept attempts employed a surrogate booster and an  earlier configuration of the kill vehicle. In particular, IFT-13C was to  have launched a GMD interceptor comprised of the operational kill  vehicle mated to an OSC booster.
IFT-13C offered the opportunity to exercise Aegis BMD tracking and  connectivity in a manner consistent with an actual defensive mission,  that is, to demonstrate Aegis BMD’s ability to serve as a fire-control  radar for ICBM engagements. However, because weather exceeded  peacetime operational safety limits, Navy commanders withdrew Aegis  BMD participation from IFT-13C; the program office concurred with  the decision.
The delay of IFT-13C by 9 months demonstrates that MDA is responsibly  following an event-driven test program, that is, conducting tests only when  ready. IFT-13C was delayed more than once to correct technical problems  with the interceptor and to upgrade the test interceptor to a configuration  that matches the ones deployed. However, the event-driven approach was  not carried over into fielding. Eight GMD interceptors were in their silos  by the end of December 2004 before flight testing was completed to verify  that LDO hardware and software could function in an operational  environment. If future flight testing identifies problems with the  interceptor, MDA could incur added costs to recall and update fielded  assets.
section_title: Aegis BMD Conducted Limited Testing of Its Long- Range Surveillance and Tracking Capability
paragraphs: In anticipation of fielding for LDO, the Aegis BMD flight test program  focused on long-range surveillance and tracking—that is, to operate the  element as a forward-deployed BMDS sensor—in support of the GMD  mission. To this end, by October 2004, the Aegis BMD program completed  software development and upgraded three Aegis destroyers for this role;  they are available for operations. However, the surveillance and tracking  function has only been partially demonstrated. For example:    Aegis BMD participated in Glory Trip 185, during which an Aegis  destroyer successfully tracked a Minuteman III ICBM launched from  Vandenberg Air Force Base. However, the test did not exercise Aegis  BMD tracking and connectivity in a manner needed for an actual  defensive mission, that is, as an integral part of the system during  which the destroyer acts as a fire control radar. In addition, the  software tested was not the version installed on fielded destroyers.
During the Pacific Explorer II field exercise, a destroyer in the Sea of  Japan successfully passed track data of a simulated target, thereby  demonstrating connectivity with the BMDS. In Pacific Explorer III, an  Aegis destroyer planned to track an actual missile and pass track data  to the BMDS. Although the destroyer tracked the live target missile, a  malfunction with the target limited the amount of data collected by the  Aegis destroyer. Specifically, the target ended its flight before Aegis  BMD could send the GMD element all of the information needed for  engaging the target.
Finally, delays in the GMD flight test program precluded Aegis BMD  from participating in two planned integrated flight tests, IFT-13C and  IFT-14, during fiscal year 2004. Without these tests, MDA has not  verified that the element’s long-range surveillance and tracking  capability will perform as desired in an actual defensive mission.
section_title: MDA Mandated to Conduct Operationally Realistic Testing
paragraphs: The 2005 Defense Authorization Act, section 234, directed DOD to conduct  an operationally realistic test of the BMDS by October 1, 2005, and  required the Secretary of Defense, in consultation with the Director,  Operational Test and Evaluation (DOT&E), to prescribe appropriate test  objectives. Such a test is expected to exercise the LDO and Block 2004  configuration in a more realistic manner. Officials from the office of  DOT&E told us that the test would be derived from an existing flight test  with objectives focused more on operational than developmental aspects.
DOT&E recently approved the operational test portion of MDA’s  Integrated Master Test Plan. The Integrated Master Test Plan establishes  the framework for BMDS ground and flight testing through Block 2006. It  is an overarching document that defines the test plans for the BMDS and  its elements, identifies operational test objectives to support continuous  characterization of demonstrated operational capability, and identifies  associated test resources.
section_title: Assessment of System Performance in Fiscal Year 2004
paragraphs: MDA has conducted various ground and flight tests that provide some  degree of confidence that the LDO capability—consisting of the GMD  element, Aegis BMD destroyers for surveillance and tracking, and C2BMC  for command and control—will operate as intended. In addition, MDA  predicts that the LDO capability, although limited in inventory, will be  effective in providing some protection of the United States against ICBM  attacks from Northeast Asia. However, the agency has not verified that the  LDO capability can operate as an integrated system without range-test  limitations and artificialities (for example, using surrogate components to  emulate missile defense functions), and operational testers within DOD  state that there is not enough data to accurately characterize system  performance.
subsections: section_title: Assessment of LDO Effectiveness Subject to Interpretation
paragraphs: MDA and DOT&E differ on derived estimates of LDO effectiveness. Both  offices employed similar methodologies—that is, they identified critical  functions needed to carryout a BMD engagement, estimated the  probability of success for each function, and combined results into a  “probability chain” to calculate a total probability of success for a given  scenario. However, the assessments made by MDA and DOT&E differ in  that they are based on different types and sources of information.
MDA’s assessment is based on the output from BMDS-level simulations  using data derived from a variety of sources, including design  specifications and output from high-fidelity simulations of various  components (such as radars and interceptors). By employing digital  simulations, estimates of system effectiveness are obtained over a wide  range of conditions, scenarios, and system architectures. These  simulations are anchored by data collected during flight testing so that  their underlying models are reflective of real-world operation.
DOT&E generated its estimates of system effectiveness by also  approximating each factor of the “probability chain,” but it relied on  historical data and results from recent ground and flight tests. Based on  this methodology, DOT&E concluded that there is not enough test data to  accurately characterize system effectiveness—that is, the estimates are  too uncertain to make definitive conclusions. In commenting on MDA’s  methodology, DOT&E officials made the following points:    MDA’s computer-based assessments are appropriate for a  developmental program, but there could be difficulty in interpreting  results for operational considerations.
A noteworthy limitation of MDA’s assessment is the lack of system- level performance data. Although its models provide a good  representation of the system being built, fundamentally they are not  predictive of actual system performance.
The uncertainty in LDO effectiveness has a direct impact on how the  warfighter operates the system. As noted by officials from USSTRATCOM,  the uncertainty limits the warfighter’s ability to formulate tactics and  procedures in operating the system, especially with limited inventory.
In addition, knowledge of component performance can play a useful role  in fielding decisions by assisting decision makers in determining whether  the capability available at the time warrants the cost of fielding, operating,  and sustaining the system, or whether additional investment and  development to enhance the capability are needed.
section_title: Integrated Operation of LDO Capability Remains Unverified
paragraphs: MDA has conducted a variety of tests that provide some degree of  confidence that the LDO capability will operate as intended. For example,  since 1999, the GMD program has conducted eight flight tests (intercept  attempts) that emulated system operation against ICBM attacks. In  addition, based on MDA documentation, the various functions of the BMD  engagement—such as launch detection, tracking, interceptor launch, and  intercept—have been demonstrated in a variety of venues, including  simulations, ground tests, and flight tests. Technical indicators monitored  by GMD, Aegis BMD, and C2BMC show that the elements’ various  components are on track to function as expected during a BMD  engagement. For example, the Aegis BMD program projects that the Aegis  SPY-1 radar is able to deliver adequate performance in support of the GMD  mission. Furthermore, based on past flight tests, MDA states that  discrimination performance of the GMD kill vehicle is adequate to meet  system-level objectives relative to the Block 2004 threat.
However, collectively, these accomplishments do not verify integrated  system operation of the LDO capability because of inherent limitations and  artificialities. An end-to-end test of system operation—beginning with  launch detection and ending with intercept confirmation—should  incorporate operational test objectives such as test realism, lack of  scripting, and the utilization of production-representative hardware.  Although MDA has progressed in demonstrating such objectives in a  ground-test setting, they have yet to be demonstrated in end-to-end flight  tests. As we reported in February 2004, GMD flight tests to date have  demonstrated basic functionality of a representative missile defense  system using surrogate and prototype components. In addition, they have  shown success in intercepting a mock reentry vehicle in a developmental  test environment. However, as developmental tests, they were scripted,  did not use production-representative hardware and software, and  required the placement of a C-band transponder on the target reentry  vehicle. The transponder was essential for the execution of the flight  tests—no ground radar of sufficient accuracy for guiding the interceptor  to the intercept point was available.
Although MDA has conducted many tests to exercise separate functions of  the BMD mission, component-level testing in preparation for LDO has  been incomplete. For example, MDA conducted wargames that enabled  the warfighter to exercise the C2BMC in a simulated operational  environment to gain insight in and provide feedback on C2BMC  capabilities. Also, GMD radars and Aegis BMD destroyers took advantage  of other DOD missions that enabled these elements to exercise radar and  battle management operations. However, some components have not been  fully tested:    The Cobra Dane radar is located at Eareckson Air Station in Shemya,  Alaska, at the western end of the Aleutian chain. Its close proximity to  Russia allows it to perform its primary mission of collecting data on  ICBMs and submarine-launched ballistic missiles launched into the  Kamchatka impact area. In fiscal year 2004, the GMD program  completed hardware installation and software upgrades to the Cobra  Dane radar. To test these upgrades, Cobra Dane tracked a foreign  missile launch and participated in an integrated ground test. However,  the upgraded Cobra Dane radar has not participated in a flight test  event as the primary fire control radar—a role it would need to fill in  the event of a real threat. MDA may conduct a test during the third  quarter of fiscal year 2005 using a long-range air-launched target to  demonstrate the upgraded Cobra Dane under more operationally  realistic conditions.
Aegis destroyers upgraded for the long-range surveillance and tracking  capability have not been exercised in a manner consistent with an  actual defensive mission. That is, the Aegis BMD element has not  provided track data of a target, in real time, for use in planning a BMD  mission against a target ICBM. Aegis BMD will first participate in a  GMD flight test in this role in fiscal year 2005. Despite this concern,  DOT&E officials believe that Aegis BMD can adequately perform its  detection and tracking functions.
section_title: Assessment of System Cost in Fiscal Year 2004
paragraphs: We used contractor Cost Performance Reports in combination with  Earned Value Management (EVM) analysis to assess progress made by  the various element prime contractors toward MDA’s cost and schedule  goals during fiscal year 2004. The government routinely uses such reports  to independently evaluate these aspects of the prime contractors’  performance. Generally, the reports detail deviations in cost and schedule  relative to expectations established under the contract. Contractors refer  to deviations as “variances.” Positive variances are generally associated  with the accomplishment of activities under cost or ahead of schedule,  while negative variances are often associated with the accomplishment of  activities over cost or behind schedule. Cost Performance Reports provide  program mangers and others with information on a contractor’s ability to  perform work within estimated cost and schedule. When reports show that  the contractor is encountering problems that cause cost growth, program  officials can then take actions to prevent further growth.
We assessed MDA fiscal year 2004 cost performance by reviewing the cost  performance of each system element, which, in turn, is based on the cost  performance of its element prime contractor. We used this methodology  because a large percentage of MDA’s budget is allocated to prime  contractors that develop the various BMDS elements. As summarized in  table 6, prime contractors responsible for developing three of the seven  BMDS elements we reviewed—C2BMC, KEI, and THAAD—completed  their fiscal year 2004 work at or near budgeted costs. Activities cost more  than budgeted for the ABL, GMD, and the STSS elements by $114 million,  $220 million, and $35 million, respectively. Also, our analysis of cost and  schedule performance for the entire Aegis BMD element could not be  conducted, because Cost Performance Reports for the Standard Missile 3  contract were not issued until September 2004. Our detailed findings are  presented in appendices II through VIII of this report.
subsections: section_title: Negative Cost Variances Incurred by ABL, GMD, and STSS Prime Contractors
paragraphs: ABL incurred a negative cost variance of $114 million during the first half  of fiscal year 2004, before the program was restructured to make its cost  and schedule targets more realistic. This variance stemmed primarily from  two sources. First, the program encountered unanticipated complexity in  manufacturing and in integrating advanced optics and laser components  for the prototype system. Second, the push to rapidly develop the  prototype aircraft caused the program to limit testing of subcomponents,  which, in turn, generated rework and modified requirements. To address  the negative variance for ABL, program officials told us that they  redirected funds originally earmarked for other program efforts.
GMD incurred a negative cost variance of $220 million. The contractor  originally underestimated the cost of readying the element for LDO and  experienced unexpected problems requiring some rework of its kill  vehicle. Additionally, in response to explosions at a subcontractor’s  propellant mixing facility, the program incurred cost to transition  operations to a new vendor. To address its negative cost variance for  GMD, MDA deferred some work planned for completion in fiscal year 2004  into fiscal year 2005, and, to cover these increased costs, requested and  received additional money in its fiscal year 2005 budget. MDA also  directed other programs within the agency, such as Test and Evaluation, to  pick up GMD’s portion of the cost of work tasks that benefited both  programs. Employing established EVM analysis techniques, we estimate  that the GMD contract—which ends in September 2007—will overrun its  budget by between $593 million and $950 million at its completion  assuming no corrective actions are taken.
The negative STSS cost variance was largely attributed to a subcontractor  who had a number of quality and systems-engineering problems in  developing the payload—sensors and supporting subsystems—onboard  the two STSS demonstration satellites. The program office maintains that  there is enough management reserve to cover the overrun at the end of the  contract, assuming that the reserve is not used for other purposes before  then.
section_title: Lack of Cost Performance Data for ABL, Aegis BMD, and KEI Elements Prevented Full Assessment
paragraphs: ABL program officials’ insight of their prime contractor’s cost and  schedule performance between April and July 2004 was somewhat limited.  During this time, program officials directed the contractor to suspend  normal cost performance reporting while they restructured the ABL prime  contract to make its target cost and schedule more realistic. In lieu of  providing normal Cost Performance Reports, the contractor provided the  program office with monthly forecast expenditure plans, detailed work  activities, and the number of staff needed to complete planned tasks. The  program office relied on these metrics to determine the program’s status  and to provide insight into the contractor’s cost and schedule  performance. In the 5 months since cost reporting resumed, the cost and  schedule variance has been relatively stable.
We could not fully assess cost performance for the Aegis BMD program in  fiscal year 2004. The prime contractor developing the SM-3 missile did not  generate Cost Performance Reports until September 2004, even though the  prime contract was awarded in August 2003. Program officials told us that,  instead, they monitored contractor performance through monthly  management and business meetings where cost performance, milestones,  and future performance were reviewed. Program officials indicated that  the delay in issuing Cost Performance Reports stemmed from the late  establishment of the contract’s performance management baseline. It was  established 7 months after contract award because of the need for the  program office to react to funding issues. In addition, the program  suspended contractor cost and schedule performance reporting until after  the Aegis BMD program office completed an integrated baseline review 5  months later.
KEI program officials also had reduced insight into its prime contractor’s  work efforts for a portion of fiscal year 2004. After contract award in  December 2003, the prime contractor began submitting Cost Performance  Reports in May 2004. Program officials suspended cost performance  reporting after August 2004 because of the need to restructure the prime  contract in response to reduced funding. Program officials told us that the  contractor will resume reporting in 2005 after a reliable baseline that  reflects the full extent of the program’s restructure is available.
section_title: Funding Risks Expected to Increase for Ballistic Missile Defense Program
paragraphs: A number of factors portend an increasing level of funding risk for the  ballistic missile defense program in the years ahead. Based on DOD’s  Future Years Defense Plan for fiscal years 2006-2011, MDA plans to  request, on average, Research, Development, Test, and Evaluation  (RDT&E) funding of about $10 billion annually. This funding supports  continued development, procurement, and sustainment of hardware and  software that MDA is fielding. However, sources outside and within DOD  are expected to put pressure on MDA’s share of research and development  dollars.
One factor for the increasing pressure is that DOD’s acquisition programs  such as ballistic missile defense are likely to be competing for a decreasing  share of the federal budget. These programs are categorized as  “discretionary spending” as opposed to “mandatory spending,” such as  Social Security, Medicare, and Medicaid. In fiscal year 2004, discretionary  spending accounted for about 39 percent of the federal budget. The  Congressional Budget Office projects that discretionary spending is likely  to decrease to 36 percent of the federal budget by fiscal year 2009 and to  32 percent in by fiscal year 2014.
A second factor is competing demands for funding within DOD. For  example, although missile defense is seen as a national priority and has  been funded nearly at requested levels in the past few years, MDA is facing  budget cuts. Indeed, DOD’s Program Budget Direction of December 2004  called for MDA to plan for a $5 billion reduction in funding over fiscal  years 2006-2011. In addition, MDA is receiving about 13 percent of the $70  billion RDT&E budget in fiscal year 2005 but must continue to compete  with hundreds of existing and planned technology development and  acquisition programs for RDT&E funding. Cost growth of existing weapon  programs puts additional pressure on MDA’s share. We found, for  example, that RDT&E cost estimates grew $6.7 billion for the Joint Strike  Fighter in calendar year 2003 and $9.2 billion for the Future Combat  System in fiscal year 2004.
The third factor comes from within MDA itself. The agency continues to  respond to cost growth of ongoing programs to enhance the components  and elements of the BMDS. As noted above, ABL, GMD, and STSS incurred  a collective negative cost variance of approximately $370 million in fiscal  year 2004 and, as we reported last year, MDA elements incurred a  collective negative cost variance of about $380 million in fiscal year 2003.  Unless MDA can mitigate these cost variances, significant cost overruns  could occur on these contracts in the future. Estimating cost and schedule  targets of new and complex technologies can be difficult and, as  demonstrated, are often underestimated. Furthermore, hardware made  available for operational purposes is not being fully tested before being  fielded. If the need arises to correct problems identified in subsequent  testing, removing and recalling this hardware could prove costly.
A fourth factor for the increasing pressure on MDA’s RDT&E budget is  that MDA is starting to field components of the BMDS, whose production,  operation, and sustainment are also funded by RDT&E dollars. A flat  RDT&E budget combined with growing fielding costs would result in a  decrease in investment in research and development—MDA’s primary  mission. According to program documentation, MDA’s budget for its  fielding activities between fiscal years 2006 and 2011 includes an average  of $1.76 billion per year for procuring BMDS assets and an additional $400  million per year for sustaining the fielded capability. However, the fielding  costs can be expected to increase in the years to come as more  components of GMD, Aegis BMD, and THAAD are integrated into the  BMDS.
Operations and support (O&S) costs of fielded systems are generally  significant and can be expected to be substantial for operational  capabilities of the BMDS. In our 2003 report on total-ownership (life-cycle)  cost, we found that the cost to develop and procure a weapon system  usually represents about 28 percent of the weapon system’s life-cycle cost;  O&S costs typically account for the remaining 72 percent of a weapon’s  systems total life-cycle cost. The only BMDS element thus far with a life- cycle cost estimate, the Army’s Patriot-MEADS missile defense program,  has comparable life-cycle cost percentages. According to the Army’s  Lower-Tier Project Office, the Patriot-MEADS development cost accounts  for 6.4 percent, procurement accounts for 21.2 percent, and O&S costs  account for 72.4 percent of the total life-cycle cost of $151 billion.
DOD officials cautioned us that estimating life-cycle costs of missile  defense capabilities involves considerable uncertainty. For example, O&S  costs depend on the state of readiness of the fielded system, which is  difficult to predict. In addition, historical data of component reliability in  the field and the cost to repair operational missile defense assets are  essentially nonexistent. Furthermore, life-cycle cost estimates of standard  DOD weapon systems assume O&S costs apply for long periods of time, on  the order of 20 years. Components of the BMDS, however, might be in the  field for shorter durations. Finally, our previous work recognized that  life-cycle cost estimates for revolutionary systems such as the ABL  program, which utilize new technologies in unproven applications, are  unknown. When fielded, operation and support efforts for ABL could be  substantial because ABL will require unique support for its laser and  beam-control components and ground infrastructure for chemical storage,  mixing, and handling.
section_title: MDA Is Not Consistently Matching Cost and Fielding Goals
paragraphs: In assessing the extent MDA achieved its stated goals in fiscal year 2004,  we observed that MDA’s cost goal for a given block is not consistently  aligned with that block’s fielding goals. According to MDA policy, for  example, interceptors identified with the Block 2004 fielding goals and  fielded during calendar years 2004-2005 should be funded as part of the  Block 2004 cost goal. As originally designed, the block approach would  provide MDA with the flexibility to deliver a basic capability initially and  enhance it during subsequent blocks to respond to the changing threat and  to insert new technologies for enhanced performance. The block approach  also would provide for accountability, because MDA would identify for  decision makers the promised capabilities to be delivered by the end of  each block for a specified investment of funds.
In the following instances, however, we found that MDA has not been  consistently matching a block’s cost and fielding goals thereby obscuring  the relationship between requested funding and delivered capabilities:    Funds accounted for in the Block 2004 cost goal are being used to  procure 32 Aegis BMD SM-3 missiles. Of these missiles, 11 will be  delivered in 2004-2005, and the remaining missiles will be delivered  during 2006-2007. Similarly, funds accounted for in the Block 2006 cost  goal are being used to procure 40 missiles. Of these missiles, 7 will be  delivered in 2006-2007, and the remaining delivered during 2008-2009.
The THAAD program is funding a “fire unit” as part of its Block 2006  program. Operated by the Army, it will consist of a radar, a battle  management unit, 3 launchers, 24 missiles, and equipment for support,  maintenance and training. Even though MDA refers to this fire unit as a  Block 2006 fielding, it will not be delivered until 2009 (i.e., during Block  2008).
In addition, counter to the definition of a block as an integrated set of  capabilities fielded during the 2-year block window, the Airborne Laser  program will not field any capabilities during Block 2004 although Block  2004 funds are used in the program’s development. Rather, the ABL  program is focused on developing a prototype aircraft for use in a lethality  demonstration—a flight test in which the ABL aircraft will attempt to  shoot down a short-range ballistic missile. However, ABL’s funding is  broken out by block—2004, 2006, and 2008—even though the program is  developing a single configuration of the element that will not be integrated  into the BMDS earlier than Block 2008.
section_title: Conclusion
paragraphs: MDA delivered much of what it planned in fiscal year 2004, and DOD is on  the verge of standing up an initial capability against long-range ballistic  missiles launched from Northeast Asia. Despite this success, the  performance of the system remains uncertain and unverified because of  recurrent test delays and failures. Also, Ground-based Midcourse Defense  developmental costs continue to increase and the Airborne Laser program  was restructured when it became clear that much more time and money  would be needed to develop and demonstrate a prototype aircraft.
Looking to the future, decision makers in Congress and DOD face billion  dollar investment decisions in allocating funds both within MDA’s RDT&E  activities and between MDA and other DOD programs. In exercising their  funding and oversight responsibilities, these decision makers would  benefit from a consistent implementation of a block policy for which  delivered capability is aligned with tax dollars received.
section_title: Recommendation for Executive Action
paragraphs: To assist decision makers in Congress and DOD in exercising their  oversight of MDA’s acquisition plans and in evaluating MDA’s budget  requests, we recommend that the Director, MDA, clarify and modify, as  needed, its block policy to ensure that a block’s cost and fielding goals are  consistently aligned.
section_title: Agency Comments and Our Evaluation
paragraphs: DOD’s comments on our draft report are reprinted in appendix I. DOD  concurred with our recommendation. Acknowledging our observations,  the Department noted that the policy for ballistic missile defense block  definitions should provide for consistent accounting of the various  features of each block. MDA is taking steps to clarify and modify the block  definitions for that purpose.
We are sending copies of this report to the Secretary of Defense and to the  Director, MDA. We will make copies available to others upon request. In  addition, the report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841. The major contributors to this report are  listed in appendix XI.
section_title: Appendix I: Comments from the Department of Defense
subsections: section_title: Program Description
paragraphs: The Aegis Ballistic Missile Defense  (Aegis BMD) element is designed  to protect U.S deployed forces,  friends, and allies from short- and  medium-range ballistic missile  attacks. Additionally, its shipboard  radar can serve as a forward- deployed sensor for surveillance  and early tracking of long-range  ballistic missiles in support of the  Ground-based Midcourse Defense  (GMD) mission. To provide these  capabilities, the Missile Defense  Agency (MDA) is upgrading  existing Aegis Navy ships for the  BMD mission. MDA completed an  initial surveillance and tracking  capability in fiscal year 2004 and  plans to field an initial intercept  capability in April 2005.
The Aegis BMD program completed work planned for fiscal year 2004  generally on schedule and is largely on track to upgrade system software and  expand missile inventory for an enhanced capability by the end of December  2005 (Block 2004). However, Aegis destroyers upgraded for the long-range  surveillance and tracking (LRS&T) mission had limited opportunities to be  exercised in a manner consistent with an actual defensive mission.
Schedule:  In fiscal year 2004 and early 2005, the Aegis BMD program  completed the upgrade of three Aegis destroyers for the LRS&T mission—all  are available for operations. In addition, the program delivered five missiles,  known as the Standard Missile 3 (SM-3), in the first quarter of fiscal year  2005 for the element’s Block 2004 engagement capability. Because of funding  constraints and ship availability, missile deliveries and ship upgrades were  delayed. In particular, the program expects to have available a slightly  smaller inventory of SM-3 missiles by December 2005 than was originally  planned. Also, the program expected to upgrade three cruisers by the end of  Block 2004, but only two will be completed by this time.
DOD’s planned investment in the  Aegis BMD program from program  inception in 1996 through 2011 is  approximately $10 billion. DOD  expended $3.67 billion between  fiscal years 1996 and 2004,  Congress appropriated $1.14 billion  for fiscal year 2005, and MDA is  budgeting about $5.22 billion  between fiscal years 2006 and 2011  for Aegis BMD development,  procurement, and operations.
Testing:  Aegis BMD flight testing conducted in fiscal year 2004 focused on  the LRS&T mission, including the element’s connectivity with the BMDS.  Because there were limited opportunities to track actual targets using the  fielded version of the LRS&T system, this capability was only partially  demonstrated prior to the destroyers’ fielding. The Aegis BMD program also  conducted one successful intercept attempt against a short-range ballistic  missile target during fiscal year 2004. Finally, design changes to the missile’s  divert system underwent ground testing and are planned to be tested in flight  in fiscal year 2005.
Performance:  The Aegis BMD program has demonstrated the capability to  intercept a non-separating target through its successes in five of six flight  tests. The root cause of a failure in the missile’s divert system during the one  unsuccessful attempt is understood, and design changes are expected to be  tested in flight in fiscal year 2005. Although the program has exercised the  element’s LRS&T capability in a small number of flight-test events, it has not  yet used the fielded version of the system software to provide real-time track  data of a target for use in planning a BMD mission, as it would need to do in  an actual defensive operation.
Cost:  We could not fully assess cost performance for the Aegis BMD  program in fiscal year 2004 based on an analysis of prime contractor Cost  Performance Reports. We found that the contractor responsible for  upgrading existing Aegis ships for the BMD mission completed fiscal year  2004 work $3.5 million under budget but was unable to complete $2.0 million  worth of work. However, we were unable to assess cost and schedule  performance of the prime contractor who develops the SM-3 missile because  Cost Performance Reports were not available during fiscal year 2004.
section_title: Appendix II: Aegis Ballistic Missile Defense
subsections: section_title: Element Description
paragraphs: The Aegis Ballistic Missile Defense (Aegis BMD) element is a sea-based  missile defense system being developed to protect deployed U.S. forces,  allies, and friends from short- and medium-range ballistic missile attacks.  It will also be used as a forward-deployed Ballistic Missile Defense System  (BMDS) sensor, employing its shipboard SPY-1 radar, to perform  surveillance and tracking of long-range ballistic missiles in support of the  Ground-based Midcourse Defense (GMD) mission.
The Aegis BMD element builds upon the existing capabilities of Aegis- equipped Navy cruisers and destroyers. Planned hardware and software  upgrades to these ships will enable them to carry out the missile defense  mission in addition to their current role of protecting U.S. Navy ships from  air, surface, and subsurface threats. The program is also developing the  Standard Missile 3 (SM-3)—the system’s interceptor missile, which is  designed to destroy enemy warheads through hit-to-kill collisions above  the atmosphere. The SM-3 is comprised of a kill vehicle mounted atop a   3-stage booster.
section_title: History
paragraphs: In 1996, the Department of Defense (DOD) initiated the Navy Theater Wide  program, the predecessor to Aegis BMD. The Navy Theater Wide system  was to be a ship-based missile defense system capable of destroying short- range ballistic missiles above the atmosphere. At the time, plans called for  deploying the first increment of the Navy Theater Wide system in 2010 and  a final increment with an improved kill vehicle at a later, undefined date.
section_title: Developmental Phases
paragraphs: The Missile Defense Agency (MDA) currently manages and funds the Aegis  BMD program, although the U.S. Navy has a role in its development and  management. Accordingly, the Aegis BMD element is being developed  under MDA’s acquisition approach, which delivers system capabilities in   2-year block increments. The first increment of the Aegis BMD element,  Block 2004, is expected to deliver a limited operational capability in the  2004-2005 time frame. It provides for surveillance and tracking of long- range ballistic missiles and an intercept capability (engagement role)  against shorter-range ballistic missiles. The Block 2004 capability is being  rolled out in three phases:    Initial fielding of the surveillance and tracking capability. By  October 2004, the program office upgraded three Aegis destroyers with  the ability to perform the long-range surveillance and tracking (LRS&T)  function as a BMDS sensor in support of the GMD mission. All three  destroyers are available for operations. This capability is the element’s  contribution to MDA’s fielding of Limited Defensive Operations (LDO),  MDA’s first increment of fielded capability.
Initial fielding of an intercept capability. By April 2005, MDA plans  to have available two cruisers, along with a combined inventory of  approximately five SM-3 missiles. The cruisers are expected to be  capable of performing its two BMD missions, LRS&T and the  engagement of short- and medium-range ballistic missiles. This  configuration could be deployed operationally if so directed in an  emergency.
Completion of the Block 2004 element. The program expects to  increase the number of Aegis destroyers capable of providing LRS&T  from 3 to 10 by the end of December 2005. In addition, the program  plans to deliver eight SM-3 missiles available to be deployed on  upgraded cruisers available for the engagement role.
Future block configurations of the Aegis BMD element build upon the  Block 2004 capability. In Block 2006, MDA plans to add the capability to  defeat intermediate-range ballistic missiles with limited countermeasures  and to increase Aegis BMD’s role as a remote sensor by upgrading radar  capabilities. The Aegis BMD Block 2008 configuration will incorporate  upgrades to the SPY-1 radar to improve the radar’s discrimination  capability and to enhance the element’s command and control component  so that the element can engage multiple threats simultaneously. Finally,  the Aegis BMD Block 2010 and 2012 configurations are expected to  incorporate missile enhancements, improve discrimination capability  against advanced countermeasures, and improve planning and  coordination as part of the BMDS.
section_title: Planned Accomplishments for Fiscal Year 2004
paragraphs: The Aegis BMD program establishes annual element-level goals by  outlining specific activities the program plans to complete during a given  fiscal year. In fiscal year 2004, the program focused largely on delivering  the LRS&T capability for LDO and continuing with activities leading to the  full Block 2004 capability. These activities can be grouped into three  categories: fielding, testing, and design reviews.
Fielding. The Aegis BMD program planned to install the initial version  of the operational computer program and make associated hardware  upgrades on three Aegis destroyers enabling them to perform the  LRS&T mission. In addition, the program planned to continue its  activities leading to the initial delivery of SM-3 missiles during fiscal  year 2005.
Testing. The Aegis BMD program office planned to conduct an  intercept attempt against a short-range ballistic missile—Flight Mission  6 (FM-6)—and to participate in other events that exercise the system’s  LRS&T functionality and connectivity with the BMDS.
Design reviews. The program planned to conduct design reviews of  the final Block 2004 Aegis Weapon System software, the final Block  2004 missile configuration, and the SM-3 missile’s shipboard launch  system.
section_title: Assessment of Scheduled Activities
paragraphs: In fiscal year 2004, the Aegis BMD program completed the upgrade of  three Aegis destroyers for the LRS&T mission. In addition, the program  was completing the final assembly of the first five SM-3 missiles for the  Block 2004 engagement capability, which were delivered in early fiscal  year 2005. The program is largely on track to upgrade software, expand  missile inventory, and conduct flight tests to deliver an enhanced  capability for Block 2004 by the end of December 2005. However, funding  modifications and ship availability delayed final missile deliveries and ship  upgrades. In particular, although the program expected to field nine SM-3  missiles by the end of Block 2004, only eight will be delivered by this time.  Also, the program expected to upgrade three cruisers by the end of Block  2004, but only two will be completed by this time. Specific progress made  in fiscal year 2004 relative to fielding, testing, and design is given in the  narrative below and summarized in tables 7 to 12.
subsections: section_title: Fielding Activities
paragraphs: The Aegis BMD program has plans to eventually upgrade 18 Aegis- equipped Navy ships (15 destroyers and 3 cruisers) with enhanced  planning, surveillance, tracking, and engagement functions to make them  capable of performing the BMD mission. These upgrades will improve the  capability of the element’s SPY-1 radar to discriminate a missile’s warhead  from decoys, enable tracking of long-range ballistic missiles as a BMDS  sensor, plan engagements, and launch SM-3 missiles to engage ballistic  missiles. To achieve this enhanced functionality, the Aegis BMD program  office is upgrading the Aegis Weapon System on designated ships through  a series of software builds and hardware upgrades, referred to as BMD  3.0E, BMD 3.0, and BMD 3.1.
Each BMD upgrade will increase the element’s capability. The Aegis BMD  program has successfully installed BMD 3.0E in three destroyers, which  enables the ships to carry out long-range surveillance and tracking.  However, the ships are not yet capable of launching missiles to engage  ballistic missiles. Rather, the next software build, BMD 3.0, will be needed  to provide the preliminary engagement capability for Aegis cruisers. It is  expected to be approved for use in April 2005 and could be deployed  operationally if so directed in an emergency. The third version of the BMD  upgrade—BMD 3.1—will eventually enable the destroyers to also launch  missiles, but because other hardware upgrades are needed, only Aegis  cruisers will be equipped to do so by the end of Block 2004. BMD 3.1 is the  last weapon system upgrade planned for the Block 2004 time frame.   Table 7 summarizes the principal software development and installation  activities completed in fiscal year 2004.
As software builds and hardware upgrades are completed and installed,  Navy cruisers and destroyers will become available to perform their  expected missions. Table 8 summarizes the availability of Aegis ships for  the BMD mission in the Block 2004 time frame. Although MDA program  goals specified that three cruisers would be available by the end of Block  2004 (December 2005), only two are expected to be upgraded by this time;  the third is expected to be upgraded in early 2006, depending on ship  availability.
In fiscal year 2004, the Aegis BMD program office continued to procure  SM-3 missiles for delivery in the 2004-2005 time frame. In particular,   11 “Block I” SM-3 missiles are expected to be delivered by the end of  calendar year 2005, some of which will be used in flight testing. Table 9  summarizes the status of SM-3 deliveries through December 2005.
Prior to September 2004, three SM-3 missiles of an earlier configuration  were delivered and subsequently used in flight missions (intercept  attempts), FM-4, FM-5, and FM-6. “Block I” SM-3 missiles, which are being  fielded during 2004-2005, are an operational configuration that evolved  from this earlier design. Fiscal year 2004 funding modifications impacted  SM-3 missile integration and delivery; consequently, the Aegis BMD  program expects to have available a slightly smaller inventory of SM-3  missiles by December 2005 than was originally planned.
section_title: Testing Activities
paragraphs: The Aegis BMD program conducts both ground and flight tests to  demonstrate and validate element performance. Ground tests serve to  reduce risk and, in some cases, are conducted under conditions that are  difficult to replicate in flight. Flight tests verify the element’s ability to  engage ballistic missile targets using actual equipment, computer  programs, and an operational ship with a Navy crew.
subsections: section_title: Ground Testing
paragraphs: Ground tests completed during fiscal year 2004 included those focused on  a subcomponent of the missile’s divert system—the Solid Divert and  Attitude Control System (SDACS). This subcomponent is a collection of  solid-fuel thrusters used to steer the kill vehicle into its designated target.  When an updated SDACS design proved successful in earlier ground tests,  the program flight-tested it during Flight Mission 5 (FM-5) in June 2003.  However, during this test, the subassemblies supporting the energetic  pulse-mode failed, causing the kill vehicle to be less maneuverable and  miss its target. Program officials stated that the failure likely stemmed  from a “diverter ball” in the SDACS, which acts as a valve to control pulses  that allow the missile to maneuver quickly. The exercising of the   high-energy pulse mode of the SDACS increased internal operating  pressures, and, under the thermal stress, the protective coating of the  diverter ball cracked, disabling normal SDACS operation. The root cause  of this failure has been traced to a material failure under intense  temperature and pressure.
In response to this failure, during fiscal year 2004, the program modified  the SDACS design to improve its switching performance and reliability  during high-energy pulse operation. A series of ground tests and  engineering analysis is ongoing to validate the design updates. Following  completion of ground tests and analysis, future flight tests are planned to  demonstrate operation of the SDACS using its high-energy pulse mode.
section_title: Flight Testing
paragraphs: Since 1999, there have been six intercept attempts using variants of the  SM-3 missile. In five of the six, the SM-3 successfully intercepted targets.  In fiscal year 2004, the program conducted one of these successful  intercept attempts—FM-6. Additionally, the Aegis BMD element  participated in other non-intercept test events to assess the Aegis  destroyer’s ability to track targets of opportunity and pass data to the  BMDS. Because of the technical issues associated with the SDACS  reliability that arose in FM-5, the program office delayed FM-6 from  September 2003 to December 2003 and did not exercise the SDACS high- energy pulse mode as originally planned.
After the FM-6 flight mission in December 2003, Aegis BMD flight testing  conducted in fiscal year 2004 focused on the LRS&T mission although  there were limited opportunities to track actual targets using the fielded  version of the LRS&T software, BMD 3.0E. For example, delays in the  GMD flight test program prevented Aegis BMD from participating in two  integrated flight tests, IFT-13C and IFT-14, during fiscal year 2004. In  addition, the Aegis BMD program participated in Glory Trip 185, during  which an Aegis destroyer successfully tracked a Minuteman III ICBM  launched from Vandenberg Air Force Base. However, it exercised an  earlier version of the LRS&T software, rather than BMD 3.0E, which is  installed on fielded destroyers. Finally, in Pacific Explorer III, an Aegis  destroyer planned to track an actual missile and pass track data to the  BMDS. Although the destroyer tracked the live target missile, a  malfunction with the target limited the amount of data collected by the  Aegis destroyer. Specifically, the target ended its flight before Aegis BMD  could send the GMD element enough information needed for engaging the  target.
Although there were limited opportunities to track actual targets, Aegis  BMD participated in other tests that verified connectivity with the BMDS.  For example, in Pacific Explorer II, Glory Trip 185, Pacific Explorer III,  and Pacific Explorer IV (conducted in fiscal year 2005), simulated or real  ballistic missile target track data was successfully transmitted to the  BMDS.
Table 10 summarizes the flight test and LRS&T activities completed in  fiscal year 2004 by the Aegis BMD program.
In fiscal year 2005, the program office scheduled three more Block 2004  flight tests, all of which are planned as intercept attempts. These tests aim  to progressively demonstrate the element’s capability against short- and  medium-range unitary and separating targets, as well as demonstrate that  Aegis BMD can support the BMDS as a forward-deployed sensor. FM-7  was the first flight test to use BMD 3.0 and the Block I SM-3 missile, which  is the configuration of the first set of SM-3 missiles that will be made  available for fielding. Table 11 provides a summary of the Block 2004 flight  tests the program expects to conduct through fiscal year 2005.
section_title: Design Reviews
paragraphs: The Aegis BMD program scheduled four component-level design reviews  in fiscal year 2004 to evaluate the design maturity of the Aegis Weapon  System software, launch system, and upgraded SM-3 missile, known as  “Block IA.” The program successfully completed three of these design  reviews but delayed the fourth until early 2005. Table 12 summarizes the  principal activities related to each review.
section_title: Assessment of Element Performance
paragraphs: We identified areas for which the Aegis BMD program has not fully  demonstrated element performance and reliability. First, the program has  demonstrated its intercept capability under limited conditions; second, the  program has not successfully demonstrated, in a flight test, SDACS  operation using its high-energy pulse mode; and third, the program has  only exercised the element’s LRS&T capability in a small number of flight- test events.
The Aegis BMD program demonstrated the capability to intercept a non- separating target through its successes in FM-2, FM-3, FM-4, FM-6, and  FM-7. Although these tests were scripted, they are noteworthy, given the  difficulty of “hit-to-kill” intercepts. Officials with the office of Director,  Operational Test and Evaluation (DOT&E), pointed out that the Aegis  BMD program has conducted the most operationally realistic testing of all  BMDS elements, especially because they utilize an operational U.S. Navy  cruiser. They recognize, however, that the targets in FM-2 and FM-3 flew  trajectories that facilitated radar detection and tracking. More realistic  engagement scenarios will be tested in Block 2006, for example, tests with  multiple simultaneous engagements.
As we reported last year, the Aegis BMD program faced challenges with  ensuring the reliability of SDACS operation; the issue continues to be  relevant. The root causes of the SDACS failure in FM-5 are understood and  the program is implementing four design changes to correct the problem.  After completing ground tests to verify these changes, the program plans  to flight test the modified multi-pulse SDACS no earlier than FM-8,  scheduled for the third quarter of fiscal year 2005. Even if the design  changes prove to resolve the SDACS issue, program officials do not expect  to implement any design changes in the first 11 Block 2004 missiles being  delivered. Program officials believe that these missiles provide a credible  defense against a large population of the threat even with reduced divert  capability.
The program has exercised the element’s LRS&T capability in a limited  number of flight-test events, as noted above. Nonetheless, the Aegis BMD  program predicts that the Aegis SPY-1 radar is able to deliver adequate  performance in support of the BMD mission, and DOT&E officials believe  that Aegis BMD can adequately perform its detection and tracking  functions. Although the Aegis destroyers have been upgraded for the  LRS&T capability, they have not been exercised in a manner consistent  with an actual defensive mission. That is, the Aegis BMD element has not  provided track data of a target, in real time, to plan a BMD mission and  launch GMD interceptors.
section_title: Assessment of Element Cost
paragraphs: DOD’s planned investment in the Aegis BMD program from program  inception in 1996 through 2011 is approximately $10 billion. As broken out  in table 13, DOD expended $3.67 billion between fiscal years 1996 and  2004, Congress appropriated $1.14 billion for fiscal year 2005, and MDA is  budgeting about $5.22 billion between fiscal years 2006 and 2011 for Aegis  BMD development, procurement, and operations. Budgeted activities in  the “cooperative work” column include SM-3 component development  between the United States and Japan.
subsections: section_title: Contract Activities
paragraphs: In the second half of 2003, two new prime contracts for the Aegis BMD  element were awarded, one for the Aegis Weapon System and one for the  SM-3 missile. Aegis Weapon System efforts, previously part of five Navy  contracts, were merged into one contract, which was awarded to  Lockheed Martin in October 2003. This contract covers Block 2004  activities, including upgrades to BMD software, upgrades to the SM-3  missile launch system, and planning activities for future blocks. The two  previous Navy SM-3 contracts were merged into a new contract, which  was awarded to Raytheon in August 2003. It covers development and  delivery of SM-3 missiles and related engineering efforts.
section_title: Prime Contractor Cost and Schedule Performance
paragraphs: The government routinely uses contractor Cost Performance Reports to  independently evaluate a prime contractor’s cost and schedule  performance. Generally, the reports detail deviations in cost and schedule  relative to expectations established under the contract. Contractors refer  to deviations as “variances.” Positive variances are generally associated  with the accomplishment of activities under cost or ahead of schedule,  while negative variances are often associated with the accomplishment of  activities over cost or behind schedule.
We used the Cost Performance Reports to evaluate the cost and schedule  performance of the Aegis Weapon System prime contractor but had  insufficient data to assess the performance of the SM-3 contractor. Our  analysis of the Aegis Weapon System found that the prime contractor  performed at or near budgeted cost and schedule during fiscal year 2004.  Specifically, since contract inception in October 2003 through September  2004, the prime contractor was $3.5 million under budget. However, it was  unable to complete $2 million of work because of fluctuations in ship and  testing schedules (see fig. 3).
The Defense Contract Management Agency is concerned with the delay  that occurred in the implementation of the SM-3 contract’s performance  measurement baseline, which reflects the schedule and budget for all  work tasks that must be performed to meet contract objectives. Although  the contract was awarded to the prime contractor, Raytheon, in August  2003, the contract’s baseline was not reviewed at an Integrated Baseline  Review (IBR) until almost a year after contract award. Program officials  indicated that the delay stemmed from the late establishment of the  contract’s performance management baseline, which was established 7  months after contract award because of the need for the program office to  react to funding issues. Raytheon was allowed to postpone issuing Cost  Performance Reports until after the Aegis BMD program office held an  IBR 5 months after establishment of the baseline.
Until the completion of the Raytheon IBR, program officials monitored  contractor performance through monthly management and business  meetings where cost and performance data, milestones, and projections of  future performance were reviewed. The program office stated that these  monthly meetings provided sufficient data to monitor contractor  performance. Nonetheless, without these reports, it is difficult for the  program office (and other independent agencies) to monitor cost and  schedule performance of the contract’s various components and,  therefore, to identify areas in need of corrective action. Additionally,  although we are aware of past problems with SDACS performance on the  SM-3 contract, we did not have any data to evaluate its impact on the  contract’s cost and schedule.
section_title: Program Description
paragraphs: The Airborne Laser (ABL) is being  developed to shoot down enemy  missiles during the boost phase of  flight. Integrated onboard a Boeing  747 aircraft, ABL is designed to use a  high-energy chemical laser to  rupture the enemy missile’s fuel or  oxidizer tanks, causing the missile to  lose thrust or flight control. As part  of its development effort, the Missile  Defense Agency (MDA) plans to  demonstrate the feasibility of using  the prototype ABL aircraft to shoot  down a short-range ballistic missile.  This event is referred to as the lethal  demonstration.
During fiscal year 2004, MDA restructured the ABL program to focus on near- term milestones and to improve confidence in longer-term schedule and cost  projections. The restructuring placed the near-term focus on two events: (1)  the combined operation of individual laser modules to generate a single laser  beam, known as “First Light,” and (2) a flight test of the prototype aircraft with  an installed laser beam control system, known as “First Flight.” In light of the  program’s restructure, ABL completed most of its planned fiscal year 2004  activities on schedule. However, total contract costs through calendar year  2008 increased by approximately $1.5 billion, and the program’s schedule was  extended over 3 years.
Schedule:  The program completed on schedule most of its fiscal year 2004  activities associated with the preparation for “First Light” and “First Flight.”  However, as a result of the recent program restructuring, the demonstration to  shoot down a short-range ballistic missile—the focus of the program—was  delayed from 2005 and is now scheduled to occur no earlier than 2008.
DOD’s planned investment in the  ABL program from program  inception in 1996 through 2011 is  about $7.3 billion. DOD expended  $2.52 billion between fiscal years  1996 and 2004, Congress  appropriated $458 million for fiscal  year 2005, and MDA is budgeting  about $4.32 billion between fiscal  years 2006 and 2011 for ABL  research and development.
Testing:  Both “First Light” and “First Flight” were achieved in early fiscal  year 2005. Although the achievement of “First Light” is a key milestone for the  program, it was not intended as an operational demonstration of a high-power  laser, that is, at full power and for the length of time needed to shoot down a  boosting missile. Rather, the laser’s operation for a fraction of a second  demonstrates successful integration of subsystems. “First Flight” is also a key  milestone for the program. It is the first of a series of flights to demonstrate  the completion of design, safety, and verification activities that are necessary  to assure flight worthiness of the aircraft with the laser beam control system  installed.
Performance:  At this stage of ABL development—before the laser has been  operated at full power or critical technologies have been demonstrated in  flight tests—any assessment of effectiveness is questionable. Nonetheless, the  program office monitors performance indicators to assess the element’s  readiness for successfully completing the lethality demonstration. One  indicator in particular—atmospheric compensation, the process whereby a  system of deformable mirrors and electronics is used to minimize the  degradation of the laser beam as it travels through the atmosphere—is not  meeting its performance objectives. Program officials told us that a recovery  plan for this indicator is in place.
Cost:  ABL program costs continue to grow. During the first half of fiscal year  2004, prior to the restructuring of the program, the ABL prime contractor  incurred a negative cost variance of $114 million and could not complete   $47 million of planned work. MDA’s restructuring of the ABL program  increased program cost by about $1.5 billion—the prime contract is currently  valued at approximately $3.6 billion, more than three times its original value   of $1.02 billion—although overall program objectives did not change.
section_title: Appendix III: Airborne Laser
subsections: section_title: Element Description
paragraphs: The Airborne Laser (ABL) is a missile defense system designed to shoot  down enemy missiles during the boost phase of flight, the period after  launch during which the missile’s rocket motors are thrusting. By engaging  ballistic missiles during the boost phase, ABL destroys enemy missiles  early in their trajectory before warheads and countermeasures can be  released. ABL plans to use a high-energy chemical laser to defeat enemy  missiles by rupturing a missile’s fuel or oxidizer tanks, causing the missile  to lose thrust or flight control. ABL’s objective is to prevent the delivery of  the missile’s warhead to its intended target.
ABL was initially conceived as a theater system to defeat short- and  medium-range ballistic missiles. However, its role has been expanded to  include the full range of ballistic missile threats, including intercontinental  ballistic missiles (ICBM). In addition, ABL could be used as a forward- deployed Ballistic Missile Defense System (BMDS) sensor to provide  launch point, impact point, and trajectory data of enemy missiles in  support of engagements by other system elements.
The ABL element consists of the following three major components  integrated onboard a highly modified Boeing 747 aircraft. In addition, the  element includes ground support infrastructure for storing, mixing, and  handling the chemicals used in the laser.
High-energy chemical oxygen-iodine laser (COIL). The laser, which  generates energy through chemical reactions, consists of six laser modules  linked together to produce megawatt levels of power. Because the laser  beam travels at the speed of light, ABL is expected to destroy missiles  quickly, giving it a significant advantage over conventional boost-phase  interceptors.
Beam control/fire control (BC/FC). The BC/FC component’s primary  mission is to maintain the beam’s quality as it travels through the aircraft  and atmosphere. Through tracking and stabilization, the BC/FC ensures  that the laser’s energy is focused on a targeted spot of the enemy missile.
Battle management/command and control (BMC2). The BMC2  component plans and executes the element’s defensive engagements. It is  being designed to work autonomously using its own sensors for launch  detection, but it could also receive early warning data from other external  sensors.
section_title: History
paragraphs: In 1996, the Air Force initiated the ABL program to develop a defensive  system that could destroy enemy missiles from a distance of several  hundred kilometers. Developmental testing of the first prototype aircraft  was originally planned to conclude in 2002 with an attempt to shoot down  a short-range ballistic missile target.
In 2002, management authority and funding responsibility transferred from  the Air Force to the Missile Defense Agency (MDA). In accordance with  MDA planning, the ABL program restructured its acquisition strategy to  conform to an evolutionary, capabilities-based approach.
section_title: Developmental Phases
paragraphs: The ABL program is focused on developing a prototype aircraft for use in a  lethality demonstration—a flight test in which the ABL aircraft will  attempt to shoot down a short-range ballistic missile. If this test is  successful, MDA believes it will prove out the concept of using directed  energy for missile defense. Although ABL’s funding is broken out by  block—2004, 2006, 2008, and 2010—the program is developing a single  configuration of the element leading to the lethality demonstration, which  will occur no earlier than 2008. A specific date for the demonstration has  not been scheduled and depends on the success of ground testing.  Furthermore, there is uncertainty as to when ABL will provide an initial  operational capability. MDA plans to provide this capability through the  development of a second aircraft, but the purchase of this aircraft is  contingent upon the successful test of the prototype aircraft.
In January 2004, MDA restructured the ABL program to focus on near-term  milestones and to improve confidence in longer-term schedule and cost  projections. The near-term focus of the program was shifted toward two  events: (1) the achievement of a key laser demonstration known as “First  Light”—the first demonstration of the integration of six individual laser  modules to produce a single beam of laser energy—and (2) the initial flight  test of the prototype aircraft with the BC/FC installed, which is referred to  as “First Flight.” Key provisions of the restructure call for the program  office to complete the following activities during the next few years:    Ground test and flight test the BC/FC segment independent of high- energy laser testing activities. BC/FC testing would utilize a low-power,  substitute laser in place of the high-energy laser, as needed.
Ground test the high-energy laser independent of BC/FC testing  activities.
Integrate and ground test the complete ABL weapon system (i.e.,  combined laser, BC/FC, and battle management segments).
Flight test the ABL weapon system, culminating in a lethality  demonstration against a boosting missile.
The lethal demonstration has been delayed by about 6 years. This event  was originally scheduled to occur in 2002 and, as we reported last year,  was later rescheduled to be conducted in early 2005. However, as a result  of the January 2004 restructuring of the program, the event is now  scheduled to occur no earlier than 2008.
In its report accompanying the 2005 Defense Authorization Act, the House  Armed Services Committee noted its approval of the restructured  program. However, the Committee also recognized that the future of the  ABL program depended upon successful completion of “First Light” and  “First Flight.” The Committee stated that these milestones must be  completed in order for the Committee to further support the program after  fiscal year 2005.
section_title: Fiscal Year 2004 Planned Accomplishments
paragraphs: The program planned to complete several activities during fiscal year 2004  commensurate with the program’s restructuring. As noted above, the  program shifted its near-term focus toward key demonstrations within the  BC/FC and laser segments. The following activities were identified as the  key milestones for the fiscal year.
BC/FC Segment. Complete ground integration and testing of the  BC/FC segment and begin integration of beam control segment into the  ABL prototype aircraft in preparation for “First Flight.”
Laser Segment. Complete integration of the six laser modules in the  System Integration Laboratory (SIL)—a ground-test facility located at  Edwards Air Force Base, California—in preparation for “First Light.”
section_title: Assessment of Scheduled Activities
paragraphs: In fiscal year 2004, the program completed most of its planned activities  on schedule. Tables 14 and 15 summarize the progress made toward  completing BC/FC and laser activities in fiscal year 2004.
subsections: section_title: Demonstration of “First Light”
paragraphs: The demonstration of “First Light”—to prove that individual laser modules  can be successfully integrated and operated to generate a single laser  beam—was achieved on November 10, 2004, at the SIL ground facility. In  general, “First Light” is an important milestone for any laser system  because it demonstrates the ability to get all major laser subsystems to  work together.
Although the achievement of “First Light” is a key milestone for the  program, it was not intended as an operational demonstration of a high- power laser, that is, at full power and for the length of time needed to  shoot down a boosting missile. Rather, the laser’s operation for a fraction  of a second demonstrates successful integration of subsystems. “First  Light” demonstrated that the six modules are aligned optically and the  flow system is functioning, but program officials noted that the operation  of the laser was too short to make meaningful predictions of power and  beam quality. The program plans to conduct a series of tests that will  gradually increase the length and power of the laser operation until full  power lasing objectives are achieved.
section_title: Demonstration of “First Flight”
paragraphs: The achievement of “First Flight”—the first of 22 planned tests—is also a  key milestone for the program. This flight test was conducted on  December 3, 2004, and served as the functional check of the aircraft with  its newly installed laser beam control system. This event is critical  because:  It demonstrates that all necessary design, safety, and verification  activities to assure flight worthiness have been completed.
It begins the process of expanding the aircraft flight envelope—types  and combinations of flight conditions—in which the ABL can operate.
It offers the program the opportunity to collect data on the effects of  the environment on the BC/FC system while the aircraft is in flight. The  data gathered during this test will be used to address jitter issues.
Although “First Flight” was conducted, the program was unable to achieve  all of its intended test objectives. The test was originally planned for 2-½  hours but was terminated early due to some erroneous instrumentation  readings. Program officials made several attempts to resolve the readings  in flight but were unsuccessful and the aircraft was landed early. However,  the instrumentation anomalies were all fixed and the program conducted a  second flight test on December 9, 2004, which lasted the intended duration  of 2-½ hours. The primary objective of the second test was the same as  that for “First Flight”—to perform all necessary in-flight functional checks  to ensure flight worthiness of the aircraft. The flight test was completed  and all remaining test points not completed during “First Flight” were  completed successfully.
section_title: Assessment of Element Performance
paragraphs: The program office monitors performance indicators to determine the  program’s readiness for successfully completing the lethality  demonstration in 2008. Based on its assessment, 11 of 15 of these  indicators point to some risk in achieving this goal. For example, one  indicator—atmospheric compensation—is not meeting its performance  objectives. Program officials identified a shortfall in the bandwidth of the  adaptive optics control system—the system of deformable mirrors and  electronics that focus the laser beam on the target—as the primary cause  of this deficiency. Program officials told us that a recovery plan for this  indicator is already in place and that the contractor is in the process of  fixing the shortfall.
Another important indicator pertaining to the technology of controlling  and stabilizing the high-energy laser beam so that vibration unique to the  aircraft does not degrade aimpoint—a phenomenon referred to as  “jitter”—was identified as a risk item by the program office early on and  continues to be a program risk. Jitter control is crucial to the operation of  the laser because the laser beam must be stable enough to impart  sufficient energy on a fixed spot of the missile target to rupture its fuel or  oxidizer tank. Because jitter is among the least mature of ABL’s critical  technologies, the program office is conducting ground tests and, in the  future, flight tests to learn more about jitter control.
section_title: Assessment of Element Cost
paragraphs: DOD’s planned investment in the ABL program from program inception in  1996 through 2011 is approximately $7.3 billion. As broken out in table 16,  DOD expended $2.52 billion between fiscal years 1996 and 2004, Congress  appropriated $458 million for fiscal year 2005, and MDA is budgeting about  $4.32 billion between fiscal years 2006 and 2011 for ABL research and  development.
ABL was funded as an Air Force program from 1996 through 2001 and  during that time a little over $1 billion was spent. After the program was  transferred to MDA in fiscal year 2002, MDA expended approximately $1  billion in fiscal years 2002 and 2003 on ABL development.
subsections: section_title: Major Contracting Activity in Fiscal Year 2004
paragraphs: The cost of the ABL program continues to grow. In May 2004, we reported  that the prime contractor’s costs for developing ABL had nearly doubled  from the Air Force’s original estimate. In addition, the program incurred  cost overruns. In fiscal year 2003 alone, the contractor overran its budget  by $242 million, which resulted primarily from integration and testing  issues.
The program office recognized that the contractor’s unfavorable cost and  schedule performance would eventually cause the contract to reach its  ceiling price by May 2004. Consequently, MDA considered three  alternatives to the contract: (1) continue to work toward the planned  schedule, (2) develop a new schedule that scaled back planned activities,  or (3) discontinue the contract. Agency officials decided to continue with  the existing contract and refocus the program on near-term technical  progress. In an effort to continue with the current contract, program  officials reevaluated the program schedule and extended the contract  period of performance, established a new estimate to complete the  contract, and increased the contract cost ceiling by about $1.5 billion.  Prior to the recent program restructure, the Block 2004 prime contract  was valued at approximately $2.1 billion and was scheduled to end six  months after the lethality demonstration in June 2005. However, as a result  of the recent program changes, the lethality demonstration is now  expected to occur no earlier than 2008 and the contract’s period of  performance was extended through December 2008. The prime contract to  conduct the lethality demonstration is currently valued at approximately  $3.6 billion—more than three times its original value of $1.02 billion.  Figure 4 summarizes the major activity for the program’s prime contract  since inception.
section_title: Prime Contractor Fiscal Year 2004 Cost and Schedule Performance
paragraphs: The government routinely uses contractor Cost Performance Reports to  independently evaluate prime contractor performance relative to cost and  schedule. Generally, the reports detail deviations in cost and schedule  relative to expectations established under the contract. Contractors refer  to deviations as “variances.” Positive variances are generally associated  with the accomplishment of activities under cost or ahead of schedule,  while negative variances are often associated with the accomplishment of  activities over cost or behind schedule.
Our analysis of prime contractor Cost Performance Reports indicates that  ABL cost and schedule performance declined during the first half of fiscal  year 2004 even though the program implemented a new performance  measurement baseline at the beginning of the fiscal year. As illustrated in  figure 5, the program incurred a negative cost variance of $114 million and  a negative schedule variance of $47 million during the first 6 months of  fiscal year 2004. Program officials indicated that delays in hardware  delivery, design problems, and integration issues were the primary drivers  of cost growth.
Between April and July 2004, while the contractor was re-planning its  work effort, the program was unable to fully evaluate the contractor’s  progress against its cost and schedule objectives. During this time,  program officials directed the contractor to suspend normal cost  performance reporting and redirected resources to complete the re- planning effort. Since the contractor was not required to provide program  officials with full Cost Performance Reports, the program was unable to  perform meaningful Earned Value Management (EVM) analysis. However,  in the absence of these reports, program officials took steps to ensure that  some insight into the contractor’s progress was maintained throughout the  re-planning effort. For example, the program measured schedule progress  by comparing actual progress against the completion of detailed activities  associated with “First Light” and “First Flight” and gauged the contractor’s  cost performance by comparing contractor forecasted expenditures to the  actual costs of the work performed.
The contractor resumed normal cost performance reporting in August  2004. As of September 2004, the contractor was performing work under  budget but slightly behind schedule—the program had a positive cost  variance of $6.6 million and a negative schedule variance of $1.6 million.  According to Cost Performance Reports, the program experienced delays  associated with the integration and checkout of the turret assembly—a  subcomponent of the BC/FC system—which caused schedule slips  through the end of the fiscal year. The late delivery of laser spare material  and assembly parts caused additional schedule delays for the program.
section_title: Award Fee Plan Unchanged
paragraphs: Although the program was restructured in spring 2004 and the ABL prime  contract modified to extend the contract period and increase its value, the  associated award fee plan was not adjusted. Therefore, the contractor  currently has no opportunity to earn any fee for successful demonstration,  since the current award fee plan was tied to a successful completion of  shoot down by December 2004.
The Command, Control, Battle  Management, and Communications  (C2BMC) element is the integrating  and controlling element of the  Ballistic Missile Defense System  (BMDS). It is designed to link all  system elements, manage real-time  battle information for the  warfighter, and coordinate element  operation to counter ballistic  missile attacks in all phases of  flight.
The C2BMC team executed the program within budget but slightly behind  schedule in fiscal year 2004. Important activities—such as the completion of  software development and testing, integration activities, and operator  training continued in fiscal year 2004 to ready the element for Limited  Defensive Operations (LDO)—were completed.
Schedule:  By the end of September 2004, the C2BMC program office  completed activities needed to ready the C2BMC element for LDO. The LDO  software “build” (spiral 4.3) was delivered. The program office also carried  out a number of activities enabling BMDS integration and communications.  Finally, C2BMC suites at U.S. Strategic Command and U.S. Northern  Command were activated, and “web browsers” providing summary screens  of the unfolding battle (such as trajectories of attacking missiles and  launched interceptors) were installed at U.S. Pacific Command and locations  in the National Capital Region.
The C2BMC element is being  developed under MDA’s  evolutionary acquisition approach,  which delivers system capabilities  in 2-year blocks beginning with  Block 2004. Within each block,  C2BMC software is developed  incrementally through a series of  software builds known as “spirals.”  The principal function of the Block  2004 C2BMC element is to provide  situational awareness, that is, to  monitor the operational status of  each BMDS component and to  display threat information such as  missile trajectories and impact  points. It also performs deliberate  planning activities for developing  battle plans and other operational  concepts.
Testing:  Testing to evaluate C2BMC functionality, interoperability, and  system-level integration for LDO was completed. For example, Cycle-3  testing—the third of four cycles of testing to verify that C2BMC interfaces  with each BMDS element individually—was completed in August 2004.  Cycle-4 testing, which is ongoing, is the final cycle of testing to verify  system-level integration. During these tests, the C2BMC element participates  in flight tests planned and conducted by MDA.
Performance:  During testing of its software, the C2BMC program  uncovered a performance issue with its “track correlation and association”  algorithm in scenarios involving multiple tracks. The program monitored this  issue as a high-risk item because it had the potential to impact situational  awareness. In particular, threat information could be displayed differently at  C2BMC suites and GMD fire control nodes, possibly causing confusion  within the command structure. The problem was resolved with software  fixes and the issue retired in July 2004.
DOD’s planned investment in the  C2BMC program from program  inception in 2002 through 2011 is  approximately $2.2 billion. DOD  expended $344 million between  fiscal years 2002 and 2004,  Congress appropriated $191 million  for fiscal year 2005, and MDA is  budgeting about $1.65 billion for  C2BMC development and  operations between fiscal years  2006 and 2011.
Cost:  Our analysis of the prime contractor’s Cost Performance Reports  shows that the contractor continued to carry a positive cost variance, that is,  in total it completed work under budget. However, the contractor  experienced a modest erosion in cost performance in fiscal year 2004. In  particular, it completed fiscal year 2004 activities slightly over budget,  incurring a negative cost variance of $3.6 million. The prime contractor’s  schedule performance was slightly, yet consistently, behind schedule for  most of fiscal year 2004. In total, the contractor incurred a negative schedule  variance of $5.7 million because of unanticipated technical issues.
section_title: Appendix IV: Command, Control, Battle Management, and Communications
subsections: section_title: Element Description
paragraphs: The Command, Control, Battle Management, and Communications  (C2BMC) element is being developed as the integrating and controlling  entity of the Ballistic Missile Defense System (BMDS). It is designed to  provide connectivity between the various BMDS elements and to manage  their operation as part of an integrated, layered missile defense system.
C2BMC has neither a sensor nor weapon. As a software system housed in  command centers known as suites, C2BMC provides network-centric  warfare capabilities that provide the warfighter with the capability to plan  and monitor the missile defense mission. The C2BMC element will track  ballistic missile threats—utilizing all available sensors from the various  elements—and direct weapons systems to engage the threat.
As the name indicates, the C2BMC is comprised of three major  components:    Command and control. The command and control component  enables the warfighter to monitor the operational status of each BMDS  component, display threat information, such as missile trajectory and  impact point, and control defensive actions. In other words, it provides  the situational awareness and planning tools to assist the command  structure in formulating and implementing defensive actions.
Battle management. The battle management component formulates  the detailed instructions (task plans) for executing various missile  defense functions, such as tracking enemy missiles, discriminating the  warhead from decoys and associated objects, and directing the launch  of interceptors. Once implemented, the battle manager will direct the  operation of system elements and components, especially under  evolving battle conditions.
Communications. Leveraging existing infrastructure, the  communications component manages the exchange and dissemination  of information necessary for carrying out the battle management and  command and control objectives.
section_title: History
paragraphs: The Missile Defense Agency (MDA) initiated the C2BMC program in 2002  as a new element of the BMDS. Program officials noted that initial  versions of C2BMC software are based on existing Air Force and GMD- developed fire control (battle management) software.
section_title: Developmental Phases
paragraphs: The C2BMC element is being developed under MDA’s evolutionary  acquisition approach, which delivers system capabilities in 2-year blocks,  beginning with Block 2004. Within each block, C2BMC software is  developed incrementally through a series of software builds known as  “spirals.” Over time, the C2BMC element will be enhanced to provide  overarching control and execution of missile defense engagements with  the aim of implementing layered defense through the collective use of  individual BMDS elements.
The principal function of the Block 2004 C2BMC element is to provide  situational awareness, that is, to monitor the operational status of each  BMDS component and to display threat information such as missile  trajectories and impact points. The program expects to develop this  capability incrementally through spirals 4.1 – 4.5. The interim delivery,  spiral 4.3, is available for Limited Defensive Operations (LDO) and is on  the path to full Block 2004 functionality.
The incorporation of battle management capabilities in the C2BMC  element begins with Block 2006. In the 2006-2007 time frame, the element  is expected to track that ballistic missile threat throughout its entire  trajectory and select the appropriate elements to engage the threat. For  example, the Block 2006 C2BMC configuration would be able to generate a  single, more precise track from multiple radars and to transmit it to the  other elements. Together, this functionality enables each element to “see  farther” than it could using its own radar system. This allows elements to  launch interceptors earlier, which provides more opportunity to engage  incoming ballistic missiles.
Block 2006 is also expected to make a significant improvement over Block  2004 with respect to BMDS communications. During this time, the C2BMC  program office will work to establish communications to all elements of  the BMDS, overcome limitations of legacy satellite communications  protocols, and establish redundant communications links to enhance  robustness. Such upgrades serve to improve operational availability and  situational awareness.
section_title: Planned Accomplishments for Fiscal Year 2004
paragraphs: Planned accomplishments for the C2BMC program in fiscal year 2004  centered on completing activities to ready the element for LDO by the end  of September 2004. To achieve this goal, the C2BMC element planned to  complete the following specific activities:    Software development. Complete the design, development, and testing  of LDO C2BMC software spirals 4.1 – 4.3.
BMDS integration and communications. Integrate the C2BMC element  into the BMDS; install and activate global communications capabilities.
Make BMDS operational. Complete and activate C2BMC suites; train  operators.
section_title: Assessment of Scheduled Activities
paragraphs: By the end of September 2004, the C2BMC program office completed  activities needed to ready the C2BMC element for LDO. The LDO “build”  of C2BMC (spiral 4.3) was delivered and installed at the various suites. The  program office also carried out a number of activities enabling BMDS  integration and communications. Finally, C2BMC suites at U.S. Strategic  Command (USSTRATCOM) and U.S. Northern Command  (USNORTHCOM) were activated, and “web browsers” providing summary  screens of the unfolding battle (such as trajectories of attacking missiles  and launched interceptors) were installed at U.S. Pacific Command  (USPACOM) and locations in the National Capital Region (such as the  White House).
subsections: section_title: Status of C2BMC Software Development
paragraphs: Table 17 summarizes the principal development and testing activities for  the first three spirals of Block 2004 C2BMC element software. Most  notably, development of the LDO build, spiral 4.3, was completed in May  2004. Testing to evaluate C2BMC functionality, interoperability, and  system-level integration was also completed. For example, Cycle-3  testing—the third of four cycles of testing to verify that C2BMC interfaces  with each BMDS element individually—was completed in August 2004.  Cycle-4 testing, the final cycle of testing to verify system-level integration,  is ongoing. During these tests, the C2BMC element participates in flight  tests planned and conducted by MDA.
The program office plans to complete, by the end of calendar year 2005,  key activities pertaining to the development and testing of spirals 4.4 and  4.5—the final two builds of Block 2004 C2BMC element software. For  example, development of spiral 4.4 was completed in November 2004 and  Cycle-3 testing is expected to be completed in April 2005. In addition, the  program office expects to complete development of spiral 4.5 in March  2005 and begin Cycle-3 testing in June 2005. Cycle-4 testing of spiral 4.5 is  scheduled to begin during the first quarter of fiscal year 2006 with  completion coinciding with the completion of Block 2004.
section_title: Status of BMDS Integration and Communications
paragraphs: The C2BMC program office carried out a number of activities in fiscal year  2004 related to C2BMC’s role in BMDS integration and communications.  For example, interface specifications between C2BMC and other elements  were completed. In addition, communications software and hardware  were installed at the various C2BMC sites, including USSTRATCOM,  USNORTHCOM, and USPACOM. Finally, the C2BMC element participated  in a number of MDA test events to verify system integration.
section_title: Status of Steps Taken to Make BMDS Operational
paragraphs: The C2BMC program completed a variety of activities in fiscal year 2004 to  make the BMDS operational. These activities included activation of  C2BMC suites at the various command sites and the training of military  operators for conducting ballistic missile defense missions. Table 18  summarizes the program’s efforts in making the system available for LDO.
section_title: Assessment of Element Performance
paragraphs: During testing of C2BMC software, the C2BMC program uncovered a  performance issue with its “track correlation and association” algorithm in  scenarios involving multiple tracks. During a portion of fiscal year 2004,  the program monitored this issue as a high-risk item because it had the  potential to impact situational awareness. In particular, threat information  could be displayed differently at C2BMC suites and GMD fire control  nodes, possibly causing confusion within the command structure. The  program implemented a mitigation plan to resolve this issue, including the  formation of a “Blue Ribbon Panel” in June 2004 to analyze the problem.  The problem was resolved with software fixes and the issue retired in July  2004.
section_title: Assessment of Element Cost
paragraphs: DOD’s planned investment in the C2BMC program from program inception  in 2002 through 2011 is approximately $2.2 billion. As broken out in table  19, DOD expended $343 million between fiscal years 2002 and 2004,  Congress appropriated $191 million for fiscal year 2005, and MDA is  budgeting $1.65 billion for C2BMC development and operations between  fiscal years 2006 and 2011.
subsections: section_title: Prime Contractor Cost and Schedule Performance
paragraphs: C2BMC development is being carried out through a contractual vehicle  known as an Other Transaction Agreement (OTA), which functions much  like a prime contract. MDA believes that an OTA allows the C2BMC  element to take advantage of more collaborative relationships between  industry, the government, Federally Funded Research and Development  Centers, and University Affiliated Research Centers. OTAs generally are  not subject to federal procurement laws and regulations. The OTA did  implement the earned value management system used to assess the cost  and schedule performance of contractors developing large weapon  systems. The C2BMC Missile Defense National Team, for which Lockheed  Martin Integrated System and Solutions serves as the industry lead, is  developing and fielding the C2BMC element of the BMDS.
The government routinely uses contractor Cost Performance Reports to  independently evaluate a prime contractor’s cost and schedule  performance. Generally, these reports detail deviations in cost and  schedule relative to expectations established under the contract.  Contractors refer to deviations as “variances.” Positive variances are  usually associated with the accomplishment of activities under cost or  ahead of schedule, while negative variances are often associated with the  accomplishment of activities over cost or behind schedule.
During fiscal year 2004, C2BMC development was performed under two  parts of the existing OTA—Part 2, for which work was completed in March  2004, and Part 3, for which work began in March 2004. As illustrated in  figure 6, Cost Performance Reports show that Lockheed Martin, the  industry lead for the OTA, continued to carry a positive cost variance, that  is, in total it completed work under budget. However, Lockheed  experienced a modest erosion in cost performance in fiscal year 2004. In  particular, it completed fiscal year 2004 activities slightly over budget,  incurring a negative cost variance of $3.6 million on combined Part 2 and  Part 3 work efforts.
The prime contractor’s schedule performance was slightly, yet  consistently, behind schedule for most of fiscal year 2004. However,  beginning in May 2004, schedule performance sharply declined. In total,  Lockheed incurred a negative schedule variance of $5.7 million for  combined Part 2 and Part 3 work performed in fiscal year 2004.
The C2BMC program office reported the following two drivers as  contributing to fiscal year 2004 cost and schedule variances.
Track association algorithm. As noted in the performance section,  the C2BMC program uncovered a performance issue with its “track  correlation and association” algorithm during spiral testing. Resources  allocated to spiral 4.4 development were used to address this problem,  including the convening of a Blue Ribbon panel to analyze it. In the  course of analyzing and correcting this issue, more time and money  were needed for additional testing of spiral 4.3 and associated risk  reduction efforts on developing an alternative algorithm.
Site activation. C2BMC suites are being integrated with existing  systems at USSTRATCOM, USNORTHCOM, and USPACOM. The  integration efforts, particularly those aspects pertaining to information  assurance, were considerably more difficult that anticipated. The result  was the need for more travel by the engineering team to field, install,  and troubleshoot problems at the three activation sites.
section_title: Program Description
paragraphs: The Ground-based Midcourse  Defense (GMD) element is a  missile defense system being  developed to protect the United  States against limited long-range  ballistic missile attacks launched  from Northeast Asia and the Middle  East. The first increment of this  capability, Block 2004, is being  developed and fielded during the  2004-2005 time frame.
By the end of fiscal year 2004, GMD carried out planned activities needed to  field an initial missile defense capability, including, as summarized below,  the emplacement of interceptors at Fort Greely, Alaska. However, delays of  flight tests prevented MDA from demonstrating the operation of the  integrated system in a realistic environment before placing interceptors in  silos for defensive operations. The program also showed unfavorable trends  in contractor cost and schedule performance in fiscal year 2004.
By the end of September 2004, the  GMD program put in place the  components of a limited capability,  which is known as Limited  Defensive Operations (LDO). MDA  plans to augment this capability  with additional interceptors and  radars by the end of calendar year  2005 to complete the full Block  2004 increment.
Schedule:  The GMD program completed construction of missile silos and  facilities at Fort Greely, Alaska, and Vandenberg Air Force Base, California;  emplaced five GMD interceptors in their silos at Fort Greely by the end of  September 2004; and completed the upgrade of the Cobra Dane radar. MDA  is on track to add additional interceptors and radar capabilities throughout  Block 2004, although there is some risk that the sea-based X-band radar will  not be completed by the first quarter of fiscal year 2006, as planned.
DOD’s planned investment in the  GMD program from program  inception in 1996 through 2011 is  approximately $31.6 billion. DOD  expended $15.3 billion between  fiscal years 1996 and 2004,  Congress appropriated $3.3 billion  for fiscal year 2005, and MDA is  budgeting about $13.0 billion  between fiscal years 2006 and 2011  for GMD development,  procurement, and operations.
Test:  The GMD program office conducted two flight tests (non-intercept  booster tests) in fiscal year 2004 out of six events that were planned—no  intercept attempts were conducted. Accordingly, GMD interceptors were  fielded before flight testing was performed to verify that LDO hardware and  software could function in an operational environment. In preparation for  defensive operations, the GMD program also completed a series of System  Integration and Checkouts that demonstrated connectivity, functionality,  and integration of its fielded components.
Performance:  While ground and flight tests have demonstrated each step of  the missile defense engagement sequence—detect, track, launch/engage, and  intercept—collectively, these accomplishments do not verify integrated  operation of the GMD capability. For example, BMDS and GMD radars have  not performed their primary function as a fire control radar in a flight test  event.
Cost:  Our analysis of the prime contractor’s Cost Performance Reports  shows that the contractor overran its budgeted costs in fiscal year 2004 by  $219.6 million and was unable to complete $59.9 million worth of scheduled  work. Developmental issues with the interceptor’s booster and kill vehicle  remain the leading causes of cost overruns and schedule slips. For example,  interceptor development cost $204 million more in fiscal year 2004 than the  contractor budgeted. Flight test delays also contributed to unfavorable cost  and schedule performance.
section_title: Appendix V: Ground-Based Midcourse Defense
subsections: section_title: Element Description
paragraphs: The Ground-based Midcourse Defense (GMD) element is a missile defense  system designed to protect the U.S. homeland against intercontinental  ballistic missile (ICBM) attacks. As an integral part of the Ballistic Missile  Defense System (BMDS), GMD functions to destroy long-range ballistic  missiles during the midcourse phase of flight, the period after booster  burnout when the warhead travels through space on a predictable path.
The GMD element relies on a broad array of components, including   (1) space- and ground-based sensors to provide early warning and tracking  of missile launches; (2) ground- and sea-based radars to identify and refine  the tracks of threatening objects; (3) ground-based interceptors to destroy  enemy missiles through “hit-to-kill” impacts outside the atmosphere; and  (4) fire control and communications nodes for battle management and  execution of the GMD mission. Figure 7 illustrates GMD components,  current and planned, which are situated at several locations within and  outside of the United States.
The program office produced, emplaced, and upgraded all GMD  components needed for an initial capability by the end of September 2004  and is working to augment this initial capability with additional  interceptors and radars by the end of calendar year 2005. This first block  of capability—Block 2004—is estimated to provide the U.S. with  protection against ICBMs launched from Northeast Asia and the Middle  East.
section_title: History
paragraphs: The Department of Defense (DOD) established the National Missile  Defense program in 1996 to develop a missile defense system capable of  protecting the United States from ICBM attacks. The program was to be in  a position to deploy the system by 2005, if the threat warranted. Many of  the components used in the current GMD program are based directly on  the research and development conducted by the National Missile Defense  program.
In response to the President’s December 2002 directive to field a missile  defense system, the Missile Defense Agency (MDA) accelerated its  developmental activities to make the GMD element operational—that is, to  field a working system operated by trained warfighters. GMD remains a  capabilities-based research and development program with enhanced  capabilities delivered periodically in block upgrades.
section_title: Developmental Phases
paragraphs: GMD’s development and fielding are proceeding in a series of planned 2- year blocks, which incrementally increase the element’s capability by  maturing the design of element components and upgrading software.  Block 2004, the first increment, is being rolled out in two major phases:    Limited Defensive Operations (LDO). The GMD program  completed an initial capability in September 2004, which is available  for limited defensive operations. The principal components include five  interceptors at Fort Greely, Alaska; GMD fire control and  communications nodes for battle management and execution at Fort  Greely and Schriever Air Force Base, Colorado; an upgraded Cobra  Dane radar at Eareckson Air Station, Alaska; and connectivity to Aegis  BMD for additional radar tracking. DOD will use this initial capability  to provide the United States with protection against a limited ballistic  missile attack launched from Northeast Asia. This capability was  expanded by the end of calendar year 2004 with the addition of three  interceptors—one at Fort Greely and two at Vandenberg Air Force  Base (VAFB), California—and an upgraded early warning radar  (UEWR) at Beale Air Force Base, California.
Block 2004 Defensive Capability. By the end of calendar year 2005,  MDA plans to augment the LDO capability by installing 10 additional  interceptors at Fort Greely (for a total of 18 interceptors at Fort Greely  and VAFB); deploying a sea-based X-band radar; and upgrading the  early warning radar at Fylingdales, England. These enhancements are  expected to provide additional protection against ICBMs launched  from the Middle East.
Future block configurations of the GMD element build upon the Block  2004 capability. As part of its Block 2006 program, MDA expects to field   10 additional interceptors at Fort Greely and upgrade the early warning  radar located at Thule Airbase, Greenland. MDA also plans to conduct  more realistic flight tests to demonstrate performance against more  complex missile threats and environments.
section_title: Planned Accomplishments for Fiscal Year 2004
paragraphs: The GMD element plays a central role in the Block 2004 BMDS. In general,  planned accomplishments for GMD in fiscal year 2004 centered on  continuing development of element components, conducting ground and  flight testing, and fielding components for LDO. Specific planned  accomplishments include:    Component Development. The program office planned to continue  development of all element components for LDO, Block 2004, and the  incremental improvement of block capability.
Testing. The program planned to conduct six flight tests (three  booster tests, one “fly-by” test, and two intercept attempts), two  integrated ground tests, and System Integration and Checkouts in  preparation for LDO.
Fielding Initial Capability. The program planned to complete  construction of facilities and the installation of five ground-based  interceptors at Fort Greely, complete upgrades of the Cobra Dane  radar, and activate its fire control and communications component.
section_title: Assessment of Scheduled Activities
paragraphs: MDA met its fielding goals for LDO and is on track, with some schedule  risk, to add additional interceptors and radar capabilities throughout  Block 2004. Ground tests were conducted to ensure interoperability of  element components and to verify operation and performance of  component software. However, several key flight tests needed to verify the  effectiveness of LDO hardware and software, originally scheduled for  fiscal year 2004, were delayed into fiscal year 2005.
subsections: section_title: GMD Component Development
paragraphs: In fiscal year 2004, a large portion of the GMD program focused on the  development of its Block 2004 components, some of which will be fielded  as part of LDO. Summaries of progress made by the GMD program office  during fiscal year 2004 in developing its components are given in table 20.
In our April 2004 report on missile defense, we noted that MDA is  pursuing the development of two types of boosters for the GMD  interceptor, one referred to as the Lockheed BV+ booster and the other  known as the Orbital Sciences Corporation (OSC) booster. We also  described how problems with the development and delivery of Lockheed’s  BV+ booster contributed to cost growth and schedule slips for the  program. For example, BV+ production was temporarily suspended  because of two separate explosions at a subcontractor’s propellant-mixing  facility.
Despite these problems, MDA is dedicated to pursuing a dual-booster  strategy. However, the problems with Lockheed’s booster in fiscal year  2003 had ramifications for the program’s fiscal year 2004 activities. For  example, MDA planned to use BV+ boosters in alternating Block 2004  flight tests and in about half of the interceptors fielded. However, because  of BV+ development and production problems, MDA deferred BV+  participation in integrated flight tests into Block 2006, and the Block 2004  inventory of GMD interceptors will consist entirely of those utilizing OSC  boosters. MDA plans to restart the manufacturing of BV+ boosters in fiscal  year 2005 and to field the first BV+ booster in 2007.
section_title: GMD Testing
paragraphs: The GMD program conducts a variety of tests, the most visible being flight  test events. For example, the program conducted booster validation (BV)  flight tests to assess the operation of GMD’s two booster designs. In  addition, the program conducts integrated flight tests (IFT) to more  realistically demonstrate the GMD element using actual hardware and  software. IFTs are reflective of the environment in which the GMD  element would operate for a given threat trajectory and given set of  conditions.
Although MDA hoped to gain knowledge about the element’s effectiveness  by conducting several integrated flight tests throughout fiscal year 2004,  only two of six scheduled tests—non-intercept tests of the Lockheed BV+  booster and the OSC booster—were executed. Table 21 summarizes the  major GMD flight tests that MDA planned to conduct in fiscal year 2004.
IFT-13C, which was the first flight test in 2 years with the potential for an  intercept, was delayed several times during fiscal year 2004. Part of the  delay was attributed to technical problems with the interceptor. In  addition, MDA upgraded the test interceptor to a configuration that more  closely matches the ones deployed. The test was conducted in December  2004, but failed to execute fully because the interceptor did not launch  from its silo. IFT-13C was of particular significance, because it was to have  demonstrated operational aspects of the LDO capability for the first time  in a flight test environment. For example, it was to have demonstrated: (1)  the operation of LDO hardware and software; (2) the operation of the kill  vehicle mated with an OSC booster; and (3) “real-time” connectivity  between Aegis destroyers and the C2BMC. IFT-14 was conducted in  February 2005 as a repeat of IFT-13C but with the added objective to  achieve an intercept. However, as in IFT-13C, it failed to execute fully  because the interceptor did not launch from its silo.
MDA relies heavily on its ground test program to characterize element and  system performance (especially under a broad set of conditions not  testable in flight), to demonstrate interoperability, and to develop  operational doctrine. MDA conducted two integrated ground tests (IGT) in  fiscal year 2004, IGT-2 and IGT-4a. These tests employed actual GMD- component processors integrated together in a hardware-in-the-loop  facility that emulated GMD operation in a simulated environment. They  also included warfighter participation to aid in the development of  operational concepts. Although the tests demonstrated that GMD  components could work together, its utility in assessing element  performance was limited. Officials in the office of DOT&E told us that  such assessments should be anchored by flight test data so that models  and simulations accurately characterize the system. Delays in the GMD  flight test program precluded these tests from being adequately anchored  and, therefore, limited its usefulness in assessing element performance.
The GMD program also participated in a series of System Integration and  Checkouts (SICO) of its fielded components. While these checkouts do not  assess element performance, they do demonstrate connectivity,  functionality, integration, and configuration in preparation for defensive  operations. During fiscal year 2004, MDA successfully conducted SICOs 1,  3, 5, and 6A. SICO 3 demonstrated the integration of non-LDO interceptor  equipment at Fort Greely into the overall BMDS; SICO 5 confirmed that  the upgraded Cobra Dane radar was properly connected to the  Communications Network; and SICO 6A confirmed integration of LDO  interceptor equipment at Fort Greely into the BMDS. Finally, SICO 6B was  successfully conducted in the beginning of fiscal year 2005 (December  2004). It demonstrated the integration of interceptor equipment at  Vandenberg into the BMDS.
section_title: Fielding Initial Capability
paragraphs: The GMD program completed the development, emplacement, and/or  upgrade of element components planned for LDO, including ground-based  interceptors, the Cobra Dane radar, the Beale UEWR (in fiscal year 2005),  and the GMD fire control and communications. Most notably, five  interceptors were placed in silos at Fort Greely and are available for  defensive operations. GMD also completed hardware and software  upgrades to the Cobra Dane and Beale radars, both of which met  objectives in ground tests and tracked targets of opportunity. Fire control  and communications nodes have been activated and linked to all GMD  locations. Finally, facility construction at Fort Greely and other GMD sites  was completed. Table 22 summarizes main accomplishments made in  fiscal year 2004 for each activity.
section_title: Assessment of Element Performance
paragraphs: GMD, the centerpiece of the BMDS Block 2004 defensive capability, has  demonstrated its ability to intercept target warheads in several flight tests  since 1999. Indeed, the program has achieved five successful intercepts  out of eight attempts. In addition, according to MDA officials, ground and  flight tests have demonstrated each step of the engagement sequence— detect, track, launch/engage, and intercept—collectively, although these  accomplishments do not verify integrated operation of the GMD capability.
Although GMD flight tests have demonstrated basic functionality of a  representative missile defense system using surrogate and prototype  components, the tests were developmental in nature and relied on  artificialities to overcome test-range limitations. For example, flight tests  required the placement of a C-band transponder and Global Positioning  System instrumentation on the target reentry vehicle. In addition,  engagement conditions were limited to low closing velocities and short  interceptor fly-out ranges. Finally, the tests were scripted and did not use  production-representative hardware and software.
In its push to field the first eight GMD interceptors by the end of  December 2004, MDA is assuming both performance and cost risk. As  noted above, the GMD program emplaced interceptors in silos before  successfully conducting a flight test utilizing components with the LDO  configuration. For example, the program did not demonstrate that the kill  vehicle could operate with the OSC booster prior to placing it in the silo  for future operational use (even though this booster puts more stress on  the kill vehicle). If future flight testing identifies problems with fielded  interceptors, the need for corrective actions could be costly, but  confidence would increase as corrections are made and capability is  understood.
section_title: Assessment of Element Cost
paragraphs: DOD’s planned investment in the GMD program from program inception in  1996 through 2011 is approximately $31.6 billion. As broken out in table 23,  DOD expended $15.3 billion between fiscal years 1996 and 2004, Congress  appropriated $3.3 billion for fiscal year 2005, and MDA is budgeting about  $13.0 billion between fiscal years 2006 and 2011 for GMD development,  procurement, and operations.
subsections: section_title: Prime Contractor Fiscal Year 2004 Cost and Schedule Performance
paragraphs: GMD’s prime contract consumes the bulk of the program’s budget. The  contract originally covered Block 2004 and Block 2006 developmental  activities, not the procurement and fielding of interceptors for the initial  defensive capability. Therefore, the program significantly modified the  contract in October 2003. The $823 million modification directed the  delivery of Block 2004 interceptors 6-20. The program is expected to  modify the contract again to procure additional interceptors. The added  cost of these interceptors is already reflected in the planned GMD budget  and MDA cost goals.
The government routinely uses contractor Cost Performance Reports to  independently evaluate prime contractor performance relative to cost and  schedule. Generally, the reports detail deviations in cost and schedule  relative to expectations established under the contract. Contractors refer  to deviations as “variances.” Positive variances are usually associated with  the accomplishment of activities under cost or ahead of schedule, while  negative variances are often associated with the accomplishment of  activities over cost or behind schedule.
The GMD program showed an unfavorable trend in contractor  performance in fiscal year 2004. According to our analysis, the contractor  exceeded its budgeted costs during fiscal year 2004 by $219.6 million,  which equates to 11.6 percent of the contract value over the fiscal year. In  addition, the contractor fell behind schedule in its work plan. In fiscal year  2004, the contractor was unable to complete $59.9 million of planned  work. Figure 8 shows how the contractor’s cumulative cost and schedule  performance declined during fiscal year 2004.
Our analysis shows that developmental issues with the interceptor  continue to be the leading contributor to cost overruns and schedule slips.  Interceptor-related work cost $204 million more than budgeted in fiscal  year 2004, with the kill vehicle accounting for approximately 40 percent of  this overrun. Delays in flight tests IFT-13C and IFT-14 also caused  unfavorable cost and schedule variances.
Based on the contractor’s cost and schedule performance in fiscal year  2004, we estimate that the current GMD contract—which ends in  September 2007—will overrun its budget by between $593 million and  $950 million. The contractor, in contrast, estimates a $200 million overrun  at contract completion. However, as of the end of fiscal year 2004, the  contractor had already incurred a negative cumulative cost variance of  approximately $348 million. In order for the prime contractor to complete  the contract within the established budget, the contractor must not incur  any additional cost overruns through contract completion and recoup at  least $148 million. The Defense Contract Management Agency believes  that the prime contractor is optimistic in projecting that it can limit further  cost growth and schedule slips. Indeed, the Defense Contract Management  Agency predicts that the contractor will continue to fall behind and be  unable to recover from past cost growth and schedule slips.
section_title: Program Description
paragraphs: The Kinetic Energy Interceptors  (KEI) element is a new Missile  Defense Agency (MDA) program in  its early stage of development. The  program is building on existing  missile defense technology to  develop an interceptor capable of  destroying long-range ballistic  missiles during the boost phase of  flight—the period after launch  when rocket motors are thrusting.  KEI also provides the opportunity  to engage an enemy missile in the  early-ascent phase, the period after  booster burnout before warheads  are released. MDA expects to have  available a land-based capability in  the 2012-2013 time frame.
KEI program activities completed in fiscal year 2004 include the selection of  Northrop Grumman as prime contractor for KEI development, associated  planning activities, and experimental work geared toward collecting data of  boosting missiles. Of significance, the amount appropriated by Congress for  missile defense in fiscal years 2004 and 2005 did not include the amount of  funding for KEI that was requested in the President’s Budget. As a result, the  program delayed its land-based capability from the originally planned Block  2008 time frame to Block 2012.
Schedule:  In December 2003, MDA awarded Northrop Grumman a $4.6  billion prime contract to develop and test the KEI element over the next 8  years. The award follows an 8-month concept design effort between  competing contractor teams, each of which was awarded $10 million  contracts to design concepts for KEI.
DOD’s planned investment in the  KEI program from program  inception in 2003 through 2011 is  approximately $6.0 billion. DOD  expended $192 million between  fiscal years 2003 and 2004,  Congress appropriated $267 million  for fiscal year 2005, and MDA is  budgeting about $5.5 billion for KEI  research and development between  fiscal years 2006 and 2011.
Testing:  In fiscal year 2004, the KEI program office continued with  activities designed to reduce technical risks in developing the KEI  interceptor. In particular, the program office is working on an experiment to  collect data on boosting missiles, known as the Near Field Infrared  Experiment. At this early stage of development, however, no significant  testing of the land-based capability has been conducted by the program  office.
Performance:  Because this element is still in its infancy, data are not yet  available to make a performance assessment. However, the program office  identified areas of high risk that could have an impact on the element’s  future performance. All risks are associated with interceptor development— including motor development and plume-to-hardbody handover—stemming  from the demands required of the boost phase intercept mission.
Cost:  Our analysis of the prime contractor’s cost performance report shows  that the contractor completed planned work under budget but was slightly  behind schedule in performing planned activities. Specifically, during fiscal  year 2004, the contractor could not complete about $1.6 million worth of  work. The program was unexpectedly tasked to complete trade studies of  how to incorporate new requirements being imposed by MDA. Due to plans  to restructure the KEI program, the prime contract’s long-term baseline is no  longer relevant; a reliable baseline will not be available until 2005.
section_title: Appendix VI: Kinetic Energy Interceptors
subsections: section_title: Element Description
paragraphs: The Kinetic Energy Interceptors (KEI) element is a missile defense system  designed to destroy ballistic missiles during the boost phase of flight, the  period after launch during which the missile’s rocket motors are thrusting.  KEI is also planned to engage enemy missiles in the early ascent-phase, the  period after booster burnout before the missile releases warheads and  countermeasures. Unlike the Airborne Laser element, which utilizes  directed energy to disable boosting missiles, the KEI element launches  interceptors to engage and destroy these threats through hit-to-kill  collisions.
The KEI program is currently focused on developing a mobile, land-based  system—to be fully demonstrated by the Block 2012 time frame—to  protect the United States against long-range ballistic missile attacks. The  land-based system will be a deployable unit consisting of a command and  control/battle management unit, mobile launchers, and interceptors. The  KEI element has no sensor component, such as radars, for detecting and  tracking boosting missiles. Instead, it will rely on Ballistic Missile Defense  System (BMDS) sensors, such as space-based infrared sensors and  forward-deployed radars, for such functions.
Concurrent with KEI development, the program is proceeding with its  Near Field Infrared Experiment (NFIRE). The experiment consists of  launching an experimental satellite in fiscal year 2006 to collect infrared  imagery of boosting intercontinental ballistic missiles (ICBM). The data it  collects will support the program’s efforts in developing the software that  operates the interceptor’s kill vehicle, in addition to enhancing plume  models and boost-phase simulations.
section_title: History
paragraphs: In fiscal year 2003, MDA initiated the KEI program as part of its Boost  Defense Segment. To select a contractor and a concept for the element,  the KEI program office awarded competitive contracts to teams headed by  Northrop Grumman and Lockheed Martin. Each contractor was given the  flexibility to design a system that met only one broad requirement—that  the KEI element be capable of reliably intercepting missiles in their  boost/ascent phases. MDA did not set cost or schedule requirements or  specify how the contractors should design the system.
MDA initially requested funds for the KEI element along with other boost- phase defense elements, such as the Airborne Laser, in its Boost Defense  Segment. However, in fiscal year 2004, MDA budgeted the KEI program  under a new area known as BMDS Interceptors.
section_title: Developmental Phases
paragraphs: The KEI element is being developed under MDA’s acquisition approach,  which delivers system capabilities in 2-year block increments. When the  KEI concept was first being pursued in fiscal year 2003—during which  Northrop Grumman and Lockheed Martin were competing for the prime  contract—the program planned on developing a mobile, land-based system  to be available in the Block 2008 time frame and expanding it to sea-based  platforms in Block 2010. However, the amount appropriated by Congress  for missile defense in fiscal year 2004 did not include the amount of  funding for KEI that was requested in the President’s Budget. As a result,  the program delayed completion of its land-based capability into Block  2010 and delayed the expansion of the sea-based capability into Block  2012.
In fiscal year 2004, the KEI program underwent a second re-plan to  compensate for anticipated fiscal year 2005 funding cuts and the addition  of new requirements (such as nuclear hardening) imposed by MDA. In the  re-plan, the land-based capability was combined with the sea-based  capability of Block 2012, both of which utilize the same interceptor.
The KEI program has undergone further restructuring, as reflected in the  fiscal year 2006 President’s Budget submitted in February 2005. Based on  revised funding levels beyond fiscal year 2005, the program deferred the  sea-based capability into Block 2014 (2014-2015 time frame), removed the  international program, and initiated plans for a Space Test Bed.
The program now expects to develop KEI capabilities as follows:    Block 2012—land. MDA envisions that the first-generation land based  interceptors would be launched from trucks that can be driven up close  to the border of the threatening nation. An initial land-based capability  will be declared after the final flight test, Integrated Test 5 (IT-5), is  conducted by the end of 2013.
Block 2014—sea. This block increment expands KEI’s land-based  capabilities to include the capability to launch KEI interceptors from  sea-based platforms, such as Aegis cruisers. The sea-based capability  will use the same interceptor as the land-based capability.
Blocks 2012/2014—space test bed. Development of the space test  bed is planned to be carried out concurrently with the development of  KEI’s terrestrial (land and sea) capabilities. Consisting of a limited  constellation of space-based interceptors, the test bed is envisioned to  provide an additional layer of defense against ICBMs. MDA plans to  initiate a concept design phase in fiscal year 2008 and conduct space- based intercept tests in the Block 2012/2014 time frame.
section_title: Planned Accomplishments for Fiscal Year 2004
paragraphs: The KEI program planned to accomplish several activities during fiscal  year 2004 associated with the land-based capability, with its primary focus  being the selection of a prime contractor for KEI’s developmental phase.  In the first quarter of fiscal year 2004, the program selected Northrop  Grumman as its prime contractor and awarded the company a contract  valued at $4.6 billion that covers a 98-month performance period.
The program office also planned to complete design, test, and risk  reduction efforts in fiscal year 2004. However, budget reductions forced  Northrop Grumman to delay several of these planned activities until fiscal  year 2005. The program office originally told the contractor to plan for a  $90 million budget during fiscal year 2004, but only $47 million was  available. Because program funding in fiscal year 2004 was much less than  requested, several design and test activities were postponed into fiscal  year 2005. For example, the program’s System Requirements Review  (SRR)—a review during which mission objectives are documented, critical  components are identified, and program planning is established—was  postponed into fiscal year 2005.
section_title: Assessment of Scheduled Activities
paragraphs: While the program completed a number of its planned activities, overall,  the KEI program progressed much more slowly than anticipated. As noted  above, Northrop Grumman was forced to re-plan several scheduled  activities because of reduced funding for the KEI program in fiscal years  2004 and 2005. Progress made toward achieving scheduled activities is  summarized in tables 24 through 27.
A key program accomplishment in fiscal year 2004 was the selection of  Northrop Grumman as the KEI prime contractor. The KEI program office  employed a unique acquisition strategy in the award of the contract by  making mission assurance—the successful operation of the element to  perform its mission—the basis for the amount of the contractor’s profit  from the performance of the contract. MDA built incentives into the  contract that require the prime contractor to assure mission assurance  through a disciplined execution of quality processes. For example, the  contractor earns an award fee only if flight tests are successful, and the  percentage of the award fee earned is determined by whether the tests are  conducted on schedule. The program’s intention is to maximize the  contractor’s incentives to develop a quality product on schedule and at the  originally proposed price.
section_title: Assessment of Element Performance
paragraphs: At this early stage of element development, data are not available to  evaluate element performance through the use of technical indicators.  However, the program office identified areas of high risk that may have an  impact on the element’s future performance. Table 28 summarizes these  risks. All risks are associated with interceptor operation for the boost- phase intercept mission.
In its July 2003 report on the boost-phase intercept mission, the American  Physical Society indicated that “time line” is a major challenge for boost  phase defense systems. In particular, boost phase defense against ICBMs  hinges (in large part) on the length of time an attacking missile is in boost  phase and on the speed of the defending interceptor. Accordingly, KEI  program officials recognize the time constraints of the boost phase  intercept mission and the challenge in developing quicker interceptors—as  is evident by the first high-risk item of table 28.
This same report also questions the feasibility of a land-based boost-phase  intercept concept, especially against large nations. For example, the report  states that a boost-phase intercept system employing terrestrial-based  interceptors would generally be ineffective against ICBMs launched from  the interiors of large countries—those having dimensions greater than  1,000 kilometers. Nonetheless, the program office contends sufficient  coverage is possible given adequate numbers and stationing of KEI units.  Furthermore, sea basing, which offers more options for boost phase  defense, builds directly upon the investments being made in the land- based capability.
Finally, a scientific study on boost phase defense commissioned by MDA  focused on selected issues of high risk. Plume-to-hardbody handover was  identified as high risk because of a lack of plume phenomenology data  available for determining the appropriate sensor combination for the  interceptor. The program office recognizes this challenge, as noted in table  28. As a result, the KEI program is proceeding with a 2-color seeker, better  enabling the kill vehicle to differentiate between the plume and hardbody  of a missile. In addition, the program is sponsoring NFIRE and  participating in targets of opportunity to collect data of boosting missiles.
section_title: Assessment of Element Cost
paragraphs: DOD’s planned investment in the KEI program from program inception in  2003 through 2011 is approximately $6.0 billion. As broken out in table 29,  DOD expended $192 million between fiscal years 2003 and 2004, Congress  appropriated $267 million for fiscal year 2005, and MDA is budgeting about  $5.5 billion for KEI research and development between fiscal years 2006  and 2011.
Table 29 reflects the planned funding profile of the KEI program as  presented in the President’s Budget for fiscal year 2006, which was  submitted in February 2005. When compared with the fiscal year 2005  President’s Budget—submitted last year in February 2004—KEI’s current  funding level is considerably less. Indeed, last year MDA budgeted   $7.87 billion for KEI program activities between fiscal years 2004 and 2009.  The current budget of $2.77 billion over the same time period represents a  65 percent reduction in program funding.
subsections: section_title: Prime Contractor Cost and Schedule Performance
paragraphs: The government routinely uses contractor Cost Performance Reports to  independently evaluate prime contractor performance relative to cost and  schedule. Generally, the reports detail deviations in cost and schedule  relative to expectations established under the contract. Contractors refer  to deviations as “variances.” Positive variances are usually associated with  the accomplishment of activities under cost or ahead of schedule, while  negative variances are often associated with the accomplishment of  activities over cost or behind schedule.
The KEI prime contractor performed work in fiscal year 2004 near its  budgeted costs. From contract inception through August 2004 (which  covers less than 1 percent of the contract), the contractor completed work  slightly under budget but was behind schedule in performing about   $1.6 million worth of planned work. Program officials indicated that the  negative schedule variance was the result of the contractor delaying  activities so that it could conduct trade studies on new requirements  imposed by MDA. For example, the contractor has been directed to  determine the cost of adding requirements for anti-tampering, nuclear  hardening, and insensitive munitions.
Because of plans to restructure the KEI program, the long-term  performance measurement baseline is no longer relevant. Near-term work  is still being performed according to plan, but the program suspended  contractor cost and schedule performance reporting for current work  efforts after August 2004. As a result, KEI program officials had reduced  insight into its prime contractor’s work efforts for a portion of fiscal year  2004. The program office told us that the contractor will resume reporting  in 2005 after a reliable baseline that reflects the full extent of the  program’s restructure is available.
The Space Tracking and  Surveillance System (STSS) is  being developed as a constellation  of low-orbiting satellites to detect  and track enemy missiles  throughout all phases of flight.  Funded and managed by the  Missile Defense Agency (MDA),  STSS replaces the Air Force’s  Space-Based Infrared System-Low  (SBIRS-Low) program. The STSS  program office is preparing to  launch in 2007 two technology  demonstration satellites that were  partially built under the SBIRS-Low  program. MDA intends to assess  how well these satellites perform  missile defense surveillance and  tracking functions and use this  information to establish  capabilities and goals for next- generation STSS satellites.
The STSS program office accomplished all but one of the principal Block  2006 activities planned for completion in fiscal year 2004 and initiated work  planned for completion in fiscal year 2005. Although the prime contractor is  working to an accelerated delivery schedule, quality and systems- engineering problems with a subcontractor are jeopardizing the early  delivery of a satellite’s payload.
Schedule: Program activities completed in fiscal year 2004 include the  complex tasks of systems integration, testing, and software development.  The program office completed a critical design review on time. Hardware  modifications to the satellites were completed, but a heat problem resulting  from the redesign of the electrical power subsystem caused a delay of three  months. Software development activities were also completed, and reviews  to ensure that the design for the STSS ground system could accommodate a  larger constellation of satellites were conducted.
DOD’s planned investment in the  STSS program from program  inception in 2002 through 2011 is  approximately $4.5 billion. DOD  expended $819 million between  fiscal years 2002 and 2004,  Congress appropriated $305 million  for fiscal year 2005, and MDA is  budgeting about $3.35 billion for  element development between  fiscal years 2006 and 2011.
Testing: Functional tests on components of the second technology  demonstration satellite were completed several months late because of  minor problems with the spacecraft’s computer processor and other  components. Planned integration tests on the track sensor were not  completed, and integration testing of an interim version of the software that  controls the sensors onboard the satellites took longer than planned.  Although final acceptance testing for the ground software is expected to be  completed 2 months late, all software development tasks are scheduled to be  completed two years before satellite launch.
Performance: Data provided by MDA indicate that two STSS performance  indicators do not meet their respective requirements—one pertaining to the  acquisition sensor and a second pertaining to the tracking sensor. Program  officials stated that degradation in performance is within acceptable limits.  The program considers the demonstration of STSS functionality more  critical than verifying the effectiveness of the demonstrator satellites.
MDA’s planned budget for the next  6 years through 2011 funds  activities associated with the  assembly and launch of the two  demonstrator satellites (Block  2006), ground segment upgrades  (Block 2008), and the development  of an operational constellation of  satellites (Block 2012).
Cost: Our analysis of prime contractor Cost Performance Reports shows  that the contractor completed work in fiscal year 2004 over budget by about  $34.6 million. In addition, the contractor could not complete $20.7 million of  scheduled work (relative to a 6-month accelerated schedule). Quality and  systems-engineering problems with a subcontractor contributed to the  overruns in cost and schedule.
section_title: Appendix VII: Space Tracking and Surveillance System
subsections: section_title: Element Description
paragraphs: The Space Tracking and Surveillance System (STSS) is being developed as  a space-based sensor for the Ballistic Missile Defense System (BMDS). As  envisioned by the Missile Defense Agency (MDA), the full STSS element  will be comprised of a constellation of low-orbiting satellites designed to  detect and track enemy missiles throughout all phases of flight. Each  satellite making up the program’s “space segment” includes a space  vehicle and a payload of two infrared sensors—the acquisition sensor to  watch for the bright plumes (hot exhaust gas) of boosting missiles, and the  tracking sensor to follow the missile through midcourse and reentry.   The STSS element also has supporting ground infrastructure, known as the  “ground segment,” which includes a ground station and mission software  to support the processing and communication of data from the satellites to  the BMDS.
MDA is currently working on the first increment of STSS, known as Block  2006, which is focused on the preparation and launch of two technology  demonstration satellites partially built under the Space Based Infrared  System Low (SBIRS-Low) program. MDA plans to launch these satellites in  2007, in tandem, in an effort to assess how well they perform surveillance  and tracking functions. Using data collected by the satellites, MDA will  determine what capabilities are needed and what goals should be set for  the next generation of STSS satellites. Any real operational capability,  however, would not be realized until the next decade.
section_title: History
paragraphs: Initiated in 1996, SBIRS-Low was the latest in a series of Department of  Defense (DOD) satellite programs attempting to deliver an operational  capability for detecting and tracking missiles from low-earth orbits. The  program experienced cost and schedule growth and performance  shortfalls. In response, DOD cancelled the accompanying demonstration  program in 1999 and put the partially constructed satellite equipment into  storage.
In October 2000, Congress directed the Air Force to transfer the SBIRS- Low program to the Ballistic Missile Defense Organization (MDA’s  predecessor). When MDA inherited SBIRS-Low, the agency decided to  make use of the equipment that was partially built under the SBIRS-Low  technology demonstrator program. By completing the assembly of the two  satellites and launching them in 2007, MDA intends to use the satellites in  missile defense flight tests. At the end of 2002, the SBIRS-Low program  was renamed STSS.
section_title: Developmental Phases
paragraphs: STSS’s development is proceeding in a series of 2-year blocks, namely,  Blocks 2006, 2008, and beyond. As noted above, Block 2006 involves the  assembly, integration, testing, and launch of two research and  development satellites in 2007. The first satellite is expected to be ready in  September 2005 and the second in early fiscal year 2007. Block 2008 is  primarily an upgrade of the Block 2006 ground stations, which are used to  collect and analyze data from the two satellites. As technology matures  and as lessons are learned from the first satellites, more capable satellites  will be designed and launched in subsequent blocks.
section_title: Planned Accomplishments for Fiscal Year 2004
paragraphs: The STSS program office intended to accomplish several activities during  fiscal year 2004 related to the preparation of the two demonstration  satellites for launch in 2007. Specifically, the program office planned to  complete the following space- and ground-segment activities:    Space Segment. The program planned to complete a design review to  ensure the STSS design can support the BMDS mission; complete the  reactivation of hardware components for the second satellite; modify  two satellite hardware components to enhance spacecraft  performance; continue to develop the payload software; and start the  assembly, integration, and testing of satellite components.
Ground Segment. The program planned to complete activities to  ensure that the STSS element has a mature ground system design and  to continue with the development of software for the ground segment  of the program.
section_title: Assessment of Scheduled Activities
paragraphs: The STSS program office completed all but one of the principal Block 2006  activities planned for fiscal year 2004, including the complex tasks of  systems integration, testing, and software development. Moreover, the  program office initiated work planned for completion in fiscal year 2005.  The contractor has been performing to an accelerated delivery schedule,  that is, attempting to complete all contracted activities six months earlier  than required by the contract. However, according to the program office,  quality and systems-engineering problems at the payload subcontractor  are jeopardizing the early delivery. Progress made toward achieving the  space- and ground-segment activities is summarized in tables 30 and 31,  respectively.
section_title: Assessment of Element Performance
paragraphs: The Block 2006 STSS satellites will be used as technology demonstrators  (rather than for operational missions) and have an in-orbit life of 18-24  months. To keep costs within budget, the program considers the  demonstration of STSS functionality more critical than the demonstration  of STSS effectiveness in performing the functions. MDA decided to fly  these demonstration satellites before developing and producing them in  larger numbers to see how components and subsystems work together as  a system in a realistic environment before a greater investment of  resources is made, thereby reducing program risk. As noted above, each  satellite contains two infrared sensors—an acquisition sensor to detect a  missile launch and a tracking sensor to track the missile through space  once it has been detected. The tracking sensor would continue tracking  the missile after the acquisition sensor has completed its detection  function. The ability of one satellite to detect or “acquire” a missile launch  and to transmit this data to its internal tracking sensor has not yet been  demonstrated in space, although DOD has had successes in demonstrating  some related on-orbit capabilities through experimental satellites.
Even with a focus on system functionality over effectiveness, the prime  contractor continues to track 12 system level technical parameters that are  critical to the performance of the sensors onboard the Block 2006  satellites. Data provided to us by MDA indicate that 2 of the 12 indicators  do not meet their respective requirements. The details on these issues,  including the impact on STSS performance, are classified. However,  shortfalls in performance involve both sensors. The ability of the  acquisition sensors to properly detect a missile launch is falling below  performance margins and the accuracy of the tracking sensor is getting  close to the margin. Program officials stated that the degradation in  acquisition sensor performance is within allowable limits and steps are  being taken to improve tracking sensor performance.
section_title: Assessment of Element Cost
paragraphs: DOD’s planned investment in the STSS program from program inception in  2002 through 2011 is approximately $4.5 billion. As broken out in table 32,  DOD expended $819 million between fiscal years 2002 and 2004, Congress  appropriated $302 million for fiscal year 2005, and MDA is budgeting about  $3.35 billion between fiscal years 2006 and 2011 for element development.  MDA’s planned budget for the next 6 years through 2011 funds activities  associated with the assembly and launch of the two demonstrator  satellites (Block 2006), ground segment upgrades (Block 2008), and the  development of an operational constellation of satellites (Block 2012).
subsections: section_title: Prime Contractor Cost and Schedule Performance
paragraphs: The government routinely uses contractor Cost Performance Reports to  independently evaluate prime contractor performance relative to cost and  schedule. Generally, the reports detail deviations in cost and schedule  relative to expectations established under the contract. Contractors refer  to deviations as “variances.” Positive variances are usually associated with  the accomplishment of activities under cost or ahead of schedule, while  negative variances are often associated with the accomplishment of  activities over cost or behind schedule.
Figure 9 shows the STSS contractor’s cost and schedule performance  during fiscal year 2004. According to Cost Performance Reports, the work  completed during this time cost more than budgeted and was behind  schedule relative to a 6-month accelerated schedule. Specifically, during  fiscal year 2004, the work cost about $34.6 million more than expected,  and the contractor could not complete approximately $20.7 million of  scheduled work.
The erosion of cumulative cost variance throughout fiscal year 2004 was  largely attributed to cost overruns by the payload subcontractor, whose  costs comprise about one-third of the total STSS contract. During the past  year, the subcontractor has had a number of quality and systems- engineering problems that contributed to overruns in cost and schedule.  These problems are largely the result of unclear systems engineering  procedures and the subcontractor’s lack of experience with space  hardware. In response to these problems, the prime contractor conducted  a thorough review of the subcontractor’s quality assurance program for  the assembly, integration, and testing of satellite components. In addition,  the subcontractor added technicians who have more experience working  with space hardware and brought in systems engineers to work with the  technicians. Despite these issues, the program office still expects the  prime contractor to complete the contract early and with minimal cost  overruns.
The cumulative schedule variance also eroded during fiscal year 2004. The  delay in the delivery of the payload is the major driver of the unfavorable  schedule variance. In addition to these drivers, performance upgrades to  the Electrical Power Subsystem were completed three months later than  planned due to a heat-removal problem. A factor complicating our analysis  of schedule variance is that the contractor implemented a performance  measurement baseline that reflects a six-month accelerated schedule.  This means the contractor might be performing work on a schedule that  would allow it to complete all the work by the end of the contract, but  schedule performance data would show that work was falling behind  schedule.
Our assessment of fiscal year 2004 activities did not identify any evidence  that the STSS program would be unable to launch the two demonstration  satellites in 2007. Although the payload subcontractor experienced  schedule delays and cost overruns arising from quality issues, the program  office is still confident that the satellites will be delivered early. In  addition, the reactivation of components from storage went better than  anticipated and, accordingly, the program office reduced the risk level  associated with hardware and software furnished by the government.  Furthermore, the prime contractor is making progress on the parts  obsolescence issue. For example, the prime contractor located most  replacement parts and is assembling a database to track them.
The Terminal High Altitude Area  Defense (THAAD) element is a  ground-based missile defense  system designed to protect  deployed military forces and  civilian population centers from  short- and medium-range ballistic  missile attacks. THAAD engages  ballistic missiles during the late- midcourse and terminal phases of  flight, that is, before or after the  warhead reenters the atmosphere.  The THAAD program expects to  field an initial capability consisting  of 24 interceptors during the 2009  time frame.
The bulk of fiscal year 2004 activities focused on developing and ground- testing THAAD components in preparation for the first round of flight tests  in mid-fiscal year 2005. At the end of fiscal year 2004 with 61 percent of the  THAAD prime contract completed, THAAD’s prime contractor was under  budget and ahead of schedule. However, the contractor’s favorable cost and  schedule performance eroded somewhat during fiscal year 2004. Our  analysis indicates that problems with missile development were a major  driver of the deteriorating performance.
Schedule:  During fiscal year 2004, the THAAD program accomplished key  activities ahead, on, or slightly behind schedule. The program conducted the  missile-component design readiness review ahead of schedule, completed  radar assembly on schedule, but was behind schedule on missile delivery for  the element’s first flight test, Flight Test 1. In addition, the program  successfully conducted ground tests in preparation for the initial flight test.
DOD’s planned investment in the  THAAD program from program  inception in 1992 through 2011 is  approximately $12.3 billion. DOD  expended $7.2 billion between  fiscal years 1992 and 2004,  Congress appropriated $760 million  for fiscal year 2005, and MDA is  budgeting about $4.3 billion for  THAAD development and  procurement between fiscal years  2006 and 2011.
Testing:  Two explosions in the summer of 2003 at a subcontractor’s  propellant mixing facility impacted THAAD’s fiscal year 2004 funding,  delayed the start of flight testing, and led to a revision of the flight test  program.
Performance:  The program office told us that key indicators show that  THAAD is on track to meet operational performance goals. However, an  assessment of THAAD’s effectiveness remains uncertain until the program  conducts flight tests with updated hardware and software. Data from flight  testing are needed to “anchor” simulations of THAAD’s performance and to  more confidently predict the element’s effectiveness.
Cost:  Our analysis of prime contractor cost performance reports shows that  the contractor’s favorable cost and schedule performance eroded somewhat  during fiscal year 2004. The declining schedule performance was largely  driven by unfavorable performance in the missile component—caused by  two separate explosions at a subcontractor’s propellant mixing facility—but  offset by other THAAD components with favorable performance. Overall, the prime contractor is under budget and ahead of schedule.
section_title: Appendix VIII: Terminal High Altitude Area Defense
subsections: section_title: Element Description
paragraphs: The Terminal High Altitude Area Defense (THAAD) element is being  developed as a ground-based missile defense system to protect forward- deployed military forces, population centers, and civilian assets from  short- and medium-range ballistic missile attacks. THAAD provides the  opportunity to engage ballistic missiles—outside or inside the earth’s  atmosphere—not destroyed earlier in the boost or midcourse phases of  flight by other elements of the Ballistic Missile Defense System (BMDS).
A THAAD unit consists of a command, control, battle management, and  communications (C2/BMC) component for controlling and executing a  defensive mission, truck-mounted launchers, ground-based radar,  interceptor missiles, and ground support equipment. The ground-based  radar is a solid-state, phased-array, X-band radar that performs search,  track, discrimination, and other fire-control functions. The THAAD missile  is comprised of a kill vehicle mounted atop a single-stage booster and is  designed to destroy enemy warheads through hit-to-kill collisions.
section_title: History
paragraphs: The THAAD program entered the Program Definition and Risk Reduction  phase of acquisition in 1992 but was plagued by missed intercepts in its  first six attempts. As noted in our 1999 report, THAAD’s failures were  caused by a combination of a compressed test schedule and quality  control problems. The Director, Operational Test and Evaluation  (DOT&E), reported in his Fiscal Year 1999 Annual Report to the Congress  that the sense of urgency to deploy a prototype system resulted in an  overly optimistic development schedule.
The THAAD program conducted two successful intercept attempts in 1999  after devoting substantial time to pretest activities. The program then  transitioned to the product development phase of acquisition, in which  program activities shifted from technology development and  demonstration to missile redesign and engineering. The Department of  Defense (DOD) transferred the THAAD program from the U.S. Army to the  Ballistic Missile Defense Organization (now MDA) on October 1, 2001.
section_title: Developmental Phases
paragraphs: The THAAD program is pursuing its goals within the MDA block approach,  which incrementally increases the element’s capability against the ballistic  missile threat. We reported last year that THAAD’s development was  structured around a Block 2004-2006-2008 program, with program funding  aligned accordingly. However, with the submission of the fiscal year 2006  President’s Budget in February 2005, MDA implemented a new BMDS  baseline approach for the THAAD program. Under this new program,  THAAD development is structured around a Block 2006-2008-2010  program, with funding broken out by Block 2006/2008 and Block 2010.
Block 2006. Block 2006 incorporates the activities of the former Block  2004 program. The Block 2006 THAAD program is expected to  demonstrate an engagement capability against short- and medium- range ballistic missiles above the atmosphere.
Block 2008. By the end of Block 2008, the THAAD element will have  completed additional flight tests (including attempts employing a salvo- firing doctrine), demonstrated an engagement capability inside and  above the atmosphere, and be configured to accept data from other  BMDS sensors for launching its interceptor missiles. THAAD’s  integration with the BMDS is expected to increase its defended area by  more than a factor of three.
The THAAD program includes a “fire unit” for delivery in fiscal year  2009. Operated by the Army, it will consist of a radar, a C2/BMC unit, 3  launchers, 24 missiles, and equipment for support, maintenance and  training. The Army has “signed on” to receive the equipment and is  planning to allocate nearly 100 soldiers for training and operations.
Block 2010. The THAAD program plans to enhance the element’s  ability to interoperate with other elements and sensors of the BMDS.  By engaging threats with external BMDS data, THAAD is expected to  increase its defended area by more than a factor of ten.
section_title: Planned Accomplishments for Fiscal Year 2004
paragraphs: The bulk of the fiscal year 2004 activities focused on developing and  ground-testing THAAD components in preparation for the first round of  flight tests in mid-fiscal year 2005. We grouped activities into three  categories: (1) design, (2) build, and (3) integration and test. Progress on  key activities scheduled for fiscal year 2004 is discussed below.
section_title: Assessment of Scheduled Activities
paragraphs: During fiscal year 2004, the THAAD program accomplished key activities  ahead, on, or slightly behind schedule. As examples, the program  conducted the missile-component design readiness review ahead of  schedule, completed radar assembly on schedule, but delivery of the  missile for Flight Test 1 slipped into fiscal year 2005. Specifics regarding  progress in achieving these and other key scheduled activities are  summarized below in tables 33 through 35.
subsections: section_title: THAAD Flight Test Program Delayed 3-5 Months
paragraphs: The THAAD flight-test program consists of 15 flight-test events divided  among Blocks 2006 and 2008. Two explosions in the summer of 2003 at a  subcontractor’s propellant mixing facility impacted THAAD’s fiscal year  2004 funding, delayed the start of flight testing, and led to revisions of the  flight test plans.
The first set of flight tests have been delayed 3-5 months. The first flight  test, referred to as a control test flight (CTF), is a missile-only, non- intercept test that focuses on how the missile operates under high  endoatmospheric environmental conditions. The second flight test is an  integrated system test with a “virtual target” to demonstrate system  performance under conditions comparable to the next flight test (first  flight test utilizing a real target). The third flight test is a seeker  characterization flight (SCF), which ensures proper functioning of the  seeker. This SCF is also a non-intercept test, but the seeker will  demonstrate the ability to view a real target. The fourth flight test, FT-04,  is the first intercept attempt with a configuration—target and engagement  geometry—comparable to that used in flight tests conducted during the  Program Definition and Risk Reduction phase of development. Table 36  summarizes the first six flight test events, including current and prior flight  test dates with their objectives.
Compared to test plans of fiscal year 2004, the THAAD program deferred  two test events. A second control test flight conducted at WSMR— formerly FT-02—and an intercept attempt against a threat-representative  target at the Pacific Missile Range Facility (PMRF)—formerly FT-05—have  been deferred to a later time.
section_title: Assessment of Element Performance
paragraphs: Any assessment of THAAD’s effectiveness is uncertain at this time. The  program office told us that key indicators show that THAAD is on track to  meet operational performance goals. However, the THAAD program has  not conducted any recent flight tests and, as a result, performance  indicators used to gauge progress toward meeting performance objectives  are based only on engineering analysis and ground testing. Until data  collected during flight tests are used to “anchor” simulations of THAAD  operation, the program cannot be confident that current indicators  accurately predict THAAD’s performance in actual combat conditions.
section_title: Assessment of Element Cost
paragraphs: DOD’s planned investment in the THAAD program from program inception  in 1992 through 2011 is approximately $12.3 billion. As broken out in table  37, DOD expended $7.2 billion between fiscal years 1992 and 2004,  Congress appropriated $760 million for fiscal year 2005, and MDA is  budgeting about $4.3 billion for THAAD development and procurement  between fiscal years 2006 and 2011.
subsections: section_title: Prime Contractor Fiscal Year 2004 Cost and Schedule Performance
paragraphs: The government routinely uses contractor Cost Performance Reports to  independently evaluate the prime contractor’s performance relative to cost  and schedule. Generally, the reports detail deviations in cost and schedule  relative to expectations established under the contract. Contractors refer  to deviations as “variances.” Positive variances are usually associated with  the accomplishment of activities under cost or ahead of schedule, while  negative variances are often associated with the accomplishment of  activities over cost or behind schedule. At the end of fiscal year 2004, the  THAAD prime contractor was carrying a positive cumulative cost and  schedule variance of $3.9 million and $14.7, respectively. That is, overall,  the prime contractor was under budget and ahead of schedule.
As figure 10 shows, declining cumulative schedule variance during the  latter portion of fiscal year 2004 was eroding overall performance. The  decline in the positive schedule variance was largely caused by problems  with the missile component, which were the result of two explosions at a  subcontractor’s propellant mixing facility. In January 2004, these incidents  and efforts to reestablish booster production caused MDA to revise  THAAD’s baseline. The new baseline recognizes the inevitable delay to  initial flight testing and all supporting tasks. It also provides a new  starting point for measuring the prime contractor’s schedule performance.  Therefore, even though the prime contractor completed $8.1 million worth  above that scheduled for fiscal year 2004 (that is, incurred a positive  schedule variance of $8.1 million), the variance would have been less  favorable had the contractor not established a new baseline.
The favorable cumulative cost variance incurred during fiscal year 2004  masks problems with the cost variance incurred by the missile component,  which was unfavorable for the year. Major factors contributing to the  missile’s unfavorable cost variance include explosions at a subcontractor’s  facility used to mix missile propellant and the cost of efforts to reestablish  booster production, as noted above; delays in activating a test facility at  the Air Force Research Laboratory; and re-design efforts on a faulty valve  thrust vector assembly. Favorable cost variances in other THAAD areas,  such as the radar segment, offset the missile’s unfavorable cost variance.
section_title: Appendix IX: Information on the Army’s Missile Defense Programs
subsections: section_title: Background
paragraphs: The Army is responsible for funding and managing two missile defense  programs. The programs—which ultimately will be fielded as a single  missile defense system—include the Patriot missile defense system  including its newest missile variant, the Patriot Advanced Capability-3  (PAC-3), and the Medium Extended Air Defense System (MEADS), which  is currently under development. The Army intends to incrementally  replace fielded Patriot components with more-capable MEADS  components as they become available. The resulting system is expected to  better protect deployed U.S. forces and critical assets from short- and  medium-range tactical ballistic missile attacks. The Army’s Lower Tier  Project Office manages Patriot and MEADS development, procurement,  and fielding.
Now operational with the U.S. Army, Patriot with its PAC-3 missiles is the  latest evolution of the Patriot air and missile defense system. The Patriot  system has four basic components: (1) ground-based radar to detect and  track targets; (2) engagement control station to provide command, control,  and communications; (3) launcher; and (4) interceptor missiles. Compared  with earlier versions of the Patriot missile, PAC-3 provides improved  performance against short- and medium-range tactical ballistic missiles,  cruise missiles, and aircraft. The PAC-3 missile is in production and  successfully achieved initial fielding in September 2001.
MEADS is an international co-development program between the United  States, Germany, and Italy with a cost share of 58, 25, and 17 percent,  respectively. MEADS expands upon Patriot capability with four new  components: (1) a launcher; (2) battle management, command, control,  communications, computer and intelligence (BMC4I) equipment; (3) a  surveillance radar; and (4) a multi-function fire control radar. MEADS is  expected to offer significant improvements in tactical mobility and  strategic deployability over existing Patriot units. In addition, MEADS is  designed to be interoperable with other airborne and ground-based  sensors and utilize a netted architecture to provide a robust, 360-degree  defense against cruise missiles, unmanned-aerial-vehicles, tactical air to  surface missiles, rotary-wing and fixed-wing threats, and very short and  medium range theater ballistic missiles.
section_title: Combined Aggregate Program
paragraphs: In 2003, the Under Secretary of Defense for Acquisition, Technology, and  Logistics approved plans for combining management, development, and  fielding of the Patriot and MEADS programs. The approach calls for  incremental fielding and early insertion of MEADS components within  existing Patriot batteries rather than delivering MEADS as a single system.  The Army uses the term “Combined Aggregate Program (CAP)” to refer to  the transitional activities leading up to full fielding of the MEADS and  replacement of Patriot components. CAP also includes an enhanced PAC-3  missile—funded 100 percent by the United States—called the Missile  Segment Enhancement (MSE). The MSE missile is intended to operate at  higher altitudes and longer ranges than existing PAC-3 missiles.
The plan calls for MEADS components to be inserted into Patriot  battalions in three time-phased increments, as follows:    Increment one. Scheduled for initial fielding in fiscal year 2009,  increment one consists of the insertion of the MEADS BMC4I to begin  replacing the Patriot engagement control station component and  associated equipment. This increment is considered the highest  acquisition priority because it (a) integrates with existing sensors to  provide 360-degree coverage to counter cruise missiles, and   (b) supports targeting by using data from external sensors, which is  referred to as “engage on remote.”
Increment two. Scheduled for initial fielding in fiscal year 2011,  increment two consists of the insertion of the MEADS launcher to  begin replacing the Patriot launcher. This increment is expected to  enhance system mobility and be capable of firing either the existing  PAC-3 missile or the new MSE missile. The MSE missile is scheduled  for initial fielding in 2011. It does not replace the PAC-3 missile but,  rather, supplements fielded inventory.
Increment three. Scheduled for initial fielding in fiscal year 2015,  increment three consists of the insertion of the MEADS Ultra High  Frequency surveillance radar and the X-band multifunction fire control  radar to replace the Patriot C-band radars. These radars are expected  to provide (a) 360-degree coverage for defense against cruise missiles  and fire control to engage low-altitude, stressing targets; and   (b) surveillance and fire control for high-value asset defense against  short-range ballistic missiles.
The overall Patriot/MEADS CAP is scheduled for initial fielding in 2015  when increment three is available. MEADS production is scheduled to  continue through fiscal year 2028. The 2015 fielding date, approved by the  Under Secretary for Defense, represents a three-year delay from the  fielding date planned in the previous MEADS program. According to a  Lower Tier Project Office spokesperson, constraints in developmental  funding caused the delay in initial fielding of MEADS components.  Specifically, out-year Research, Development, Test and Evaluation  (RDT&E) funding was insufficient to field MEADS in fiscal year 2012.
section_title: Patriot/MEADS CAP Funding
paragraphs: The Army’s Lower Tier Project Office estimates that the life-cycle cost for  the United States’ portion of the Patriot/MEADS CAP program—which  includes PAC-3 and MEADS-component development, procurement, and  operations and support (O&S) costs—will be $150.6 billion through  approximately fiscal year 2048. Of this amount:    $109 billion (72.4 percent) is for O&S.   $31.9 billion (21.2 percent) is for procurement.   $9.7 billion (6.4 percent) is for RDT&E.
Operations and support costs are a large proportion of the total cost  largely because of the length of time a fielded unit is supported. Although  production is scheduled to end in fiscal year 2028, these newest units are  expected to be in the field for another 20 years.
Table 38 summarizes the funding requested by the U.S. Army to fund  development and missile procurement of the Patriot/MEADS Combined  Aggregate Program over the Future Years Defense Plan (fiscal years 2006- 2011). The requested funding supports the procurement of 108 PAC-3  missiles per year.
section_title: Appendix X: Scope and Methodology
paragraphs: The accomplishment of Missile Defense Agency (MDA) program goals is  ultimately achieved through the efforts of individual Ballistic Missile  Defense System (BMDS) elements. Therefore, we based our assessment  on the progress made in fiscal year 2004 by those seven elements that   (1) are under the management of MDA and (2) are being developed as part  of a block capability. The elements we reviewed accounted for 72 percent  of MDA’s fiscal year 2004 research and development budget. We compared  each element’s completed activities, test results, demonstrated  performance, and prime contractor cost and schedule performance in  fiscal year 2004 with those planned for the year. We also completed an  abbreviated evaluation of an eighth BMDS element, the U.S. Army’s  Combined Aggregate Program, which consists of Patriot and the Medium  Extended Air Defense System.
Many activities completed in fiscal year 2004 by the various element  programs pertained to the completion of Limited Defensive Operations,  which is an integral part of the Block 2004 goals. To assess progress  toward schedule goals—that is, program activities including test events  scheduled for completion in fiscal year 2004—we examined each  element’s prime contractor Cost Performance Reports, Defense Contract  Management Agency’s analyses of these reports (if available), quarterly  reviews of element progress (known as System Element Reviews), and  other agency documents to determine whether key activities were  accomplished as planned. We also developed a data collection instrument,  which was submitted to MDA, to gather detailed information on completed  program activities, including tests, design reviews, prime contracts, and  estimates of element performance.
We assessed MDA’s fiscal year 2004 cost performance by separately  reviewing the cost performance of each BMDS element’s prime contractor.  We used this methodology because MDA allocates a large percentage of its  budget to fund prime contractors that develop system elements. To make  these assessments, we applied established earned value management  techniques to data captured in contractor Cost Performance Reports.  Results were presented in graphical form to determine trends. We also  used established earned value management formulas to project the likely  costs of the contracts at completion. discussions with, and attending overview briefings presented by, various  program office officials. Furthermore, we interviewed officials from the  office of the Director, Operational Test and Evaluation, within the  Department of Defense (DOD) to learn more about their assessment of the  operational capability of the initial BMDS. Finally, we met with officials  from U.S. Strategic Command to discuss the initial capability’s military  utility from the warfighter’s perspective.
During our review, we observed that MDA is expected to face increasing  funding risks—arising from sources both within and outside DOD—in the  years ahead as MDA attempts to enhance and field its missile defense  capabilities. To examine this issue further, we reviewed life-cycle cost  documentation from the U.S. Army Lower Tier Project Office, our report  on total ownership costs, a Congressional Budget Office report, and MDA  documentation on the agency’s plans for development and fielding.
We also observed inconsistencies in how MDA is implementing its block  approach. To gain insight into this issue, we examined element-level  documents and answers to a data collection instrument that we generated  to extract specific information on planned deliveries of fielded assets. We  also examined MDA’s Statement of Goals, budget statements for fiscal  years 2004 and 2005, and other documents provided by MDA, such as  Missile Defense Plan II.
To ensure that MDA-generated data used in our assessment are reliable,  we evaluated the agency’s internal management control processes. We  discussed these processes extensively with MDA upper management. In  addition, we confirmed the accuracy of MDA-generated data with multiple  sources within MDA and, when possible, with independent experts. To  assess the validity and reliability of prime contractors’ Earned Value  Management systems and reports, we analyzed audit reports prepared by  the Defense Contract Audit Agency. Finally, we assessed MDA’s internal  accounting and administrative management controls by reviewing MDA’s  Federal Managers’ Financial Integrity Report for Fiscal Years 2003 and  2004.
Our work was performed primarily at MDA headquarters in Arlington,  Virginia. At this location, we met with officials from the Kinetic Energy  Interceptors Program Office; Aegis Ballistic Missile Defense Program  Office; Airborne Laser Program Office; Command, Control, Battle  Management, and Communications Program Office; and Ground-based  Midcourse Defense Program Office. In addition, we met with officials from  the Space Tracking and Surveillance System Program Office, Los Angeles,  California; Terminal High Altitude Area Defense Project Office, Huntsville,  Alabama; and the U.S. Army Lower Tier Program Office, Huntsville,  Alabama. We also interviewed officials from the office of the Director,  Operational Test and Evaluation, Arlington, Virginia; U.S. Strategic  Command, Omaha, Nebraska; and the Joint Theater Air Missile Defense  Organization, Arlington, Virginia.
We conducted our review from May 2004 through February 2005 in  accordance with generally accepted government auditing standards.
section_title: Appendix XI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the individual named above, Tony Beckham, Ivy Hübler,  Stan Lipscomb, LaTonya Miller, Karen Richey, Adam Vodraska, Jonathan  Watkins, and Randy Zounes (Analyst-in-Charge) made key contributions to  this report.