Defense Acquisitions: 2009 Review of Future Combat System Is Critical to Program's Direction
Published: 2008-04-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Future Combat System (FCS) program--which comprises 14 integrated weapon systems and an advanced information network--is the centerpiece of the Army's effort to transition to a lighter, more agile, and more capable combat force. The substantial technical challenges, the Army's acquisition strategy, and the cost of the program are among the reasons why the program is recognized as needing special oversight and review. This testimony is based on GAO's two March 2008 reports on FCS and addresses (1) how the definition, development, and demonstration of FCS capabilities are proceeding, particularly in light of the go/no-go decision scheduled for 2009; (2) the Army's plans for making production commitments for FCS and any risks related to the completion of development; and (3) the estimated costs for developing and producing FCS.
section_title: What GAO Found
paragraphs: Today, the FCS program is about halfway through its development phase, yet it is, in many respects, a program closer to the beginning of development. This portends additional cost increases and delays as FCS begins what is traditionally the most expensive and problematic phase of development. In the key areas of defining and developing FCS capabilities, requirements definition is still fluid, critical technologies are immature, software development is in its early stages, the information network is still years from being demonstrated, and complementary programs are at risk for not meeting the FCS schedule. It is not yet clear if or when the information network that is at the heart of the FCS concept can be developed, built, and demonstrated. Yet, the time frame for completing FCS development is ambitious; even if all goes as planned, the program will not test production-representative prototypes or fully demonstrate the system of systems until after low rate production begins. Even though the development of FCS will finish late in its schedule, commitments to production will come early. Production funding for the first spinout of FCS technologies and the early version of the FCS cannon begin in fiscal years 2008 and 2009. Production money for the core FCS systems will be requested beginning in February 2010, with the DOD fiscal year 2011 budget request--just months after the go/no-go review and before the stability of the design is determined at the critical design review. In fact, by the time of the FCS production decision in 2013, a total of about $39 billion, which comprises research and development and production costs, will already have been appropriated for the program, with another $8 billion requested. Also, the Army plans to contract with its lead system integrator for the initial FCS production, a change from the Army's original rationale for using an integrator. This increases the burden of oversight faced by the Army and the Office of the Secretary of Defense. While the Army's cost estimates for the FCS program remain about the same as last year--$160.9 billion--the content of the program has been reduced, representing a reduction in buying power for the Army. The level of knowledge for the program does not support a confident estimate, and cost estimates made by two independent organizations are significantly higher. Competing demands from within the Army and DOD limits the ability to fund higher FCS costs. Thus, the Army will likely continue to reduce FCS capabilities in order to stay within available funding limits. Accordingly, FCS's demonstrated performance, the reasonableness of its remaining work, and the resources it will need and can reasonably expect will be of paramount importance at the 2009 milestone review for the FCS program.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Department of the Army’s  Future Combat System (FCS), a networked family of weapons and other  integrated systems. FCS is in the forefront of efforts to help the Army  transform itself into a lighter, more agile, and more capable combat force  by using a new concept of operations, new technologies, and a new  information network linking whole brigades together in a system of  systems. In 2009, FCS faces a congressionally mandated go/no-go decision  review to determine the program’s future. This review is crucial, as  production funding and commitments will build rapidly after that point,  limiting the government’s ability to alter course.
My statement today is based on the work we conducted over the past year  in response to the National Defense Authorization Act for Fiscal Year 2006,  which requires GAO to report annually on the FCS program. Accordingly,  this statement discusses (1) how the definition, development, and  demonstration of FCS capabilities are proceeding, particularly in light of  the go/no-go decision scheduled for 2009; (2) the Army’s plans for making  production commitments for FCS and any risks related to completing  development; and (3) the estimated costs for developing and producing  FCS and risks the Army faces in both meeting the estimate and providing  commensurate funding.
subsections: section_title: Background
paragraphs: The FCS concept is designed to be part of the Army’s Future Force, which  is intended to transform the Army into a more rapidly deployable and  responsive force that differs substantially from the large division-centric  structure of the past. The Army is reorganizing its current forces into  modular brigade combat teams, each of which is expected to be highly  survivable and the most lethal brigade-sized unit the Army has ever  fielded. The Army expects FCS-equipped brigade combat teams to provide  significant warfighting capabilities to DOD’s overall joint military  operations. The Army has also instituted plans to spin out selected FCS  technologies and systems to current Army forces throughout the  program’s system development and demonstration phase.
The FCS program is recognized as being high risk and needing special  oversight. Accordingly, in 2006, Congress mandated that the Department  of Defense (DOD) hold a milestone review following its preliminary design  review. Congress directed that the review include an assessment of  whether (1) the needs are valid and can best be met with the FCS concept,  (2) the FCS program can be developed and produced within existing  resources, and (3) the program should continue as currently structured, be  restructured, or be terminated. Congress required the Secretary of Defense  to review and report on specific aspects of the program, including the  maturity of critical technologies, program risks, demonstrations of the  FCS concept and software, and a cost estimate and affordability  assessment.
This statement is based on work we conducted between March 2007 and  March 2008 and is in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
section_title: Definition, Development, and Demonstration of Capabilities Will Finish Late in the FCS Schedule
paragraphs: Ideally, the Army should have entered development in 2003 with firm  requirements and mature technologies. However, the FCS program will be  challenged to meet these markers by the time of the preliminary design  review in 2009. The Army has only recently formed an understanding of  what will be expected of the FCS network. Complementary programs,  necessary to the success of the FCS, are not yet fully synchronized with  the FCS schedule and face funding and technical challenges. By 2009, the  Army will have spent 6 years and $18 billion on these initial efforts, with  the costlier components of a development program still to come. It will be  years before demonstrations validate that the FCS will provide needed  capabilities.
subsections: section_title: Requirements, Technologies, and Designs Are Not Yet Mature
paragraphs: While the Army should have firmed requirements at the outset of its  development program, it now faces a daunting task in completing this  work by the preliminary design review and subsequent milestone review in  2009—6 years into a 10-year development schedule. Many of FCS’s  thousands of requirements are almost certain to be modified as the  program approaches these reviews. The Army’s decision to restructure the  program in early 2007, reducing the set of systems from 18 to 14, resulted  in requirements modifications, deferrals, and redistributions that affected  the requirements balance among the remaining systems. As this program  adjustment is implemented, further requirements changes to the systems,  as well as to the network, could be required. The Army also continues to  make design trade-offs to accommodate restrictions such as space, weight,  and power constraints; affordability; and technical risks, such as transport  requirements for manned ground vehicles. FCS software development is  hampered by incomplete requirements and designs for the information  network. While the Army’s user community expects that FCS will deliver  capabilities that are as good as or better than current forces, this position  is based on the results of modeling and simulation activities—it will be  several years before field demonstrations validate the user community’s  position.
FCS’s critical technologies remain at low maturity levels. According to the  Army’s latest technology assessment, only two of FCS’s 44 critical  technologies have reached a level of maturity that, based on best practice  standards, should have been demonstrated at program start. Even applying  the Army’s less rigorous standards, only 73 percent can be considered  mature enough to begin system development today. The technological  immaturity, coupled with incomplete requirements, is a mismatch that has  prevented the Army from reaching the first critical knowledge point for  this program—a precursor for cost growth. Many of these immature  technologies may have an adverse cumulative impact on key FCS  capabilities such as survivability. In addition, the Army is struggling to  synchronize the schedules and capabilities of numerous essential  complementary programs with the overall FCS program. The Army has  identified problems that raise concerns about the likelihood that many  complementary systems will deliver the required capabilities when  needed. In some cases, complementary programs have been adversely  affected by FCS demands, and in others, lack of coordination between  FCS and complementary program officials has stalled efforts aimed at  synchronizing programs and resolving cost, schedule, and technical issues.
section_title: Significant Challenges in Developing And Demonstrating FCS Network and Software
paragraphs: It is not yet clear if or when the information network that is at the heart of  the FCS concept can be developed, built, and demonstrated by the Army  and lead system integrator (LSI). Significant management and technical  challenges—owing more to the program’s complexity and immaturity than  to the approach to software—have placed development of the network  and software at risk. These risks include network performance and  scalability, immature network architecture, and synchronization of FCS  with Joint Tactical Radio System (JTRS) and Warfighter Information  Network-Tactical programs that have significant technical challenges of  their own. The amount of estimated software code required for the FCS  network and platforms has recently increased to 95.1 million lines. This is  nearly triple the size of the original estimate in 2003, and the largest  software effort by far for any weapon system. Software code is difficult to  estimate, and underestimation is not unique to FCS. Compounding this  inherent difficulty on FCS were the program’s poorly defined  requirements, indicative of its immaturity. Lines of code have grown as  requirements have become better understood. The Army believes the  latest increases will not substantially increase software development  costs, but updated Army and independent cost estimates will not be  available until next year. Previously, the independent estimates have  differed sharply from the Army’s in the area of FCS software development  costs.
Although several disciplined practices are being used to develop FCS’s  network and software, the program’s immaturity and aggressive pace  during development have delayed requirements development at the  software developer level. For example, software developers for five major  software packages that we reviewed report that high-level requirements  provided to them were poorly defined, omitted, or late in the development  process. These caused the software developers to do rework or defer  functionality to future builds. In turn, these poor or late requirements had  a cascading effect that caused other software development efforts to be  delayed.
It is unclear when or how it can be demonstrated that the FCS network  will work as needed, especially at key program junctures. For example, in  2009, network requirements, including software, may not be well defined  nor designs completed at the preliminary design review; and at the FCS  milestone review later that year, network demonstration is expected to be  very limited. The Army and LSI have identified and need to address  numerous areas of high risk such as network performance and scalability.  The first large scale FCS network demonstration—the limited user test in  2012—will take place at least a year after the critical design review and  only a year before the start of FCS production. That test will seek to  identify the impact of the contributions and limitations of the network on  the ability to conduct missions. This test will be conducted after the  designs have been set for the FCS ground vehicles, a situation that poses  risks because the designs depend on the network’s performance. A full  demonstration of the network with all of its software components will not  be demonstrated until at least 2013 when the fully automated battle  command system is expected to be ready.
section_title: FCS Capabilities Will Be Demonstrated after Key Decision Points
paragraphs: When FCS reaches its planned preliminary design review in 2009, the  Army will have expended over 60 percent of its development funds and  schedule. However, much will still need to be done in terms of technology  maturation, system integration and demonstration, and preparing for  production—all three knowledge points fundamental to a successful  acquisition. Large scale demonstrations of the network will not occur until  after manned ground vehicles, which depend on the performance of the  network, are already designed and prototyped. The Army does not plan to  demonstrate that the FCS system of systems performs as required until  after the production decision for the core program in 2013. That would  preclude opportunities to change course if warranted by test results and  increasing the likelihood of costly discoveries in late development or  during production. The cost of correcting problems in those stages is high  because program expenditures and schedules are less forgiving than in the  early stages of a program. Conversely, the test standards we apply reflect  the best practice of having production-representative prototypes tested  prior to a low rate production decision. This approach demonstrates the  prototypes’ performance and reliability as well as manufacturing  processes—in short, that the program is ready to be manufactured within  cost, schedule, and quality goals.
section_title: Significant Commitments to Production Will Be Made Before FCS Capabilities Are Demonstrated
paragraphs: While the FCS production decision for the core FCS program is to be held  in fiscal year 2013, production commitments will begin in fiscal years 2008  and 2009 with production for the first of a series of three planned spin out  efforts and the early versions of the NLOS-C vehicle. When considering  these activities, along with long-lead and facilitization investments  associated with the production of FCS core systems, a total of $11.9 billion  in production money will have been appropriated and another $6.9 billion  requested by the time of the production decision for the FCS core systems  in 2013. When development funds are included, $39 billion will have been  appropriated and another $8 billion requested. As noted previously, key  demonstrations will not yet have taken place by this time. Also, in April  2007, the Army announced its intention to contract with the LSI for the  production for the first three brigade combat teams of FCS systems, the  production of the FCS spin out items, and the early production of NLOS-C  vehicles. This decision makes an already unusually close relationship  between the Army and the LSI even closer, and heightens the oversight  challenges FCS presents.
subsections: section_title: Spin Out Procurement to Begin before Testing Completed
paragraphs: In 2004, the Army revised its acquisition strategy to bring selected  technologies and systems to current forces via spin outs while  development of the core FCS program is underway. The first of these spin  out systems will be tested and evaluated in the coming year, and a  production decision is planned in 2009. However, the testing up to that  point will feature some surrogate subsystems rather than the fully  developed subsystems that would ultimately be deployed to the current  forces. For example, none of the tests will include fully functional JTRS  radios or associated software. The Army believes this strategy is adequate;  however, testing of surrogates may not provide quality measurements to  gauge system performance, and the Army may have to redesign if JTRS  radios have different form, fit, and function than expected. Taken  together, these spin out 1 capabilities serve as a starting point for FCS but  represent only a fraction of the total capability that the Army plans for  FCS to provide. The Army has general plans for a second and third set of  spin out items but, according to the Army, these have not yet been funded.
section_title: NLOS-C Production to Begin Soon at Congress’ Direction
paragraphs: Responding to congressional direction, the Army will begin procuring long  lead production items for the NLOS-C vehicle in 2008. The Army will  deliver six units per year in fiscal years 2010 through 2012; however, these  early NLOS-C vehicles will not meet threshold FCS requirements and will  not be operationally deployable without significant modifications. Rather,  they will be used as training assets for the Army Evaluation Task Force.
To meet the early fielding dates, the Army will begin early production of  the NLOS-C vehicles with immature technologies and designs. Several key  technologies will not be mature for several years, and much requirements  and design work remains on the manned ground vehicles, including the  NLOS-C. Significant challenges involving integrating the technologies,  software, and design will follow. To the extent these aspects of the  manned ground vehicles depart from the early production cannons, costly  rework of the cannons may be necessary.
The Army is planning a seamless transition between NLOS-C production  and core FCS production. However, beginning the production of NLOS-C  vehicles 5 years before the start of FCS core production could create  additional pressure to proceed with FCS core production. Moreover, to the  extent that beginning NLOS-C production in 2008 starts up the manned  ground vehicle industrial base, it could create a future need to sustain the  base. If decision makers were to consider delaying FCS core production  because it was not ready, a gap could develop when early NLOS-C  production ends. Sustaining the industrial base could then become an  argument against an otherwise justified delay. The Under Secretary of  Defense for Acquisition, Technology, and Logistics recently took steps to  keep the decisions on the NLOS-C early production separate from FCS  core production. In approving procurement of long lead items for the  NLOS-C vehicles in 2008, the Under Secretary designated the 18 early  prototypes as a separate, special interest program for which he will retain  authority for making milestone decisions. The Under Secretary will make a  second decision in 2009 whether to approve NLOS-C production and has  put a cost limit of $505.2 million (fiscal year 2003 dollars) on production of  these vehicles. He also added that specific requirements be met at that  time, such as a capability production document, technology readiness  assessment, test plan, independent estimate of costs, and an approved  acquisition program baseline. This is a positive step in ensuring that the  Army’s efforts to meet Congressional direction do not result in  unfavorable consequences.
section_title: Army Commitment to LSI for Production Heightens Oversight Challenges
paragraphs: The Army’s April 2007 decision to contract with the LSI for FCS  production makes an already close relationship closer, represents a  change from the Army’s original rationale for using an LSI, and may  further complicate oversight. The specific role the LSI will play in  production of spin outs, NLOS-C, and FCS core production are unclear at  this point. According to program officials, the statements of work for the  long lead items contracts for spin outs and NLOS-C have not yet been  worked out. The statements of work for the production contract will also  be negotiated later. The work the LSI does in actual production of FCS is  likely to be small compared to the other hardware suppliers and  assemblers. Thus, the production role of the LSI is likely to be largely in  oversight of the first tier subcontractors.
From the outset of the program, the LSI was to focus its attention on  development activities that the Army judged to be beyond what it could  directly handle. Army leadership believed that by using an LSI that would  not necessarily have to be retained for production, the Army could get the  best effort from the contractor during the development phase while at the  same time making the effort profitable for the contractor. Nonetheless, the  LSI’s involvement in the production phase has been growing over time.  The current LSI development contract for the core FCS systems extends  almost 2 years beyond the 2013 production decision. The Army does not  expect the initial brigades outfitted by FCS will meet the upper range of its  requirements and has made the LSI responsible for planning future FCS  enhancements during the production phase. Combined with a likely role in  sustainment, the LSI will remain indefinitely involved in the FCS program.  By committing to the LSI for early production, the Army effectively ceded  a key point of leverage it had held—source selection—and is perhaps the  final departure from the Army’s initial efforts to keep the LSI’s focus solely  on development. This decision also creates a heightened burden of  oversight in that there is now additional need to guard against the natural  incentive of production from creating more pressure to proceed through  development checkpoints prematurely. As we have previously reported,  this is a burden that will need to be increasingly borne by the Office of the  Secretary of Defense.
section_title: FCS Costs Likely to Grow beyond Army Estimates
paragraphs: The Army’s $160.9 billion cost estimate for the FCS program is largely  unchanged from last year’s estimate despite a program adjustment that  reduced the number of systems from 18 to 14. This may mean a reduction  in capabilities of the FCS program and thus represents a reduction in the  Army’s buying power on FCS. Further, two independent cost estimates— from DOD’s Cost Analysis Improvement Group (CAIG) and the other from  the Institute for Defense Analyses (IDA), a federally funded research and  development center—are significantly higher than the Army’s estimate.  Both assessments estimate higher costs for software development, to  which a recent increase in lines of code adds credence. The Army has not  accepted either of the independent estimates on the grounds that they  each include additional work scope, particularly in the later years of the  development phase. Also, the CAIG and IDA both use historical growth  factors in their estimates, based on the results of previous programs. It is  reasonable to include such growth factors, based on our own analysis of  weapon systems and the low level of knowledge attained on the FCS  program at this time.
Given the program’s relative immaturity in terms of technology and  requirements definition and demonstrations of capabilities to date, there is  not a firm foundation for a confident cost estimate. The Army has not  calculated confidence levels on its estimates, though this is a best practice  and could reduce the probability of unbudgeted cost growth. Under its  current structure, the Army will make substantial investments in the FCS  program before key knowledge is gained on requirements, technologies,  system designs, and system performance, leaving less than half its  development budget to complete significantly expensive work, such as  building and testing prototypes, after its preliminary design review. The  Army maintains that if it becomes necessary, FCS content will be further  reduced, by trading away requirements or changing the concept of  operations, to keep development costs within available funding levels. As  the Army begins a steep ramp-up of FCS production, FCS costs will  compete with other Army funding priorities, such as the transition to  modular organizations and recapitalizing the weapons and other assets  that return from current operations. Together, the program’s uncertain  cost estimate and competing Army priorities make additional reductions in  FCS scope and increases in cost likely.
section_title: Conclusion
paragraphs: The deficiencies we cite in areas such as requirements and technology are  not criticisms of progress in the sense that things should have gone  smoother or faster. At issue, rather, is the misalignment of the program’s  normal progress with the events used to manage and make decisions on  such acquisitions—key decisions are made well before sufficient  knowledge is available. The decision in 2009 will provide an opportunity to  realign the progress of knowledge in FCS with events such as the critical  design review and tests of prototypes before the production decision. The  2009 decision may also be the government’s last realistic opportunity to  safeguard its ability to change course on FCS, should that be warranted.  The first decision, as we see it, will have to determine whether FCS  capabilities have been demonstrated to be both technically feasible and  militarily worthwhile. If they have not, then DOD and the Army will need  to have viable alternatives to fielding the FCS capability as currently  envisioned. Depending on the results of the first decision, the second  decision is to determine how to structure the remainder of the FCS  program so that it attains high levels of knowledge before key  commitments.
Other aspects of the FCS program warrant attention that should not wait  until the 2009 decision. Primary among these is the Army’s decision to  extend the role of the LSI into FCS production. This is a decision that will  necessarily heighten the role the Office of the Secretary of Defense will  have to play in overseeing the program and departs from the Army’s  philosophy of having the LSI focus on development without the competing  demands and interests that production poses. A second aspect of the  program warranting attention is the Army’s approach to spin outs. It will  be important for the Army to clearly demonstrate the military utility of the  spin outs to current Army forces, based on testing high-fidelity,  production-representative prototypes, before a commitment is made to  their low rate production. This is not the current plan, as the Army plans  to use some surrogate equipment in the testing that will support the  production decision for spin out 1. Finally, it is important that the  production investments in the spin outs and NLOS-C do not create undue  momentum for production of the FCS core systems. As noted above,  commitment to production of the FCS core systems must be predicated on  attaining high levels of knowledge, consistent with DOD policy.
section_title: Actions Recommended in Our Recent Reports
paragraphs: In our March 2008 reports, we made several recommendations to ensure  that the 2009 FCS milestone review is positioned to be both well-informed  and transparent. Specifically, we recommended that the Secretary of  Defense establish objective and quantitative criteria that the FCS program  will have to meet in order to justify its continuation and gain approval for  the remainder of its acquisition strategy. The criteria should be set by at  least July 30, 2008, in order to be prescriptive, and should be consistent  with DOD acquisition policy and best practices. At a minimum, the criteria  should include, among other things, the completion of the definition of all  FCS requirements including those for the information network and the  synchronization of FCS with all essential complementary programs. We  also recommended that the Secretary of Defense, in advance of the 2009  milestone review, identify viable alternatives to FCS as currently  structured that can be considered in the event that FCS does not measure  up to the criteria set for the review. As we have previously reported, an  alternative need not be a rival to the FCS, but rather the next best solution  that can be adopted if FCS is unable to deliver the needed capabilities. For  example, an alternative need not represent a choice between FCS and the  current force, but could include fielding a subset of FCS, such as a class of  vehicles, if they perform as needed and provide a militarily worthwhile  capability. We further recommended that the Secretary of Defense (1)  closely examine the oversight implications of the Army’s decision to  contract with the LSI for early production of FCS spin outs, NLOS-C, and  low rate production for the core FCS program; (2) take steps to mitigate  the risks of the Army’s decisions, including the consideration of the full  range of alternatives for contracting for production; and (3) evaluate  alternatives to the LSI for long-term sustainment support of the FCS  system of systems.
Finally, regarding the FCS network and software development and  demonstration efforts, we recommended that the Secretary of Defense (1)  direct the FCS program to stabilize network and software requirements on  each software build to enable software developers to follow disciplined  software practices; (2) establish a clear set of criteria for acceptable  network performance at each of the key program events; and (3) in setting  expectations for the 2009 milestone review, include a thorough analysis of  network technical feasibility and risks, synchronization of network  development and demonstration with that of other FCS elements, and a  reconciliation of the differences between independent and Army estimates  of network and software development scope and cost.
DOD concurred with our recommendations and stated that criteria for the  2009 FCS Defense Acquisition Board review will be established and will be  reviewed and finalized at the 2008 Defense Acquisition Board review. The  results of the analyses and assessments planned to support the 2009  review will inform DOD’s acquisition and budget decisions for FCS. These  are positive steps toward informing the 2009 Defense Acquisition Board  review.
Mr. Chairman, this concludes my prepared statement. I would be happy to  answer any questions you or members of the subcommittee may have.
section_title: Contacts and Staff Acknowledgements
paragraphs: For future questions about this statement, please contact me on (202) 512- 4841 or francisp@gao.gov. Individuals making key contributions to this  statement include William R. Graveline, Assistant Director; Martin G.  Campbell; Ronald N. Dains; Tana M. Davis; Marcus C. Ferguson; John A.  Krump, John M. Ortiz; and Carrie R. Wilson.
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