Defense Acquisitions: Improved Business Case Key for Future Combat System's Success
Published: 2006-04-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Future Combat System (FCS) is a networked family of weapons and other systems in the forefront of efforts by the Army to become a lighter, more agile, and more capable combat force. When considering complementary programs, projected investment costs for FCS are estimated to be on the order of $200 billion. FCS's cost is of concern given that developing and producing new weapon systems is among the largest investments the government makes, and FCS adds significantly to that total. Over the last 5 years, the Department of Defense (DOD) doubled its planned investments in such systems from $700 billion in 2001 to $1.4 trillion in 2006. At the same time, research and development costs on new weapons continue to grow on the order of 30 to 40 percent. FCS will be competing for significant funds at a time when federal fiscal imbalances are exerting great pressures on discretionary spending. In the absence of more money being available, FCS and other programs must be executable within projected resources. Today, I would like to discuss (1) the business case needed for FCS to be successful and (2) our recent recommendations to DOD and matters for congressional consideration regarding the FCS program.
section_title: What GAO Found
paragraphs: There are a number of compelling aspects of the FCS program, and it is hard to argue with the program's goals. However, the elements of a sound business case for such an acquisition program--firm requirements, mature technologies, a knowledge-based acquisition strategy, a realistic cost estimate, and sufficient funding--are not yet present. FCS began product development prematurely in 2003. Since then, the Army has made several changes to improve its approach for acquiring FCS. Yet today, the program remains a long way from having the level of knowledge it should have had before starting product development. FCS has all the markers for risks that would be difficult to accept for any single system, much less a complex, multiprogram effort. These challenges are even more daunting in the case of FCS not only because there are so many of them but because FCS represents a new concept of operations that is predicated on technological breakthroughs. Thus, technical problems, which accompany immaturity, not only pose traditional risks to cost, schedule, and performance; they pose risks to the new fighting concepts envisioned by the Army. Last month, we made recommendations to the Secretary of Defense to take several actions, prior to DOD's long-term commitment to the program, to improve the FCS business case and establish knowledge-based measures to guide oversight of FCS progress. These recommendations detailed specific steps DOD should take leading up to a major milestone review of the program in 2008 when the program is expected to have achieved the level of knowledge it should have had in 2003. We believe it is at this point the program should be reviewed as to whether it has established enough of a solid business case to continue. While DOD concurred with the intent of our recommendations, it did not agree to limit its commitment to the FCS program or to do much beyond what it had already planned to do. This concerns us. As a result, we have also raised to Congress several matters for consideration to ensure that FCS has a sound business case before future funding commitments are made. We believe the actions we have recommended to DOD and the matters for consideration we have presented to Congress are necessary to improve the prospects for FCS success and to protect the government's ability to change course if the program does not progress as the Army plans.

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  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. This is a tremendous undertaking that  will involve a total investment cost on the order of $200 billion.
The context within which the FCS investment is being made is important.  Fiscal imbalances faced by the federal government will continue to  constrain discretionary spending. One of the single largest investments the  government makes is the development and production of new weapon  systems. Over the last 5 years, the Department of Defense (DOD) has  doubled its planned investments in new weapon systems from about $700  billion in 2001 to nearly $1.4 trillion in 2006. At the same time, research  and development cost growth on new weapons maintains its historical  level of about 30 to 40 percent. This is the lens that must be used to look at  major new investments, such as FCS, because more money may not be an  option for the future. Rather, the key to getting better outcomes is to make  individual programs more executable.
My statement today is based on our recently issued report about the need  for an improved business case for the FCS. This report responds to the  National Defense Authorization Act for Fiscal Year 2006, which requires  GAO to report annually on the product development phase of the FCS’s  acquisition. Recently, we testified before the Senate Armed Services  Committee about the FCS’s business case and related business  arrangements.
Today, I would like to discuss (1) the scope of the business case that we  feel is necessary for the FCS to be successful and (2) our recent  recommendations to DOD and matters for congressional consideration  regarding the FCS program.
subsections: section_title: Background
paragraphs: The FCS concept is part of a pervasive change to what the Army refers to  as the Future Force. The Army is reorganizing its current forces into  modular brigade combat teams, meaning troops can be deployed on  different rotational cycles as a single team or as a cluster of teams. The  Future Force is designed to transform the Army into a more rapidly  deployable and responsive force and to enable the Army to move away  from the large division-centric structure of the past. Each brigade combat  team 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 is implementing its  transformation plans at a time when current U.S. ground forces are playing  a critical role in the ongoing conflicts in Iraq and Afghanistan.
The FCS family of weapons includes 18 manned and unmanned ground  vehicles, air vehicles, sensors, and munitions linked by an information  network. These vehicles, weapons, and equipment will constitute the  majority of the equipment needed for a brigade combat team. The Army  plans to buy 15 brigades’ worth of FCS equipment by 2025. See figure 1 for  the various elements of the FCS program.
If successful, the FCS system-of-systems concept will leverage individual  capabilities of weapons and platforms and will facilitate interoperability  and open system designs. This would be a significant improvement over  the traditional approach of building superior individual weapons that must  be retrofitted and netted together after the fact. This transformation, in  terms of both operations and equipment, is under way with the full  cooperation of the Army warfighter community. In fact, the development  and acquisition of FCS is being accomplished using a uniquely  collaborative relationship among the Army’s developers, the participating  contractors, and the warfighter community.
subsections: section_title: FCS Restructures the Program and Changes Contracting Approach
paragraphs: As a key element of its efforts to transform itself, the Army has recognized  FCS from its outset as the greatest technology and integration challenge it  has ever undertaken. In May 2003, DOD approved the FCS program to  begin the system development and demonstration phase, a milestone that  ideally marks the completion of technology development and the start of  product development. However, FCS’s entry into this phase was  premature given the program had failed to satisfy basic tenets of DOD  acquisition policy. We have reported that, as FCS started product  development, it did not have mature technologies or adequately defined  requirements.
Responding to direction from the Army Chief of Staff, the Army  announced in July 2004 its plans to restructure the FCS program. The  Army added 4 years to develop and mature the manned ground vehicles,  added more demonstrations and experiments, and established an  evaluation unit to demonstrate FCS capabilities. The restructuring  reintroduced 4 systems that previously had been left unfunded, raising the  total number of FCS-related systems to 18. The restructure also included  plans to spin off mature FCS capabilities as they become available to  current force units. With the restructuring, the FCS program now plans to  achieve initial operational capability in fiscal year 2015 and full  operational capability in fiscal year 2017. FCS low-rate production is  expected to start in fiscal year 2012, and full-rate production in fiscal year  2016. The Army intends to continue FCS procurement through fiscal year  2025, eventually equipping 15 brigade combat teams.
The restructuring was not the only major modification to the FCS  program. Because of congressional concerns that the Army’s contracting  approach incorporated insufficient safeguards to protect the government’s  interests, the Army is preparing a new contract that is to be completed and  finalized in late March 2006 and is based on the Federal Acquisition  Regulation, which governs acquisitions within the federal government. The  new contract will incorporate standard Federal Acquisition Regulation  clauses such as those relating to procurement integrity, Truth in  Negotiations, and Cost Accounting Standards. Previously, the lead systems  integrator had been performing FCS work for the Army under a  contractual instrument called an “other transaction agreement” that was  not subject to the Federal Acquisition Regulation. The other transaction  agreement gave the Army considerable flexibility to negotiate the terms  and conditions for contractors involved in FCS development. The Army’s  purpose for using such an agreement was to encourage innovation and to  use its wide latitude in tailoring business, organizational, and technical  relationships to achieve the program goals. In April 2005, the Army  decided to incorporate into its agreement the procurement integrity, Truth  in Negotiations, and Cost Accounting Standards clauses from the  regulation.
After Congress raised questions about the Army using an other transaction  agreement for the development of a program as large and risky as FCS and  about the Army’s choice not to include standard Federal Acquisition  Regulation clauses in the agreement, the Secretary of the Army directed  that the other transaction agreement be converted to a Federal Acquisition  Regulation-based contract. All of the work performed under the product  development phase as of September 2005 will be accounted for under the  prior other transaction agreement, and all work after September 2005 will  be performed under the new contract. The Army expects the content of  the program—its statement of work—will remain largely the same, and it  does not expect the cost, schedule, and performance of the overall  development effort to change materially.
section_title: Elements of a Business Case
paragraphs: We have frequently reported on the importance of using a solid,  executable business case before committing resources to a new product  development. In its simplest form, this is evidence that (1) the warfighter’s  needs are valid and can best be met with the chosen concept, and (2) the  chosen concept can be developed and produced within existing  resources—that is, proven technologies, design knowledge, adequate  funding, and adequate time to deliver the product when needed.
At the heart of a business case is a knowledge-based approach to product  development demonstrating high levels of knowledge before significant  commitments are made. In essence, knowledge supplants risk over time.  This building of knowledge can be described as three levels, or knowledge  points, that should be attained over the course of a program:    First, at program start, the customer’s needs should match the  developer’s available resources—mature technologies, time, and  funding. An indication of this match is the demonstrated maturity of  the technologies needed to meet customer needs.
Second, about midway through development, the product’s design  should be stable and demonstrate it is capable of meeting performance  requirements. The critical design review takes place at that point of  time because it generally signifies when the program is ready to start  building production-representative prototypes.
Third, by the time of the production decision, the product must be  shown to be producible within cost, schedule, and quality targets and  have demonstrated its reliability, and the design must demonstrate that  it performs as needed through realistic system-level testing.
The three knowledge points are related in that a delay in attaining one  delays the points that follow. Thus, if the technologies needed to meet  requirements are not mature, then design and production maturity will be  delayed.
section_title: Objectives, Scope, and Methodology
paragraphs: To develop the information on the Future Combat System program’s  progress toward meeting established goals, the contribution of critical  technologies and complementary systems, and the estimates of cost and  affordability, we interviewed officials of the Office of the Under Secretary  of Defense (Acquisition, Technology, and Logistics); the Army G-8; the  Office of the Under Secretary of Defense (Comptroller); the Secretary of  Defense’s Cost Analysis Improvement Group; the Director of Operational  Test and Evaluation; the Assistant Secretary of the Army (Acquisition,  Logistics, and Technology); the Army’s Training and Doctrine Command;  Surface Deployment and Distribution Command; the Program Manager for  the Future Combat System (Brigade Combat Team); the Future Combat  System Lead Systems Integrator; and other contractors. We reviewed,  among other documents, the Future Combat System’s Operational  Requirements Document, the Acquisition Strategy Report, the Baseline  Cost Report, the Critical Technology Assessment and Technology Risk  Mitigation Plans, and the Integrated Master Schedule. We attended or  reviewed the results of the FCS System-of-Systems Functional Review, In- Process Reviews, Board of Directors Reviews, and multiple system  demonstrations. In our assessment of the FCS, we used the knowledge- based acquisition practices drawn from our large body of past work as  well as DOD’s acquisition policy and the experiences of other programs.  We conducted the above in response to the National Defense  Authorization Act of Fiscal Year 2006, which requires GAO to annually  report on the product development phase of the FCS acquisition. We  performed our review from June 2005 to March 2006 in accordance with  generally accepted government auditing standards.
section_title: Improved Business Case Is Needed for the FCS’s Success
paragraphs: The FCS program started its product development phase with inadequate  knowledge in several key areas. After almost 3 years and progress in key  areas, the elements of a sound business case, namely firm requirements,  mature technologies, a knowledge-based acquisition strategy, a realistic  cost estimate, and sufficient funding, are not yet demonstrably present.  Given that, an improved business case for the FCS program is essential to  help ensure the program is successful in the long run. The importance of a  business case is amplified by the fact that the program is developing 18  systems and a network under a single program office and lead system  integrator in the same amount of time it would take to develop a single  system.
subsections: section_title: While Progress Has Been Made, Requirements Still Remain Uncertain
paragraphs: The Army has made significant progress defining FCS’s system-of-systems  requirements, particularly when taking into account the daunting number  of them involved—nearly 11,500 at this level. Yet system-level  requirements are not yet stabilized and will continue to change,  postponing the needed match between requirements and resources. Now  the Army and its contractors are working to complete the definition of  system-level requirements, and the challenge is in determining if those  requirements are technically feasible and affordable. Army officials say it  is almost certain some FCS system-level requirements will have to be  modified, reduced, or eliminated; the only uncertainty is by how much. We  have previously reported unstable requirements can lead to cost, schedule,  and performance shortfalls. Once the Army gains a better understanding of  the technical feasibility and affordability of the system-level requirements,  trade-offs between the developer and the warfighter will have to be made,  and the ripple effect of such trade-offs on key program goals will have to  be reassessed. Army officials have told us it will be 2008 before the  program reaches the point that it should have reached before it started in  May 2003 in terms of stable requirements.
section_title: FCS Success Hinges on Numerous Undemonstrated Technologies and Complementary Programs
paragraphs: Development of concrete program requirements depends in large part on  stable, fully mature technologies. Yet, according to the latest independent  assessment, the Army has not fully matured any of the technologies  critical to FCS’s success. Some of FCS’s critical technologies may not  reach a high level of maturity until the final major phase of acquisition, the  start of production. The Army considers a lower level of demonstration as  acceptable maturity, but even against this standard, only about one-third  of the technologies are mature. We have reported going forward into  product development without demonstrating mature technologies  increases the risk of cost growth and schedule delays throughout the life  of the program. The Army is also facing challenges with several of the  complementary programs considered essential for meeting FCS’s  requirements. Some are experiencing technology difficulties, and some  have not been fully funded. These difficulties underscore the gap between  requirements and available resources that must be closed if the FCS  business case is to be executable.
Technology readiness levels (TRL) are measures pioneered by the  National Aeronautics and Space Administration and adopted by DOD to  determine whether technologies are sufficiently mature to be incorporated  into a weapon system. Our prior work has found TRLs to be a valuable  decision-making tool because they can presage the likely consequences of  incorporating a technology at a given level of maturity into a product  development. The maturity levels range from paper studies (level 1), to  prototypes tested in a realistic environment (level 7), to an actual system  proven in mission operations (level 9). Successful DOD programs have  shown critical technologies should be mature to at least a TRL 7 before the  start of product development.
Table 1 shows that in the latest independent FCS technology assessment,  none of the critical technologies are at TRL 7, and only 18 of the 49  technologies currently rated have demonstrated TRL 6, defined as  prototype demonstration in a relevant environment. None of the critical  technologies may reach TRL 7 until the production decision in fiscal year  2012, according to Army officials. Projected dates for FCS technologies to  reach TRL 6 have slipped significantly since the start of the program. In  the 2003 technology assessment, 87 percent of FCS’s critical technologies  were projected to be mature to a TRL 6 by 2005. When the program was  looked at again in April 2005, 31 percent of the technologies were  expected to mature to a TRL 6 by 2005, and all technologies are not  expected to be mature to that level until 2009.
section_title: FCS Acquisition Strategy Will Demonstrate Design Maturity after Production Begins
paragraphs: The knowledge deficits for requirements and technologies have created  enormous challenges for devising an acquisition strategy that can  demonstrate the maturity of design and production processes. Several  efforts within the FCS program are facing significant problems that may  eventually involve reductions in promised capabilities and may lead to  cost overruns and schedule delays. Even if requirements setting and  technology maturity proceed without incident, FCS design and production  maturity will still not be demonstrated until after the production decision  is made. Production is the most expensive phase in which to resolve  design or other problems.
The Army’s acquisition strategy for FCS does not reflect a knowledge- based approach. Figure 2 shows how the Army’s strategy for acquiring  FCS involves concurrent development, design reviews occurring late, and  other issues out of alignment with the knowledge-based approach outlined  in DOD policy.
Ideally, the preliminary design review occurs at or near the start of  product development. Review at this point can help reveal key technical  and engineering challenges and can help determine if a mismatch exists  between what the customer wants and what the product developer can  deliver. An early preliminary design review is intended to help stabilize  cost, schedule, and performance expectations. The critical design review  ideally occurs midway into the product development phase. The critical  design review should confirm the system design is stable enough to build  production-representative prototypes for testing.
The FCS acquisition schedule indicates several key issues:    The program did not have the basic knowledge needed for program  start in 2003. While the preliminary design review normally occurs at or  near the start of product development, the Army has scheduled it in  fiscal year 2008, about 5 years after the start of product development.
Instead of the sequential development of knowledge, major elements of  the program are being conducted concurrently.
The critical design review is scheduled in fiscal year 2010, just 2 years  after the scheduled preliminary review and the planned start of detailed  design. The timing of the design reviews is indicative of how late  knowledge will be attained in the program, assuming all goes according  to plan.
The critical design review is also scheduled just 2 years before the  initial FCS low-rate production decision in fiscal year 2012, leaving  little time for product demonstration and correction of any issues  identified at that time.
The FCS program is thus susceptible to late-cycle churn, which refers to  the additional—and unanticipated—time, money, and effort that must be  invested to overcome problems discovered late through testing.
section_title: FCS’s Higher Costs May Result in Funding Challenge
paragraphs: The total cost for the FCS program, now estimated at $160.7 billion (then- year dollars), has climbed 76 percent from the Army’s first estimate.  Because uncertainties remain regarding FCS’s requirements and the Army  faces significant challenges in technology and design maturity, we believe  the Army’s latest cost estimate still lacks a firm knowledge base.  Furthermore, this latest estimate does not include complementary  programs that are essential for FCS to perform as intended, or the  necessary funding for spin-outs. The Army has taken some steps to help  manage the growing cost of FCS, including establishing cost ceilings or  targets for development and production. However, program officials told  us that setting cost limits may result in accepting lower capabilities. As  FCS’s higher costs are recognized, it remains unclear whether the Army  will have the ability to fully fund the planned annual procurement costs for  the FCS current program of record. FCS affordability depends on the  accuracy of the cost estimate, the overall level of development and  procurement funding available to the Army, and the level of competing  demands.
At the start of product development, FCS program officials estimated that  the program would require about $20 billion in then-year dollars for  research, development, testing, and evaluation and about $72 billion to  procure the FCS systems to equip 15 brigade combat teams. At that time,  program officials could only derive the cost estimate on the basis of what  they knew then—requirements were still undefined and technologies were  immature. The total FCS program is now expected to cost $160.7 billion in  then-year dollars, a 76 percent increase. Table 2 summarizes the growth of  the FCS cost estimate.
According to the Army, the current cost estimate is more realistic, better  informed, and based on a more reasonable schedule. The estimate  accounts for the restructure of the FCS program and its increased scope,  the 4-year extension to the product development schedule, the  reintroduction of four systems that had been previously deferred, and the  addition of a spin-out concept whereby mature FCS capabilities would be  provided, as they become available, to current Army forces. The estimate  also reflects a rate of production reduced from an average of 2 brigade  combat teams per year to an average of 1.5 brigades per year. Instead of  completing all 15 brigades by 2020, the Army would complete production  in 2025. This cost estimate has also benefited from progress made in  defining system-of-systems requirements.
Figure 3 compares the funding profiles for the original program and for the  latest restructured program.
The current funding profile is lower than the original through fiscal year  2013, but is substantially higher than the original after fiscal year 2013. It  still calls for making substantial investments before key knowledge has  been demonstrated. Stretching out FCS development by 4 years freed up  about $9 billion in funding through fiscal year 2011 for allocation to other  Army initiatives. Originally, FCS annual funding was not to exceed $10  billion in any 1 year. Now, the cost estimate is expected to exceed $10  billion in each of 9 years. While it is a more accurate reflection of program  costs than the original estimate, the latest estimate is still based on a low  level of knowledge about whether FCS will work as intended. The cost  estimate has not been independently validated, as called for by DOD’s  acquisition policy. The Cost Analysis Improvement Group will not release  its updated independent estimate until spring 2006, after the planned  Defense Acquisition Board review of the FCS program.
The latest cost estimate does not include all the costs that will be needed  to field FCS capabilities. For instance,    Costs for the 52 essential complementary programs are separate, and  some of those costs could be substantial. For example, the costs of the  Joint Tactical Radio System Clusters 1 and 5 programs were expected  to be about $32.6 billion (then-year dollars).
Some complementary programs, such as the Mid-Range Munition and  Javelin Block II, are currently not funded for their full development.  These and other unfunded programs would have to compete for  already tight funding.
Procurement of the spin-outs from the FCS program to current Army  forces is not yet entirely funded. Procuring the FCS items expected to  be spun out to current forces is expected to cost about $19 billion, and  the needed installation kits may add $4 billion. Adding these items  brings the total required FCS investment to the $200 billion range.
Through fiscal year 2006, the Army will have budgeted over $8 billion for  FCS development. Through fiscal year 2008, when the preliminary design  review is held, the amount budgeted for FCS will total over $15 billion. By  the time the critical design review is held in 2010, about $22 billion will  have been budgeted. By the time of the production decision in 2012, about  $27 billion will have been budgeted.
The affordability of the FCS program depends on several key assumptions.  First, the program must proceed without exceeding its currently projected  costs. Second, the Army’s annual procurement budget—not including  funds specifically allocated for the modularity initiative—is expected to  grow from about $11 billion in fiscal year 2006 to at least $20 billion by  fiscal year 2011. Even if this optimistic projection comes to pass, FCS  annual procurement costs will dominate the Army procurement funding. If  the Army budget remains at fiscal year 2011 levels, FCS procurement will  represent about 60 to 70 percent of Army procurement from fiscal years  2014 to 2022. With the remainder, the Army will have to address current  force upgrades, including spin-outs from FCS, the procurement of FCS  complementary programs, aviation procurement, trucks, ammunition, and  other equipment. Further, FCS will have to compete for funding with other  Army “big-ticket” items, such as missile defense systems and the future  heavy lift helicopter.
Figure 4 compares the projected FCS budget with the funds the Army  projects for its total procurement budget.
The large annual procurement costs for FCS are expected to begin in fiscal  year 2012, which is beyond the current Future Years Defense Plan period  (fiscal years 2006-2011). This situation is typically called a funding bow  wave. The term “bow wave” is used to describe a requirement for more  funds just beyond the years covered in the current defense plan that are  subject to funding constraints. As it prepares the next defense plan, the  Army will face the challenge of allocating sufficient funding to meet the  increasing needs for FCS procurement in fiscal years 2012 and 2013.  According to an Army official, if all the needed funding cannot be  identified, the Army will consider reducing the FCS procurement rate or  delaying or reducing items to be spun out to current Army forces.  However, reducing the procurement rate would increase the FCS unit  costs and extend the time needed to deploy FCS-equipped brigade combat  teams.
section_title: Recent FCS Recommendations and Matters for Congressional Consideration
paragraphs: In our most recent report on the FCS, we made specific recommendations  to the Secretary of Defense, with the intent that DOD limit its commitment  to the FCS until it demonstrates a solid business case. DOD, in its  response to our draft report, concurred with the intent of the  recommendations but did not agree to limit its commitment to the FCS  program or to take any action beyond what it had already planned to do.  Consequently, we added several matters for congressional consideration  in order to highlight key issues and actions that Congress may want to  take.
subsections: section_title: Recommendations to DOD
paragraphs: In our March report we made several specific recommendations to the  Secretary of Defense, which are intended to limit DOD’s commitment to  the FCS until a sound business case that is consistent with DOD  acquisition policy and best practices can be clearly demonstrated.
Specifically, we recommended that the Secretary of Defense lay the  groundwork for the Army’s development of a sound FCS business case by  tasking the spring 2006 Defense Acquisition Board to do the following:    Revaluate the FCS business case—including requirements,  technologies, complementary programs, acquisition strategy, cost, and  funding availability—in light of its own acquisition policies.
If the business case for FCS is found not to be executable, determine  whether investments in FCS design- and production-related activities  should be curbed until system-level requirements are firm and  technologies are mature.
If the deficiencies in the FCS business case are judged to be  recoverable, establish the incremental markers that are needed to  demonstrate that FCS is proceeding on a knowledge-based approach  and to hold the Army accountable, through periodic reporting or other  means, for achieving those markers.
We also recommended that the Secretary of Defense reassess the FCS cost  estimate and funding availability based on the independent cost estimate  and any program changes to improve its business case.
Finally, we recommended that the Secretary of Defense establish a  milestone review by the Defense Acquisition Board following the Army’s  preliminary design review scheduled for 2008. This should be a go/no-go  review of the FCS program that is based on (1) the program’s ability to  demonstrate whether it is meeting the knowledge markers outlined above  at times consistent with DOD policy and best practices and (2) whether  the funds can still be made available to afford its costs.
section_title: DOD Comments on Our Report and Our Evaluation
paragraphs: DOD concurred with the intent of our recommendations but did not agree  to limit its commitment to the FCS program or to take any action beyond  what it had already planned to do. DOD stated it is committed to the  Army’s transformation, and that effort, in particular the FCS program,  requires a disciplined, yet agile, acquisition construct. DOD’s response to  our draft report did not specifically address our findings on the FCS  program’s lack of a sound business case. DOD added that the Defense  Acquisition Executive has determined that the FCS program is based on a  viable acquisition strategy and that it would reevaluate the FCS acquisition  strategy and reassess FCS cost estimates and funding in the spring 2006  Defense Acquisition Board review. DOD also noted a Defense Acquisition  Board review would be held for the time frame (2008) of the FCS  preliminary design review, but it refrained from committing to making a  milestone decision review.
Regarding a commitment to a milestone review in 2008, we noted that the  FCS was allowed to proceed into Systems Development and  Demonstration prematurely, while DOD had directed a full milestone  review update be held in November 2004. However, the review has not yet  occurred, and it now appears it will not occur. Thus, there is no  commitment by DOD to review the FCS business case (including all  elements in addition to the acquisition strategy), culminating in a go/no-go  decision in 2008 based on the preliminary design review. The increased  responsibility of making a declarative decision adds a higher level of  discipline and accountability than a review implies. We maintain our  position that such a decision is warranted.
section_title: Matters for Congressional Consideration
paragraphs: Based on DOD’s response to our report, it did not appear that DOD  planned to assess the FCS business case against best practices or its own  policies. Nor did DOD agree to hold a go/no-go milestone review in 2008  based on the preliminary design review. Congress will likely be asked to  approve fiscal years 2008 and 2009 funding requests before the FCS  business case is adequately demonstrated. In light of DOD’s response,  Congress should consider directing the Secretary of Defense to:  report on the results of the May 2006 Defense Acquisition Board’s  review of the FCS program business case in the areas of requirements,  technologies, acquisition strategy, cost, and funding, and    direct DOD to conduct and report the results of a milestone review in  2008, following the preliminary design review, that will be a go/no-go  review of the FCS program based on its demonstration of a sound  business case.
Congress should also consider restricting annual appropriations for fiscal  years 2008 and 2009 for the FCS program until definitive progress in  establishing a sound business case is demonstrated in terms of firm  requirements, mature technologies, a knowledge-based acquisition  strategy, a realistic cost estimate, and sufficient funding. Most important,  the Army must provide sufficient evidence FCS will work.
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 Acknowledgments
paragraphs: For future questions about this statement, please contact me at (202) 512- 4841. Individuals making key contributions to this statement include  Robert L. Ackley, Noah B. Bleicher, Lily J. Chin, Randolfo E. DeLeon,  Marcus C. Ferguson, William R. Graveline, Michael J. Hesse, Guisseli  Reyes, John P. Swain, and Carrie R. Wilson.
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