Navy Unmanned Aerial Refueling System: Acquisition Addresses Validated Requirements and Reflects a Knowledge-Based Approach
Published: 2017-09-06T00:00:00

Fast Facts:
The Navy is planning to begin its MQ-25 program, which is a drone with two key requirements: it should be able to operate from an aircraft carrier, and refuel other aircraft while in flight.
We found that the Navy's planned approach to acquire the MQ-25 generally looks sound. With the program still quite early in its life cycle, program success will largely depend on the Navy’s ability to (1) make a business case for starting development in 2018, and (2) effectively implement its planned approach.

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Navy expects to invest almost $2.5 billion through fiscal year 2022 in the development of an unmanned aerial refueling system referred to as the MQ-25 . The MQ-25 is the result of a restructure of the former Unmanned Carrier-Launched Airborne Surveillance and Strike system. The program is expected to deliver an unmanned aircraft system that operates from aircraft carriers and provides aerial refueling to other Navy aircraft and intelligence, surveillance, and reconnaissance capabilities. The Navy plans to release a request for proposals for air system development by October 2017 and award a development contract one year later.
A House Armed Services Committee report on a bill for the National Defense Authorization Act for Fiscal Year 2017 contained a provision for GAO to review the status of the MQ-25 program. This report assesses the extent to which the MQ-25's acquisition strategy is (1) rooted in validated requirements and (2) structured to follow a knowledge-based acquisition process.
To do this work, GAO reviewed the Navy's requirements documentation, acquisition strategy, and other relevant documents and compared them with acquisition statutes, Department of Defense acquisition policy, and previous GAO reports and best practices. GAO also discussed the MQ-25 requirements and acquisition strategy with the Navy program office and other cognizant officials.
section_title: What GAO Found
paragraphs: The MQ-25 requirements have been validated by DOD's Joint Requirements Oversight Council. The Navy has identified two primary requirements: carrier suitability, which means the ability to operate on and from the Navy's aircraft carriers; and air refueling, which is the ability to provide fuel to other carrier-based assets while in flight. While the MQ-25 system is also expected to possess intelligence, surveillance and reconnaissance capabilities; those capabilities are not considered primary requirements. According to the program's acquisition strategy, the MQ-25 system will consist of three segments: the Air segment; a control and connectivity segment, which will interface with existing command and control systems; and an aircraft carrier segment, which will make modifications to upgrade existing carrier infrastructure. These three segments will be managed and integrated by the Navy's Unmanned Carrier Aviation program office, acting as a Lead Systems Integrator (see figure below).
The Navy has established a knowledge-based approach for acquiring the MQ-25 aircraft. For example, the Navy plans to take an incremental approach to develop and evolve the MQ-25 over time. Further, the Navy expects to use knowledge-based criteria to assess progress at key decision points during development, and to use only technologies with high levels of maturity. With the Milestone B review scheduled in the summer of 2018—signaling the beginning of development—the ultimate success of the MQ-25 program depends heavily on the Navy's ability to present an executable business case and then effectively implement its planned approach.
section_title: What GAO Recommends
paragraphs: GAO is not making recommendations. DOD's technical comments are incorporated in this report.

section_title: Letter
paragraphs: The Navy expects to invest almost $2.5 billion through fiscal year 2022 in  the development of a Carrier Based Aerial Refueling System, currently  designated the MQ-25 Unmanned Air System. This program is the  outcome of a restructuring of the former Unmanned Carrier-Launched  Airborne Surveillance and Strike (UCLASS) system, which was halted in  January 2016. The MQ-25 will be a catapult-launched unmanned aircraft  system that operates from aircraft carriers and provides a robust refueling  capability while also providing intelligence, surveillance, and  reconnaissance (ISR) capabilities needed to search, detect, track,  classify, identify, and report on surface targets.
Acquisition statutes, Department of Defense (DOD) acquisition policy,  and product-development best practices all illustrate the need for valid,  clear, and achievable requirements before committing to make significant  investments to develop a new product. Further, our body of work on best  practices for weapons system acquisitions has established that  successful product developers ensure a high level of knowledge is  achieved at key junctures during the acquisition process. A House Armed  Services Committee report accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2017 contained a provision for us to  review the status of the MQ-25 program. This report assesses the extent  to which the Navy has an MQ-25 aircraft acquisition strategy that is (1)  rooted in validated requirements and (2) structured to follow a knowledge- based acquisition process.
To assess the extent to which the Navy’s MQ-25 system acquisition  strategy is rooted in validated requirements, we reviewed the content of  underlying requirements documents and analyses and assessed the  extent to which they addressed the need for future carrier based airborne  refueling capabilities. We discussed the MQ-25 requirements and our  assessment with knowledgeable officials from the MQ-25 program office,  the Naval Air Systems Command, and the Cost Assessment and  Program Evaluation office within the Office of the Secretary of Defense  (OSD). We also assessed whether the requirements had been reviewed  and validated within the Navy and by DOD’s Joint Requirements  Oversight Council (JROC).
To assess the extent to which the Navy’s acquisition strategy is structured  to follow a knowledge-based process, we reviewed the Navy’s Acquisition  Strategy for the MQ-25 Unmanned Carrier-Based Capability as well as  other related program documents and analyses. We compared the  content of those documents and analyses to the knowledge-based  aspects of relevant weapon system acquisition statutes, DOD  requirements and acquisition policies, and our previous work examining  weapon system acquisitions and best practices for product development.  To gain additional clarification and insights, we also discussed the  acquisition strategy with knowledgeable Navy and OSD officials.
We conducted this performance audit from October 2016 to September  2017 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Within DOD, the commitment to make significant investments in  developing a new product typically takes place at a decision review  known as Milestone B, which authorizes military service officials to enter  the engineering and manufacturing development phase of the DOD  acquisition process, select a development contractor, and sign a  development contract. The process of identifying and understanding  requirements typically begins when a sponsor, usually a military service,  submits an Initial Capabilities Document that identifies the existence of a  capability gap, the operational risks associated with the gap, and a  recommended solution or preferred set of solutions for filling the gap.  Potential solutions are then assessed in an Analysis of Alternatives prior  to the start of the technology maturation and risk reduction phase of  DOD’s acquisition process. According to DOD guidance, an Analysis of  Alternatives assesses the costs and benefits of potential materiel  solutions that could fill the capability gaps documented in an Initial  Capabilities Document and supports a decision on the most cost effective  solution.
Operational requirements for that preferred solution are then defined in a  draft Capability Development Document that goes through several stages  of military service- and DOD-level review and validation. Our work on  product-development best practices has found that clearly understood  and stable program requirements are critical to establishing a sound,  executable business case for any product development program. Figure 1  shows the phases of DOD’s acquisition process.
In a March 2016 report, we found that after completing a review of its  airborne intelligence, surveillance, and reconnaissance (ISR) portfolio,  OSD directed the Navy in January 2016 to focus on developing and  fielding an unmanned Carrier Based Aerial Refueling System, which  represented a significant shift in requirements. The program was  subsequently designated the MQ-25. Previously the Navy had been  largely focused on developing and fielding a system that could provide  ISR and air-to ground strike capabilities, with the potential to add aerial  refueling capability in the future. That system, referred to as the  Unmanned Carrier Launched Airborne Surveillance and Strike (UCLASS)  system was to have the potential to operate in highly contested  environments.
Under the MQ-25 program, the Navy is now focused on developing and  fielding an unmanned tanker capable of operating from the carrier, in a  permissive environment, to refuel other naval aircraft and provide only  limited ISR capability. The overall system is expected to extend the range  of the carrier air wing’s mission effectiveness and increase the number of  F/A-18E/Fs available for strike fighter missions, among other things.
The MQ-25 system will consist of three segments: an aircraft segment; a  control system and connectivity segment (CS&C); and an aircraft carrier  segment (see figure 2). The aircraft segment is to develop a carrier- suitable unmanned vehicle and associated support systems. The CS&C  segment is to interface with existing command and control systems, and  the tasking, processing, exploitation, and dissemination system. The  aircraft carrier segment is to make modifications to upgrade the existing  carrier infrastructure to support unmanned aircraft systems. These three  segments will be managed and integrated by the Navy’s Unmanned  Carrier Aviation program office, acting as a Lead Systems Integrator.
Between fiscal years 2017 and 2022, the Navy has budgeted almost $2.5  billion to continue development of the MQ-25 carrier and control  segments and to begin development of the aircraft segment. Over that  period, the annual funding requirements for the overall MQ-25 system will  increase from $89.0 million in 2017 to $554.6 million in 2022 (see figure  3).
In the first quarter of fiscal year 2018, the Navy plans to request MQ-25  aircraft proposals from four competing contractors. Then, in the summer  of 2018, the Navy expects to hold a Milestone B review to assess whether  the Navy is ready to enter the engineering and manufacturing  development phase of the acquisition process for the aircraft segment  and downselect to one of the four contractors.
section_title: MQ-25 Requirements Have Been Validated
paragraphs: In July 2017, the Joint Requirements Oversight Council (JROC) validated  system requirements for the MQ-25. The Navy has two primary  requirements, known as key performance parameters. Those  requirements are: (1) carrier suitability and (2) air refueling. Carrier  suitability is defined by the Navy as the ability of the aircraft to effectively  operate on and from all current and planned aircraft carriers and to  integrate into carrier air wing operations. Air refueling indicates the ability  of the aircraft to be equipped as a sea-based tanker to refuel other  carrier-based aircraft—a mission currently performed by Navy’s F/A- 18E/F Super Hornets.
The MQ-25 requirements have evolved intermittently over the past 16  years instead of following the more sequential processes described in  DOD requirements and acquisition guidance. The MQ-25 requirements  are not traced back to a single, standalone Initial Capabilities Document  (ICD). Instead they address capability gaps identified in two different such  documents that were developed more than 4 years apart. Over time, the  Navy conducted various analyses, each focused on different aspects of  those capability gaps.
Our assessment of the content of the Navy’s underlying documentation  and analyses, when taken together, is that they provide a basis for the  current set of MQ-25 requirements. Figure 4 illustrates the iterative  evolution of the MQ-25 requirements.
As noted in the figure, after receiving direction from OSD in January 2016  to pursue a carrier based airborne tanking system, the Navy began the  process of defining more specific MQ-25 aircraft requirements and  reducing technology and design risks. In September and October 2016,  the Navy awarded cost-plus-fixed-fee contracts to each of the four  competing contractors to conduct risk reduction activities, including  concept refinement and requirements trade analysis. The total combined  value of the contracts, including options, is approximately $250 million.  The Navy expects the contractors to provide concepts for an unmanned  aircraft that could meet the tanking requirements of the F/A-18E/F in the  mid-2020s, while also providing some ISR capabilities.
Our comparison of the Navy’s final requirements document—the Carrier  Based Unmanned Aircraft System Capability Development Document— with earlier draft versions found that the Navy reduced the total number of  key performance parameters from seven to two—carrier suitability and air  refueling—and made adjustments to both. The Navy refined the carrier  suitability requirement to focus more clearly on the MQ-25’s basic ability  to operate on and from the aircraft carrier. For air refueling, the Navy  adjusted the mission focus and the required refueling capacity at a  specific distance from the ship. Our work in product-development best  practices has found that as detailed requirements are identified, decision  makers can make informed trades between the requirements and  available resources, potentially achieving a match and establishing a  sound basis for a program business case before entering the product  development phase of the defense acquisition system.
section_title: Navy’s Proposed Acquisition Strategy Largely Reflects a Knowledge-Based Approach
paragraphs: The Navy’s MQ-25 acquisition strategy, approved by Navy leadership in  April 2017, reflects key aspects of an evolutionary, knowledge-based  acquisition approach. While the Navy is still developing, refining, and  finalizing most of the acquisition documentation that will make up its  program business case, our review of its acquisition strategy and other  available documentation showed that they reflect key aspects of a  knowledge-based approach and generally align with what we have found  to be product-development best practices:
Using open systems standards and an evolutionary approach:  The Navy is planning to use open systems standards and an  evolutionary development approach to develop, fly, and deploy the  MQ-25 over time. The Navy expects to provide primarily aerial  refueling and ISR capabilities first, while using open systems  standards to support incremental capability upgrades in the future like  adding the capability to receive fuel, weapons and improving radars.  In July 2013, we concluded that the adoption of open systems  standards in defense acquisitions can provide significant cost and  schedule savings. In addition, we have previously reported that  adopting a more evolutionary, incremental approach can enable the  capture of design and manufacturing knowledge and increase the  likelihood of success in providing timely and affordable capabilities.
Using knowledge-based criteria to assess progress and inform  key decisions: The Navy has established knowledge-based criteria  for seven key points during MQ-25 aircraft development. Those points  include the development contract award, the system design review,  the low-rate production contract award, and the start of initial  operational testing. At each point, the Navy plans to assess program  progress against the established criteria and provide briefings to key  leadership stakeholders before moving into the next phase of  development. If implemented, this knowledge-based approach would  align with best practices that we identified in our body of work related  to product-development. Specifically, we have found that achieving  positive program outcomes requires the use of a knowledge-based  approach to product development that demonstrates high levels of  knowledge attained at key junctures.
Constraining development schedule: According to the Navy’s  acquisition strategy, the MQ-25 aircraft is expected to take 6 to 8  years from the start of product development (i.e., Milestone B) to the  fielding of an initial operational capability. Based on our work in  product development best practices, constraining the development  phase of a program to 5 or 6 years is preferred because, among other  things, it aligns with DOD’s budget planning process and fosters the  negotiation of trade-offs in requirements and technologies.
Limiting technology risk: The Navy expects to significantly reduce  technology risk during development by mandating that technologies,  or subsystems, for the MQ-25 aircraft must be demonstrated in a  relevant environment to be included in the design. If a technology is  identified that does not meet this criteria, the Navy plans to push that  technology into the future and include it only when it reaches the  specified level of maturity. Federal statute and product development  best practices illustrate the critical importance of demonstrating high  levels of technology maturity prior to entering the product  development phase of the defense acquisition system. As we  reported in March 2017, failure to fully mature technologies prior to  developing the system design can lead to redesign and cost and  schedule growth if later discoveries during development lead to  revisions.
Limiting design risk: While the Navy does not plan to hold a MQ-25  system level preliminary design review prior to the start of  development, as best practices recommend, it is tailoring its previous  UCLASS aircraft requirements which may allow the contractors to  leverage the preliminary design knowledge gained under that  program. In addition, the Navy is leveraging knowledge gained under  the four recent risk reduction contracts, as well as various levels of  prototyping done by each of the contractors and the Navy. Our work in  product-development best practices emphasizes the importance of  gaining early design knowledge to reduce design risk before  beginning a product development. In June 2017, we reported that  prototyping helped programs better understand design requirements,  the feasibility of proposed solutions, and cost—key elements of a  program business case.
Developing an independent cost estimate: Cost analysts within the  Cost Analysis and Program Evaluation office of the Office of the  Secretary of Defense are in the process of developing an independent  cost estimate for the MQ-25 aircraft. Federal statute, DOD acquisition  guidance, and product-development best practices illustrate the  importance of having an independent cost estimate to inform the  business case for a new product development program. Cost  Analysis and Program Evaluation officials explained that they had not  yet completed their estimate, but they plan to have it done in time to  support the Navy’s MQ-25 Milestone B review in the summer 2018.
Given the early focus on defining requirements and reducing risk prior to  the start of product development, the Navy plans to award a fixed-price  incentive, firm target contract for MQ-25 aircraft development. This type of  contract is designed to provide a profit incentive for the contractor to  control costs. It specifies target cost, target profit, and ceiling price  amounts, with the latter being the maximum amount that may be paid to  the contractor. The Navy plans to issue a request for proposals to the  four competing contractors in October 2017 and award the contract to  one of those four contractors the following year. With the Milestone B  review scheduled in the summer of 2018, the ultimate success of the MQ- 25 program largely depends on the Navy’s ability to present an  executable business case and then effectively implement its planned  approach.
section_title: Agency Comments
paragraphs: We are not making recommendations in this report. We provided DOD  with a copy of this report and they returned technical comments, which  we incorporated as appropriate.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense and the Secretary of the Navy. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or sullivanm@gao.gov. GAO staff who made key  contributions to this report are listed in the appendix.
section_title: Appendix I: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, key contributors to this report  were Travis Masters, Assistant Director; Marvin E. Bonner; Laura  Greifner; Kristine Hassinger; and Roxanna Sun.