Space Acquisitions: Stronger Development Practices and Investment Planning Needed to Address Continuing Problems
Published: 2005-07-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: GAO was asked to testify on problems relating to the Department of Defense's (DOD) space system acquisitions. In doing so, we drew on our previous reports related to the causes of acquisition problems, underlying incentives and pressures, and potential solutions.
section_title: What GAO Found
paragraphs: Our work on the acquisition of space-based capabilities over the last several years has been conducted on two levels. First, we have reviewed most of the major space system acquisitions to determine their status at different points in time. The results are discouraging--systems cost more and take much longer to acquire than promised when initially approved. In some cases, the justification or business case for the system when initially approved is far different from the current status, so DOD has had to re-assess the need to acquire that particular system and the soundness of its acquisition strategy. Second, we have analyzed the common and causal factors for these poor acquisition outcomes. Overall, we have found that DOD has been unable to match resources (technology, time, money) to requirements before beginning individual programs, setting the stage for technical and other problems, which lead to cost and schedule increases. Specifically, (1) requirements for what the satellite needed to do and how well it must perform are not adequately defined at the beginning of a program or are changed significantly once the program has begun; (2) technologies are not mature enough to be included in product development; and (3) cost estimates are unreliable--largely because requirements have not been fully defined and because programs start with many unknowns about technologies. We also have reported on cross-cutting factors that make it more difficult for DOD to achieve a match between resources and requirements for space acquisitions. These include: a diverse array of organizations with competing interests; a desire to satisfy all requirements in a single step, regardless of the design or technology challenge; and a tendency for acquisition programs to take on technology development that should occur within the S&T environment. On a broader scale, DOD starts more programs than it can afford in the long run, forcing programs to underestimate costs and over promise capability. As a result, there is pressure to suppress bad news about programs, which could endanger funding and support, as well as to skip testing because of its high cost. One key to success is closing the gaps between available technologies and customer needs before beginning an acquisition program. This puts programs in a better position to succeed because they can focus on design, system integration, and manufacturing. DOD has recently revised its space acquisition policy, in part to attain more knowledge about technologies before starting an acquisition program. However, we remain concerned that the policy still allows programs to begin before demonstrating technologies in an operational or simulated environment.

section_title: Letter
paragraphs: I am pleased to be here today to discuss DOD’s efforts to acquire space- based capabilities. In fiscal year 2006 alone, DOD plans to spend almost  $20 billion to develop and procure satellites and other space systems. Our  work on the acquisition of space-based capabilities over the last several  years has been conducted on two levels. First, we have reviewed most of  the major space system acquisitions to determine their status at different  points in time. The results are discouraging—systems cost more and take  much longer to acquire than promised when initially approved. In some  cases, the justification or business case for the system when initially  approved is far different from the current status, so DOD has had to re- assess the need to acquire that particular system and the soundness of its  acquisition strategy. Second, we have analyzed space system acquisitions  to identify the common and causal factors for these poor outcomes.  Overall, we have found that DOD has been unable to match resources  (technology, time, and money) to requirements before beginning  individual programs, setting the stage for technical and other problems,  which lead to cost and schedule increases. Moreover, on a broader scale,  DOD starts more programs than it can afford, creating a set of incentives  and pressures that invariably have negative effects on individual programs  and the larger investment portfolio. Our recommendations have been  focused on getting modifications to the space acquisition policy to ensure  that decisions are more knowledge-based and holding decision makers  accountable. Here the results are mixed. We have seen some positive  changes to the policy, such as a greater emphasis on attaining knowledge  about technologies, but we remain concerned that the policy still allows  programs to begin before those technologies are actually demonstrated in  an operational or simulated environment.
My testimony today describes the condition we have found in our system- focused reviews and lays out the problems across systems and the  changes that need to be made if DOD is to break the cycle of acquisition  problems. Let me start by recognizing that developing satellites is a very  complex task and one which does differ from other military systems.  However, we have not been convinced that those differences merit  distinction in how system development and production are approached.  Nor should those differences ever excuse the Department from achieving  the outcomes it promises when requesting and receiving funding.
subsections: section_title: Problems Affecting Space System Acquisitions Persist
paragraphs: For decades, space acquisition programs have been encountering large  cost increases and schedule delays. As a result, DOD has been unable to  deliver capabilities as promised. This past year alone, for example, costs  have continued to climb on the Space Based Infrared System High (SBIRS- High) program—triggering another Nunn-McCurdy review and  certification of the program and pushing DOD’s investment in this critical  missile warning system to over $9.9 billion, from the initial $3.9 billion  estimate made 9 years ago. At the same time, programs focused on  developing new communications satellites are facing cost increases and  schedule delays, the National Polar-orbiting Operational Environmental  Satellite System has been restructured and is facing cost increases and  schedule delays, and unit cost increases for launch vehicles have now  increased by 81 percent since 2002 due to erroneous assumptions about  the commercial launch market upon which the program’s business case  was based.
Taken together, these problems have had a dramatic impact on DOD’s  overall space portfolio. DOD has had to shift scarce resources to poorly  performing programs and has pushed off starting a new version of the  Global Positioning System (forcing costs to increase for the current  version under development). Cost increases have also kept DOD from  investing more in science and technology efforts that support space. We  reported recently, for example, that funding for testing of space  technologies has declined in recent years. It is also important to note that,  for some programs, DOD is spending considerable sums of money—in  addition to what was planned or long after it had originally anticipated— thus posing additional pressures on its overall investment portfolio. DOD  originally planned to complete expenditures for SBIRS-High in fiscal year  2006, for example, but currently it plans to spend about $3.4 billion in  fiscal years 2007 through 2013.
At the same time DOD is facing these problems, it is attempting to  undertake new efforts—including the Transformational Satellite  Communications System (TSAT) program and Space Radar program— which are expected to be among the most expensive and complex ever,  and which DOD is heavily relying on in its efforts to fundamentally  transform how military operations are conducted. In fact, many other  weapon systems will be interfaced with these satellites and highly  dependent on them for their own success.
Figure 1 shows the percent increase in total cost from the initial estimate  to its most recent, for current major space system acquisitions. Systems  that have incurred particularly significant cost increases include the  SBIRS-High and the Global Broadcasting System. In addition, relatively  newer programs such as the Evolved Expendable Launch Vehicle (EELV),  Advanced Extremely High Frequency (AEHF) satellite and the Wideband  Gapfiller communication satellites have also been experiencing cost  increases. In general, the longer a system has been in development, the  greater the amount of its cost growth. In addition, nearly all of the  programs have also experienced significant schedule delays as well.
As figure 2 illustrates, there is a vast difference between DOD’s budgeting  plans and the reality of the cost of its space systems. Over the next 10  years, space systems, each year, on average, will cost DOD in excess of  $1.5 billion more than it had originally planned. Moreover, the sum of the  percentage cost increases represents an additional $20 billion over the  combined lives of the programs above. This means there is $1.5 billion less  that DOD has to spend on other priorities annually and tens of billions less  available for DOD’s overall weapons portfolio over time. It is not clear  how DOD’s budget will accommodate these additional costs.
In Table 1 below, we highlight recent findings from our reports. As the  table notes, many programs are still addressing past mistakes in  acquisition approaches and contractor oversight as well as technical,  design, and manufacturing problems.
section_title: Causes of Space System Acquisition Problems
paragraphs: We have analyzed the range of space-based acquisitions over the last  several years to identify the common and causal factors for these poor  acquisition outcomes. Overall, we have found that DOD has been unable to  match resources (technology, time, and money) to requirements before  beginning individual programs, setting the stage for technical and other  problems, which lead to cost and schedule increases. Moreover, on a  broader scale, DOD starts more programs than it can afford, creating a set  of incentives and pressures that invariably have negative effects on  individual programs and the larger investment portfolio.
Match Between Resources and Requirements Seldom Achieved at the  Our past work has shown that space programs have typically not achieved  a match between requirements and resources at program start. In other  words, the programs did not have the level of knowledge needed to assure  that they could be completed within expected cost and schedule  estimates.
Requirements for what the satellite needed to do and how well it must  perform are not adequately defined at the beginning of a program or are  changed significantly once the program has begun.
Technologies are not mature enough to be included in product  development.
Cost estimates are unreliable—largely because requirements have not  been fully defined and because programs start with many unknowns about  technologies.
There are a range of other resource gaps that DOD faces when it begins  new space acquisitions. For example, we have reported on deficiencies  within the space acquisition workforce, contracting strategies that support  acquisitions, contractor capabilities, as well as funding available for  testing of space technologies. Nevertheless, unstable requirements and  immature technologies are the most significant contributors to cost and  schedule increases, and not just for space acquisitions but all DOD  weapons acquisitions.
We also have reported on cross-cutting factors that make it more difficult  for DOD to achieve a match between resources and requirements for  space acquisitions. First, space systems may suffer from more  requirements pressures than other weapon systems because there is  usually a very broad constituency—contractors, military services, civilian  users, administrations, and Congress—behind each satellite program. This  creates challenges in making tough tradeoff decisions. The Global  Positioning System, for example, not only serves military users but also  serves civilians, supports various key economic sectors such as  transportation and communications, and is used by allies. As a result,  when starting these new systems, space program managers can expect to  be inundated with competing demands—not just among military users— but also among civilian and industry users.
Second, space acquisition programs have historically attempted to satisfy  all requirements in a single step, regardless of the design challenge or the  maturity of technologies to achieve the full capability. There is a variety of  reasons for this, including a desire to include the most advanced  technologies onboard satellites, particularly in view of the length of time it  takes to develop space systems. However, this approach invariably  increases the technology challenges facing programs, and thus, the risk  that costly problems will be encountered.
Third, there is a tendency among space system acquisition programs to  take on technology development that should occur within the science and  technology (S&T) environment. Reasons for this include the greater ability  to secure funding for costly technology development within an acquisition  program versus a science and technology program, a belief among the  acquisition community that labs in charge of developing space  technologies do not adequately understand their needs, as well as  communication gaps between the S&T and acquisition communities.  Nevertheless, our work has continually shown that allowing technology  development to carry over into product development increases the risk  that significant problems will be discovered late in development.  Addressing such problems may require more time, money, and effort to fix  because they may require more extensive retrofitting and redesign as well  as testing. Moreover, when there are many unknowns about critical  technologies, a program cannot reliably estimate what resources will be  needed to complete a program—leaving DOD and the Congress in a  position of committing to large investments without knowing how much  they will truly cost or how long it will actually take for capabilities to be  delivered.
section_title: DOD Starts More Programs than It Can Afford in the Long Run
paragraphs: There is a widespread belief among DOD and other officials involved with  space programs that DOD starts more programs than it can afford in the  long run, forcing programs to underestimate costs and over-promise  capability and creating a host of negative incentives and pressures.  Specifically, officials we have spoken with cited the following.
Because programs are funded annually and priorities have not been  established, competition for funding continues over time, forcing  programs to view success as the ability to secure the next installment  rather than the end goal of delivering capabilities when and as promised.
Concurrently, when faced with lower budgets, senior executives within  the Office of the Secretary of Defense and the Air Force would rather  make across-the-board cuts to all space programs than hard decisions as  to which ones to keep and which ones to cancel or cut back.
Having to continually “sell” a program creates incentives to suppress bad  news about a program’s status and avoid activities that uncover bad news.
When combined with the high cost of launching demonstrators into space,  the competition for funding often encourages programs to avoid testing  technologies in space before acquisition programs are started.
Our previous reports have found that these pressures are long-standing  and common to weapon acquisitions, not just space acquisitions. The  competition within DOD to win funding and get approval to start a new  program is intense, creating strong incentives to make a weapon system  stand out from existing or alternative systems. Moreover, overall DOD  funding constraints put a high priority on appearing affordable, making it  important for program sponsors to provide cost estimates that will fit  within the funding constraints. Instead of forcing trade-offs, challenging  performance requirements—when coupled with other constraints, such as  cost or the weight of the satellite—can drive product developers to pursue  exotic solutions and technologies that, in theory, can do it all.
section_title: Keys to Overcoming Space Acquisition Problems
paragraphs: Our work has shown that fundamental changes are necessary to stem cost  and schedule increases and enable DOD to field new capabilities more  efficiently and effectively. The following actions, in particular, would  assure that DOD can match resources to requirements before its starts  new programs and that it has an investment strategy in place that would  prevent it from starting more programs than it can afford.
Specifically, to better match resources to requirements, DOD should do  the following.
Implement processes and policies that stabilize requirements. Our reports  over the years as well as many DOD studies have pointed to a need to  stabilize requirements for all weapons system development. In response,  the Office of the Secretary of Defense has taken steps to strengthen  requirements setting department-wide, principally by establishing its new  Joint Capabilities Integration and Development System (JCIDS). JCIDS is  focused on achieving greater across-the-board agreement up front on what  capabilities need to be achieved and how they are to be achieved. Because  this system is relatively new, it is too early to determine whether it is  addressing requirements setting problems within DOD. The Air Force has  also taken measures to strengthen requirements setting for key systems  such as SBIRS-High and Space Radar, including instituting high-level  boards to approve of new requirements and processes that ensure the  right officials are involved. However, we reported on Space Radar in July  2004 that even these changes were not ensuring that the intelligence  community—a major stakeholder in Space Radar—was in agreement with  requirements and that all stakeholders would be held accountable for their  agreements. DOD is now working on strengthening its partnership within  the Space Radar program to avoid this problem.
Separate technology development from acquisition. We have previously  reported that DOD’s practice of taking on technology development  concurrently with product development stands in sharp contrast to that  followed by successful programs and the approach recommended by  DOD’s acquisition policy for weapon systems. Successful programs will  not commit to undertaking product development unless they have a high  confidence that they have achieved a match between what the customer  wants and what the program can deliver. Technologies that are not mature  continue to be developed in an environment that is focused solely on  technology development. Another key to success is employing the  technique of systems engineering to close the gaps between available  technologies and customer needs before committing to new product  development. This puts programs in a better position to succeed because  they can focus on design, system integration, and manufacturing. DOD has  made some efforts to address this problem. For example, it has recently  revised its space acquisition policy, in part to encourage programs to  attain more knowledge about technologies before starting. It has  developed a strategy for space S&T to help strengthen partnerships  between the acquisition and S&T communities and assure they are  working toward common goals. It has strengthened its systems  engineering capabilities. Department-wide, DOD has expanded the  authorities of its Director of Defense Research and Engineering (DDR&E)  to help keep technology development out of acquisition programs and  within the S&T communities. However, we remain concerned that these  measures will not be sufficient. The space acquisition policy, for example,  still allows programs to begin before demonstrating technologies in an  operational or simulated environment. Moreover, DOD is still approving  new programs like TSAT even when many of their critical technologies are  still immature. In fact, in our 2005 department-wide assessment of selected  major weapon programs, we found that only 15 percent of the programs  we assessed began system development having demonstrated all of their  technologies mature.
Adopt an evolutionary development approach for its space systems, that  is, pursue incremental increases in capability versus significant leaps. Our  examinations of best practices have found that this approach can decrease  time and cost for development because it closes gaps in unknowns. DOD’s  space acquisition policy states its preference for evolutionary  development, and DOD pursued evolutionary approaches in the past with  GPS. But, more often, it has attempted to achieve significant leaps in  capability in one step. Moreover, DOD officials have told us that they are  pursuing evolutionary development for space systems, when, in fact, they  are beginning programs by challenging program managers to achieve  significant leaps in capability with the intention of abandoning those  efforts later in the development cycle should too many problems be  encountered. This is not a true evolutionary approach, as it still leaves  DOD facing increased technical challenges at the beginning of a program  and thus, increased risks, and it raises expectations on the part of  stakeholders who may be unwilling to accept less capability later on.
Address other resource shortfalls. As noted earlier, our reports have  identified other resource gaps that should be addressed by DOD. For  example, DOD S&T officials cited shortages of staff with science and  engineering backgrounds and had more concerns about the future since  their workforces were reaching retirement age. Officials who oversee  programs cited deficiencies in the program manager workforce— particularly when it comes to experience and knowledge in dealing with  contractors. In addition, funding for testing space technologies has  decreased, cost to launch experiments have increased, and opportunities  for testing have been reduced with the loss of the space shuttle, which had  been partially used for DOD-related technology experiments. DOD  concurred with our recommendation that it develop plans for addressing  these shortages. The Congress has also called on DOD to strengthen its  efforts to revitalize its space workforce, and we are undertaking a review  for your committee on progress being made by the DOD.
DOD should also guide its decisions to start acquisition programs with an  overall investment strategy. Our recent reports on space and other weapon  systems have suggested that having a department-wide investment  strategy for weapon systems would help reduce pressures facing  acquisition programs. For space in particular, a strategy would help DOD  rebalance its investments in acquisition programs as it continues to  contend with cost increases from its programs. Moreover, it would also  help DOD balance investments between S&T and acquisition. This is  particularly important since DOD is undertaking a range of initiatives— collectively known as operationally responsive space—designed to  facilitate evolutionary development, more testing of technologies before  acquisition, and ultimately, enable DOD to deliver space-based capabilities  to the warfighter much faster and cheaper.
Critical components of an investment strategy would include identifying  overall capabilities and how to achieve them, that is, what role space will  play versus other air-, sea-, and land-based assets; identifying priorities for  funding; and implementing mechanisms that would enforce the strategy.  While DOD has made revisions to its requirements-setting and budgeting  processes to strengthen investment planning, it is unclear as to how these  changes will be implemented over time and whether they can serve as a  foundation for direction of space S&T and acquisition investments.
In conclusion, there is no question that space acquisition programs are  encountering cost increases and schedule delays that are having negative  effects—both in terms of DOD’s ability to deliver current capabilities as  well as its ability to deliver future capabilities. Many of these problems are  rooted in past mistakes and their impact will be felt for years to come.  Nevertheless, it is exceedingly important that DOD takes whatever  midcourse corrections it can and ensures it has a foundation in place that  puts acquisition programs on a better path, particularly since DOD is  counting on its future space programs to play an increasingly critical role  in national security and military operations. At this juncture, DOD must  still adopt practices that better match resources to requirements before  starting its acquisition programs and decide exactly what role space will  play in achieving future desired capabilities and what programs merit the  highest priorities. At the same time, DOD must continue its efforts to  assure it has the right resources to carry out increasingly technically  challenging programs—including workforce, funds for testing, less costly  and more responsive launch systems, and standardized components—and  that it continue to seek ways to deliver capability much more efficiently  and effectively. All of these changes will not be easy to undertake. They  require significant shifts in thinking about how space systems should be  developed; changes in incentives and perceptions; as well as further policy  and process changes. As a result, these efforts will require strong and  sustained commitment from senior executives and encouragement from  the Congress.
Mr. Chairman and Members of the Subcommittee, this concludes my  statement. I would be happy to respond to any questions that you or other  members of the Subcommittee may have.
section_title: Scope and Methodology
paragraphs: In preparing for this testimony, we relied on previously issued GAO  reports on assessments of individual space programs, incentives and  pressures that drive space system acquisition problems, common  problems affecting space system acquisitions, space science and  technology, and DOD’s space acquisition policy, as well as our reports on  best practices for weapon systems development. We also analyzed DOD’s  Selected Acquisition Reports to assess cost increases and investment  trends. We conducted our review between June 23 and July 12, 2005 in  accordance with generally accepted government auditing standards.
section_title: Contacts and Acknowledgments
paragraphs: For future information, please contact Bob Levin at 202-512-4841 or  levinr@gao.gov. Individuals making contributions to this testimony include  Cristina Chaplain, Maricela Cherveny, Art Gallegos, Jean Harker,   John Krump, and Nancy Rothlisberger.
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