Missile Defense: Opportunity to Refocus on Strengthening Acquisition Management
Published: 2013-05-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In order to meet its mission, MDA is developing a highly complex group of systems comprised of land-, sea-, and space-based sensors to track missiles, as well as ballistic missile interceptors and a battle management system. These systems can be integrated in different ways to provide protection in various regions of the world. Since its initiation in 2002, MDA has been given a significant amount of flexibility in executing the development and fielding of the ballistic missile defense system. This statement addresses recent MDA progress and the challenges it faces with its acquisition management. It is based on GAO's April 2013 report and reports on missile defense issued from September 2008 through July 2012.
section_title: What GAO Found
paragraphs: The Department of Defense's (DOD) Missile Defense Agency (MDA) has made some recent progress gaining important knowledge for its Ballistic Missile Defense System (BMDS) by successfully conducting several important tests. In addition, the agency made substantial improvements to the clarity of its cost and schedule baselines since first reporting them in 2010, and declared the first major deployment of U.S. missile defense in Europe operational in December 2011. MDA also took steps to reduce acquisition risk by decreasing the overlap between technology and product development for two of its programs.
MDA faces considerable challenges in executing acquisition programs; strengthening accountability; assessing alternatives before making new investment commitments; developing and deploying U.S. missile defense in Europe and using modeling and simulations to understand capabilities and limitations of the BMDS. The appointment of a new director for MDA provides an opportunity to address these challenges. More specifically:
Interceptor production for three of MDA's systems has been significantly disrupted during the past few years due to high-risk acquisition strategies which have resulted in delaying planned deliveries to the warfighter, raising costs, and disrupting the industrial base. Further, MDA continues to follow high-risk acquisition strategies for other programs. For example, its Targets and Countermeasures program is adding risk to an upcoming complex, costly operational flight test involving multiple MDA systems because it plans to use unproven targets.
While MDA made substantial improvements to the clarity of its reported cost and schedule baselines, MDA's estimates are not comprehensive because they do not include costs from military services in reported life-cycle costs for its programs. Instability due to MDA's frequent adjustments to its acquisition baselines makes assessing progress over time using these baselines extremely difficult and, in many cases, impossible.
While MDA has conducted some analyses that consider alternatives in selecting which acquisitions to pursue, it did not conduct robust analyses of alternatives for two of its new programs, both of which were recently proposed for cancellation.
During the past several years, MDA has been responding to a mandate from the President to develop and deploy new missile defense systems in Europe for the defense of Europe and the United States. GAO's work continues to find that a key challenge facing DOD is to keep individual system acquisitions synchronized with the planned deployment time frames.
MDA has also struggled for years to develop the tools--the models and simulations--to understand the capabilities and limitations of the individual systems before they are deployed. While MDA recently committed to a new approach that could enable them to credibly model individual programs and system-level BMDS performance, warfighters will not benefit from this effort until after the first two of the currently planned three phases for U.S. missile defense in Europe have been deployed in 2011 and 2015 respectively.
section_title: What GAO Recommends
paragraphs: GAO makes no new recommendations in this statement. In the April 2013 report, GAO made four recommendations to DOD to ensure MDA (1) fully assesses alternatives before selecting investments, (2) takes steps to reduce the risk that unproven target missiles can disrupt key tests, (3) reports full program costs, and (4) stabilizes acquisition baselines. DOD concurred with two recommendations and partially concurred with two, stating the decision to perform target risk reduction flight tests should be weighed against other programmatic factors and that its current forum for reporting MDA program costs should not include non-MDA funding. GAO continues to believe the recommendations are valid as discussed in that report.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the progress made and  challenges that remain for the Department of Defense’s (DOD) Missile  Defense Agency (MDA) in developing and fielding the Ballistic Missile  Defense System (BMDS). Since MDA was established in 2002, it has  spent over $90 billion to provide protection from enemy ballistic missiles  by developing battle management systems, sensors that identify incoming  threats, and missiles to intercept them. MDA plans to spend about $7.5  billion per year through 2018. Since its inception, MDA has been  operating in an environment of tight time frames for delivering  capabilities—first with a presidential directive in 2002 and then with a  presidential announcement in 2009 on U.S. missile defense in Europe. It  is now also operating in an environment of growing budgetary constraints,  which have already necessitated tough trade-off decisions and will require  additional steps to reduce acquisition risk. At the same time, MDA is  undergoing significant transition. In addition to a recent change in the  agency’s leadership, MDA is responding to the Secretary of Defense’s  March 2013 announcement to increase the planned numbers of ground- based interceptors designed to protect the United States as well as to  changes in plans for U.S. missile defense in Europe.
Since the 2002 National Defense Authorization Act, we have been  mandated to prepare annual assessments of MDA’s progress toward its  acquisition goals. The National Defense Authorization Act for Fiscal Year  2012 required us to report on our assessment of the extent to which MDA  has achieved its stated acquisition goals and objectives, as reported  through their acquisition baselines, and also to include any other findings  and recommendations on MDA acquisition programs and accountability  as appropriate. We recently issued our report responding to this  mandate. This testimony highlights our findings from that report as well  as relevant findings from several of our prior reports on missile defense  issued from September 2008 through July 2012, particularly as they  relate to the progress MDA made this year in reducing acquisition risks  and the challenges that still face MDA.
To assess MDA’s progress and related challenges, we examined the  acquisition accomplishments of individual missile defense programs and  supporting efforts that MDA is currently developing and fielding. We  conducted this work in accordance with generally accepted government  auditing standards. Additional information on our scope and methodology  is available in our April 2013 and prior issued reports.
subsections: section_title: Background
paragraphs: MDA’s BMDS is being designed to counter ballistic missiles of all  ranges—short, medium, intermediate, and intercontinental. Because  ballistic missiles have different ranges, speeds, sizes, and performance  characteristics, MDA is developing multiple systems that, when  integrated, provide multiple opportunities to destroy ballistic missiles  before they can reach their targets. The BMDS architecture includes  space-based sensors, ground- and sea-based radars, ground- and sea- based interceptor missiles, and a command and control, battle  management, and communications system to provide the warfighter with  the necessary communication links to the sensors and interceptor  missiles.
Table 1 provides a brief description of individual BMDS systems, which  MDA refers to as elements of the BMDS. As noted in the table, two  programs were proposed for cancellation in April 2013 as part of DOD’s  Fiscal Year 2014 President’s Budget Submission.
When MDA was established in 2002, the Secretary of Defense granted it  exceptional flexibility to set requirements and manage the acquisition of  the BMDS in order to quickly deliver protection against ballistic missiles.  This decision enabled MDA to rapidly deliver assets but we have reported  that it has come at the expense of transparency and accountability.  Moreover, to meet tight deadlines, MDA has employed high-risk  acquisition strategies that have resulted in significant cost growth,  schedule delays, and in some cases, performance shortfalls. Examples of  key problems we have cited in reports in recent years are highlighted  below.
In recent years, MDA has experienced several test failures. These, as  well as a test anomaly and delays, disrupted MDA’s flight test plan  and the acquisition strategies of several components.  Overall, these  issues forced MDA to suspend or slow production of three out of four  interceptors being manufactured. The GMD program in particular has  been disrupted in its attempts to demonstrate the CE-II interceptors by  two test failures. As a result of a failed flight test in January 2010 due  to an assembly process quality issue, MDA added a retest designated  as Flight Test GMD-06a (FTG-06a). However, this retest also failed in  December 2010 due to the effects of vibration on the kill vehicle’s  guidance system. As a result of these failures, MDA decided to halt  GMD flight testing and restructure its multiyear flight test program, halt  production of the GMD interceptors, and redirect resources to return- to-flight testing activities. Additionally, as we reported in April 2013,  the costs to demonstrate and fix CE-II capability have grown from  $236 million to over $1.2 billion and are continuing to grow.
MDA acquisitions have faced significant cost growth, schedule delays,  and/or performance shortfalls due to a highly concurrent acquisition  approach. Concurrency is broadly defined as the overlap between  technology development and product development or between  product development and production. While some concurrency is  understandable, committing to product development before  requirements are understood and technologies are mature or  committing to production and fielding before development is complete  is a high-risk strategy that often results in performance shortfalls,  unexpected cost increases, schedule delays, and test problems. High  levels of concurrency were present in MDA’s initial efforts and remain  present in current efforts.
There has been limited visibility into cost and schedule progress  associated with the BMDS. We have reported on the limited  usefulness of MDA’s acquisition baselines for oversight due to (1) a  lack of clarity, consistency, and completeness; (2) a lack of high- quality supporting cost estimates and schedules; and (3) instability in  the content of the baselines.
MDA has made limited progress in developing the individual system  models it uses to assess performance of the BMDS elements and  linking those models. Models and simulations are critical to  understanding BMDS capabilities. The complex nature of the BMDS,  with its wide range of connected elements, requires integrated  system-level models and simulations to assess its performance in a  range of system configurations and engagement conditions.
Quality issues have also impeded missile defense development in   These were due to workmanship issues, the use of recent years. undocumented and untested manufacturing processes and poor  control of manufacturing materials, among other factors.
Congress and DOD have taken steps in recent years to address concerns  over MDA’s acquisition management strategy, accountability, and  oversight. These include efforts to provide more information on cost,  schedule, and other baselines; efforts to prevent quality problems; and  efforts to begin obtaining independent cost estimates.
section_title: MDA Has Made Progress on Testing, Reducing Some Acquisition Risks, and Improving the Clarity of the Baselines
paragraphs: In April 2013, we reported that in the past year MDA gained important  knowledge through its test program, including successfully conducting its  most complex integrated air and missile defense flight test to date, and it  took some positive steps to reduce acquisition risks for two of its  programs. It has also improved the clarity of baseline information it  reports to Congress.
Specifically, in April 2013 we reported that in October 2012, MDA  conducted the largest integrated air and missile defense flight test to date,  achieving near simultaneous intercepts of multiple targets by various  BMDS interceptors. This test was a combined developmental and  operational flight test that for the first time used warfighters from multiple  combatant commands and employed multiple missile defense systems.  All five targets—three ballistic and two cruise missiles—were launched  and performed as expected. In this test, THAAD also intercepted a  medium range target for the first time and an Aegis ship conducted  successfully a standard missile-2 Block IIIA engagement against a cruise  missile. This test also provided valuable data to evaluate interoperability  between several systems during a live engagement.
In April 2013, we reported that in fiscal year 2012, the Aegis BMD SM-3  Block IB and THAAD programs also attained important knowledge in their  flight test programs. In May 2012, the Aegis BMD SM-3 Block IB system  intercepted a short-range target for the first time. In June 2012, the  system completed another successful intercept which provided more  insight into the missile’s enhanced ability to discriminate the target from  other objects during an engagement. In October 2011, THAAD  successfully conducted its first operational flight test prior to entering full- rate production.intercepted two short-range targets, demonstrating that the system can  perform under operationally realistic conditions from mission planning  through the end of the engagement. Additionally, this test supported the  resumption of interceptor manufacturing, and was used by the Army as  support for accepting the first two THAAD batteries. This also marked the   During the test, THAAD fired two missiles that  first time Army and DOD test and evaluation organizations confirmed that  the test and its results resembled the fielded system.
We also reported in April 2013 that MDA took steps to reduce acquisition  risk by decreasing the overlap between technology and product  development for two of its programs—the Aegis BMD SM-3 Block IIA and  Block IIB programs. By taking steps to reconcile gaps between  requirements and available resources before product development  begins, MDA makes it more likely that programs can meet cost, schedule,  and performance targets. The Aegis BMD SM-3 Block IIA program added  time and money to extend development following significant problems  with four components. MDA reduced its acquisition risk by delaying the  program’s system preliminary design review for more than one year and,  as a result, in March 2012, the program successfully completed the  review because it allowed additional development of the components. We  also reported in April 2013 that the Aegis BMD SM-3 Block IIB program  had taken important steps to reduce concurrency and increase the  technical knowledge it planned to achieve before development by  delaying product development until after its preliminary design review was  completed.
Pub. L. No. 110-181, § 223(g), repealed by Pub. L. No. 112-81, § 231(b) (2011). operations and support, and disposal costs.key milestones and tasks, such as important decision points, significant  increases in performance knowledge, modeling and simulation events,  and development efforts. Some also show time frames for flight and  ground tests, fielding, and events to support fielding.
In its 2012 BAR, MDA made several useful changes to its reported  resource and schedule baselines in response to our concerns and  congressional direction. For example, MDA  reported the full range of life cycle costs borne by MDA; defined and explained more clearly what costs are in the resource  baselines or were excluded from the estimates;  included costs already incurred in the unit cost for Targets and  Countermeasures so they were more complete; added a separate delivery table that provided more detailed  information on deliveries and inventories; and added a list of significant decisions made or events that occurred in  the past year—either internal or external to the program—that  affected program progress or baseline reporting.
section_title: MDA Continues to Face a Variety of Acquisition Challenges
paragraphs: Although the MDA has made some progress, the new MDA Director faces  considerable challenges in executing acquisition programs; strengthening  accountability; assessing alternatives before making new investment  commitments; developing and deploying U.S. missile defense in Europe  and using modeling and simulations to understand capabilities and  limitations of the BMDS.
subsections: section_title: Challenge: Executing Acquisition Programs
paragraphs: In April 2013 we reported that though MDA has gained important insights  through testing and taken some steps to reduce acquisition risk and  increase transparency, it still faces challenges stemming from high-risk  acquisition strategies. As noted earlier, MDA has undertaken and  continues to undertake highly concurrent acquisitions. While some  concurrency is understandable, committing to product development  before requirements are understood and technologies are mature or  committing to production and fielding before development is complete is a  high-risk strategy that often results in performance shortfalls, unexpected  cost increases, schedule delays, and test problems. It can also create  pressure to keep producing to avoid work stoppages.
Our April 2012 report detailed how the Aegis BMD SM-3 Block IB, GMD,  and THAAD programs undertook highly concurrent acquisition  strategies. For example, to meet the presidential directive to deploy an  initial set of missile defense capabilities by 2004, the GMD program  concurrently matured technology, designed the system, tested the design,  and produced and deployed an initial set of missile defense capabilities.  CE-I interceptors were rapidly delivered to the warfighter but they  required an expensive retrofit and refurbishment program that is still  ongoing. Similarly, MDA proceeded to concurrently develop, manufacture,  and deliver 12 of the next generation of interceptors, the CE-IIs. They  were also delivered prematurely to the warfighter and will require an  extensive and expensive retrofit.
In April 2012, we also reported that the Aegis Ashore and PTSS  programs were adopting acquisition strategies with high levels of  concurrency. The Aegis Ashore program, for instance, began product  development on two systems—one designated for testing and the other  operational—and set the acquisition baseline before completing the  preliminary design review. Best practices, by contrast, call for such  baselines to be set after this review because the review process is  designed to ensure the program has sufficient knowledge about  resources and requirements before engaging in large-scale acquisition  activities. Similarly, for its new PTSS, MDA planned to develop and  produce two industry-built satellites while a laboratory-led contractor team  was still in the development phase of building two lab development  satellites. Such an approach would not enable decision makers to fully  benefit from the knowledge about the design to be gained from on-orbit  testing of the laboratory-built satellites before committing to the next  industry-built satellites.
In our April 2013 report, we noted that the concurrent high risk  approaches for the GMD and Aegis BMD SM-3 Block IB programs were  continuing to have negative effects, while the THAAD program was able  to overcome most of its issues. For instance, discovery of the CE-II  design problem while production was already under way increased MDA  costs to demonstrate and fix CE-II capability from approximately $236  million to over $1.2 billion, due to the costs of additional flight tests  including the target and test-range, investigating the failure, developing  failure resolutions, and fixing the already delivered missiles. Costs  continue growing because MDA further delayed the next intercept test  planned for fiscal year 2012. At this time, the next intercept test date is  not yet determined as MDA is considering various options. While the  Aegis BMD SM-3 Block IB program slowed production to address  developmental issues that arose when the program experienced a failure  and a flight anomaly in early flight tests, it experienced further difficulties  completing testing of a new maneuvering component—contributing to  delays for a third flight test needed to validate the interceptor’s capability.
We also reported in April 2013 that MDA was continuing to follow high  risk acquisition strategies for its Aegis Ashore, PTSS, and Targets and  Countermeasures programs. For example, this year we reported that the  Targets and Countermeasures acquisition strategy is adding risk to an  upcoming complex, costly operational flight test involving multiple MDA  systems because it plans to use unproven targets. Using these new  targets puts this major test at risk of not being able to obtain key  information should the targets not perform as expected. Developmental  issues with this new medium-range target as well as identification of new  software requirements have already contributed to delaying the test,  which was originally planned for the fourth quarter of fiscal year 2012 and  is now planned for the fourth quarter of fiscal year 2013.
In 2012, we recommended MDA make adjustments to the acquisition  schedules to reduce concurrency. DOD agreed and partially addressed  the recommendation. Specifically, MDA reduced concurrency in the Aegis  BMD SM-3 Block IIA and Block IIB programs, but continues to include  high levels of concurrency in other programs as discussed above. We  also recommended in 2013 that the Secretary of Defense direct MDA’s  new Director to add non-intercept flight tests for each new type of target   DOD partially concurred, stating that  missile developed to reduce risk.the decision to perform a non-intercept target test must be balanced  against cost, schedule and programmatic impacts. While there may be  exceptions that need to occur when there is a critical warfighter need, we  believe, whenever possible, that MDA should avoid using  undemonstrated targets, particularly for costly and complex major  operational tests.
section_title: Challenge: Strengthening Accountability by Ensuring Program Baselines Support Oversight
paragraphs: In April 2013 we reported that while MDA made substantial improvements  to the clarity of its reported resource and schedule baselines in fiscal year  2012, it has made little progress improving the quality of its cost estimates  that support its resource baseline since we made a recommendation to  improve these estimates in our March 2011 report.resource baselines are not yet sufficiently reliable, in part because they  do not include costs from military services in reported life cycle costs for  its programs. Instability due to MDA’s frequent adjustments to its  acquisition baselines also makes assessing progress over time extremely  difficult and, in many cases, impossible. Despite some positive steps  forward since 2004, the baselines are of limited use for meaningfully  assessing BMDS cost and schedule progress.
In particular, MDA’s  In our March 2011 report, we assessed MDA life cycle cost estimates  using the GAO Cost Estimating and Assessment Guide. We found that the cost estimates we assessed, that were used to support MDA’s  resource baselines, were not comprehensive, lacked documentation,  were not completely accurate, or were not sufficiently credible. In April  2013 we reported that, in June 2012, MDA completed an internal Cost  Estimating Handbook, largely based on our guide which, if implemented,  could help address nearly all of the shortfalls we identified. Because the  Handbook was only recently completed, it is too early to assess whether  the quality of MDA’s cost estimates have improved. In our April 2013  report, we found that while the agency made improvements to its reported  resource baselines to include all of the life cycle costs funded by MDA  from development through retirement of the program, the baselines do  not include operation and support costs funded by the individual military  services. According to our guide, cost estimates should be  comprehensive. Comprehensive estimates include both the government  and contractor costs of the program over its full life cycle, from inception  of the program through design, development, deployment, and operation  and support to retirement. MDA officials told us in 2011 that MDA does  not consider military service operation and support funds to be part of the  baselines because the services execute the funds. It is unclear what  percentage operation and support costs are in the case of MDA programs  because they have not been reported. For programs outside of MDA  these costs can be significant, and as a result the reported life cycle costs  for some MDA programs could be significantly understated.
In our April 2013 report, we recommended that the Secretary of Defense  direct MDA’s new Director to include in its resource baseline cost  estimates all life cycle costs, specifically the operations and support costs  from the military services in order to provide decision makers with the full  costs of ballistic missile defense systems. DOD partially concurred with  this recommendation, agreeing that decision makers should have insight  into the full life cycle costs of DOD programs, but disagreeing that they  should be reported in MDA’s BAR. DOD did not identify how the full life  cycle costs should be reported. We continue to believe that these costs  should be reported because good budgeting requires that the full costs of  a project be considered when making decisions to provide resources. In  addition, DOD has reported full operation and support costs to Congress  for major defense acquisition programs where one military service is  leading the development of an acquisition planned to be operated by  many military services. We also believe that MDA’s BAR is the most  appropriate way to report the full costs to Congress because it already  includes the acquisition costs and the MDA funded operation and support  costs.
In July 2012, we also used our Schedule Assessment Guide to assess  five MDA program schedules that support the baselines and found that  none fully met the best practices identified in the guide. For example,  three programs took steps to ensure resources were assigned to their  schedule activities, but one program did not do so and the other only  partially did so. Moreover, none of the five programs we reviewed had an  integrated master schedule for the entire length of acquisition as called  for by the first best practice, meaning the programs are at risk for  unreliable completion estimates and delays. DOD concurred with our  recommendations to ensure that best practices are applied to those  schedules as outlined in our guide, and MDA programs have taken some  actions to improve their schedules, though they have not yet had time to  fully address our recommendations. We plan to continue to monitor their  progress because establishing sound and reliable schedules is  fundamental to creating realistic schedule and cost baselines.
Lastly, as we reported in March 2009, in order for baselines to be useful,  they need to be stable over time so progress can be measured and so  that decision makers can determine how to best allocate limited  resources.  In April 2013, we reported that most major defense  acquisition programs are required to establish baselines prior to  beginning product development.DOD, include key performance, cost, and schedule goals. Decision  makers can compare the current estimates for performance, cost, and  schedule goals against a baseline in order to measure and monitor  progress. Identifying and reporting deviations from the baseline in cost,  schedule, or performance as a program proceeds provides valuable  information for oversight by identifying areas of program risk and its  causes.
These baselines, as implemented by  However, as we reported in April 2013, MDA only reports annual progress  by comparing its current estimates for unit cost and scheduled activities  against the prior year’s estimates. As a result, MDA’s baseline reports are  not useful for tracking longer term progress. When we sought to compare  the latest 2012 unit cost and schedule estimates with the original  baselines set in 2010, we found that because the baseline content had  been adjusted from year to year, in many instances the baselines were no  longer comparable. I would like to highlight the problems we identified in  Aegis Ashore to illustrate how these adjustments limited visibility into cost  or schedule progress. MDA prematurely set the Aegis Ashore baseline  before program requirements were understood and before the acquisition  strategy was firm. The program has subsequently added significant  content to the resource baseline to respond to acquisition strategy  changes and requirements that were added after the baseline was set. In  addition, activities from Aegis Ashore’s 2010 BAR schedule baseline were  split into multiple events, renamed, or eliminated altogether in the  program’s 2012 BAR schedule baseline. MDA also redistributed planned  activities from the Aegis Ashore schedule baselines into several other  Aegis BMD schedule baselines. These major adjustments in program  content made it impossible to understand annual or longer-term program  cost progress. Rearranging content to other baselines also made tracking  the progress of these activities very difficult and in some cases  impossible.
We recommended in our April 2013 report that the Secretary of Defense  direct MDA’s new Director to stabilize the acquisition baselines so that  meaningful comparisons can be made over time that support oversight of  those acquisitions. DOD concurred with this recommendation.
section_title: Other Challenges Reported by GAO
paragraphs: Our April 2013 report discussed a variety of other challenges facing MDA  that I would like to highlight today. First, in light of growing fiscal  pressures, it is becoming increasingly important that MDA have a sound  basis before investing in new efforts. But MDA has not analyzed  alternatives in a robust manner before making recent commitments.  Second, during the past several years, MDA has been responding to a  mandate from the President to develop and deploy new missile defense  systems in Europe for defense of Europe and the United States. Our work  continues to find that a key challenge facing DOD is to keep individual  system acquisitions synchronized with the planned time frames of the  overall U.S. missile defense capability planned in Europe. Third, MDA  also is challenged by the need to develop the tools—the models and  simulations—to understand the capabilities and limitations of the  individual systems before they are deployed, which will require the  agency to overcome technical limitations in the current approach to  modeling missile defense performance. While MDA recently committed to  a new approach in modeling and simulation that could enable them to  credibly model individual programs and system-level BMDS performance,  warfighters will not benefit from this effort until two of the currently  planned three phases for U.S. missile defense in Europe have already  been deployed in 2011 and 2015 respectively.
Because MDA faces growing fiscal pressure as it develops new programs  at the same time as it supports and upgrades existing ones, DOD and  MDA face key challenges getting the best value for its missile defense  investments. We have frequently reported on the importance of  establishing a sound basis before committing resources to developing a  new product. We have also reported that part of a sound basis is a full  analysis of alternatives (AOA). The AOA is an analytical study that is  intended to compare the operational effectiveness, cost, and risks of a  number of alternative potential solutions to address valid needs and  shortfalls in operational capability. A robust AOA can provide decision  makers with the information they need by helping establish whether a  concept can be developed and produced within existing resources and  whether it is the best solution to meet the warfighter’s needs. Major  defense acquisition programs are generally required by law and DOD’s  acquisition policy to conduct an AOA before they are approved to enter  the technology development phase. Because of the flexibilities that have  been granted to MDA, its programs are not required to complete an AOA  before starting technology development. Nevertheless, MDA’s acquisition  directive requires programs to show they have identified competitive  alternative materiel solutions before they can proceed to MDA’s  technology development phase. However, this directive provides no  specific guidance on how this alternatives analysis should be conducted  or what criteria should be used to identify and assess alternatives, such  as risks and costs.
We reported in February 2013 that the Aegis BMD SM-3 Block IIB had  not conducted a robust alternatives analysis and also reported in April  2013 that MDA did not conduct robust alternatives analyses for the PTSS  program. Both of these programs were recently proposed for cancellation  in the Fiscal Year 2014 President’s Budget Submission. In our April 2013  report, we recommended that the Secretary of Defense direct the new  MDA Director to undertake robust alternatives analyses for new major  missile defense efforts currently underway and before embarking on other  new missile defense programs. Doing so can help provide a foundation  for developing and refining new program requirements, understanding the  technical feasibility and costs of alternatives and help decision makers  determine how to balance and prioritize MDA’s portfolio of BMDS  investments.DOD concurred with our recommendation but asserted MDA  already performs studies and reviews that function as analyses of  alternatives. We have found, however, that these studies are not  sufficiently robust.
In September 2009, the President announced a new approach to provide  U.S. missile defense in Europe. This four-phase effort was designed to  rely on increasingly capable missiles, sensors, and command and control  systems to defend Europe and the United States. In March 2013, the  Secretary of Defense canceled Phase 4, which called for Aegis BMD SM- 3 Block IIB interceptors, and announced several other plans, including  deploying additional ground based interceptors in Fort Greely, Alaska,  and deploying a second AN/TPY-2 radar in Japan. DOD declared the first  phase of U.S. missile defense in Europe operational in December 2011.  The current three-phase effort is shown in figure 1.
We reported in April 2012 that in order to meet the 2009 presidential  announcement to deploy missile defenses in Europe, MDA has  undertaken and continues to undertake highly concurrent acquisitions.  We reported in April 2013 that, according to MDA documentation, system  capabilities originally planned for the first three phases are facing delays,  either in development or in integration and testing.
The systems delivered for Phase 1 do not yet provide the full  capability planned for the phase. Phase 1 was largely defined by  existing systems that could be quickly deployed because of the limited  time between the September 2009 announcement and the planned  deployment of the first phase in 2011. MDA planned to deploy the first  phase in two stages—the systems needed for the phase and then  upgrades to those systems in 2014. However, an MDA official told us  that MDA now considers the system upgrades stage to be part of the  second phase, which may not be available until the 2015 time frame.
For Phase 2, some capabilities, such as an Aegis weapon system  software upgrade, may not yet be available. MDA officials stated they  are working to resolve this issue.
For Phase 3, some battle management and Aegis capabilities are  currently projected to be delayed.
We recommended in our April 2012 report that DOD review the extent  to which capability delivery dates announced by the President in 2009  were contributing to concurrency in missile defense acquisitions and  identify schedule adjustments where significant benefits could be  obtained by reducing concurrency. DOD concurred with this  recommendation.
We reported in April 2013 that a key challenge for both the Director of  MDA and the warfighter is understanding the capabilities and limitations  of the systems MDA is going to deploy, particularly given the rapid pace  of development. According to MDA’s Fiscal Year 2012 President’s Budget  Submission, models and simulations are critical to understanding BMDS  operational performance because assessing performance through flight  tests alone is prohibitively expensive and can be affected by safety and  test range constraints. In August 2009, U.S. Strategic Command and  the BMDS Operational Test Agency jointly informed MDA of a number of  system-level limitations in MDA’s modeling and simulation program that  adversely affected their ability to assess BMDS performance. Since then,  we reported in March 2011 and again in April 2012 that MDA has had  difficulty developing its models and simulations to the point where it can  assess operational performance. In April 2013, we reported that MDA  recently committed to a new approach in modeling and simulation that  officials stated could enable them to credibly model individual programs  and system-level BMDS performance by 2017. To accomplish this,  MDA will use only one simulation framework, not two, to do ground  testing and performance assessments. With one framework, the agency  anticipates data quality improvements through consistent representations  of the threat, the environment, and communications at the system level.  Without implementing these changes, MDA officials told us it would not  be possible to credibly model BMDS performance by 2017, in time to  assess the third phase of U.S. missile defense in Europe.
MDA program officials told us that the next major assessment of U.S.  missile defense in Europe for the 2015 deployment will continue to have  many of the existing shortfalls. As a result, MDA is pursuing initiatives to  improve confidence in the realism of its models in the near term, one of  which involves identifying more areas in the models where credibility can  be certified by the BMDS Operational Test Agency. Another focuses on  resolving the limitations identified jointly by the Operational Test Agency  and U.S. Strategic Command. Lastly, MDA officials told us they are  refining the process used to digitally recreate system-level flight tests in  order to increase confidence in the models.
Because MDA recently committed to a new approach for modeling and  simulation, we did not make recommendations in our 2013 report.  However, it is important that this effort receive sufficient management  attention and resources, given past challenges and the criticality of  modeling and simulation.
In conclusion, many of the challenges I have highlighted today are rooted  in both the schedule pressures that were placed on MDA when the  agency was directed in 2002 to rapidly field an initial missile defense  capability and the flexibilities that were granted MDA so that it could do  so. Today, however, initial capability is in place; MDA has begun to  transition more mature systems to the military services; it has had to  propose canceling two major efforts in the face of budget reductions,  concerns about affordability, and technical challenges; and the  employment of BMDS systems is becoming increasingly interdependent,  thereby increasing the potential consequences of problems discovered  late in the development cycle. In recent years, both Congress and MDA  have recognized that conditions have changed and steps need to be  taken that reduce acquisition risk, while increasing transparency and  accountability. However, especially in light of growing budget pressures,  additional actions are needed, including  sufficiently analyzing alternatives before making major new  investment commitments;  stabilizing acquisition baselines and ensuring they are comprehensive  and reliable; ensuring acquisition strategies allow for the right technical and  programmatic knowledge to be in place before moving into more  complex and costly phases of development; and demonstrating new types of targets in less critical tests before they  are used in a major test in order to lower testing risks  The appointment of a new Director provides an opportunity to address  these challenges, but doing so will not be easy as MDA is still under  significant schedule pressures and the agency is undergoing a transition  to respond to new Secretary of Defense direction to expand the GMD  capabilities. As such, we look forward to continuing to work with MDA to  identify and implement actions that can reduce acquisition risk and  facilitate oversight and better position MDA to respond to today’s  demands.
Chairman Udall, Ranking Member Sessions, and Members of the  Subcommittee, this concludes my statement. I am happy to answer any  questions you have.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: For future questions about this statement, please contact me at (202)  512-4841 or chaplainc@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Individuals making key contributions to this statement  include David B. Best, Assistant Director; Aryn Ehlow; Ivy Hübler;  Meredith Allen Kimmett; Wiktor Niewiadomski; Kenneth E. Patton; John  H. Pendleton; Karen Richey; Brian T. Smith; Steven Stern; Robert  Swierczek; Brian Tittle; and Hai V. Tran.
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