Defense Acquisitions: Improved Business Case Is Needed for Future Combat System's Successful Outcome
Published: 2006-03-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Defense (DOD) anticipates that the Future Combat System (FCS) will modernize the U.S. Army's ability to move, shoot, and communicate on the battlefield. It is an impressive concept that is the product of holistic, non-traditional thinking. The Army describes FCS as one of the most complex weapon acquisition programs ever executed because it involves developing and integrating a family of 18 systems and an information network. Army leadership started the program early as part of its effort to change Army culture and believes that the program risks are manageable. GAO is required by law to review the program annually. In this report, GAO analyzes FCS's acquisition business case and assesses requirements stability, technology maturity, soundness of the acquisition strategy, and reasonableness and affordability of program costs.
section_title: What GAO Found
paragraphs: The FCS entered the development phase in 2003 and has not yet reached the level of knowledge it should have attained in the pre-development stage. The elements of a sound business case--firm requirements, mature technologies, a knowledge-based acquisition strategy, a realistic cost estimate, and sufficient funding--are still not demonstrably present. The Army will continue building basic knowledge in areas such as requirements and technologies for several more years. Requirements stability: The Army has reached agreement on FCS system of systems requirements--about 11,500--that help define how FCS units are expected to work as a whole. But the Army must continue to work out the technical feasibility and expected costs of the requirements for individual FCS systems. These requirements may not be completely stabilized until 2008. Until then, the Army expects the system-level requirements to change and to make trade-offs to offset technical risks and cost. Technology maturity: None of FCS's 49 critical technologies was at a level of maturity recommended by DOD policy at the start of a program. Some technologies may not reach full maturity until after production starts. Not having firm requirements matched with mature technologies at the start of development is a key indicator of program risk. Also, the Army is depending on 52 complementary programs, each of which is essential for FCS to perform as intended. Some of these programs have significant technical challenges; some do not have the funding needed to complete development. Soundness of acquisition strategy for design and production: The current acquisition strategy for FCS is improved over the original strategy but still calls for maturing technologies, designing systems, and preparing for production at the same time. Even if requirements and technologies proceed without incident, FCS design and production process maturity will not be demonstrated until after the production decision is made. Although production representative prototypes will not be available, the Army plans to test all FCS systems before committing to production. If problems are discovered in testing at that stage, they will be very expensive to correct. Reasonableness and affordability of program costs: The estimated cost of the FCS program now stands at $160.7 billion, a 76 percent increase since program start. This is a better estimate than the original, as it embodies a more realistic schedule and scope. Including the total investment for the 52 essential complementary programs, the FCS program cost estimate would reach the $200 billion range. The Army has taken steps it believes will control FCS costs. Yet, the current level of knowledge about FCS is low, which makes it difficult to have a solid basis for cost projections. FCS's long-term affordability depends on the accuracy of cost estimates, an increased level of procurement funding, and the level of competing demands.

section_title: Letter
paragraphs: The Department of the Army (Army) is in the midst of transforming itself  into a lighter, more agile, and more capable combat force that will be  better equipped to meet the defense challenges of the future. One of the  centerpieces of the Army’s transformation is the Future Combat System  (FCS), a weapon systems acquisition program that embraces a new  concept of operations, new technologies, and a new information network  of numerous ground and air vehicles, sensors, and munitions. The Army  itself calls this the “greatest technology and integration challenge the Army  has ever undertaken.” The FCS concept demonstrates the Army’s desire to  be proactive in preparing for the changing scope of modern warfare. When  factoring in other Army programs needed to deliver FCS’s full capability,  the total investment costs are on the order of $200 billion. Spending of this  magnitude has drawn attention in Congress because the nation is facing a  large and growing deficit. Fiscal realities are putting pressure on the Army  and the rest of the Department of Defense (DOD) to take a hard look at  how it is managing its resources for weapon acquisition programs, such as  FCS.
Given the Army’s challenges to date and the cost and scope of the FCS  program, the National Defense Authorization Act for Fiscal Year 2006  requires GAO to report annually on the product development phase of the  FCS’s acquisition. Congressional Committees and GAO agreed that this  report should analyze FCS against the basic elements of an acquisition  business case, namely: (1) firmness of requirements, (2) maturity of  critical technologies, (3) soundness of the acquisition strategy as it relates  to design and production, and (4) reasonableness and affordability of  program costs.
In conducting our work, we have contacted numerous DOD and Army  offices. We reviewed many documents pertaining to the FCS program,  attended meetings at which DOD and Army officials reviewed program  progress, and we held discussions with key DOD and Army officials on  various aspects of the program. Officials from DOD and the Army have  provided us access to sufficient information to make informed judgments  on the matters in this report. In addition, we drew from our large body of  past work on weapon systems acquisition practices. We reviewed DOD’s  acquisition policy, the experiences of successful and unsuccessful DOD  programs, and the best acquisition practices of leading commercial firms.
We performed our work from June 2005 to March 2006 in accordance with  generally accepted government auditing standards. Appendix I further  discusses our scope and methodology.
subsections: section_title: Background
paragraphs: The FCS concept is part of a pervasive change toward what the Army  refers to as the Future Force. The Army is reorganizing its current forces  into modular brigade combat teams, meaning troops can be deployed on  different rotational cycles as a single team or as a cluster of teams. The  Future Force is designed to transform the Army into a more rapidly  deployable and responsive force and enables the Army to move away from  the large division-centric structure of the past. Each FCS brigade combat  team is expected to be highly survivable and the most lethal brigade-sized  unit the Army has ever fielded. The Army expects FCS-equipped brigade  combat teams to provide significant warfighting capabilities to DOD’s  overall joint military operations. The Army is implementing its  transformation plans at a time when current U.S. ground forces are playing  a critical role in the ongoing conflicts in Iraq and Afghanistan.
The FCS family of weapons includes 18 manned and unmanned ground  vehicles, air vehicles, sensors, and munitions that will be linked by an  information network. The systems include    eight new types of manned ground vehicles to replace current tanks,  infantry carriers, and self-propelled howitzers;  four classes of unmanned aerial vehicles;    several unmanned ground vehicles; and    an attack missile.
At a fundamental level, the FCS concept is to replace mass with superior  information—that is, to see and hit the enemy first rather than to rely on  heavy armor to withstand a hit. This solution attempts to address the  mismatch that has posed a dilemma to the Army for decades. The Army’s  heavy forces had the necessary firepower but required extensive support  and too much time to deploy. Its light forces could deploy rapidly but  lacked firepower. If the Future Force becomes a reality, then the Army  would be better organized, staffed, equipped, and trained for prompt and  sustained land combat. This is expected to translate into a force that is  responsive, technologically advanced, and versatile. These qualities are  intended to ensure the Future Force’s long-term dominance over evolving,  sophisticated threats. The Future Force is to be offensively oriented and  will employ revolutionary concepts of operations, enabled by new  technology. The Army envisions a new way of fighting that depends on  networking the force, which involves linking people, platforms, weapons,  and sensors seamlessly together in a system of systems.
If successful, the FCS system of systems concept will leverage individual  capabilities of weapons and platforms and will facilitate interoperability  and open system designs. This would be a significant improvement over  the traditional approach of building superior individual weapons that must  be retrofitted and netted together after the fact. This transformation, in  terms of both operations and equipment, is under way with the full  cooperation of the Army warfighter community. In fact, the development  and acquisition of FCS is being accomplished using a uniquely  collaborative relationship between the Army’s developers, the  participating contractors, and the warfighter community.
The Army has employed a management approach that centers on a lead  systems integrator. Although there is no complete consensus on the  definition of a lead systems integrator, those we are aware of appear to be  prime contractors with increased program management responsibilities.  These responsibilities have included greater involvement in requirements  development, design, and source selection of major system and subsystem  subcontractors. Boeing is the lead systems integrator for the FCS system  development and demonstration phase of acquisition. The FCS lead  systems integrator acts on behalf of the Army to optimize the FCS  capability, maximize competition, ensure interoperability, and maintain  commonality in order to reduce life cycle costs. The Army advised us that  it did not believe it had the resources or flexibility to use its traditional  acquisition process to field a program as complex as FCS under the  aggressive timeline established by the then-Army Chief of Staff. The Army  will maintain oversight and final approval of the lead systems integrator’s  subcontracting and competition plans.
subsections: section_title: FCS Restructures the Program and Changes Contracting Approach
paragraphs: As a key element of its efforts to transform itself, the Army has recognized  FCS from its outset as the greatest technology and integration challenge it  has ever undertaken. In May 2003, DOD approved the FCS program to  begin the system development and demonstration phase, a milestone that  ideally marks the completion of technology development and the start of  product development. However, FCS’s entry into this phase was  premature given that the program had failed to satisfy basic tenets of DOD  acquisition policy. We have reported that, as FCS started product  development, it did not have mature technologies or adequately defined  requirements.
Responding to direction from the Army Chief of Staff, the Army  announced in July 2004 its plans to restructure the FCS program. The  Army added four years to develop and mature the manned ground  vehicles, added more demonstrations and experiments, and established an  evaluation unit to demonstrate FCS capabilities. The restructuring  reintroduced four systems that previously had been left unfunded, raising  the total number of FCS-related systems to 18. The restructure also  included plans to spin off mature FCS capabilities as they become  available to current force units. With the restructuring, the FCS program  now plans to achieve initial operational capability in fiscal year 2015 and  full operational capability in fiscal year 2017. FCS low-rate production is  expected to start in fiscal year 2012, and full-rate production in fiscal year  2016. The Army intends to continue FCS procurement through fiscal year  2025, eventually equipping 15 brigade combat teams.
The restructuring was not the only major modification to the FCS  program. Because of congressional concerns that the Army’s contracting  approach incorporated insufficient safeguards to protect the government’s  interests, the Army is preparing a new contract that is to be completed and  finalized in March 2006 and is based on the Federal Acquisition  Regulation, which governs acquisitions within the federal government. The  new contract will incorporate standard Federal Acquisition Regulation  clauses such as those relating to procurement integrity, Truth in  Negotiations, and Cost Accounting Standards. Previously, the lead systems  integrator had been performing FCS work for the Army under a  contractual instrument called an “other transaction agreement” that was  not subject to the Federal Acquisition Regulation. The other transaction  agreement gave the Army considerable flexibility to negotiate the terms  and conditions for contractors involved in FCS development. The Army’s  purpose for using such an agreement was to encourage innovation and to  use its wide latitude in tailoring business, organizational, and technical  relationships to achieve the program goals. In April 2005, the Army  decided to incorporate into its agreement the procurement integrity, Truth  in Negotiations, and Cost Accounting Standards clauses from the  regulation.
After the Congress raised questions about the Army using an other  transaction agreement for the development of a program as large and risky  as FCS and about the Army’s choice not to include standard Federal  Acquisition Regulation clauses in the agreement, the Secretary of the Army  directed that the other transaction agreement be converted to a Federal  Acquisition Regulation-based contract. All of the work performed under  the product development phase as of September 2005 will be accounted  for under the prior other transaction agreement, and all work after  September 2005 will be performed under the new contract. The Army  expects the content of the program—its statement of work—will remain  largely the same, and it does not expect the cost, schedule, and  performance of the overall development effort to change materially.
section_title: Elements of a Business Case
paragraphs: We have frequently reported on the importance of using a solid,  executable business case before committing resources to a new product  development effort. In the case of DOD, a business case should be based  on DOD acquisition policy and lessons learned from leading commercial  firms and successful DOD programs. The business case in its simplest  form is demonstrated evidence that (1) the warfighter’s needs are valid  and that they can best be met with the chosen concept, and (2) the chosen  concept can be developed and produced within existing resources—that  is, proven technologies, design knowledge, adequate funding, and  adequate time to deliver the product when it is needed. A program should  not go forward into product development unless a sound business case  can be made. If the business case measures up, the organization commits  to the development of the product, including making the financial  investment.
At the heart of a business case is this knowledge-based approach to  product development that is both a best practice among leading  commercial firms and the approach preferred by DOD in its acquisition  regulations. For a program to deliver a successful product within available  resources, managers should demonstrate high levels of knowledge before  significant commitments are made. In essence, knowledge supplants risk  over time. This building of knowledge can be described as three levels or  knowledge points that should be attained over the course of a program:    First, at program start, the customer’s needs should match the  developer’s available resources—mature technologies, time, and  funding. An indication of this match is the demonstrated maturity of  the technologies needed to meet customer needs. The ability of the  government acquisition workforce to properly manage the effort  should also be an important consideration at program start.
Second, about midway through development, the product’s design  should be stable and demonstrate that it is capable of meeting  performance requirements. The critical design review is the vehicle for  making this determination and generally signifies the point at which the  program is ready to start building production-representative  prototypes.
Third, by the time of the production decision, the product must be  shown to be producible within cost, schedule, and quality targets and  have demonstrated its reliability. It is also the point at which the design  must demonstrate that it performs as needed through realistic system- level testing.
The three knowledge points are related in that a delay in attaining one  delays the points that follow. Thus, if the technologies needed to meet  requirements are not mature, design and production maturity will be  delayed. On the successful commercial and defense programs we have  reviewed, managers were careful to conduct development of technology  separately from and ahead of the development of the product. For this  reason, the first knowledge point is the most important for improving the  chances of developing a weapon system within cost and schedule  estimates. DOD’s acquisition policy has adopted the knowledge-based  approach to acquisitions. DOD policy requires program managers to  provide knowledge about certain aspects of a system at key points in the  acquisition process. Program managers are also required to reduce  integration risk and demonstrate product design prior to the design  readiness review and to reduce manufacturing risk and demonstrate  producibility prior to full-rate production.
The FCS program is about one-third of the way into its scheduled product  development. At this stage, it should have attained knowledge point one,  with a strategy for attaining knowledge points two and three. Accordingly,  we analyze the FCS business case first as it pertains to firming  requirements and maturing technologies, which indicate progress against  the first knowledge point. We then analyze FCS’s strategy for attaining  design and production maturity. Finally, we analyze the costs and funding  estimates made to execute the FCS business case.
section_title: Army Has Made Progress but Feasibility and Affordability of System-level Requirements Remain Uncertain
paragraphs: The Army has made significant progress defining FCS’s system of systems  requirements, particularly when taking into account the daunting number  of requirements involved—nearly 11,500—at this level. Yet system-level  requirements are not yet stabilized and will continue to change,  postponing the needed match between requirements and resources. Now,  the Army and its contractors are working to complete the definition of  system-level requirements, and the challenge is in determining if those  requirements are technically feasible and affordable. Army officials say it  is almost certain that some FCS system-level requirements will have to be  modified, reduced, or eliminated; the only uncertainty is by how much. We  have previously reported that unstable requirements can lead to cost,  schedule, and performance shortfalls. Once the Army gains a better  understanding of the technical feasibility and affordability of the system- level requirements, trade-offs between the developer and the warfighter  will have to be made, and the ripple effect of such trade-offs on key  program goals will have to be reassessed.
subsections: section_title: Army Has Largely Completed the Definition of FCS System of Systems Requirements
paragraphs: The Army has completed an FCS operational requirements document, a  mandatory step in the DOD acquisition process. This document outlines  552 requirements intended to meet the warfighter’s needs and discusses  the characteristics needed for the FCS-equipped brigade combat teams to  achieve the Army’s desired tactical concepts and capabilities. FCS is  described in this document as a family of systems comprising advanced,  networked air- and ground-based maneuver, maneuver support, and  sustainment systems. The program has seven key performance  parameters: network-ready, networked battle command, networked  lethality, transportability, sustainability/reliability, training, and  survivability. In simpler terms, the Army has stated that the FCS-equipped  brigade combat teams must be as good as or better than current Army  forces in terms of lethality, responsiveness, sustainability, and  survivability. Since the FCS program started in May 2003, the Army and the  lead systems integrator have been working to translate those warfighter  requirements first into system of systems requirements at the FCS level.  Having this information in hand gives the Army a good understanding of  what FCS brigade combat teams should be capable of, but more detailed  knowledge is needed for each of the 18 individual systems. Now, the Army  and the lead systems integrator are delving much deeper and more  precisely to translate system of systems requirements into more specific  requirements for individual systems within FCS. Figure 2 illustrates how  the requirements laid out in the operational requirements document flow  down to the FCS’s system of systems and later to the individual system  level.
During the requirements definition process, the Army, its lead systems  integrator, and other contractors provided feedback on the feasibility of  the requirements being proposed. The feedback sometimes resulted in  several rounds of negotiations and trade-offs before requirements could be  finalized. For example, the Army has invested much time and effort in  deciding how best to meet the FCS transportability requirements while  continuing to meet its lethality and survivability requirements. A series of  design concepts were used to examine the possibilities, and the Army and  the lead systems integrator have conducted numerous design trade  studies. Since program start, the Army has made a number of design trade- offs that have been incorporated into the current design concepts. For  example, the current manned ground vehicle design concepts feature a  basic, lightly armored vehicle (each weighing about 19 tons) and  additional armor (bringing the total vehicle weight up to about 24 tons).  This trade-off was intended to achieve an acceptable level of survivability  while maintaining a limited capability for the vehicles to be transported on  the C-130 Hercules air lifter. The Army also decided to accept a higher  weight to achieve the lethality of the 120-mm cannon for the mounted  combat system. Finally, the Army decided to accept a reduction in range  inherent in the lighter weight 38-caliber 155-mm cannon for the non-line- of-sight cannon vehicle.
In August 2005, the Army and the lead systems integrator conducted the  System of Systems Functional Review, which is a multi-disciplined  technical review used to ensure that a system can proceed into  preliminary design. The review is conducted to ensure that all system of  systems requirements have been defined and are consistent with program  budget, schedule, risk, and other constraints. The Army and the lead  systems integrator demonstrated that they had (1) essentially completed  the definition of the system of systems level requirements, (2) established  the functional baseline for the program, and (3) made an initial allocation  of functional requirements down to the individual FCS system level. As  shown in figure 2 above, at the system of systems level, there are about  11,500 requirements. The Army anticipates that there eventually could be  eight times the number of requirements at the FCS system level, or roughly  90,000 requirements.
For the System of Systems Functional Review, the Army prepared a  number of performance evaluations, including assessments of the entire  brigade combat team’s capabilities as well as more focused evaluations of  individual FCS design concepts or requirements. The Army is conducting  performance evaluations while continuing to evaluate requirement trade- offs and refine system-level requirements. These evaluations will be  valuable in understanding the impact of individual requirement trade-off  decisions on FCS capabilities as well as the Army’s pledge that FCS would  be as good as or better than the current Army forces in terms of lethality,  survivability, responsiveness and sustainability.
section_title: FCS System-Level Requirements Are Not Yet Firm
paragraphs: The Army deserves credit for having decided on so many requirements at  the system of systems level and for beginning the process allocating  functional requirements to the individual system level. However,  according to DOD policy and best practices, requirements should be  firmed up at the beginning of the product development phase. System  requirements—how big, how heavy, how fast, how strong—can each be  expressed in multiple ways. In deciding how best to address those system- level requirements, trade-offs may be necessary. Ideally, solutions go  through a prioritization and refinement process before final decisions can  be agreed upon. But continuing to define and refine system-level  requirements three years after product development began creates a real  challenge for the other elements of the FCS business case.
Signs of instability in FCS system-level requirements are already evident.  At the System of Systems Functional Review, an initial assessment was  made of the technical feasibility of the functional requirements allocated  to the individual FCS systems. While many are expected to be achievable,  there would be technical risk in the full achievement of some system-level  requirements including    mine detection;    automatic target recognition for weapon terminal guidance;   real-time battle damage assessment;    chemical and radiation detection;     weapon self-loading for some of the unmanned ground vehicles;    manned ground vehicle countermine capabilities;    safe operation of unmanned ground vehicles;    network latency, quality of service, and intrusion detection;  improvised explosive device detection and suppression;  reliability, availability, maintainability, and testing;    unmanned air vehicle size and weight;    hidden target detection; and    sensor data fusion.
The Army’s System of Systems Functional Review also underscored how  critical the FCS information network is to the achieving of many of FCS’s  requirements. For example, FCS survivability depends on the brigade-wide  availability of network-based situational awareness plus the inherent  survivability of the FCS platforms. There is hardly any aspect of FCS  functionality that is not predicated on the network, and for many key  functions, the network is essential. As we will discuss later in this report,  there is considerable technical uncertainty surrounding several key  aspects of the FCS network.
In the coming months, FCS teams working on individual systems will  continue to evaluate the technical feasibility of addressing the allocated  requirements within their current design concepts. Program officials also  will be conducting functional reviews at the system level. According to  Army officials, it is almost certain that some of the FCS system-level  requirements will have to be changed; it is only uncertain by how much.  The Army does have the ability to reallocate a requirement from one  system to another. The Army plans to evaluate its progress in defining and  refining FCS system-level requirements at the August 2006 initial  preliminary design review, which signals the start of the systems  engineering process as well as the beginning of preliminary design work.  However, the Army may not have a stabilized set of technically feasible  and affordable system-level requirements until 2008.
Concurrently, the system-level teams will be evaluating the affordability of  fully developing and producing each of the FCS systems and platforms to  meet the allocated requirements. The Army has stated it will not exceed  the target cost of $20.9 billion for the lead systems integrator’s  development contract and will attempt to produce the FCS systems and  platforms within specific procurement cost targets. Key FCS program  officials have indicated to us that additional system-level requirements  changes will be needed to meet these targets.
Applying the discipline of affordability is a good step, but it can make the  requirement definition process more difficult. For example, to meet the  weight goals for the manned ground vehicles, the Army expects to use  advanced, light weight materials, such as ceramics, rather than traditional  steel for armor protection. However, these materials are expected to be  much more costly to produce than steel. To meet the individual manned  ground vehicle’s survivability requirements, each vehicle will have to be  equipped for detection avoidance, target acquisition avoidance, hit  avoidance, ballistic protection, and kill avoidance. Further, each manned  ground vehicle would have to carry sensors that can detect, classify,  recognize, identify, and locate enemy combatants. All of these capabilities  will add to the cost of developing and producing the manned ground  vehicles. Finally, the FCS concept depends, among other things, on the  capabilities of the unmanned ground vehicles and unmanned air vehicles  to enhance the survivability of the rest of the brigade combat team.  However, a high number of unmanned ground vehicles and unmanned air  vehicles themselves are expected to be lost to enemy fire. In the end, the  Army may have to either provide additional unmanned ground vehicles  and/or unmanned air vehicles or risk the loss of even more valuable  manned ground vehicles and soldiers. Either option would involve  additional costs.
section_title: Cumulative Effects of Individual Requirement Trade-Offs Must Be Measured
paragraphs: Since the start of the program, the Army has already made some  requirements trade-offs. The Army realizes that the ripple effects of  requirements trade-offs on the anticipated FCS capabilities will need to be  thoroughly assessed to determine if the fundamental tenets of the  program—such as being as lethal and survivable as the current Army  force—are still intact. For example, in deciding to maintain a requirement  for the manned ground vehicles to be transportable on C-130 aircraft, the  Army determined that the vehicles could still meet their survivability and  lethality requirements while meeting the size and weight restrictions  needed to be compatible with the C-130 operating limitations. This  solution involves, in part, the use of additional armor that would be put on  the vehicle after it had been flown by a C-130 to its new operating location.  The Army made this decision with the knowledge that the C-130 aircraft's  capability to transport the FCS vehicles would be very limited and that the  solution would require more C-130s to transport vehicles than previously  planned. Also, as we pointed out in our March 2005 testimony, the  development and integration of manned ground vehicle technologies was  made vastly more difficult by the Army's decision to retain the C-130  transportability requirement. As the FCS development effort proceeds, the  Army will have to regularly assess whether the manned ground vehicles  will still be able to meet their lethality, survivability, and other  requirements as well as the assumed operational value of maintaining the  C-130 transportability requirement. Decision makers need to be kept  informed on the status of the program’s basic tenets, such as FCS  capabilities being as good as or better than those of current Army forces.
As the technical feasibility and affordability of requirements are better  understood, additional FCS requirements trade-offs will have to be made  and their ripple effects identified. For example, if the requirements for  FCS missile and munition terminal guidance are changed due to feasibility  or cost issues, that may not have an impact only on lethality, but also on  overall FCS survivability because the Army maintains that FCS  survivability will be enhanced if it is able to see first and kill first. Also, if  the FCS weapon terminal guidance requirements are changed, the brigade  combat teams may have to carry and use more weapons than expected,  which would have an impact on the team’s sustainability. As another  example, if the FCS countermine requirements are changed, then FCS  manned ground vehicles may be less survivable and mobile. The Army  may have to add additional armor to the manned ground vehicles, directly  affecting their weight and impacting their transportability and  sustainability. Finally, if the reliability, availability, maintainability, and  testing requirements are adjusted, the brigade combat teams may have to  carry more spare parts and use more maintenance personnel than  originally anticipated.
The Army is aiming to field FCS systems and platforms that meet all of its  minimally acceptable threshold requirements, but according to program  officials, that may not be possible for all requirements. Further, it is  unclear at this point if the resulting set of system-level requirements will  yield an overall FCS capability that will be acceptable to the Army as a  whole and its user representative, the Training and Doctrine Command.  The Training and Doctrine Command has had extensive involvement in the  program to date and would have to approve any major changes in FCS  requirements. At the System of Systems Functional Review, the Training  and Doctrine Command representatives pledged their continuing  cooperation in the process but also vowed to appeal to the Army  leadership if the FCS design concepts do not provide sufficient capabilities  to meet their wartime needs.
section_title: FCS Success Hinges on Numerous Undemonstrated Technologies and Complementary Programs
paragraphs: According to the latest independent assessment, the Army has not fully  matured any of the technologies critical to FCS’s success. Some of FCS’s  critical technologies may not reach a high level of maturity until the final  major phase of acquisition, the start of production. The Army considers a  lower level of demonstration as acceptable maturity, but even against this  standard, only one-third of the technologies are mature. We have reported  that proceeding into product development without demonstrating mature  technologies increases the risk of cost growth and schedule delays  throughout the life of the program. The Army is also facing challenges with  several of the complementary programs considered essential for meeting  FCS’s requirements. Some complementary programs are experiencing  technology difficulties, and some have not been fully funded. These  difficulties underscore the gap between requirements and available  resources that must be closed if the FCS business case is to be executable.
subsections: section_title: Critical Technologies Are a Long Way from Reaching Maturity
paragraphs: Technology readiness levels (TRL) are measures pioneered by the  National Aeronautics and Space Administration and adopted by DOD to  determine whether technologies were sufficiently mature to be  incorporated into a weapon system. Our prior work has found TRLs to be  a valuable decision-making tool because they can presage the likely  consequences of incorporating a technology at a given level of maturity  into a product development. The maturity level of a technology can range  from paper studies (level 1), to prototypes that can be tested in a realistic  environment (level 7), to an actual system that has proven itself in mission  operations (level 9). The definitions of each TRL can be found in appendix  IV. According to DOD acquisition policy, a technology should have been  demonstrated in a relevant environment (TRL 6) or, preferably, in an  operational environment (TRL 7) to be considered mature enough to use  for product development in systems integration. Best practices of leading  commercial firms and successful DOD programs have shown that critical  technologies should be mature to at least a TRL 7 before the start of  product development.
In the case of the FCS program, the latest independent technology  assessment shows that none of the critical technologies are at TRL 7, and  only 18 of the 49 technologies currently rated have demonstrated TRL 6.  None of the critical technologies may reach TRL 7 until the production  decision in fiscal year 2012, according to Army officials. Five technologies  that the Army previously considered to be critical to FCS are no longer  being monitored for technology maturity, although those technologies  continue to be under development by either the Army or another military  service. Table 1 sorts FCS’s critical technologies according to readiness  levels, and their progression over the last two years.
Projected dates for FCS technologies to reach TRL 6 have slipped  significantly since the start of the program, as shown in figure 3.
In the 2003 technology assessment, 87 percent of FCS’s critical  technologies were projected to be mature to a TRL 6 by 2005. In April  2005, 31 percent of the technologies were expected to mature to a TRL 6  by 2005, and all technologies are not expected to be mature to that level  until 2009. Several key technologies have slipped. For example, to meet  FCS survivability and sustainability requirements, the Army requires High  Density Packaged Power, a technology designed to provide high-output,  constant-level, stored power to the FCS manned ground vehicles. This  technology was originally projected to reach TRL 6 maturity by fiscal year  2003. In the latest assessment, however, that date slipped nearly five years  to fiscal year 2008. Another technology, Quality of Service Algorithms,  which are protocols implemented in network software and used to  determine how information is moved and tracked to users, was originally  expected to reach TRL 6 by fiscal year 2004, but now projected maturity  has slipped three years. The Army originally anticipated the Lightweight  Hull and Vehicle Armor to reach TRL 6 by fiscal year 2003; however, this  has been delayed by five years. Appendix III lists all 54 critical  technologies, their current TRL status, and the projected date for reaching  TRL 6.
section_title: Technology and Integration Challenges for Manned Ground Vehicles
paragraphs: FCS features eight types of manned ground vehicles, each requiring the  development of numerous technologies that must be brought together in  an integrated design to deliver required capabilities. The Mounted Combat  System will require a newly developed lightweight weapon for lethality; a  hybrid electric drive system and a high-density engine for mobility;  advanced armors, an active protection system, and advanced signature  management systems for survivability; and the Joint Tactical Radio System  with the wideband networking waveform for communications and  network connectivity. FCS manned ground vehicles are expected to be  revolutionary, not only because of their proposed capabilities but also in  terms of their size and weight. They have been likened in complexity to  fighter aircraft. Under other circumstances, each of the eight manned  ground systems would be a major defense acquisition program in its own  right.
Since 2003, the Army has been working to develop a series of design  concepts and is currently evaluating the technical feasibility and  affordability of the system-level requirements that have been allocated to  each of the eight vehicles. By August 2006, the Army expects to decide  which of those requirements will be pursued in the preliminary design, and  which ones will have to be changed or deleted. Among many others, the  achievement of the following manned ground vehicles requirements have  been identified as involving technical and design challenges:    engine,    silent watch (which relates to battery capacity),    14.5-mm survivability,    signature management,    power distribution.
As we noted earlier, several critical technologies are not projected to  mature to a TRL 6 until fiscal year 2008 or 2009, at or around the point  when the program should be starting detailed designs for each vehicle.  Further, it should be noted that the step to mature technologies from a  TRL 6 to a TRL 7 is often difficult and unpredictable. All told, the Army is  unlikely to be able to match requirements with technical and design  solutions until at least fiscal year 2008.
In addition, manned ground vehicles face several technology and  integration challenges.
The Active Protection System is expected to protect manned ground  vehicles by sensing and destroying such threats as incoming tank  rounds and rocket-propelled grenades. However, technology  assessments have recognized that (1) it may not be possible to have a  single, integrated active protection system that protects against all  threats, (2) the Threat Warning System, a technology used to detect  and track incoming threats at extended ranges, will not be mature to  TRL 6 until fiscal 2009, (3) the part of the system to defeat kinetic  energy threats will require significant effort from the science and  technology community, and (4) protection technology may have  limited utility in urban environments due to collateral effects.
The Army is considering integrating an electromagnetic armor as a  defense layer for manned ground vehicles. However, electromagnetic  armor is still an immature technology and poses integration issues,  including requiring a large amount of power storage capability that may  not be possible within vehicle design and weight constraints.  Component maturation and size reduction will be needed to keep  electromagnetic armor as a viable survivability approach.
The integration of the 120-mm cannon on the Mounted Combat System  vehicle poses design challenges. While the lightweight 120-mm cannon  has achieved TRL 6 maturity that meets baseline requirements for the  gun, this testing was conducted on a stationary hardstand and not on a  turret or vehicle prototype. Those tests are planned for fiscal years  2007 and 2009, respectively. Realistic testing is important because  program officials cannot be certain whether the turret and vehicle  design will be able to withstand the gun blast without damage to the  vehicle.
The integration of the Lightweight Hull and Vehicle Armor in manned  ground vehicles may also prove to be difficult, and there is a risk that  the proposed lightweight armor will not satisfy transportability  requirements while providing adequate protection. The design and  integration issues must be addressed by large-scale ballistic testing,  particularly for the cutting-edge ceramic armors being considered.
Mine protection technology, intended to protect manned ground  vehicles and occupants from mine blast, is still immature and has  significant challenges that include blast armor development, armor  repair, and structural and weight integration. Because of its immature  status, the program is considering alternatives for its development.
The acceptable resolution of at least some of these issues—such as those  involving the active protection system, lightweight hull and armor, and  mine protection—may be important enough that they represent “go/no go”  markers in the development of manned ground vehicles. For example, if  the active protection system technology and integration issues cannot be  acceptably resolved and its capabilities may be less than needed, it is  unclear if the FCS program will be able to complete the detailed designs of  the manned ground vehicles and meet the expectations for critical design  review.
To meet the program’s goal to have manned ground vehicle prototypes  available in late fiscal year 2010 or early fiscal year 2011, their fabrication  would probably have to start well before design stability is achieved. If  technology and integration issues identified to date are not resolved by  that point, it is questionable whether the level of system integration that  may be available for the prototype designs and if their demonstration will  be able to yield acceptable results.
section_title: Many Complementary Programs Are at Risk
paragraphs: The FCS program may have to interoperate or integrate with as many as  170 programs, some of which are in development and many are currently  fielded programs. Many complementary programs are not being developed  exclusively for FCS and are outside the direct control of the FCS program.  Because of the complementary programs’ importance to FCS, the Army  closely monitors how well those efforts will synchronize with the FCS  program. Of all the complementary programs, 52 are considered essential  to meeting FCS key performance parameters. However, many of these  programs have technical or funding problems and generally have uncertain  futures.
We reported in June 2005 that two key systems of the FCS network, the  Joint Tactical Radio System (JTRS) and Warfighter Information Network- Tactical (WIN-T), were struggling to meet ambitious user requirements,  steep technical challenges, and aggressive schedules, which raised  uncertainty about the ability of the FCS network to perform as intended  and threatened the schedule for fielding Future Force capabilities. We  recommended that the Secretary of Defense establish low-risk schedules  for JTRS and WIN-T and synchronize the FCS schedule with a  demonstration of JTRS and WIN-T capabilities. DOD generally concurred  and indicated it has begun taking action to address our recommendations.  Since our report, JTRS has been undergoing a major restructuring to  reduce technical and programmatic risks. In addition, WIN-T is being  rebaselined to address the Army’s recent shift in focus to meet both near-  and future-term requirements, as well as to better synchronize with FCS.  The results of the JTRS and WIN-T program restructurings are not  expected to be completed and approved until later this year, however;  preliminary indications are that the programs will focus on delivering  incremental capabilities to support the needs of FCS and other users.
JTRS is a family of software-based radios that is to provide the high  capacity, high-speed information link to vehicles, weapons, aircraft, and  soldiers. The JTRS program to develop radios for ground vehicles and  helicopters—referred to as Cluster 1—began product development in June  2002 with an aggressive schedule, immature technologies, and lack of  clearly defined and stable requirements. The Army has not been able to  mature the technologies needed to provide radios that both generate  sufficient power as well as meet platform size and weight constraints. In  addition, the radio design is not sufficient to meet security requirements  for operating in an open network environment. These factors have  contributed to significant cost and schedule problems. In early 2005, the  Office of the Secretary of Defense directed the Army to stop work on  portions of the Cluster 1 development and have a newly established JTRS  Joint Program Executive Office conduct an assessment of the program  and develop options for restructuring the program.
A second JTRS program—referred to as Cluster 5—to develop different  variants of small radios that will be carried by soldiers and be embedded  in several FCS core systems, also entered product development with  immature technologies and a lack of well-defined requirements. Since the  program began in 2004, it has faced significant technical challenges due to  the small size, weight, power, and large data processing requirements for  the radios. As a result, the Army recognized in 2005 that the Cluster 5  program was not sufficiently synchronized with the FCS program and it  began assessing the feasibility of accelerating the development of some of  the small form Cluster 5 radios. However, in light of the problems  encountered with the Cluster 1 program, DOD directed the JTRS Joint  Program Executive Office to conduct a broad assessment of all the JTRS  components and identify more well defined and executable increments for  Cluster 5.
In December 2005, DOD approved a preliminary plan for restructuring the  JTRS program, including Clusters 1 and 5. Details of the restructuring,  however, are still to be worked out and the new program is not expected  to be formally approved by DOD until late 2006. According to JTRS Joint  Program Executive Office officials, the proposed program will address  many of the concerns we raised in our July 2005 report and be structured  to deliver capabilities in increments rather than all at once. The first  increment is intended to support the FCS schedule. However, there are  still cost, schedule, and technical risks associated with the planned  delivery of increment one capabilities, and therefore it is unclear whether  the capabilities will be available in time for the first spin-out of FCS  capabilities to current forces in 2008.
The WIN-T program is intended to provide an integrated communications  network to connect Army units on the move with higher levels of  command and provide the Army’s tactical extension to the Global  Information Grid, a separate, DOD-wide networked force. The WIN-T  program began with an aggressive acquisition schedule and entered  product development with only three of its 12 critical technologies close to  full maturity. The program office expects that all 12 critical technologies  demonstrated during a November 2005 developmental test/operational test  event will be assessed as close to fully mature. In August 2005, the  Department of the Army conducted a study which explored options for  better synchronizing three of its major system development efforts—  FCS, JTRS, and WIN-T. As a result of this study, the WIN-T program will be  rebaselined to meet emerging requirements. A new WIN-T capability  development document will support the rebaselining of the program and is  currently under review. A milestone B reexamination to rebaseline the  program is planned for July 2006, and a new date for the WIN-T production  decision will be established then.
The restructuring of the JTRS and WIN-T programs and the success in  developing these capabilities could well be deciding factors in the overall  success of the FCS program. If JTRS and WIN-T do not work as intended,  there will not be sufficient battlefield information for the FCS units to  operate effectively. Because the network is so crucial to the overall  success of FCS, we have suggested that its development and  demonstration should precede major commitments to other elements of  the FCS program, particularly the manned ground vehicles. However, the  Army has admitted that the development of the network is several years  behind the development of other elements of the FCS program.
subsections: section_title: Funding Issues Cloud Future of Other Complementary Programs
paragraphs: The future of other complementary programs is in doubt primarily  because of funding issues. The Compact Kinetic Energy Missile was to  provide superior lethality against current tanks, bunkers, buildings, and  future threat armor. The Joint Common Missile was to provide line-of-sight  and beyond-line-of-sight capabilities and could be employed in a fire-and- forget mode or a precision attack mode. The Army has not yet decided if it  will fund the full development of the Compact Kinetic Energy Missile. In  December 2004, a DOD program budget decision deleted all procurement  funding for the Joint Common Missile. The absence of these systems  could reduce the brigade combat teams’ ability to fight at stand off ranges,  thereby reducing lethality and the ability to dictate the terms of the  engagement. The Mid-Range Munition is to provide beyond-line-of-sight  precision munitions for the mounted combat system, but its development  is unfunded after fiscal year 2007. Elimination of the Mid-Range Munition  would compromise the beyond-line-of-sight capability------which is a FCS  threshold operational requirement------as well as the Army’s ability to shape  the battle space and dictate the terms of the engagement. The Precision  Guidance Kit is a technology for projectiles that provides greater accuracy  at extended ranges, but the development of this technology is partially  unfunded. If this technology is not available for FCS, then long-range  projectiles would be less accurate, reducing their effectiveness and  requiring additional rounds to be fired at the threat. As a result, the  brigade combat team may need to carry additional munitions, an outcome  that imposes a logistical and transportability burden. The Army also  concedes that there is no funding to develop the following munitions  needed to meet selected requirements: Advanced Kinetic Energy munition,  Advance Multi-Purpose Munition, Javelin Block II missile, Loitering Attack  Missile, and non-lethal munitions.
Recognizing the multiple issues surrounding complementary programs,  the Army is reassessing its list of 52 essential programs. When that list is  finalized in the coming months, the Army will have to determine how to  replace any capabilities eliminated from the list. As with requirements, the  cumulative effects of changes in technologies and complementary  programs on overall FCS capabilities are important to measure. The  Army’s inability to fund all essential complementary programs raises  concerns about the gap between requirements and resources.
section_title: FCS Acquisition Strategy Will Demonstrate Design Maturity After Production Begins
paragraphs: The knowledge deficits for requirements and technologies have created  enormous challenges for devising an acquisition strategy that can  demonstrate the maturity of design and production processes. Even if  requirements setting and technology maturity proceed without incident,  FCS design and production maturity will still not be demonstrated until  after the production decision is made. Production is the most expensive  phase in which to resolve design or other problems. Several efforts within  the FCS program are facing significant problems that may eventually  involve reductions in promised capabilities and may lead to cost overruns  and schedule delays.
subsections: section_title: FCS Acquisition Strategy Involves Concurrent Development and Is Not Knowledge-Based
paragraphs: The Army’s acquisition strategy for FCS does not reflect a knowledge- based approach. Figure 4 shows how the Army’s strategy for acquiring  FCS involves concurrent development, design reviews that occur late, and  other issues that are out of alignment with the knowledge-based approach  outlined in DOD policy.
Ideally, the preliminary design review occurs at or near the start of  product development. Activities leading up to the preliminary design  review include, among others, translating system requirements into design  specifics. Doing so can help reveal key technical and engineering  challenges and can help determine if a mismatch exists between what the  customer wants and what the product developer can deliver. Scheduling  the preliminary design review early in product development is intended to  help stabilize cost, schedule, and performance expectations. The critical  design review ideally occurs midway into the product development phase.  The critical design review should confirm that the system design performs  as expected and is stable enough to build production-representative  prototypes for testing. The building of production-representative  prototypes helps decision makers confirm that the system can be  produced and manufactured within cost, schedule, and quality targets.  According to the knowledge-based approach, a high percentage of design  drawings should be completed and released to manufacturing at critical  design review. The period leading up to critical design review is referred to  as system integration, when individual components of a system are  brought together, and the period after the review is called system  demonstration, when the system as a whole demonstrates its reliability as  well as its ability to work in the intended environment.
The Army has scheduled the preliminary design review in fiscal year 2008,  about five years after the start of product development. The critical design  review is scheduled in fiscal year 2010, just two years after the scheduled  preliminary design review and the planned start of detailed design. This is  not to suggest that the two design reviews for the FCS could have been  scheduled earlier but rather that commitments to production are  scheduled too soon afterward. The timing of the design reviews is  indicative of how late knowledge will be attained in the program,  assuming all goes according to plan. The critical design review is  scheduled just two years before the initial FCS production decision in  fiscal year 2012, leaving little time for product demonstration and  correction of any issues that are identified at that time. The Army is  planning to have prototypes of all FCS systems available for testing prior  to low-rate initial production. For example, manned ground vehicle  prototypes are expected to be available in late 2010 and early 2011 for  developmental and qualification testing. However, these prototypes are  not expected to be production-representative prototypes and may not be  fully integrated. Whereas the testing of fully integrated, production- representative prototypes demonstrate design maturity and their  fabrication can demonstrate production process maturity, neither of these  knowledge points will be attained until after the production decision is  made.
The FCS program is thus susceptible to late-cycle churn, a condition that  we reported on in 2000. Late cycle churn is a phrase private industry has  used to describe the efforts to fix a significant problem that is discovered  late in a product’s development. Churn refers to the additional—and  unanticipated—time, money, and effort that must be invested to overcome  problems discovered through testing. Problems are most serious when  they delay product delivery, increase product cost, or “escape” to the  customer. The discovery of problems in testing conducted late in  development is a fairly common occurrence on DOD programs, as is the  attendant late cycle churn. Often, tests of a full system, such as launching  a missile or flying an aircraft, become the vehicles for discovering  problems that could have been found out earlier and corrected less  expensively. When significant problems are revealed late in a weapon  system’s development, the reaction—or churn—can take several forms:  extending schedules to increase the investment in more prototypes and  testing, terminating the program, or redesigning and modifying weapons  that have already made it to the field. While DOD has found it acceptable  to accommodate such problems over the years, this will be a difficult  proposition for the FCS given the magnitude of its cost in an increasingly  competitive environment for investment funds.
The Army is proceeding with its plans to mitigate FCS risks using  modeling, simulation, emulation, and system integration laboratories. This  approach is a necessary aspect of the Army acquisition strategy and is  designed to reduce the dependence on late testing to gain valuable insights  about many aspects of FCS development, including design progress.  However, on a first-of-a-kind system—like FCS—that represents a radical  departure from current systems and warfighting concepts, actual testing of  all the components integrated together is the final proof that the FCS  system of systems concept works both as predicted and as needed.
section_title: As FCS’s Higher Costs Are Recognized, Funding Availability Becomes a Greater Challenge
paragraphs: The total cost for the FCS program, now estimated at $160.7 billion (then- year dollars), has climbed 76 percent from the Army’s first estimate.  Because uncertainties remain regarding FCS’s system-level requirements  and the Army faces significant challenges in technology and design  maturity, we believe the Army’s latest cost estimate still lacks a firm  knowledge base. Furthermore, this latest estimate does not include  complementary programs that are essential for FCS to perform as  intended, or the necessary funding for spin-outs. The Army has taken some  steps to help manage the growing cost of FCS, including establishing cost  ceilings or targets for development and production. However, program  officials told us that setting cost limits may result in accepting lower  capabilities. As FCS’s higher costs are recognized, it remains unclear  whether the Army will have the ability to fully fund the planned annual  procurement costs for the FCS current program of record. FCS  affordability depends on the accuracy of the cost estimate, the overall  level of development and procurement funding available to the Army, and  the level of competing demands.
subsections: section_title: FCS Costs Have Increased as Army Attains More Information, but Firm Knowledge Base Still Lacking
paragraphs: At the start of product development, FCS program officials estimated that  the program would require about $20 billion in then-year dollars for  research, development, testing, and evaluation and about $72 billion to  procure the FCS systems to equip 15 brigade combat teams. At that time,  program officials could only derive the cost estimate on the basis of what  they knew then—requirements were still undefined and technologies were  immature. The total FCS program is now expected to cost $160.7 billion in  then-year dollars, a 76 percent increase. Table 2 summarizes the growth of  the FCS cost estimate.
According to the Army, the current cost estimate is more realistic, better  informed, and based on a more reasonable schedule. The estimate  accounts for the restructure of the FCS program and its increased scope,  the four-year extension to the product development schedule, the  reintroduction of four systems that had been previously deferred, and the  addition of a spin-out concept whereby mature FCS capabilities would be  provided, as they become available, to current Army forces. Under the  original estimate, the program planned to acquire enough FCS equipment  for an average of two brigade combat teams per year and to equip all 15 by  fiscal year 2020. Army officials told us that the current cost estimate  incorporates the lengthened development schedule and a more realistic  procurement plan under which the program will procure 1.5 brigade  combat teams per year (versus two per year in the original cost estimate),  reaching 15 complete brigade combat teams by fiscal year 2025. This cost  estimate has also benefited from progress made in defining the FCS  system of systems requirements.
Figure 5 compares the funding profiles for the original program and for the  latest restructured program.
The current FCS funding profile is lower than the original through fiscal  year 2013, but is substantially higher than the original after fiscal year  2013. Stretching out FCS development by four years freed up about $9  billion in funding through fiscal year 2011 for allocation to other Army  initiatives. Originally, FCS annual funding was not to exceed $10 billion in  any one year. Now, the cost estimate is expected to exceed $10 billion in  each of nine years. While it is a more accurate reflection of program costs  than the original estimate, the latest estimate is still based on a low level of  knowledge about whether FCS will work as intended. Also, the latest cost  estimate has not yet been independently validated, as called for by DOD’s  acquisition policy. The Cost Analysis Improvement Group will not provide  its updated independent estimate until spring 2006, for the planned  Defense Acquisition Board review of the FCS program in May 2006.
The latest cost estimate does not include all the costs that will be needed  to field FCS capabilities. For instance, the costs of the 52 essential  complementary programs are separate, and some of those costs could be  substantial. For example, the costs of the Joint Tactical Radio System  Clusters 1 and 5 programs were expected to be about $32.6 billion (then- year dollars). Some complementary programs, such as the Mid-Range  Munition and Javelin Block II, are currently not funded for their full  development. These and other unfunded programs would have to compete  for already tight funding. Furthermore, program officials told us the  procurement of the spin-outs from the FCS program to current Army  forces is not yet entirely funded. Procuring the FCS items expected to be  spun out to current forces is expected to cost about $19 billion, and the  needed installation kits may add another $4 billion. Adding these items to  the FCS cost estimate brings the total required investment from the Army  to the $200 billion range.
The Army is planning to make substantial financial investments in the FCS  program before key knowledge is gained on requirements, technologies,  system designs, and system performance. Table 3 shows the annual and  cumulative funding and the level of knowledge to be attained each fiscal  year.
Through fiscal year 2006, about $8 billion will have been spent on FCS  development efforts. However, many pre-development activities, such as  requirements definition and technology development, were slated for this  period. About one-half of FCS’s development funding, or about $15 billion,  will be spent by the time most critical technologies are mature to TRL 6  and the preliminary design review is conducted. About $22 billion, or over  70 percent of the total funding, will be spent by the expected time of the  critical design review. Further, about 88 percent will have been spent  before an initial demonstration of FCS capabilities is accomplished.
section_title: Army Has Taken Steps to Control FCS Program Costs
paragraphs: The Army has taken several steps to help manage the growing cost of FCS.  Program officials told us they have budgeted for development risk by  building a total of $5 billion into the FCS cost estimates to cover risk. Also,  program officials have said that they will not exceed the $20.9 billion cost  ceiling of the lead systems integrator’s development contract, but may  have to modify, reduce, or delete FCS requirements to stay within this  target. For example, the Army has prioritized each of the FCS  requirements. If one or more of the highest priority requirements  ultimately cost more to develop than anticipated, the Army plans to  modify, reduce, or delete a lower priority requirement. In addition to the  ceiling on FCS development costs, the Army says it will focus on reducing  the average unit production cost of the FCS brigade combat teams. To do  this, the Army is evaluating and improving producibility of designs early in  the program and has given the contractor incentives to reduce the unit  costs.
The Army monitors the FCS program’s development progress through its  earned value management system. This is a tool by which the program  manager can monitor the technical, schedule, and cost parameters of the  contract. As the program proceeds, the Army and the lead systems  integrator can determine the status of each portion and can take  corrective actions as problems occur. While the earned value system  currently shows that the program slightly exceeds schedule expectations  and is below estimated cost against the restructured baseline, program  officials said it is too early to broadly interpret these data in light of the  recent rebaseline of the program. At this point, the Army believes that the  data are not yet mature enough to develop trends and make predictions.
In addition, the Deputy Secretary of Defense, in early fiscal year 2006,  asked each military service to provide additional adjustments to their  projected budgets. The Army, in particular, was asked to decrease its  budget by $11.7 billion from fiscal year 2007 to 2011. At this point, the FCS  funding profile has not been affected.
section_title: Future Funding May Not Be Sufficient to Cover Projected FCS Procurement Costs
paragraphs: The affordability of the FCS program depends on several key assumptions.  First, the program must proceed without exceeding its currently projected  costs. Second, the Army’s annual procurement budget is expected to grow,  from about $11 billion (then-year dollars) in fiscal year 2006 to at least $20  billion in future years. The Army’s projected budget also includes $5  billion per year from fiscal year 2007 through 2011 for its initiative to  convert current Army forces to modular units. The Army is counting on its  modularity initiative for brigade combat teams to be completed by fiscal  year 2014, just as FCS procurement dollars begin to ramp up. However,  recent GAO work has indicated that modularity efforts to date have  exceeded original estimates and remain likely to further exceed current  cost estimates. Army officials further told us that they expect to rely on  supplemental funding for the war on terrorism and Operation Iraqi  Freedom for the duration of those efforts plus two additional years. Within  that supplemental funding, about $4 billion per year is projected to be  needed to refurbish Army equipment used in Iraq and Afghanistan. The  Army also assumes that (1) it will realize savings of about $5 billion per  year from fiscal year 2005 through 2011 from business process engineering  and (2) Congress will continue to provide additional annual funding of  about $3 billion for higher Army troop levels.
Figure 6 compares the projected FCS budget with the funds the Army  projects for its total procurement budget.
The Army’s annual procurement budget—not including funds specifically  allocated for the modularity initiative—is expected to grow from about   $11 billion in fiscal year 2006 to at least $20 billion by fiscal year 2011.  Even if this optimistic projection comes to pass, FCS annual procurement  costs will dominate the Army procurement funding. If the Army budget  remains at fiscal year 2011 levels, FCS procurement will represent about  60-70 percent of Army procurement from fiscal years 2014 to 2022. With  the remainder, the Army will have to address current force upgrades,  including spin-outs from FCS, the procurement of FCS complementary  programs, aviation procurement, trucks, ammunition, and other  equipment. Further, FCS will have to compete for funding with other Army  “big-ticket” items, such as missile defense systems and the future heavy lift  helicopter.
The large annual procurement costs for FCS are expected to begin in fiscal  year 2012, which is beyond the current Future Years Defense Plan period  (fiscal years 2006-2011). This situation is typically called a funding bow  wave. The term bow wave is used to describe a requirement for more  funds just beyond the years covered in the current defense plan that are  subject to funding constraints. As it prepares the next defense plan, the  Army will face the challenge of allocating sufficient funding to meet the  increasing needs for FCS procurement in fiscal years 2012 and 2013.  According to an Army official, if all the needed funding cannot be  identified, the Army will consider reducing the FCS procurement rate or  delaying or reducing items to be spun out to current Army forces.  However, reducing the procurement rate would increase the FCS unit  costs and extend the time needed to deploy FCS-equipped brigade combat  teams.
section_title: Conclusions
paragraphs: The critical role played by U.S. ground combat forces is underscored today  in Operation Iraqi Freedom and the global war of terrorism. That the Army  should ensure its forces are well equipped with the capabilities they will  need in the coming years is unquestioned. Moreover, the top-level goals  the Army has set for its future force seem inarguable: to be as lethal and  survivable as the current force, but significantly more sustainable and  mobile. However, the Army’s approach to meeting these needs—embodied  in the FCS and complementary systems—does raise questions.
On the one hand, the FCS is the result of the Army leadership’s taking a  hard look at how it wants its forces to fight in the future. Army leadership  has had the courage to break with tradition on FCS; it would have likely  been much easier to win support for successor vehicles to the Abrams and  Bradley. Perhaps the most compelling aspect of the FCS solution is the  fact that the Army defined the larger context within which it wants its new  assets and capabilities to work, including command and organizational  changes. This holistic approach will facilitate designing individual systems  to operate together in a way that has not been done in the past. In this  sense, FCS is being designed to be much more than the sum of its  individual parts.
On the other hand, FCS does not present a good business case for an  acquisition program. It is necessary that a major new investment like FCS  have a compelling, well-thought out concept, but this alone is not  sufficient. FCS began product development prematurely in 2003, and today  is a long way from having the level of knowledge it should have had before  committing resources to a new product development effort. The elements  of a sound business case—firm requirements, mature technologies, a  knowledge-based acquisition strategy, a realistic cost estimate, and  sufficient funding—are not present. FCS has all the indicators for risks  that would be difficult to accept for any single system. They are even more  daunting in the case of FCS not only because of their multiplicity, but  because FCS represents a new concept of operations that is predicated on  technological breakthroughs. Thus, technical problems, which accompany  immaturity, not only pose traditional risks to cost, schedule, and  performance; they pose risks to the new fighting concepts envisioned by  the Army.
The Army sees the foregoing as risk-averse thinking. The Army does not  see immature technologies as an unacceptable risk, but as a “just in time”  approach that is necessary to guard against technological obsolescence.  The Army believes FCS technologies will mature predictably when needed  and that they must have much latitude to make trade-offs across systems  in case they do not mature. Similarly, the Army has set cost limitations for  FCS and is prepared to make trade-offs in capability to offset future cost  growth. Also, the Army is confident that advances in modeling and  simulation reduce the reliance on physical testing to demonstrate  performance.
It is possible that the Army’s strategy for acquiring FCS could succeed as  planned. But counting on it would require suspending credence in the  lessons learned on other programs as well as the best practices of  successful programs. Committing to the strategy also means setting aside  DOD’s acquisition policies—which espouse an evolutionary, knowledge- based approach—for an entire generation of Army acquisitions. The Army  has made important progress on setting FCS system of systems  requirements and making key decisions, such as vehicle weights. But its  progress thus far seems to have done more to confirm risk than to have  refuted it; setting system-level requirements and maturing technologies  have proven difficult and are taking longer than planned.
In making decisions to commit additional resources to acquiring the  capabilities represented by FCS, DOD must recognize the immaturity of  the program and the amount of discovery that lies ahead. It is not a  certainty that FCS will work and enable the concept of operations the  Army envisions. A full commitment to the Army’s strategy for acquiring  FCS is not yet warranted because the Army has not demonstrated  sufficient knowledge to provide confidence that it can deliver a fully  capable FCS within projected costs and time frames. Based on the Army’s  plans, there should be sufficient progress on system-level requirements  definition and technology development by the time of its preliminary  design review in 2008 to realistically assess whether the program’s goals  are achievable and at what cost. As DOD proceeds with its decisions, it  must preserve its ability to change course on acquiring FCS capabilities to  guard against a situation in which FCS will have to be acquired at any cost.  It must also be able to hold the Army accountable for delivering FCS  within budgeted resources. In this vein, options are available to frame FCS  capabilities around a business case that comports with acquisition policies  and best practices and to minimize risk within the current acquisition  strategy. Alternatives to the current FCS acquisition strategy must also be  kept viable in the event that desired capabilities prove unattainable.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense limit DOD’s commitment to  the FCS product development phase and eventual production until a  sound business case that is consistent with DOD acquisition policy and  best practices can be clearly demonstrated.
We also recommend that the Secretary of Defense lay the groundwork for  the Army’s development of a sound FCS business case by tasking the  spring 2006 Defense Acquisition Board to do the following:
Revaluate the FCS business case—including requirements,  technologies, complementary programs, acquisition strategy, cost, and  funding availability—in light of its own acquisition policies. In its  reevaluation, the board should (1) assess both the program’s prospects  for success and the consequences of not delivering desired capability  within budgeted resources and (2) ensure that the Army has a  disciplined way to measure and assess the cumulative effects of  individual requirements, technology, design, and cost changes on the  primary FCS characteristics of lethality, survivability, responsiveness,  and sustainability.
If the business case for FCS is found not to be executable, determine  whether investments in FCS design- and production-related activities  should be curbed until system-level requirements are firm and  technologies are mature.
If the deficiencies in the FCS business case are judged to be  recoverable, establish the incremental markers that are needed to  demonstrate that FCS is proceeding on a knowledge-based approach  and to hold the Army accountable, through periodic reporting or other  means, for achieving those markers. The markers should include, but  not be limited to  the schedules for all critical technologies to realistically progress  through TRL 7;    waypoints and criteria for reaching a set of system-level  requirements that are both technically feasible and affordable;  the schedule and funding availability for developing essential  complementary programs;    waypoints and criteria to be used to lead up to and complete the  preliminary and critical design reviews;    waypoints and criteria to be used to lead up to and complete testing  of fully integrated prototypes of all FCS systems, including the  network; and     waypoints and criteria to be used to demonstrate that key  production processes are in statistical control.
We recommend that the Secretary of Defense reassess the FCS cost  estimate and funding availability based on the independent cost estimate  and any program changes to improve its business case.
Finally, we recommend that the Secretary of Defense establish a milestone  review by the Defense Acquisition Board following the Army’s preliminary  design review scheduled for 2008. This should be a go/no-go review of the  FCS program that is based on (1) the program’s ability to demonstrate  whether it is meeting the knowledge markers outlined above at times  consistent with DOD policy and best practices and (2) whether the funds  can still be made available to afford its costs.
section_title: Matters for Congressional Consideration
paragraphs: Based on its response to our report, it does not appear that DOD plans to  assess the FCS business case against best practices or its own policies.  Nor has DOD agreed to hold a go/no-go milestone review in 2008 based on  the preliminary design review. Congress will likely be asked to approve  fiscal years 2008 and 2009 funding requests before the FCS business case  is adequately demonstrated. In light of DOD’s response, the Congress  should consider directing the Secretary of Defense to:
Report on the results of the May 2006 Defense Acquisition Board’s  review of the FCS program business case in the areas of requirements,  technologies, acquisition strategy, cost, and funding.
Direct DOD to conduct and report the results of a milestone review in  2008, following the preliminary design review, that will be a go/no-go  review of the FCS program that is based on its demonstration of a  sound business case.
The Congress should also consider restricting annual appropriations for  fiscal years 2008 and 2009 for the FCS program until definitive progress in  establishing a sound business case is demonstrated in terms of firm  requirements, mature technologies, a knowledge-based acquisition  strategy, a realistic cost estimate, and sufficient funding. Importantly, the  Army must provide sufficient evidence that FCS will work.
section_title: Agency Comments and Our Evaluation
paragraphs: DOD concurred with the intent of our recommendations but did not agree  to limit its commitment to the FCS program or to take any action beyond  what it had already planned to do. DOD stated it is committed to the  Army’s transformation and that effort, and in particular the FCS program,  requires a disciplined, yet agile, acquisition construct. DOD added that the  Defense Acquisition Executive has determined that the FCS program is  based on a viable acquisition strategy. DOD stated that it would reevaluate  the FCS acquisition strategy and reassess FCS cost estimates and funding  in the spring 2006 Defense Acquisition Board review. DOD also noted that  a Defense Acquisition Board review would be held for the timeframe  (2008) of the FCS preliminary design review, but refrained from  committing to making it a milestone decision review.
DOD’s response to our draft report did not specifically address our  findings on the FCS program’s lack of a sound business case. DOD was  also not specific about what criteria or standards for knowledge it would  use in making its assessments, but referred to the incremental markers  contained in the FCS acquisition strategy and system engineering plan. It is  important that these markers reflect standards for knowledge that are  consistent with best practices and DOD policy. Thus far, the FCS program  has been judged by its own markers. As we have pointed out in this report,  these markers have allowed FCS to be judged as acceptable despite its  falling far short of the markers that represent best practices and DOD  acquisition policy. For example, the low state of technology maturity has  not prevented DOD from concluding that the FCS strategy is viable. Using  the program’s markers as a basis for future reviews raises the question of  whether FCS will continue to be held to a lower standard than DOD  policy. Over time, as the program’s markers are adjusted in light of actual  performance and more money is invested, it will become increasingly  difficult for the Army and DOD to conclude that program progress is  anything other than acceptable.
Regarding a commitment to a milestone review in 2008, we note that, in  recognition of the fact that the FCS was allowed to proceed into Systems  Development and Demonstration prematurely, DOD had directed a full  milestone review update be held in November 2004. However, that review  has not yet occurred and it now appears that it will not occur. Thus, there  is no commitment by DOD to review the FCS business case (including all  elements in addition to the acquisition strategy), culminating in a go/no-go  decision in 2008 based on the preliminary design review. The increased  responsibility of making a declarative decision adds a higher level of  discipline and accountability than a review implies. We maintain our  position that such a decision is warranted.
It is important to note that Congress will continue to be asked to make  funding commitments in advance of program events. Specifically, the  budget request for fiscal year 2008, which will support the preliminary  design review, will be presented to Congress for approval in January 2007.  Conceivably, the request for the fiscal year 2009 budget, which will be  presented in January 2008, will also precede the preliminary design  review. Congress should safeguard itself against a situation in which  budget decisions could preclude its ability to make adjustments to FCS as  warranted by actual demonstrated performance against the business case.  For example, the status of the FCS business case based on the knowledge  demonstrated in the 2008 preliminary design review should be used to  guide ensuing program activities and funding commitments. Accordingly,  we have raised these issues as matters for congressional consideration.
We also received technical comments from DOD which have been  addressed in the report, as appropriate.
We are sending copies of this report to the Secretary of Defense; the  Secretary of the Army; and the Director, Office of Management and  Budget. Copies will also be made available to others on request. Please  contact me on (202) 512-4841 if you or your staff has any questions  concerning this report. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  Other contributors to this report were Assistant Director William R.  Graveline, Robert L. Ackley, Lily J. Chin, Noah B. Bleicher, Marcus C.  Ferguson, Michael J. Hesse, Guisseli Reyes, Lisa R. Simon, John P. Swain,  and Carrie R. Wilson.
section_title: Appendix I: Scope and Methodology
paragraphs: To develop the information on the Future Combat System program’s  progress toward meeting established goals, the contribution of critical  technologies and complementary systems, and the estimates of cost and  affordability, we interviewed officials of the Office of the Under Secretary  of Defense (Acquisition, Technology, and Logistics); the Army G-8; the  Office of the Under Secretary of Defense (Comptroller); the Secretary of  Defense’s Cost Analysis Improvement Group; the Director of Operational  Test and Evaluation; the Assistant Secretary of the Army (Acquisition,  Logistics, and Technology); the Army’s Training and Doctrine Command;  Surface Deployment and Distribution Command; the Program Manager for  the Future Combat System (Brigade Combat Team); the Future Combat  System Lead Systems Integrator; and LSI One Team contractors. We  reviewed, among other documents, the Future Combat System’s  Operational Requirements Document, the Acquisition Strategy Report, the  Baseline Cost Report, the Critical Technology Assessment and Technology  Risk Mitigation Plans, and the Integrated Master Schedule. We attended  the FCS System of Systems Functional Review, In-Process Reviews, Board  of Directors Reviews, and multiple system demonstrations. In our  assessment of the FCS, we used the knowledge-based acquisition practices  drawn from our large body of past work as well as DOD’s acquisition  policy and the experiences of other programs.
We discussed the issues presented in this report with officials from the  Army and the Secretary of Defense, and made several changes as a result.  We performed our review from June 2005 to March 2006 in accordance  with generally accepted auditing standards.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: Critical Technologies’ Current Status and Projections for Reaching Technology Readiness Level 6 (TRL 6)
paragraphs: Appendix III: Critical Technologies’ Current  Status and Projections for Reaching  Technology Readiness Level 6 (TRL 6)
subsections: section_title: FCS Critical Technologies and Associated Key Performance Parameters
paragraphs: Air (rotary wing/Unmanned Aerial Vehicle)—to—ground  Air (fixed wing)—to—ground (interim/robust solutions)
Ground—to—ground (mounted)
section_title: Appendix IV: Technology Readiness Levels
subsections: section_title: Lowest level of technology readiness. Scientific research begins to be translated into applied research and development. Examples might include paper studies of a technology’s basic properties
paragraphs: None (paper studies and  analysis)
Invention begins. Once basic principles  are observed, practical applications can  be invented. The application is  speculative and there is no proof or  detailed analysis to support the  assumption. Examples are still limited to  paper studies.
None (paper studies and  analysis)
Active research and development is  initiated. This includes analytical studies and laboratory studies to physically  validate analytical predictions of  separate elements of the technology.  Examples include components that are  not yet integrated or representative.
Analytical studies and  demonstration of non-scale  individual components (pieces  of subsystem).
Basic technological components are  integrated to establish that the pieces  will work together. This is relatively “low  fidelity” compared to the eventual  system. Examples include integration of  “ad hoc” hardware in a laboratory.
Low-fidelity breadboard.  Integration of non-scale  components to show pieces  will work together. Not fully  functional or form or fit but  representative of technically  feasible approach suitable for  flight articles.
Fidelity of breadboard technology  increases significantly. The basic  technological components are  integrated with reasonably realistic  supporting elements so that the  technology can be tested in a simulated  environment. Examples include “high  fidelity” laboratory Integration of  components.
High-fidelity breadboard.  Functionally equivalent but not  necessarily form and/or fit  (size, weight, materials, etc.).  Should be approaching  appropriate scale. May include  integration of several  components with reasonably  realistic support  elements/subsystems to  demonstrate functionality.
Lab demonstrating  functionality but not  form and fit. May  include flight  demonstrating  breadboard in surrogate  aircraft. Technology  ready for detailed  design studies.
Representative model or prototype  system, which is well beyond the  breadboard tested for TRL 5, is tested  in a relevant environment. Represents a  major step up in a technology’s  demonstrated readiness. Examples  include testing a prototype in a high- fidelity laboratory environment or in  simulated operational environment.
Prototype—Should be very  close to form, fit, and function.  Probably includes the  integration of many new  components and realistic  supporting  elements/subsystems if  needed to demonstrate full  functionality of the subsystem.
High-fidelity lab  demonstration or  limited/restricted flight  demonstration for a  relevant environment.  Integration of  technology is well  defined.
Prototype near or at planned  operational system. Represents a major  step up from TRL 6, requiring the  demonstration of an actual system  prototype in an operational  environment, such as in an aircraft,  vehicle, or space. Examples include  testing the prototype in a test bed  aircraft.
Prototype. Should be form, fit,  and function integrated with  other key supporting  elements/subsystems to  demonstrate full functionality  of subsystem.
Flight demonstration in  representative  operational environment  such as flying test bed  or demonstrator aircraft.  Technology is well  substantiated with test  data.
Technology has been proven to work in  its final form and under expected  conditions. In almost all cases, this TRL  represents the end of true system  development. Examples include  developmental test and evaluation of  the system in its intended weapon  system to determine if it meets design  specifications.
Actual application of the technology in  its final form and under mission  conditions, such as those encountered  in operational test and evaluation. In  almost all cases, this is the end of the  last “bug fixing” aspects of true system  development. Examples include using  the system under operational mission  conditions.
section_title: Related GAO Products
paragraphs: Defense Acquisitions: Business Case and Business Arrangements Key  for Future Combat System’s Success, GAO-06-478T. Washington, D.C.:  March 1, 2006.
DOD Acquisition Outcomes: A Case for Change, GAO-06-257T.  Washington, D.C.: November 15, 2005.
Force Structure: Actions Needed to Improve Estimates and Oversight of  Costs for Transforming Army to a Modular Force, GAO-05-926.  Washington, D.C.: September 29, 2005.
Defense Acquisitions: Resolving Development Risks in the Army’s  Networked Communications Capabilities is Key to Fielding Future  Force, GAO-05-669. Washington, D.C.: June 15, 2005.
Defense Acquisitions: Future Combat Systems Challenges and Prospects  for Success, GAO-05-428T. Washington, D.C.: March 16, 2005.
Defense Acquisitions: Future Combat Systems Challenges and Prospects  for Success, GAO-05-442T. Washington, D.C.: March 16, 2005.
NASA’s Space Vision: Business Case for Prometheus 1 Needed to Ensure  Requirements Match Available Resources, GAO-05-242. Washington, D.C.:   February 28, 2005.
Defense Acquisitions: The Army’s Future Combat Systems’ Features,  Risks, and Alternatives, GAO-04-635T. Washington, D.C.: April 1, 2004.
Defense Acquisitions: Assessments of Major Weapon Programs,   GAO-04-248. Washington, D.C.: March 31, 2004.
Issues Facing the Army’s Future Combat Systems Program,   GAO-03-1010R. Washington, D.C.: August 13, 2003.
Defense Acquisitions: Army Transformation Faces Weapon Systems  Challenges, GAO-01-311. Washington, D.C.: May 2001.
Best Practices: Better Matching of Needs and Resources Will Lead to  Better Weapon System Outcomes, GAO-01-288. Washington, D.C.:   March 8, 2001.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.