Defense Acquisitions: Opportunities Exist to Position Army's Ground Force Modernization Efforts for Success
Published: 2010-03-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since 2003, the Future Combat System (FCS) program has been the centerpiece of the Army's efforts to transition to a lighter, more agile, and more capable combat force. In 2009, however, concerns over the program's performance led to the Secretary of Defense's decision to significantly restructure and ultimately cancel the program. As a result, the Army has outlined a new approach to ground force modernization. This report (1) outlines the Army's preliminary post-FCS plans and (2) identifies the challenges and opportunities the Department of Defense (DOD) and the Army must address as they proceed with Army ground force modernization efforts. To meet these objectives, GAO reviewed key documents, performed analyses, visited test facilities where the Army evaluated FCS equipment, and interviewed DOD and Army officials.
section_title: What GAO Found
paragraphs: With DOD having canceled the FCS acquisition program, the Army has moved away from FCS as the centerpiece of ground force modernization. Although the Army is still refining its post-FCS plans, it has already taken a number of actions to comply with DOD directions and define new modernization initiatives. For instance, the Army has terminated FCS vehicle development and is preparing for a new ground combat vehicle program. Also, Army officials convened a special task force to refine future force concepts and formulate an expedited fielding strategy. The Army also announced preliminary plans for new acquisition programs. With ground force modernization efforts at an early stage, DOD and the Army face the challenge of setting the emerging modernization efforts on the best possible footing by buying the right capabilities at the best value. They have an opportunity to position these efforts for success by effectively implementing the enhanced body of acquisition legislation and DOD policy reforms as well as lessons learned from the FCS program, including lessons that underscore the use of knowledge-based acquisition and disciplined contracting strategies. Preliminary plans suggest that the Army is moving in that direction, including expectations to begin future developments with mature technologies and utilizing competitive prototyping. However, DOD recently approved, with a number of restrictions, low-rate initial production of the first increment of FCS spinout equipment, such as new radios and sensors, despite having acknowledged that the systems were immature, unreliable, and not performing as required. The restrictions include required DOD reviews of Army progress toward improving the systems' maturity and reliability. The spin out equipment was being developed within the FCS program, and the decision to approve production reflects DOD and Army emphasis on providing new capabilities quickly to combat units. However, this decision runs the risk of delivering unacceptable equipment to the warfighter and trading off acquisition principles whose validity has been so recently underscored. Detailed plans for most of the Army's new modernization efforts are still being developed and may not be available until at least later in fiscal year 2010. That will be a limiting factor as the Congress considers the Army's fiscal year 2011 budget request for these modernization efforts.

section_title: Letter
paragraphs: Since 2003, the Future Combat System (FCS) program has been at the  center of the Army’s efforts to modernize by replacing existing combat  systems with a family of manned and unmanned vehicles and systems  linked by an advanced information network. However, the Army started  FCS without determining whether the concept could be successfully  developed with existing resources. Specifically, the Army had not  established firm system-level requirements, mature technologies, a  realistic cost estimate, or an acquisition strategy wherein knowledge  drives schedule. In our March 2009 report, we concluded that the Army  would be challenged to demonstrate the knowledge necessary to warrant  an unqualified commitment to FCS at a congressionally mandated 2009  milestone review.
In April 2009, the Secretary of Defense proposed restructuring the FCS  program to lower risk and address more near-term needs shortly before  FCS was to undergo the congressionally mandated review to determine its  future. The Secretary of Defense’s recommendations served as a  preemptive “no-go” decision for this review, and the FCS acquisition  program was subsequently canceled in June 2009. As a result, the Army  has outlined a new approach to modernizing its ground forces. To  understand the Army’s new approach to modernization, you asked us to  (1) outline the Army’s preliminary post-FCS plans and (2) identify the  challenges and opportunities the Department of Defense (DOD) and the  Army will need to address as they proceed with ground force  modernization efforts.
In conducting our work, we met with Army and DOD officials responsible  for carrying out the FCS cancellation and formulating new approaches for  Army modernization. We reviewed the revised overarching Army concept  document and the preliminary plans for emerging acquisition programs  and assessed those against the earlier FCS concept. We assessed the  Army’s preliminary modernization plans against lessons learned from the  FCS program, acquisition best practices, and the latest acquisition policy.  In addition, we drew from our body of past work on weapon system  acquisition practices and conducted our own analyses of recent policy  changes and acquisition reform legislation. We conducted this  performance audit from March 2009 to March 2010 in accordance with  generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives. Appendix I further discusses our scope and methodology.
subsections: section_title: Background
paragraphs: Since it started development in 2003, FCS was at the center of the Army’s  efforts to modernize into a lighter, more agile, and more capable combat  force. The FCS concept involved replacing existing combat systems with a  family of manned and unmanned vehicles and systems linked by an  advanced information network. The Army anticipated that the FCS  systems, along with the soldier and enabling complementary systems,  would work together in a system of systems wherein the whole provided  greater capability than the sum of the individual parts. The Army expected  to develop this equipment in 10 years, procure it over 13 years, and field it  to 15 FCS-unique brigades—about one-third of the active force at that  time. The Army also had planned to spin out selected FCS technologies  and systems to current Army forces throughout the system development  and demonstration phase. In 2006, the Army established the Army  Evaluation Task Force to use, evaluate, and train with these FCS spinout  capabilities.
The Army used a management approach for FCS that centered on a lead  system integrator (LSI) to provide significant management services to help  the Army define and develop FCS and reach across traditional Army  mission areas. Army officials have stated that they did not believe the  Army 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.
As we have reported in the past, the FCS program was immature and  unable to meet DOD’s own standards for technology and design from the  start (see the list of related GAO products at the end of this report).  Although adjustments were made, such as adding time and reducing  requirements, vehicle weights and software code grew, key network  systems were delayed, and technologies took longer to mature than  anticipated (see fig. 1). By 2009, after an investment of 6 years and an  estimated $18 billion, the viability of the FCS concept was still unknown.  As such, in our 2009 report, we concluded that the maturity of the  development efforts was insufficient and the program could not be  developed and produced within existing resources.
In April 2009, the Secretary of Defense proposed a significant restructuring  of the FCS program in order to address more near-term combat needs and  incorporate a role for the Mine Resistant Ambush Protected (MRAP)  vehicles being used in today’s conflicts. The Secretary noted significant  concerns that the FCS program’s vehicle designs—where greater  information awareness was expected to compensate for less armor and  result in lower weight and higher fuel efficiency—did not adequately  reflect the lessons of counterinsurgency and close-quarters combat  operations in Iraq and Afghanistan. As such, the Secretary recommended  accelerating fielding of ready-to-go systems and capabilities to all  combat brigades;  canceling the vehicle component of the FCS program, reevaluating the  requirements, technology, and approach, and relaunching the Army’s  vehicle modernization program; and  addressing fee structure and other concerns with current FCS  contracting arrangements.
Subsequently, in June 2009, DOD issued an acquisition decision  memorandum that canceled the FCS acquisition program, terminated  manned ground vehicle development efforts, and laid out plans for follow- on Army brigade combat team modernization efforts. DOD directed the  Army to transition to an Army-wide modernization plan consisting of a  number of integrated acquisition programs, including one to develop  ground combat vehicles (GCV). The memorandum also instructed the  Army to transition away from an LSI management approach.
In recent months, the Army has been defining its ground force  modernization efforts per the Secretary’s decisions and the June 2009  acquisition decision memorandum. Although the details are not yet  complete, the Army took several actions through the end of calendar year  2009. It stopped all development work on the FCS manned ground  vehicles—including the non-line-of-sight cannon—in the summer of 2009  and recently terminated development of the Class IV unmanned aerial  vehicle and the countermine and transport variants of the Multifunction  Utility/Logistics and Equipment unmanned ground vehicle. For the time  being, the Army is continuing selected development work under the  existing FCS development contract, primarily residual FCS system and  network development. In October 2009, the Army negotiated a  modification to the existing contract that clarified the development work  needed for the brigade combat team modernization efforts.
section_title: In Implementing DOD Direction, the Army Is Moving Away from Many of Its FCS Approaches
paragraphs: The Army is implementing DOD direction and redefining its overall  modernization strategy as a result of the Secretary of Defense’s decision to  significantly restructure the FCS program. It established a key task force  to refine its future force concepts and modernization plans and has moved  away from FCS as the centerpiece of ground force modernization.  Additionally, the Army is transitioning from the FCS long-term acquisition  orientation to a shorter-term approach that biennially develops and fields  new increments of capability within capability packages. It now has one  approved acquisition program that will produce and field the initial  increment of the FCS spinout equipment, as well as preliminary plans for  two other acquisition programs that will define and develop follow-on  increments and develop a new GCV. The Army also plans to continue  network development for all the combat brigades and to develop and field  upgrades to other existing equipment.
subsections: section_title: The Army Has Established a New Operational Concept
paragraphs: In response to the Secretary’s recommendation to restructure FCS, the  Army established a Training and Doctrine Command-based task force to  reexamine current force capability gaps, make resource-informed  recommendations on how to fill them, and provide elements of planning  for future force modernization. Through that process, the task force  found that some assumptions were no longer valid, such as reliance on  networking for survivability, which essentially meant trading heavy armor  for better information or situational awareness. The Army acknowledges  that this is not the best trade for the way it now has to fight. As a result of  the task force’s analysis, the Army is implementing a new operational  concept and brigade combat team modernization strategy that will update  all Army combat brigades for full-spectrum operations. That is a  significant contrast to the FCS approach that would have created 15 new  FCS-unique brigades.
The task force developed a concept of continual modernization of ready- to-go capabilities through biennial deliveries of capability packages. In  addition to select FCS systems, these capability packages could also  include materiel and nonmateriel items developed outside the FCS  program. The concept also included plans to reallocate assets, divest older  technologies, and incrementally modernize the Army’s information  network. The Army expects to field the first capability package in fiscal  years 2011 through 2012, followed by additional capability packages  delivered in 2-year increments. The Army plans to align capability package  fielding with an established equipment reset and training process in order  to provide these systems to deploying units. A network effort, to include  more advanced hardware, software, and radios, will be included in each  capability package. The Army’s near-term plan is to define, develop,  produce, and field capabilities to some of the Army’s combat brigades, and  the long-term plan is to field those capabilities to all remaining combat  brigades. The Army has specified that the new capabilities will be tested  and their performance validated before they are deployed in the capability  packages.
section_title: The Army Has Started a Series of Development and Fielding Efforts
paragraphs: In recent months, the Army has been defining its ground force  modernization efforts per the Secretary’s decisions and the specifics of the  June 2009 acquisition decision memorandum. The Army has one approved  acquisition program as well as preliminary plans for starting two other  acquisition programs, integrating network capabilities across the Army’s  combat brigade structure, and upgrading and fielding existing ground  force capabilities.
The first program, Increment 1, is a continuation of previous FCS- related efforts to spin out emerging capabilities and technologies to  current forces. Of the Army’s post-FCS modernization initiatives,  Increment 1, which includes such FCS remnants as unmanned air and  ground systems, unattended ground sensors, the non-line-of-sight  launch system, and a network integration kit, is the furthest along in  the acquisition development cycle (see fig. 2). The network integration  kit includes, among other things, the integrated computer system, an  initial version of the system-of-systems common operating  environment, early models of the Joint Tactical Radio System and  waveforms, and a range extension relay. In December 2009, the Army  requested and DOD approved, with a number of restrictions, the low- rate initial production of Increment 1 systems that are expected to be  fielded in the fiscal year 2011-12 capability package, which will be  discussed in more detail later in this report. The Army will be  continuing Increment 1 development over the next 2 years while low- rate initial production proceeds. The projected development and  production cost to equip nine combat brigades with the Increment 1  network and systems, supported by an independent cost estimate,  would be about $3.5 billion.
Provides enhanced situational awareness and force protection  through reduced exposure to hazards during soldier-intensive  and/or high-risk functions.
Provides enhanced communications and situational awareness  through radios with multiple software waveforms, connections to  unattended sensors, and links to existing networking capabilities.
Provides force protection in an urban setting through a leave- behind, network-enabled reporting system of movement and/or  activity in cleared areas.
Provides independent, soldier-level aerial reconnaissance,  surveillance, and target acquisition capability.
Provides the ability to precisely attack armored, lightly  armored, and stationary or moving targets at extended ranges  despite weather/environmental conditions and/or presence of  countermeasures.
Provides enhanced situational awareness, force protection, and  early warnings in a tactical setting through cross-cues to sensors  and weapon systems.
For the second acquisition program, Increment 2 of brigade combat  team modernization, the Army has preliminary plans to mature  Increment 1 capabilities—potentially demonstrating full FCS threshold  requirements—as well as contribute to further developments of the  system-of-systems common operating environment and battle  command software, and demonstrate and field additional capabilities.  For example, these may include the Armed Robotic Vehicle Assault  (Light)—an unmanned ground vehicle configured for security and  assault support missions—and the Common Controller, which will  provide the dismounted soldier a handheld device capable of  controlling, connecting, and providing data transfer from unmanned  vehicles and ground sensors. According to Army officials, they are  currently working to define the content, cost, and schedule for  Increment 2 and are planning a Defense Acquisition Board review in  the third quarter of fiscal year 2010 and a low-rate initial production  decision for fiscal year 2013.
The third acquisition program would develop a new GCV. The Army  reviewed current fighting vehicles across the force structure to  determine whether to sustain, improve, divest, or pursue new vehicles  based on operational value, capability shortfalls, and resource  availability. Per DOD direction, the Army also collaborated with the  Marine Corps to identify capability gaps related to fighting vehicles.  For development of a new GCV, the Army’s preliminary plans indicate  the use of an open architecture design to enable incremental  improvements in modular armor; network architecture; and  subcomponent size, weight, power, and cooling. Preliminary funding  and schedule information for the proposed program was recently  provided to the defense committees by way of the Fiscal Year 2011  President’s Budget Request. According to a DOD official, in February  2010, DOD made a materiel development decision for the Army’s  proposed GCV effort. As a result of that decision, DOD authorized the  Army’s release of a request for proposals for GCV technology  development. Over the next several months, the Army will be  conducting an analysis of alternatives to assess potential materiel  solutions for the GCV. The Army expects to follow the analysis with a  Milestone A decision review on whether to begin technology  development in September 2010. After Milestone A, Army officials are  proposing the use of competitive prototyping with multiple  contractors—the number of which will depend on available funding— during the technology development phase, which will feature the use  of mature technologies and the fabrication and testing of prototype  subsystems. A preliminary design review would be used to validate  contractor readiness to enter detailed design at Milestone B in fiscal  year 2013. The Army’s preliminary plans indicate that the first  production vehicles could be delivered in late fiscal year 2017, about 7  years from Milestone A.
The Army is planning to incrementally develop and field an  information network to all of its combat brigades in a decentralized  fashion—that is, not as a separate acquisition program. The Army has  defined a preliminary network strategy and is in the process of  defining what the end state of the network will need to be, as well as  how it may build up that network over an undefined period of time. In  the near term, the Army is working to establish a common network  foundation to build on and to define a common network architecture  based on what is currently available and expected to become available  in the near future. Current communications, command and control,  and networking acquisition programs will continue and will be  expected to build on to the current network foundation and  architecture over time. Networking capabilities will be expected to  meet specific standards and interface requirements. According to  Army officials, the ongoing incremental network and software  development activities and requirements will be dispersed to these  acquisition programs, where they will be considered for further  development and possible fielding. The only original FCS network  development activities that the Army plans to continue under the FCS  development contract are those supporting the network integration kit  for Increment 1 and whatever additional networking capabilities may  be needed for Increment 2. DOD expects the Army to present network  development plans in March 2010.
The Army has also outlined plans to upgrade existing ground force  capabilities and integrate the MRAP vehicle into its forces. The plans  include upgrades to the Abrams tank fleet, Paladin cannon, and  Stryker vehicles. They also include a role for MRAP vehicles within the  brigade combat team structure, in accordance with the Secretary of  Defense’s April 2009 statement that the Army’s vehicle program  developed 9 years ago did not include a role for the $25 billion  investment in MRAP being used to “good effect” in today’s conflicts.  Using the recommendations from the task force, the Army drafted  plans to fully integrate MRAP vehicles into 20 combat brigades.
section_title: Acquisition Direction and FCS Lessons Learned Offer Opportunities to Increase the Likelihood of Successful Outcomes
paragraphs: The challenge facing both DOD and the Army is to set these ground force  modernization efforts on the best footing possible by buying the right  capabilities at the best value. In many ways, DOD and the Army have set  modernization efforts on a positive course by following direction from  DOD leadership, and they have an opportunity to reduce risks by adhering  to the body of acquisition legislation and policy reforms—which  incorporate knowledge-based best practices we identified in our previous  work—that have been introduced since FCS started in 2003. The new  legislation and policy reforms emphasize a knowledge-based acquisition  approach, a cumulative process in which certain knowledge is acquired by  key decision points before proceeding. In essence, knowledge supplants  risk over time. Additionally, DOD and the Army can further reduce risks  by considering lessons learned from problems that emerged during the  FCS development effort. Initial indications are that the Army is moving in  that direction. These lessons span knowledge-based acquisition practices,  incremental development, affordability, contract management, and  oversight. However, in the first major acquisition decision for the Army’s  post-FCS initiatives, DOD and the Army—because they want to support  the warfighter quickly—are proceeding with low-rate initial production of  one brigade set of Increment 1 systems despite having acknowledged that  the systems are immature, are unreliable, and cannot perform as required.
subsections: section_title: New Acquisition Reforms Point Way to Lower Risk
paragraphs: DOD’s body of acquisition policy, which includes reforms introduced since  FCS started development in 2003, incorporates nearly all of the  knowledge-based practices we identified in our previous work (see table  1). For example, it includes controls to ensure that programs have  demonstrated a certain level of technology maturity, design stability, and  production maturity before proceeding into the next phase of the  acquisition process. As such, if the Army proceeds with preliminary plans  for new acquisition programs, then adherence to the acquisition direction  in each of its new acquisition efforts provides an opportunity to improve  the odds for successful outcomes, reduce risks for follow-on Army ground  force modernization efforts, and deliver needed equipment more quickly  and at lower costs. Conversely, acquisition efforts that proceed with less  technology, design, and manufacturing knowledge than best practices  suggest face a higher risk of cost increases and schedule delays.
As shown above, the cumulative building of knowledge consists of  information that should be gathered at three critical points over the course  of a program:  Knowledge point 1 (at the program launch or Milestone B  decision): Establishing a business case that balances requirements  with resources. At this point, a match must be made between the  customer’s needs and the developer’s available resources—technology,  engineering, knowledge, time, and funding. A high level of technology  maturity, demonstrated via a prototype in its intended environment,  indicates whether resources and requirements match. Also, the developer  completes a preliminary design of the product that shows that the design  is feasible and that requirements are predictable and doable. FCS did not  satisfy this criterion when it began in 2003, and by 2009, 6 years into  development, the Army still had not satisfied this criterion as emerging  designs did not meet requirements, critical technologies were immature,  and cost estimates were not realistic.
Knowledge point 2 (at the critical design review between design  integration and demonstration): Gaining design knowledge and  reducing integration risk. At this point, the product design is stable  because it has been demonstrated to meet the customer’s requirements as  well as cost, schedule, and reliability targets. The best practice is to  achieve design stability at the system-level critical design review, usually  held midway through system development. Completion of at least 90  percent of engineering drawings at this point provides tangible evidence  that the product’s design is stable, and a prototype demonstration shows  that the design is capable of meeting performance requirements.
Knowledge point 3 (at production commitment or the Milestone C  decision): Achieving predictable production. This point is achieved  when it has been demonstrated that the developer can manufacture the  product within cost, schedule, and quality targets. The best practice is to  ensure that all critical manufacturing processes are in statistical control— that is, they are repeatable, sustainable, and capable of consistently  producing parts within the product’s quality tolerances and standards—at  the start of production.
In recent years, a number of specific changes have been made to DOD  acquisition policies. Further policy changes should be incorporated as a  result of the Weapon System Acquisition Reform Act of 2009. These  changes, if implemented properly, allow programs to achieve knowledge  at the right times by ensuring that any critical technologies to be included  in the weapon system are mature and ready for integration. The changes  provide support to program managers to keep requirements reasonable  and to keep changes at a minimum. The prototyping provisions included in  these changes call for developmental prototypes beginning very early in  the program. With FCS, the Army did not follow knowledge-based  acquisition practices, but reforms introduced since FCS’s start in 2003  incorporate nearly all of the knowledge-based practices we identified in  our previous work. For example, the reforms include controls to ensure  that programs have demonstrated a certain level of technology maturity,  design stability, and production maturity before they proceed to the next  phase of the acquisition process. If the Army adheres to these acquisition  practices, it has an opportunity to increase the likelihood of successful  outcomes for follow-on Army ground force modernization efforts.  Conversely, acquisition efforts that deviate from knowledge-based  practices face a higher risk of cost increases and schedule delays. Table 2  lists some of those acquisition reforms and their potential impact.
There are initial indications that DOD and the Army are moving forward to  implement the acquisition policy reforms as they proceed with ground  force modernization, including the Secretary of Defense’s statement about  the ground vehicle modernization program—to “get the acquisition right,  even at the cost of delay.” In addition, DOD anticipates that the GCV  program will comply with DOD acquisition policy in terms of utilizing  competitive system or subsystem prototypes. According to a DOD official,  DOD made a materiel development decision for the GCV in February 2010,  and the Army is proposing to conduct a preliminary design review on GCV  before Milestone B. Additionally, a configuration steering board is planned  in 2010 to address reliability and military utility of infantry brigade  systems.
section_title: Lessons Learned from FCS Can Foster a Smoother Acquisition Strategy Moving Forward
paragraphs: The Army has the opportunity to reduce risks by incorporating lessons  learned from the FCS development effort. These key lessons span several  areas: knowledge-based acquisition principles, incremental development,  affordability, contract management, oversight, and incentive fee structure.  Considering these lessons give the Army an opportunity to reduce risks by  utilizing the things that worked well on the FCS program, while avoiding  the acquisition pitfalls that plagued the program.
subsections: section_title: Always Follow Principles of Knowledge-Based Acquisition
paragraphs: Lesson: The Army did not position the FCS program for success because  it did not establish a knowledge-based acquisition approach—a strategy  consistent with DOD policy and best acquisition practices—to develop  FCS. The Army started the FCS program in 2003 before defining what the  systems were going to be required to do and how they were going to  interact. It moved ahead without determining whether the FCS concept  could be developed in accordance with a sound business case.  Specifically, at the FCS program’s start, the Army had not established firm  system-level requirements, mature technologies, a realistic cost estimate,  or an acquisition strategy wherein knowledge drives schedule. By 2009,  the Army still had not shown that emerging FCS system designs could  meet requirements, that critical technologies were at minimally acceptable  maturity levels, and that the acquisition strategy was executable within  estimated resources.
Actions being taken: In the first major acquisition decision for the  Army’s post-FCS initiatives, DOD and the Army—because they want to  support the warfighter quickly—are proceeding with low-rate initial  production of Increment 1 systems despite having acknowledged that  systems are immature, are unreliable, and cannot perform as required. In  December 2009, the Under Secretary of Defense for Acquisition,  Technology and Logistics approved low-rate initial production of  Increment 1 equipment for one infantry brigade but noted that there is an  aggressive risk reduction plan to grow and demonstrate the network  maturity and reliability to support continued Increment 1 production and  fielding. In the associated acquisition decision memorandum, the Under  Secretary acknowledged the risks of pursuing Increment 1 production,  including early network immaturity; lack of a clear operational perspective  of the early network’s value; and large reliability shortfalls of the network,  systems, and sensors. The Under Secretary also said that he was aware of  the importance of fielding systems to the current warfighter and that the  flexibility to deploy components as available would allow DOD to “best  support” the Secretary of Defense’s direction to “win the wars we are in.”  Because of that, the Under Secretary specified that a number of actions be  taken over the next year or more and directed the Army to work toward  having all components for the program fielded as soon as possible and to  deploy components of the program as they are ready. However, the Under  Secretary did not specify the necessary improvements that the Army  needed to make or that those improvements are a prerequisite for  approving additional production lots of Increment 1.
The approval for low-rate initial production is at variance with DOD policy  and Army expectations. DOD’s current acquisition policy requires that  systems be demonstrated in their intended environments using the  selected production-representative articles before the production decision  occurs. However, the testing that formed the basis for the Increment 1  production decision included surrogates and non-production- representative systems, including the communications radios. As we have  previously noted, testing with surrogates and non-production- representative systems is problematic because it does not conclusively  show how well the systems can address current force capability gaps.  Furthermore, Increment 1 systems—which are slated for a fiscal year  2011-12 fielding—do not yet meet the Army’s expectations that new  capabilities would be tested and their performance validated before they  are deployed in a capability package. As noted in 2009 test results, system  performance and reliability during testing was marginal at best. For  example, the demonstrated reliability of the Class I unmanned aerial  vehicle was about 5 hours between failure, compared to a requirement for  23 hours between failure. The Army asserts that Increment 1 systems’  maturity will improve rapidly but admits that it will be a “steep climb” and  not a low-risk effort.
While the Under Secretary took current warfighter needs into account in  his decision to approve Increment 1 low-rate initial production, it is  questionable whether the equipment can meet one of the main principles  underpinning knowledge-based acquisition—whether the warfighter needs  can best be met with the chosen concept. Test reports from late 2009  showed conclusively that the systems had limited performance, and that  this reduced the test unit’s ability to assess and refine tactics, techniques,  and procedures associated with employment of the equipment. The  Director, Operational Test and Evaluation, recently reported that none of  the Increment 1 systems have demonstrated an adequate level of  performance to be fielded to units and employed in combat. Specifically,  the report noted that reliability is poor and falls short of the level expected  of an acquisition system at this stage of development. Shortfalls in meeting  reliability requirements may adversely affect Increment 1’s overall  operational effectiveness and suitability and may increase life cycle costs.  In addition, in its 2009 assessment of the increment’s limited user test—the  last test before the production decision was made—the Army’s Test and  Evaluation Command indicated that the Increment 1 systems would be  challenged to meet warfighter needs. The Evaluation Command concluded  that, with the exception of the non-line-of-sight launch system, which had  not yet undergone flight testing, all the systems were considered  operationally effective and survivable, but with limitations, because they  were immature and had entered the test as pre-production representative  systems, pre-engineering design models, or both. Additionally, the  command noted that these same systems were not operationally suitable  because they did not meet required reliability expectations.
section_title: Develop the Advanced Information Network Incrementally as Technology Becomes Available
paragraphs: Lesson: The FCS concept depended heavily on the network to link people,  platforms, weapons, and sensors together within the 15 FCS brigades and  to help eliminate the “fog of war.” There were significant risks associated  with network development, including those related to performance and  scalability, architecture, and tests of network performance being  performed only after designs for vehicles carrying the network equipment  already were set. The network never matured to show that it could deliver  expected performance and reliability. Six years into network development  efforts, it was still not clear whether the network could be developed,  built, and demonstrated as planned.
Actions being taken: Under the Army’s revised concept, rather than  build a new network all at once and field it only to the unique FCS  brigades, the Army’s intent is to develop and field an information network  across the Army, building on current communications networks. Full  details of the Army’s network strategy are still being developed, including  the desired end state, incremental steps to that end state, and its costs.  However, the Army anticipates that the new network will be bounded by  available funding as well as technology readiness. It also expects, as with  capability packages, to field network capability sets on a biennial basis.  Network capability sets feature multiple pieces of the network that have  been integrated and demonstrated. Near-term goals for the network  include starting to connect the individual soldiers, expanding situational  awareness to the company level, and expanding interoperability. As the  Army envisions the network strategy, it will leverage network investments  in systems already procured for ongoing wars, build upon a core set of  network-related foundation products, and develop network packages that  can be customized in support of current and future force platforms. These  packages will include software, computers, and radios.
section_title: Ensure Affordability with More Knowledge and Realism Up Front
paragraphs: Lesson: The affordability of FCS was always in doubt and, in the end, was  a contributing factor to the decision to cancel the program. Ultimately,  FCS affordability depended on two factors: the actual cost of the program  and the availability of funds. The Army could not provide confident cost  estimates for the actual costs of FCS because of the low levels of  knowledge within the program. Instead, it indicated a willingness to  accept the program’s high risks and make trade-offs in requirements for  FCS and other programs to accommodate FCS’s growing costs. When the  Army’s predicted costs for FCS rose from $92 billion in 2003 to $159 billion  by 2009, the Army indicated that it would defer upgrades to current force  systems, such as the Abrams Tank and Bradley Fighting Vehicle, to free up  funds for FCS. In the end, the competition for funds—within the Army,  among Army programs and other DOD programs, and among DOD  programs and other federal government needs—was a factor in the  decision to end the FCS program. According to a September 2009 letter  from the Under Secretary of Defense for Acquisition, Technology and  Logistics, the FCS acquisition could not be developed and produced within  existing resources. Additionally, the Under Secretary noted that based on  an evaluation of the overall priorities for Army modernization, developing  and procuring FCS brigades was not fiscally viable given DOD priorities.
Action being taken: The Army has not yet fully defined major  predictors—content, pace, and costs—for long-term affordability of  ground force modernization efforts. It has indicated that work is ongoing  to develop priorities and resource plans for fiscal years 2011 through 2015,  including fielding capability packages, incrementally improving the  network, and establishing a new GCV program. The Army has also  indicated that funding will drive capability trades. For example, the  content and quantity of capability packages could be decreased or  increased depending on available funding. Additionally, the Director of  Cost Analysis and Program Evaluation prepared an independent cost  assessment for Increment 1. This independent estimate was very close to  the Army’s cost position for Increment 1 development and production.
In its fiscal year 2011 budget request, the Army asked the Congress to  approve funding for further Increment 1 development and production,  Increment 2 development, GCV development, and some network  development. As we have noted, at this time, detailed plans for these  efforts are still being developed and may not be available until at least  later in fiscal year 2010 as those plans are solidified and approved.
section_title: Transition Away from Industry- Led Integration
paragraphs: Lesson: In 2003, the Army contracted with an LSI for FCS because of the  program’s ambitious goals and the Army’s belief that it did not have the  capacity to manage the program. The Army did not have the expertise to  develop the FCS information network or enough people to support the  program had it been organized into separate program offices. Through its  relationship with the LSI, the Army believed that it found a partner that  could help to define and develop FCS and reach across the Army’s  organizations. In our 2007 report, we pointed out that the close partnerlike  relationship between the Army and the LSI posed risks to the Army’s  effective management and oversight of the FCS program. As a result, the  June 2009 acquisition decision memorandum that outlined plans to cancel  the FCS program also articulated a desire to move away from industry-led  integration activities.
Action being taken: While Army officials have acknowledged the Under  Secretary’s direction to transition away from reliance on the LSI and  affirmed their desire to comply with that direction, the transition will not  happen right away. The Army is beginning a deliberate process to  transition system engineering and integration activities from the LSI to the  government. For example, Army officials stated that the Army will be  contracting with the LSI for the procurement of the first three brigade sets  of Increment 1 equipment. When these systems move into full-rate  production, the Army may be in a better position to contract directly with  the original equipment manufacturers and without the assistance of an  LSI. According to the Army, the development of Increment 2 may be  jointly managed by the LSI and the original equipment manufacturers.  Likewise, the first lot of Increment 2 production may be jointly managed  by the LSI and the original equipment manufacturers; the other production  lots may be managed directly by the original equipment manufacturers.
In September 2009, the Army established the Program Executive Office for  Integration to oversee coordination of the three separate but integrated  programs and the network development. Roles and responsibilities have  not yet been fully defined. According to Army officials, the office will be  modeling the various brigade architectures and infrastructures to better  understand how they currently function and to facilitate adding  capabilities to the brigades. They also expect the office to work with the  individual acquisition programs to ensure that the programs are properly  integrated with other elements of each capability package and equipment  already fielded in the various brigades. As the integration issues are  addressed, the individual acquisition programs will be responsible for  execution. Additionally, the office will perform system engineering and  integration via in-house capabilities and supplemented by federally funded  research and development centers or contractors for the capability  packages. The Army is also establishing an organization above the  program executive office level to integrate ongoing network acquisition  efforts to better capture new network technologies, expand technologies  in the field so that they work better together, and provide better  networking capability to more units. One way that the Army will be doing  this is through establishing network standards and interface requirements.
section_title: Improve Oversight
paragraphs: Lesson: DOD largely accepted the FCS program and its changes as  defined by the Army, even though it varied widely with the best practices  embodied in DOD’s own acquisition policies. Until late in the FCS  program, DOD passed on opportunities to hold the FCS program  accountable to more knowledge-based acquisition principles. Despite the  fact that the program did not meet the requisite criteria for starting an  acquisition program, DOD approved the program’s entrance into system  development and demonstration in 2003. DOD later reevaluated the  decision and decided to hold a follow-on review with a list of action items  the program had to complete in order to continue. However, this review  never occurred, and the FCS program continued as originally planned. In  addition, DOD allowed the Army to use its own cost estimates rather than  independent—and often higher—cost estimates when submitting annual  budget requests.
Action being taken: DOD appears to be more resolute in some of its  oversight responsibilities for the emerging post-FCS efforts. For instance,  at an October 2009 DOD review, the Army offered preliminary plans for  post-FCS efforts. While DOD agreed to schedule an Increment 1  production decision and a GCV materiel development decision, DOD also  noted that additional clarity was needed for development and  procurement of follow-on items beyond Increment 1, as well as for  transition of the integration activities from the current FCS contractors to  the Army. DOD noted in its decision memorandum that it requires these  plans before it will approve any acquisition strategy for modernization  activities other than Increment 1 and GCV development. Additionally,  while DOD did not hold the Army accountable to knowledge-based  principles when it approved Increment 1 for low-rate production, DOD did  limit low-rate initial procurement quantities to one brigade’s worth of  equipment. DOD also required the Army to prepare for two additional  reviews in 2010—one review to provide a status report on non-line-of-sight  launch system testing and a report detailing the network maturity plan for  Increment 1, and another review for examining the results of additional  testing performed on Increment 1 systems. Additionally, DOD required the  Army to fund Increment 1 acquisition efforts to the cost estimate prepared  by the Director, Cost Assessment and Program Evaluation.
section_title: Create a Better Incentive and Award Fee Contract Structure
paragraphs: Lesson: In the near future, the Army will likely be awarding development  contracts for the emerging post-FCS programs. As we noted in 2005, DOD  award fees do not always link to acquisition outcomes. Additionally,  prior defense acquisition contracts, including the FCS contract, have complied with preferred DOD guidance for structuring incentive and  award fees. In 2007, we reported that the Army’s contract with the FCS LSI  contained fee provisions that did not tie fees to demonstrated  performance, and it rewarded the LSI too early in the development   Specifically, we reported that the Army would be paying 80  process. percent of the total incentive fee before the LSI conducted the critical  design review. We viewed this arrangement as risky because most of a  program’s cost growth occurs after the critical design review.
Action being taken: In April 2009, when the Secretary of Defense  announced his plans to significantly change the FCS program, he noted  that he was troubled by the terms of the contract, particularly in its very  unattractive fee structure that gives the government little leverage to  promote cost efficiency. Previously, in an April 2008 memorandum, DOD  stated that a more typical fee arrangement would be significantly less than  what the Army featured in the FCS contract, and that fees should be based  on demonstrated performance to the government. In September 2009,  DOD issued another memorandum to the military services, instructing the  acquisition officials to (1) be more consistent in applying the department’s  guidance, (2) be more judicious in their reviews of fees to ensure that they  are tied to demonstrated performance, and (3) collect additional fee data.  These two memorandums indicate that the department appears focused  on achieving more disciplined award and incentive fee practices. In  addition, DOD officials have recently stated that they expect future Army  contracts for ground force modernization to incorporate a fee structure  with a “more classic and reasonable” form, in accordance with the  Secretary’s direction and the September 2009 memorandum.
In October 2009, the Army negotiated a contract modification for  additional development of Increment 1 systems. The Army will soon be  contracting for the procurement of those systems. Later, the Army will be  awarding contracts for GCV development. At this point, it is unclear how  and to what extent the Army will be applying the new fee guidance.
section_title: Conclusions
paragraphs: Army and DOD officials made a very difficult decision when they canceled  what was the centerpiece of Army modernization—the FCS program. As  they transition away from the FCS concept, both the Army and DOD have  an opportunity to improve the likely outcomes for the Army’s ground force  modernization initiatives by adhering closely to recently enacted  acquisition reforms and by seeking to avoid the numerous acquisition  pitfalls that plagued FCS. As DOD and the Army proceed, they should keep  in mind the Secretary of Defense’s admonition about the new ground  vehicle modernization program: “get the acquisition right, even at the cost  of delay.” Based on the preliminary plans, we see a number of good  features. For example, we applaud the Army’s decision to pursue an  incremental acquisition approach for its post-FCS efforts. However, it is  vitally important that each of those incremental efforts adheres to  knowledge-based acquisition principles and strikes a balance between  what is needed, how fast it can be fielded, and how much it will cost.  Moreover, the acquisition community needs to be held accountable for  expected results, and DOD and the Army must not be willing to accept  whatever results are delivered regardless of military utility.
We are concerned that in their desire for speedy delivery of emerging  equipment to our warfighters in the field, DOD and the Army did not strike  the right balance in prematurely approving low-rate initial production of  Increment 1 of brigade combat team modernization. Although the Army  will argue that it needs to field these capabilities as soon as possible, none  of these systems has been designated as urgent and it is not helpful to  provide early capabilities to the warfighter if those capabilities are not  technically mature and reliable. If the Army moves forward too fast with  immature Increment 1 designs, this could cause additional delays as the  Army and its contractors concurrently address technology, design, and  production issues. Production and fielding is not the appropriate phase of  acquisition to be working on such basic design issues.
While the Army has not yet finalized its plans for its post-FCS initiatives,  one thing is certain—these programs are likely to require significant  financial investments. In its fiscal year 2011 budget request, the Army has  asked the Congress to approve funding for Increment 1 development and  production, Increment 2 development, GCV development, and some  network development. At this time, detailed plans for these efforts are still  being developed and were not yet available as of early January 2010. This  means that the Congress will have limited information on which to base its  funding decisions. The Army’s fiscal year 2011 budget request does not  provide sufficient details to allay all concerns. DOD and the Army need to  clearly define and communicate plans in order to ensure broad agreement  among all stakeholders, including the Congress. It appears that the Army’s  plans may not be solidified until well beyond the point when the  congressional defense committees will have marked up the fiscal 2011  defense authorization bill.
section_title: Recommendations for Executive Action
paragraphs: In order to ensure that only technically mature and reliable capabilities are  fielded to the warfighters, we recommend that the Secretary of Defense  mandate that the Army correct the identified maturity and reliability issues  with the Increment 1 network and systems prior to approving any  additional lots of the Increment 1 network and systems for production.  Specifically, the Army should ensure that the network and the individual  systems have been independently assessed as fully mature, meet reliability  goals, and have been demonstrated to perform as expected using  production-representative prototypes. We also recommend that the  Secretary of the Army not field the Increment 1 network or any of the  Increment 1 systems until the identified maturity and reliability issues  have been corrected.
In order to enhance congressional visibility into the Army’s plans in this  area, we also recommend that the Secretary of Defense direct the Army to  submit a comprehensive report to the Congress before the end of fiscal  year 2010 on its ground force modernization investment, contracting, and  management strategies.
section_title: Agency Comments and Our Evaluation
paragraphs: DOD concurred with, and provided comments to, all our  recommendations. Regarding our recommendation to correct Increment 1  maturity and reliability issues prior to approving additional production,  DOD stated that the need to correct those issues has been communicated  to the Army. DOD also asserts that all Increment 1 systems will be tested  in their production configuration, and performance will be independently  assessed against capability requirements prior to approving production of  any additional lots of Increment 1 systems. DOD’s comments concisely  summarize the instructions that the Under Secretary of Defense for  Acquisition, Technology and Logistics included in his December 2009  acquisition decision memorandum that approved low-rate initial  production for the first brigade’s worth of infantry brigade combat team  systems. The memorandum includes a number of sensible provisions, such  as (1) an aggressive risk reduction plan to grow and demonstrate network  maturity and reliability, (2) monthly reporting requirements for network  and system reliability improvements, (3) a comprehensive precision mix  analysis to demonstrate the cost-effectiveness of the non-line-of-sight  launch system, (4) the use of a configuration steering board to examine  reliability and military utility, and (5) a plan to compare the effectiveness  of operational units with and without the Increment 1 systems and  network. However, neither the memorandum nor DOD’s comments to this  report indicated the minimally acceptable standards that must be met in  order to proceed with additional procurement lots of the Increment 1  systems and network. The Army has many Increment 1 development and  testing activities planned for the coming months and we intend to monitor  their progress closely.
Regarding our recommendation that the Army not field the Increment 1  systems and network until maturity and reliability issues had been  corrected, DOD stated that Increment 1 systems would not be fielded until  performance is sufficient to satisfy the warfighter’s capability  requirements. We believe it will be vitally important that (1) Increment 1  systems and network clearly demonstrate their ability to fully satisfy the  needs of the warfighter and (2) DOD and the Army not be willing to accept  whatever acquisition results are delivered regardless of their military  utility. Again, we intend to follow the Army and DOD’s activities and  actions in the coming months.
Regarding our recommendation to submit a comprehensive report to the  Congress on Army ground force modernization investment, contracting,  and management strategies, DOD stated that the Army will provide its  annual Army Modernization Strategy no later than the third quarter of  fiscal year 2010. According to DOD, this strategy document, in conjunction  with the 2010 Army Weapons Systems Handbook and the 2011 budget  request material, provides the Army’s investment, contracting, and  management strategies for ground force modernization. In making this  recommendation, we felt that the Army had made significant changes in its  investment, contracting, and management strategies as it moved away  from the FCS program. We felt that a comprehensive report on its new  strategies for ground force modernization would be enlightening to the  Congress. In the coming months, we will review the materials promised by  the Army to determine if they provide adequate knowledge to the  Congress.
DOD’s comments are reprinted in appendix II.
We received other technical comments from DOD, which have been  addressed in the report.
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. This report also is available at no charge on the GAO Web site at  http://www.gao.gov.
Please contact me on (202) 512-4841 or sullivanm@gao.gov if you or your  staff have 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. The major contributors are listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: To outline the Army’s preliminary post–Future Combat System (FCS)  plans, we obtained and reviewed proposed plans for the Army’s new  modernization approach. We compared those plans against the FCS  operational concept and acquisition approach. We interviewed officials  responsible for carrying out the FCS cancellation, including officials from  the Office of the Under Secretary of Defense for Acquisition, Technology  and Logistics and the Program Executive Office for Integration (formerly  the FCS Program Office). We also met with officials responsible for  reexamining current-force capability gaps and formulating the new  operational concept, including officials from the Army’s Training and  Doctrine Command, the Future Force Integration Directorate, and the  Army Evaluation Task Force.
To identify the challenges and opportunities the Department of Defense  (DOD) and the Army will need to address as they proceed with Army  ground force modernization efforts, we reviewed relevant Army and DOD  documents, including the Secretary of Defense’s April 6, 2009,  announcement on restructuring FCS and the June 23, 2009, acquisition  decision memorandum that implemented the Secretary’s proposed  restructure; the Army Capstone Concept; the Director, Operational Test  and Evaluation’s Fiscal Year 2009 Annual Report; the Comprehensive  Lessons Learned White Paper; and the Army Modernization White Paper.  Additionally, we reviewed recent acquisition reforms, including DOD  Instruction 5000.02, Operation of the Defense Acquisition System; the  Weapon Systems Acquisition Reform Act of 2009 (Public Law No. 111-23);  and other legislative initiatives. In developing lessons learned from the  FCS program, we reviewed current Army ground force modernization  plans and assessed them against FCS approaches and outcomes, best  practices, and the latest acquisition policies and reforms. In our  assessment of the Army’s modernization approach, we used the  knowledge-based acquisition practices drawn from our body of past work  as well as DOD’s acquisition policy and the experiences of other programs.  We interviewed officials responsible for providing independent  assessments of technologies, testing, networking, and systems  engineering. This included officials from the Office of the Secretary of  Defense’s Cost Assessment and Program Evaluation Office; Office of the  Director, Defense Research and Engineering; Office of the Assistant  Secretary of Defense (Networks and Information Integration); and Office  of the Director, Operational Test and Evaluation.
We discussed the issues presented in this report with officials from the  Army and the Secretary of Defense and made changes as appropriate. We  conducted this performance audit from March 2009 to March 2010 in  accordance with generally accepted auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on our  audit objectives.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: In addition to the contact named above, the following staff members made  key contributions to the report: William R. Graveline, Assistant Director;  William C. Allbritton; Noah B. Bleicher; Helena Brink; Tana M. Davis;  Marcus C. Ferguson; and Robert S. Swierczek.
section_title: Related GAO Products
paragraphs: Defense Acquisitions: Issues to be Considered for Army’s Modernization  of Combat Systems. GAO-09-793T. Washington, D.C.: June 16, 2009.
Defense Acquisitions: Assessments of Selected Weapon Programs.  GAO-09-326SP. Washington, D.C.: March 30, 2009.
Defense Acquisitions: Key Considerations for Planning Future Army  Combat Systems. GAO-09-410T. Washington, D.C.: March 26, 2009.
Defense Acquisitions: Decisions Needed to Shape Army’s Combat  Systems for the Future. GAO-09-288. Washington, D.C.: March 12, 2009.
Defense Acquisitions: 2009 Review of Future Combat System Is Critical  to Program’s Direction. GAO-08-638T. Washington, D.C.: April 10, 2008.
Defense Acquisitions: 2009 Is a Critical Juncture for the Army’s Future  Combat System. GAO-08-408. Washington, D.C.: March 7, 2008.
Defense Acquisitions: Future Combat System Risks Underscore the  Importance of Oversight. GAO-07-672T. Washington, D.C.: March 27, 2007.
Defense Acquisitions: Key Decisions to Be Made on Future Combat  System. GAO-07-376. Washington, D.C.: March 15, 2007.
Defense Acquisitions: Improved Business Case Key for Future Combat  System’s Success. GAO-06-564T. Washington, D.C.: April 4, 2006.
Defense Acquisitions: Improved Business Case Is Needed for Future  Combat System’s Successful Outcome. GAO-06-367. Washington, D.C.:  March 14, 2006.
Defense Acquisitions: Future Combat Systems Challenges and Prospects  for Success. GAO-05-428T. Washington, D.C.: March 16, 2005.
Defense Acquisitions: The Army’s Future Combat Systems’ Features,  Risks, and Alternatives. GAO-04-635T. Washington, D.C.: April 1, 2004.
Issues Facing the Army’s Future Combat Systems Program.  GAO-03-1010R. Washington, D.C.: August 13, 2003.
Best Practices: Better Matching of Needs and Resources Will Lead to  Better Weapon System Outcomes. GAO-01-288. Washington, D.C.: March 8,  2001.