Missile Defense: Actions Needed to Improve Planning and Cost Estimates for Long-Term Support of Ballistic Missile Defense
Published: 2008-09-25T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Defense (DOD) has spent a total of over $115 billion since the mid-1980s to develop a Ballistic Missile Defense System (BMDS) comprised of land, air, and sea-based elements--such as missiles and radars--working together as an integrated system. Since the cost to operate and support a weapon system usually accounts for most of a system's lifetime costs, the resources needed to fund BMDS could be significant as DOD fields an increasing number of BMDS elements. In 2005, DOD began planning to transition responsibility for supporting BMDS elements from the Missile Defense Agency (MDA) to the services. GAO was asked to assess the extent to which DOD has (1) planned to support BMDS elements over the long-term, and (2) identified long-term operation and support costs. To do so, GAO analyzed 7 BMDS elements that will be fielded by 2015, compared DOD's plans and cost estimates to DOD and GAO key principles, and assessed the extent to which MDA and the services have agreed on responsibilities for supporting and funding BMDS elements.
section_title: What GAO Found
paragraphs: DOD has taken some initial steps to plan for BMDS support, but efforts to date are incomplete, and difficulties in transitioning responsibilities from MDA to the services have complicated long-term planning. DOD key principles for weapon system life-cycle management stress the importance of completing support plans that cover a system's expected useful life before it is fielded. Although MDA has developed some policies and guidance for BMDS support planning, it has not developed support plans for three of the seven elements that GAO examined, and MDA has not completed an overall support plan for the integrated system. DOD's long-term support planning for BMDS is incomplete because it has not established a standard process clearly specifying what support planning should be completed before fielding or how to transition the responsibility for supporting BMDS elements from MDA to the services. For five of the seven elements GAO examined, MDA and the services have been unable to reach agreement on who will be responsible for providing support after 2013. DOD has drafted a proposal for BMDS management that DOD officials have stated is intended, in part, to address these issues. However, the draft proposal lacks important details, and it is not clear when it is expected to be approved and implemented. Without a standardized process for long-term support planning, uncertainty will persist regarding how the elements will be supported over the long term. DOD's recent efforts to develop operation and support cost estimates for BMDS elements have limitations and are not transparent for DOD and congressional decision makers. DOD and GAO key principles for cost estimating state that complete, credible, and independently verified cost estimates are important to support preparation of budget submissions over the short term as well as for assessing the long-term affordability of a program. DOD has started to develop operation and support cost estimates for the seven elements GAO examined, but those efforts are not yet complete and have limitations. First, the estimates are likely to change since DOD is still determining key assumptions. Second, DOD does not plan to have the estimates independently verified. Furthermore, the Future Years Defense Program, DOD's 6-year spending plan, does not fully reflect BMDS operation and support costs. DOD has not yet clearly identified BMDS operation and support costs because the department has not required that these costs are to be developed, validated, and reviewed, and it has not specified when this should be done or who is responsible for doing so. Although DOD's draft proposal for managing BMDS contains some funding suggestions, it does not address the operation and support cost limitations GAO identified. Without a requirement to develop and validate BMDS operation and support cost estimates, DOD will have difficulty preparing credible budget requests and assessing the affordability of BMDS over the long term.

section_title: Letter
paragraphs: The Department of Defense (DOD) has spent about $57 billion to develop  the Ballistic Missile Defense System (BMDS) since the Missile Defense  Agency (MDA) was created in 2002, and a total of over $115 billion since  the mid-1980s. The BMDS is intended to be ultimately comprised of land,  air, and sea-based elements—such as missiles and radars—working  together as an integrated, layered system capable of defeating ballistic  missiles of all ranges and in all phases of flight. DOD plans to field an  increasing number of BMDS elements over the next several years, and  since the cost to operate and support a weapon system traditionally  accounts for over 70 percent of the total cost over the system’s lifetime,  the resources needed to operate and support BMDS could be significant  over time. Furthermore, in order to meet the President’s goal of fielding an  initial ballistic missile defense capability in 2004, the Secretary of Defense  granted MDA a significant amount of funding and decision-making  flexibility by exempting it from traditional weapon system development  regulations, but our prior work has shown that this flexibility has come at  the cost of transparency and accountability and has made oversight more  challenging. Although MDA has programmed approximately $800 million  annually over fiscal years 2008 through 2013 to operate and support the  BMDS elements, we previously reported that DOD has not included all  known BMDS operating and support costs in its budget and that BMDS  operation and support costs are not identified and aggregated in the  Future Years Defense Program, which is one of the principal sources of  DOD budget information available to senior DOD leadership and  Congress.
In developing an integrated BMDS, DOD’s intention was for MDA to  develop BMDS elements and then transition the elements to the services  which would operate and support them. In 2005, DOD began planning to  transition responsibility for supporting BMDS elements from MDA to the  services, which involves providing a ballistic missile defense element to a  “lead” military service. Each lead service is responsible for providing  personnel, force protection, operations and support, and for developing  doctrine, organizations, and facilities requirements. The transition process  also involves lead services beginning to assume responsibility for  operating, supporting, and funding BMDS elements, necessitating  negotiations between MDA and each lead service over which organization  will provide and pay for each element’s operating and support costs in  specific years. DOD has developed a transition plan that covers the BMDS  elements and is intended to guide the transition of roles and  responsibilities from MDA to the services, document the status of  agreements on cost sharing, and serve as a basis for preparing budget  submissions. Another purpose of this transition plan is to highlight critical  issues that are of executive interest for the overall BMDS, such as the  critical issues of how BMDS elements will be managed over their life  cycle, and how operation and support costs will be shared between MDA  and the services.
Since traditional oversight mechanisms are not applied to BMDS, DOD has  created various high-level groups to advise the Deputy Secretary of  Defense on ballistic missile defense issues. Most recently, DOD created a  new Missile Defense Executive Board in 2007 to recommend and oversee  implementation of strategic policies, plans, program priorities, and  investment options. The Board is developing a draft proposal for how to  improve management of BMDS elements over their life cycle including  transition of support responsibilities and how to fund operation and  support costs.
We reported earlier this year that DOD’s transition efforts have, to date,  been arduous and time-consuming. Also, the House Armed Services  Committee has expressed concern about the apparent reluctance of the  services to assume responsibility for acquiring, fielding, and sustaining  missile defense capabilities. Considering the extensive advance planning  required to establish and operate BMDS elements and potential effects on  future resource needs, we were asked to examine DOD’s plans for  preparing to operate and support BMDS elements, including planning to  transition BMDS elements to the services. Accordingly, we assessed the  extent to which DOD has (1) planned for support of BMDS elements over  the long term; and (2) identified the long-term operation and support costs  for the BMDS elements it plans to field. For both objectives, we analyzed  planning and cost data for the seven BMDS elements that are already  fielded or planned for fielding by 2015. We also reviewed DOD policies and  guidance that establish DOD’s overall approach for preparing to operate  and support weapon systems and ballistic missile defense. To assess the  extent to which DOD has planned for support of BMDS elements, we  compared the planning that had been done, including the extent to which  MDA and the services have agreed on responsibilities for supporting  BMDS elements, with DOD key principles for life-cycle management to  determine what aspects may be missing that could hinder transition of  responsibility for support of BMDS elements from MDA to the services  and hinder the ability to provide long-term support. To assess whether  DOD has identified the operation and support costs to operate and support  the BMDS elements it plans to field, we compared the method DOD used  in developing its operation and support cost estimates with key principles  for developing accurate and reliable cost estimates and assessed the  extent to which MDA and the services have or have not agreed on which  organization is responsible for funding operation and support of BMDS  elements. We discussed the results of our analyses on both objectives with  DOD officials. We conducted this performance audit from August 2007  through September 2008 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. See  appendix I for a more complete description of our scope and  methodology.
subsections: section_title: Background
paragraphs: The Missile Defense Agency plans to develop and field ballistic missile  defense elements in increments called “blocks,” with each block providing  increasing levels of capability over the previous block. In doing so, MDA’s  charter states that MDA is responsible for assuring the supportability of  the system and for developing plans with the services for BMDS elements  early enough to support effective transition.
subsections: section_title: Life-Cycle Management
paragraphs: DOD policy calls for new weapon systems be managed using a life-cycle  management approach, which should include all activities for acquiring,  developing, producing, fielding, supporting, and disposing of a weapon  system over its expected lifetime. In addition, each service is responsible  for developing force structure to organize units to accomplish missions  using the new system. Life-cycle management is to consider how the new  system will be supported over its expected useful life because system  engineering and design can have a significant effect on operations and  support costs. Typically, support planning begins early in development as  DOD begins exploring concepts for a new weapon system and the support  strategy is developed as the system is developed and completed before  fielding. However, the DOD Inspector General reported in 2006 that MDA  had not planned fully for system sustainment and had not developed a  complete integrated logistics support plan. The report concluded that  without improving its processes, including support planning, MDA faces  increased risk in successfully integrating elements into a single system  that will meet U.S. requirements for ballistic missile defense.
A life-cycle cost estimate includes all costs associated with a weapon  system’s research and development, investment, military construction,  operations and support, and disposal. Since operation and support costs  historically are the largest portion (over 70 percent) of a weapon system’s  costs over its life, these costs can significantly affect development of a life- cycle cost estimate and were the focus of our analysis of DOD’s cost  estimates. DOD usually prepares an independent life-cycle cost estimate  for major weapons systems, and these estimates typically form the basis  for budget submissions. Using a life-cycle cost estimate helps support the  budget process by providing estimates of the funding required to execute a  program and can help assess whether resources are adequate to support  the program. A key step in assuring the credibility of the estimate is  acquiring an independent cost estimate by an entity separate from those  connected to the program. Independent estimates tend to be higher and  more accurate than estimates developed by a system’s program office  since independent estimators may be more objective and less likely to use  optimistic assumptions.
section_title: Transition Planning
paragraphs: In its 2007 transition plan, DOD recognized that as much time as  possible—72 months or more—should be allotted to transition a BMDS  element from MDA to a military service. The transition process may, for  some elements, end at a point that DOD calls transfer—which is the  reassignment of the MDA program office responsibilities to a service.  According to MDA and Office of the Under Secretary of Defense for  Acquisition, Technology, and Logistics officials, not all BMDS elements  will ultimately transfer; the decision to do so will be made on a case-by- case basis and the conditions under which this may happen have not yet  been specifically identified for each element. MDA’s 2004 charter states  that the agency shall develop plans in conjunction with the services for  BMDS elements during transition. The transition plan covers some  overarching issues and contains separate sections for each BMDS element.  For example, the transition plan includes some discussion for each  element of various topics such as doctrine, organization, training, materiel,  facilities, security, support strategies, and funding. DOD approved the first  transition plan in September 2006 and approved the second plan in  February 2008. DOD intends for its plan to guide the transition of roles and  responsibilities from MDA to the services and serve as a basis for  preparing budget submissions. Another purpose of DOD’s transition plan  is to highlight critical issues that are of executive interest for the overall  BMDS. For example, the latest plan included a critical issue of how BMDS  capabilities will be managed over their life cycle and another critical issue  is how operation and support costs will be shared between MDA and the  services. Table 1 below shows the BMDS elements, when they were or are  planned to be fielded, and which service has been designated as the lead  for each element.  year time period and to make resource decisions in light of competing  priorities. The FYDP is a report that resides in an automated database,  which is updated and published to coincide with DOD’s annual budget  submission to Congress. The current FYDP, submitted with DOD’s fiscal  year 2008 budget, included data through fiscal year 2013. Likewise, the  FYDP that will be submitted with DOD’s fiscal year 2010 budget will  include data through fiscal year 2015.
This report is one in a series of reports we have issued on ballistic missile  defense (see the list of Related GAO Products at the end of this report).  Most recently, we found that DOD lacks a sound process for identifying  and addressing the overall priorities of the combatant commands when  developing ballistic missile defense capabilities. We reported in May 2006  that DOD had not established the criteria that must be met before BMDS  can be declared operational. Also, in April 2007, we found that DOD and  congressional decision-makers could benefit from more complete  information to assess basing, support, infrastructure, budget requests, and  DOD spending plans when considering BMDS program and investment  decisions. Also, we issue an annual assessment of DOD’s progress in  developing BMDS, and in March 2008, we reported that the high level of  investment MDA plans to make in technology development warrants some  mechanism for reconciling the cost of these efforts with the program’s  progress.
section_title: DOD Has Taken Some Initial Steps to Plan for Support of BMDS, but Planning to Date Is Incomplete and Complicated by Difficulties in Transitioning Support Responsibilities to the Services
paragraphs: DOD has taken some initial steps to plan for BMDS support, but planning  efforts to date are incomplete. In addition, long-term support planning has  been complicated by difficulties in transitioning responsibility for  providing support from MDA to the services. While DOD has drafted a  proposal for BMDS management that DOD officials have stated is  intended, in part, to address this issue, the draft proposal lacks important  details. DOD’s long-term support planning for BMDS is incomplete  because DOD has not developed and instituted a standard process that  clearly specifies what support planning should be completed before  elements are fielded, identifies which organization is responsible for life- cycle management, involves the services, and specifies how to transition  support responsibilities from MDA to the services. Without such an  established process that is enforced, DOD faces uncertainty over how  BMDS elements will be supported over the long term and will be limited in  its ability to improve support planning for future BMDS elements.
subsections: section_title: MDA Has Developed Some Guidance for BMDS Support Planning but Efforts to Date Are Incomplete
paragraphs: While MDA has developed some guidance for developing support plans for  BMDS elements and the overall system, based on Presidential and  Secretary of Defense direction, MDA has focused on fielding a defensive  ballistic missile capability as soon as practical. In 2005, MDA issued an  Integrated Program Policy and a companion Implementation Guide,  which directed MDA’s BMDS element offices to develop support plans for  each element, as well as develop an integrated support plan for the entire  system, update these plans every 2 years, and complete an assessment of  readiness of the integrated plan to support operations of the overall  BMDS.
Nevertheless, planning efforts are incomplete. According to officials, as of  August 2008, three of the seven elements we examined, the forward-based  radar, the sea-based radar, and the European radar, do not have support  plans in place. Additionally, a fourth element, the Ground-based  Midcourse Defense element, has a plan that was initially completed in  2005, but the plan is now out of date, does not reflect the current  configuration of the element, and it is therefore currently being updated.
MDA has also issued a sustainment directive which states that support  planning should be completed as elements move through various  development phases. MDA’s directive specifies four phases with  associated criteria that should be completed before exiting a phase to  ensure, in part, effective long-term support of BMDS elements.  Accordingly, initial support plans for a BMDS element should be  completed before an element progresses from the programming and  planning phase to the program execution phase and before the final  deployment phase when an element is fielded. However, two of the  elements we examined did not have support plans, even though they had  progressed to a subsequent phase of development. One of these elements,  the sea-based radar, has been categorized by MDA officials as being in the  program execution phase, but officials stated that currently there is no  support plan for this element and MDA has just recently begun to develop  one. In addition, MDA officials told us that portions of the forward-based  radar’s development are described as being in the deployment phase since  the element has been fielded, but as of August 2008, there was no support  plan for the radar and officials told us a plan would be completed by the  end of the year. MDA officials recognize that past efforts in support  planning have been incomplete. In response, MDA is proposing forming a  logistics directorate, but it is not clear what the roles and responsibilities  of this group will be or how soon the group will be fully staffed.
Incomplete support planning is not a new issue. In 2006, DOD’s Inspector  General reported that MDA had not developed an overall, integrated,  BMDS-wide support plan, but had developed a summary document  containing only general support planning information for four elements.  The DOD Inspector General’s report concluded that without improving  support planning, MDA faced increased risk in successfully integrating  elements into a single system that will meet U.S. requirements. In 2006,  MDA revised the document to include information on a total of 8 elements,  but the document still did not contain more than high-level information on  how each individual element would be supported and did not contain  specific detail for how support would be managed across the integrated  system. As of August 2008, MDA still had not developed an overall,  integrated, BMDS-wide support plan. Without current support plans for  every element and an integrated, system-wide support plan, MDA will be  unable to conduct a support readiness assessment of the overall,  integrated ballistic missile defense system as directed by its guidance. As a  result, MDA cannot ensure that the integrated system has appropriate  plans in place to support operations.
section_title: DOD’s Support Planning for BMDS Has Not Followed Key Principles
paragraphs: DOD’s planning to support BMDS over the long term has not followed  DOD’s key principles of weapon system life-cycle management. Although  BMDS is not required to follow traditional weapon system life-cycle  management processes, MDA’s charter states that BMDS will be managed  consistent with the principles of the traditional weapon system process  and that the office of the Under Secretary of Defense for Acquisition,  Technology, and Logistics (USD (AT&L)) and MDA will determine which  principles will be applied to the management of BMDS. However, USD  (AT&L) and MDA have not determined and communicated to the services  which parts of the usual life-cycle management processes apply to each  element. Our prior work has shown that organizations should have defined  guidance for planning and should communicate this guidance to  stakeholders.
While DOD’s key principles of weapon system life-cycle management state  that support plans should be completed before a system is fielded, DOD  has fielded BMDS elements before developing support plans. Of the  elements we examined, three of the five elements that had been fielded as  of August 2008 did not have support plans in place before the element was  fielded. MDA fielded the Ground-based Midcourse Defense element in  2004 for limited defensive operations, but a support plan was not  developed until 2005 and, officials said, it is now out of date. Similarly,  MDA fielded a forward-based radar in Japan in 2006, but as of August 2008,  the element still did not have a support plan. Finally, as of August 2008,  MDA has not completed a support plan for the sea-based radar, even  though the element was fielded in 2007 and is available for emergency use.  Figure 1 below shows, for selected elements, a comparison of when the  element was fielded to when the element’s support plan was, or is  expected to be, completed.
MDA’s support planning may not cover the elements’ expected useful life.  Typically, weapon system developers are expected to develop support  plans that provide detail for support that will be provided throughout a  system’s life cycle. MDA officials told us that, in general, BMDS elements  have an expected useful life of 20 years. However, MDA’s sustainment  directive only applies until support responsibilities for an element have  transitioned from MDA to the lead service. In general, MDA has agreed to  support BMDS elements via contractors through 2013. However, Army and  Navy officials told us that in some cases, they may prefer to perform some  support functions within their organization and have begun some efforts  to determine to what extent that should be done. For example, the  Terminal High Altitude Area Defense (THAAD) element support plan  assumes contractor-provided support, but Army officials told us that MDA  and the Army are currently conducting an analysis of support options for  THAAD, including contractor- or service-provided or a mix of the two.  Depending on results of analyses of support options, BMDS support  planning for some elements may change, making it difficult for DOD to  consolidate element support planning into an overall, integrated system  support plan.
section_title: Difficulties in Transitioning BMDS Elements from MDA to the Services Complicate Long- term Support Planning
paragraphs: DOD has experienced difficulties in long-term support planning because  DOD has not developed and instituted a standard process that clearly  specifies what support planning should be completed before elements are  fielded, identifies which organization is responsible for life-cycle  management, involves the services, and specifies how to transition  support responsibilities from MDA to the services. Until DOD takes action  to do so, DOD will be unable to ensure that individual elements will be  sustained after 2013. Also, without such a standard process, DOD’s long- term support planning for BMDS has been faced with a number of  challenges.
The first challenge affecting long-term support planning is that MDA and  the services have not agreed on which organization should be responsible  for long-term life-cycle management responsibilities, including developing  long-term support plans. DOD policy and guidance state that the program  manager is responsible for life-cycle management activities, including  developing support plans, and is the single point of accountability for  sustainment of a weapon system throughout its life. Additionally, our prior  work has shown that establishing clear roles and responsibilities can  improve outcomes by identifying who is accountable for various activities.  However, in negotiating transition for some BMDS elements, MDA and the  services disagree over which organization will be responsible for  performing life-cycle management responsibilities, such as providing and  planning for support over the long term. As a result, for five of the seven  elements we examined, MDA and the services have been unable to reach  agreement on who will be responsible for providing support and how  these elements will be supported after 2013, even though MDA officials  have stated that most elements are expected to have a useful life of 20  years. For example, MDA hopes to have the Army assume support  responsibilities after 2013 for the Terminal High Altitude Area Defense  element, the forward-based radar, and the Ground-based Midcourse  Defense element. However, Army officials stated that they have not agreed  to take over support of these elements at that time. Moreover, Navy  officials stated that all life-cycle issues have to be considered to prevent  the emergence of unplanned, future costs and intend to have the  responsibilities for life-cycle support of the sea-based radar understood  and apportioned between MDA and the Navy and documented prior to the  formal transfer of the element. Table 2 below shows, by element, whether  there is agreement on who provides support after 2013 and on who should  be responsible for life-cycle management, and the status of support  planning.
Second, although DOD has designated a lead service to assume support  responsibilities for most BMDS elements that have been or will be fielded  by 2015, MDA and the services have not consistently worked together to  develop plans to transition responsibility for long-term support. A DOD  directive states that lead services, who will assume support  responsibilities for BMDS, should work with MDA to develop transition  and support plans. However, there was little or no service input in  developing transition plans for three of the seven elements we examined— the ground-based element, sea-based radar, and the European radar. The  services have been involved in support planning for ballistic missile  defense capabilities added to already existing, legacy systems, but not  routinely involved in support planning for newer elements. For example,  MDA officials told us the Air Force was involved in support planning for  the Upgraded Early Warning Radar since a ballistic missile defense  capability was added to an existing Air Force radar. Similarly, the Navy  included support planning for the Aegis Ballistic Missile Defense element  in its existing support for Aegis ships. For non-legacy elements, however,  services have either not been involved in support planning at all or have  not been involved “early” enough to influence design decisions that may  affect how an element is to be supported. For example, after the 2004  fielding of the ground-based element, the contractor developed a support  plan for the element, but MDA and Army officials told us that since the  plan was developed before the Army was named lead service, the plan had  little to no Army input. Further, the Army stated that it is reluctant to  assume responsibility for support contracts involving design decisions  made without Army involvement. Also, Army officials said that it would  have been helpful if they had input into facilities and security design  decisions for the forward-based radar that were made before they were  named lead service.
Third, MDA and the services use methods to negotiate transition of  support responsibilities from MDA to the services that are inconsistent,  resulting in confusion over which method is authoritative and binding. Our  prior work has shown that it is important for organizations to provide  clear and complete guidance to their subordinate organizations.  According to our analysis of the transition plan and what DOD officials  have told us, it is unclear whether the transition plan is binding on the  parties, and the plan does not provide specific guidance to the services or  MDA for how to transition support responsibilities of individual elements.  As a result, the transition plan is not the preferred forum for negotiating  transition for all elements. For example, Air Force officials told us that  they prefer using the transition plan as their negotiation forum because it  identifies open issues unique to each element, and documents what MDA  and the Air Force will do in specific years. In contrast, Navy officials told  us that they prefer to use a memorandum of agreement to document  transition agreements for each element that is signed by MDA and Navy  leaders since it can take several months for the transition plan to be  approved. As a result of the transition plan timing, Navy officials told us  that the transition plan may not always reflect the Navy’s views,  particularly for new elements such as the sea-based radar. Without a clear  agreement on how to negotiate transition of support responsibilities, MDA  has proposed that each service have a memorandum of agreement that  would provide a strategic overview of how BMDS elements will transition  from MDA to a service. These service memoranda of agreement would be  supplemented by an element-specific transition plan that would provide a  detailed, tactical view and specify when and how responsibilities, such as  support, will transition from MDA to the service. However, DOD has not  documented that this approach is the preferred method. As a result,  transition of support responsibilities seems to occur ad hoc, element by  element, with no standard process. Further, DOD will not be able to take  advantage of lessons learned from one transition effort to the next without  a consistent, documented process for how support responsibilities are  transitioned from MDA to the services.
section_title: DOD Is Developing a Draft Proposal for Managing BMDS, but the Draft Proposal Lacks Important Details
paragraphs: The Missile Defense Executive Board is developing a proposal to improve  management of BMDS elements, in part, to address support and transition  issues. DOD created the Missile Defense Executive Board in 2007 to  recommend and oversee implementation of strategic policies, plans,  program priorities, and investment options for BMDS. The draft proposal  states that BMDS should be managed as a portfolio to ensure major  decisions take into account the BMDS life-cycle and include all major  stakeholders. The proposed portfolio management suggests defense-wide  funding for research and development, procurement, operation and  support, and military construction. Finally, the draft proposal states that  the responsibilities of DOD stakeholders in BMDS life-cycle management  should be clarified. As the Board’s Chair, the office of USD (AT&L) has  taken the lead in developing this draft proposal. USD (AT&L) officials  explained that this draft proposal is intended to bridge the gap that exists  between the traditional life-cycle system management processes and how  BMDS is currently being fielded and managed. This process is also  intended to: identify which principles of traditional life-cycle system  management should be applied to BMDS, such as milestone reviews and  support planning; specify how to transition responsibility for support from  MDA to the services; and explain when a lead service should become  involved.
However, the draft proposal is very general and lacks important details. In  particular, the draft proposal does not specify the role or timing for service  involvement in developing support plans for elements, that support plans  are to cover the elements’ expected life, be completed before fielding, how  MDA and the services should negotiate transition of responsibility for  providing support of BMDS elements, or when the draft proposal is  expected to be approved and implemented. Also, MDA and USD (AT&L)  officials told us that the draft proposal would not require discussions  about life-cycle management for elements until the element has a lead  service—which makes it difficult for the lead service to provide input into  support decisions.
section_title: Despite Recent Efforts, Operation and Support Cost Estimates for BMDS Elements Have Limitations and Are Not Transparent
paragraphs: DOD’s recent efforts to develop operation and support cost estimates for  BMDS elements have limitations and are not transparent for DOD and  congressional decision-makers. Although DOD has started to develop  operation and support cost estimates for BMDS elements, the estimates  are not complete and have limitations. Furthermore, BMDS operation and  support costs are not transparent in the Future Years Defense Program  (FYDP). DOD has not yet clearly identified BMDS operation and support  costs because the department has not required that these costs are to be  developed, validated, and reviewed according to key principles for cost  estimating, and it has not specified when this should be done or identified  who is responsible for doing so. DOD has developed a draft proposal for  the overall management of BMDS, but the draft proposal lacks important  details and does not address the limitations we identified. Without a  requirement to develop operation and support cost estimates, DOD and  the services will have difficulty preparing credible and transparent budget  requests and face unknown financial obligations over the long term, thus  hindering decision-makers’ ability to make informed tradeoffs among  competing priorities both across BMDS elements and across the  department.
subsections: section_title: DOD Is Developing Some BMDS Operation and Support Cost Estimates, but Efforts Are Not Yet Complete
paragraphs: DOD is developing operation and support cost estimates for all seven of  the BMDS elements we examined, which it intended to use in preparing its  fiscal year 2010 through 2015 spending plan and to facilitate transition of  funding responsibilities from MDA to the services. Thus far, MDA and the  services have jointly developed and agreed on cost estimates for only two  of the seven elements we examined—the Aegis ballistic missile defense  and the Upgraded Early Warning Radar. MDA and the services have not  yet completed the joint estimates for operation and support costs for the  remaining five elements. The status of each of these remaining efforts is  summarized below.
Army—Ground-based Midcourse Defense, Terminal High Altitude  Area Defense, and the forward-based radar: As of July 2008, MDA and  the Army had not completed operation and support cost estimates for  these three elements. MDA initially planned to complete the estimates by  February 2008. The Army and MDA have agreed on the methodologies for  developing operation and cost estimates. However, Army officials stated  that, as of July 2008, the estimates are not complete because some of the  assumptions may change and the estimates have not been reviewed and  approved by the Army Cost Review Board. For example, an Army cost  estimator told us that the estimate for the forward-based radar is not  complete because many of the major assumptions that will drive costs,  such as physical site location, infrastructure, and security requirements,  remain undetermined.
Air Force—European radar: The Air Force and MDA began to develop a  joint estimate for the European radar in August 2008 and plan to update  the estimate as assumptions are refined. However, since all base operating  support requirements are not finalized, the Air Force spending plan for  fiscal years 2010 through 2015, which is due to the Office of the Under  Secretary of Defense (Comptroller) in August 2008, may not include all the  operation and support costs for the European radar.
Navy—Sea-based radar: The Navy and MDA plan to develop a joint  estimate in fiscal year 2009. However, MDA and the Navy have separately  developed operation and support cost estimates for this element. Using  their separate estimates, MDA and Navy officials met to discuss the  differences. According to MDA and Navy cost estimators, the Navy’s  estimate was approximately $10 million a year higher than MDA’s, but  MDA officials agreed that the Navy’s estimated platform maintenance  costs were more accurate. The resulting cost estimate is intended to  support a cost-sharing agreement between MDA and the Navy which, as of  August 2008, had not been finalized.
MDA and some service officials told us that the longer it takes to finish the  estimates and agree on funding responsibilities, the less likely it is that  these estimates will be reflected in the spending plans for fiscal years 2010  through 2015, which are currently under development. MDA officials have  stated that their intention is to update these estimates annually, beginning  in October 2009; however, as of August 2008, there were no signed  agreements or requirements for the agency to do so.
section_title: Ongoing Efforts to Develop Operation and Support Cost Estimates Have Limitations
paragraphs: MDA and the services are beginning to estimate BMDS operation and  support costs, but these efforts have limitations. First, the initial estimates  are not yet complete and are likely to change over time, perhaps  significantly, since MDA and the services are still determining key  assumptions, such as how support will be provided—by contractor, the  service, or a combination of the two—and where some elements may be  fielded and operated. DOD and GAO key principles for preparing cost  estimates state that complete and credible cost estimates are important to  support preparation of budget submissions over the short term as well as  to assess the long-term affordability of the program.
As discussed earlier in this report, MDA and the services have not  completed long-term support planning and they are still in the process of  determining where some BMDS elements will be fielded and operated.  DOD and GAO key principles for developing accurate and reliable cost  estimates recommend that all assumptions that can profoundly influence  cost should be identified before calculating the estimate. However, MDA  and the services have not determined how some of the elements will be  supported over the long term, which will affect operation and support  costs, such as maintenance, base operating support, and facilities. For  instance, during research, development, and fielding, MDA is using  contractors to support the BMDS elements. However, after the elements  transition from MDA to the services, the services may decide to support  the elements using their own military personnel and facilities or possibly a  combination of contractor support and military service support. For  example, if the Army used its own operation and support personnel, the  cost estimate could increase, since Army would require facilities costing  about $138 million for 41 different buildings.
Further, assumptions about where two of the BMDS elements will be  fielded and operated could change which, when finalized, could affect key  assumptions and the resulting cost estimate. An official in the Office of the  Secretary of Defense, Cost Analysis Improvement Group, stated that any  ambiguity in the estimate’s assumptions lowers the quality of the estimate  and creates uncertainty about the results. For example, the Navy and MDA  have not determined the amount of time the sea-based radar will spend on  location in Adak, Alaska, in transit, and at sea. The greater use of fuel  alone for increased time spent in-transit could significantly affect the  operation and support cost estimate for the sea-based radar. Also, in  developing the cost estimate for the Terminal High Altitude Area Defense,  MDA and Army assumed peacetime operations with all of the units to be  located at one site within the continental United States. However, if the  Army decides to forward deploy one or more of the units for peacetime  rotations, as is done for other similar weapon systems such as the Patriot  system, the cost estimate could change significantly. Also, additional  infrastructure and operation and support costs may be incurred if the  Army decides to base the Terminal High Altitude Area Defense units at  more than one site within the United States.
The second major limitation to DOD’s cost estimates is that DOD does not  plan to have the operation and support cost estimates for all the elements  independently verified. DOD and GAO key principles for cost estimating  state that independent verification of cost estimates is necessary to assure  accuracy, completeness, and reliability. In typical weapon system  development, cost estimates—including estimates for operation and  support costs—are developed, independently validated, and reviewed by  senior DOD leadership before a system is fielded. However, since MDA is  exempt from traditional DOD weapon system development processes,  there is no requirement for independent cost estimates, and DOD’s Cost  Analysis Improvement Group prepares independent cost estimates only at  MDA’s request. As of August 2008, MDA had requested only independent  estimates of operation and support costs for two of the seven BMDS  elements we reviewed. The Cost Analysis Improvement Group completed  an estimate for Aegis ballistic missile defense in 2006 and is currently  developing an estimate, including operation and support costs, for the  European radar and interceptor site. Independently validated cost  estimates are especially important to formulating budget submissions and  DOD’s 6-year spending plan, the FYDP, which is submitted to Congress,  since, historically, cost estimates created by program offices are lower  than those that are created independently.
Nevertheless, MDA and Cost Analysis Improvement Group officials have  stated that there is no firm schedule or agreement to develop independent  operation and support estimates for any of the other five BMDS elements  we reviewed, including those that are already fielded, such as the forward- based radar, or will soon be fielded, such as the Terminal High Altitude  Area defense element. However, even though the Army Cost Review  Board will be reviewing the operation and support cost estimates for the  Army’s three elements, these reviews do not constitute an independently  developed cost estimate. MDA officials have stated that their priority is for  the Cost Analysis Improvement Group to develop independent cost  estimates for the research, development, and procurement costs of BMDS  blocks, and this effort will not include independently estimating operation  and support costs. MDA officials stated that they intend to ask the Cost  Analysis Improvement Group to begin working on independent operation  and support cost estimates after the block estimates are completed.  However, MDA officials also acknowledged that there is no requirement  for independent validation of operation and support estimates and the  Cost Analysis Improvement Group would not begin its work on operation  and support cost estimates until at least late 2009. Without credible long- term operation and support cost estimates, DOD and the services face  unknown financial obligations for supporting BMDS fielding plans which  will hinder budget preparation and assessment of long-term affordability.  Table 3 below shows whether the joint operation and support cost  estimates have been completed, whether the cost estimates will be  independently verified, and the status of the joint estimates.
section_title: BMDS Operation and Support Costs Are Not Transparent in DOD’s Future Years Defense Program
paragraphs: The cost to operate and support the BMDS elements is not transparent in  the FYDP and, as a result, DOD may have difficulty communicating to  congressional decision-makers how much it will cost over time to support  DOD’s fielding plans. For example, the FYDP, DOD’s 6-year spending plan,  does not fully reflect BMDS operation and support costs that are expected  to be incurred—and these are likely to be significant since operation and  support costs are typically over 70 percent of a system’s total lifetime  costs. Key principles for estimating program costs note that credible cost  estimates are the basis for establishing and defending spending plans. We  and DOD have repeatedly recognized the need to link resources to  capabilities to facilitate DOD’s decision-making and congressional  oversight. However, four factors hinder the visibility of BMDS operation  and support costs in the FYDP.
First, for five of the seven elements we examined, MDA and the services  have not yet agreed on which organization is responsible for funding  operation and support costs after fiscal year 2013, as shown in Table 4  below.
As a result, all of the BMDS operation and support costs will not be  reflected in the FYDP for fiscal years 2010 through 2015, which is currently  under development. For example, the Army and MDA are still negotiating  memoranda of agreements for the Ground-based Midcourse Defense  element, Terminal High Altitude Area Defense, and forward-based radar  that are intended, in part, to specify which organization is to fund  operation and support costs in which fiscal years. One Army official  estimated that it could take up to 18 months for these agreements to be  signed. Hence, the Army will not be including all the costs in its budget for  fiscal years 2010 through 2015 other than what the Army has already  agreed to fund, such as security for the first forward-based radar at  Shariki, Japan and some base support costs at Ft. Greely, Alaska. Also,  MDA has not yet reached agreement with the Navy and the Air Force on  which organization will fund operation and support costs for the sea-based  radar and the European radar, respectively. The extent to which the FYDP  for fiscal years 2010 through 2015 will include all of the operation and  support costs that might be incurred for these elements is unclear.
The second factor that hinders visibility of BMDS operation and support  costs is that DOD’s transition plan, which is intended to reflect the most  current cost agreements between MDA and the services, has not been  completed in time for the services to use as they prepare their budgets and  spending plans. The 2006 transition plan was approved in September 2006  and was intended to support the development of the budget and spending  plan for fiscal years 2008 through 2013, but the services were required to  submit their budgets to DOD in August 2006, which allowed no time for  the services to alter their budget submissions accordingly. Similarly, the  2007 transition plan was originally intended to influence development of  the fiscal year 2008 budget, but it was not approved until February 2008— too late to support development of the fiscal year 2008 budget. In  commenting on the 2007 transition plan, the Army stated that the plan was  not the basis for the Army’s budget submission. Consequently, the  transition plan has not been effective in assisting development of the  services’ budget and FYDP spending plans.
The third factor that hinders transparency is that DOD does not clearly  identify and aggregate BMDS operation and support costs in the FYDP. We  previously reported that there is no FYDP structure to identify and  aggregate ballistic missile defense operational costs. In 2006, we  recommended that DOD develop a structure within the FYDP to identify  all ballistic missile defense operational costs. However, as of August  2008, according to an official in the Office of the Under Secretary of  Defense (Comptroller), DOD has not adjusted the FYDP structure to allow  identification and aggregation of ballistic missile defense operation and  support costs.
Fourth, as the services develop their spending plans, funding BMDS  operation and support costs will compete with other service priorities.  Service officials stated that BMDS operation and support costs will have to  come out of their operation and maintenance budgets, which fund the  training, supply, and equipment maintenance of military units, as well as  the administrative and facilities infrastructure of military bases. Priorities  within this fund are highly competitive and BMDS operation and support  would have to compete against all other service operation and  maintenance priorities. It is therefore unclear how much of the operation  and support costs will ultimately be reflected in the services’ budget  submissions and spending plans, and DOD faces a risk that operation and  support for BMDS will be funded unevenly across elements.
section_title: DOD Has Not Required That Operation and Support Cost Estimates Be Developed
paragraphs: DOD has not yet clearly identified BMDS operation and support costs  because the department has not required that these costs be developed,  validated, and reviewed, and it has not specified when this should be done  or identified who is responsible for doing so. Without such a requirement,  DOD’s operation and support cost estimates will continue to have  limitations and will not be transparent in the FYDP. As a result, DOD will  have difficulty preparing credible budget requests and estimating long- term costs, which are important in assessing affordability over time.
As mentioned earlier in this report, DOD’s Missile Defense Executive  Board is developing a draft proposal for the overall management of BMDS,  which is intended to include an approach for managing and funding  operation and support; however, the draft proposal is not well defined.  The draft proposal suggests funding operation and support costs from a  defense-wide account which, in theory, would allow these costs to be  clearly identified and would alleviate the pressure on the services’ budgets  to fund operation and support for BMDS. However, this proposal as  drafted to date does not fully address the operation and support cost  limitations identified in this report. Specifically, the draft proposal to date  is not well defined, and the explicit process detailing how it would work  has not been developed. Among other things, the draft proposal does not  specify how MDA and the services will jointly determine the amount of  operation and support funding that is needed; when and how operation  and support cost estimates are to be developed, validated, and reviewed;  or who should be responsible for doing so. Also, the draft proposal does  not include a requirement for senior level review of cost estimates where  the cost drivers and differences between the program estimates and  independent estimates could be reviewed and explained. In typical  weapon system programs, the program office estimate and the  independent estimate are reviewed by senior DOD leaders and  differences explained. Finally, it is not clear when the draft proposal will  be approved or implemented. As a result, there is little likelihood that the  upcoming DOD spending plan for fiscal years 2010 through 2015 will  contain significant improvements in the visibility of BMDS operation and  support costs.
section_title: Conclusions
paragraphs: Although DOD has taken some initial steps to plan for support of BMDS  elements, without a clearly defined process for long-term support  planning, DOD is not poised to effectively manage the transition of BMDS  support responsibilities from MDA to the services or to plan for their  support over the long term. This will become increasingly important in  years to come as more elements are fielded and operation and support  costs begin to increase. Further, if the lead service is not actively involved  early enough to influence support planning, the services may have little  time to prepare to assume responsibility for the elements and could risk  being unable to provide support for an element in the short term,  particularly for new elements that did not originate in a service, such as  the adjunct sensor. At the same time, DOD may face difficulties  determining how the overall BMDS and individual elements will be  sustained over the long term. MDA is not required to follow all of DOD’s  traditional life-cycle management processes for weapon system programs.  However, unless DOD takes action—either via the Missile Defense  Executive Board’s draft proposal or by some other means—to establish  when support planning that covers the element’s expected life and  involves the services is to be completed, to specify who is responsible for  life-cycle management and specify what this entails, and to establish  accountability for ensuring these steps are completed, Congress will lack  assurance that key decisions have been made that involve the services for  which organization is responsible for providing support and how that  support will be provided over the long term. Further, as Congress  considers requests to fund operation and support for BMDS elements, in  the face of many competing priorities, decision-makers may lack  confidence that DOD has plans in place to assure the overall long-term  supportability of this complex and costly system.
As one of DOD’s largest weapon system investments, BMDS could easily  incur billions of dollars in operation and support costs over time.  Operation and support typically comprises over 70 percent of a weapon  system’s total cost over its life. It is therefore critical that DOD and  congressional decision-makers have complete, credible, and transparent  cost information with which to evaluate budget requests in the near term  and to evaluate whether fielding plans are affordable over the long term as  an increasing number of BMDS elements are fielded. Given the program’s  limited transparency to date, Congress is already limited in its ability to  evaluate the near- and long-term budget implications of decisions already  made to develop and field BMDS elements. Until DOD develops accurate,  realistic, and transparent cost estimates according to key principles,  including independent verification, its estimates will continue to lack the  credibility necessary for building budget submissions and spending plans.
Also, since MDA and the services have, in general, not reached agreement  on who will pay for operation and support after 2013, and since BMDS will  compete with other service priorities, there is a risk that operation and  support funding for BMDS elements will vary from element to element.  Until DOD requires that credible estimates be developed and until DOD  specifies how BMDS operation and support funds will be prioritized,  allocated, and distributed, the department risks being unable to clearly  identify and align operation and support cost with fielding plans or to  assure that funds are available for the operation and support of the missile  defense elements over the long term. Further, the department will  continue to lack internal controls to manage and oversee a significant  number of federal dollars. Moreover, DOD and the services face unknown  financial obligations to support BMDS elements over the long term.  Finally, decision-makers inside and outside DOD will not have a sound  basis with which to make difficult funding tradeoffs among competing  priorities both across BMDS elements and across the department.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense take the following six  actions:  To improve planning to support BMDS elements, including planning for  the transition of support responsibilities from MDA to the services, we  recommend that the Secretary of Defense direct the Under Secretary of  Defense for Acquisition, Technology, and Logistics, establish a standard  process for long-term support planning that adheres to key principles for  life-cycle management, including:    establishing timelines for planning that must be completed before each  element is fielded, such as naming a lead service, involving services in  support and transition planning, and deciding when support  responsibilities will be transitioned to the services;  requiring active lead service participation in developing long-term support  plans and designating what support planning should be completed before  elements are fielded; and    specifying which organization is responsible for life-cycle management  and identifying steps for oversight to identify who is accountable for  ensuring these actions are accomplished.
To increase transparency and improve fiscal stewardship of DOD  resources for BMDS, we recommend that the Secretary of Defense direct  the Under Secretary of Defense for Acquisition, Technology, and Logistics,  to establish a requirement to estimate BMDS operation and support costs  including:    detailing when credible estimates are to be developed, updated, and  reviewed; specifying criteria for prioritizing, allocating, and distributing  funds; and clearly identifying who is responsible for oversight of this  process;  requiring periodic independent validation of operation and support costs  for each BMDS element; and    using the independently validated estimates to support preparation of  complete and credible budget submissions and DOD’s spending plan and  to assess the long-term affordability of the integrated system and  individual elements for informing key trade-off decisions.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, DOD concurred with one  and partially concurred with five recommended actions. The department’s  comments are reprinted in their entirety in appendix II. DOD also provided  technical comments, which we have incorporated as appropriate.
DOD partially concurred with our three recommendations to improve  long-term support planning for BMDS elements. First, DOD partially  concurred with our recommendation that the Under Secretary of Defense  for Acquisition, Technology, and Logistics (USD (AT&L)) establish  timelines for planning that must be completed before each element is  fielded, such as naming a lead service, involving services in support and  transition planning, and deciding when support responsibilities will be  transitioned to the services. In its comments, DOD stated that the new  BMDS life-cycle management process provides for service participation in  annual MDA planning and programming. DOD further stated that through  this process, timelines for transition of BMDS elements from MDA to the  services after initial fielding will be executable within reasonable periods  of time following initial fielding. DOD also stated that tailored negotiations  between MDA and the services would be better than establishing uniform  timelines and the Missile Defense Executive Board would step in if issues  cannot be resolved in a timely fashion. However, USD (AT&L) officials  told us that, as of September 15, 2008, the proposed BMDS life-cycle  management process is a proposal and has not yet been implemented.  Moreover, the draft proposal does not specify the role or timing for service  involvement in developing support plans for elements. Regarding DOD’s  preference not to establish uniform timelines, we believe that key steps in  completing support planning can be condition-based rather than calendar- based. For example, we point out in our report that MDA’s own  sustainment directive specifies what criteria, including support planning,  should be completed before an element moves to a subsequent  development phase. Also, while the Missile Defense Executive Board may  step in to resolve issues, the Board is a new organization and it is not clear  what criteria the Board would use to determine whether intervention is  needed, specifically in the absence of specific guidance outlining how the  process should work. Our recommendation would provide some needed  structure and specificity that the draft proposal currently lacks; unless  DOD takes action to implement this recommendation, transition of  support responsibilities may continue in an ad hoc manner, and DOD may  not be able to take advantage of lessons learned from one transition effort  to the next.
Second, DOD partially agreed with our recommendation that USD (AT&L)  require active lead service participation in developing long-term support  plans and designate what support planning should be completed before  elements are fielded. DOD agreed that it is better to put long-term support  plans into effect before BMDS elements are fielded, but said that fielding  of an element should not be delayed because of incomplete support  planning. DOD stated that once a lead service is designated, the element  enters into the transition phase, memoranda of agreement are established,  and an assessment is made by the department to determine when the  element transfer is appropriate. As stated in our report, however, DOD has  not documented that establishing memoranda of agreement is the  preferred method of negotiating transition of responsibilities from MDA to  the services. DOD also stated that by initiating its proposed life-cycle  management process, the department intends to ensure that the services  are active participants in long-term support planning. However, we point  out in our report that several elements were fielded before support plans  were completed and some, like the forward-based radar, still do not have a  support plan more than 2 years after fielding. Also, we point out that  DOD’s draft proposal for life-cycle management lacks important details  such as when support plans are to be completed, and how MDA and the  services should negotiate transition of responsibility for providing support.  Further it is not clear when this draft proposal might be approved and  implemented. Therefore, without specifying active service participation in  developing long-term support plans and when these should be completed,  DOD is likely to face continued difficulty in transitioning support  responsibilities from MDA to the services and uncertainty will persist  regarding how elements will be supported over the long term.
Third, DOD partially agreed with our recommendation that USD (AT&L)  specify which organization is responsible for life-cycle management and  identify steps for oversight to identify who is accountable for ensuring  these actions are accomplished. DOD stated that USD (AT&L) is  responsible for initiating lead service designations and expects that the  proposed life-cycle management process will ensure service involvement.  DOD further stated that the Missile Defense Executive Board is chartered  for providing oversight. However, we point out in our report that MDA and  the services disagree over which organization will be responsible for  performing life-cycle management responsibilities, such as providing and  planning for support over the long term. Further, even though the Missile  Defense Executive Board may provide some oversight, the proposed  management process developed by this Board does not specify the role or  timing for service involvement in developing support plans for elements,  or that support plans are to cover the elements’ expected life and be  completed before fielding, or how MDA and the services should negotiate  transition of responsibility for providing support of BMDS elements. Our  prior work has shown that establishing clear roles and responsibilities can  improve outcomes by identifying who is accountable for various activities.  Therefore, without specifically designating life-cycle management  responsibilities and specifying what these responsibilities entail, DOD may  continue to face challenges it its ability to transition responsibility for  providing support from MDA to the services and will be limited in its  ability to improve long-term support planning for future BMDS elements.
DOD concurred with one and partially concurred with two of our  recommendations to establish a requirement to estimate BMDS operation  and support costs. DOD agreed with our recommendation that USD  (AT&L) require periodic independent validation of operation and support  costs for each BMDS element. In its comments, DOD stated that periodic  independent estimates of operation and support costs for BMDS elements  are desirable. DOD also stated that the current arrangement between its  Cost Analysis Improvement Group and MDA provides for independent  cost estimates based on the MDA Director’s priorities and that additional  direction from the Under Secretary on the timing and frequency of  independent cost estimates could facilitate planning for and executing  these estimates. Although DOD agreed with this recommendation, its  response did not indicate when it would implement the recommendation.  Since independent verification of cost estimates is necessary to assure  accuracy, completeness, and reliability, we encourage DOD to implement  this recommendation as soon as possible. Without credible long-term  operation and support cost estimates, DOD and the services face unknown  financial obligations for supporting BMDS fielding plans, which will hinder  assessing long-term affordability.
DOD partially agreed with our recommendation that the Secretary of  Defense direct USD (AT&L) to detail when credible estimates are to be  developed, updated, and reviewed; specify criteria for prioritizing,  allocating, and distributing funds; and clearly identify who is responsible  for oversight of this process. In its comments, DOD stated that it does not  require specific direction from the Under Secretary at this time. However,  we reported that DOD has not clearly identified operation and support  costs because the department has not required that these costs be  developed, validated, and reviewed. Therefore, we continue to believe  that, in the absence of a clear requirement for estimating long-term  operation and support costs, direction from senior DOD leadership is  needed. DOD also stated in its comments that it remains confident its  proposed BMDS life-cycle management process and the efforts of the  Missile Defense Executive Board will be successful in ensuring that  decision-makers have complete, credible, and transparent cost  information before the services assume and/or fund any responsibilities  transitioned to them. However, as we reported, the BMDS draft proposal  for the life-cycle management process is not well defined and does not  specify when and how operation and support cost estimates are to be  developed, validated, and reviewed or who should be responsible for  doing so. Also, we reported that it is not clear when the draft proposal will  be approved or implemented and DOD’s comments did not provide us with  a schedule or time frame for taking action. Without taking specific action  on this recommendation, it is not clear who will be responsible for  ensuring credible operation and support estimates are developed or how  these funds will be managed. Further, decision-makers inside and outside  DOD will not have a sound basis with which to make difficult funding  tradeoffs among competing priorities both across BMDS elements and  across the department.
Finally, DOD partially agreed with our recommendation that the Secretary  of Defense direct USD (AT&L) to use independently validated operation  and support cost estimates to support preparation of complete and  credible budget submissions and DOD’s spending plan and to assess the  long-term affordability of the integrated system and individual elements  for informing key trade-off decisions. In its comments, DOD agreed that,  whenever possible, independent cost estimates should be used to support  its planning, programming, and budgeting decisions, but stated that the  department does not believe that specific direction from the Under  Secretary is needed. We reported that BMDS operation and support costs  are not transparent in DOD’s spending plan, the Future Years Defense  Program, and that DOD has not yet completed operation and support cost  estimates for several BMDS elements. Although DOD agreed that  independent cost estimates should be used to support planning,  programming, and budgeting decisions, its draft proposal for the life-cycle  management process does not address this issue. Without specific  direction to use independently validated cost estimates to prepare budget  submissions and spending plans, there is little assurance that DOD’s future  spending plans will contain significant improvements in the credibility of  BMDS operation and support costs.
We are sending copies of this report to the Secretary of Defense; the  Director, Missile Defense Agency; Chairman, Joint Chiefs of Staff; and the  Chiefs of Staff and Secretaries of the Army, Navy, and Air Force. We will  make copies available to others upon request. In addition, the report will  be available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions, please call me at (404) 679-1816.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. Staff members who  made key contributions to this report are listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the extent to which the Department of Defense (DOD) has  (1) planned for the support of Ballistic Missile Defense System (BMDS)  elements over the long term and (2) identified the long-term operation and  support costs for the BMDS elements it plans to field, we conducted  various analyses, reviewed key documentation, and interviewed relevant  DOD officials. During this review, we focused on the seven BMDS  elements that are already fielded or planned for fielding over fiscal years  2008 through 2015. Since all the BMDS elements are in various stages of  development and transition to a military service, we selected a  nongeneralizable sample to provide illustrative examples of issues related  to both objectives. The illustrative sampling strategy identifies examples to  gain deeper insight, demonstrate consequences, and provide practical,  significant information about the BMDS elements under a variety of  conditions, such as identifying at least one element that is intended to  transition to each of the services, some elements that are already fielded,  and some elements that will be fielded by 2015. As a result, we selected  seven BMDS elements: Aegis Ballistic Missile Defense, Ground-based  Midcourse Defense, Terminal High Altitude Area Defense, AN/TPY-2  (forward-based radar), Sea-based X-band Radar, Upgraded Early Warning  Radar, and European Midcourse Radar.
To assess the extent to which DOD has developed plans for how to  support BMDS elements over the long term, we compared the planning  that had been done with key principles embodied in DOD and Missile  Defense Agency (MDA) policies and guidance for life-cycle management  to determine what aspects may be missing or have limited service  involvement that could hinder transition of responsibility for support of  BMDS elements from MDA to the services and hinder the ability to provide  long-term support. To do so, we obtained and assessed relevant  documents such as BMDS element support plans, MDA support  documents, DOD guidance for MDA and the Missile Defense Executive  Board, and MDA documents explaining program status and plans such as  the 2007 BMDS Transition and Transfer Plan signed February 4, 2008. We  also discussed the extent of support planning, the level of service  involvement in support and transition planning, and whether the  assignment of life-cycle management responsibilities was clearly  designated with MDA and relevant officials from the Army, Navy, and Air  Force. Further, using DOD briefings, memorandums, and discussions with  DOD officials, we compared the draft Missile Defense Executive Board  draft proposal for BMDS management with the shortfalls in support  planning we identified to determine the extent to which the draft proposal  may address those shortfalls. Finally, we discussed the results of our  comparisons with officials from the Office of the Under Secretary of  Defense for Acquisition, Technology, and Logistics; Missile Defense  Agency; Air Force Headquarters Strategic Plans and Policy Directorate;  U.S. Air Force Space Command; U.S. Army Headquarters and Space and  Missile Defense Command; and the Office of Naval Operations Theater Air  and Missile Defense Branch.
To assess whether DOD has identified the long-term operation and support  costs for the BMDS elements it plans to field, we evaluated how MDA and  the services developed cost estimates and then compared the method by  which those estimates were prepared with key principles compiled from  DOD and GAO sources that describe how to develop accurate and reliable  cost estimates to determine their completeness and the extent to which  DOD took steps to assess the confidence in the estimates. We then  discussed the results of our comparison and the status of the operation  and support cost estimates with officials from the Office of the Deputy  Assistant Secretary of the Army for Cost and Economics; the Naval Center  for Cost Analysis; Air Force Space Command; the Missile Defense Agency;  the Office of the Secretary of Defense Program, Analysis, and Evaluation  and its Cost Analysis Improvement Group, and the Office of the Under  Secretary of Defense for Acquisition, Technology, and Logistics. In  addition, we assessed key documents such as the 2007 Transition and  Transfer Plan and the Aegis memorandum of agreement to determine the  extent to which MDA and the services have or have not agreed to fund  operation and support costs for BMDS elements after 2013 and confirmed  our understanding with MDA and service officials. Furthermore, to follow- up on our previous recommendation, we interviewed an official in the  Office of the Under Secretary of Defense (Comptroller) to determine  whether DOD had taken any action on our recommendation to develop a  structure in the FYDP to identify all ballistic missile defense operational  costs. Finally, using DOD briefings and other documents, we compared the  Missile Defense Executive Board draft proposal for BMDS management  with the shortfalls in estimating and funding operation and support costs  we identified to determine the extent to which the draft proposal may  address those shortfalls. We discussed our findings with officials from the  Office of the Under Secretary of Defense for Acquisitions, Technology, and  Logistics and the Missile Defense Agency.
Other organizations we visited to gain an understanding of their roles in  support planning and cost estimating included the Joint Staff, U.S.  Strategic Command and its Joint Functional Component Command for  Integrated Missile Defense, and U.S. Northern Command.
We conducted this performance audit from August 2007 through  September 2008 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.
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 individual named above, Gwendolyn R. Jaffe and Marie  A. Mak, Assistant Directors; Brenda M. Waterfield; Whitney E. Havens; Pat  L Bohan; Pamela N. Harris; Kasea Hamar; Nicolaas C. Cornelisse; and  Susan C. Ditto made key contributions to this report.
section_title: Related GAO Products
paragraphs: Ballistic Missile Defense: Actions Needed to Improve the Process for  Identifying and Addressing Combatant Command Priorities. GAO-08-740.  Washington, D.C.: July 31, 2008.
Defense Acquisitions: Progress Made in Fielding Missile Defense, but  Program Is Short of Meeting Goals. GAO-08-448. Washington, D.C.: March  14, 2008.
Cost Assessment Guide: Best Practices for Estimating and Managing  Program Costs, Exposure Draft. GAO-07-1134SP. Washington, D.C.: July  2007.
Missile Defense: Actions Needed to Improve Information for Supporting  Future Key Decisions for Boost and Ascent Phase Element. GAO-07-430.  Washington, D.C.: April 17, 2007.
Defense Acquisitions: Missile Defense Acquisition Strategy Generates  Results, but Delivers Less at a Higher Cost. GAO-07-387. Washington, D.C.:  March 15, 2007.
Defense Management: Actions Needed to Improve Operational Planning  and Visibility of Costs for Ballistic Missile Defense. GAO-06-473.  Washington, D.C.: May 31, 2006.
Defense Acquisitions: Missile Defense Agency Fields Initial Capability but  Falls Short of Original Goal. GAO-06-327. Washington, D.C.: March 15,  2006.
Defense Acquisitions: Actions Needed to Ensure Adequate Funding for  Operation and Sustainment of the Ballistic Missile Defense System. GAO- 05-817. Washington, D.C.: September 6, 2005.
Military Transformation: Actions Needed by DOD to More Clearly Identify  New Triad Spending and Develop a Long-term Investment Approach. GAO- 05-962R. Washington, D.C.: August 4, 2005.
Military Transformation: Actions Needed by DOD to More Clearly Identify  New Triad Spending and Develop a Long-term Investment Approach. GAO- 05-540. Washington, D.C.: June 30, 2005.
Defense Acquisitions: Status of Ballistic Missile Defense Program in 2004.  GAO-05-243. Washington, D.C.: March 31, 2005.
Future Years Defense Program: Actions Needed to Improve Transparency  of DOD’s Projected Resource Needs. GAO-04-514. Washington, D.C.: May  7, 2004.
Missile Defense: Actions Are Needed to Enhance Testing and  Accountability. GAO-04-409. Washington, D.C.: April 23, 2004.
Missile Defense: Actions Being Taken to Address Testing  Recommendations, but Updated Assessment Needed. GAO-04-254.  Washington, D.C.: February 26, 2004.
Missile Defense: Additional Knowledge Needed in Developing System for  Intercepting Long-Range Missiles. GAO-03-600. Washington, D.C.: August  21, 2003.
Missile Defense: Alternate Approaches to Space Tracking and Surveillance  System Need to Be Considered. GAO-03-597. Washington, D.C.: May 23,  2003.
Missile Defense: Knowledge-Based Practices Are Being Adopted, but Risks  Remain. GAO-03-441. Washington, D.C.: April 30, 2003.
Missile Defense: Knowledge-Based Decision Making Needed to Reduce  Risks in Developing Airborne Laser. GAO-02-631. Washington, D.C.: July  12, 2002.
Missile Defense: Review of Results and Limitations of an Early National  Missile Defense Flight Test. GAO-02-124. Washington, D.C.: February 28,  2002.
Missile Defense: Cost Increases Call for Analysis of How Many New  Patriot Missiles to Buy. GAO-NSIAD-00-153. Washington, D.C.: June 29,  2000.
Missile Defense: Schedule for Navy Theater Wide Program Should Be  Revised to Reduce Risk. GAO/NSIAD-00-121. Washington, D.C.: May 31,  2000.