MDA’s BMDS is being designed to counter ballistic missiles of all ranges—short, medium, intermediate, and intercontinental.ballistic missiles have different ranges, speeds, sizes, and performance characteristics, MDA is developing multiple systems that when integrated provide multiple opportunities to destroy ballistic missiles before they can reach their targets. The BMDS architecture includes space-based and airborne sensors as well as ground- and sea-based radars; ground- and sea-based interceptor missiles; and a command and control, battle management, and communications system to provide the warfighter with the necessary communication links to the sensors and interceptor missiles. Table 1 provides a brief description of 10 BMDS elements and supporting efforts currently under development by MDA. MDA experienced mixed results in executing its fiscal year 2011 development goals and BMDS tests. For the first time in 5 years, we are able to report that all of the targets used in fiscal year 2011 test events were delivered as planned and performed as expected. In addition, the Aegis BMD program’s SM-3 Block IA missile was able to intercept an intermediate-range target for the first time. Also, the THAAD program successfully conducted its first operational flight test in October 2011. However, none of the programs we assessed were able to fully accomplish their asset delivery and capability goals for the year. See table 2 for how each of these programs met some of its goals during the fiscal year. Our report provides further detail on these selected accomplishments. Although some programs completed significant accomplishments during the fiscal year, there were also several critical test failures. These as well as a test anomaly and delays disrupted MDA’s flight test plan and the acquisition strategies of several components. Overall, flight test failures and an anomaly forced MDA to suspend or slow production of three out of four interceptors currently being manufactured. The Aegis BMD SM-3 Block IA program conducted a successful intercept in April 2011, but there was an anomaly in a critical component of the interceptor during the test. This component is common with the Block IB missile. Program management officials stated that the SM-3 Block IA deliveries have been suspended while the failure reviews are being conducted. The Aegis BMD SM-3 Block IB program failed in its first intercept attempt in September 2011. The Aegis program has had to add an additional flight test and delay multiple other flight tests. Program management officials stated that the SM-3 Block IB production has been slowed while the failure reviews are being conducted. The GMD program has been disrupted by two recent test failures. As a result of a failed flight test in January 2010, MDA added a retest designated as Flight Test GMD-06a (FTG-06a). However, this retest also failed in December 2010 because of a failure in a key component of the kill vehicle. As a result of these failures, MDA has decided to halt flight testing and restructure its multiyear flight test program, halt production of the interceptors, and redirect resources to return-to-flight activities. Production issues forced MDA to slow production of the THAAD interceptors, the fourth missile being manufactured. To meet the 2002 presidential direction to initially rapidly field and update missile defense capabilities as well as a 2009 presidential announcement to deploy missile defenses in Europe, MDA has undertaken and continues to undertake highly concurrent acquisitions. While this approach enabled MDA to rapidly deploy an initial capability in 2005 by concurrently developing, manufacturing, and fielding BMDS assets, it also led to the initiation of large-scale acquisition efforts before critical technologies were fully understood and allowed programs to move forward into production without having tests completed to verify performance. After delivering its initial capability in 2005, MDA continued these high-risk practices that have resulted in problems requiring extensive retrofits, redesigns, delays, and cost increases. While MDA has incorporated some acquisition best practices in its newer programs, its acquisition strategies still include high or elevated levels of concurrency that result in increased acquisition risk—including performance shortfalls, cost growth, and schedule delays—for these newer programs. Concurrency is broadly defined as overlap between technology development and product development or between product development and production of a system. This overlap is intended to introduce systems rapidly, to fulfill an urgent need, to avoid technology obsolescence, and to maintain an efficient industrial development and production workforce. However, while some concurrency is understandable, committing to product development before requirements are understood and technologies mature as well as committing to production and fielding before development is complete is a high-risk strategy that often results in performance shortfalls, unexpected cost increases, schedule delays, and test problems. At the very least, a highly concurrent strategy forces decision makers to make key decisions without adequate information about the weapon’s demonstrated operational effectiveness, reliability, logistic supportability, and readiness for production. Also, starting production before critical tests have been successfully completed has resulted in the purchase of systems that do not perform as intended. These premature commitments mean that a substantial commitment to production has been made before the results of testing are available to decision makers. Accordingly, they create pressure to avoid production breaks even when problems are discovered in testing. These premature purchases have affected the operational readiness of our forces and quite often have led to expensive modifications. In contrast, our work has found that successful programs that deliver promised capabilities for the estimated cost and schedule follow a systematic and disciplined knowledge-based approach, in which high levels of product knowledge are demonstrated at critical points in development.require an appropriate balance between schedule and risk and, in practice, programs can be executed successfully with some level of This approach recognizes that development programs concurrency. For example, it is appropriate to order long-lead production material in advance of the production decision, with the pre-requisite that developmental testing is substantially accomplished and the design confirmed to work as intended. This knowledge-based approach is not unduly concurrent. Rather, programs gather knowledge that demonstrates that their technologies are mature, designs are stable, and production processes are in control before transitioning between acquisition phases, which helps programs identify and resolve risks early. It is a process in which technology development and product development are treated differently and managed separately. Technology development must allow room for unexpected results and delays. Developing a product culminates in delivery and therefore gives great weight to design and production. If a program falls short in technology maturity, it is harder to achieve design stability and almost impossible to achieve production maturity. It is therefore key to separate technology from product development and product development from production— and thus avoid concurrency. A knowledge-based approach delivers a product on time, within budget, and with the promised capabilities. See figure 1 for depictions of a concurrent schedule and a schedule that uses a knowledge-based approach. To meet the 2002 presidential direction to initially rapidly field and update missile defense capabilities as well as the 2009 presidential announcement to deploy missile defenses in Europe, MDA has undertaken and continues to undertake highly concurrent acquisitions. Such practices enabled MDA to quickly ramp up efforts in order to meet tight presidential deadlines, but they were high risk and resulted in problems that required extensive retrofits, redesigns, delays, and cost increases. Table 3 illustrates concurrency in past efforts and its associated effects. Among earlier MDA programs, concurrency was most pronounced in the GMD program, where the agency was pressed to deliver initial capabilities within a few years to meet the 2002 presidential directive. The consequences here have been significant, in terms of production delays and performance shortfalls, and are still affecting the agency. In recent years, MDA has taken positive steps to incorporate some acquisition best practices, such as increasing competition and partnering with laboratories to build prototypes. For example, MDA took actions in fiscal year 2011 to reduce acquisition risks and prevent future cost growth in its Aegis BMD SM-3 Block IIA program. The agency recognized that the program’s schedule included elevated acquisition risks, so it appropriately added more time to the program by revising the schedule to relieve schedule compression between its subsystem and system-level design reviews. In addition, it incorporated lessons learned from other SM-3 variants into its development to further mitigate production unit costs. Moreover, for its PTSS program, MDA has simplified the design and requirements. However, table 4 shows that the agency’s current acquisition strategies still include high or elevated levels of concurrency that set many of its newer programs up for increased acquisition risk, including performance shortfalls, cost growth, and schedule delays. In our April 2012 report, we made two recommendations to strengthen MDA’s longer-term acquisition prospects. We recommended that the Secretary of Defense direct the Office of Acquisition Technology and Logistics to (1) review all of MDA’s acquisitions for concurrency and determine whether the proper balance has been struck between the planned deployment dates and the concurrency risks taken to achieve those dates and (2) review and report to the Secretary of Defense the extent to which the directed capability delivery dates announced by the President in 2009 are contributing to concurrency in missile defense acquisitions and recommend schedule adjustments where significant benefits can be obtained by reducing concurrency. DOD concurred with both of these recommendations. In addition, we recommended specific steps to reduce concurrency in several of MDA’s programs. DOD agreed with four of the five missile defense element-specific recommendations and partially agreed with our recommendation to report to the Office of the Secretary of Defense and to Congress the root cause of the SM-3 Block IB developmental flight test failure, path forward for future development, and the plans to bridge production from the SM-3 Block IA to the SM-3 Block IB before committing to additional purchases of the SM-3 Block IB. DOD commented that MDA will report this information to the Office of the Secretary of Defense and to Congress upon completion of the failure review in the third quarter of fiscal year 2012. However, DOD makes no reference to delaying additional purchases until the recommended actions are completed. We maintain our position that MDA should take the recommended actions before committing to additional purchases of the SM-3 Block IB. MDA parts quality issues have seriously impeded the development of the BMDS in recent years. For example, during a THAAD flight test in fiscal year 2010, the air-launched target failed to initiate after it was dropped from the aircraft and fell into the ocean. The test was aborted and a subsequent failure review board investigation identified as the immediate cause of the failure the rigging of cables to the missile in the aircraft and shortcomings in internal processes at the contractor as the underlying cause. This failure led to a delay of the planned test, restructuring of other planned tests, and hundreds of millions of dollars being spent to develop and acquire new medium-range air-launched targets. In another widely- reported example, the GMD element’s first intercept test of its CE-II Ground-Based Interceptor failed and the ensuing investigation determined the root cause of the failure to be a quality control event. This failure also caused multiple flight tests to be rescheduled, delayed program milestones, and cost hundreds of millions of dollars for a retest. In view of the cost and importance of space and missile defense acquisitions, we were asked to examine parts quality problems affecting satellites and missile defense systems across DOD and the National Aeronautical and Space Administration. In June 2011, we reported that parts problems discovered after assembly or integration of the instrument or spacecraft had more significant consequences as they required lengthy failure analysis, disassembly, rework, and reassembly—sometimes resulting in a launch delay. For example, the Space Tracking and Surveillance System program, a space-based infrared sensor program with two demonstration satellites that launched in September 2009, discovered problems with defective electronic parts in the Space-Ground Link Subsystem during system-level testing and integration of the satellite. By the time the problem was discovered, the manufacturer no longer produced the part and an alternate contractor had to be found to manufacture and test replacement parts. According to officials, the problem cost about $7 million and was one of the factors that contributed to a 17-month launch delay of two demonstration satellites and delayed participation in the BMDS testing we reported on in March 2009. Our work highlighted a number of causal factors behind the parts quality problems being experienced at MDA and space agencies. present examples of the parts quality issues we found at MDA below, the June 2011 report also describes the parts quality issues we found with other space agencies. Poor workmanship. For example, poor soldering workmanship caused a power distribution unit to experience problems during vehicle-level testing on MDA’s Targets and Countermeasures program. According to MDA officials, all units of the same design by the same manufacturer had to be X-ray inspected and reworked, involving extensive hardware disassembly. As a corrective action, soldering technicians were provided with training to improve their soldering operations and ability to perform better visual inspections after soldering. The use of undocumented and untested manufacturing processes. GAO-11-404. manufacturing materials, a portion of the material was not returned and was inadvertently used to fabricate manifolds for two complete CE-II Ground-Based Interceptors. The vehicles had already been processed and delivered to the prime contractor for integration when the problem was discovered. Prime contractor’s failure to ensure that its subcontractors and suppliers met program requirements. The GMD program experienced a failure with an electronics part purchased from an unauthorized supplier. According to program officials, the prime contractor required subcontractors to only purchase parts from authorized suppliers; however, the subcontractor failed to execute the requirement and the prime contractor did not verify compliance. At the time of our June 2011 report, MDA had instituted policies to prevent and detect parts quality problems. The programs reviewed in the report—GMD, Aegis BMD, Space Tracking and Surveillance System, and Targets and Countermeasures—were initiated before these recent policies aimed at preventing and detecting parts quality problems took full effect. In addition to new policies focused on quality, MDA has developed a supplier road map database in an effort to gain greater visibility into the supply chain to more effectively manage supply chain risks. In addition, according to MDA officials, MDA has recently been auditing parts distributors in order to rank them for risk in terms of counterfeit parts. MDA also participates in a variety of collaborative initiatives to address quality, in particular, parts quality. These range from informal groups focused on identifying and sharing news about emerging problems as quickly as possible, to partnerships that conduct supplier assessments, to formal groups focused on identifying ways industry and the government can work together to prevent and mitigate problems. Moreover, since our report, MDA has added a new clause in one of its GMD contracts to provide contractor accountability for quality. We have not yet fully assessed the clause but it may allow the contracting officer to make an equitable reduction of performance incentive fee on two contract line items for certain types of quality problems. This new clause shows some leadership by MDA to hold contractors accountable for parts quality. But, we do not yet know what the impact of this clause will be on improving MDA’s problems with parts quality. Our June 2011 report recommended greater coordination between government organizations responsible for major space and missile defense programs on parts quality issues and periodic reporting to Congress. DOD partially concurred with our recommendation for greater coordination but responded that it would work with the National Aeronautics and Space Administration to determine the optimal government-wide assessment and reporting implementation to include all quality issues, of which parts, materials, and processes would be one of the major focus areas. In addition, DOD proposed an annual reporting period to ensure planned, deliberate, and consistent assessments. We support DOD’s willingness to address all quality issues and to include parts, materials, and processes as an important focus area in an annual report. DOD further stated that it had no objection to providing a report to Congress, if Congress wanted one. We believe that DOD should proactively provide its proposed annual reports to Congress on a routine basis, rather than waiting for any requests from Congress, which could be inconsistent from year to year. The parts quality issues will require sustained attention from both the executive and legislative branches to improve the quality of the systems in development, particularly because there are significant barriers to addressing quality problems, such as an increase in counterfeit electronic parts, a declining government share of the overall electronic parts market, and workforce gaps within the aerospace sector. In conclusion, as the MDA completes a decade of its work, it continues to make progress in delivering assets, completing intercept tests, and addressing some of the quality issues that have plagued it in the past. This year, there were significant accomplishments, such as the successful operational test for THAAD, but also setbacks, including failed tests and their aftermath. Such setbacks reflect inherent risks associated with the challenging nature of missile defense development, but they are also exacerbated by strategies that adopt high levels of concurrency that leave decision makers with less knowledge than needed to move programs forward. Given that initial capabilities are now in place and broader fiscal pressures require sound and more efficient management approaches, it is now time for DOD to reassess MDA's strategy of accelerating development and production to determine whether this approach needs to be rethought for current and future BMDS programs. Chairman Nelson, Ranking Member Sessions, and Members of the Subcommittee, this concludes my statement. I am happy to answer any questions you have. For future questions about this statement, please contact me at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include David B. Best, Assistant Director; Meredith Allen Kimmett; Ivy Hubler; Steven Stern; Ann Rivlin; Kenneth E. Patton; Robert S. Swierczek; and Alyssa B. Weir. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Summary: In order to meet its mission, MDA is developing a highly complex system of systemsground-, sea-, and space-based sensors, interceptors, and battle management. Since its initiation in 2002, MDA has been given a significant amount of flexibility in executing the development and fielding of the ballistic missile defense system. This statement addresses progress MDA made in the past year, the challenges it still faces with concurrent acquisitions and how it is addressing parts quality issues. It is based on GAOs April 2012 report on missile defense and its June 2011 report on space and missile defense parts quality problems. In fiscal year 2011, the Missile Defense Agency (MDA) experienced mixed results in executing its fiscal year 2011 development goals and tests. For the first time in 5 years, GAO was able to report that the agency delivered all of the targets used in fiscal year 2011 test events with the targets performing as expected. In addition, the Aegis Ballistic Missile Defense programs Standard Missile-3 Block IA missile was able to intercept an intermediate-range target for the first time and the Terminal High Altitude Area Defense program successfully conducted its first operational flight test. However, none of the programs GAO assessed were able to fully accomplish their asset delivery and capability goals for the year. Flight test failures, a test anomaly, and delays disrupted MDAs flight test plan and the acquisition strategies of several components. Flight test failures forced MDA to suspend or slow production of three out of four interceptors currently being manufactured. Some of the difficulties in MDAs testing and production of assets can be attributed to its highly concurrent acquisition approach. Concurrency is broadly defined as the overlap between technology development and product development or between product development and production. High levels of concurrency were present in MDAs initial efforts and are present in current efforts. For example, MDAs flight test failures of a new variant of the Ground-based Midcourse Defense programs interceptors while production was underway delayed delivery to the warfighter, increased costs, and will require retrofit of fielded equipment. Flight test costs to confirm its capability has increased from $236 million to about $1 billion. MDA has taken positive steps to incorporate some acquisition best practices, such as increasing competition and partnering with laboratories to build prototypes. For example, MDA took actions in fiscal year 2011 to reduce acquisition risks and prevent future cost growth in its Aegis SM-3 Block IIA program. Nevertheless, as long as newer programs adopt acquisition approaches with elevated levels of concurrency, there is still considerable risk of future performance shortfalls that will require retrofits, cost overruns, and schedule delays. MDA is also taking the initiative to address parts quality issues through various means, including internal policies, collaborative initiatives with other agencies, and contracting strategies to hold its contractors more accountable. Quality issues have seriously impeded to the development of the missile defenses in recent years. For example, during a fiscal year 2010 Terminal High Altitude Area Defense flight test, the air-launched target failed to initiate after it was dropped from the aircraft and fell into the ocean. A failure review board identified shortcomings in internal processes at the contractor to be the cause of the failure. This failure led to a delay of the planned test, restructuring of other planned tests, and hundreds of millions of dollars being spent to develop and acquire new medium-range air-launched targets. Parts quality issues will require sustained attention from both the executive and legislative branches. MDA is exhibiting some leadership, but there are significant barriers to addressing quality problems, such as the increase in counterfeit electronic parts, a declining government share of the overall electronic parts market, and workforce gaps within the aerospace sector. GAO makes no new recommendations in this statement. In the April 2012 report, GAO made recommendations to strengthen MDAs longer-term acquisition prospects including a review of MDAs acquisitions for concurrency to determine whether the proper balance has been struck between planned deployment dates and concurrency risks to achieve those dates. The report includes additional recommendations on how individual program elements can reduce concurrency. DOD agreed with six of the seven recommendations and partially agreed with one. DOD generally concurred with the recommendations in the June 2011 report for greater coordination between government organizations responsible for major space and missile defense programs on parts quality issues and periodic reporting to Congress.