DOD expects unmanned aircraft systems to transform the battlespace with innovative tactics, techniques, and procedures and take on the so-called “dull, dirty, and dangerous missions” without putting pilots in harm’s way. The use of unmanned aircraft systems in military operations has increased rapidly since the fall of 2001, with some notable successes. Potential missions considered appropriate for unmanned systems have expanded from the original focus on the intelligence, surveillance, and reconnaissance mission area to limited tactical strike capabilities with projected plans for persistent ground attack, electronic warfare, and suppression of enemy air defenses. The Global Hawk, Predator, and Joint Unmanned Combat Air Systems are DOD’s three largest unmanned aircraft programs in terms of cost. (For more details on the three systems and their performance characteristics, see app. I.) Since the terror attacks in September 2001, defense investments in unmanned aircraft systems have exponentially increased. In the 10 years prior to the attacks, DOD invested a total of about $3.6 billion compared to the nearly $24 billion it plans to invest in the subsequent 10 years. DOD currently has about 250 unmanned aircraft in inventory and plans to increase its inventory to 675 by 2010 and to 1,400 by 2015. (These numbers are the larger systems and do not count numerous small and hand- launched systems used by ground forces.) In the fiscal year 2001 Defense Authorization Act, Congress set a goal that by 2010, one-third of DOD’s deep strike force will be unmanned in order to perform this dangerous mission; this would significantly increase the number of unmanned aircraft in DOD’s inventory. In addition, foreign countries and other federal agencies, including the Department of Homeland Security and the Interior Department, are expressing interest in unmanned aircraft systems. Table 1 shows the funding in the fiscal year 2006 Defense budget for research, development, procurement, and support of current and planned unmanned aircraft systems. The 2006 Quadrennial Defense Review contained a number of decisions that would further expand investments in unmanned systems and their use in military operations. The report states DOD’s intent to nearly double unmanned aircraft coverage by accelerating the acquisition of the Predator and the Global Hawk. It also restructures the J-UCAS program to develop an unmanned, long-range carrier-based aircraft to increase naval reach and persistence. It further establishes a plan to develop a new land-based, penetrating long-range strike capability by 2018 and sets a goal that about 45 percent of the future long-range strike force be unmanned. Officials told us that elements of the J-UCAS effort will be considered in Air Force analyses and efforts supporting future long-range strike capability. Unmanned aircraft systems are being developed under DOD’s acquisition policy, which emphasizes a knowledge-based, evolutionary approach to acquiring major weapon systems. This approach separates technology development from product development, as suggested by best practices. In implementing the policy, a critical first step to success is formulating a comprehensive business case that justifies the investment decision to begin development. The business case should validate warfighter needs and match product requirements to available resources, including proven technologies, sufficient engineering capabilities, adequate time, and adequate funds. Several basic factors are critical to establishing a sound business case for undertaking a new product development. First, the user’s needs must be accurately defined, alternative approaches to satisfying these needs properly analyzed, and quantities needed for the chosen system must be well understood. The developed product must be producible at a cost that matches the users’ expectations and budgetary resources. Finally, the developer must have the resources to design the product with the features that the customer wants and to deliver it when it is needed. If circumstances substantially change, the business case should be revisited and revised as appropriate. If the financial, material, and intellectual resources to develop the product are not available, a program should not move forward. Best practices indicate that the business case is best accomplished using an evolutionary (or incremental) approach that plans to deliver an early but relevant capability first, followed by definable and doable increments that ultimately achieve the full capability. Each increment is expected to have its own decision milestones and baseline—cost, schedule, and performance requirements. An acquisition strategy is the disciplined process employed by the service program office and prime contractor to manage the acquisition, deliver knowledge at key junctures to make further investments, and continue the program. The strategy implements the business case; sets schedules for developing, designing, and producing the weapon system; and establishes exit/entrance criteria to guide acquisition managers and executives through key program milestones to control and oversee the acquisition. While the Global Hawk and Predator both began as successful advanced concept technology demonstration (ACTD) programs, they have since adopted different strategies in system development that have led to different outcomes. The Global Hawk adopted a riskier acquisition strategy that has led to significant cost, schedule, and performance problems. Conversely, the Predator program pursued a more structured and evolutionary strategy more consistent with DOD’s acquisition policy guidance and has thus far experienced fewer negative outcomes. Following a successful ACTD, DOD approved an acquisition program in 2001 to incrementally develop and acquire systems similar to the demonstrators, now designated the RQ-4A (Global Hawk A). In 2002, the Global Hawk program was substantially restructured to more quickly develop and field a new, larger, and more advanced aircraft, designated the RQ-4B (Global Hawk B). The new acquisition strategy was now highly concurrent, overlapping technology development, design, testing, and production. Our November 2004 report on Global Hawk, raised concerns about the revised strategy and its elevated risks of poor cost, schedule, and performance outcomes. We recommended limiting procurement to only those aircraft needed for testing to allow product knowledge to more fully mature and the design and technologies to be tested before committing resources to the full program. DOD officials did not agree because, in their opinion, we overstated some risks and they were effectively mitigating other risks. The Global Hawk program is already experiencing problems that are associated with high concurrency and gaps in product knowledge. Production of the larger Global Hawk B aircraft began in July 2004 with immature technologies and an unstable design. The design had been expected to be very similar to the smaller Global Hawk A, whose performance had been proven in the ACTD, but as the larger aircraft design matured and production geared up, the differences were more extensive, complex, and costly than anticipated. Within a year, there were more than 2,000 authorized engineering drawing changes to the total baseline of 1,400 drawings, and more than half were considered major changes. Also, once manufacturing began, there were recurring quality and performance issues on the work of several key subcontractors. The subcontractor building the tail scrapped seven of the first eight main structural components because of design changes and manufacturing process deficiencies. The wing manufacturer had to terminate a key subcontractor because of poor performance and quality. Other suppliers delivered parts late and with defects. These specific problems have mostly been resolved, but the potential for even greater problems exists when the major subsystems, still in development, are integrated into the new larger aircraft already being produced. Outcomes so far have not been good, as the program has experienced significant cost increases. Extensive design changes contributed to a $209 million overrun in the development contract and resulted in a more expensive production aircraft than forecast. Requirements growth, increased costs of airframe and sensors, and increased support requirements significantly increased procurement costs. In April 2005, the Air Force reported to Congress a Nunn-McCurdy breach in procurement unit costs—an 18 percent increase over the program’s cost baseline approved in 2002. In December 2005, we reported the Air Force had failed to report $401 million in procurement costs and that the procurement unit cost had actually increased 31 percent. Subsequently, in December 2005, the Air Force renotified Congress that, if these additional costs were included, the procurement unit costs had actually increased by over 25 percent and that program acquisition unit costs (including development and military construction costs in addition to procurement) had also breached the thresholds established in the law. Under the law, DOD must now certify the program to Congress. The Air Force is currently restructuring the Global Hawk program—the fourth restructuring since it began as a major acquisition. Program schedules and performance have also been negatively affected. For example, the start of operational assessment of the Global Hawk A slipped about 1 year, and the planned start of initial operational testing of the Global Hawk B design has slipped 2 years. The Director, Operational Test and Evaluation, reports that operational assessment of the Global Hawk A identified significant deficiencies in processing and providing data to the warfighter, communication failures, and problems with engine performance at high altitudes. In addition, planned delivery dates have continued to slip, the procurement for two aircraft were moved to later years, and some development work content was deferred or deleted; this means that the warfighter will not get anticipated capability at the time originally promised. For example, defensive subsystems required by Air Combat Command have been pushed off the schedule, and it is not known whether they will be added in the future. The frequent deployment of Global Hawk demonstrator aircraft to support combat operations has further affected costs and schedule, according to officials. Support to the warfighter is the program’s top priority. Deployments have resulted in increased costs and time delays for acquisition but, at the same time, provide a valuable, realistic test for the system and its employment concepts to improve its performance and responsiveness to the warfighter. Fleet flying hours now exceed 8,000 hours, more than half in combat operations. The following table shows changes in cost and quantities since the program started in March 2001. The restructured program tripled development costs, reflecting the addition of the new Global Hawk B aircraft with advanced capabilities still in technology development.