To help manage its multi-billion dollar acquisition investments, DHS has established policies and processes for acquisition management, test and evaluation, and resource allocation. The department uses these policies and processes to deliver systems that are intended to close critical capability gaps, helping enable DHS to execute its missions and achieve its goals. DHS policies and processes for managing its major acquisition programs are primarily set forth in Acquisition Management Directive (MD) 102-01 and DHS Instruction Manual 102-01-001, Acquisition Management Instruction/Guidebook. DHS issued the initial version of this directive in November 2008 in an effort to establish an acquisition management system that effectively provides required capability to operators in support of the department’s missions. DHS’s Under Secretary for Management (USM) is currently designated as the department’s Chief Acquisition Officer and, as such, is responsible for managing the implementation of the department’s acquisition policies. DHS’s USM serves as the decision authority for the department’s largest acquisition programs: those with LCCEs of $1 billion or greater. Component Acquisition Executives—the most senior acquisition management officials within each of DHS’s component agencies—may be delegated decision authority for programs with cost estimates between $300 million and less than $1 billion. Table 1 identifies how DHS has categorized the 26 major acquisition programs we review in this report, and table 7 in appendix II specifically identifies the programs within each level. DHS acquisition policy establishes that a major acquisition program’s decision authority shall review the program at a series of five predetermined Acquisition Decision Events (ADE) to assess whether the major program is ready to proceed through the acquisition life-cycle phases. Depending on the program, these ADEs can occur within months of each other, or be spread over several years. Figure 1 depicts the acquisition life cycle established in DHS acquisition policy. An important aspect of an ADE event is the decision authority’s review and approval of key acquisition documents. See table 2 for a description of the type of key acquisition documents requiring department-level approval before a program moves to the next acquisition phase. DHS acquisition policy establishes that the APB is the agreement between program, component, and department-level officials establishing how systems will perform, when they will be delivered, and what they will cost. Specifically, the APB establishes a program’s schedule, costs, and KPPs. DHS defines KPPs as a program’s most important and non- negotiable requirements that a system must meet to fulfill its fundamental purpose. For example, a KPP for an aircraft may be airspeed and a KPP for a surveillance system may be detection range. The APB schedule, costs, and KPPs are defined in terms of an objective and minimum threshold value. According to DHS policy, if a program fails to meet any schedule, cost, or performance threshold approved in the APB, it is considered to be in breach. Programs in breach are required to notify their acquisition decision authority and develop a remediation plan that outlines a time frame for the program to return to its APB parameters, re-baseline—that is, establish new schedule, cost, or performance goals—or have a DHS-led program review that results in recommendations for a revised baseline. In addition to the acquisition decision authority, other bodies and senior officials support DHS’s acquisition management function: The Acquisition Review Board (ARB) reviews major acquisition programs for proper management, oversight, accountability, and alignment with the department’s strategic functions at ADEs and other meetings as needed. The ARB is chaired by the acquisition decision authority or a designee and consists of individuals who manage DHS’s mission objectives, resources, and contracts. The Office of Program Accountability and Risk Management (PARM) is responsible for DHS’s overall acquisition governance process, supports the ARB, and reports directly to the USM. PARM develops and updates program management policies and practices, reviews major programs, provides guidance for workforce planning activities, provides support to program managers, and collects program performance data. Component agencies, such as U.S. Customs and Border Protection (CBP), the Transportation Security Administration (TSA), and the U.S. Coast Guard (USCG) sponsor specific acquisition programs. The 26 programs we review in this report are sponsored by eight component agencies. Component Acquisition Executives within the components are responsible for overseeing the execution of their respective portfolios. Program management offices, also within the components, are responsible for planning and executing DHS’s individual programs. They are expected to do so within the cost, schedule, and performance parameters established in their APBs. If they cannot do so, programs are considered to be in breach and must take specific steps, as noted above. Figure 2 depicts the relationship between acquisition managers at the department, component, and program level. In May 2009, DHS established policies and processes for testing the capabilities delivered by the department’s major acquisition programs. The primary purpose of test and evaluation is to provide timely, accurate information to managers, decision makers, and other stakeholders to reduce programmatic, financial, schedule, and performance risk. We provide an overview of each of the 26 programs’ test activities in the individual program assessments, presented in appendix I. DHS testing policy assigns specific responsibilities to particular individuals and entities throughout the department: Program managers have overall responsibility for planning and executing their programs’ testing strategies. They are responsible for scheduling and funding test activities and delivering systems for testing. They are also responsible for controlling developmental testing. Programs use developmental testing to assist in the development and maturation of products, product elements, or manufacturing or support processes. Developmental testing includes engineering-type tests used to verify that design risks are minimized, substantiate achievement of contract technical performance, and certify readiness for operational testing. Operational test agents (OTA) are responsible for planning, conducting, and reporting on operational testing, which is intended to identify whether a system can meet its KPPs and provide the acquisition decision authority with an evaluation of the operational effectiveness and suitability of a system in a realistic environment. Operational effectiveness refers to the overall ability of a system to provide desired capability when used by representative personnel. Operational suitability refers to the degree to which a system can be placed in field use and sustained satisfactorily. The OTAs may be organic to the component, another government agency, or a contractor, but must be independent of the developer in order to present credible, objective, and unbiased conclusions. For example, the U.S. Navy Commander, Operational Test and Evaluation Force is the OTA for the USCG National Security Cutter (NSC) program. The Director, Office of Test and Evaluation (DOT&E) is responsible for approving major acquisition programs’ OTAs, operational test plans, and Test and Evaluation Master Plans (TEMP). A program’s TEMP must describe the developmental and operational testing needed to determine technical performance, and operational effectiveness and suitability. As appropriate, DOT&E is also responsible for participating in operational test readiness reviews, observing operational tests, reviewing OTAs’ reports, and assessing the reports. Prior to a program’s ADE 3, DOT&E provides the program’s acquisition decision authority a letter of assessment that includes an appraisal of the program’s operational test, a concurrence or non-concurrence with the OTA’s evaluation, and any further independent analysis. As an acquisition program proceeds through its life cycle, the testing emphasis moves gradually from developmental testing to operational testing. See figure 3. DHS has established a planning, programming, budgeting, and execution (PPBE) process to allocate resources to acquisition programs and other entities throughout the department. DHS’s PPBE process produces the multi-year funding plans presented in the FYHSP, a database that contains, among other things, 5-year funding plans for DHS’s major acquisition programs. DHS guidance states that the 5-year plans in the FYHSP should allow the department to achieve its goals more efficiently than an incremental approach based on 1-year plans. DHS guidance also states that the FYHSP articulates how the department will achieve its strategic goals within fiscal constraints. According to DHS guidance, at the outset of the annual PPBE process, the department’s Office of Policy and Chief Financial Officer (CFO) should provide planning and fiscal guidance, respectively, to the department’s component agencies. In accordance with this guidance, the components should submit 5-year funding plans to the CFO; these plans are subsequently reviewed by DHS’s senior leaders, including the DHS Secretary and Deputy Secretary. DHS’s senior leaders are expected to modify the plans in accordance with their priorities and assessments, and they document their decisions in formal resource allocation decision memorandums. DHS submits the revised funding plans to the Office of Management and Budget, which uses them to inform the President’s annual budget request—a document sent to Congress requesting new budget authority for federal programs, among other things. In some cases, the funding appropriated to certain accounts in a given fiscal year can be carried over to subsequent fiscal years. Figure 4 depicts DHS’s annual PPBE process. Federal law requires DHS to submit an annual FYHSP report to Congress at or about the same time as the President’s budget request. This report presents the 5-year funding plans in the FYHSP database at that time. Within DHS’s Office of the CFO, the Office of Program Analysis and Evaluation is responsible for establishing policies for the PPBE process and overseeing the development of the FYHSP. In this role, the Office of Program Analysis and Evaluation reviews the components’ 5-year funding plans, advises DHS’s senior leaders on resource allocation issues, maintains the FYHSP database, and submits the annual FYHSP report to Congress.