The FCS concept is part of a pervasive change to what the Army refers to as the Future Force. The Army is reorganizing its current forces into modular brigade combat teams, meaning troops can be deployed on different rotational cycles as a single team or as a cluster of teams. The Future Force is designed to transform the Army into a more rapidly deployable and responsive force and to enable the Army to move away from the large division-centric structure of the past. Each brigade combat team is expected to be highly survivable and the most lethal brigade-sized unit the Army has ever fielded. The Army expects FCS-equipped brigade combat teams to provide significant warfighting capabilities to DOD’s overall joint military operations. The Army is implementing its transformation plans at a time when current U.S. ground forces are playing a critical role in the ongoing conflicts in Iraq and Afghanistan. The FCS family of weapons includes 18 manned and unmanned ground vehicles, air vehicles, sensors, and munitions linked by an information network. These vehicles, weapons, and equipment will constitute the majority of the equipment needed for a brigade combat team. The Army plans to buy 15 brigades’ worth of FCS equipment by 2025. See figure 1 for the various elements of the FCS program. If successful, the FCS system-of-systems concept will leverage individual capabilities of weapons and platforms and will facilitate interoperability and open system designs. This would be a significant improvement over the traditional approach of building superior individual weapons that must be retrofitted and netted together after the fact. This transformation, in terms of both operations and equipment, is under way with the full cooperation of the Army warfighter community. In fact, the development and acquisition of FCS is being accomplished using a uniquely collaborative relationship among the Army’s developers, the participating contractors, and the warfighter community. As a key element of its efforts to transform itself, the Army has recognized FCS from its outset as the greatest technology and integration challenge it has ever undertaken. In May 2003, DOD approved the FCS program to begin the system development and demonstration phase, a milestone that ideally marks the completion of technology development and the start of product development. However, FCS’s entry into this phase was premature given the program had failed to satisfy basic tenets of DOD acquisition policy. We have reported that, as FCS started product development, it did not have mature technologies or adequately defined requirements. Responding to direction from the Army Chief of Staff, the Army announced in July 2004 its plans to restructure the FCS program. The Army added 4 years to develop and mature the manned ground vehicles, added more demonstrations and experiments, and established an evaluation unit to demonstrate FCS capabilities. The restructuring reintroduced 4 systems that previously had been left unfunded, raising the total number of FCS-related systems to 18. The restructure also included plans to spin off mature FCS capabilities as they become available to current force units. With the restructuring, the FCS program now plans to achieve initial operational capability in fiscal year 2015 and full operational capability in fiscal year 2017. FCS low-rate production is expected to start in fiscal year 2012, and full-rate production in fiscal year 2016. The Army intends to continue FCS procurement through fiscal year 2025, eventually equipping 15 brigade combat teams. The restructuring was not the only major modification to the FCS program. Because of congressional concerns that the Army’s contracting approach incorporated insufficient safeguards to protect the government’s interests, the Army is preparing a new contract that is to be completed and finalized in late March 2006 and is based on the Federal Acquisition Regulation, which governs acquisitions within the federal government. The new contract will incorporate standard Federal Acquisition Regulation clauses such as those relating to procurement integrity, Truth in Negotiations, and Cost Accounting Standards. Previously, the lead systems integrator had been performing FCS work for the Army under a contractual instrument called an “other transaction agreement” that was not subject to the Federal Acquisition Regulation. The other transaction agreement gave the Army considerable flexibility to negotiate the terms and conditions for contractors involved in FCS development. The Army’s purpose for using such an agreement was to encourage innovation and to use its wide latitude in tailoring business, organizational, and technical relationships to achieve the program goals. In April 2005, the Army decided to incorporate into its agreement the procurement integrity, Truth in Negotiations, and Cost Accounting Standards clauses from the regulation. After Congress raised questions about the Army using an other transaction agreement for the development of a program as large and risky as FCS and about the Army’s choice not to include standard Federal Acquisition Regulation clauses in the agreement, the Secretary of the Army directed that the other transaction agreement be converted to a Federal Acquisition Regulation-based contract. All of the work performed under the product development phase as of September 2005 will be accounted for under the prior other transaction agreement, and all work after September 2005 will be performed under the new contract. The Army expects the content of the program—its statement of work—will remain largely the same, and it does not expect the cost, schedule, and performance of the overall development effort to change materially. We have frequently reported on the importance of using a solid, executable business case before committing resources to a new product development. In its simplest form, this is evidence that (1) the warfighter’s needs are valid and can best be met with the chosen concept, and (2) the chosen concept can be developed and produced within existing resources—that is, proven technologies, design knowledge, adequate funding, and adequate time to deliver the product when needed. At the heart of a business case is a knowledge-based approach to product development demonstrating high levels of knowledge before significant commitments are made. In essence, knowledge supplants risk over time. This building of knowledge can be described as three levels, or knowledge points, that should be attained over the course of a program: First, at program start, the customer’s needs should match the developer’s available resources—mature technologies, time, and funding. An indication of this match is the demonstrated maturity of the technologies needed to meet customer needs. Second, about midway through development, the product’s design should be stable and demonstrate it is capable of meeting performance requirements. The critical design review takes place at that point of time because it generally signifies when the program is ready to start building production-representative prototypes. Third, by the time of the production decision, the product must be shown to be producible within cost, schedule, and quality targets and have demonstrated its reliability, and the design must demonstrate that it performs as needed through realistic system-level testing. The three knowledge points are related in that a delay in attaining one delays the points that follow. Thus, if the technologies needed to meet requirements are not mature, then design and production maturity will be delayed. To develop the information on the Future Combat System program’s progress toward meeting established goals, the contribution of critical technologies and complementary systems, and the estimates of cost and affordability, we interviewed officials of the Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics); the Army G-8; the Office of the Under Secretary of Defense (Comptroller); the Secretary of Defense’s Cost Analysis Improvement Group; the Director of Operational Test and Evaluation; the Assistant Secretary of the Army (Acquisition, Logistics, and Technology); the Army’s Training and Doctrine Command; Surface Deployment and Distribution Command; the Program Manager for the Future Combat System (Brigade Combat Team); the Future Combat System Lead Systems Integrator; and other contractors. We reviewed, among other documents, the Future Combat System’s Operational Requirements Document, the Acquisition Strategy Report, the Baseline Cost Report, the Critical Technology Assessment and Technology Risk Mitigation Plans, and the Integrated Master Schedule. We attended or reviewed the results of the FCS System-of-Systems Functional Review, In- Process Reviews, Board of Directors Reviews, and multiple system demonstrations. In our assessment of the FCS, we used the knowledge- based acquisition practices drawn from our large body of past work as well as DOD’s acquisition policy and the experiences of other programs. We conducted the above in response to the National Defense Authorization Act of Fiscal Year 2006, which requires GAO to annually report on the product development phase of the FCS acquisition. We performed our review from June 2005 to March 2006 in accordance with generally accepted government auditing standards. The FCS program started its product development phase with inadequate knowledge in several key areas. After almost 3 years and progress in key areas, the elements of a sound business case, namely firm requirements, mature technologies, a knowledge-based acquisition strategy, a realistic cost estimate, and sufficient funding, are not yet demonstrably present. Given that, an improved business case for the FCS program is essential to help ensure the program is successful in the long run. The importance of a business case is amplified by the fact that the program is developing 18 systems and a network under a single program office and lead system integrator in the same amount of time it would take to develop a single system. The Army has made significant progress defining FCS’s system-of-systems requirements, particularly when taking into account the daunting number of them involved—nearly 11,500 at this level. Yet system-level requirements are not yet stabilized and will continue to change, postponing the needed match between requirements and resources. Now the Army and its contractors are working to complete the definition of system-level requirements, and the challenge is in determining if those requirements are technically feasible and affordable. Army officials say it is almost certain some FCS system-level requirements will have to be modified, reduced, or eliminated; the only uncertainty is by how much.