The BMDS is designed to defend the United States homeland and our regional friends and allies against attacks from ballistic missiles of all ranges—short, medium, intermediate, and intercontinental. Since ballistic missiles have different ranges, speeds, sizes, and performance characteristics, MDA is developing a variety of systems, known as elements or programs, that, when integrated, provide multiple opportunities to destroy ballistic missiles in flight. The BMDS includes space-based sensors; ground- and sea-based radars; ground- and sea- based interceptor missiles; and a command and control system that provides communication links to the sensors and interceptor missiles. The BMDS is comprised of several systems, which MDA calls elements or programs. Table 1 provides a brief description and status of the BMDS elements assessed in this report. See appendixes II-IX for more detailed information. When MDA was established in 2002, it was granted exceptional flexibility in setting requirements and managing the acquisition. The BMDS was to be developed as a single program designed to quickly deliver a set of integrated defensive capabilities. This decision deferred application of DOD acquisition policy to the BMDS until a mature capability is ready to be handed over to a military service for production and operation. Because the BMDS program has not yet formally entered the DOD acquisition cycle, application of laws and policies that are designed to facilitate oversight and accountability of major defense acquisition programs and that are triggered by phases of this cycle, such as the engineering and manufacturing development phase, have also effectively been deferred. These laws and policies include such things as: Documenting program parameters in an acquisition program baseline that has been approved by a higher-level DOD official prior to the program’s entry into the engineering and manufacturing development phase or program initiation, whichever occurs later. Measuring the program against the approved baseline or obtaining the approval of a higher-level acquisition executive before making changes. Reporting certain increases in unit cost measured from the original or current program baseline. Obtaining an independent life-cycle cost estimate prior to beginning engineering and manufacturing development, and/or production and deployment. Regularly providing detailed program status information to Congress, including information on cost, in Selected Acquisition Reports. Congress and DOD have taken actions to address oversight of MDA. For example, in the NDAA for Fiscal Year 2008, Congress required MDA to establish acquisition cost, schedule, and performance baselines for each system element that has entered the equivalent of the engineering and manufacturing development phase of acquisition or is being produced or acquired for operational fielding. MDA reported its newly-established resource, schedule, test, operational capacity, technical, and contract baselines for certain BMDS components for the first time in its June 2010 BMDS Accountability Report (BAR). Since that time, Congress has continued to alter MDA’s baseline reporting requirements in the NDAA for Fiscal Years 2011 and 2012. Additionally, to enhance oversight of the information provided in the BAR, MDA continues to incorporate suggestions and recommendations from GAO on the content and clarity of the information reported in the BAR to include: 1) the addition of information to explain the major changes experienced by each program over the past year; 2) the addition of buy/delivery information for each program that has advanced to Product Development, Initial Production, or Production; 3) a description of cost items not included in program Resource Baselines; and 4) a summary of critical schedule milestones with their respective initial baseline dates and dates from the previous BAR to facilitate tracking. Successful programs that deliver promised capabilities for the estimated cost and on schedule use a disciplined, knowledge-based approach where knowledge supplants risk over time. In our past work examining weapon system acquisition and best practices, we have found that successful commercial firms pursue an acquisition approach that is anchored in knowledge, whereby high levels of product knowledge are demonstrated at critical points in the acquisition process. This approach recognizes that programs require an appropriate balance between schedule and risk, but does not include an undue amount of what is often referred to as acquisition concurrency, where overlap occurs between technology development and product development or between product development and production of a system. Instead, programs take steps to gather knowledge prior to moving from one acquisition phase to another. These steps for a program include: Demonstrating its technologies are mature and that allotted resources match the program’s requirements before deciding to invest in product development. Demonstrating its designs are stable and perform as expected before deciding to build and test production-representative prototypes. Demonstrating its production processes are in control and meet cost, schedule, and quality targets before deciding to produce first units. Since 2002, MDA has developed, demonstrated, and fielded a limited homeland and regional ballistic missile defense capability, but has fallen short of its goals, in part, because of its acquisition practices. Some of these practices include initiating new programs without robustly assessing alternative solutions, incorporating high levels of concurrency, and fielding capabilities prior to completing flight testing. While some concurrency is understandable, committing to product development before requirements are understood and technologies are 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. We previously found that although these practices enabled MDA to quickly ramp up efforts in order to meet tight, presidentially-directed deadlines, they were also high risk and resulted in problems that caused some programs to be cancelled or significantly disrupted. For example: In July 2013, we found that the Secretary of Defense decided to cancel an MDA satellite system program, called the Precision Tracking Space System, based on the results of a departmental review of the program which determined that the program had significant technical, programmatic, and affordability risks. We previously found that MDA did not consider a broad range of alternatives prior to its decision to start the program, was relying on a highly-concurrent acquisition approach despite significant technical and operational challenges, and was projecting a lower total program cost by increasing risk to the warfighter. Although MDA gained some technical knowledge from the effort, it also expended significant resources—approximately five years and $231 million. The sensor coverage gaps, such as persistent tracking from space, that the program was intended to address persist. In April 2014, we found that a series of GMD test failures in conjunction with a highly concurrent CE-II development, production, and fielding strategy caused major disruptions to the program. Because the program moved forward with producing and fielding interceptors before completing its flight test program, test failures exacerbated the disruptions to the program, causing the program to fall several years behind on its flight test program and increasing the cost to demonstrate the CE-II from $236 million—the cost of GMD’s first CE-II flight test—to $1.981 billion—the cost to resolve the test failures and implement a retrofit program. See appendix VII for more detailed information. MDA made progress, but did not achieve all of its planned test and asset delivery goals for fiscal year 2014, and has not fully met its test goals since first reporting baselines in its 2010 BAR. MDA utilizes ground, non- intercept, and intercept tests to provide it with knowledge on the operational effectiveness, suitability, and survivability of an asset or capability. Ground tests use simulations and scenarios when flight testing may be impractical or cost-prohibitive. Flight tests—intercept and non- intercept—evaluate an asset’s ability to defend against a specific threat. Intercept tests include active engagement of one or more targets, while non-intercept tests do not include active engagement of a target. Moreover, non-intercept tests can assess specific aspects of an asset to potentially reduce risks for future intercept tests. Completing planned testing is a key step to enable the delivery of assets and capabilities, in line with GAO best practices. However, despite testing delays, shortfalls, and failures, MDA has continued to deliver assets. Without completing planned testing, MDA is delaying or foregoing the full breadth and depth of knowledge it planned to have attained prior to the delivery of its assets. In fiscal year 2014, MDA conducted four out of ten planned flight tests (as shown below in table 2). It also conducted an additional flight test in June 2014 that was inserted into the schedule to retest and confirm a capability that failed during a prior test. MDA conducted two intercept and three non-intercept flight tests in fiscal year 2014 that demonstrated an increased capability for the Aegis BMD and the GMD programs. The three non-intercept tests evaluated Aegis Ashore’s ability to launch and guide an SM-3 interceptor, as well as the SM-3 Block IIA interceptor booster performance and tracking capabilities for the Aegis BMD Weapon System. One intercept test supported the Aegis BMD program’s full rate production decision for the SM-3 Block IB interceptor by demonstrating the capability to intercept a medium- range ballistic missile target. The other intercept test—FTG-06b—was inserted into the test schedule to retest and demonstrate the performance of the CE-II interceptor, which failed its prior two attempts in 2010. MDA successfully executed FTG-06b in June 2014, which was a major accomplishment for the program as it was the first successful intercept attempt with the CE-II interceptor, ending a five-and-a-half year period without a successful intercept for the GMD program. For further details about the Aegis BMD and GMD programs, see appendixes II, III, IV, V, and VII. MDA did not conduct six planned flight tests in fiscal year 2014, and it has been unable to conduct all of its planned tests since fiscal year 2010 because, as we previously reported, its test plan is ambitious and success-oriented, which makes it difficult to adjust the schedule if necessary and results in frequent changes and disruptions to its test plan.