The Missile Defense Agency’s mission is to develop an integrated and layered BMDS to defend the United States, its deployed forces, allies, and friends. The BMDS is expected to be capable of engaging all ranges of enemy ballistic missiles in all phases of flight. This is a challenging expectation, requiring a complex combination of defensive components— space-based sensors, surveillance and tracking radars, advanced interceptors, and a battle management, command, control, and communications component—that work together as an integrated system. A typical scenario to engage an intercontinental ballistic missile (ICBM) would unfold as follows: Infrared sensors aboard early-warning satellites detect the hot plume of a missile launch and alert the command authority of a possible attack. Upon receiving the alert, land- or sea-based radars are directed to track the various objects released from the missile and, if so designed, to identify the warhead from among spent rocket motors, decoys, and debris. When the trajectory of the missile’s warhead has been adequately established, an interceptor—consisting of a kill vehicle mounted atop a booster—is launched to engage the threat. The interceptor boosts itself toward a predicted intercept point and releases the kill vehicle. The kill vehicle uses its onboard sensors and divert thrusters to detect, identify, and steer itself into the warhead. With a combined closing speed on the order of 10 kilometers per second (22,000 miles per hour), the warhead is destroyed above the atmosphere through a “hit to kill” collision with the kill vehicle. To develop a system capable of carrying out such an engagement, MDA, until December 2007, executed an acquisition strategy in which the development of missile defense capabilities was organized in 2-year increments known as blocks. Each block was intended to provide the BMDS with capabilities that enhanced the development and overall performance of the system. The first 2-year block—Block 2004—fielded a limited initial capability that included early versions of the GMD, Aegis BMD, Patriot Advanced Capability-3, and C2BMC elements. The agency’s second 2-year block—Block 2006—culminated on December 31, 2007, and fielded additional BMDS assets. Block 2006 also continued the evolution of Block 2004 by providing improved GMD interceptors, enhanced Aegis BMD missiles, upgraded Aegis BMD ships, a Forward-Based X-Band- Transportable radar, and enhancements to C2BMC software. On December 7, 2007, MDA’s Director approved a new block construct that will be the basis for all future development and fielding. Table 1 provides a brief description of all elements currently being developed by MDA. MDA made progress in developing and fielding the BMDS during 2007. Additional assets were fielded and/or upgraded, several tests met planned objectives, and other development activities were conducted. On the other hand, fewer assets were fielded than originally planned, the cost of the block increased, some flight tests were deferred, and the performance of fielded assets could not be fully evaluated. During Block 2006, MDA increased its inventory of BMDS assets while enhancing the system’s performance. The agency fielded 14 additional Ground-based interceptors, 12 Aegis BMD missiles designed to engage more advanced threats, 4 new Aegis BMD destroyers, 1 new Aegis BMD cruiser, as well as 8 C2BMC Web browsers and 1 C2BMC suite. In addition, MDA upgraded half of its Aegis BMD ship fleet, successfully conducted four Aegis BMD and two GMD intercept tests, and completed a number of ground tests to demonstrate the capability of BMDS components. Considering assets fielded during Blocks 2004 and 2006, MDA, by December 31, 2007, had cumulatively fielded a total of 24 Ground-based interceptors, 2 upgraded early-warning radars, an upgraded Cobra Dane surveillance radar, 1 Sea-based X-band radar, 2 Forward-Based X-Band Transportable radars, 21 Aegis BMD missiles, 14 Aegis BMD destroyers, and 3 Aegis BMD cruisers. In addition, MDA had fielded 6 C2BMC suites; 46 warfighter enterprise workstations with situational awareness; BMDS planner and sensor management capabilities; 31 C2BMC Web browsers, 13 with laptop planners; and redundant communications node equipment to connect BMDS elements worldwide. In March 2005, MDA submitted to Congress the number of assets it planned to field during Block 2006. However, increasing costs, technical challenges, and schedule delays prompted the agency to reduce the quantity of planned assets. Consequently, in March 2006, shortly after submitting its fiscal year 2007 budget, MDA notified Congress that it was revising its Block 2006 Fielded Configuration Baseline. Although MDA did not meet its original block fielding goals, it was able in nearly all instances to meet or exceed its revised goals. Of the four elements delivering assets during Block 2006, one—Sensors—was able to meet its original goal. However, two elements—GMD and C2BMC—were able to exceed their revised fielding goals. Table 2 depicts the goals and the number of assets fielded. Although GMD did not meet its original goal of fielding up to 15 interceptors and partially upgrading the Thule early warning radar, the element was able to surpass its revised goal of fielding 12 interceptors. By December 31, 2007, the GMD element fielded 14 interceptors—2 more than planned. To achieve its revised goal, the element’s prime contractor added a manufacturing shift during 2007 and extended the number of hours that certain shifts’ personnel worked. These actions allowed the contractor to more than double its interceptor emplacement rate. Last year, we reported that MDA delayed the partial upgrade of the Thule early-warning radar—one of GMD’s original goals—until a full upgrade could be accomplished. According to DOD, the full upgrade of Thule is the most economical option and it meets DOD’s desire to retain a single configuration of upgraded early warning radars. The Thule early warning radar upgrade is being accomplished by two separate contract awards. Raytheon was awarded a contract in April 2006 to develop and install prime mission equipment; while Boeing was expected to receive a contract in January 2008 to integrate the equipment into the BMDS ground communication network. In March 2005, MDA included three C2BMC suites as part of its fielding goal for Block 2006. These suites were to be fielded at U.S. European Command, U.S. Central Command, and another location that was to be identified later. Faced with a $30 million reduction in C2BMC’s fiscal year 2006 budget, MDA in March 2006 revised this goal to replace the 3 suites with 3 less expensive Web browsers. However, by the end of Block 2006, MDA found an innovative way to increase combatant commands’ situational awareness and planning capability. In 2005, the C2BMC program conducted a network load analysis and concluded that situational awareness and planning capability—equivalent to that provided by a suite- -could be gained by combining Web browsers and planners. To prove that this approach would work, MDA fielded 4 Web browsers and one planner at the U.S. European Command. MDA learned that this combination of hardware, fielded in the quantities needed to meet a command’s needs and connected to an existing server, provided the situational awareness and planning capability of a suite at less cost. MDA extended this approach by fielding one Web browser and one planner at four other locations—U.S. Forces Japan; U.S. Forces Korea; the Commander of U.S. Strategic Command; and the Commander of the Space and Missile Defense Command. In addition, MDA fielded one suite at U.S. Pacific Command. The Aegis BMD element was able to meet its revised block goals for only one of its two components. The program upgraded all planned ships, but fielded three fewer Aegis BMD Standard Missile-3s (SM-3) than planned. The program did not meet its revised missile goal because three U.S missiles were delayed into 2008 to accommodate an unanticipated requirement to deliver three missiles to Japan. Figure 1 below depicts the location of current BMDS assets. MDA’s Block 2006 program of work culminated with higher than anticipated costs. In March 2007, we reported that MDA’s cost goal for Block 2006 increased by approximately $1 billion because of greater than expected GMD operations and sustainment costs and technical problems. During fiscal year 2007, some prime contractors performing work for the BMDS overran their budgeted costs. To stay within its revised budget, MDA was forced to reduce the amount of work it expected to accomplish during the block. The full cost of the block cannot be determined because of the deferral of work from one block to another. In addition, some MDA prime contractors too often employ a planning methodology that has the potential to obscure the time and money that will be needed to produce the outcomes intended. If the work does not yield the intended results, MDA could incur additional future costs. While MDA struggled to contain costs during Block 2006, the agency awarded two contractors a large percentage of available fee for performance in cost and/or program management although the contractor-reported data showed declining cost and schedule performance. Both award fee plans for these contractors direct that cost and schedule performance be considered as factors in making the evaluation. While these factors are important, MDA’s award fee plans provide for the consideration of many other factors in making award fee determinations. To determine if contractors are executing the work planned within the funds and time budgeted, each BMDS program office requires its prime contractor to provide monthly Earned Value Management reports detailing cost and schedule performance.