Quality assurance has a simple goal: to ensure that products perform the way they are supposed to. For many years, the traditional way DOD and commercial companies achieved quality was through systematic final inspection. But now, intense competition has led some U.S. companies to adopt total quality management practices that are prevention based. Consequently, quality assurance has taken on a broader meaning, to include virtually all key design and engineering elements during development, the transition to production, and production itself. There is general agreement across government and industry that DOD’s inspection-based quality assurance practices have added unnecessary costs to acquisitions because they require DOD and contractor personnel and resources for oversight that are separate from the production process. Until recently, DOD’s quality requirements were based on MIL-Q-9858A, a military standard established in 1963. This standard requires a contractor to establish a quality program with documented procedures and processes that are subject to approval by government representatives throughout all areas of contract performance. Quality is theoretically ensured by requiring both the contractor and the government to monitor and inspect products. In June 1994, the Secretary of Defense announced that commercial quality standards such as ISO-9000 should replace MIL-Q-9858A where it makes sense. DOD will not require MIL-Q-9858A on contracts awarded after October 1996. Until then, DOD will be approving the quality standards on a case-by-case basis at the request of industry. The Defense Contract Management Command (DCMC) has primary responsibility for setting and overseeing quality assurance standards within DOD. As of September 1995, DCMC had about 5,000 quality specialists located in contractor facilities or in regional offices across the country. DOD faces a formidable challenge in changing its quality assurance culture. This culture has been characterized by a narrow approach to quality assurance, in both DOD and the defense industry, which has led to a focus on detecting defects and recording corrective actions. In the past, DOD’s practices have reflected a narrow approach to quality assurance. Responsibility for meeting military quality standard MIL-Q-9858A has been assigned to one organization—DCMC, which is outside much of the acquisition decision-making process. DCMC has quality specialists stationed in contractor plants across the country to inspect material and end items. These specialists have relied heavily on quality system documentation, various reviews and audits of the quality process, and corrective action plans submitted by contractor quality assurance personnel to ensure quality on weapon systems. Based on information from studies performed for the Secretary of Defense, we estimate that the extra cost associated with military-unique quality assurance requirements for DOD acquisitions is $1.5 billion annually. The studies assessed the cost impact of DOD regulations on contractors and DOD and found that the contractors’ cost to implement MIL-Q-9858A and to comply with DOD requirements represented at least 1.7 percent of DOD’s acquisition cost, or about $1 billion. Most of this cost occurred as the result of contractor quality assurance and operations personnel devoting time to such activities as preparing quality plans and procedures, conducting and documenting inspections, documenting deviations, proposing corrective actions to government concerns, and supporting government audits and reviews. Further, DOD’s own costs for quality assurance oversight were about $687 million annually. This estimate does not include what DOD has spent to correct the manufacturing and quality problems that have contributed to historical cost and schedule overruns on weapon system production programs. These past problems occurred partly because manufacturing processes were not considered during the design phase of the program, and inspection, rather than process control, was the predominant method of ensuring quality. Like many commercial manufacturers, DOD is now being expected to cut costs and do more with less. Commercial manufacturers have adopted far-reaching quality strategies as one way to become more competitive, efficient, and economical. Even though DOD faces the same challenge, particularly since it can no longer expect the budget increases it had during the 1980s, it has yet to effectively achieve the same level of efficiency from its manufacturers. A major difference between DOD and commercial manufacturers is that DOD has, until recently, maintained its practice of inspecting rather than designing quality into a product while world-class companies have broadened their definition of quality to include design. DOD is attempting to change its approach to quality by including design in the definition of quality. In translating this approach into practice, DOD will have to overcome a history in which many weapon system acquisitions have encountered significant cost and schedule overruns because of design and manufacturing problems. These problems usually resulted from acquisition strategies that began production before the design was complete and key manufacturing processes were in place and tested for capability. Some examples we have reported on follow: In 1985, we reported on four major weapon system acquisitions—the Army’s Copperhead projectile and Blackhawk helicopter, and the Navy’s High Speed Anti-Radiation Missile and Tomahawk missile—that had encountered substantial problems in early production, resulting in cost overruns and schedule delays. At least part of these cost and schedule overruns were caused by several untried manufacturing processes that were not studied to see if they could produce quality components. Symptoms of these problems were high scrap rates, parts shortages, and changes to engineering drawings.In 1988 and 1990, we reported that the B-2 bomber program’s immature design led to manufacturing problems in production that, in turn, led to schedule delays and cost increases. The contractors initiated thousands of changes to engineering drawings, some of which required new parts and tooling. Because the bomber was not ready for production, actual labor hours exceeded planned labor hours on the first three aircraft by 84, 86, and 94 percent, respectively, and the three major contractors estimated it would take over 10 million quality assurance labor hours to develop and produce 21 production aircraft, not including hours estimated for government oversight. These manufacturing problems delayed the first flight of the B-2 by 19 months and contributed to significant cost increases.In 1991, we reported that 12 tactical missile programs had cost and schedule overruns, partly because program offices had not adequately considered the risk associated with the weapons’ design, development, and production. One missile, the Advanced Medium Range Air-to-Air Missile, encountered problems in transitioning to production partly because certain electronic components proved too complex and had to be redesigned. This contributed to cost increases of 285 percent and a 5-year delay to the missile’s operational capability date.In 1994, we reported that quality problems with the C-17 program increased unit cost to production aircraft and delayed scheduled deliveries. Labor hours for rework and repair of production items made up 40 percent of the labor on the first five production C-17s, and scrap, rework, and repair cost about $44 million in 1993. In addition to these costs, some production aircraft were delivered to the Air Force with unfinished work and known deficiencies that had to be corrected after government acceptance. The Defense Science Board reviewed the C-17 program in 1993 and concluded that the production schedule could not be maintained unless the contractor changed its manufacturing and quality assurance processes. An Industry Review Panel on Specifications and Standards found that the C-17 production process had many quality problems that were adding cost to the program. It found that the production aircraft were being produced in a “development environment,” with unqualified processes, and with a reactive rather than proactive quality management system that did not analyze the causes of quality problems. It also found that a high number of engineering changes were making production less efficient. The review panel concluded that the program had an “inspection mentality” and that only 10 percent of quality cost was being spent on prevention. These examples represent a persistent problem in DOD’s major acquisitions. All of the programs began producing weapon systems before their key characteristics were fully designed and the key processes for building the system were understood. Some started production before doing a significant amount of testing to determine if these systems would perform their required mission. The consequences of beginning production before completing testing have repeatedly included procurement of substantial inventories of unsatisfactory weapons that require costly modifications to achieve satisfactory performance and, in some cases, deployment of substandard systems to combat forces. These examples do not necessarily condemn DOD to a repetition of the past or prejudge the potential success of DOD’s current efforts to better manage quality. However, they do underscore the challenge DOD faces in changing quality assurance practices. The systems in the examples were developed and produced using inspection-oriented quality assurance practices and significant DOD oversight. Yet, in each case, we reported that beginning manufacturing before the design was understood and manufacturing processes were controlled led to quality problems, cost increases, and schedule delays. The narrower interpretation of quality assurance that prevailed at the time may not have included the various design and engineering elements that played a part in the weapons’ eventual problems in production. However, the broader view of quality assurance practiced by leading commercial manufacturers includes these elements and thus covers a much larger range of responsibilities. Many companies have effectively evolved from an inspection-oriented quality assurance process, and the culture and infrastructure to support it, to a standard in which quality is an integral part of each stage of the design and production process. The difference between how a manufacturer operates on a military contract versus how it operates on a commercial contract is often startling. For example, we visited a company that manufactured military and commercial products with similar specifications and uses; both manufacturing processes were in the same building. On one side of the hallway, the commercial process used automation and process control throughout the production process to continually reduce nonvalue-added inspections. On the other side of the hallway, the military process included two large test facilities at the end of the production process, used at least four test stations, and added about 10 days to the process. Company officials told us that the military process continued to have 100-percent end-item inspection, even though the quality of these products was not in question.