DOD’s current space network is comprised of constellations of satellites, ground-based systems, and associated terminals and receivers. Among other things, these assets are used to perform intelligence, surveillance, and reconnaissance functions; perform missile warning; provide communication services to DOD and other government users; provide weather and environmental data; and provide positioning and precise timing data to U.S. forces as well as national security, civil, and commercial users. All of these systems are playing an increasingly important role in military operations. According to DOD officials, for example, in Operation Iraqi Freedom, approximately 70 percent of weapons were precision-guided, most of those using Global Positioning System (GPS) capabilities. Weather satellites enabled war fighters to not only prepare for, but also take advantage of blinding sandstorms. Communication and intelligence satellites were also heavily used to plan and carry out attacks and to assess post-strike damage. Some of DOD’s satellite systems—such as GPS—have also grown into international use for civil and military applications and commercial and personal uses. Moreover, the demand for space-based capabilities is outpacing DOD’s current capacity. For example, even though DOD has augmented its own satellite communications capacity with commercial satellites, in each major conflict of this past decade, senior military commanders reported shortfalls in capacity, particularly for rapid transmission of large data files, such as those created by imagery sensors. DOD is looking to space to play an even more pivotal role in future military operations. As such, it is developing several families of new, expensive, and technically challenging satellites, which are expected to require dramatically increased investments over the next decade. For example, DOD is building new satellites that will use laser optics to transport information over long distances in much larger quantities than radio waves. The system, known as the Transformational Satellite, or TSAT, is to be the cornerstone of DOD’s future communications architecture. Many space, air, land, and sea-based systems will depend on TSAT to receive and transmit large amounts of data to each other as DOD moves toward a more “network centric” war-fighting approach. DOD is also building a new space-based radar (SBR) system, which is to employ synthetic aperture radar and other advanced technologies to enable DOD to have 24-hour coverage over a large portion of the Earth on a continuous basis and allow military forces a “deep-look” into denied areas of interest, on a non-intrusive basis without risk to personnel or resources. SBR itself is expected to generate large amounts of imagery data, and it will rely on TSAT to deliver this data to war fighters. As figure 1 shows, the costs of these and other new efforts will increase DOD’s annual space investment significantly. For example, based on the 2003 President’s budget, acquisition costs for new satellite programs and launch services in the next 4 years are expected to grow by 115 percent— from $3.5 billion to about $7.5 billion. Costs beyond that period are as yet unknown. While DOD’s budget documents show a decrease in 2009 for these systems to $6.4 billion—they do not include procurement costs for some of the largest programs, including TSAT, GPS III, SBR, Space Tracking and Surveillance System (STSS), and Space-Based Surveillance System (SBSS), which DOD will begin fielding beginning 2011. Nor do these numbers reflect the totality of DOD’s investment in space. For example, ground stations and user equipment all require significant investment and that investment will likely increase as the new programs mature. Table 1 identifies specific programs factored into our analysis of upcoming investments. It also shows that DOD will be fielding many of the new programs within just a few years of each other. For the past 6 years, we have been examining ways DOD can get better outcomes from its investment in weapon systems, drawing on lessons learned from the best, mostly commercial, product development efforts. Our work has shown that leading commercial firms expect that their managers will deliver high quality products on time and within budgets. Doing otherwise could result in losing a customer in the short term and losing the company in the long term. Thus, these firms have adopted practices that put their individual programs in a good position to succeed in meeting these expectations on individual products. Collectively, these practices ensure that a high level of knowledge exists about critical facets of the product at key junctures and is used to make decisions to deliver capability as promised. We have assessed DOD’s space acquisition policy as well as its revised acquisition policy for other weapon systems against these practices. Our reviews have shown that there are three critical junctures at which firms must have knowledge to make large investment decisions. First, before a product development is started, a match must be made between the customers’ needs and the available resources—technical and engineering knowledge, time, and funding. Second, a product’s design must demonstrate its ability to meet performance requirements and be stable about midway through development. Third, the developer must show that the product can be manufactured within cost, schedule, and quality targets and is demonstrated to be reliable before production begins. If the knowledge attained at each juncture does not confirm the business case on which the acquisition was originally justified, the program does not go forward. These precepts hold for technically complex, high volume programs as well as low volume programs such as satellites. In applying the knowledge-based approach, the most-leveraged investment point is the first: matching the customer’s needs with the developer’s resources. The timing of this match sets the stage for the eventual outcome—desirable or problematic. The match is ultimately achieved in every development program, but in successful development programs, it occurs before product development begins. When the needs and resources match is not made before product development, realistic cost and schedule projections become extremely difficult to make. Moreover, technical problems can disrupt design and production efforts. Thus, leading firms make an important distinction between technology development and product development. Technologies that are not ready continue to be developed in the technology base—they are not included in a product development. With technologically achievable requirements and commitment of sufficient resources to complete the development, programs are better able to deliver products at cost and on schedule. When knowledge lags, risks are introduced into the acquisition process that can result in cost overruns, schedule delays, and inconsistent product performance. As we recently testified, such problems, in turn, can reduce the buying power of the defense dollar, delay capabilities for the war fighter, and force unplanned—and possibly unnecessary—trade-offs in desired acquisition quantities and an adverse ripple effort among other weapon programs or defense needs. Moreover, as DOD moves more toward a system-of- systems approach—where systems are being designed to be highly interdependent and interoperable—it is exceedingly important that each individual program stay on track. Our past work has shown that space programs have not typically achieved a match between needs and resources before starting product development. Instead, product development was often started based on a rigid set of requirements and a hope that technology would develop on a schedule. At times, even more requirements were added after the program began. When technology did not perform as planned, adding resources in terms of time and money became the primary option for solving problems, since customer expectations about the products’ performance already became hardened. For example, after starting its Advanced Extremely High Frequency (AEHF) communications satellite program, DOD substantially and frequently changed requirements. In addition, after the launch failure of one of DOD’s legacy communications satellites, DOD decided to accelerate its plans to build AEHF satellites. The contractors proposed, and DOD accepted, a high risk schedule that turned out to be overly optimistic and highly compressed, leaving little room for error and depending on a precise chain of events taking place at certain times. Moreover, at the time DOD decided to accelerate the program, it did not have funding needed to support the activities and manpower needed to design and build the satellites quicker. The effects of DOD’s inability to match needs to resources were significant. Total program cost estimates produced by the Air Force reflected an increase from $4.4 billion in January 1999 to $5.6 billion in June 2001—a difference of 26 percent. Although considered necessary, many changes to requirements were substantial, leading to cost increases of hundreds of millions of dollars because they required major design modifications. Also, schedule delays occurred when some events did not occur on time, and additional delays occurred when the program faced funding gaps. Scheduling delays eventually culminated into a 2-year delay in the launch of the first satellite. We also reported that there were still technical and production risks that need to be overcome in the AEHF program, such as a less-than-mature satellite antenna system and complications associated with the production of the system’s information security system. Another example can be found with DOD’s Space-Based Infrared System (SBIRS)–High program, which is focused on building high-orbiting satellites that can detect ballistic missile launches. Over time, costs have more than doubled for this program. Originally, total development costs for SBIRS-High were estimated at $1.8 billion. In the fall of 2001, DOD identified potential cost growth of $2 billion or more, triggering a mandatory review and recertification under 10 U.S.C. section 2433. Currently, the Air Force estimates research and development costs for SBIRS-High to be $4.4 billion. We reported that when DOD’s SBIRS-High satellite program began in 1994, none of its critical technologies were mature. Moreover, according to a DOD-chartered independent review team, the complexity, schedule, and resources needed to develop SBIRS- High, in hindsight, were misunderstood when the program began.