Today we are at a key crossroad. In the next few decades, the nation will be struggling with a large and growing structural deficit. At the same time, however, weapons programs are commanding larger budgets as DOD undertakes increasingly ambitious efforts to transform its ability to address current and potential future conflicts. These costly current and planned acquisitions are running head-on into the nation’s unsustainable fiscal path. In the past 5 years, DOD has doubled its planned investments in weapons systems, but this huge increase has not been accompanied by more stability, better outcomes, or more buying power for the acquisition dollar. Rather than showing appreciable improvement, programs are experiencing recurring problems with cost overruns, missed deadlines, and performance shortfalls. As I have testified previously, our nation is on an imprudent and unsustainable fiscal path. Budget simulations by GAO, the Congressional Budget Office, and others show that, over the long term, we face a large and growing structural deficit due primarily to known demographic trends, rising health care costs, and lower federal revenues as a percentage of the economy. Continuing on this path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our national security. Federal discretionary spending, along with other federal policies and programs, will face serious budget pressures in the coming years stemming from new budgetary demands and demographic trends. Defense spending falls within the discretionary spending accounts. Further, current military operations, such as those in Afghanistan and Iraq, consume a large share of DOD budgets and are causing faster wear on existing weapons. Refurbishment or replacement sooner than planned is putting further pressure on DOD’s investment accounts. It is within this context that we must engage in a comprehensive and fundamental reexamination of new and ongoing investments in our nation’s weapons systems. Weapons systems are one of the single largest investments the federal government makes. In the last 5 years, DOD has doubled its planned investments in new systems from about $700 billion in 2001 to nearly $1.4 trillion in 2006. Annual procurement totals are expected by DOD to increase from about $75 billion to about $100 billion during 2006 to 2011. At the same time DOD is facing future budget constraints, programs are seeking larger budgets. To illustrate, the projected cost of DOD’s top five programs in fiscal year 2001 was about $291 billion. In 2006, it was $550 billion. A primary reason why budgets are growing is that DOD is undertaking new efforts that are expected to be the most expensive and complex ever. Moreover, it is counting on these efforts to enable transformation of military operations. The Army, for example, is undertaking the Future Combat Systems (FCS) program in order to enable its combat force to become lighter, more agile, and more capable. FCS is comprised of a family of weapons, including 18 manned and unmanned ground vehicles, air vehicles, sensors, and munitions, which will be linked by an information network. These vehicles, weapons, and equipment will comprise the majority of the equipment needed for a brigade combat team in the future. When considering complementary programs, projected investment costs for FCS are estimated on the order of $200 billion. Affordability of the FCS programs depends on two key assumptions. First, the program must proceed without exceeding its currently projected costs. Second, FCS has expected large annual procurement costs beginning in 2012. FCS procurement will represent 60 to 70 percent of Army procurement from fiscal years 2014 to 2022. As the Army prepares the next Defense Plan, it will face the challenge of allocating sufficient funding to meet increasing needs for FCS procurement in fiscal years 2012 and 2013. If all the needed funding cannot be identified, the Army will have to consider reducing the FCS procurement rate or delaying or reducing items to be spun out to current Army forces. At the same time, the Air Force is undertaking two new satellite programs that are expected to play a major role in enabling FCS and other future systems. The Transformational Satellite Communications System, which is to serve as a linchpin in DOD’s future communications network, and Space Radar, which is focused on generating volumes of radar imagery data for transmission to ground-, air-, ship-, and space-based systems. Together, these systems are expected to cost more than $40 billion. The Department has also been focused on modernizing its tactical aircraft fleet. These efforts include the Joint Strike Fighter (JSF) aircraft program, currently expected to cost more than $200 billion, and the Air Force’s F-22A Raptor aircraft, expected to cost more than $65 billion. Concurrently, the Navy is focused on acquiring new ships and submarines with significantly advanced designs and technologies. These include the Virginia Class Submarine, expected to cost about $80 billion, and the DDG- 51 class destroyer ship, expected to cost some $70 billion, and the newer DD(X) destroyer program, which is focused on providing advanced land attack capability in support of forces ashore and to contribute to U.S. military dominance in the shallow coastal water environment. The Navy shipbuilding plan requires more funds than may reasonably be expected. Specifically, the plan projects a supply of shipbuilding funds that will double by 2011 and will stay at high levels for years to follow. Despite doubling its investment the past 5 years, our assessments do not show appreciable improvement in DOD’s management of the acquisition of major weapons systems. A large number of the programs included in our annual assessment of weapons systems are costing more and taking longer to develop than estimated. It is not unusual to see development cost increases between 30 percent and 40 percent and schedule delays of approximately 1, 2 or more years. The consequence of cost and cycle-time growth is manifested in a reduction of buying power of the defense dollar—causing programs to either cut back on planned quantities, capabilities, or to even scrap multi- billion dollar programs, after years of effort, in favor of pursing more promising alternatives. Figure 1 illustrates seven programs with a significant reduction in buying power; we have reported similar outcomes in many more programs. This is not to say that the nation does not get superior weapons in the end, but that at currently projected twice the level of investment, DOD has an obligation to get better results. Furthermore, the conventional acquisition process is not agile enough to meet today’s demands. Congress has expressed concern that urgent warfighting requirements are not being met in the most expeditious manner and has put in place several authorities for rapid acquisition to work around the process. The U.S. Joint Forces Command’s Limited Acquisition Authority and the Secretary of Defense’s Rapid Acquisition Authority seek to get warfighting capability to the field quicker. According to U.S. Joint Forces Command officials, it is only through Limited Acquisition Authority that the command has had the authority to satisfy the unanticipated, unbudgeted, urgent mission needs of other combatant commands. With a formal process that requires as many as 5, 10, or 15 years to get from program start to production, such experiments are needed to meet the warfighters’ needs. Our reviews have identified a number of causes behind the problems just described, but several stand out. First, DOD starts more weapons programs than it can afford and sustain, creating a competition for funding that encourages low cost estimating, optimistic scheduling, over promising, and suppressing of bad news. Programs focus on advocacy at the expense of realism and sound management. Invariably, with too many programs in its portfolio, DOD and the Congress are forced to continually shift funds to and from programs—undermining well-performing programs to pay for poorly performing ones. Adding pressure to this environment are changes that have occurred within the defense supplier base. Twenty years ago, there were more than 20 fully competent prime contractors competing for multiple new programs annually; today, there are only 6 that compete for considerably fewer programs, according to a recent DOD- commissioned study. This adds pressure on DOD to keep current suppliers in business and limits DOD’s ability to maximize competition. Second, DOD has exacerbated this problem by not clearly defining and stabilizing requirements before programs are started. At times, in fact, it has allowed new requirements to be added well into acquisition cycle— significantly stretching technology and creating design challenges, and exacerbating budget overruns. For example, in the F-22A program, the Air Force added a requirement for air-to-ground attack capability. In its Global Hawk program, the Air Force added both signals intelligence and imagery intelligence requirements. While experience would caution DOD not to pile on new requirements, customers often demand them fearing there may not be another chance to get new capabilities since programs can take a decade or longer to complete. Yet, perversely, such strategies delay delivery to the warfighter, oftentimes by years. Third, DOD commits to its programs before it obtains assurance that the capabilities it is pursuing can be achieved within available resources and time constraints. Funding processes encourage this approach, since acquisition programs attract more dollars than efforts concentrating solely on proving out technologies. Nevertheless, when DOD chooses to extend technology invention into acquisition, programs experience technical problems that have reverberating effects and require large amounts of time and money to fix. When programs have a large number of interdependencies, even minor technical “glitches” can cause disruptions. Only 10 percent of the programs in our latest annual assessment of weapons systems had demonstrated critical technologies to best practice standards at the start of development; and only 23 percent demonstrated them to DOD’s standards. The cost effect of proceeding without completing technology development before starting an acquisition can be dramatic.