The $17.9 billion THAAD is a ground-based weapon system being developed by the Ballistic Missile Defense Organization (BMDO) and the Army to defeat theater ballistic missiles. It supports the national objective of protecting U.S. and allied deployed forces, population centers, and industrial facilities from theater missile attacks. The THAAD system consists of four major components: (1) truck-mounted launchers, (2) interceptors, (3) the radar system, and (4) the battle management/command, control, communication, computer, and intelligence (BM/C4I) system. The launcher is to provide rapid reload of interceptors. Each interceptor is to consist of a single stage booster and a kill vehicle that is designed to autonomously home on an enemy missile during the last phase of interceptor flight and destroy the missile by colliding with it, called “hit-to-kill.” The radar is being designed to support the full range of surveillance, target tracking, and fire control functions and provide a communications link with THAAD interceptors in flight. The BM/C4I system is to manage and integrate all THAAD components and link the THAAD system to other missile defense systems to support an interoperable theater missile defense architecture. Figure 1 shows THAAD as the upper tier in a two-tier theater missile defense architecture. The THAAD program has undergone two major revisions. One revision delayed fielding from fiscal year 2002 until 2006 and was the result of DOD reducing planned funding by about $2 billion during the fiscal year 1997 budget process. The delay increased total system cost from $16.8 billion to $17.9 billion, or by $1.1 billion. The other revision accompanied DOD’s fiscal year 1998 budget request and involved accelerating fielding to fiscal year 2004 by adding a total of $722 million for fiscal years 1998 through 2003. To date, the Army has conducted four THAAD intercept tests. All four attempts failed. After the system failed the fourth attempt to intercept its target in March 1997, the Director, BMDO, established two independent teams to assess program requirements. One team was to determine if the system design can meet warfighter needs; and the other team was to evaluate the interceptor design and quality assurance. According to a THAAD project office representative, the teams’ results are to be used to revise the THAAD acquisition plan. BMDO’s current schedule calling for award of the low-rate initial production contract almost 2 years before the start of operational testing and evaluation increases the risk associated with the THAAD program. The Director, BMDO, acknowledged that the initial THAAD schedule was high risk and contributed to THAAD development problems. In May 1997, he stated that THAAD’s aggressive schedule led to problems probably traceable to “hurry up.” The THAAD Project Manager informed us that both the contractor and the project office were overly optimistic regarding the test schedule. In addition, he pointed out that, in hindsight, additional component testing could have prevented some test flight failures. Prior to the last test flight, the number of test flights planned as the basis for entering the engineering and manufacturing development phase was reduced from 20 to 9 flights partly to stay on schedule. DOD established three successful intercepts as the criterion for THAAD entering the engineering and manufacturing development phase. Figure 2 shows the most current approved THAAD schedule for operational testing and production of units for deployment. The figure shows that contract award of the low-rate initial production contract will precede the start of operational testing and evaluation by almost 2 years. In light of recent test failures, the THAAD program is being revised. While BMDO and DOD have not yet approved a revision to the THAAD acquisition plan and schedule, a proposed plan currently being discussed within the Army, BMDO, and DOD would equip the first unit in fiscal year 2006. However, that proposed plan still calls for significant low-rate initial production before operational testing. According to 10 U.S.C. 2400, low-rate initial production is the minimum quantity needed to (1) provide weapons for operational test and evaluation, (2) establish an initial production base for the weapon, and (3) permit an orderly increase in production before full-rate production begins. With regard to the need for weapons used in operational test and evaluation, THAAD equipment produced during low-rate initial production is currently intended for deployment to operational units rather than for use in operational test and evaluation. The low-rate initial production contract was scheduled for award almost 2 years before beginning operational testing to assess operational effectiveness. During low-rate initial production, the Army plans to produce significantly more than the amount of THAAD system components needed to equip the first deployed unit (battery). For example, the first deployed unit is to consist of 9 launchers, 72 interceptors, 1 radar, and 3 BM/C4I systems. But the plan calls for production under the low-rate initial production contract of 32 launchers, 253 interceptors, and 3 radars. Of the 253 interceptors, 234 are planned for deployment and 19 are planned for production verification and reliability testing. The 234 interceptors are more than three times the number needed to equip the first fielded unit and would represent about 20 percent of the total 1,178 interceptors planned for full deployment. Concerning the other two purposes of low-rate initial production—establishing an initial production base and permitting an orderly increase in production before full-rate production begins—we believe that starting production of significant quantities of an unproven system 2 years before beginning operational testing increases risk. If the production line prove-out and ramp-up were delayed until after the completion of sufficient independent testing in an operational environment, initial quantities of unproven systems would be reduced and additional funding would become available to buy the proven systems at more efficient rates. As we previously reported, DOD often budgets available funding for unnecessary increases in low-rate production quantities of unproven weapons whose designs are not yet stabilized with the result that it is unable to buy proven weapons at originally planned full rates because of insufficient funds. The Army’s latest approved THAAD acquisition plan calls for initial fielding in fiscal year 2004. Under this schedule, a contract is to be awarded early in the engineering and manufacturing development phase to produce components for operational testing and later a $1.2-billion low-rate initial production contract for production of system components for deployment. In prior reports, we pointed out that an aggressive schedule is also the basis for the Army’s current plans to procure prototype interceptors well before it knows whether the interceptors will be operationally effective. According to a representative from the Office of the Director, Operational Test and Evaluation, several flight tests against targets having a range of more than 2,000 kilometers will be required during developmental and operational testing to validate THAAD’s operational effectiveness against longer range missiles. Because the velocity of attacking missiles increases with range, longer range targets represent a more formidable threat than shorter range targets. In addition, the longer range targets generally represent attacking missiles having a different flight trajectory than shorter range targets. Seven longer range THAAD flight tests are being planned by the Army Space and Strategic Defense Command’s Targets Office with an eighth target as a spare. A suitable longer range target does not exist. The Storm and Hera targets used in THAAD testing, to date, have only a maximum range of about 750 and 1,100 kilometers, respectively, rather than the roughly 2,000 kilometers needed. According to the Targets Office Product Manager, numerous studies were conducted between 1992 and 1997 to determine the best options for longer range theater missile defense targets. The options studied included land/sea-launched and air-launched/dropped targets. According to Army officials, however, the use of longer range target options and target launching platforms is limited by the 1991 Strategic Arms Reduction Talks and 1987 Intermediate Range Nuclear Forces Treaties. This makes selection of a longer range target more difficult. As of June 1997, BMDO had not selected a specific longer range target solution. In testimony on May 15, 1997, before the Subcommittee on Military Research and Development, House Committee on National Security, the Under Secretary of Defense for Acquisition and Technology acknowledged that targets built for lower tier systems simulate the short-range threat but do not provide the greater range targets that are needed for upper tier theater missile defense systems such as THAAD. The Under Secretary noted that BMDO had recently completed a study of long-range target alternatives to determine the best treaty compliant, cost effective, and flexible solution. The study recommended an air-launched target that would support testing of both Army and Navy upper tier theater missile defense systems. The Under Secretary stated that BMDO would examine the technical and programmatic feasibility of the air-launched concept in 1997. The Acting Director, BMDO Test and Evaluation Directorate, has advised us that longer range targets for THAAD are now a pressing need. While the specific target concept has not been defined, the Acting Director stated that about $55 million would be required to develop the target between fiscal years 1999 and 2001. Production of eight longer range THAAD targets is estimated to cost another $56 million to $72 million. BMDO expects to develop a more precise estimate in late fiscal year 1997. However, funding to develop and produce a longer range target for the system is not currently contained in DOD’s future years funding plan for fiscal years 1999 through 2003. The current THAAD program review and evaluation provides DOD with an opportunity to (1) reduce risk in the acquisition program and minimize the number of initial quantities of unproven systems by reexamining the schedules for operational testing and production and (2) ensure that realistic targets will be used for testing.