MDA’s mission is to develop an integrated and layered system to defend the United States and its deployed forces, friends, and allies against ballistic missile attacks. The BMDS aims to engage all ranges of ballistic missiles during all phases of flight. This challenging expectation requires complex coordination within an integrated system of defensive components—space-based sensors, surveillance and tracking radars, advanced interceptors, and a battle management, command, control, and communication component. A typical engagement scenario to defend against an intercontinental ballistic missile would occur 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 of up to 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. Some interceptors use sensors to steer themselves into the inbound ballistic missile. Inside the atmosphere, these systems kill the ballistic missile using a range of mechanisms such as direct collision between the missile and the inbound ballistic missile or killing it with the combined effects of a blast fragmentation warhead (heat, pressure, and grains/shrapnel) in cases where a direct hit does not occur. Table 1 provides a brief description of 10 BMDS elements currently under development by MDA. To manage BMDS development, MDA uses an acquisition strategy defined by a block structure. From its inception in 2002 through 2007, MDA developed BMDS capability in biennial increments, ultimately delivering two blocks—Block 2004 and Block 2006. These 2-year blocks each built on preceding blocks and enhanced the development and capability of the BMDS. However, in response to recommendations from GAO, in December 2007 MDA announced a new block structure that was intended to improve the program’s transparency, accountability, and oversight. The new blocks are not based on biennial time periods, but instead focus on fielding capabilities that address particular threats. Because the new block structure is not aligned to regular time periods, multiple blocks are underway concurrently. Table 2 details the current blocks and categories included in the BMDS block structure. MDA uses a Statement of Baselines and Goals to report modifications to established block baselines. For those blocks that are currently or will soon be underway, block baselines are created to make a firm commitment to Congress. The Statement of Goals also includes the following: BMDS Baseline Capabilities – Assets and engagement sequence groups that will be made available for fielding for a particular block. During 2008, cost baselines were under development for Block 2.0 and Block increments 3.1/3.2. MDA established schedule and performance baselines for Blocks 1.0, 2.0, 3.1, and 3.2 in 2008. BMDS Capability Goals – Assets and engagement sequence groups expected to be made available for future blocks. Adversary Benchmarks – Adversary missile systems used for block performance estimates. BMDS Budget Breakdowns – Detailed fielding, development, and integration budgets for each block and BMDS Capability Development activity. MDA also uses an incremental declaration process to designate BMDS capability for its blocks. Three capability designations are applied to all BMDS elements, their hardware and software components, and engagement sequence groups. This allows these BMDS features to play a limited role in system operations before they have attained their expected level of capability. Each capability designation in the delivery schedule represents upgraded capacity to support the overall function of BMDS in its mission as well as the level of MDA confidence in the system’s performance. The designations are defined as follows: Early Capability Delivery signifies readiness for contingency use. At this point, MDA has determined that the capability can be utilized by the BMDS. When integrated, the capability must be adequately demonstrated to build sufficient confidence that it will safely perform as intended without degrading the existing capabilities of the BMDS. Partial Capability Delivery is an intermediate state of maturity indicating that a capability has been shown through testing to perform as intended in certain scenarios. At this point, MDA is sufficiently confident that the capability can support the warfighter’s partially mission-capable objectives and logistics support is adequate to achieve defensive operations. Full Capability Delivery is the point at which a capability satisfies the BMDS block objectives and is considered to be completely mature and ready for full operational use. MDA’s capability goals for fiscal year 2008 for Blocks 1.0, 2.0, 3.1, and 3.2 are shown in table 3. MDA has not yet established baselines for total costs or unit costs, both fundamental markers that most programs use to measure progress. MDA had planned to establish total cost baselines at the element and block levels in 2008, but the initial set of total cost baselines will not be available until the spring of 2009. Similarly, MDA has not established unit costs for selected assets, such as GBIs. Consequently, for the sixth year, we have been unable to assess MDA’s overall progress on total or unit cost. While MDA plans to establish some total cost baselines in 2009, most efforts will not be captured in a baseline. MDA also plans to establish unit costs, another improvement, but is considering a narrower definition of unit cost than is used by other weapon system programs. MDA’s definition will report a subset of procurement costs called flyaway costs, which only includes the major piece of equipment and excludes all research and development as well as some procurement costs—those for support equipment and spares. Moreover, these unit costs will only be tracked within those blocks that are baselined, which will represent a minority of those assets being produced and fielded. Without total cost baselines in place, the BMDS concept continually evolves, as indicated by the number of realignments to the program of work at the individual contract level. While the changing nature of the BMDS and the lack of total cost baselines precludes analysis of total cost progress, we were able to analyze contractor fiscal year performance on the current work under the contract. We were also able to project overruns or underruns at completion for BMDS contracts using the contracts’ current budgeted costs at completion as a basis for our projections. However, in some cases, the current budgeted cost at completion changed significantly over time. In one case, the budgeted cost at completion increased by approximately five times its original value. Our analysis of fiscal year 2008 progress shows that several prime contractors exceeded budgeted costs. To provide accountability, major defense acquisition programs are required by statute to document program goals in an acquisition program baseline. MDA is not yet required to establish an acquisition program baseline because of the acquisition flexibilities it has been granted. However, Congress has enacted legislation requiring MDA to establish some baselines. Baselines serve an important discipline both by ensuring that the full cost commitment is considered before embarking on major development efforts and by identifying cost growth as a program proceeds. Since we began annual reporting on missile defense in 2004, we have been unable to assess overall progress on cost—that is, comparing BMDS baselined costs with actual costs. For example, under the prior block structure, we reported that BMDS costs grew by at least $1 billion, but the total cost growth could not be determined because MDA did not account for all costs for a given block. In response to recommendations we made in March 2008, MDA agreed to develop cost estimates and to provide independent verification for blocks outlined under its new approach. Upon conclusion of those estimates, MDA will develop cost baselines. In addition, on April 1, 2008, the Director, MDA, testified before a Senate Armed Services Subcommittee that cost baselines for the new block structure would be available by the end of 2008. As of January 2009, the agency had not yet developed full cost baselines for any blocks. MDA plans to have these cost baselines for Blocks 2.0, 3.1 and 3.2 completed, independently reviewed by DOD’s Cost Analysis Improvement Group, and released by the spring of 2009. The only information that was available for this report was limited to budget projections for BMDS blocks and capability development for fiscal years 2008 through 2013, totaling approximately $42 billion. Even with the release of some block cost estimates in 2009, all block costs will not be baselined and no date has been established for when the remaining block costs will be baselined. MDA does not plan to baseline Block 1.0 costs, but will provide the actual costs of the block since it is near completion. Full cost baselines for Block 2.0 are anticipated to be available in the spring of 2009, but only portions of Block 3.0 and none of Block 4.0 and 5.0 costs will be baselined at this time. As figure 1 shows, if MDA does complete baselines as planned, they will only cover about 26 percent of its block and capability development costs. At this point, MDA plans to baseline between 2 and 26 percent of BMDS block and capability development costs from fiscal years 2010 to 2013 as depicted above. MDA has not determined when other blocks will be baselined. If other blocks were to be baselined before 2013, the percentage of funding baselined would be increased.