SPAWAR is one of the Navy’s three major acquisition commands. SPAWAR provides information technology systems to naval forces on land, at sea, and in space and integrates all information products, including those developed by other systems commands and agencies outside the Navy. The SPAWAR workforce is over 7,300 personnel, and the fiscal year 2000 budget was $3.7 billion—about $2.7 billion to develop and procure systems and about $1.0 billion to operate and maintain them. Specifically, SPAWAR develops, acquires, and manages battle management systems (for example, software applications and undersea, terrestrial, and space sensors (for example, underwater sensors, navigation and weather systems, and satellites); information transfer systems (for example, communications systems, radios, antennas, and switches); and information management systems (for example, local area networks and routers). As of October 2000, SPAWAR was managing 21 programs that involved low-rate initial production. These programs had cumulative low-rate initial procurements ranging from 5 to 100 percent of the total inventory objective—7 systems were above 50 percent. The estimated total production costs for the eight systems we analyzed in detail ranged from $31 million to $525 million. As weapon system programs move through the phases of the acquisition process, they are subject to review at major decision points called milestones. Major defense acquisition programs, known as acquisition category I, and major systems programs, known as acquisition category II,as well as non-major systems programs, known as acquisition category III and IV, follow the same general process. DOD and Navy acquisition policies state that program risks shall be assessed at each milestone decision point before approval is granted for the next phase. The policies add that test and evaluation shall be used to determine system maturity and identify areas of technical risk. Major milestones in DOD’s systems acquisition process include Milestone 0, when the determination is made about whether an identified mission need warrants a study of alternative concepts to satisfy the need. If warranted, the program is approved to begin the concept exploration and definition phase. Milestone I, when the determination is made about whether a new acquisition program is warranted. If so, initial cost, schedule, and performance goals are established for the program, and authorization is given to start the demonstration and validation phase. Milestone II, when the determination is made about whether continuation of development, testing, and preparation for production is warranted. If so, authorization is given to start the engineering and manufacturing development phase. Approval of this phase will often involve a commitment to low-rate initial production, which is defined as the minimum quantity needed to (1) provide production- representative articles for operational testing and evaluation, (2) establish an initial production base, and (3) permit orderly ramp-up to full-rate production upon completion of operational testing and evaluation. Operational test and evaluation is a key internal control to ensure that decisionmakers have objective information available on a weapon system’s performance to minimize risks of procuring costly and ineffective systems. Operational testing and evaluation uses field tests under realistic conditions to determine the operational effectiveness and suitability of a system for use in combat. DOD acquisition regulations generally provide that programs successfully complete these tests before starting full-rate production. Milestone III, when operational test and evaluation has been completed, a determination is made about whether to proceed to full- rate production and field the system. Over the years, we have found instances in which DOD used the low-rate initial production decision phase to purchase significant numbers of major and non-major systems without successfully completing operational testing and evaluation. Often, these systems later experienced significant effectiveness and/or suitability problems. In 1994, we reported that DOD had made large buys of weapon systems during the low-rate initial production phase and prior to completion of operational test and evaluation, which resulted in operational problems. For example, we reported that the Navy procured 100 percent of a system’s inventory objective during low-rate initial production and later found that the system lacked critical hardware and software capabilities. In another case, the Navy procured 100 percent of a system’s inventory objective during low- rate initial production and later terminated the program when it failed operational testing and evaluation. A recent Defense Science Board report found that weapons systems are still being fielded without adequate testing to assure their effectiveness and utility to operating units. We conducted this review because buying systems before completing operational testing has inherent risks, and SPAWAR’s practice of buying high percentages of a system’s total inventory objective during low-rate initial production raised these risk concerns. SPAWAR officials cited three primary reasons for high-percentage buys during low-rate initial production. First, to meet Navy initiatives, SPAWAR must provide the fleet with large quantities of information technology systems as quickly as possible. Second, many information systems consist of evolving technology that quickly becomes obsolete. Third, additional low-rate initial production buys are approved due to delays in conducting the operational test and evaluation. The main reason that SPAWAR officials cited for high-percentage buys during low-rate initial production is the need to provide as many information technology systems to the fleet as quickly as possible to meet several Navy initiatives. The Navy’s current vision for the 21st century, Forward From The Sea, involves innovations in technology to rapidly transform the Navy into a 21st century force. SPAWAR provides or contributes to many of the operational capabilities that support the vision. Officials in the Chief of Naval Operations’ Fleet and Allied Requirements Division stated that the fleets put pressure on SPAWAR to provide information systems faster. These officials, as well as SPAWAR officials, contend that if SPAWAR does not provide systems to the fleet quickly, then the fleet will bypass the Chief of Naval Operations and SPAWAR and procure some systems with fleet funding. If the fleet buys the systems, SPAWAR cannot control the configuration of these systems, which can eventually result in interoperability problems with systems that SPAWAR procures. An official in the Office of the Deputy Assistant Secretary of the Navy responsible for communications and space systems also agreed that there is pressure on SPAWAR to meet fleet demands. He said that the Under Secretary of Defense for Acquisition, Technology, and Logistics stated about 3 years ago that the pace of developing systems was too slow and called for shortening the development cycle by incorporating evolutionary development and acquisition. Through evolutionary development and acquisition, systems are continuously improved, as new technology becomes available. According to the SPAWAR commander, another reason for quickly providing systems to the fleet is that information systems consist of rapidly advancing technology, which can become obsolete within 18 months. He said that procuring and fielding a large percentage of a system’s inventory objective while still in low-rate initial production quickly provide the fleet with better information systems and provide important operational data so that any system performance problems can be quickly fixed. Officials in the Navy Fleet and Allied Requirements Division said that the 18-month obsolescence cycle is the main reason that the fleet would rather have a system now with 75 to 80 percent of its full capability as opposed to waiting until the system has all of its capability. However, officials in the Chief of Naval Operations’ Office of Test, Evaluation, and Technology Requirements disputed that rapidly advancing technology is a legitimate reason for making high-percentage buys during low-rate initial production and before completing operational testing. These officials concluded that making high-percentage buys during low- rate initial production circumvents the operational testing and evaluation process and increases the risk that systems will not work as intended when fielded. High-percentage buys during low-rate initial production also were the result of delays in conducting the operational test and evaluation. According to the SPAWAR commander, the pass or fail nature of operational testing contributed to delays. Rather than fail a test and risk program reduction or termination, operational tests were delayed until there was a good probability that the system would pass the tests. As tests were delayed, additional low-rate initial production buys were approved. Six of the eight systems we analyzed had additions to the original low-rate initial production quantities. The SPAWAR commander said that making high-percentage buys of a system while still in low-rate initial production is low risk when proven commercial technology items are being procured and they are relatively low-cost items—when compared to the cost of ships and aircraft. Further, if problems arise after the low-rate initial production systems are fielded, the cost to fix them is not significant. However, SPAWAR officials agreed that none of the eight systems we analyzed are entirely commercial and that all of them have military requirements that must be tested in a realistic operational environment. The DOD Director of Operational Test and Evaluation agreed that low-rate initial production items can be used in an operational environment to learn about problems and fix them, but he said that procuring large quantities of a system before operational test and evaluation is a risky strategy. We analyzed eight SPAWAR systems and found seven of them had a combination of problems that adversely affected fleet operations—all had performance problems, all had interoperability problems, and six had suitability problems. A performance problem is the inability of a system to effectively and efficiently perform its assigned mission. An interoperability problem is the inability of systems to work together effectively to provide services to and accept services from other systems. A suitability problem involves a system not satisfactorily meeting one or more requirements, including reliability, maintainability, logistics support, or training. These problems may delay progress in achieving the Navy’s vision for using information technology to attain and maintain network-centric warfighting knowledge and decision-making superiority. The last of the eight systems had not been installed when we analyzed the eight systems. Table 1 illustrates the types of problems identified for seven of the eight systems.