There can be little doubt that we can—and must—get better outcomes from our weapon system investments. As seen in table 1, the value of these investments in recent years has been on the order of $1.5 trillion or more, making them a significant part of the Federal discretionary budget. As one can see, cost and schedule growth for DOD’s aggregate portfolio remain significant. For example, when measured against programs’ first full estimates, the total cost of the portfolio has increased by nearly $448 billion with an average delay of 28 months in initial operating capability. Also, as indicated in table 1, 42 percent of programs have had unit cost growth of 25 percent or more. On the other hand, we have recently seen some modest improvements in a large number of programs. For example, 50 of the 80 programs in the portfolio reduced their total acquisition costs over the past year. A number of these programs have improved their buying power by finding efficiencies. While these modest improvements are encouraging, the enormity of the investment in acquisitions of weapon systems and its role in making U.S. fighting forces capable, warrant continued attention and reform. The potential for savings and for better serving the warfighter argue against complacency. When one thinks of the weapon system acquisition process, the image that comes to mind is that of the methodological procedure depicted on paper and in flow charts. It is the “how to” side of acquisitions. DOD’s acquisition policy takes the perspective that the goal of acquisition is to obtain quality products that satisfy user needs in a timely manner at a fair and reasonable price. The sequence of events that comprise the process defined in policy reflects principles from disciplines such as systems engineering, as well as lessons learned and past reforms. The body of work we have done on benchmarking best practices has also been reflected in acquisition policy. Recent, significant changes to the policy include those introduced by the Weapon Systems Acquisition Reform Act of 2009 and the Department’s own “Better Buying Power” initiatives which, when fully implemented, should further strengthen practices that can lead to successful acquisitions. The policy provides a framework for developers of new weapons to gather knowledge at appropriate stages that confirms that their technologies are mature, their designs are stable, and their production processes are in control. These steps are intended to ensure that a program will deliver the capabilities required utilizing the resources—cost, schedule, technology, and personnel—available. Successful product developers ensure a high level of knowledge is achieved at key junctures in development. We characterize these junctures as knowledge points. While there can be differences of opinion over some of the specifics of the process, I do not believe there is much debate about the soundness of the basic steps. It is a clear picture of “what to do.” Table 2 summarizes these steps and best practices, organized around three key knowledge points in a weapon system acquisition. Our work over the last few years shows that, to the extent reforms like the Weapon Systems Acquisition Reform Act and DOD’s Better Buying Power initiatives are being implemented, they are having a positive effect on individual programs. For example, we found that over 80 percent of the 38 programs included in our annual assessment of weapon programs this year had conducted a “should-cost” analysis—one of DOD’s Better Buying Power initiatives—and reported an anticipated savings of approximately $24 billion, with more than half of this amount to be reallocated to meet other DOD priorities. In addition, we recently reviewed several programs to determine the impact of the Weapon Systems Acquisition Reform Act and found that the programs are: making early tradeoffs among cost, schedule, and technical developing more realistic cost and schedule estimates, increasing the amount of testing during development, and placing greater emphasis on reliability. These improvements do not yet signify a trend or suggest that a corner has been turned and, in fact, we found in our annual assessment of programs that most are not yet fully following a knowledge-based acquisition approach. The reforms themselves still face implementation challenges, such as staffing and clarity of guidance and will doubtless need refining as experience is gained. We have made a number of recommendations on how DOD can improve implementation of the Weapon Systems Acquisition Reform Act. To a large extent, the improvements we have seen tend to result from external pressure exerted by higher level offices within DOD on individual programs. In other words, the reforms have not yet been institutionalized within the services. We still see employment of other practices—not prescribed in policy—such as concurrent testing and production, optimistic assumptions, and delayed testing. These are the same kinds of practices that perpetuate the significant cost growth and schedule delays that have persisted in acquisitions through the decades. They share a common dynamic: moving forward with programs before the knowledge needed to reduce risk and make those decisions is sufficient. We have found that programs proceed through the critical design review without having a stable design, although we have made recommendations on the importance of this review and how to prepare for it. Programs also proceed with testing and production before they are ready. The F-35 Joint Strike Fighter program is a classic example of how concurrency can erode the cost and schedule of an acquisition. Further, some programs are significantly at odds with the acquisition process. Among these I would number the Ballistic Missile Defense System, Littoral Combat Ship, and airships. We also recently reported on the Unmanned Carrier-Launched Airborne Surveillance and Strike program which proposes to complete the main acquisition steps of design, development, testing, manufacturing, and initial fielding before it formally enters the acquisition process. The fact that programs adopt practices that run counter to what policy and reform call for is evidence of the other pressures and incentives that significantly influence program practices and outcomes. I will turn to these next. An oft-cited quote of David Packard, former Deputy Secretary of Defense, is: “We all know what needs to be done. The question is why aren’t we doing it?” To that point, reforms have been aimed mainly at the “what” versus the “why.” They have championed sound management practices, such as realistic estimating, thorough testing, and accurate reporting. Reforms have also added program decision points, reviews, and reporting requirements to help ensure these practices are used. We need to consider that these reforms mainly address the mechanisms of weapon acquisitions. Seen this way, the practices prescribed in policy are only partial remedies. The acquisition of weapons is much more complex than this and involves very basic and strongly reinforced incentives to pursue weapons that are not always feasible and affordable. Accordingly, rival practices, not normally viewed as good management techniques, comprise an effective stratagem for fielding a weapon because they reduce the risk that the program will be interrupted or called into question. I will now discuss several factors that illustrate the pressures that create incentives to deviate from sound acquisition management practices. A key cause of poor acquisition outcomes is the mismatch between the validated capability requirements for a new weapon system and the appropriate systems engineering knowledge, funding, and time that is planned to develop that new system. DOD’s three key decision making processes for acquiring weapon systems—requirements determination, resource allocation, and the acquisition management system—are fragmented, making it difficult for the department to achieve a balanced mix of weapon systems that are achievable and affordable and provide the best military value to the warfighter when the warfighter needs them. In addition, these processes are led by different organizations, making it difficult to hold any one person or organization accountable for saying “no” to an unrealistic requirement or for tempering optimistic cost and schedule estimates. While the department has worked hard to overcome this fragmented decision making paradigm and policies have been written to force more integrated decisions and more accountability, we continue to see programs that have experienced cost and schedule growth. This is because weapon system programs often begin with validated requirements that have not been informed by solid systems engineering practices, often do not represent true “needs” as much as “desires,” have optimistic cost and schedule estimates, and, all too often, are unachievable. Program managers are handed a business case that can be fatally flawed, and usually have no recourse other than to execute it as best they can and therefore cannot be held accountable. The process of planning and executing the program is (1) shaped by many different participants and (2) far more complex than the seemingly straightforward purchase of equipment to defeat an enemy threat. Collectively, as participants’ needs are translated into actions on weapon programs, the purpose of such programs transcends efficiently filling voids in military capability. Weapons have become integral to policy decisions, definitions of roles and functions, justifications of budget levels and shares, service reputations, influence of oversight organizations, defense spending in localities, the industrial base, and to individual careers. Consequently, the reasons “why” a weapon acquisition program is started are manifold and thus acquisitions do not merely provide technical solutions. While individual participants see their needs as rational and aligned with the national interest, collectively, these needs create incentives for pushing programs and encouraging undue optimism, parochialism, and other compromises of good judgment. Under these circumstances, persistent performance problems, cost growth, schedule slippage, and difficulties with production and field support cannot all be attributed to errors, lack of expertise, or unforeseeable events. Rather, a level of these problems is embedded as the undesirable, but apparently acceptable, consequence of the process. These problems persist not because they are overlooked or under-regulated, but because they enable more programs to survive and thus more needs to be met. The problems are not the fault of any single participant; they are the collective responsibility of all participants. Thus, the various pressures that accompany the reasons why a program is started can also affect and compromise the practices employed in its acquisition. There are several characteristics about the way programs are funded that create incentives in decision-making that can run counter to sound acquisition practices.