DOD is not receiving expected returns on its large investment in weapon systems. The total acquisition cost of DOD’s 2007 portfolio of major programs under development or in production has grown by nearly $300 billion over initial estimates. While DOD is committing substantially more investment dollars to develop and procure new weapon systems, our analysis shows that the 2007 portfolio is experiencing greater cost growth and schedule delays than the fiscal years 2000 and 2005 portfolios (see table 1). Total acquisition costs for programs in DOD’s fiscal year 2007 portfolio have increased 26 percent from first estimates—compared to a 6-percent increase for programs in its fiscal year 2000 portfolio. Total RDT&E costs for programs in 2007 have increased by 40 percent from first estimates, compared to 27 percent for programs in 2000. The story is no better when expressed in unit costs. Schedule delays also continue to impact programs. On average, the current portfolio of programs has experienced a 21-month delay in delivering initial operational capability to the warfighter, and 14 percent are more than 4 years late. Continued cost growth results in less funding being available for other DOD priorities and programs, while continued failure to deliver weapon systems on time delays providing critical capabilities to the warfighter. Put simply, cost growth reduces DOD’s buying power. As program costs increase, DOD must request more funding to cover the overruns, make trade-offs with existing programs, delay the start of new programs, or take funds from other accounts. Delays in providing capabilities to the warfighter result in the need to operate costly legacy systems longer than expected, find alternatives to fill capability gaps, or go without the capability. The warfighter’s urgent need for the new weapon system is often cited when the case is first made for developing and producing the system. However, DOD has already missed fielding dates for many programs and many others are behind schedule. Over the past several years our work has highlighted a number of underlying systemic causes for cost growth and schedule delays both at the strategic and at the program level. At the strategic level, DOD’s processes for identifying warfighter needs, allocating resources, and developing and procuring weapon systems—which together define DOD’s overall weapon system investment strategy—are fragmented and broken. At the program level, the military services propose and DOD approves programs without adequate knowledge about requirements and the resources needed to successfully execute the program within cost, schedule, and performance targets. DOD largely continues to define war fighting needs and make investment decisions on a service-by-service basis, and assess these requirements and their funding implications under separate decision-making processes. While DOD’s requirements process provides a framework for reviewing and validating needs, it does not adequately prioritize those needs and is not agile enough to meet changing warfighter demands. Ultimately, the process produces more demand for new programs than available resources can support. This imbalance promotes an unhealthy competition for funds that encourages programs to pursue overly ambitious capabilities, develop unrealistically low cost estimates and optimistic schedules, and to suppress bad news. Similarly, DOD’s funding process does not produce an accurate picture of the department’s future resource needs for individual programs—in large part because it allows programs to go forward with unreliable cost estimates and lengthy development cycles—not a sound basis for allocating resources and ensuring program stability. Invariably, DOD and the Congress end up continually shifting funds to and from programs—undermining well-performing programs to pay for poorly performing ones. At the program level, the key cause of poor outcomes is the consistent lack of disciplined analysis that would provide an understanding of what it would take to field a weapon system before system development. Our body of work in best practices has found that an executable business case is one that provides demonstrated evidence that (1) the identified needs are real and necessary and that they can best be met with the chosen concept and (2) the chosen concept can be developed and produced within existing resources—including technologies, funding, time, and management capacity. Although DOD has taken steps to revise its acquisition policies and guidance to reflect the benefits of a knowledge- based approach, we have found no evidence of widespread adoption of such an approach in the department. Our most recent assessment of major weapon systems found that the vast majority of programs began development with unexecutable business cases, and did not attain, or plan to achieve, adequate levels of knowledge before reaching design review and production start—the two key junctures in the process following development start (see figure 2). Knowledge gaps are largely the result of a lack of disciplined systems engineering analysis prior to beginning system development. Systems engineering translates customer needs into specific product requirements for which requisite technological, software, engineering, and production capabilities can be identified through requirements analysis, design, and testing. Early systems engineering provides knowledge that enables a developer to identify and resolve gaps before product development begins. Because the government often does not perform the proper up-front analysis to determine whether its needs can be met, significant contract cost increases can occur as the scope of the requirements change or become better understood by the government and contractor. Not only does DOD not typically conduct disciplined systems engineering prior to beginning system development, it has allowed new requirements to be added well into the acquisition cycle. The acquisition environment encourages launching ambitious product developments that embody more technical unknowns and less knowledge about the performance and production risks they entail. A new weapon system is not likely to be approved unless it promises the best capability and appears affordable within forecasted available funding levels. We have recently reported on the negative impact that poor systems engineering practices have had on several programs such as the Global Hawk Unmanned Aircraft System, F-22A, Expeditionary Fighting Vehicle, Joint Air-to-Surface Standoff Missile and others. With high levels of uncertainty about technologies, design, and requirements, program cost estimates and related funding needs are often understated, effectively setting programs up for failure. We recently compared the service and independent cost estimates for 20 major weapon system programs and found that the independent estimate was higher in nearly every case, but the difference between the estimates was typically not significant. We also found that both estimates were too low in most cases, and the knowledge needed to develop realistic cost estimates was often lacking. For example, program Cost Analysis Requirements Description documents—used to build the program cost estimate—are not typically based on demonstrated knowledge and therefore provide a shaky foundation for estimating costs. Cost estimates have proven to be off by billions of dollars in some of the programs we reviewed. For example, the initial Cost Analysis Improvement Group estimate for the Expeditionary Fighting Vehicle program was about $1.4 billion compared to a service estimate of about $1.1 billion, but development costs for the system are now expected to be close to $3.6 billion. Estimates this far off the mark do not provide the necessary foundation for sufficient funding commitments and realistic long-term planning. When DOD consistently allows unsound, unexecutable programs to pass through the requirements, funding, and acquisition processes, accountability suffers. Program managers cannot be held accountable when the programs they are handed already have a low probability of success. In addition, they are not empowered to make go or no-go decisions, have little control over funding, cannot veto new requirements, and they have little authority over staffing. At the same time, program managers frequently change during a program’s development. Limiting the length of development cycles would make it easier to more accurately estimate costs, predict the future funding needs, effectively allocate resources, and hold decision makers accountable. We have consistently emphasized the need for DOD’s weapon programs to establish shorter development cycles. DOD’s conventional acquisition process often requires as many as 10 or 15 years to get from program start to production. Such lengthy cycle times promote program instability—especially when considering DOD’s tendency to change requirements and funding as well as leadership. Constraining cycle times to 5 or 6 years would force programs to conduct more detailed systems engineering analyses, lend itself to fully funding programs to completion, and thereby increasing the likelihood that their requirements can be met within established time frames and available resources. An assessment of DOD’s acquisition system commissioned by the Deputy Secretary of Defense in 2006 similarly found that programs should be time-constrained to reduce pressure on investment accounts and increase funding stability for all programs. Our work shows that acquisition problems will likely persist until DOD provides a better foundation for buying the right things, the right way. This involves (1) maintaining the right mix of programs to invest in by making better decisions as to which programs should be pursued given existing and expected funding and, more importantly, deciding which programs should not be pursued; (2) ensuring that programs that are started can be executed by matching requirements with resources and locking in those requirements; and (3) making it clear that programs will then be executed based on knowledge and holding program managers responsible for that execution. We have made similar recommendations in past GAO reports, but DOD has disagreed with some and not fully implemented others. These changes will not be easy to make. They will require DOD to reexamine not only its acquisition process, but its requirement setting and funding processes as well. They will also require DOD to change how it views program success, and what is necessary to achieve success. This includes changing the environment and incentives that lead DOD and the military services to overpromise on capability and underestimate costs in order to sell new programs and capture the funding needed to start and sustain them. Finally, none of this will be achieved without a true partnership among the department, the military services, the Congress, and the defense industry. All of us must embrace the idea of change and work diligently to implement it. The first, and most important, step toward improving acquisition outcomes is implementing a new DOD-wide investment strategy for weapon systems.