Strategic Missiles

Citing the dissolution of the Soviet Union and the reduced nuclear threat, the President announced in January 1992 an end to production of the Advanced Cruise Missile. The Defense Department plans to cap procurement at 640 missiles, including the purchase of 120 missiles authorized for fiscal year 1992. In GAO's view, however, the purchase of the additional 120 missiles may be unnecessary. While the Air Force plans to buy no more than 520 missiles, the Defense Department had not concurred with this decision as of April 1992. A major consideration by the Air Force in limiting procurement to 520 missiles was its need to find funding to cover prior-year missile contract funding shortfalls. The shortfalls, estimated at $121.2 million, mainly arose from the suspension of deliveries while design and quality problems were being resolved. The Air Force, having determined that enough prior-year funds were not available to cover the shortfalls, partially terminated the contract for fiscal year 1987 and 1988 missiles. The Air Force immediately awarded a new letter contract to continue the work that was being done under the partially terminated contract and used funds appropriated for fiscal year 1992. GAO is concerned about the potential for cost increases, as well as the legal and programmatic issues that may arise from these actions. GAO plans to continue to review these matters.

GAO found that: (1) in January 1992, citing the dissolution of the Soviet Union and the reduced nuclear threat, the President announced an end to ACM production; (2) to implement the President's decision, the Department of Defense (DOD) issued plans to cease procurement of 640 missiles, including the purchase of 120 missiles authorized for fiscal year (FY) 1992; (3) as of April 7, 1992, DOD had not concurred the Air Force's plans to procure no more than 520 ACM; (4) the Air Force limited its procurement to 520 missiles primarily because it lacked funds to cover prior year ACM contract funding shortfalls; (5) the shortfalls, estimated at $121 million, were primarily due to costs incurred by suspended deliveries due to design and quality problems; (6) in early April 1992, the Air Force partially terminated its FY 1987 and FY 1988 ACM missile contracts, since it lacked sufficient prior year funds to cover the shortfalls; (7) the Air Force immediately awarded a new letter contract to continue the partially terminated contracts and used FY 1992 appropriated funds to pay for those services; and (8) as of March 1992, ACM contractors had not demonstrated the ability to consistently deliver quality missiles on schedule.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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