Strategic Missiles

The Advanced Cruise Missile, which the Air Force began developing in the early 1980s, is a subsonic, turbofan-powered missile equipped with a nuclear warhead. To meet operational deadlines, the Air Force implemented a highly concurrent program. Flight tests discovered many design and manufacturing deficiencies, and the program's schedule slipped and projected costs began to increase. To overcome the design and manufacturing problems, many changes were made to the missile's guidance set, sensor, actuators, and other subsystems. In addition, the planned procurement rate was slowed and actions were taken to improve the missile's quality and reliability. Flight tests improved considerably in 1989, but design, quality, and financial problems continued to plague the program. This report provides information on the program's restructuring, funding, and missile performance. It also discusses the application of work measurement standards to missile production contracts and the criteria used in determining progress payments while missile deliveries were suspended to overcome quality problems.

GAO found that: (1) because of funding problems, the Air Force dramatically restructured the ACM program as of January 1992; (2) between fiscal years (FY) 1982 and 1993, about $2.5 billion was obligated to the ACM program, and the Air Force received 461 missiles; (3) funds from FY 1990, 1991, and 1992 were not used to cover cost overruns from FY 1987 and 1988 ACM contracts; (4) residual material and associated costs accounted for nearly $227 million of the $314 million the Air Force obligated to FY 1990 to 1993 efforts; (5) about 41 percent of the value of the residual material could be used for spare parts; (6) the Air Force could incur costs of $56.7 million to terminate ACM contracts and close out the program; (7) nearly half of the Air Force's appropriated funds for terminating the ACM program have been held as management reserve, withheld at the Department of Defense (DOD), or reprogrammed; (8) although manufacturing problems have adversely affected the ACM program for years, there has been continued improvement in manufacturing efficiency and quality and the missile has generally met or exceeded its performance requirements; (9) the Air Force lowered its work measurement standards for some systems because the contractors were unable to implement the original standards; and (10) DOD did not reduce contractor payments during the period when missile deliveries were suspended, since the contractor was not at fault or negligent in its failure to comply with the contract.