Missile Defense

Estimated costs of the Patriot Advanced Capability-3 program (the hit-to-kill program) have increased 77 percent from 1994 ($3.9 billion) to March 2000 ($6.9 billion). The number of missiles to be procured decreased from 1,200 to 1,012. Development cost increases are attributed to the difficulty of developing and producing a hit-to-kill missile, and procurement costs rose because the procurement period was extended by seven years. Costs are likely to increase further. Contractor costs could exceed its estimate by $26 million. The military now wants additional testing at a cost of $88 million for four tests (and there may be as many as 12 to 15). It further estimates that costs could increase by as much as $100 million because of risks and potential schedule delays. The military has begun to undertake several program changes to control costs. Independent estimators have projected savings of $140 million to $216 from these changes. There is a gap between the Army's stated requirements (2,200 hit-to-kill missiles) and the Defense Department (DOD) plan (1,200 missiles). Because of program concerns, DOD now plans to procure 1,012, although the Army maintains that it would be forced to defend forces and critical assets with less capable missiles. No detailed analyses have been made of the costs, benefits for defending U.S. forces and assets, or implications of any alternatives. Without such analyses, DOD and Congress are not the best position to decide how many missiles to buy.

GAO noted that: (1) estimated costs of the Patriot Advanced Capability-3 program increased from about $3.9 billion in 1994 to about $6.9 billion in March 2000--a 77-percent cost increase; (2) the number of missiles to be procured decreased from 1,200 to 1,012; (3) missile development costs accounted for about $775 million of the cost increase, and missile procurement costs accounted for about $2.2 billion; (4) a major reason for the development cost increase was that the original cost estimate did not recognize the level of effort and difficulties associated with developing and producing a hit-to-kill missile compared with those of previous missiles; (5) missile procurement costs increased primarily because the procurement was extended by 7 years; (6) missile procurement was originally scheduled for the 6-year period from 1997 through 2002; (7) the current procurement schedule covers the 13-year period from 1998 through 2010; (8) costs are likely to increase further for several reasons; (a) the Department of Defense (DOD) has already recognized that contractor costs for missile development could exceed the contractor's estimate by $26 million; (b) DOD's Director for Operational Test and Evaluation was concerned about the adequacy of the testing, DOD is considering additional tests; and (c) DOD officials estimate that costs could increase between $72 million and $100 million because of risks and potential schedule delays associated with completing missile development; (9) DOD has begun to implement a number of program changes to control costs, and other changes are being studied; (10) other measures being studied include additional hardware changes and new contracting strategies; (11) there is a gap between the Army's stated requirements and DOD's planned missile procurements; (12) the Army states that 2,200 Patriot Advanced Capability-3 missiles are required to comply with the national security strategy of winning two nearly simultaneous major wars; (13) because of its concerns about program affordability, DOD never planned to buy all 2,200 missiles; (14) it originally planned to buy 1,200 missiles, and in light of cost increases, it now plans to procure 1,012; (15) Army officials told GAO that having fewer than 2,200 missiles would force the Army to defend forces and critical assets with less capable missiles; and (16) if further cost increases occur, it could decide to buy fewer missiles, extend the procurement period, or spend more to maintain the current plan.

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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