Defense Acquisitions
Actions Needed to Ensure Adequate Funding for Operation and Sustainment of the Ballistic Missile Defense System Gao ID: GAO-05-817 September 6, 2005In 2002, the Department of Defense (DOD) implemented a new acquisition model to develop a Ballistic Missile Defense System (BMDS) that included all major missile defense acquisitions, some of which were being developed by the military services. The model called for the management and funding responsibility for production, operation, and sustainment of a capability to be transferred to a military service when a BMDS element or major component is technically mature and plans for production are well developed. The Missile Defense Agency (MDA) was given responsibility for developing the BMDS and recommending the transfer of management and funding responsibilities to the services. In 2004, MDA emplaced an initial missile defense capability, but DOD did not transfer management and funding responsibility for that capability. Because a formal transfer did not occur, GAO was asked to (1) identify DOD's criteria for deciding when a missile defense capability should be transferred to a service and (2) determine how DOD is managing the costs of fielding a BMDS capability.
There is currently uncertainty as to which assets may eventually be transferred to each military service and under what conditions those transfers should occur. This uncertainty makes it difficult for the services to plan to address the requirements of DOD acquisition regulations and realign their budgets to support the missile defense mission. According to MDA and other DOD officials, when transfer criteria were established in 2002, the Department did not fully understand the complexity of the BMDS and how it could affect transfer decisions. For example, it has been difficult to determine whether MDA or a military service will be responsible for managing and funding some assets, such as stand-alone missile defense radars, because these assets are not integrated on service platforms or do not perform core service missions. MDA officials suggested that these components could be operated by either contractors or military personnel and MDA might fund their operation and sustainment. A team that includes representatives from the military services, the combatant commands, MDA, and other DOD offices was established early this year to address transfer issues. However, because MDA and the services have been unable to reach agreement on the transfer of some missile defense assets, a unit under the Joint Chiefs of Staff was tasked in July 2005 with recommending revisions to the existing transfer criteria. MDA budgeted $1.5 billion of its fiscal year 2005 research and development funds to acquire interceptors and radars and upgrade various BMDS components. It expects to continue to acquire and upgrade BMDS assets through 2011 and beyond. However, MDA and the services disagree as to who should pay for operating and sustaining the initial defensive capability after fiscal year 2005. Additionally, although DOD has budgeted $68.5 billion to develop, procure, operate, and sustain a missile defense capability between 2005 and 2011, it has not completely determined whether additional operation and sustainment funds will be needed, and it has not included all known operation and sustainment costs in its budget. Until DOD decides who will fund these costs, the services will likely continue to provide only the funding that they have been directed to provide. As a result, some needs--for which neither MDA nor the services have planned--will go unfunded. Additionally, if the funds budgeted for some purposes, such as logistical support for the BMDS, turn out to be insufficient, DOD will either have to take funds from other programs or spend less on missile defense.
RecommendationsOur 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.
Director: Team: Phone:GAO-05-817, Defense Acquisitions: Actions Needed to Ensure Adequate Funding for Operation and Sustainment of the Ballistic Missile Defense System
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Report to the Subcommittee on Strategic Forces, Committee on Armed
Services, House of Representatives:
United States Government Accountability Office:
GAO:
September 2005:
Defense Acquisitions:
Actions Needed to Ensure Adequate Funding for Operation and Sustainment
of the Ballistic Missile Defense System:
GAO-05-817:
GAO Highlights:
Highlights of GAO-05-817, a report to the Subcommittee on Strategic
Forces, Committee on Armed Services, House of Representatives:
Why GAO Did This Study:
In 2002, the Department of Defense (DOD) implemented a new acquisition
model to develop a Ballistic Missile Defense System (BMDS) that
included all major missile defense acquisitions, some of which were
being developed by the military services. The model called for the
management and funding responsibility for production, operation, and
sustainment of a capability to be transferred to a military service
when a BMDS element or major component is technically mature and plans
for production are well developed.
The Missile Defense Agency (MDA) was given responsibility for
developing the BMDS and recommending the transfer of management and
funding responsibilities to the services. In 2004, MDA emplaced an
initial missile defense capability, but DOD did not transfer management
and funding responsibility for that capability. Because a formal
transfer did not occur, GAO was asked to (1) identify DOD‘s criteria
for deciding when a missile defense capability should be transferred to
a service and (2) determine how DOD is managing the costs of fielding a
BMDS capability.
What GAO Found:
There is currently uncertainty as to which assets may eventually be
transferred to each military service and under what conditions those
transfers should occur. This uncertainty makes it difficult for the
services to plan to address the requirements of DOD acquisition
regulations and realign their budgets to support the missile defense
mission. According to MDA and other DOD officials, when transfer
criteria were established in 2002, the Department did not fully
understand the complexity of the BMDS and how it could affect transfer
decisions. For example, it has been difficult to determine whether MDA
or a military service will be responsible for managing and funding some
assets, such as stand-alone missile defense radars, because these
assets are not integrated on service platforms or do not perform core
service missions. MDA officials suggested that these components could
be operated by either contractors or military personnel and MDA might
fund their operation and sustainment. A team that includes
representatives from the military services, the combatant commands,
MDA, and other DOD offices was established early this year to address
transfer issues. However, because MDA and the services have been unable
to reach agreement on the transfer of some missile defense assets, a
unit under the Joint Chiefs of Staff was tasked in July 2005 with
recommending revisions to the existing transfer criteria.
MDA budgeted $1.5 billion of its fiscal year 2005 research and
development funds to acquire interceptors and radars and upgrade
various BMDS components. It expects to continue to acquire and upgrade
BMDS assets through 2011 and beyond. However, MDA and the services
disagree as to who should pay for operating and sustaining the initial
defensive capability after fiscal year 2005. Additionally, although DOD
has budgeted $68.5 billion to develop, procure, operate, and sustain a
missile defense capability between 2005 and 2011, it has not completely
determined whether additional operation and sustainment funds will be
needed, and it has not included all known operation and sustainment
costs in its budget. Until DOD decides who will fund these costs, the
services will likely continue to provide only the funding that they
have been directed to provide. As a result, some needs”for which
neither MDA nor the services have planned”will go unfunded.
Additionally, if the funds budgeted for some purposes, such as
logistical support for the BMDS, turn out to be insufficient, DOD will
either have to take funds from other programs or spend less on missile
defense.
What GAO Recommends:
GAO is making recommendations that will assist in clarifying MDA and
military service roles and responsibilities for missile defense assets.
DOD agreed to implement these recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-05-817.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Robert E. Levin at (202)
512-4841 or levinr@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DOD Established Transfer Criteria But Changes Are Being Considered:
MDA and the Military Services Disagree on Funding Responsibilities:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Air Force Officials Concerned with Some MDA Funding Plans:
Air Force Believes Radar Test Equipment Is Needed:
Appendix II: MDA and the Air Force Disagree as to Which Should Pay
Eareckson Support Costs:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contacts and Staff Acknowledgments:
Tables:
Table 1: Total Planned Expenditures for Missile Defense, Fiscal Years
2005-2011:
Table 2: Research, Development, and Test Funds Devoted to Acquiring
Missile Defense Capabilities:
Table 3: Elements or Components MDA Plans to Acquire or Upgrade for
Fielding between 2004 and 2011:
Table 4: The Fiscal Year 2005 Cost of MDA's Support Agreements:
Figures:
Figure 1: Examples of Missile Defense Systems for which MDA Became
Fully Responsible:
Figure 2: Intended Model for Each Acquisition Phase:
Abbreviations:
BMDS: Ballistic Missile Defense System:
DOD: Department of Defense:
MDA: Missile Defense Agency:
United States Government Accountability Office:
Washington, DC 20548:
September 6, 2005:
The Honorable Terry Everett:
Chairman:
The Honorable Silvestre Reyes:
Ranking Minority Member:
Subcommittee on Strategic Forces:
Committee on Armed Services:
House of Representatives:
In 2002, the Secretary of Defense directed the Department of Defense
(DOD) to adopt a new acquisition model for acquiring a missile defense
capability.[Footnote 1] This model, which is intended to more quickly
place a capability in the hands of the warfighter, gives the Missile
Defense Agency (MDA) responsibility for developing the Ballistic
Missile Defense System (BMDS), a system that includes all major missile
defense acquisitions, some of which were being developed by the
military services. Once capabilities useful to the warfighter are
developed, the management and funding responsibility for production,
operation, and sustainment of the capability is to be transferred to a
military service.[Footnote 2]
In 2004, MDA emplaced an initial missile defense capability, but it did
not transfer management and funding responsibility for that capability,
or any element or major component of that capability, to a military
service. Because a formal transfer did not occur,[Footnote 3] you asked
that we determine (1) the criteria that DOD is using to decide when a
missile defense capability should be transferred to a military service
and (2) how DOD is allocating the cost of fielding a BMDS capability in
fiscal years 2005 through 2011, if fielding costs have been fully
identified, and if all costs expected to be incurred between 2006 and
2011 are included in DOD's budget.
To conduct our work, we examined relevant documents, such as directives
issued by the Secretary of Defense and the Under Secretary of Defense
for Acquisition, Technology and Logistics; installation support and
services agreements between MDA and the Army and the Air Force;
Integrated Product Team briefing charts and minutes; and fiscal year
2006 budget documents. We also held discussions with the Office of the
Under Secretary of Defense for Acquisition, Technology and Logistics;
Office of the Under Secretary of Defense for Policy; Office of the
Under Secretary of Defense (Comptroller); the Joint Theater Air and
Missile Defense Organization; the Missile Defense Agency; and the
Departments of the Army, Air Force, and Navy. We conducted our review
from October 2004 to August 2005 in accordance with generally accepted
government auditing standards.
Results in Brief:
DOD is in the process of considering revisions to the criteria that it
will use to decide when and under what conditions elements and
components will be transferred from MDA to the military services.
Criteria established by the Under Secretary of Defense for Acquisition,
Technology and Logistics in December 2002 called for a transfer when an
element or component was technically mature, plans for production were
well developed, and funds had been allocated to carry out the
production plans. However, officials across the department now
recognize that the transfer criteria are neither complete nor clear
given the BMDS's complexity. For example, it has been difficult to
determine whether MDA or a military service will be responsible for
managing and funding some assets, such as stand-alone missile defense
radars, because these assets are not integrated on service platforms or
do not perform core service missions. MDA officials suggested that
these components could be operated by either contractors or military
personnel and MDA might fund their operation and sustainment. Early
this year, a team that includes representatives from the Missile
Defense Agency, the Office of the Secretary of Defense, the military
services, and the U.S. Strategic and Northern Commands was established
to develop individual transfer plans for each BMDS element or major
component. However, because MDA and the services have been unable to
reach agreement on the transfer of some missile defense assets, a unit
under the Joint Chiefs of Staff was tasked in July 2005 with
recommending revisions to the existing transfer criteria.
In providing direction on the implementation of the 2002 acquisition
model, the Secretary of Defense directed the military services to
budget the resources to procure and operate the planned force structure
for fielding the BMDS. However, MDA and the military services continue
to disagree as to which organization should pay for operating and
sustaining the initial missile defense capability, which remains under
MDA's management, after fiscal year 2005. Additionally, DOD has not yet
determined the full cost of procuring, operating, and sustaining the
initial capability from 2006 through 2011, and it has not included all
known costs in its budget. While the military services do not object to
funding the operation and sustainment costs of elements or major
components transferred to them, the military services do not believe
that they should pay these costs for developmental assets even though
the assets may be available for operational use. It is likely that
until DOD decides which organization will fund these costs, the
military services will continue to provide only the funding that they
were directed to provide in a 2003 Program Decision Memorandum and some
needs, for which neither MDA nor the military services have planned,
will go unfunded. Additionally, if the funds budgeted for some
purposes, such as logistical support for the BMDS, turn out to be
insufficient, DOD will either have to take funds from other programs or
spend less on missile defense.
We are making recommendations to DOD that will assist in clarifying the
roles and responsibilities of MDA and the military services for
managing and funding missile defense assets. In commenting on a draft
of this report, DOD agreed to implement our recommendations.
Background:
In 2001, DOD conducted missile defense reviews to determine how best to
fulfill the nation's need to defend the United States, deployed forces,
allies, and friends from ballistic missile attacks. The findings of
these reviews led the Secretary of Defense to declare the need for a
new strategy to acquire and deploy missile defenses and to issue
direction in January 2002 to improve the leadership, management, and
organization of missile defense activities.
Specifically, the Secretary delegated to MDA the authority to manage
all ballistic missile defense systems under development and shifted
programs being executed or developed by the military services to MDA.
Figure 1 below describes some of the missile defense programs whose
execution or development was transferred from the military services
into MDA.
Figure 1: Examples of Missile Defense Systems for which MDA Became
Fully Responsible:
[See PDF for image]
[End of figure]
The Secretary also instructed MDA to develop a single integrated
system, to be called the Ballistic Missile Defense System, capable of
intercepting enemy missiles launched from all ranges and in all phases
of their flight. The systems transferred from or executed by the
services and new systems whose development MDA initiates are considered
to be elements of the BMDS and are managed by MDA. In 2002, drawing on
research and development efforts that were ongoing for years, MDA
established the Command, Control, Battle Management, and Communications
system as an element to provide connectivity between other BMDS
elements and to manage their operation as an integrated, layered
missile defense system.
In his direction to MDA and the military services, the Secretary called
for a capabilities-based requirements process and an evolutionary
development program. In a capabilities-based program, the system
developer--MDA--designs a system based on the technology available,
rather than designing a system to meet requirements established by
those that will use the system. Additionally, in an evolutionary
program, a baseline capability is developed that is improved over time.
Therefore, the BMDS has no fixed design or final architecture. Each
evolution, or block, as MDA calls such increments, is meant to take
advantage of advancing technology so that over time the BMDS is
enhanced. MDA's capabilities-based evolutionary approach to development
is meant to provide a capability to the users as quickly as possible
while also maintaining flexibility. MDA is in the process of developing
the first BMDS block, which is known as Block 2004. This block consists
of the Ground-Based Midcourse Defense, Aegis Ballistic Missile Defense,
Patriot Advanced Capability-3, and Command, Control, Battle Management,
and Communications elements, as well as the Forward- Based X-Band
Radar.[Footnote 4]
The Secretary also established a procedure for making developmental
assets available for operational use. On the basis of assessments of
the BMDS's military utility, progress in development, and a
recommendation by the Director, MDA, and the military services, the
Secretary, with input from the DOD Senior Executive Council, decides
whether assets whose development is ongoing should be fielded.[Footnote
5] When such a decision is made, the Secretary directed that the
military departments provide forces to support the early fielding and
budget resources to procure and operate the planned force structure. In
December 2002, the President directed DOD to begin fielding an initial
set of missile defense capabilities to meet the near-term ballistic
missile threat to our nation. MDA responded by emplacing Block 2004
developmental assets for use against limited attacks. However, the
Secretary has not yet activated this capability by placing it on alert.
The Secretary's 2002 direction intended that acquisition of missile
defense elements and components be completed in three phases. In the
first phase, MDA develops ballistic missile defense elements and
components using research, development, test, and evaluation funds.
When appropriate, the MDA Director recommends and the Senior Executive
Council approves the entry of an element or major component into the
second phase, known as the transition phase. This phase allows the
military services to prepare for the element's or component's transfer.
During the third phase, a military service--using procurement,
operation and maintenance, and personnel funds--procures, operates, and
sustains the element or component. Figure 2 includes some of the
activities, such as those carried out by the Joint Air and Missile
Defense Organization (JTAMDO)[Footnote 6] that DOD envisioned taking
place during each of the three phases.
Figure 2: Intended Model for Each Acquisition Phase:
[See PDF for image]
[End of figure]
Finally, the Secretary's 2002 direction effectively allowed MDA to
defer application of many of the requirements that are generally
applied to the development of major systems under DOD's traditional
acquisition system regulations.[Footnote 7] For example, the
requirements for acquisition program baselines and independent cost
estimates, generally applicable by statute to major defense acquisition
programs and implemented by the DOD regulations, will not be applied
until a BMDS element or component is transferred to a military service
concurrent with Milestone C.[Footnote 8] Milestone C, the point at
which a decision is made to begin initial production, is the point at
which the service is to assume management and funding responsibility
for an element or component of the BMDS.
Once elements or components are transferred, the Secretary directed MDA
to continue to fund modifications to fielded systems and to manage
development activities for new missile defense capabilities.[Footnote
9] The Secretary also gave MDA approval authority over any engineering
changes that the military services might want to make to transferred
BMDS elements. This process, known as configuration control, is meant
to ensure that changes do not degrade the interoperability of the BMDS.
MDA has recommended and DOD approved the transfer of one missile
defense element to a military service since 2002. DOD transferred the
Patriot Advanced Capability-3 program to the Army in 2003. MDA
continues to exercise configuration control and provide funding for the
development of Patriot Advanced Capability-3 missile defense-related
upgrades.[Footnote 10]
DOD Established Transfer Criteria But Changes Are Being Considered:
In December 2002, the Under Secretary of Defense for Acquisition,
Technology and Logistics established criteria for deciding when to
transfer acquisition responsibility from MDA to the military services.
The specified criteria are (1) testing demonstrates that an element or
component is mature, (2) plans and resources are in place to ensure
that facilities are available to support production, and (3) funds are
programmed in DOD's Future Years Defense Program to carry out
production plans.[Footnote 11] After the Under Secretary established
these criteria, one BMDS element--the Patriot Advanced Capability-3--
was transferred to a military service.
However, officials across DOD now recognize that the transfer criteria
are neither complete nor clear and believe that revised criteria are
needed for deciding to move an element or component into the transition
phase. These officials told us that when the Under Secretary
established transfer criteria in 2002, DOD did not fully understand the
complexity of the BMDS and how it could affect transfer decisions.
MDA's Director testified earlier this year that MDA will use several
models to transfer system elements to the military services and that it
may not be appropriate to transfer some elements or
components.[Footnote 12] In such cases, he envisions the services and
MDA sharing responsibilities for the assets. Further, he said that MDA
will continue to work with the Secretary of Defense, the military
services, and the Combatant Commanders to arrange appropriate transfers
on a case-by-case basis.
MDA Contemplates a Revised Acquisition Model:
There is currently uncertainty as to when and under what conditions DOD
will transfer management and funding responsibility for elements and
major components from MDA to the military services. The acquisition
model directed by the Secretary in 2002 is now viewed by many in DOD as
needing modifications to meet the evolving needs of a complex ballistic
missile defense system.
Although MDA began to emplace Block 2004 developmental assets for the
warfighters' potential use, it is not ready to transfer management
responsibility for some of these assets to the military services.
According to officials in MDA's Business Management Office, continued
management of some system elements and components by MDA may be
necessary to fully develop the overall effectiveness of the BMDS. For
example, if the missile-tracking capability of the Space Tracking and
Surveillance System is going to be added to the BMDS, MDA will need to
test it with other BMDS elements to determine how to make all elements
work together most effectively. To do this, MDA believes it must have
the authority to pull back elements or components that are fielded so
that the elements and components can be utilized in developmental
efforts.
The MDA officials also indicated that full transfer of elements and
components could threaten the priority that the President and DOD have
given to missile defense. The officials told us that the military
services could subordinate missile defense missions to service
missions, funding service programs at the expense of the missile
defense program. Service acquisition officials and officials in the
Office of the Secretary of Defense agreed that the military services
have many competing priorities and that should missile defense programs
be transferred to a service, those programs would likely have to
compete with service programs for procurement, operations, and
sustainment funds.
Officials in MDA's transition office offered examples of how management
and funding responsibility of elements and components currently in
development might be handled.
* Management responsibility for some elements and components might
never be transferred to a military service because these assets are not
integrated on service platforms or do not perform core service
missions. Examples include the Cobra Dane radar, the Forward-Based X-
Band radars, and the Sea-Based X-Band radar. MDA officials suggested
that these components could be operated by either contractors or
military personnel,[Footnote 13] and MDA might fund their operation and
sustainment. However, discussions are still ongoing as to whether these
components will eventually be transferred to the military services.
* MDA and a military service might be collaboratively involved in the
management of other assets, such as the Airborne Laser, the Kinetic
Energy Interceptor, the Space Tracking and Surveillance System, and
Terminal High Altitude Area Defense because these elements are not yet
technically mature and MDA needs to manage their development.[Footnote
14] The services will remain closely involved to provide feedback on
the development process. As the capability of these elements is ready
to be demonstrated, MDA will acquire them in limited quantities. For
example, MDA plans to acquire two Terminal High Altitude Area Defense
fire units, which include 48 missiles. If early tests are successful,
MDA will turn the first fire unit over to the Army in 2009. The Army
will operate it and provide feedback on its performance. Once any of
these assets are available for operational use, MDA believes that the
services should accept some responsibility for funding their operation
and sustainment costs.
Officials in MDA's transition office told us that management
responsibility for assets in this group may eventually be handed over
to a military service. The officials said that the transition status of
an element is a function of technical maturity, programmatic
achievement, time, and relative stakeholder involvement.
* Management and funding responsibility for other systems already have
or likely will be transitioned to a military service because they have
reached or are nearing technical maturity. As mentioned above, MDA
transferred responsibility for the Patriot Advanced Capability-3 to the
Army in 2003, and it is likely that in the future MDA will transfer
responsibility for Aegis Ballistic Missile Defense to the Navy.
Officials in MDA's transition office told us that Aegis Ballistic
Missile Defense is reaching technical maturity, as demonstrated by its
being fielded operationally on Navy ships. The Navy is almost certain
to accept responsibility for the Aegis missile defense capability
because it is mounted on the Aegis ships.
Service Officials Emphasize Need for Sufficient Advance Notice of
Transfers:
Service acquisition officials told us that they need sufficient notice
to prepare for a transfer and enough time to ensure that funds are
available to produce, operate, and sustain the system. Several things
have to be done for a service to operate and maintain a system. For
example, personnel have to be assigned and trained, a command structure
has to be organized, and facilities may have to be provided for the
system and its operators. Also, because transferred elements of the
BMDS will enter DOD's acquisition cycle at Milestone C, other
activities have to be completed in advance of the milestone to ensure
compliance with DOD acquisition regulations. For example, the
documentation required by the Chairman of the Joint Chiefs of Staff
Capabilities Integration and Development System must be completed and
an independent cost estimate must be obtained. Service officials
estimated that it takes at least a year and a half to complete all of
the tasks needed to meet Milestone C requirements of the DOD
acquisition regulations.
Sufficient advance notice is also needed for budgeting purposes. One
DOD official said that until responsibilities are established and
transition plans are in place, it is difficult for the services to plan
their budgets. If transfers take place with little advance notice, DOD
will either have to provide the services with additional funds for the
production, operation, and sustainment of BMDS elements or direct the
services to support the BMDS assets with funds reserved for service
missions. In written comments on a draft of this report, DOD said that
there is no basis to presume that programs will transfer from MDA to
the services with insufficient notice because of the process
established by the Secretary and described above.
Work Begun to Develop Transfer Plans and Revise Criteria:
Early in 2005, an Integrated Product Team was established to develop
transition plans. The team's mission is to:
* specify management and funding responsibilities for MDA and the
military services;
* work out a strategy for establishing doctrine, planning an
organizational structure and its leadership, developing training and
materiel, and providing personnel and facilities;
* provide appropriate notification for service budget requirements;
* establish configuration control procedures; and:
* ensure mission success.
The team has conducted three meetings to date at the colonel and
captain level and two at the general officer level. The inaugural
meeting of colonels and captains was held on January 21, 2005. It was
attended by almost 80 people who represented MDA, the Office of the
Secretary of Defense, the military services, the U.S. Strategic
Command, and the U.S. Northern Command. An MDA executive official
chairs the team. Two more meetings (one at each level) are planned,
along with numerous meetings of support working groups.
Officials in MDA's transition office told us that the team will draw up
a broad plan, but it will include annexes tailored for each individual
element or component. These annexes will specify the likely date that
the element or component under consideration will be transferred;
identify how MDA, the affected military service, and the combatant
commander will share responsibilities; provide the status of existing
contracts; identify funding requirements; and lay out tasks and
milestones in the transfer process. MDA transition office officials
also told us that the annexes may propose handovers from MDA to the
services that are not as formal as the transfers originally envisioned
by the Secretary of Defense.
Each individual transition plan will be cosigned by MDA's Director and
a military service representative. However, DOD officials noted that
the team will likely have disputes that can only be decided by
officials in the Office of the Secretary of Defense. DOD and service
acquisition officials expressed concern that although the Integrated
Product Team members may be able to plan transition details, they
likely will not be empowered to make major decisions or resolve major
impasses. However, MDA transition office officials told us that the
team's objective is to secure agreement of transition and transfer
plans at the lowest level possible.
The Deputy for Ballistic Missile Defense, Missile Warfare Division,
within the Office of the Under Secretary of Defense for Acquisition,
Technology and Logistics, said that the current plan is to have the
Missile Defense Support Group recommend solutions for impasses to the
Under Secretary of Defense for Acquisition, Technology and
Logistics.[Footnote 15] The Under Secretary would then consider the
support group's recommendations, make any needed changes, and forward
all transition/transfer plans to the Secretary of Defense for approval.
According to the Deputy, the goal is to have DOD approve all transfer
plans by December 31, 2005, so that direction is available to the
appropriate DOD components as they begin preparing their 2008-2013
budgets.
In July 2005, the Director, Joint Staff, directed the Joint Staff's
Deputy for Force Protection to establish a team to recommend revised
criteria for making transfer decisions. The team members told us that
the impetus for their study was the Integrated Product Team's
difficulties in determining when and under what conditions military
services should take responsibility for some BMDS components. They said
that the military services are not eager to receive components, such as
the Sea-Based X-Band Radar, Forward-Based X-Band Radar, and the Cobra
Dane Radar, that do not provide a capability that furthers the military
services' core missions. The team, which expects to complete its work
by December 31, 2005, expects to work with the Integrated Product Team
and the Missile Defense Support Group.
MDA and the Military Services Disagree on Funding Responsibilities:
In 2002, the Secretary of Defense directed the military services to
budget the resources to procure and operate the planned force structure
for an early missile defense capability. However, MDA and the military
services continue to disagree as to which organization should pay,
after 2005, for operating and sustaining developmental assets even
though the assets may be available for operational use. Additionally,
DOD has not yet determined the full cost of procuring, operating, and
sustaining the BMDS from 2006 through 2011, and it has not included all
known costs in its budget. Until DOD decides which organization will
fund these costs, the services will likely continue to provide only the
funding that they are directed to make available, and some needs, which
neither MDA nor the services have planned for, will probably go
unfunded. Additionally, if the funds budgeted for some purposes, such
as logistical support for the BMDS, turn out to be insufficient, DOD
will either have to take funds from other programs or spend less on
missile defense.
DOD reports that it will spend $68.5 billion between fiscal years 2005
and 2011 to develop, acquire, and support missile defense capabilities,
including an initial capability emplaced in 2004-2005 that can be used
in the event of an emergency. MDA has been authorized by statute to use
research and development funds for this purpose. Table 1 identifies the
DOD components that have budgeted funds for missile defense activities
through 2011.
Table 1: Total Planned Expenditures for Missile Defense, Fiscal Years
2005-2011:
In millions of then-year dollars.
DOD Component: MDA;
Research, development,test & evaluation: $66,458;
Military construction: $69;
Total: $66,527.
DOD Component: Air Force;
Procurement: $59;
Operation and maintenance: $174;
Military personnel: $46;
Total: $279.
DOD Component: Army;
Operation and maintenance: $475;
Total: $475.
DOD Component: Army National Guard;
Operation and maintenance: $941;
Military personnel: $165;
Total: $1,106.
DOD Component: Navy;
Operation and maintenance: $144;
Total: $144.
Total;
Research, development,test & evaluation: $66,458;
Procurement: $59;
Operation and maintenance: $1,734;
Military construction: $69;
Military personnel: $211;
Total: $68,531.
Source: DOD Fiscal Year 2006/2007 Budget Estimates, Research,
Development, Test, and Evaluation, Defense-Wide, Volume 2, Missile
Defense Agency.
[End of table]
MDA Is Using RDT&E Funds to Acquire BMDS Components:
In fiscal year 2005, MDA budgeted $1.5 billion of its research and
development funds to acquire interceptors and radars and to upgrade
various BMDS elements or components. It expects to continue to acquire
and upgrade BMDS assets through 2011. Table 2 shows planned funding by
fiscal year.
Table 2: Research, Development, and Test Funds Devoted to Acquiring
Missile Defense Capabilities:
In billions of then-year dollars.
FY 2006: $1.055;
FY 2007: $1.754;
FY 2008: $2.490;
FY 2009: $2.085;
FY 2010: $1.987;
FY 2011: $1.201;
Total: $10.572.
Source: MDA, Fiscal Year 2006 Staffer Day Overview.
[End of table]
A complete list of all assets that MDA is acquiring during Block 2004
and plans to acquire or enhance from 2006-2011 is provided in table 3.
Table 3: Elements or Components MDA Plans to Acquire or Upgrade for
Fielding between 2004 and 2011:
Element or component being acquired or upgraded for fielding: Terminal
High Altitude Area Defense Element;
Quantity to be acquired or upgraded for fielding during Block 2004: 0;
Quantity to be acquired or upgraded for fielding from 2006 to 2011: 2
fire units, each with an inventory of 24 missiles.
Element or component being acquired or upgraded for fielding: Aegis
Ballistic Missile Defense's Standard Missile-3;
Quantity to be acquired or upgraded for fielding during Block 2004: 8;
Quantity to be acquired or upgraded for fielding from 2006 to 2011: 93
missiles.
Element or component being acquired or upgraded for fielding: Ground-
Based Midcourse Defense Element's Interceptor;
Quantity to be acquired or upgraded for fielding during Block 2004: 14;
Quantity to be acquired or upgraded for fielding from 2006 to 2011: 30
interceptors.
Element or component being acquired or upgraded for fielding: Sea-Based
X-Band Radar;
Quantity to be acquired or upgraded for fielding during Block 2004: 1;
Quantity to be acquired or upgraded for fielding from 2006 to 2011: 0.
Element or component being acquired or upgraded for fielding: Forward-
Based X-Band Radar;
Quantity to be acquired or upgraded for fielding during Block 2004: 1;
Quantity to be acquired or upgraded for fielding from 2006 to 2011: 3.
Element or component being acquired or upgraded for fielding: Upgrades
to Early Warning Radar located at various sites;
Quantity to be acquired or upgraded for fielding during Block 2004: 2;
Quantity to be acquired or upgraded for fielding from 2006 to 2011: 1.
Element or component being acquired or upgraded for fielding:
Discrimination X-Band Radar;
Quantity to be acquired or upgraded for fielding during Block 2004: 0;
Quantity to be acquired or upgraded for fielding from 2006 to 2011: 3.
Element or component being acquired or upgraded for fielding: Upgrade
of Aegis Cruiser to allow engagement of ballistic missiles;
Quantity to be acquired or upgraded for fielding during Block 2004: 2;
Quantity to be acquired or upgraded for fielding from 2006 to 2011: 1.
Element or component being acquired or upgraded for fielding: Upgrade
of Aegis Destroyers to allow engagement of ballistic missiles;
Quantity to be acquired or upgraded for fielding during Block 2004: 0;
Quantity to be acquired or upgraded for fielding from 2006 to 2011: 15.
Source: MDA and the military services.
[End of table]
Although the elements or components shown in table 3 will be available
to provide an increased missile defense capability, officials within
MDA's transition office told us that responsibility for acquiring them
will not be transferred to a military service. For example, MDA is
acquiring two Terminal High Altitude Area Defense fire units, including
48 missiles. The fire units will be made available to the Army so that
soldiers can operate Terminal High Altitude Area Defense to provide
feedback on its development and to defend against short-and medium-
range ballistic missiles in the event of an emergency. Should the Army,
or any other military service that has received a developmental asset,
need additional units of an element or larger quantities of some
components--for example, should the Army need more Terminal High
Altitude Area Defense fire units or missiles--the officials suggested
that the military service should be responsible for acquiring them. In
addition, MDA would expect the services to budget funds for any common
support equipment required for the elements that MDA is acquiring. For
example, according to MDA's Terminal High Altitude Area Defense Program
Office, it expects the Army to purchase trucks needed to move the two
Terminal High Altitude Area Defense fire units' radar, launchers, and
generators.
However, no military service has budgeted funds for procurement of
elements or components, and only the Air Force has included funds in
its budget for support equipment. An official in the Air Force's
Missile Warning and Defense Office within the Office of the Deputy
Chief of Staff for Air and Space Operations told us that the Air Force
included approximately $59 million in its fiscal year 2006-2011 budgets
to acquire and sustain devices that detect incursions at Vandenberg Air
Force Base and to improve test equipment for upgraded early-warning
radars located at Beale (California) Air Force Base and at Fylingdales
Air Force Station in the United Kingdom. However, the official told us
that the cost of acquiring and sustaining the detection devices and the
test equipment is expected to exceed planned funding. Further
information on Air Force officials' concerns with MDA's plan for
funding procurements is discussed in appendix 1.
While the Army has not budgeted funds for support equipment, it has
provided equipment from inventory to support the Ground-based Midcourse
Defense element that MDA has emplaced at Fort Greely. An official from
the Army's Air and Missile Defense/Space Division within the Office of
the Assistant Secretary for Acquisition, Logistics and Technology told
us that the Army, Army National Guard, and National Guard Bureau
provided equipment, such as trucks, radios, and machine guns, from
inventory to support the Ground-Based Midcourse Defense element.
Additionally, pending Terminal High Altitude Area Defense test results
and Senior Executive Council decisions, the official told us that the
Army expects to include funds in its fiscal year 2008-2013 budgets for
Terminal High Altitude Area Defense common support equipment.
Military Services Fund Costs for Most Personnel Operating BMDS Assets:
The military services are currently paying for most of the personnel
who operate the missile defense assets. For example, an Army National
Guard unit operates Ground-Based Midcourse Defense components located
at Fort Greely, and Navy sailors operate the Aegis Ballistic Missile
Defense element. The cost to the military services of operating these
missile defense elements is not easily discernable because it is
intermingled with other operation and sustainment costs. However, Army
officials told us that the Army is providing about $2.4 million for
missile defense operations in fiscal year 2005 and expects to incur an
additional cost of $23.3 million for this purpose between fiscal years
2006 and 2011. Navy officials told us that at this time the missile
defense mission does not create additional personnel cost because the
same sailors who stand watch in the combat information center to
support conventional anti-air warfare missions also support the
ballistic missile defense mission. Additionally, the Air Force has not
identified any additional personnel cost between 2006 and 2011 to
operate upgraded early warning radar for the missile defense mission.
Officials in MDA's transition office told us that in the future MDA may
use some of its research and development funds to operate major
components that are bought in small quantities. The officials suggested
that components such as the Forward-Based X-Band and Sea-Based X-Band
radar, which may never be transferred to a military service, could be
operated by contractor personnel who, at least through 2011, would be
paid from funds set aside for contractor logistics support.
MDA and Military Services Are Presently Sharing Sustainment Costs:
In fiscal year 2005, MDA and the military services shared sustainment
costs. These costs are incurred for (1) logistics support, which
includes the services and materiel needed to support the fielded BMDS;
(2) installation support and services costs, which are all of the
additional costs incurred by an installation (or base) to support a
resident tenant; and (3) other supplies, such as fuel and lubricants.
Sustainment costs are generally one of the largest contributors to a
weapon's life-cycle cost because weapon systems are usually in the
field for years and require support during this time. Together,
operation, maintenance, and disposal costs typically account for about
72 percent of the total cost of a weapon system.[Footnote 16] However,
MDA does not believe that this percentage can be used to estimate the
sustainment cost of BMDS elements or components because MDA Program
Officials expect fielded assets will be updated and improved more
quickly than standard DOD weapon systems. If this proves true, an
element or component may be in the field for only a few years before it
is replaced with an enhanced configuration. But regardless of the
length of time each configuration is in use, DOD will incur sustainment
cost because each configuration must be sustained.
Contractors to Provide Logistics Support:
In December 2003, DOD's Program Decision Memorandum III directed MDA to
assume all fiscal year 2005 and 2006 costs for materials and services
needed to support the operation of primary BMDS mission equipment,
critical spares, and standard military equipment. MDA is paying prime
contractors, who are developing the elements that will be available for
limited use, to provide this support in fiscal year 2005. For example,
MDA has contracted with the Boeing Company to provide logistics support
for the Ground-Based Midcourse Defense element. Transition office
officials told us that they plan to continue this arrangement through
2011.
However, MDA cannot be sure that the funds set aside for logistics
support will provide all of the material and services needed.
Reliability and maintainability are key factors in the design of
affordable and supportable systems. Generally reliability growth is the
result of an iterative design, build, test, analyze, and fix
process.[Footnote 17] However, officials in MDA's Business Management
Office told us that because they have limited experience with the
systems being fielded, they cannot estimate how often parts will break
or how much repairs will cost. Additionally, as noted in table 3, MDA
plans to add assets to its limited capability during this time frame,
and as the quantity of assets increases, the cost of logistics support
can be expected to grow.
By 2007, MDA hopes to better understand the cost of logistics support.
To gain this understanding, MDA has directed the contractors to collect
and report reliability data, including data on the frequency of
breakdowns and the cost of repairs.
MDA and the Services Are Jointly Funding Installation Support and
Services Costs:
In fiscal year 2005, MDA and the military services are sharing the
additional cost that the military services are incurring because BMDS
elements or components and the personnel who work with them have been
placed on military bases. Generally, a tenant on a military base is
expected to reimburse its host (the military service whose base the
tenant is occupying) for additional base support costs incurred because
the tenant is in residence.[Footnote 18] For example, the tenant is
expected to reimburse the host for the additional cost of
communications services, lodging, and utilities. However, DOD's Program
Decision Memorandum III directed the Army and Air Force to assume some
installation costs related to missile defense. The Memorandum directed
the Army to provide funds for Fort Greely installation costs and
training, and the Air Force to fund additional security forces and
infrastructure at Vandenberg Air Force Base.[Footnote 19]
To address the DOD memorandum's directions, the Army is supporting
soldiers stationed at Fort Greely to operate deployed missile defense
assets. This support includes providing mail services, health and food
services, and chaplain services. The Army budgeted $42 million in
fiscal year 2005 for these purposes and estimates that it will need
about $402.7 million more between fiscal years 2006 and 2011.
According to an official in the Air Force Missile Warning and Defense
Office, the Air Force included some funds in its fiscal year 2006
budget to procure and install detection devices at Vandenberg Air Force
Base as directed by the memorandum. The official said funds were also
included in the budgets for the following fiscal years (2007-2011) to
sustain the devices. However, the official told us that a new cost
estimate shows that it is likely to cost more to procure and install
the devices than first estimated. Without the detection devices, Air
Force officials estimate that additional security personnel will be
needed, but funds for these personnel are not included in the Air
Force's budget. Because the Air Force has not added all security forces
needed, the security at Vandenberg is not at the level directed by U.S.
Strategic Command. Additionally, because the Air Force had no funds set
aside in fiscal year 2005 for missile defense active duty security
personnel, the Air Force is mostly relying upon Air Reserve volunteers
to provide some additional security for missile defense assets located
at Vandenberg and Schriever Air Force Bases.[Footnote 20]
MDA Pays Most Installation Services and Support Costs in 2005:
MDA is paying for other installation services and support costs that
the DOD memorandum did not direct the military services to fund.
Agreements have been finalized with the Army for installation services
and support at Fort Greely and with the Air Force for services and
support at Vandenberg and Schriever Air Force Bases and Eareckson Air
Station. Table 4 exhibits the costs MDA has agreed to pay at each of
the bases in fiscal year 2005.
Table 4: The Fiscal Year 2005 Cost of MDA's Support Agreements:
Dollars in millions.
Installation: Fort Greely;
Host: Army;
Cost to be recovered from MDA: $5.53.
Installation: Vandenberg Air Force Base;
Host: Air Force;
Cost to be recovered from MDA: $1.89.
Installation: Eareckson Air Station;
Host: Air Force;
Cost to be recovered from MDA: $9.80[A].
Other Air Force facilities;
Host: Air Force;
Cost to be recovered from MDA: $2.21.
Source: MDA.
[A] Appendix II provides information on the disagreement between MDA
and the Air Force as to which organization should pay support costs at
Eareckson Air Station.
[End of table]
MDA and the Services Disagree On Responsibility for Operation and
Sustainment Costs:
The 2003 Program Decision Memorandum directed the military services,
combatant commands, and MDA to continue to refine fiscal years 2006-
2011 missile defense operation and support requirements and costs. The
memorandum also directed MDA and the military services to budget for
those costs, but it did not clarify which costs would be assumed by
each organization. An official in MDA's transition office told us that
MDA included funds in its 2006-2011 budgets for costs similar to those
paid in fiscal year 2005. However, the official pointed out that the
Military Service Deputies for Operations are examining whether MDA
should pay any operations and sustainment costs, other than contractor
logistics costs, after fiscal year 2005. Additionally, MDA proposes
that the military services assume contractor logistics costs beginning
in 2012.
However, in February 2005, the Deputies for Operations from the three
military services involved met to develop a coordinated position on the
services' roles and missions for missile defense. The Deputies
concluded that the services should not incur operation and support
costs for fielded missile defense elements or components until a
transition plan for those elements or components is successfully
executed.
We talked to acquisition officials in each of the three services
involved in operating the BMDS about their services' views on paying
future operation and sustainment costs for assets that have not been
transferred.
* Navy officials believe that ongoing transition discussions will
determine which Aegis Ballistic Missile Defense components are
sufficiently mature for the Navy to assume the cost of their operation
and sustainment. The officials pointed out that the Navy addressed the
Program Decision Memorandum III. However, it is the Navy's position
that a transfer decision should precede the Navy's assumption of future
operation and sustainment costs. The Navy expects MDA to maintain the
Standard Missile-3 until it is transferred to the Navy and to procure
all Aegis Ballistic Missile Defense equipment, including any support
equipment, through 2011. Additionally, the officials told us that the
Navy does not expect to incur any support costs for the Sea-Based X-
Band radar that will support the Ground-Based Midcourse Defense element
when it is fielded.
* Air Force officials told us that the Air Force should not incur any
operation and sustainment costs after 2005 unless a decision is made to
transfer an element or component to the Air Force. An official in the
Air Force's Missile Warning and Defense Office said that only MDA,
which is developing and deploying the elements and components, can
control or plan for operations and sustainment costs. Furthermore, the
official said that transition plans can best be made after assets have
been deployed, costs are known, military utility is verified, and
capabilities have been evaluated. He told us that this approach would
provide programming structure and cost transparency.
* The Army is willing to assume some costs associated with supporting
the initial missile defense capability. An official in the Army's Air
and Missile Defense/Space Division told us that the Army is willing to
continue to budget for the cost of operating this capability,
supporting soldiers that perform a missile defense mission, and for
common support equipment for fielded assets. However, the official said
that the Army would not want to assume the maintenance costs of
elements or major components until those assets are transferred to the
Army. The official said that the Army usually maintains its own
equipment and that as long as an asset is in development the Army would
not have an inventory of spare parts to make repairs. Neither would it
have engineers, or maintenance personnel with an equivalent level of
expertise, to make the repairs.
Conclusions:
The military services are uncertain as to which missile defense assets
may eventually be transferred to them and under what conditions those
transfers may occur. This uncertainty makes it difficult for the
services to plan the activities that are necessary to apply the
requirements of DOD acquisition system regulations and to consider how
to best realign their budgets to support the missile defense mission.
DOD needs to establish clear and complete transfer criteria to better
guide those making the difficult decisions for allocating management
and funding responsibilities for missile defense assets.
DOD also needs to clarify whether MDA or the services will be
responsible for sustaining missile defense capabilities that have not
been transferred to the services. The Secretary's direction did not
clearly spell out whether MDA or the military departments would be
responsible for sustaining the early capability, and it is this cost
that has become most contentious. If sustainment costs are much higher
than expected and the number of assets being made available to the
warfighter grows, as MDA expects, the use of research and development
dollars to procure and sustain a missile defense capability will begin
to affect MDA's primary mission of developing new capabilities and
enhancing existing ones. On the other hand, the military services will
not want to fund the operation and sustainment of a missile defense
capability if its cost cannot be accurately estimated. Nor will they
want to fund the capability if they are not given the time to determine
how to do so with the least impact on service missions. While the team
established by MDA to develop transition plans includes working-level
representatives from MDA, the military services, and the combatant
commands, it will be difficult to reach full agreement as to who should
pay sustainment costs for these assets because the representatives do
not have the authority to make binding financial decisions for their
organizations. MDA and the services may continue to disagree as to
which component will bear sustainment costs for the early capability
until DOD directs one or the other to do so. Because the services and
MDA will begin to plan their 2008-2013 budgets in 2006, a decision as
to who will fund these costs should be made in time for the budget
deliberations.
Recommendations:
We recommend that the Under Secretary of Defense for Acquisition,
Technology and Logistics revise the criteria for deciding when
management and funding responsibility for missile defense assets should
be transferred from MDA to a military service so that those criteria
are clear and complete.
We also recommend that the Secretary of Defense ensure that a decision
is made as to which DOD organization will fund the operation and
sustainment of missile defense assets that are part of the initial
defensive capability but have not been transferred from MDA to a
military service and direct that organization, or those organizations,
to budget for those costs.
Agency Comments and Our Evaluation:
In written comments on a draft of this report (see app. III), DOD
agreed that the criteria for making decisions to transfer missile
defense assets from MDA to the services must be clear. Our draft report
had recommended that the Secretary of Defense direct the Under
Secretary of Defense for Acquisition, Technology, and Logistics to
revise the criteria. In its comments, DOD stated that the Secretary of
Defense did not need to provide additional direction to the Under
Secretary. We accepted this view and, accordingly, revised the
recommendation's wording in the final report.
DOD also agreed with the need to settle, as soon as possible, the issue
as to which component will fund the operation and sustainment of
missile defense assets that are part of the initial defensive
capability. DOD said this issue would soon be resolved without the
Secretary taking additional action. We continued to address our final
report's recommendation to the Secretary because if the services and
MDA can not agree about which organization(s) should pay for these
costs, the decision may have to be elevated to the Secretary's level.
We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Armed Services; the Senate
Committee on Appropriations, Subcommittee on Defense; the House
Committee on Armed Services; and the House Committee on Appropriations,
Subcommittee on Defense; the Secretary of Defense; and the Director,
Missile Defense Agency. We will make copies available to others upon
request. In addition, the report will be available at no charge on the
GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please
contact me at (202) 512-4841 or levinr@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix IV.
Signed by:
Robert E. Levin:
Director, Acquisition and Sourcing Management:
[End of section]
Appendix I: Air Force Officials Concerned with Some MDA Funding Plans:
Air Force Space Command officials are concerned that the Missile
Defense Agency (MDA) is not providing funds to purchase test equipment
for upgraded early-warning radars. According to the officials, without
the test equipment, the operation of upgraded early-warning radars
could be degraded.
Air Force Believes Radar Test Equipment Is Needed:
Air Force Space Command officials told us that a system programming
agency is needed to support software and hardware changes to the Beale
and Fylingdales early-warning radars once they are upgraded. A system
programming agency consists of multiple strings of computers and
peripherals that can emulate the unique aspects of the radar's
operating system and is used to maintain, modify, and test software and
hardware changes prior to those changes being made to the operational
radar. The Air Force currently has a system programming agency in place
to support hardware and software development for the early-warning
radar. However, neither MDA nor the Air Force has included funds in
their budgets to establish a system programming agency for the upgraded
Beale and Fylingdales radars.
Space Command officials told us that a system programming agency is of
particular importance because the upgraded early-warning radar is very
dependent on commercial off-the-shelf equipment that often has a short
life cycle. If a computer or radar replacement part is needed, there is
no certainty that the part available will be compatible with other
parts installed in the radar or its operating system. The officials
said that if a replacement part operates nanoseconds faster or slower
than the old part, the radar could fail or possibly generate false
missile reports.
An official in the Air Force's Missile Warning and Defense Office told
us that the Air Force included funds in its 2008-2011 budgets to
upgrade the system programming agency so that its hardware and software
would always be identical to the software and hardware in the
operational radar. However, the official said that the Air Force
believed that MDA planned to pay for the system programming agency's
development cost and that the funds budgeted by the Air Force are not
sufficient to both create and sustain an upgraded early-warning radar
system programming agency. Space Command officials told us that the
system programming agency could cost as much as $88 million. Without
the system programming agency, the officials said changes will be made
directly to the operational radar, decreasing its operational
availability and increasing operational risks. In a written response to
a draft of this report, MDA officials said that MDA has not agreed to
fund a system programming agency for upgraded early-warning radar as
the Air Force has requested.
[End of section]
Appendix II: MDA and the Air Force Disagree as to Which Should Pay
Eareckson Support Costs:
During much of fiscal year 2005, MDA and the Air Force disagreed as to
which organization should pay the additional costs being incurred at
Eareckson Air Station in support of the missile defense mission. While
MDA eventually agreed to pay all fiscal year 2005 costs, no agreement
has been reached for subsequent fiscal years. Both MDA and the Air
Force predict that costs at Eareckson will again be a contentious issue
in fiscal year 2006.
The Air Force maintains that Program Decision Memorandum III did not
direct the Air Force to provide security forces and infrastructure for
the missile defense mission at Eareckson. Therefore, the Air Force's
position is that the additional costs being incurred at Eareckson
should be paid by MDA. Officials in the Air Force's Missile Warning and
Defense Office told us that Eareckson is populated entirely with
contractor personnel who operate and maintain the Cobra Dane radar in
its intelligence-gathering role. The Air Force maintains a small
diversionary air strip at the base, but it does not have any military
personnel located there. The officials said that the Air Force is the
administrator for the Eareckson Air Station contract, but the
intelligence community reimburses the Air Force for the station's
operations costs. The officials said that MDA should pay the costs
incurred at Eareckson that are directly attributable to the missile
defense mission, just as the intelligence community pays all costs
attributable to its mission.
Conversely, MDA maintains that omitting Eareckson from the Program
Decision Memorandum was an oversight. However, an official in the
Department of Defense's (DOD) Comptroller's Office told us that DOD
always intended that MDA pay normal installation support and services
cost at Eareckson. DOD recognized that Eareckson is an unusual base
because the Air Force does not maintain a presence there. For the first
two quarters of fiscal year 2005, MDA paid the additional costs that
the Air Force incurred because missile defense contract personnel were
located on the base and because the number of security personnel was
increased to protect the missile defense mission. However, for the
first 7 months of fiscal year 2005, MDA and the Air Force continued to
disagree as to which party would pay installation support and services
cost for the last two quarters of fiscal year 2005. In May 2005, MDA
agreed to assume these costs. MDA transition office officials said that
the issue of Eareckson support costs would be raised again in fiscal
year 2006.
MDA officials told us that Eareckson installation support and services
cost will continue to be an issue because MDA is being asked to pay
costs that are normally paid by the installation's host and that MDA is
not paying at other bases with which it has agreements. For example,
the host typically provides fire protection for the base and the tenant
would only pay the additional cost created by the tenant's residency.
However, at Eareckson, MDA is being asked to pay a portion of the cost
that the Air Force is incurring to provide a basic fire protection
capability. The officials said that they fear the Eareckson
installation support and services agreement could establish a precedent
that the military services could insist on following at other bases
where missile defense assets are located. Should this happen, MDA
officials contend that MDA would, in effect, be supplementing the
military services' operation and maintenance budget.
[End of section]
Appendix III: Comments from the Department of Defense:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
3000 DEFENSE PENTAGON:
ACQUISITION TECHNOLOGY AND LOGISTICS:
WASHINGTON, DC 20301-3000:
AUG 1 2005:
Mr. Robert E. Levin:
Director, Acquisition and Sourcing Management:
U. S. Government Accountability Office:
441 G. Street, N. W.:
Washington, DC 20548:
Dear Mr. Levin:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-05-817 "DEFENSE ACQUISITIONS: Actions Needed to Ensure
Adequate Funding for Operation and Sustainment of the Ballistic Missile
Defense System (BMDS)," dated July 12, 2005 (GAO Code 120379).
The draft report recommends certain actions in the Department that need
to occur and recommends the Secretary of Defense take steps to assure
that they do occur. The Department partially concurs with the
recommendations. The actions that the report identifies are, in fact,
in progress now, so the Secretary of Defense does not need to carry out
specific recommendations in the report.
The Department appreciates the opportunity to comment on the draft
report. The Department provided technical comments separately. For
further questions concerning this report, please contact Colonel Dan
Hughes, Deputy for Ballistic Missile Defense, Missile Warfare, Defense
Systems, 703-695-7329.
Sincerely,
Signed for:
Glenn F. Lamartin:
Director:
Defense System:
GAO DRAFT REPORT DATED JULY 12, 2005 GAO-05-817 (GAO CODE 120379):
"DEFENSE ACQUISITIONS: Actions Needed to Ensure Adequate Funding for
Operations and Sustainment of the Ballistic Missile Defense System"
DEPARTMENT OF DEFENSE COMMENTS TO THE GAO RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology, and
Logistics to clarify the criteria that MDA will consider when
recommending formal transfers of elements and components to the
Services. (p. 25/GAO Draft Report):
DOD RESPONSE: Partially Concur. MDA will continue its work with the
Services and the Combatant Commands through the Transition and Transfer
IPT to develop the annexes to the BMDS Transition and Transfer Plan.
Each of the components of the BMDS will have an annex that will include
a detailed description of the agreed--to criteria to be considered when
recommending a component for transfer. The Department sees no need for
the Secretary to provide additional direction to the USD(AT&L) on the
subject.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
direct the Under Secretary of Defense for Acquisition, Technology, and
Logistics to clarify the criteria that the Senior Executive Council
will use in making formal transfer decisions. (p. 25/GAO Draft Report):
DOD RESPONSE: Partially Concur. The Department agrees the criteria must
be clear. As noted in the draft report (p. 7), the Under Secretary of
Defense for Acquisition, Technology and Logistics established the
transfer criteria in December 2002. Those criteria will apply in making
transfer decisions. In addition, we would require that the transfer
plan for each element or component of the BMDS (the appropriate annex
noted above) be agreed by both MDA and the appropriate Service or that
any issues between them would be resolved. In this circumstance, there
is no need for additional action by the Secretary of Defense.
RECOMMENDATION 3: The GAO recommended that the Secretary of Defense
ensure that a decision is made by December 2005 as to which DOD
component will fund the operation and sustainment of missile defense
assets that are part of the initial defensive capability but have not
been transferred from MDA to a Service and direct that component, or
components, to budget for those costs. (p. 25/GAO Draft Report):
DOD RESPONSE: Partially Concur. The Department agrees this issue must
be settled as soon as possible. Activity is currently underway,
including the work of the Transition Transfer IPT noted above, to
resolve the issue for each element and component of the initial
defensive capability. We expect most of the issues will be resolved by
December 2005, but some may take until early 2006. In this
circumstance, there is no need for additional action by the Secretary
of Defense.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Robert E. Levin (202) 512-4841 or levinr@gao.gov:
Acknowledgments:
In addition to the contact named above, Barbara Haynes, Assistant
Director; David Hand; Mary Quinlan; Adam Vodraska, and Karen Sloan made
key contributions to this report.
FOOTNOTES
[1] Secretary of Defense Memorandum, Missile Defense Program Direction,
January 2, 2002.
[2] Sustainment costs include all costs incurred from initial system
deployment through the end of system operations, including the costs of
operating, maintaining, and supporting a fielded system.
[3] A formal transfer decision is made when MDA recommends and DOD's
Senior Executive Council approves the transfer of acquisition
responsibility for an element or major component from MDA to a military
service.
[4] Block 2004 began in January 2004 and ends in December 2005.
[5] The Senior Executive Council is a committee established at the
direction of the Secretary of Defense to provide policy, planning, and
programming guidance; oversee DOD's missile defense activities; and
approve BMDS fielding recommendations. The council is chaired by the
Deputy Secretary of Defense.
[6] The Joint Air and Missile Defense Organization, which reports to
the Joint Chiefs of Staff, is chartered to plan, coordinate, and
oversee Joint Air and Missile Defense requirements, joint operational
concepts, and operational architectures.
[7] DOD Directive 5000.1, The Defense Acquisition System; DOD
Instruction 5000.2, Operation of the Defense Acquisition System, May
12, 2003.
[8] Baseline descriptions and independent cost estimates, as well as
other management and oversight requirements, are normally first
required for Milestone B, the decision to enter system development and
demonstration. However, because BMDS elements will not enter DOD's
acquisition cycle until Milestone C, these requirements may not be
applied to the BMDS until the transition phase that leads to the
transfer to a military service. We note that in the absence of the
baselines required by DOD's acquisition system regulations, Congress
has required MDA to separately establish cost, schedule, and
performance baselines for each block of the BMDS being fielded,
including full life cycle costs. Ronald W. Reagan National Defense
Authorization Act for Fiscal Year 2005 (P.L 108-375), sec. 234(e).
[9] MDA Business Management officials told us that MDA only expects to
fund modifications that are directly attributable to the missile
defense mission.
[10] MDA is required by Section 232 of the 2005 Defense Authorization
Act to maintain configuration control of the Patriot Advanced
Capability-3/Medium Extended Air Defense System program as an element
of the BMDS.
[11] DOD's Future Years Defense Program is a massive DOD database and
internal accounting system that summarizes forces and resources
associated with programs approved by the Secretary of Defense. The
program is required by statute to be submitted to Congress each year
with the President's budget. It reflects the estimated expenditures and
proposed appropriations included in that budget and also covers at
least the four succeeding fiscal years.
[12] Lieutenant General Henry A. Obering III, USAF, Director, Missile
Defense Agency, presented this information in his statement before the
Senate Committee on Appropriations, Subcommittee on Defense, regarding
the Fiscal Year 2006 Defense Appropriations for Ballistic Missile
Defense, May 11, 2005.
[13] We did not discuss with these officials potential legal issues
associated with contractor operation of a component of a deployed
weapons system.
[14] MDA initiated development of the Kinetic Energy Interceptor
element in fiscal year 2003. It is being designed to attack ballistic
missiles in the boost phase of their flight, while their motors are
thrusting.
[15] The Missile Defense Support Group includes representatives from
the Joint Air and Missile Defense Organization; the DOD Comptroller's
Office; the Office of the Director, Operational Test and Evaluation;
and other units across DOD. Its purpose is to advise MDA's Director on
such subjects as policy, operations, testing, acquisition, and
resources.
[16] GAO, Best Practices: Setting Requirements Differently Could Reduce
Weapon Systems' Total Ownership Costs, GAO-03-57 (Washington, D.C.:
Feb. 11, 2003).
[17] GAO, Best Practices: Capturing Design and Manufacturing Knowledge
Early Improves Acquisition Outcomes, GAO-02-701 (Washington, D.C.: July
15, 2002).
[18] DOD Instruction 4000.19 provides that a DOD activity requesting
support from an interservice host reimburse the host for the
incremental direct cost of the services provided.
[19] Program Decision Memorandum III also directed the Navy to provide
funds for additional ship operations, training, and contractor support.
The Navy addressed the Memorandum's direction by programming funds for
maintenance of missile defense software and the ships' fuel when it
conducts missile defense missions. It is also conducting training to
certify crews for this new mission.
[20] Schriever Air Force Base houses a missile defense command and
control suite.
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