Defense Acquisitions
Actions Needed to Get Better Results on Weapons Systems Investments Gao ID: GAO-06-585T April 5, 2006In the past 5 years, DOD has doubled its planned investments in weapons systems, but this huge increase has not been accompanied by more stability, better outcomes, or more buying power for the acquisition dollar. Rather than showing appreciable improvement, programs are experiencing recurring problems with cost overruns, missed deadlines, and performance shortfalls. GAO was asked to testify on ways to obtain a better return on DOD's weapons systems investments. This testimony identifies the following steps as needed to provide a better foundation for executing weapon programs: (1) developing a DOD-wide investment strategy that prioritizes programs based on realistic and credible threat-based customer needs for today and tomorrow, (2) enforcing existing policies on individual acquisitions and adhering to practices that assure new programs are executable, and (3) making it clear who is responsible for what and holding people accountable when these responsibilities are not fulfilled. Past GAO reports have made similar recommendations.
DOD has a mandate to deliver high-quality products to warfighters, when they need them and at a price the country can afford. Quality and timeliness are especially critical to maintain DOD's superiority over others, to counter quickly changing threats, and to better protect and enable the warfighter. Cost is critical given DOD's stewardship responsibility for taxpayer money, combined with long-term budget forecasts which indicate that the nation will not be able to sustain its currently planned level of investment in weapons systems, and DOD's plans to increase investments in weapons systems that enable transformation of various military operations. At this time, however, DOD is simply not positioned to deliver high quality products in a timely and cost-efficient fashion. It is not unusual to see cost increases that add up to tens or hundreds of millions of dollars, schedule delays that add up to years, and large and expensive programs frequently rebaselined or even scrapped after years of failing to achieve promised capability. Recognizing this dilemma, DOD has tried to embrace best practices in its policies, and instill more discipline in requirements setting, among numerous other actions. Yet it still has trouble distinguishing wants from needs, and many programs are still running over cost and behind schedule. 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 making tough tradeoff decisions as to which programs should be pursued, and more importantly, not pursued, making sure programs are executable, locking in requirements before programs are ever started, and making it clear who is responsible for what and holding people accountable when these responsibilities are not fulfilled. These changes will not be easy to make. They require DOD to re-examine the entirety of its acquisition process--what we think of as the "Big A"--including requirements setting, funding, and execution. Moreover, DOD will need to alter perceptions of what success means, and what is necessary to achieve success.
GAO-06-585T, Defense Acquisitions: Actions Needed to Get Better Results on Weapons Systems Investments
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Testimony Before the Armed Services Committee, House of
Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Wednesday, April 5, 2006:
Defense Acquisitions:
Actions Needed to Get Better Results on Weapons Systems Investments:
Statement of David M. Walker, Comptroller General of the United States:
GAO-06-585T:
GAO Highlights:
Highlights of GAO-06-585T, a testimony before the Armed Services
Committee, House of Representatives:
Why GAO Did This Study:
In the past 5 years, DOD has doubled its planned investments in weapons
systems, but this huge increase has not been accompanied by more
stability, better outcomes, or more buying power for the acquisition
dollar. Rather than showing appreciable improvement, programs are
experiencing recurring problems with cost overruns, missed deadlines,
and performance shortfalls. GAO was asked to testify on ways to obtain
a better return on DOD‘s weapons systems investments.
This testimony identifies the following steps as needed to provide a
better foundation for executing weapon programs: (1) developing a DOD-
wide investment strategy that prioritizes programs based on realistic
and credible threat-based customer needs for today and tomorrow, (2)
enforcing existing policies on individual acquisitions and adhering to
practices that assure new programs are executable, and (3) making it
clear who is responsible for what and holding people accountable when
these responsibilities are not fulfilled. Past GAO reports have made
similar recommendations.
What GAO Found:
DOD has a mandate to deliver high-quality products to warfighters, when
they need them and at a price the country can afford. Quality and
timeliness are especially critical to maintain DOD‘s superiority over
others, to counter quickly changing threats, and to better protect and
enable the warfighter. Cost is critical given DOD‘s stewardship
responsibility for taxpayer money, combined with long-term budget
forecasts which indicate that the nation will not be able to sustain
its currently planned level of investment in weapons systems, and DOD‘s
plans to increase investments in weapons systems that enable
transformation of various military operations. At this time, however,
DOD is simply not positioned to deliver high quality products in a
timely and cost-efficient fashion. It is not unusual to see cost
increases that add up to tens or hundreds of millions of dollars,
schedule delays that add up to years, and large and expensive programs
frequently rebaselined or even scrapped after years of failing to
achieve promised capability.
Additional Investment: Top Five Programs in 2006 Plan, Billions in
Constant 2006 Dollars:
[See PDF for image]
Note: Estimate includes total research, development, test, and
evaluation (RDT&E); procurement; military construction; and
acquisition, operation, and maintenance.
[End of figure]
Recognizing this dilemma, DOD has tried to embrace best practices in
its policies, and instill more discipline in requirements setting,
among numerous other actions. Yet it still has trouble distinguishing
wants from needs, and many programs are still running over cost and
behind schedule.
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 making tough tradeoff decisions as to which programs
should be pursued, and more importantly, not pursued, making sure
programs are executable, locking in requirements before programs are
ever started, and making it clear who is responsible for what and
holding people accountable when these responsibilities are not
fulfilled. These changes will not be easy to make. They require DOD to
re-examine the entirety of its acquisition process”what we think of as
the ’Big A“”including requirements setting, funding, and execution.
Moreover, DOD will need to alter perceptions of what success means, and
what is necessary to achieve success.
www.gao.gov/cgi-bin/getrpt?GAO-06-585T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Katherine Schinasi at
(202) 512-4841 or schinasik@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss how to get better results from
the Department of Defense's (DOD) weapons systems investments and why
we must ensure that DOD be held accountable for doing so. DOD has a
mandate to deliver high-quality products to warfighters, when they need
them and at a price the country can afford. Quality and timeliness are
especially critical to maintain DOD's superiority over others, to
counter quickly changing threats, and to better protect and enable the
warfighter. Cost is also critical given DOD's stewardship over taxpayer
money, long-term budget forecasts which indicate that the nation will
not be able to sustain its currently planned level of investment in
weapons systems, and plans to increase investments in weapons systems
that enable transformation of various military operations. At this
time, however, DOD is simply not positioned to deliver high quality
products in a timely and cost-efficient fashion. It is not unusual to
see cost increases that add up to tens or hundreds of millions of
dollars, schedule delays that add up to years, and large and expensive
programs continually rebaselined or even scrapped after years of
failing to achieve promised capability.
Recognizing this dilemma, DOD has tried to embrace best practices in
its policies, instill more discipline in requirements setting,
strengthen training for program managers, reorganize offices that
support and oversee programs, and require the use of independent cost
estimates and systems engineering. Yet despite these and many other
actions, the Department still has trouble distinguishing wants from
needs, and many programs are still running over cost and behind
schedule.
Our work shows that poor performance and cost overruns will likely
persist until DOD provides a better foundation for executing its
weapons programs. As I will further discuss today, this foundation
includes (1) a DOD-wide investment strategy that prioritizes programs
based on realistic and credible threat-based customer needs for today
and tomorrow ("Big A" acquisition); (2) enforcing existing policies on
individual acquisitions and adhering to practices that assure new
programs are executable ("little a" acquisition); and (3) making it
clear who is responsible for what and holding people accountable when
these responsibilities are not fulfilled. While such steps represent
basic and commonly accepted sound business practices, they will be
extremely difficult to implement within DOD, given the myriad of
missions that compete for the attention of DOD's leadership and
resources, frequent turnover in leadership and key personnel, DOD's
intricate and outdated organizational structure, outmoded and flawed
supporting business processes, as well as entrenched cultural behaviors
and internal pressures. As a result, solutions demand the highest
levels of leadership attention and commitment from DOD, the
Administration, and the Congress over a sustained period of years.
A Mandate for Change:
Today we are at a key crossroad. In the next few decades, the nation
will be struggling with a large and growing structural deficit. At the
same time, however, weapons programs are commanding larger budgets as
DOD undertakes increasingly ambitious efforts to transform its ability
to address current and potential future conflicts. These costly current
and planned acquisitions are running head-on into the nation's
unsustainable fiscal path. In the past 5 years, DOD has doubled its
planned investments in weapons systems, but this huge increase has not
been accompanied by more stability, better outcomes, or more buying
power for the acquisition dollar. Rather than showing appreciable
improvement, programs are experiencing recurring problems with cost
overruns, missed deadlines, and performance shortfalls.
Dollars Available for Weapons Will Face Serious Budget Pressures:
As I have testified previously, our nation is on an imprudent and
unsustainable fiscal path. Budget simulations by GAO, the Congressional
Budget Office, and others show that, over the long term, we face a
large and growing structural deficit due primarily to known demographic
trends, rising health care costs, and lower federal revenues as a
percentage of the economy. Continuing on this path will gradually
erode, if not suddenly damage, our economy, our standard of living, and
ultimately our national security. Federal discretionary spending, along
with other federal policies and programs, will face serious budget
pressures in the coming years stemming from new budgetary demands and
demographic trends. Defense spending falls within the discretionary
spending accounts. Further, current military operations, such as those
in Afghanistan and Iraq, consume a large share of DOD budgets and are
causing faster wear on existing weapons. Refurbishment or replacement
sooner than planned is putting further pressure on DOD's investment
accounts.
It is within this context that we must engage in a comprehensive and
fundamental reexamination of new and ongoing investments in our
nation's weapons systems. Weapons systems are one of the single largest
investments the federal government makes. In the last 5 years, DOD has
doubled its planned investments in new systems from about $700 billion
in 2001 to nearly $1.4 trillion in 2006. Annual procurement totals are
expected by DOD to increase from about $75 billion to about $100
billion during 2006 to 2011.
Programs Are Seeking Larger Budgets:
At the same time DOD is facing future budget constraints, programs are
seeking larger budgets. To illustrate, the projected cost of DOD's top
five programs in fiscal year 2001 was about $291 billion. In 2006, it
was $550 billion[Footnote 1]. A primary reason why budgets are growing
is that DOD is undertaking new efforts that are expected to be the most
expensive and complex ever. Moreover, it is counting on these efforts
to enable transformation of military operations. The Army, for example,
is undertaking the Future Combat Systems (FCS) program in order to
enable its combat force to become lighter, more agile, and more
capable. FCS is comprised of a family of weapons, including 18 manned
and unmanned ground vehicles, air vehicles, sensors, and munitions,
which will be linked by an information network. These vehicles,
weapons, and equipment will comprise the majority of the equipment
needed for a brigade combat team in the future. When considering
complementary programs, projected investment costs for FCS are
estimated on the order of $200 billion. Affordability of the FCS
programs depends on two key assumptions. First, the program must
proceed without exceeding its currently projected costs. Second, FCS
has expected large annual procurement costs beginning in 2012. FCS
procurement will represent 60 to 70 percent of Army procurement from
fiscal years 2014 to 2022. As the Army prepares the next Defense Plan,
it will face the challenge of allocating sufficient funding to meet
increasing needs for FCS procurement in fiscal years 2012 and 2013. If
all the needed funding cannot be identified, the Army will have to
consider reducing the FCS procurement rate or delaying or reducing
items to be spun out to current Army forces.
At the same time, the Air Force is undertaking two new satellite
programs that are expected to play a major role in enabling FCS and
other future systems. The Transformational Satellite Communications
System, which is to serve as a linchpin in DOD's future communications
network, and Space Radar, which is focused on generating volumes of
radar imagery data for transmission to ground-, air-, ship-, and space-
based systems. Together, these systems are expected to cost more than
$40 billion. The Department has also been focused on modernizing its
tactical aircraft fleet. These efforts include the Joint Strike Fighter
(JSF) aircraft program, currently expected to cost more than $200
billion, and the Air Force's F-22A Raptor aircraft, expected to cost
more than $65 billion.
Concurrently, the Navy is focused on acquiring new ships and submarines
with significantly advanced designs and technologies. These include the
Virginia Class Submarine, expected to cost about $80 billion, and the
DDG-51 class destroyer ship, expected to cost some $70 billion, and the
newer DD(X) destroyer program, which is focused on providing advanced
land attack capability in support of forces ashore and to contribute to
U.S. military dominance in the shallow coastal water environment. The
Navy shipbuilding plan requires more funds than may reasonably be
expected. Specifically, the plan projects a supply of shipbuilding
funds that will double by 2011 and will stay at high levels for years
to follow.
Problematic Acquisitions Continue to Reduce DOD's Buying Power:
Despite doubling its investment the past 5 years, our assessments do
not show appreciable improvement in DOD's management of the acquisition
of major weapons systems. A large number of the programs included in
our annual assessment of weapons systems[Footnote 2] are costing more
and taking longer to develop than estimated. It is not unusual to see
development cost increases between 30 percent and 40 percent and
schedule delays of approximately 1, 2 or more years.
The consequence of cost and cycle-time growth is manifested in a
reduction of buying power of the defense dollar--causing programs to
either cut back on planned quantities, capabilities, or to even scrap
multi-billion dollar programs, after years of effort, in favor of
pursing more promising alternatives. Figure 1 illustrates seven
programs with a significant reduction in buying power; we have reported
similar outcomes in many more programs. This is not to say that the
nation does not get superior weapons in the end, but that at currently
projected twice the level of investment, DOD has an obligation to get
better results.
Figure 1: Examples of Programs with Reduced Buying Power:
[See PDF for image]
[End of figure]
Furthermore, the conventional acquisition process is not agile enough
to meet today's demands. Congress has expressed concern that urgent
warfighting requirements are not being met in the most expeditious
manner and has put in place several authorities for rapid acquisition
to work around the process. The U.S. Joint Forces Command's Limited
Acquisition Authority and the Secretary of Defense's Rapid Acquisition
Authority seek to get warfighting capability to the field quicker.
According to U.S. Joint Forces Command officials, it is only through
Limited Acquisition Authority that the command has had the authority to
satisfy the unanticipated, unbudgeted, urgent mission needs of other
combatant commands. With a formal process that requires as many as 5,
10, or 15 years to get from program start to production, such
experiments are needed to meet the warfighters' needs.
Underlying Causes of Acquisition Problems:
Our reviews have identified a number of causes behind the problems just
described, but several stand out. First, DOD starts more weapons
programs than it can afford and sustain, creating a competition for
funding that encourages low cost estimating, optimistic scheduling,
over promising, and suppressing of bad news. Programs focus on advocacy
at the expense of realism and sound management. Invariably, with too
many programs in its portfolio, DOD and the Congress are forced to
continually shift funds to and from programs--undermining well-
performing programs to pay for poorly performing ones. Adding pressure
to this environment are changes that have occurred within the defense
supplier base. Twenty years ago, there were more than 20 fully
competent prime contractors competing for multiple new programs
annually; today, there are only 6 that compete for considerably fewer
programs, according to a recent DOD-commissioned study. This adds
pressure on DOD to keep current suppliers in business and limits DOD's
ability to maximize competition.
Second, DOD has exacerbated this problem by not clearly defining and
stabilizing requirements before programs are started. At times, in
fact, it has allowed new requirements to be added well into acquisition
cycle--significantly stretching technology and creating design
challenges, and exacerbating budget overruns. For example, in the F-22A
program, the Air Force added a requirement for air-to-ground attack
capability. In its Global Hawk program, the Air Force added both
signals intelligence and imagery intelligence requirements. While
experience would caution DOD not to pile on new requirements, customers
often demand them fearing there may not be another chance to get new
capabilities since programs can take a decade or longer to complete.
Yet, perversely, such strategies delay delivery to the warfighter,
oftentimes by years.
Third, DOD commits to its programs before it obtains assurance that the
capabilities it is pursuing can be achieved within available resources
and time constraints. Funding processes encourage this approach, since
acquisition programs attract more dollars than efforts concentrating
solely on proving out technologies. Nevertheless, when DOD chooses to
extend technology invention into acquisition, programs experience
technical problems that have reverberating effects and require large
amounts of time and money to fix. When programs have a large number of
interdependencies, even minor technical "glitches" can cause
disruptions. Only 10 percent of the programs in our latest annual
assessment of weapons systems had demonstrated critical technologies to
best practice standards at the start of development; and only 23
percent demonstrated them to DOD's standards.[Footnote 3] The cost
effect of proceeding without completing technology development before
starting an acquisition can be dramatic. For example, research,
development, test and evaluation costs for the programs included in our
review that met best practice standards at program start increased by a
modest average of 4.8 percent over the first full estimate, whereas the
costs for the programs that did not meet these standards increased by a
much higher average of 34.9 percent over the first full estimate.
Fourth, officials are rarely held accountable when programs go astray.
There are several reasons for this, but the primary ones include the
fact that DOD has never clearly specified who is accountable for what,
invested responsibility for execution in any single individual, or even
required program leaders to stay until the job is done. Moreover,
program managers are not empowered to make go or no-go decisions, they
have little control over funding, they cannot veto new requirements,
and they have little authority over staffing. Because there is frequent
turnover in their positions, program managers also sometimes find
themselves in the position of having to take on efforts that are
already significantly flawed.
Likewise, contractors are not always held accountable when they fail to
achieve desired acquisition outcomes. In a recent study,[Footnote 4]
for example, we found that DOD had paid out an estimated $8 billion in
award fees on contracts in our study population regardless of outcomes.
In one instance, we found that DOD paid its contractor for a satellite
program--the Space-Based Infrared System High--74 percent of the award
fee available, or $160 million, even though research and development
costs increased by more than 99 percent, the program was delayed for
many years and was rebaselined three times.[Footnote 5] In another
instance, DOD paid its contractor for the F-22A aircraft more than $848
million, 91 percent of the available award fee, even though research
and development costs increased by more than 47 percent, the program
has been rebaselined 14 times, and delayed by more than 2 years.
Fifth, these strategies work, because they win dollars. DOD and
congressional funding approval reinforces these practices and serves to
undercut reform efforts. Stated differently, typically no one is held
accountable for unacceptable outcomes and there are little or no
adverse consequences for the responsible parties. This is a shared
responsibility of both the executive and legislative branches of
government.
Of course, there are many other factors that play a role in causing
weapons programs to go astray. They include workforce challenges, poor
contractor oversight, frequent turnover in key leadership, and a lack
of systems engineering, among others. Moreover, many of the business
processes that support weapons development--strategic planning and
budgeting, human capital management, infrastructure, financial
management, information technology, and contracting--are beset with
pervasive, decades-old management problems, including outdated
organizational structures, systems, and processes. In fact, these
areas--along with weapons system acquisitions--are on GAO's high risk
list of major government programs and operations.
DOD has long recognized such problems and initiated numerous
improvement efforts. In fact, since 1949, more than 10 commissions have
studied issues such as long cycle time and cost increases as well as
deficiencies in the acquisition workforce. This committee just last
week heard testimony regarding several of them.[Footnote 6] Among these
recent studies, there is a consensus that DOD needs to instill much
stronger discipline into the requirements setting process, prioritize
its investments, seek additional experienced and capable managers,
control costs, strengthen accountability, and enhance the basis for
enterprise-wide decision making.
In response to past studies and recommendations, including our own, DOD
has taken a number of acquisition reforms. Specifically, DOD has
restructured its acquisition policy to incorporate best practices as
the suggested way of doing business. For example, policies embrace the
concept of closing gaps between requirements and resources before
launching new programs. DOD is also reviewing changes to requirements
setting. DOD has also strengthened training for program managers,
required the use of independent cost estimating, reemphasized the
discipline of systems engineering, and tried extracting better
performance from contractors--by alternately increasing and relaxing
oversight.
While all of these steps are well-intentioned, recent policy
statements, such as the Quadrennial Defense Review (QDR), and decisions
on individual programs have fallen far short of the needed fundamental
review reassessment, reprioritization and reengineering efforts. For
example, the Office of the Secretary of Defense (OSD) does not seem to
be pushing for dramatic and fundamental reforms in its acquisition
process. In fact, it has either disagreed with recommendations we have
made over the past year or claimed that it was already addressing them.
These include reports on specific systems such as JSF, the Missile
Defense program, FCS, and Global Hawk as well as reports on cross-
cutting issues, such as DOD's rebaselining practices, acquisition
policy, and support for program managers. We believe DOD's recently
issued QDR did not lay out a long term, resource constrained,
investment strategy. In fact, the gap between wants, needs,
affordability and sustainability seems to be greater than ever.
Solutions:
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 making tough tradeoff decisions as to which programs
should be pursued, and more importantly, not pursued, making sure
programs are executable, locking in requirements before programs are
ever started, and making it clear who is responsible for what and
holding people accountable when these responsibilities are not
fulfilled. These changes will not be easy to make. They require DOD to
reexamine the entirety of its acquisition process--what we think of as
the "Big A". This includes making deep-seated changes to program
requirements setting, funding, and execution. It also involves changing
how DOD views success, and what is necessary to achieve success.
Buy the Right Thing: Develop and Implement an Investment Strategy:
The first, and most important, step is implementing a revised DOD-wide
investment strategy for weapons systems. In a recent study on program
management best practices,[Footnote 7] we recommended that DOD
determine the priority order of needed capabilities based on
assessments of the resources--that is dollars, technologies, time, and
people needed to achieve these capabilities. We also recommended that
capabilities not designated as a priority should be set out separately
as desirable but not funded unless resources were both available and
sustainable.
DOD's Under Secretary of Defense for Acquisition Technology and
Logistics--DOD's corporate leader for acquisition--should develop this
strategy in concert with other senior leaders, for example, combatant
commanders who would provide input on user needs; DOD's comptroller;
science and technology leaders, who would provide input on available
resources; and acquisition executives from the military services, who
could propose solutions. Finally, once priority decisions are made,
Congress will need to enforce discipline through various authorization
and appropriation decisions.
Table 1: Steps That Can Be Taken for Developing an Investment Strategy
for Acquiring New Systems:
Who: Under Secretary of Defense for Acquisition, Technology and
Logistics in concert with other senior officials:
Action:
* Analyze customer needs vs. wants based on available technology and
available resources;
* Compare analysis to DOD's long-term vision;
* Determine priorities for acquisitions based on this comparison;
* Separate other programs as "desirable," resources permitting;
* Enforce funding for priorities annually; measure success against the
plan.
[End of table]
Buy the Right Way: Ensure Individual Programs Are Executable:
Once DOD has prioritized capabilities, it should work vigorously to
make sure each new program is executable before the acquisition begins.
This is the "little a." More specifically, this means assuring
requirements are clearly defined and achievable given available
resources and that all alternatives have been considered. System
requirements should be agreed to by Service Acquisition Executives as
well as Combatant Commanders. Once programs begin, requirements should
not change without assessing their potential disruption to the program
and assuring that they can be accommodated within time and funding
constraints. In addition, DOD should prove that technologies can work
as intended before including them in acquisition programs. This
generally requires a prototype to be tested in an operational
environment. More ambitious technology development efforts should be
assigned to the science and technology community until they are ready
to be added to future generations of the product. DOD should also
require the use of independent cost estimates as a basis for budgeting
funds. Our work over the past 10 years has consistently shown when
these basic steps are taken, programs are better positioned to be
executed within cost and schedule.
To further ensure that programs are executable, DOD should pursue an
evolutionary path toward meeting user needs rather than attempting to
satisfy all needs in a single step. This approach has been consistently
used by successful commercial companies we have visited over the past
decade because it provides program managers with more achievable
requirements, which, in turn, would facilitate shorter cycle times.
With shorter cycle times, the companies we have studied have also been
able to assure that program managers and senior leaders stay with
programs throughout the duration of a program. DOD has policies that
encourage evolutionary development, but programs often favor pursuing
more exotic solutions that will attract funds and support.
Lastly, to keep programs executable, DOD should demand that all go/no-
go decisions be based on quantifiable data and demonstrable knowledge.
These data should cover critical program facets such as cost, schedule,
technology readiness, design readiness, production readiness, and
relationships with suppliers. Development should not be allowed to
proceed until certain thresholds are met, for example, a high
percentage of engineering drawings completed at critical design review.
DOD's current policies encourage these sorts of metrics to be used as a
basis for decision making, but they do not demand it. DOD should also
place boundaries on time allowed for specific phases of development and
production.
Table 2: Steps That Can Be Taken for Making Sure Programs are
Executable:
Who: Military services and joint developers with support from USD AT&L:
Action:
* Keep technology discovery/invention out of acquisition programs;
* Follow an incremental path toward meeting user needs; assure all
alternatives are considered;
* Ensure system requirements are agreed to by service acquisition
executives and warfighters and that no additional requirements are
added during execution unless they are fully resourced;
* Use systems engineering to close gaps between requirements and
resources prior to launching the development process;
* Require the use of independent cost estimates as a basis for
budgeting funds; update cost estimates annually and track against the
original baseline estimate;
* Use earned value data at each systems engineering technical review in
order to track program progress against original baseline estimates;
* Use quantifiable data and demonstrable knowledge to make decisions to
move to next phases;
* Employ additional management reviews when deviations of cost or
schedule exceed a certain level (e.g. 10 percent) against baseline
estimates;
* Place boundaries on time allowed for specific phases of development.
[End of table]
Hold People Accountable:
To strengthen accountability, DOD will need to clearly delineate
responsibilities among those who have a role in deciding what to buy as
well as those who have role in executing, revising, and terminating
programs. Within this context, rewards and incentives will need to be
altered so that success can be viewed as delivering needed capability
at the right price and the right time, rather than attracting and
retaining support for numerous new and ongoing programs. After all,
given our current and projected fiscal imbalances, every dollar spent
on a want today may not be available for an important need tomorrow. To
enable accountability to be exercised at the program level, DOD will
also need to (1) match program manager tenure with development or the
delivery of a product;( 2) tailor career paths and performance
management systems to incentivize longer tenures; (3) strengthen
training and career paths as needed to ensure program managers have the
right qualifications for run the programs they are assigned to; (4)
empower program managers to execute their programs, including an
examination of whether and how much additional authority can be
provided over funding, staffing, and approving requirements proposed
after the start of a program; and (5) develop and provide automated
tools to enhance management and oversight as well as to reduce the time
required to prepare status information.
DOD also should hold contractors accountable for results. As we have
recently recommended, this means structuring contracts so that
incentives actually motivate contractors to achieve desired acquisition
outcomes and withholding award fees when those goals are not met. In
addition, DOD should collect data that will enable it to continually
assess its progress in this regard.
Table 3: Steps That Can Be Taken to Instill Accountability:
Who: The Secretary of Defense and military service secretaries:
Actions:
* Make it clear who is accountable on a program for what, including
program managers, their leaders, stakeholders, and contractors;
* Hold people accountable when these responsibilities are not met;
* Require program managers and others, as appropriate, to stay with
programs until a product is delivered or for system design and
demonstration;
* Empower program managers to execute their programs so that they can
be accountable; strengthen training and career paths as needed to
ensure that qualified program managers are being assigned;
* Improve the use of award fees in order to hold contractors
accountable.
[End of table]
In closing, the past year has seen several defense reviews that include
new proposed approaches to improve the way DOD buys weapons. These
reviews contain many constructive ideas. If they are to produce better
results, however, they must heed the lessons taught--but perhaps not
learned--by acquisition history. Specifically, DOD must separate needs
from wants in the context of the nation's greater fiscal challenges.
Policy must also be manifested in decisions on individual programs or
reform will be blunted. DOD's current acquisition policy is a case in
point. The policy supports a knowledge-based, evolutionary approach to
acquiring new weapons. The practice--decisions made on individual
programs--sacrifices knowledge and executability in favor of
revolutionary solutions. It's time to challenge such solutions. Reform
will not be real unless each weapons system is shown to be both a
worthwhile investment and an executable program. Otherwise, we will
continue to start more programs than we can finish, produce less
capability for more money, and create the next set of case studies for
future defense reform reviews.
Mr. Chairman and Members of the Committee, this concludes my statement.
I will be happy to take any questions.
Scope and Methodology:
In preparing for this testimony, we relied on previously issued GAO
reports and analyzed recent acquisition reform studies from various
organizations. We conducted our review between March 20 and April 5,
2006, in accordance with generally accepted government auditing
standards.
FOOTNOTES
[1] The top five programs in 2001 were: the F-22A Raptor aircraft, DDG
51 class destroyer ship, Virginia class submarine, C-17 Globemaster
airlift aircraft, and the F/A-18 E/F Super Hornet fighter aircraft. The
top 5 programs in 2006 are: the Joint Strike Fighter aircraft, Future
Combat Systems, Virginia class submarine, DDG 51 class destroyer ship,
and the F-22A Raptor aircraft.
[2] GAO, Defense Acquisitions: Assessments of Selected Major Weapon
Programs, GAO-06-391 (Washington, D.C.: Mar. 31, 2006).
[3] DOD's policy states technologies should be demonstrated in at least
a relevant environment before a program enters system development;
whereas, GAO utilizes the best practice standard that calls for
technologies to be demonstrated one step higher--demonstration in an
operational environment.
[4] GAO, Defense Acquisitions: DOD Has Paid Billions in Award and
Incentive Fees Regardless of Outcomes, GAO-06-66 (Washington, D.C.:
Dec. 19, 2005).
[5] When calculating the percentage of award fee paid (i.e., percentage
of award fee paid = total fee paid to date/(total fee pool - remaining
fee pool)), we included rolled-over fees in the remaining fee pool when
those fees were still available to be earned in future evaluation
periods.
[6] House Armed Services Committee, "Hearing on Department of Defense
Acquisition Reform," (Washington, D.C.: Mar. 29, 2006)
[7] GAO, Best Practices: Better Support of Weapon System Program
Managers Needed to Improve Outcomes, GAO-06-110 (Washington, D.C.: Nov.
30, 2005).
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