Space Acquisitions
Improvements Needed in Space Systems Acquisitions and Keys to Achieving Them Gao ID: GAO-06-626T April 6, 2006DOD's space system acquisitions have experienced problems over the past several decades that have driven up costs by hundreds of millions, even billions of dollars, stretched schedules by years, and increased performance risks. GAO was asked to testify on its findings on space acquisition problems and steps needed to improve outcomes.
DOD's space acquisition programs continue to face substantial cost and schedule overruns. At times, cost growth has come close to or exceeded 100-percent, causing DOD to nearly double its investment in face of technical and other problems without realizing a better return on its investment. Along with the cost increases, many programs are experiencing significant schedule delays--as much as 6 years--postponing delivery of promised capabilities to the warfighter. Outcomes have been so disappointing in some cases that DOD has had to go back to the drawing board to consider new ways to achieve the same capability. These problems are having a dramatic effect on DOD's space investment portfolio. Over the next 5 years, there will be about $12 billion less dollars available for new systems as well as for the discovery of promising new technologies because of cost growth. And while DOD is pushing to start new, highly ambitious programs such as the Transformational Satellite and Space Radar, broader analyses of the nation's fiscal future indicate that spending for weapon systems may need to be reduced, rather than increased, to address growing deficits. GAO has identified a number of causes behind these problems, but several stand out. First, DOD starts more space and weapons programs than it can afford, which pressures programs to under estimate costs and over promise capabilities. Second, DOD starts its space programs too early, that is, before it is sure the capabilities it is pursuing can be achieved within available resources and time constraints. DOD has also allowed new requirements to be added well into the acquisition phase. DOD has appointed a new leadership to oversee space acquisitions who have committed to adopting practices GAO has recommended for improving outcomes. These include delegating the maturation of technologies to the S&T community; adopting an evolutionary development approach in which new systems would be developed in a series of discrete increments, or blocks; fund S&T appropriately so that significant technology breakthroughs can be continually pursued; and improving collaboration on requirements. Adopting best practices for space acquisitions will not be an easy undertaking. DOD, as a whole, still operates in an environment that encourages competition for funding, and thus, behaviors that have been detrimental to meeting cost and schedule goals. Moreover, the changes being proposed will require significant shifts in thinking about how space systems should be developed and changes in incentives. By establishing investment priorities, embedding best practices in policy, and addressing capacity shortfalls, DOD can mitigate these challenges and better position programs for success.
GAO-06-626T, Space Acquisitions: Improvements Needed in Space Systems Acquisitions and Keys to Achieving Them
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Testimony before the Subcommittee on Strategic Forces, Senate Committee
on Armed Services:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 3:30 p.m. EDT:
Thursday, April 6, 2006:
Space Acquisitions:
Improvements Needed in Space Systems Acquisitions and Keys to Achieving
Them:
Statement of Cristina T. Chaplain, Acting Director, Acquisition and
Sourcing Management Team:
GAO-06-626T:
GAO Highlights:
Highlights of GAO-06-626T, a testimony before the Subcommittee on
Strategic Forces, Senate Committee on Armed Services:
Why GAO Did This Study:
DOD‘s space system acquisitions have experienced problems over the past
several decades that have driven up costs by hundreds of millions, even
billions of dollars, stretched schedules by years, and increased
performance risks. GAO was asked to testify on its findings on space
acquisition problems and steps needed to improve outcomes.
What GAO Found:
DOD‘s space acquisition programs continue to face substantial cost and
schedule overruns. At times, cost growth has come close to or exceeded
100-percent, causing DOD to nearly double its investment in face of
technical and other problems without realizing a better return on its
investment. Along with the cost increases, many programs are
experiencing significant schedule delays”as much as 6 years”postponing
delivery of promised capabilities to the warfighter. Outcomes have been
so disappointing in some cases that DOD has had to go back to the
drawing board to consider new ways to achieve the same capability.
These problems are having a dramatic effect on DOD‘s space investment
portfolio. Over the next 5 years, there will be about $12 billion less
dollars available for new systems as well as for the discovery of
promising new technologies because of cost growth. And while DOD is
pushing to start new, highly ambitious programs such as the
Transformational Satellite and Space Radar, broader analyses of the
nation‘s fiscal future indicate that spending for weapon systems may
need to be reduced, rather than increased, to address growing deficits.
GAO has identified a number of causes behind these problems, but
several stand out. First, DOD starts more space and weapons programs
than it can afford, which pressures programs to under estimate costs
and over promise capabilities. Second, DOD starts its space programs
too early, that is, before it is sure the capabilities it is pursuing
can be achieved within available resources and time constraints. DOD
has also allowed new requirements to be added well into the acquisition
phase.
DOD has appointed a new leadership to oversee space acquisitions who
have committed to adopting practices GAO has recommended for improving
outcomes. These include delegating the maturation of technologies to
the S&T community; adopting an evolutionary development approach in
which new systems would be developed in a series of discrete
increments, or blocks; fund S&T appropriately so that significant
technology breakthroughs can be continually pursued; and improving
collaboration on requirements.
Adopting best practices for space acquisitions will not be an easy
undertaking. DOD, as a whole, still operates in an environment that
encourages competition for funding, and thus, behaviors that have been
detrimental to meeting cost and schedule goals. Moreover, the changes
being proposed will require significant shifts in thinking about how
space systems should be developed and changes in incentives. By
establishing investment priorities, embedding best practices in policy,
and addressing capacity shortfalls, DOD can mitigate these challenges
and better position programs for success.
What GAO Recommends:
GAO does not make recommendations in this testimony. However, GAO
testified that there are steps DOD can take to ensure better outcomes
for its space acquisitions programs. They include developing an overall
investment strategy for space acquisition programs; revising policies
supporting space to incorporate best practices; and addressing human
capital and other shortfalls in capacity.
www.gao.gov/cgi-bin/getrpt?GAO-06-626T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Cristina T. Chaplain at
(202) 512-4841 or chaplainc@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the Department of Defense's
(DOD) space acquisitions. Each year, DOD spends billions to acquire
space-based capabilities to support current military and other
government operations as well as to enable DOD to transform the way it
collects and disseminates information, gathers data on its adversaries,
and attacks targets. In fiscal year 2007 alone, DOD expects to spend
almost $20 billion dollars to develop and procure satellites and other
space systems, including nearly $7 billion on the major space
systems.[Footnote 1] Despite its growing investment in space, however,
DOD's space system acquisitions have experienced problems over the past
several decades that have driven up costs by hundreds of millions, even
billions of dollars, stretched schedules by years, and increased
performance risks. In some cases, capabilities have not been delivered
to the warfighter after decades of development.
As a result of these problems, DOD is now contending with important
trade-off decisions such as whether to continue investing in long
beleaguered efforts or undertake more promising alternatives. At the
same time, leadership now recognizes the need to substantially change
DOD's current space acquisition approach and the value of adopting
practices that will lay a better foundation for program execution.
Within this context, I will discuss our findings on space acquisition
problems, recent steps DOD has taken in an effort to address these
problems, and the changes that still need to occur if DOD is to break
the cycle of acquisition problems.
Space Acquisition Problems Persist:
The majority of satellite programs we have reviewed over the past 2
decades experienced problems during their acquisition that drove up
costs and schedules and increased technical risks. Several programs
were restructured by DOD in the face of delays and cost growth. At
times, cost growth has come close to or exceeded 100-percent, causing
DOD to nearly double its investment in face of technical and other
problems without realizing a better return on its investment. Along
with the cost increases, many programs are experiencing significant
schedule delays--as much as 6 years--postponing delivery of promised
capabilities to the warfighter. Outcomes have been so disappointing in
some cases that DOD has had to go back to the drawing board to consider
new ways to achieve the same capability. It is in such a position
today, with its Space-based Infrared System (SBIRS) High program and
possibly its National Polar-orbiting Operational Environmental
Satellite System (NPOESS) program, both of which have been mired in
expanding cost and schedule setbacks.
More specifically, DOD's investment in SBIRS High, a critical missile
warning system, has been pushed to over $10.5 billion from the initial
$4.1 billion estimate made over 9 years earlier. This 160-percent
increase in estimated costs triggered a fourth Nunn-McCurdy[Footnote 2]
breach (see 10 U.S.C. 2433), requiring a review by the Secretary of
Defense and a report to Congress, and resulted in the program being
restructured for a third time, in late 2005. With costs and timelines
spiraling out of control, DOD reduced the number of satellites it plans
to procure--pushing the average per unit procurement cost up to 224-
percent above 2002 baseline costs--and is now pursuing an alternative
to SBIRS High while it continues with the scaled back program.
Initial cost and schedule estimates for NPOESS--a new satellite
constellation intended to replace existing weather and environmental
monitoring satellites--have also proven unreliable. NPOESS is managed
by a tri-agency Integrated Program Office consisting of DOD, the
National Oceanic and Atmospheric Administration, and National
Aeronautics and Space Administration. In January 2006, the program
reported a Nunn-McCurdy unit cost breach, at the 25-percent threshold,
due to continuing technical problems, including problems with the
development of key sensors. Specifically, in early 2005, DOD learned
that a subcontractor could not meet cost and schedule targets due to
significant technical issues on an imaging sensor known as the
visible/infrared imager radiometer suite (VIIRS) sensor--including
problems with the cryoradiator, excessive vibration of sensor parts,
and errors in the sensor's solar calibration. These technical problems
were further complicated by subcontractor management problems. To
address these issues, DOD provided additional funds for VIIRS, capped
development funding for other critical technologies, and revised its
schedule to keep the program moving forward. We also reported that
based on our own analysis of contractor trends, the program will most
likely overrun costs by $1.4 billion.[Footnote 3] Given the challenges
currently facing the program, the scheduled first launch date slipped
17 months to September 2010.
Another recent example of problems is evident in the Advanced Extremely
High Frequency (AEHF) program. We reported in the past that this
program experienced cost increases due to requirements changes,
inadequate contract strategies, and funding shortfalls. We also
reported that DOD had to cut back its planned purchase of satellites
from five to three as a result. The outcome has been an 84-percent unit
cost increase--each AEHF satellite is now estimated to cost about $2.1
billion. More recently, we reported that scheduling delays and the late
delivery of cryptographic equipment have culminated into nearly a 3-
year delay in the launch of the first satellite and that the program
still faces schedule risk due to the continued concurrent development
of two critical path items managed and developed outside the program.
Acquisition problems have not been limited to the development of home-
grown systems. DOD's purchase of an ostensible commercial satellite for
the use of communications, the Wideband Gapfiller Satellite (WGS), is
experiencing about a 70-percent cost growth, due in part to the
problems a subcontractor was experiencing in assembling the satellites.
Improperly installed fasteners on the satellites' subcomponents have
resulted in rework on the first satellite and extensive inspections of
all three satellites currently being fabricated. The cost for WGS has
increased about $746.3 million but DOD estimates that about $276.2
million of this amount is largely due to cost growth associated with a
production gap between satellites three and four. The launch of the
first satellite has now been delayed for over 3 years and is currently
scheduled for June 2007. The delay will increase program costs and add
at least 22 months to the time it takes to obtain an initial
operational capability from the system.
Figure 1 shows that, overall for fiscal years 2006 through 2011,
estimated costs for DOD's major space acquisition programs have
increased a total of about $12.2 billion--or nearly 44-percent in
total--above initial estimates. Figure 2 breaks out this trend among
key major space acquisitions.
Figure 1: Comparison between Original Cost Estimates and Current Cost
Estimates for Major Space Acquisition Programs[A] for Fiscal Years 2006
through 2011:
[See PDF for image]
[A] Includes: AEHF, Evolved Expendable Launch Vehicle, Global Broadcast
Service, Global Positioning System II, Mobile User Objective System,
NPOESS, SBIRS High, TSAT, and WGS.
[End of figure]
Figure 2: Cost Growth in Selected Current Space Programs in Base Year
Dollars:
[See PDF for image]
Notes: Original AEHF cost was for five satellites; the latest estimate
for AEHF is for three satellites. SBIRS High data is through the latest
Selected Acquisition Report, dated September 2005.
[End of figure]
As both figures illustrate, cost increases have had a dramatic impact
on DOD's overall space portfolio. To cover the added costs of poorly
performing programs, DOD has shifted scarce resources away from other
programs, creating a cascade of cost and schedule inefficiencies. For
example, to fund other space programs, DOD has had to push off the
start of a new version of the Global Positioning System (GPS), which
has forced costs to increase for the current version under development.
Meanwhile, DOD is also contending with cost increases within its
Evolved Expendable Launch Vehicle (EELV) program. These are largely due
to misjudgments about the extent to which DOD could rely on commercial
demand to leverage its investment. Nevertheless, the resulting $12.6
billion increase has added pressures to make tradeoffs.
At the same time that DOD is juggling resources on existing programs,
it is undertaking two new efforts--the Transformational Satellite
Communications System (TSAT) program and Space Radar program--which are
expected to be among the most ambitious, expensive, and complex space
systems ever. Moreover, DOD is relying heavily on their planned
capabilities to fundamentally enable DOD to transform how military
operations are conducted. In fact, many other weapon systems will be
interfaced with these satellites and highly dependent on them for their
own success. Together, these systems have been preliminarily estimated
to cost about $40 billion. While DOD is planning to undertake the new
systems, broader analyses of the nation's fiscal future indicate that
spending for weapon systems may need to be reduced, rather than
increased, to address growing deficits.
Underlying Causes of Acquisition Problems:
Our reviews have identified a number of causes behind the problems just
described, but several consistently stand out. First, on a broad scale,
DOD starts more weapon programs than it can afford, creating a
competition for funding which encourages low cost estimating,
optimistic scheduling, over promising, suppressing bad news, and for
space programs, forsaking the opportunity to identify and assess
potentially better alternatives. Programs focus on advocacy at the
expense of realism and sound management. Invariably, with too many
programs in its portfolio, DOD and even Congress are forced to
continually shift funds to and from programs--often undermining well-
performing programs to pay for poorly performing ones.
Second, DOD starts its space programs too early, that is, before it has
assurance that the capabilities it is pursuing can be achieved within
available resources and time constraints. This tendency is caused
largely by the funding process, 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
"glitches" can cause disruptions.
A companion problem for all weapon systems is that DOD allows new
requirements to be added well into the acquisition phase. Many times,
these significantly stretch the technology challenges (and
consequently, budgets) the program is already facing. This was
particularly evident in SBIRS High up until 2004. While experiences
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.
Third, space programs have historically attempted to satisfy all
requirements in a single step, regardless of the design challenge or
the maturity of the technologies to achieve the full capability.
Increasingly, DOD has preferred to make fewer, but heavier, larger, and
complex "Battlestar Galactica-like" satellites, that perform a
multitude of missions rather than larger constellations of smaller,
less complex satellites that gradually increase in sophistication. This
has stretched technology challenges beyond the capability of many
potential contractors and vastly increased the complexities related to
software--a problem that affected SBIRS High and AEHF, for example.
Our reviews have identified additional factors that contribute to space
acquisition problems, though less directly affecting cost and schedule
problems we have reported on. For example, consolidations within
defense supplier base for space programs have made it more difficult
for DOD to incorporate competition into acquisition strategies. Since
1985, there were at least ten fully competent prime contractors
competing for the large programs and a number that could compete for
subcontracts. Arguably today, there are only two contractors that could
handle DOD's most complex space programs. DOD has exacerbated this
problem by not seeking opportunities to restructure its acquisitions to
maximize competition, particularly for the small suppliers who have a
high potential to introduce novel solutions and innovations into space
acquisitions. In the 1990s, DOD also structured contracts in a way that
reduced oversight and shifted key decisionmaking responsibility onto
contractors. DOD later found that this approach--known as Total System
Performance Responsibility, or TSPR--magnified problems related to
requirements creep and poor contractor performance.
Another factor contributing to problems is the diverse array of
officials and organizations involved with a space program, which has
made it even more difficult to pare back and control requirements. The
Space Radar system, for example, is expected to play a major role in
transforming military as well as intelligence-collecting operations and
other critical governmental functions, such as homeland security. As a
result, its constituency includes combatant commanders, all of the
military services, intelligence agencies, and the Department of
Homeland Security. The Global Positioning System not only serves the
military, it provides critical services to civilian users, the
transportation sector, the information technology sector, among many
other industries.
In addition, short tenures for top leadership and program managers
within the Air Force and the Office of the Secretary of Defense has
lessened the sense of accountability for acquisition problems and
further encouraged a short-term view of success, according to officials
we have interviewed. Though still in a pre-acquisition phase, TSAT and
Space Radar have already had one program director each. The SBIRS High
program, meanwhile, has seen at least three program directors. At the
highest levels of leadership, for many years, DOD did not invest
responsibilities for its space activities in any one individual--
leaving no one in charge of establishing an integrated vision for space
or of mediating between competing demands. In 1994, it established such
a position within the Office of the Secretary of Defense, but dissolved
this position in 1998. In 2002, DOD established a space leadership
position within the Under Secretary position in the Air Force, combined
it with the directorship of the National Reconnaissance Office in order
to better integrate DOD and intelligence space activities, and allowed
the Under Secretary to have milestone decision authority for major
space systems acquisitions. After the first Under Secretary of the Air
Force in charge of space retired in 2005, DOD split these
responsibilities and temporarily reclaimed milestone decision authority
for all major space programs. Changes in leadership and reorganizations
are common across DOD, but again, they make it more difficult to
enforce accountability and maintain the right levels of support for
acquisition programs.
Lastly, there are capacity shortfalls that have constrained DOD's
ability to optimize and oversee its space programs. These include:
shortages in the pipeline of scientists and engineers, shortages of
experts in systems and software engineering, and uneven levels of
experience among program managers. Contractors are also facing
workforce pressures similar to those experienced by the government,
that is, not enough technical expertise to develop complex space
systems. In addition, we have reported that there is a lack of low-cost
launch opportunities, which are needed to increase the level of
experimental testing in space.
DOD Has Expressed Its Commitment to Improve Its Approach to Space
Acquisitions:
DOD has recently expressed a commitment to improve its approach to
space acquisitions and embrace many of the recommendations we have made
in the past.
Our previous recommendations have been focused on providing a sound
foundation for program execution. Namely, we have recommended that DOD
separate technology discovery from acquisition, follow an incremental
path toward meeting user needs, match resources and requirements at
program start, and use quantifiable data and demonstrable knowledge to
make decisions to move to next phases. In addition, we have called on
DOD to develop an overall investment strategy for space in order to
help DOD rebalance its investments in space acquisition programs as it
continues to contend with cost increases from its programs.
These recommendations are based on a body of work that we have
undertaken over the last several years that examines weapon acquisition
issues from a perspective that draws upon lessons learned from best
product development practices. Leading commercial firms expect that
their program managers will deliver high-quality products on time and
within budget. Doing otherwise could result in the customer walking
away. Thus, those firms have created an environment and adopted
practices that put their program managers in a good position to succeed
in meeting these expectations. Collectively, these practices comprise a
process that is anchored in knowledge. It is a process in which
technology development and product development are treated differently
and managed separately. The process of developing technology culminates
in discovery--the gathering of knowledge--and must, by its nature,
allow room for unexpected results and delays. Leading firms do not ask
their program or product managers to develop technology. Rather, they
give responsibility for maturing technologies to science and technology
organizations. The process of developing a product culminates in
delivery and, therefore, gives great weight to design and production.
The firms demand--and receive--specific knowledge about a new product
before production begins. A program does not go forward unless a strong
business case on which the program was originally justified continues
to hold true.
While the practices we have recommended represent commonly accepted
sound business practices, until recently, they have not been accepted
by DOD's space acquisition community for large space acquisitions. By
contrast, these practices were implemented for the development of a
small, experimental satellite, intended for direct use by a combatant
command, (known as TacSat 1). We recently reported that by including
only mature technologies and limiting new requirements, DOD was able to
develop the satellite for less than $10 million (including surplus
hardware valued at $5 million) and within 12 months.
In disagreeing with our recommendations, DOD asserted its desire to
push programs to advance technologies as far as possible. Other reasons
that space officials have given for extending technology development
into acquisition include the greater ability to secure funding for
costly technology development within an acquisition program versus a
science and technology program, a belief among the acquisition
community that labs in charge of developing space technologies do not
understand their needs, as well as communication gaps between the
science and technology (S&T) and acquisition communities.
Moreover, while DOD officials told us they were pursuing evolutionary
development for space systems, we found that they were beginning
programs by challenging programs managers to achieve significant leaps
in capability with the intention of abandoning those efforts later in
the development cycle should too many problems be encountered. This is
not a true evolutionary approach, as it leaves DOD facing increased
technical challenges at the beginning of a program and thus, increased
risks, and it raises the expectations on the part of stakeholders who
may be unwilling to accept less capability later on. Two of the systems
we were most concerned about in this respect were and TSAT and Space
Radar --they were already expected to cost about $40 billion. DOD was
planning to start these acquisitions even when many of their critical
technologies were still immature and it was pursuing a highly ambitious
path in terms of the technology push. Given that these systems were
among the most complex programs ever undertaken for space, they were
being counted on to enable wider DOD transformation efforts, and DOD
was already contending with highly problematic space efforts, we
believed DOD could not afford to pursue such risky approaches for TSAT
and Space Radar.
Since we last testified before this subcommittee in July 2005, DOD has
appointed a new Under Secretary of the Air Force to be in charge of
space acquisitions, who, in turn, has embraced adopting best practices,
or, as he terms it, "going back to the basics." Specifically, the Under
Secretary has expressed a desire to:
* Delegate the maturation of technologies--to the point of being tested
in a relevant environment or operational environment, if appropriate--
to the S&T community.
* Adopt an evolutionary development approach in which new systems would
be developed in a series of increments, or blocks. Any desired
technology that is not expected to be matured in time to start a new
block would be assigned to a later block. Each block would have a
discrete beginning and end point.
* Fund S&T appropriately so that significant technology breakthroughs
can be continually pursued.
* Improve collaboration on requirements--consulting with warfighters on
the content of each new block.
In addition, the Under Secretary is focused on estimating cost and
funding new acquisitions to an 80-percent confidence level;
strengthening systems engineering and strengthening the acquisition
workforce.
Aspects of this approach have recently been incorporated in to DOD's
TSAT program. For the first block, satellites 1 and 2, the Air Force
has reduced its expectations in the level of sophistication of these
satellites to increase the confidence in the schedule for launching the
first satellite in 2014. Higher performing levels of the technologies
to support laser communications and an Internet-like processor router
will be pushed off to a subsequent block, along with the multi-access
laser communications--a more robust laser capable of transmitting vast
amounts of data within seconds. Program officials have also stated that
the TSAT program will not enter into product development, that is,
formal acquisition, until its critical technologies are proven.
These are good steps when looking at TSAT as an individual program. It
is important, however, that the Air Force ensure warfighters accept
lower capability and that it makes sense to pursue the current approach
versus the alternative of buying more AEHF or WGS satellites.
Keys to Realizing DOD's New Goals for Space Acquisitions:
DOD's desire to adopt best practices for space acquisition is a
positive and necessary first step toward reform. However, these changes
will not be easy to undertake. They require significant shifts in
thinking about how space systems should be developed; changes in
incentives and perceptions; as well as further policy and process
changes. Moreover, they will need to be made within a larger
acquisition environment that still encourages a competition for funding
and consequently pressures programs to view success as the ability to
secure the next installment rather than the end goal of delivering
capabilities when and as promised. In addition, DOD's space leaders
will be challenged to sustain a commitment to adopting best practices,
given the myriad of missions and programs that compete for the
attention of DOD's leadership and resources, frequent turnover in
leadership positions, and potential resistance from the many diverse
organizations involved with space acquisitions.
There are steps, however, that DOD can take to substantially mitigate
these challenges.
* First, DOD can guide its decisions to start space acquisition
programs with an overall investment strategy. More specifically, DOD
could identify overall capabilities and how to achieve them, that is,
what role space will play versus other air-, sea-, and land-based
assets; identify priorities for funding space acquisitions; and
implement mechanisms that would enforce the strategy and measure
progress. Optimally, DOD would do this for its entire weapon system
investment portfolio so that space systems that are expected to play a
critical role in transformation could be prioritized along with other
legacy and transformational systems and so that DOD could reduce
pressures associated with competition for funding. But in the absence
of a departmentwide strategy, DOD could reexamine and prioritize its
space portfolio with an eye toward balancing investments between legacy
programs and new programs as well as between S&T programs and
acquisition programs. In addition, DOD could prioritize S&T
investments. This is particularly important since DOD is undertaking a
range of initiatives--collectively known as operationally responsive
space (ORS)--designed to facilitate evolutionary development, more
testing of technologies before acquisition, and ultimately enable DOD
to deliver space-based capabilities to the warfighter much faster and
quicker. While ORS investments hold great potential, there are other
S&T projects competing for the same resources, including those focused
on discovering and developing technologies and materials that could
greatly enhance future capabilities, reduce costs, and maintain U.S.
superiority in space.
* Second, DOD could revise policies and processes supporting space as
needed to adopt the best practices being embraced. For example, DOD's
space acquisition policy could be further revised to ensure that a true
evolutionary approach is being pursued and that blocks, or increments,
will include only technologies that have been sufficiently matured. DOD
could also implement processes and policies, as needed, that stabilize
requirements, particularly for acquisitions that are being shared with
other stakeholders, such as the intelligence community, and that ensure
warfighters are bought into capabilities being pursued for each new
system increment. In recent years, it has instituted processes for some
individual systems, such as SBIRS High, that could serve as a model.
* Third, DOD could continue to address other capacity shortfalls. These
include shortages of staff with science and engineering backgrounds;
shortages of experience within the program manager workforce; limited
opportunities and funding for testing for space technologies; and the
lack of low-cost launch vehicles. At the same time, DOD could continue
to work toward strengthening relationships between the S&T and
acquisition communities and coordination within the S&T community. The
Under Secretary is uniquely positioned to do this given his previous
position as DOD's Director of Defense Research and Engineering and his
participation in previous efforts to develop a strategy for space S&T.
* Fourth, we have recommended that DOD take steps departmentwide to
hold people and programs accountable when best practices are not
pursued. This will require DOD to empower program managers to make
decisions related to funding, staffing, and moving into subsequent
phases and to match program manager tenure with development or delivery
of a product. It may also require DOD to tailor career paths and
performance management systems to incentivize longer tenures. Until
these actions have been taken, space leaders could take steps now to
ensure space program managers have the right levels of experience to
execute large programs and have sufficient authority so that they can
be held accountable. Likewise, DOD's space leaders can take steps to
hold its contractors accountable by structuring contracts so that
incentives actually motivate contractors to achieve desired acquisition
outcomes and withholding award fees when those goals are not met.
In closing, we are encouraged with the acquisition approach being
embraced by DOD's space leadership. It can enable DOD to begin to match
resources to requirements before starting new programs and therefore,
better position programs for success. Successful implementation,
however, will hinge on the ability of DOD's current space leaders to
instill and sustain commitment to adopting best practices over the
short and long term. In doing so, best practice approaches should be
reflected in policy and manifested in decisions on individual programs
or reform will be blunted. They should also be accompanied by an
investment strategy for space, and ultimately DOD, to separate wants
from needs and to alleviate long-standing pressures associated with
competition within DOD to win funding. By embracing a model that
incorporates all these elements, DOD can achieve better outcomes for
its space programs.
Scope and Methodology:
In preparing for this testimony, we relied on previously issued GAO
reports on assessments of individual space programs, incentives and
pressures that drive space system acquisition problems, common problems
affecting space system acquisitions, space science and technology
strategy, and DOD's space acquisition policy, as well as our reports on
best practices for weapon systems development. We also analyzed DOD's
Selected Acquisition Reports to assess cost increases and investment
trends. In addition, we met with the Air Force Under Secretary to
discuss his "back to basics" approach. We conducted our review between
March 6 and April 3, 2006 in accordance with generally accepted
government auditing standards.
Contacts and Acknowledgments:
For future information, please contact Cristina Chaplain at 202-512-
4841 or chaplainc@gao.gov. Individuals making contributions to this
testimony include, Art Gallegos, Robert Ackley, Maricela Cherveny,
Sharron Candon, Jean Harker, Leslie Kaas Pollock, and Karen Sloan.
Table 1 highlights recent findings from our reports on cost and
schedule overruns for DOD's current and planned space programs. The
table also notes that many programs are still addressing past mistakes
in acquisition approaches and contractor oversight as well as
technical, design, and manufacturing problems.
Table 1: Highlights of Recent Findings for Current and Planned Space
Programs:
Description: Space Based Infrared System High (SBIRS High): Ballistic
missile warning system being developed by the Air Force to replace its
legacy warning system; Development; Start-October 1996;
Recent Findings: With unit cost increases of more than 315-percent over
the 1996 initial estimate, the program has undergone four Nunn-McCurdy
unit cost breaches. Total program costs have increased from about $4
billion to more than $10 billion. The launch schedule has slipped over
6 years; the first satellite is currently scheduled to be delivered in
September 2008. DOD officials recently called for initiating planning
efforts for the development of a new missile warning system, parallel
to SBIRS; it is unclear whether this program will replace or compete
against SBIRS.
Description: Global Broadcast Service (GBS): Part of the overall DOD
military satellite communication architecture being developed by the
Air Force for one-way transmission of video, imagery and other high-
bandwidth information to the warfighter; Development; Start-November
1997;
Recent Findings: Total program costs have increased by 72-percent since
the contract was awarded in 1997, largely due to the transition from a
legacy system architecture to internet protocol, additional production
quantities, and operation and maintenance tasks. In June 2005, a
quarterly exception selected acquisition report was submitted to
reflect initial operational capability delays of six months or more due
to a delayed operational test schedule. GBS currently uses broadcast
payloads on three Ultra-High Frequency Follow-on (UFO) satellites and
will use broadcast payloads on up to five Wideband Gapfiller Satellites
(WGS) satellites when they are launched.
Description: Evolved Expendable Launch Vehicle (EELV): Acquisition of
commercial launch services from two competitive families of launch
vehicles; Development; Start-October 1998;
Recent Findings: The program cost has risen over 81-percent, with a
cost per unit increase of about 138-percent and triggered a Nunn-
McCurdy breach. A chief reason for cost increases is a decline in the
commercial launch market upon which the program's business case was
based. In 2005, the two primary contractors agreed to form a joint
venture to combine production, engineering, test and launch operations
for U.S. government launches that is under review by the Federal Trade
Commission.
Description: Navstar Global Positioning System (GPS) Modernization: A
space-based radio-positioning system that nominally consists of 24-
satellite constellation providing navigation and timing data to
military and civilian users worldwide; Development; Start-February
2000;
Recent Findings: Total costs of the GPS II modernization program have
increased by over 20-percent, largely due to DOD's decision to delay
the start of the follow-on GPS III program, which will require DOD to
buy additional GPS IIF satellites. The first GPS IIR-M satellite with
the new military code capability was launched in September 2005. A
total of 18 satellites with this code need to be on orbit to provide
initial operational capability to the warfighter and this number is
expected to be reached in fiscal year 2011. However, the software for
the control system needed to support the operational capability of
these satellites will not be operational until fiscal year 2012. Thus
the satellites on orbit with the new military code will not be fully
utilized.
Description: Wideband Gapfiller Satellites (WGS): Satellites based
almost exclusively on commercial parts being developed by the Air Force
to provide interim communications support; Development; Start- November
2000;
Recent Findings: Total program costs increased about 70- percent from
$1.06 billion in 2000 to $1.81 billion in 2005. The program office
estimates an increase since last year of about $276.2 million for the
program, largely due to cost growth resulting from a production gap
between satellites three and four. Launch of the first satellite has
now been delayed for over 3 years and is currently scheduled for June
2007. The delay will increase costs and add at least 22 months to the
time it takes to obtain an initial operational capability from the
system. The contractor continues to experience problems assembling the
satellites.
Description: Advanced Extremely High Frequency (AEHF): Communications
satellite system being developed by the Air Force to replace its legacy
protected communications satellites; Development; Start-September 2001;
Recent Findings: Unit cost has increased by about 84-percent. In 2004,
the program experienced cost increases of more than 15-percent, which
required a Nunn-McCurdy notification to Congress. The program was
restructured in 2004 when key cryptographic equipment was not delivered
to the payload contractor in time to meet the launch schedule. Current
plans are to meet full operational capability with three AEHF
satellites and the first Transformational Satellite Communication
System (TSAT) satellite, but additional AEHF satellites may be acquired
if there are deployment delays with TSAT.
Description: Space Tracking and Surveillance System (STSS): Two
satellites that are going to be launched in 2007 as technology
demonstrations for missile defense tests to assess whether missiles can
be effectively tracked from space; Development; Start-Restructured
April 2002;
Recent Findings: Total program costs have increased by about 35-percent
due to the addition of funds for designing and developing the program's
operational constellation. The initial increment of this program, which
started in 2002, is composed of two demonstration satellites that were
built under the previous Space Based Infrared System-Low (SBIRS Low)
program. SBIRS Low had incurred cost increases and schedule delays and
other problems that were so severe, DOD abandoned the effort. The STSS
program has experienced system quality and system engineering problems
with the payload, however, the program office still expects early
delivery and launch of the satellites.
Description: National Polar-orbiting Operational Environmental
Satellite System (NPOESS): Weather and environmental monitoring
satellites being developed by the National Oceanic and Atmospheric
Administration, the National Aeronautics and Space Administration, and
DOD to replace those in use by the agencies; Development; Start-August
2002;
Recent Findings: Unit costs increased by about 34-percent, triggering a
Nunn-McCurdy review in January 2006. The launch of the first satellite
has been delayed by at least 17 months (until September 2010) and could
result in a gap in satellite coverage of at least 3 years. According to
program officials, every aspect of the program is being evaluated by
internal and external groups and several options are being reviewed for
technical viability and cost effectiveness. The program office noted
that any changes resulting from this process may produce substantial
cost, schedule, and technical performance changes, such as removing a
key sensor from the first satellite, delaying launches of the first two
satellites, and not launching a preliminary risk-reduction satellite.
Description: Transformational Satellite Communications System (TSAT):
Communication satellites being developed by the Air Force to employ
advanced technologies in support of DOD's future communication
architecture; Program Initiation-January 2004;
Recent Findings: Total program costs have increased about 3-percent
from $15.5 billion in June 2004 to nearly $16 billion in December 2004,
and the initial launch of the first TSAT satellite has slipped from
2011 to 2014.The TSAT program is currently being restructured to follow
an incremental development approach--an approach that is intended to
help it stay within projected costs and provide capabilities to the war
fighter sooner.
Description: Mobile User Objective System (MUOS): Navy effort to
develop a family of unprotected, narrow-band satellites that can
support mobile and fixed-site users worldwide; Development; Start-
September 2004;
Recent Findings: This is a relatively new effort. In June 2004, DOD
delayed the first MUOS satellite launch by one year to fiscal year 2010
due to a delay in awarding the development contract and to mitigate
schedule risk. We reported that early procurement of long lead items
before achieving a stable design for this Navy communications system
could lead to cost increases and the program's development schedule
remains compressed--posing risks should software development or other
technical or design problems be encountered.
Planned Programs:
Description: GPS III: Next generation of GPS being developed to add
advanced jam resistant capabilities and provide higher quality and more
secure navigational capabilities; Planned Development Start Date- Third
quarter of fiscal year 2007;
Recent Findings: This is a relatively new effort. Initial plans were to
develop these satellites and begin launching them in 2012, but DOD has
delayed the start of this program so the planned first satellite launch
date is now 2013. Program officials intend to use an incremental
development approach for acquiring these satellites. A recent Defense
Science Board study recommended a 30 satellite, three plane
constellation for GPS III instead of the current 24 satellite, six
plane constellation. The same study also recommended that cost and
weight be key parameters in the design of the GPS III satellites, and
specifically recommended measures to limit GPS III weight so that two
satellites could be launched aboard a medium-class launch vehicle.
Description: Space Radar (SR): Reconnaissance satellites being
developed by the Air Force to find, identify, track and monitor moving
or stationary targets under all weather conditions; Planned Development
Start Date -August 2008;
Recent Findings: This is a relatively new effort with no reported cost
increases or schedule delays. The planned cost estimate is about $23
billion. A decision to develop on-orbit demonstration satellites to
validate technology maturity and cost won't be made until 2007. The
program is undergoing restructure, including a new Integrated Program
Office, a new plan for risk reduction activities and revised cost
estimates, and an acquisition strategy that calls for development of a
smaller constellation of high performing, more affordable satellites.
Source: GAO analysis of DOD data and previous GAO reports.
[End of table]
FOOTNOTES
[1] Estimates of fiscal year 2007 spending are based on DOD's Fiscal
Year 2006 Future Year Defense Program (FYDP) plan. The fiscal year 2007
FYDP plan was not available to us at the time of this testimony.
[2] 10 U.S.C. § 2433. This oversight mechanism originated with an
amendment to the Department of Defense Authorization Act, 1982. It was
made permanent in the following year's authorization act and has been
amended several times. Generally, the law requires DOD to review
programs and report to Congress whenever cost growth reaches specified
thresholds. The statute is commonly known as the Nunn-McCurdy amendment
based on the names of the sponsors of the original legislation.
[3] GAO, Defense Acquisitions: Assessment of Selected Major Weapon
Programs, GAO-06-391 (Washington, D.C.: March 31, 2006).
