Defense Acquisitions
Fundamental Changes Are Needed to Improve Weapon Program Outcomes Gao ID: GAO-08-1159T September 25, 2008Since 1990, GAO has designated the Department of Defense's (DOD) management of major weapon system acquisitions a high risk area. DOD has taken some action to improve acquisition outcomes, but its weapon programs continue to take longer, cost more, and deliver fewer capabilities than originally planned. These persistent problems--coupled with current operational demands--have impelled DOD to work outside of its traditional acquisition process to acquire equipment that meet urgent warfighter needs. Poor outcomes in DOD's weapon system programs reverberate across the entire federal government. Over the next 5 years, DOD expects to invest more than $357 billion on the development and procurement of major defense acquisition programs. Every dollar wasted on acquiring weapon systems is less money available for other priorities. This testimony describes DOD's current weapon system investment portfolio, the problems that contribute to cost and schedule increases, potential solutions based on past GAO recommendations, and recent legislative initiatives and DOD actions aimed at improving outcomes. It also provides some observations about what is needed for DOD to achieve lasting reform. The testimony is drawn from GAO's body of work on DOD's acquisition, requirements, and funding processes, as well as its most recent annual assessment of selected DOD weapon programs.
DOD is not receiving expected returns on its large investment in weapon systems. Since fiscal year 2000, DOD significantly increased the number of major defense acquisition programs and its overall investment in them. During this same time period, the performance of the DOD portfolio has gotten worse. The total acquisition cost of DOD's 2007 portfolio of major programs under development or in production has grown by nearly $300 billion over initial estimates. Current programs are also experiencing, on average, a 21-month delay in delivering initial capabilities to the warfighter--often forcing DOD to spend additional funds on maintaining legacy systems. Systemic problems both at the strategic and at the program level underlie cost growth and schedule delays. At the strategic level, DOD's processes for identifying warfighter needs, allocating resources, and developing and procuring weapon systems--which together define DOD's overall weapon system investment strategy--are fragmented and broken. At the program level, weapon system programs are initiated without sufficient knowledge about system requirements, technology, and design maturity. Lacking such knowledge, managers rely on assumptions that are consistently too optimistic, exposing programs to significant and unnecessary risks and ultimately cost growth and schedule delays. 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 decisions as to which programs should be pursued, and more importantly, not pursued; making sure programs can be executed; locking in requirements before programs are ever started; and making it clear who is responsible for what and holding people accountable when responsibilities are not fulfilled. Recent congressionally mandated changes to the DOD acquisition system, as well as initiatives being pursued by the department, include positive steps that, if implemented properly, could provide a foundation for establishing a well balanced investment strategy, sound business cases for major weapon system acquisition programs, and a better chance to spend resources wisely. At the same time, DOD must begin making better choices that reflect joint capability needs and match requirements with resources. DOD investment decisions cannot continue to be dictated by the military services who propose programs that overpromise capabilities and underestimate costs to capture the funding needed to start and sustain development programs. To better ensure warfighter capabilities are delivered when needed and as promised, incentives must encourage a disciplined, knowledge-based approach, and a true partnership with shared goals must be developed among the department, the military services, the Congress, and the defense industry.
GAO-08-1159T, Defense Acquisitions: Fundamental Changes Are Needed to Improve Weapon Program Outcomes
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Testimony:
Before the Subcommittee on Federal Financial Management, Government
Information, Federal Services, and International Security, Committee on
Homeland Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:30 p.m. EDT:
Thursday, September 25, 2008:
Defense Acquisitions:
Fundamental Changes Are Needed to Improve Weapon Program Outcomes:
Statement of Michael J. Sullivan, Director:
Acquisition and Sourcing Management:
GAO-08-1159T:
GAO Highlights:
Highlights of GAO-08-1159T, a testimony before the Subcommittee on
Federal Financial Management, Government Information, Federal Services,
and International Security, Committee on Homeland Security and
Governmental Affairs, U.S. Senate.
Why GAO Did This Study:
Since 1990, GAO has designated the Department of Defense‘s (DOD)
management of major weapon system acquisitions a high risk area. DOD
has taken some action to improve acquisition outcomes, but its weapon
programs continue to take longer, cost more, and deliver fewer
capabilities than originally planned. These persistent problems”coupled
with current operational demands”have impelled DOD to work outside of
its traditional acquisition process to acquire equipment that meet
urgent warfighter needs.
Poor outcomes in DOD‘s weapon system programs reverberate across the
entire federal government. Over the next 5 years, DOD expects to invest
more than $357 billion on the development and procurement of major
defense acquisition programs. Every dollar wasted on acquiring weapon
systems is less money available for other priorities.
This testimony describes DOD‘s current weapon system investment
portfolio, the problems that contribute to cost and schedule increases,
potential solutions based on past GAO recommendations, and recent
legislative initiatives and DOD actions aimed at improving outcomes. It
also provides some observations about what is needed for DOD to achieve
lasting reform. The testimony is drawn from GAO‘s body of work on DOD‘s
acquisition, requirements, and funding processes, as well as its most
recent annual assessment of selected DOD weapon programs.
What GAO Found:
DOD is not receiving expected returns on its large investment in weapon
systems. Since fiscal year 2000, DOD significantly increased the number
of major defense acquisition programs and its overall investment in
them. During this same time period, the performance of the DOD
portfolio has gotten worse. The total acquisition cost of DOD‘s 2007
portfolio of major programs under development or in production has
grown by nearly $300 billion over initial estimates. Current programs
are also experiencing, on average, a 21-month delay in delivering
initial capabilities to the warfighter”often forcing DOD to spend
additional funds on maintaining legacy systems.
Systemic problems both at the strategic and at the program level
underlie cost growth and schedule delays. At the strategic level, DOD‘s
processes for identifying warfighter needs, allocating resources, and
developing and procuring weapon systems”which together define DOD‘s
overall weapon system investment strategy”are fragmented and broken. At
the program level, weapon system programs are initiated without
sufficient knowledge about system requirements, technology, and design
maturity. Lacking such knowledge, managers rely on assumptions that are
consistently too optimistic, exposing programs to significant and
unnecessary risks and ultimately cost growth and schedule delays.
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 decisions as to which programs should
be pursued, and more importantly, not pursued; making sure programs can
be executed; locking in requirements before programs are ever started;
and making it clear who is responsible for what and holding people
accountable when responsibilities are not fulfilled. Recent
congressionally mandated changes to the DOD acquisition system, as well
as initiatives being pursued by the department, include positive steps
that, if implemented properly, could provide a foundation for
establishing a well balanced investment strategy, sound business cases
for major weapon system acquisition programs, and a better chance to
spend resources wisely.
At the same time, DOD must begin making better choices that reflect
joint capability needs and match requirements with resources. DOD
investment decisions cannot continue to be dictated by the military
services who propose programs that overpromise capabilities and
underestimate costs to capture the funding needed to start and sustain
development programs. To better ensure warfighter capabilities are
delivered when needed and as promised, incentives must encourage a
disciplined, knowledge-based approach, and a true partnership with
shared goals must be developed among the department, the military
services, the Congress, and the defense industry.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-1159T]. For more
information, contact Michael J. Sullivan at (202) 512-4841 or
sullivanm@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) management of its major weapon system acquisitions--an area that
has been on GAO's high risk list since 1990. Prior to and since that
time, Congress and DOD have continually explored ways to improve
acquisition outcomes without much to show for their efforts. DOD's
major weapon system programs continue to take longer, cost more, and
deliver fewer quantities and capabilities than originally planned.
Current operational demands have highlighted the impact of these
persistent problems as DOD has been forced to work outside of its
traditional acquisition process to acquire equipment that meet
warfighter needs.
Investment in weapons acquisition programs is now at its highest level
in two decades. The department expects to invest more than $357 billion
over the next 5 years on the development and procurement of major
defense acquisition programs. Given the size of this investment, poor
outcomes in DOD's weapon system programs reverberate across the entire
federal government. Every dollar wasted during the development and
acquisition of weapon systems is money not available for other internal
and external budget priorities--such as the war on terror and mandatory
payments to growing entitlement programs.
My statement today is drawn from our body of work on DOD's acquisition,
requirements, and funding processes, as well as our annual assessment
of selected DOD weapon programs. My statement today focuses on (1) the
performance of DOD's major defense acquisition program portfolio; (2)
the underlying systemic problems that contribute to poor cost and
schedule outcomes; (3) potential solutions based on past GAO
recommendations; and (4) recent congressional and DOD actions and the
extent to which those actions can be expected to improve the future
performance of DOD's major defense acquisition programs. Our work was
conducted in September 2008 in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Summary:
Since fiscal year 2000, DOD significantly increased the number of major
defense acquisition programs and its overall investment in them. During
this same time period, acquisition outcomes have not improved. Based on
our analysis, total acquisition costs for the fiscal year 2007
portfolio of major defense acquisition programs increased 26 percent
and development costs increased by 40 percent from first estimates--
both of which are higher than the corresponding increases in DOD's
fiscal year 2000 portfolio. In most cases, the programs we assessed
failed to deliver capabilities when promised--often forcing warfighters
to spend additional funds on maintaining legacy systems. Our analysis
shows that current programs are experiencing, on average, a 21-month
delay in delivering initial capabilities to the warfighter, a 5-month
increase over fiscal year 2000 programs.
Several underlying systemic problems at the strategic level and at the
program level continue to contribute to poor weapon system program
outcomes. At the strategic level, DOD does not prioritize weapon system
investments and the department's processes for matching warfighter
needs with resources are fragmented and broken. At the program level,
programs are started without knowing what resources will truly be
needed and are managed with lower levels of product knowledge at
critical junctures than expected under best practices standards. In the
absence of such knowledge, managers rely heavily on assumptions about
system requirements, technology, and design maturity, which are
consistently too optimistic. This exposes programs to significant and
unnecessary technology, design, and production risks, and ultimately
damaging cost growth and schedule delays. DOD officials are rarely held
accountable for these poor outcomes and the acquisition environment
does not provide the appropriate incentives for contractors to stay
within cost and schedule targets, making them a strong enabler of the
status quo.
These problems will likely persist until DOD provides a better
foundation for buying the right things, the right way and holds
decision makers, program managers, and contractors accountable. Across-
the-board improvements in acquisition outcomes require fundamental
changes. This involves (1) maintaining the right mix of programs to
invest in by making better decisions as to which programs should be
pursued given existing and expected funding and, more importantly,
deciding which programs should not be pursued; (2) ensuring that
programs that are started can be executed by matching requirements with
resources and locking in those requirements; and (3) making it clear
that programs will then be executed based on knowledge and holding
program managers responsible for that execution. We have made similar
recommendations in past GAO reports, but DOD has disagreed with some
and not fully implemented others.
There is some reason for optimism. Recent congressionally mandated
changes to the DOD acquisition system, as well as initiatives being
pursued by the department, could improve DOD's overall investment
strategy and the soundness of the programs it allows to move forward.
Congress has enacted legislation that requires DOD to certify that
programs meet specific criteria at key decision points early in the
acquisition process; report on its strategies for balancing the
allocation of funds and other resources among major defense acquisition
programs; and identify strategies for enhancing the role of program
managers in carrying out acquisition programs. Based in part on GAO
recommendations and congressional direction, DOD has also begun several
policy initiatives including a new concept decision review initiative,
acquisition approaches with shorter and more certain delivery time
frames, a requirement for more prototyping early in programs, and the
establishment of review boards to monitor weapon system configuration
changes, which are designed to enable key department leaders to make
informed decisions before a program starts and maintain discipline once
it begins.
While legislation and policy revisions can help guide change, DOD must
begin making better choices that reflect joint capability needs and
match requirements with resources or the department will continue to
experience poor acquisition outcomes. DOD and the military services
cannot continue to view success through the prism of securing the
funding needed to start and sustain new programs. Sound programs should
be the natural outgrowth of a disciplined knowledge-based process.
DOD's policy emphasizes the importance of a knowledge-based approach,
but practice does not always follow policy. The transitory nature of
leadership and the stovepiped process further undermines successful
reform. Meaningful and lasting reform will not be achieved until the
right incentives are established and accountability is bolstered at all
levels of the acquisition process--both within the department and in
the defense industry. Finally, unless all of the players involved with
acquisitions--the Congress, DOD, and perhaps most importantly, the
military services--have unified goals, outcomes are not likely to
improve.
DOD's Major Acquisition Programs Continue to Experience Significant
Cost Growth and Schedule Delays:
DOD is not receiving expected returns on its large investment in weapon
systems. The total acquisition cost of DOD's 2007 portfolio of major
programs under development or in production has grown by nearly $300
billion over initial estimates. While DOD is committing substantially
more investment dollars to develop and procure new weapon systems, our
analysis shows that the 2007 portfolio is experiencing greater cost
growth and schedule delays than the fiscal years 2000 and 2005
portfolios (see table 1).[Footnote 1] Total acquisition costs for
programs in DOD's fiscal year 2007 portfolio have increased 26 percent
from first estimates--compared to a 6-percent increase for programs in
its fiscal year 2000 portfolio. Total RDT&E costs for programs in 2007
have increased by 40 percent from first estimates, compared to 27
percent for programs in 2000. The story is no better when expressed in
unit costs. Schedule delays also continue to impact programs. On
average, the current portfolio of programs has experienced a 21-month
delay in delivering initial operational capability to the warfighter,
and 14 percent are more than 4 years late.
Table 1: Analysis of DOD Major Defense Acquisition Program Portfolios:
(Fiscal year 2008 dollars):
Portfolio size: Number of programs;
Fiscal year 2000 portfolio: 75;
Fiscal year 2005 portfolio: 91;
Fiscal year 2007 portfolio: 95.
Portfolio size: Total planned commitments;
Fiscal year 2000 portfolio: $790 Billion;
Fiscal year 2005 portfolio: $1.5 Trillion;
Fiscal year 2007 portfolio: $1.6 Trillion.
Portfolio size: Commitments outstanding;
Fiscal year 2000 portfolio: $380 Billion;
Fiscal year 2005 portfolio: $887 Billion;
Fiscal year 2007 portfolio: $858 Billion.
Portfolio performance: Change to total RDT&E costs from first estimate;
Fiscal year 2000 portfolio: 27 percent;
Fiscal year 2005 portfolio: 33 percent;
Fiscal year 2007 portfolio: 40 percent.
Portfolio performance: Change in total acquisition cost from first
estimate;
Fiscal year 2000 portfolio: 6 percent;
Fiscal year 2005 portfolio: 18 percent;
Fiscal year 2007 portfolio: 26 percent.
Portfolio performance: Estimated total acquisition cost growth;
Fiscal year 2000 portfolio: $42 Billion;
Fiscal year 2005 portfolio: $202 Billion;
Fiscal year 2007 portfolio: $295 Billion.
Portfolio performance: Share of programs with 25 percent or more
increase in program acquisition unit cost;
Fiscal year 2000 portfolio: 37 percent;
Fiscal year 2005 portfolio: 44 percent;
Fiscal year 2007 portfolio: 44 percent.
Portfolio performance: Average schedule delay in delivering initial
capabilities;
Fiscal year 2000 portfolio: 16 months;
Fiscal year 2005 portfolio: 17 months;
Fiscal year 2007 portfolio: 21 months.
Source: GAO analysis of DOD data.
Note: Data were obtained from DOD's Selected Acquisition Reports (dated
December 1999, 2004, and 2006) or, in a few cases, data were obtained
directly from program offices. Number of programs reflects the programs
with Selected Acquisition Reports. In our analysis we have broken a few
Selected Acquisition Report programs (such as Missile Defense Agency
systems) into smaller elements or programs. Not all programs had
comparative cost and schedule data, and these programs were excluded
from the analysis where appropriate. Also, data do not include full
costs of developing Missile Defense Agency systems.
[End of table]
Continued cost growth results in less funding being available for other
DOD priorities and programs, while continued failure to deliver weapon
systems on time delays providing critical capabilities to the
warfighter. Put simply, cost growth reduces DOD's buying power. As
program costs increase, DOD must request more funding to cover the
overruns, make trade-offs with existing programs, delay the start of
new programs, or take funds from other accounts. Delays in providing
capabilities to the warfighter result in the need to operate costly
legacy systems longer than expected, find alternatives to fill
capability gaps, or go without the capability. The warfighter's urgent
need for the new weapon system is often cited when the case is first
made for developing and producing the system. However, DOD has already
missed fielding dates for many programs and many others are behind
schedule.
Fragmented Processes, Unexecutable Business Cases, and Lack of
Knowledge Underlie Poor Acquisition Outcomes:
Over the past several years our work has highlighted a number of
underlying systemic causes for cost growth and schedule delays both at
the strategic and at the program level. At the strategic level, DOD's
processes for identifying warfighter needs, allocating resources, and
developing and procuring weapon systems--which together define DOD's
overall weapon system investment strategy--are fragmented and broken.
At the program level, the military services propose and DOD approves
programs without adequate knowledge about requirements and the
resources needed to successfully execute the program within cost,
schedule, and performance targets.
Key Acquisition Support Processes Are Fragmented and Result in Unsound
Programs:
DOD largely continues to define war fighting needs and make investment
decisions on a service-by-service basis, and assess these requirements
and their funding implications under separate decision-making
processes. While DOD's requirements process provides a framework for
reviewing and validating needs, it does not adequately prioritize those
needs and is not agile enough to meet changing warfighter demands.
Ultimately, the process produces more demand for new programs than
available resources can support. This imbalance promotes an unhealthy
competition for funds that encourages programs to pursue overly
ambitious capabilities, develop unrealistically low cost estimates and
optimistic schedules, and to suppress bad news. Similarly, DOD's
funding process does not produce an accurate picture of the
department's future resource needs for individual programs--in large
part because it allows programs to go forward with unreliable cost
estimates and lengthy development cycles--not a sound basis for
allocating resources and ensuring program stability. Invariably, DOD
and the Congress end up continually shifting funds to and from
programs--undermining well-performing programs to pay for poorly
performing ones.
Initiating Programs with Unexecutable Business Cases Sets Them Up to
Fail:
At the program level, the key cause of poor outcomes is the consistent
lack of disciplined analysis that would provide an understanding of
what it would take to field a weapon system before system development.
Our body of work in best practices has found that an executable
business case is one that provides demonstrated evidence that (1) the
identified needs are real and necessary and that they can best be met
with the chosen concept and (2) the chosen concept can be developed and
produced within existing resources--including technologies, funding,
time, and management capacity. Although DOD has taken steps to revise
its acquisition policies and guidance to reflect the benefits of a
knowledge-based approach, we have found no evidence of widespread
adoption of such an approach in the department. Our most recent
assessment of major weapon systems found that the vast majority of
programs began development with unexecutable business cases, and did
not attain, or plan to achieve, adequate levels of knowledge before
reaching design review and production start--the two key junctures in
the process following development start (see figure 2).
Figure 2: Knowledge Achievement for Weapon System Programs in 2008
Assessment at Key Junctures:
[See PDF for image]
This figure is a combination table and pie-charts depicting the
following data:
Key junctures: Best practices:
Development start: Knowledge point 1; Mature all critical technologies;
Design review: Knowledge point 2; Achieve knowledge point 1 on time and
complete 90 percent of engineering drawings;
Production start: Knowledge point 3; Achieve knowledge points1 and 2 on
time, and have all critical processes under statistical control.
Key junctures: DOD outcomes[A]:
Development start: 12 percent of programs;
Design review: 4 percent of programs;
Production start: 0 percent of programs[B].
Source: GAO analysis of DOD data.
[A] Not all programs provided information for each knowledge point or
had passed through all three key junctures.
[B] In our assessment of two programs, the Light Utility Helicopter and
the Joint Cargo Aircraft, are depicted as meeting all three knowledge
points when they began at production start. We excluded these two
programs from our analysis because they were based on commercially
available products and we did not assess their knowledge attainment
with our best practices metrics.
[End of figure]
Knowledge gaps are largely the result of a lack of disciplined systems
engineering analysis prior to beginning system development. Systems
engineering translates customer needs into specific product
requirements for which requisite technological, software, engineering,
and production capabilities can be identified through requirements
analysis, design, and testing. Early systems engineering provides
knowledge that enables a developer to identify and resolve gaps before
product development begins. Because the government often does not
perform the proper up-front analysis to determine whether its needs can
be met, significant contract cost increases can occur as the scope of
the requirements change or become better understood by the government
and contractor. Not only does DOD not typically conduct disciplined
systems engineering prior to beginning system development, it has
allowed new requirements to be added well into the acquisition cycle.
The acquisition environment encourages launching ambitious product
developments that embody more technical unknowns and less knowledge
about the performance and production risks they entail. A new weapon
system is not likely to be approved unless it promises the best
capability and appears affordable within forecasted available funding
levels. We have recently reported on the negative impact that poor
systems engineering practices have had on several programs such as the
Global Hawk Unmanned Aircraft System, F-22A, Expeditionary Fighting
Vehicle, Joint Air-to-Surface Standoff Missile and others.[Footnote 2]
With high levels of uncertainty about technologies, design, and
requirements, program cost estimates and related funding needs are
often understated, effectively setting programs up for failure. We
recently compared the service and independent cost estimates for 20
major weapon system programs and found that the independent estimate
was higher in nearly every case, but the difference between the
estimates was typically not significant. We also found that both
estimates were too low in most cases, and the knowledge needed to
develop realistic cost estimates was often lacking. For example,
program Cost Analysis Requirements Description documents--used to build
the program cost estimate--are not typically based on demonstrated
knowledge and therefore provide a shaky foundation for estimating
costs. Cost estimates have proven to be off by billions of dollars in
some of the programs we reviewed. For example, the initial Cost
Analysis Improvement Group estimate for the Expeditionary Fighting
Vehicle program was about $1.4 billion compared to a service estimate
of about $1.1 billion, but development costs for the system are now
expected to be close to $3.6 billion. Estimates this far off the mark
do not provide the necessary foundation for sufficient funding
commitments and realistic long-term planning.
When DOD consistently allows unsound, unexecutable programs to pass
through the requirements, funding, and acquisition processes,
accountability suffers. Program managers cannot be held accountable
when the programs they are handed already have a low probability of
success. In addition, they are not empowered to make go or no-go
decisions, have little control over funding, cannot veto new
requirements, and they have little authority over staffing. At the same
time, program managers frequently change during a program's
development.
Limiting the length of development cycles would make it easier to more
accurately estimate costs, predict the future funding needs,
effectively allocate resources, and hold decision makers accountable.
We have consistently emphasized the need for DOD's weapon programs to
establish shorter development cycles. DOD's conventional acquisition
process often requires as many as 10 or 15 years to get from program
start to production. Such lengthy cycle times promote program
instability--especially when considering DOD's tendency to change
requirements and funding as well as leadership. Constraining cycle
times to 5 or 6 years would force programs to conduct more detailed
systems engineering analyses, lend itself to fully funding programs to
completion, and thereby increasing the likelihood that their
requirements can be met within established time frames and available
resources. An assessment of DOD's acquisition system commissioned by
the Deputy Secretary of Defense in 2006 similarly found that programs
should be time-constrained to reduce pressure on investment accounts
and increase funding stability for all programs.
The Way Forward: Potential 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 (1) maintaining the right mix of programs to invest
in by making better decisions as to which programs should be pursued
given existing and expected funding and, more importantly, deciding
which programs should not be pursued; (2) ensuring that programs that
are started can be executed by matching requirements with resources and
locking in those requirements; and (3) making it clear that programs
will then be executed based on knowledge and holding program managers
responsible for that execution. We have made similar recommendations in
past GAO reports, but DOD has disagreed with some and not fully
implemented others.
These changes will not be easy to make. They will require DOD to
reexamine not only its acquisition process, but its requirement setting
and funding processes as well. They will also require DOD to change how
it views program success, and what is necessary to achieve success.
This includes changing the environment and incentives that lead DOD and
the military services to overpromise on capability and underestimate
costs in order to sell new programs and capture the funding needed to
start and sustain them. Finally, none of this will be achieved without
a true partnership among the department, the military services, the
Congress, and the defense industry. All of us must embrace the idea of
change and work diligently to implement it.
Buy the Right Things: Develop and Implement an Investment Strategy:
The first, and most important, step toward improving acquisition
outcomes is implementing a new DOD-wide investment strategy for weapon
systems. We have reported that DOD should develop an overarching
strategy and decision-making processes that prioritize programs based
on a balanced match between customer needs and available department
resources---that is the 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.
This means that the decision makers responsible for weapon system
requirements, funding, and acquisition execution must establish an
investment strategy in concert.
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 and
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 its legislative and
oversight mechanisms.
Buy the Right Way: Ensure Individual Programs Can Be Executed:
Once DOD has prioritized capabilities, it should work vigorously to
make sure each new program can be executed before the acquisition
begins. More specifically, this means assuring requirements for
specific weapon systems 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. 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 keep programs executable, DOD should demand that all milestone
decisions be based on quantifiable data and demonstrated 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 knowledge 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 the time allowed for system development.
To further ensure that programs can be executed, 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, 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 revolutionary, exotic solutions that will
attract funds and support. The department and, more importantly, the
military services, tend to view success as capturing the funding needed
to start and sustain a development program. In order to do this, they
must overpromise capability and underestimate cost. In order for DOD to
move forward, this view of success must change. World-class commercial
firms identify success as developing products within cost estimates and
delivering them on time in order to survive in the marketplace. This
forces incremental, knowledge-based product development programs that
improve capability as new technologies are matured.
Hold People Accountable:
To strengthen accountability, DOD must also 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 must 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.
To enable accountability to be exercised at the program level once a
program begins, DOD will 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 to manage 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
recommended, this means structuring contracts so that incentives
actually motivate contractors to achieve desired acquisition outcomes
and withholding fees when those goals are not met.
Recent Congressional Initiatives and DOD Actions Aim to Promote a More
Disciplined, Knowledge-Based Acquisition Approach:
Recognizing the need for more discipline and accountability in the
acquisition process, Congress recently enacted legislation that, if
followed, could result in a better chance to spend resources wisely.
Likewise, DOD has recently begun to develop several initiatives, based
in part on congressional direction and GAO recommendations that, if
implemented properly, could also provide a foundation for establishing
a well balanced investment strategy and sound, knowledge-based business
cases for individual acquisition programs.
Legislation Could Have a Positive Impact on Acquisition Outcomes:
Congress has enacted legislation that requires DOD to take certain
actions which, if followed, could instill more discipline into the
front-end of the acquisition process when key knowledge is gained and
ultimately improve acquisition outcomes. For example, legislation
enacted in 2006 and 2008 requires decision-makers to certify that
specific levels of knowledge have been demonstrated at key decision
points early in the acquisition process before programs can receive
milestone approval for the technology development phase or the system
development phase respectively. The 2006 legislation also requires
programs to track unit cost growth against their original baseline
estimates--and not only their most recent estimates--and requires an
additional assessment of the program if certain cost growth thresholds
are reached. Other key legislation requires DOD to report on the
department's strategies for balancing the allocation of funds and other
resources among major defense acquisition programs, and to identify
strategies for enhancing the role of program managers in carrying out
acquisition programs.
Recent DOD Actions Provide Opportunities for Improvement:
DOD has also initiated actions aimed at improving investment decisions
and weapon system acquisition outcomes, based in part on congressional
direction and GAO recommendations. Each of the initiatives is designed
to enable more informed decisions by key department leaders well ahead
of a program's start, decisions that provide a closer match between
each program's requirements and the department's resources. For
example:
* DOD is experimenting with a new concept decision review, different
acquisition approaches according to expected fielding times, and panels
to review weapon system configuration changes that could adversely
affect program cost and schedule.
* DOD is also testing portfolio management approaches in selected
capability areas to facilitate more strategic choices about how to
allocate resources across programs and also testing the use of capital
budgeting as a potential means to stabilize program funding.
* In September 2007, the Office of the Under Secretary of Defense for
Acquisition, Technology and Logistics issued a policy memorandum to
ensure weapons acquisition programs were able to demonstrate key
knowledge elements that could inform future development and budget
decisions. This policy directed pending and future programs to include
acquisition strategies and funding that provide for contractors to
develop technically mature prototypes prior to initiating system
development, with the hope of reducing technical risk, validating
designs and cost estimates, evaluating manufacturing processes, and
refining requirements.
* DOD also plans to implement new practices that reflect past GAO
recommendations intended to provide program managers more incentives,
support, and stability. The department acknowledges that any actions
taken to improve accountability must be based on a foundation whereby
program managers can launch and manage programs toward greater
performance, rather than focusing on maintaining support and funding
for individual programs. DOD acquisition leaders have told us that any
improvements to program managers' performance hinge on the success of
these departmental initiatives.
* In addition, DOD has taken actions to strengthen the link between
award and incentive fees with desired program outcomes, which has the
potential to increase the accountability of DOD programs for fees paid
and of contractors for results achieved.
If adopted and implemented properly these actions could provide a
foundation for establishing sound, knowledge-based business cases for
individual acquisition programs, and the means for executing those
programs within established cost, schedule, and performance goals.
Concluding Observations on Achieving Successful and Lasting Reform:
DOD understands what it needs to do at the strategic and at the program
level to improve acquisition outcomes. The strategic vision of the
current Under Secretary of Defense for Acquisition, Technology and
Logistics acknowledges the need to create a high-performing, boundary-
less organization--one that seeks out new ideas and new ways of doing
business and is prepared to question requirements and traditional
processes. Past efforts have had similar goals, yet we continue to find
all too often that DOD's investment decisions are too service-and
program-centric and that the military services overpromise capabilities
and underestimate costs to capture the funding needed to start and
sustain development programs. This acquisition environment has been
characterized in many different ways. For example, some have described
it as a "conspiracy of hope," in which industry is encouraged to
propose unrealistic cost estimates, optimistic performance, and
understated technical risks during the proposal process and DOD is
encouraged to accept these proposals as the foundation for new
programs. Either way, it is clear that DOD's implied definition of
success is to attract funds for new programs and to keep funds for
ongoing programs, no matter what the impact. DOD and the military
services cannot continue to view success through this prism.
More legislation can be enacted and policies can be written, but until
DOD begins making better choices that reflect joint capability needs
and matches requirements with resources, the acquisition environment
will continue to produce poor outcomes. It should not be necessary to
take extraordinary steps to ensure needed capabilities are delivered to
the warfighter on time and within costs. Executable programs should be
the natural outgrowth of a disciplined, knowledge-based process. While
DOD's current policy supports a knowledge-based, evolutionary approach
to acquiring new weapons, in practice decisions made on individual
programs often sacrifice knowledge and realism in favor of
revolutionary solutions. Meaningful and lasting reform will not be
achieved until DOD changes the acquisition environment and the
incentives that drive the behavior of DOD decision-makers, the military
services, program managers, and the defense industry. Finally, no real
reform can be achieved without a true partnership among all these
players and the Congress.
Mr. Chairman, this concludes my prepared statement. I would be happy to
answer any questions you may have at this time.
Contacts and Staff Acknowledgements:
For further questions about this statement, please contact Michael J.
Sullivan at (202) 512-4841. Individuals making key contributions to
this statement include Ron Schwenn, Assistant Director; Kenneth E.
Patton, and Alyssa B. Weir.
[End of section]
Related GAO Products:
Defense Acquisitions: A Knowledge-Based Funding Approach Could Improve
Major Weapon System Program Outcomes. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-08-619]. Washington, D.C.: July
2, 2008.
Defense Acquisitions: Better Weapon Program Outcomes Require
Discipline, Accountability, and Fundamental Changes in the Acquisition
Environment. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-
782T]. Washington, D.C.: June 3, 2008.
Defense Acquisitions: Results of Annual Assessment of DOD Weapon
Programs. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-674T].
Washington, D.C.: April 29, 2008.
Defense Acquisitions: Assessments of Selected Weapon Programs.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-467SP].
Washington, D.C.: March 31, 2008.
Best Practices: Increased Focus on Requirements and Oversight Needed to
Improve DOD's Acquisition Environment and Weapon System Quality.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-294]. Washington,
D.C.: Feb. 1, 2008.
Cost Assessment Guide: Best Practices for Estimating and Managing
Program Costs. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-
1134SP, Washington, D.C.: July 2007.
Defense Acquisitions: Assessments of Selected Weapon Programs.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-406SP].
Washington, D.C.: March 30, 2007.
Best Practices: An Integrated Portfolio Management Approach to Weapon
System Investments Could Improve DOD's Acquisition Outcomes.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-388], Washington,
D.C.: March 30, 2007.
Best Practices: Better Support of Weapon System Program Managers Needed
to Improve Outcomes. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-
06-110]. Washington, D.C.: November 1, 2005.
Defense Acquisitions: Major Weapon Systems Continue to Experience Cost
and Schedule Problems under DOD's Revised Policy. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-06-368]. Washington, D.C.: April
13, 2006.
Defense Acquisitions: Stronger Management Practices Are Needed to
Improve DOD's Software-Intensive Weapon Acquisitions. [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO-04-393]. Washington, D.C.: March
1, 2004.
Best Practices: Setting Requirements Differently Could Reduce Weapon
Systems' Total Ownership Costs. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-03-57]. Washington, D.C.: February 11, 2003.
Best Practices: Capturing Design and Manufacturing Knowledge Early
Improves Acquisition Outcomes. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-02-701]. Washington, D.C.: July 15, 2002.
Defense Acquisitions: DOD Faces Challenges in Implementing Best
Practices. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-469T].
Washington, D.C.: February 27, 2002.
Best Practices: Better Matching of Needs and Resources Will Lead to
Better Weapon System Outcomes. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-01-288]. Washington, D.C.: March 8, 2001.
Best Practices: A More Constructive Test Approach Is Key to Better
Weapon System Outcomes. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/NSIAD-00-199]. Washington, D.C.: July 31, 2000.
Defense Acquisition: Employing Best Practices Can Shape Better Weapon
System Decisions. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-
NSIAD-00-137]. Washington, D.C.: April 26, 2000.
Best Practices: Better Management of Technology Development Can Improve
Weapon System Outcomes. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/NSIAD-99-162]. Washington, D.C.: July 30, 1999.
Defense Acquisitions: Best Commercial Practices Can Improve Program
Outcomes. [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-NSIAD-99-
116]. Washington, D.C.: March 17, 1999.
Defense Acquisitions: Improved Program Outcomes Are Possible.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/T-NSIAD-98-123].
Washington, D.C.: March 17, 1998.
Best Practices: Successful Application to Weapon Acquisition Requires
Changes in DOD's Environment. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/NSIAD-98-56]. Washington, D.C.: February 24, 1998.
Best Practices: Commercial Quality Assurance Practices Offer
Improvements for DOD. [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/NSIAD-96-162]. Washington, D.C.: August 26, 1996.
[End of section]
Footnotes:
[1] Our analysis in this area reflects comparisons of performance for
programs meeting DOD's criteria for being a major defense acquisition
program in fiscal year 2007 and programs meeting the same criteria in
fiscal years 2005 and 2000. The analysis does not include all the same
systems in all 3 years.
[2] GAO, Best Practices: Increased Focus on Requirements and Oversight
Needed to Improve DOD's Acquisition Environment and Weapon System
Quality, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-294]
(Washington, D.C.: Feb. 1, 2008).
[End of section]
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