Defense Acquisitions
DOD Must Prioritize Its Weapon System Acquisitions and Balance Them with Available Resources Gao ID: GAO-09-501T March 18, 2009Since fiscal year 2000, the Department of Defense (DOD) has significantly increased the number of major defense acquisition programs and its overall investment in them. However, acquisition outcomes have not improved. Over the next 5 years, DOD expects to invest $357 billion on the development and procurement of major defense acquisition programs and billions more on their operation and maintenance. Last year, we reported that the total acquisition cost of DOD's portfolio of major defense programs under development or in production has grown by $295 billion (in fiscal year 2008 dollars). In most cases, the programs we assessed failed to deliver capabilities when promised--often forcing warfighters to spend additional funds on maintaining legacy systems. 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. This testimony describes the systemic problems that have contributed to poor cost and schedule outcomes in DOD's acquisition of major weapon systems; recent actions DOD has taken to address these problems; and steps that Congress and DOD need to take to improve the future performance of DOD's major weapon programs. The testimony is drawn from GAO's body of work on DOD's acquisition, requirements, and funding processes.
Since 1990, GAO has consistently designated DOD's management of its major weapon acquisitions as a high-risk area. A broad consensus exists that weapon system problems are serious, but efforts at reform have had limited effect. For several years, GAO's work has highlighted a number of strategic- and program-level causes for cost, schedule, and performance problems in DOD's weapon system programs. At the strategic level, DOD's processes for identifying warfighter needs, allocating resources, and developing and procuring weapon systems, which together define the department's overall weapon system investment strategy, are fragmented. As a result, DOD fails to balance the competing needs of the services with those of the joint warfighter and commits to more programs than resources can support. At the program level, DOD allows programs to begin development without a full understanding of requirements and the resources needed to execute them. The lack of early systems engineering, acceptance of unreliable cost estimates based on overly optimistic assumptions, failure to commit full funding, and the addition of new requirements well into the acquisition cycle all contribute to poor outcomes. Moreover, DOD officials are rarely held accountable for poor decisions or poor program outcomes. Recent changes to the DOD acquisition system could begin to improve weapon program outcomes. However, DOD must take additional actions to reinforce the initiatives in practice including (1) making better decisions about which programs should be pursued or not pursued given existing and expected funding; (2) developing an analytical approach to better prioritize capability needs; (3) requiring new programs to have manageable development cycles; (4) requiring programs to establish knowledge-based cost and schedule estimates; and (5) requiring contractors to perform detailed systems engineering analysis before proceeding to system development. Recently proposed acquisition reform legislation addresses some of these areas. However, while legislation and policy revisions may lead to improvements, they will not be effective without changes to the overall acquisition environment. DOD has tough decisions to make about its weapon systems portfolio, and stakeholders, including the DOD Comptroller, the military services, industry, and Congress, have to play a constructive role in the process of bringing balance to it.
GAO-09-501T, Defense Acquisitions: DOD Must Prioritize Its Weapon System Acquisitions and Balance Them with Available Resources
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Testimony:
Before the Committee on the Budget, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Wednesday, March 18, 2000:
Defense Acquisitions:
DOD Must Prioritize Its Weapon System Acquisitions and Balance Them
with Available Resources:
Statement of Statement of Michael J. Sullivan, Director:
Acquisition and Sourcing Management:
GAO-09-501T:
GAO Highlights:
Highlights of GAO-09-501T, a testimony before the Committee on the
Budget, House of Representatives.
Why GAO Did This Study:
Since fiscal year 2000, the Department of Defense (DOD) has
significantly increased the number of major defense acquisition
programs and its overall investment in them. However, acquisition
outcomes have not improved. Over the next 5 years, DOD expects to
invest $357 billion on the development and procurement of major defense
acquisition programs and billions more on their operation and
maintenance. Last year, we reported that the total acquisition cost of
DOD‘s portfolio of major defense programs under development or in
production has grown by $295 billion (in fiscal year 2008 dollars). In
most cases, the programs we assessed failed to deliver capabilities
when promised”often forcing warfighters to spend additional funds on
maintaining legacy systems. 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.
This testimony describes the systemic problems that have contributed to
poor cost and schedule outcomes in DOD‘s acquisition of major weapon
systems; recent actions DOD has taken to address these problems; and
steps that Congress and DOD need to take to improve the future
performance of DOD‘s major weapon programs. The testimony is drawn from
GAO‘s body of work on DOD‘s acquisition, requirements, and funding
processes.
What GAO Found:
Since 1990, GAO has consistently designated DOD‘s management of its
major weapon acquisitions as a high-risk area. A broad consensus exists
that weapon system problems are serious, but efforts at reform have had
limited effect. For several years, GAO‘s work has highlighted a number
of strategic- and program-level causes for cost, schedule, and
performance problems in DOD‘s weapon system programs. At the strategic
level, DOD‘s processes for identifying warfighter needs, allocating
resources, and developing and procuring weapon systems, which together
define the department‘s overall weapon system investment strategy, are
fragmented. As a result, DOD fails to balance the competing needs of
the services with those of the joint warfighter and commits to more
programs than resources can support. At the program level, DOD allows
programs to begin development without a full understanding of
requirements and the resources needed to execute them. The lack of
early systems engineering, acceptance of unreliable cost estimates
based on overly optimistic assumptions, failure to commit full funding,
and the addition of new requirements well into the acquisition cycle
all contribute to poor outcomes. Moreover, DOD officials are rarely
held accountable for poor decisions or poor program outcomes.
Recent changes to the DOD acquisition system could begin to improve
weapon program outcomes. However, DOD must take additional actions to
reinforce the initiatives in practice including (1) making better
decisions about which programs should be pursued or not pursued given
existing and expected funding; (2) developing an analytical approach to
better prioritize capability needs; (3) requiring new programs to have
manageable development cycles; (4) requiring programs to establish
knowledge-based cost and schedule estimates; and (5) requiring
contractors to perform detailed systems engineering analysis before
proceeding to system development. Recently proposed acquisition reform
legislation addresses some of these areas. However, while legislation
and policy revisions may lead to improvements, they will not be
effective without changes to the overall acquisition environment. DOD
has tough decisions to make about its weapon systems portfolio, and
stakeholders, including the DOD Comptroller, the military services,
industry, and Congress, have to play a constructive role in the process
of bringing balance to it.
Table: Analysis of DOD Major Defense Acquisition Program Portfolio
(fiscal year 2008 dollars):
Portfolio status: Number of programs;
Fiscal year 2007 portfolio: 95.
Portfolio status: Change in total research and development costs from
first estimate;
Fiscal year 2007 portfolio: 40 percent increase.
Portfolio status: Change in total acquisition cost from first estimate;
Fiscal year 2007 portfolio: 26 percent increase.
Portfolio status: Estimated total acquisition cost growth from first
estimate;
Fiscal year 2007 portfolio: $295 billion.
Portfolio status: Share of programs with 25 percent or more increase in
program acquisition unit cost;
Fiscal year 2007 portfolio: 44 percent.
Portfolio status: Average schedule delay in delivering initial
capabilities;
Fiscal year 2007 portfolio: 21 months.
Source: GAO analysis of DOD data.
[End of table]
View [hyperlink, http://www.gao.gov/products/GAO-09-501T] or key
components. For more information, contact Michael J. Sullivan at (202)
512-4841 or sullivanm@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
I am pleased to be here today to discuss the Department of Defense's
(DOD) fiscal year 2010 budget and its acquisition of major weapon
systems. While the programmatic details of the President's Budget have
not been released, its recognition of the need for reforming DOD weapon
system acquisition is a positive first step. This area has been on
GAO's high-risk list since 1990, however now there is momentum from the
administration, including the Secretary of Defense, and key
congressional committees to address this issue. While the combat
effectiveness of DOD weapon systems is unparalleled, major weapon
programs continue to cost more, take longer, and deliver fewer
quantities and capabilities than originally planned. Last year we
reported that the cumulative cost growth in DOD's portfolio of 95 major
defense acquisition programs was $295 billion and the average delay in
delivering promised capabilities to the warfighter was 21 months.
Clearly, some problems are to be expected in developing weapon systems
given the technical risks and complexities involved. However, all too
often, we have found that cost and schedule problems are rooted in poor
planning, execution, and oversight.
DOD is entrusted with more taxpayer dollars than any other federal
agency, representing the largest part of the discretionary spending in
the U.S. budget. Congress provided DOD with about $512 billion in
annual appropriations for fiscal year 2009 and the administration is
requesting almost $534 billion for 2010. Effective management of this
substantial investment is critical as competition for funding has
increased dramatically within the department and across the government.
DOD faces a number of fiscal pressures, such as the ongoing military
campaigns in Afghanistan and Iraq, rising personnel costs, the
rebuilding and modernization of the force, and cost overruns in its
major defense acquisition programs. At a time when the federal budget
is strained by spending needs for a growing number of national
priorities, it is important that DOD get the best value for every
dollar it invests in weapon system programs. Every dollar wasted during
the development and acquisition of weapon systems is money not
available for other priorities within DOD and elsewhere in the
government.
Today, I will discuss (1) the systemic problems that have contributed
to poor cost and schedule outcomes in DOD's acquisition of major weapon
systems, (2) recent actions DOD has taken to address these problems,
and (3) steps that Congress and DOD need to take to improve the future
performance of DOD's major weapon programs. The statement draws from
our extensive body of work on DOD's acquisition of weapon systems. A
list of our key products is provided at the end of this testimony. This
work was conducted 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.
Background:
For almost two decades, we have reported on pervasive and long-standing
weaknesses in DOD's business operations. In January 2009, we released
our high-risk series update for the 111th Congress.[Footnote 1] This
series emphasizes federal programs and operations that are at high risk
because of vulnerabilities to fraud, waste, abuse, and mismanagement
and has also evolved to draw attention to areas associated with broad-
based transformation needed to achieve greater efficiency,
effectiveness, and sustainability. Solutions to high-risk problems
offer the potential to save billions of dollars, dramatically improve
service to the public, strengthen confidence and trust in the
performance and accountability of the U.S. government, and ensure the
ability of government to deliver on its promises. Since our high-risk
program began, the government has taken these problems seriously and
has made progress toward correcting them. Of the 30 high-risk areas
identified by GAO across the government, DOD bears sole responsibility
for 8 high-risk areas, including weapon systems acquisition, and shares
responsibility for 7 other high-risk areas (see table 1).
Table 1: High-Risk Areas Involving the Department of Defense (DOD):
Defense-specific: DOD Approach to Business Transformation;
Governmentwide areas that apply to DOD: Strategic Human Capital
Management.
Defense-specific: DOD Weapon Systems Acquisition;
Governmentwide areas that apply to DOD: Protecting the Federal
Government's Information Systems and the Nation's Critical
Infrastructures.
Defense-specific: DOD Contract Management;
Governmentwide areas that apply to DOD: Managing Federal Real Property.
Defense-specific: DOD Supply Chain Management;
Governmentwide areas that apply to DOD: Establishing Effective
Mechanisms for Sharing Terrorism-Related Information to Protect the
Homeland.
Defense-specific: DOD Financial Management;
Governmentwide areas that apply to DOD: Ensuring the Effective
Protection of Technologies Critical to U.S. National Security
Interests.
Defense-specific: DOD Business Systems Modernization;
Governmentwide areas that apply to DOD: Management of Interagency
Contracting.
Defense-specific: DOD Support Infrastructure Management;
Governmentwide areas that apply to DOD: Improving and Modernizing
Federal Disability Programs.
Defense-specific: DOD Personnel Security Clearance Program;
Governmentwide areas that apply to DOD: [Empty].
Source: GAO.
[End of table]
In addition to monitoring these high-risk areas, we also monitor
actions that DOD has taken in response to our findings, conclusions,
and recommendations. During fiscal years 2001 through 2007, we issued
637 reports to DOD that included a total of 2,726 recommendations. In
December 2008, we reported to this committee on the implementation
status of these recommendations and related financial accomplishments.
[Footnote 2] As of October 2008, 1,682 or 62 percent of the
recommendations we made were reported as were closed and implemented,
758 or 28 percent were open, and 286 or 10 percent were closed, but not
implemented for a variety of reasons.[Footnote 3] Consistent with past
experience that shows it takes agencies some time to implement
recommendations, we found most recommendations from fiscal year 2001
have been implemented while most recommendations from fiscal year 2007
remain open. During this same period, we recorded over $89 billion in
financial benefits associated with our work involving DOD. [Footnote 4]
Besides financial accomplishments, our recommendations also produce
many nonfinancial benefits and accomplishments, such as DOD actions
taken to improve operations or management oversight. Both types of
benefits result from our efforts to provide information to the Congress
that helped to (1) change laws and regulations, (2) improve services to
the public, and (3) promote sound agency and governmentwide management.
For fiscal year 2007, 74 of our 313 recommendations to DOD were related
to improving weapon system acquisition programs. In addition, for
fiscal year 2007, we reported $2.6 billion in financial benefits
related to weapon system acquisition programs. The financial benefits
claimed result from the actions taken by Congress or DOD that are based
on findings, conclusions, or recommendations contained in our products.
Such actions include congressional reductions to the President's annual
budget requests, cost reductions due to greater efficiency, or cost
reductions due to program cancellations or program delays. For example,
the fiscal year 2007 budget request for the Army's Future Combat System
was reduced by $254 million based in part on our testimony about the
program's development risks. Over the next 5 years, DOD plans to spend
more than $357 billion on the development and procurement of major
defense acquisition programs. We will continue to seek to improve the
efficiency and effectiveness of DOD's weapon system investments through
our work on individual programs and crosscutting areas that affect
acquisition outcomes.
Failure to Match Requirements with Technology and Other Resources
Underlie Poor Weapon Program Outcomes and Undermine Accountability:
Over the past several years our work has highlighted a number of
underlying systemic causes for cost growth and schedule delays at both
the strategic and program levels. 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. As a result,
DOD fails to effectively address joint warfighting needs and commits to
more programs than it has resources for, thus creating unhealthy
competition for funding. At the program level, a military service
typically establishes and DOD approves a business case containing
requirements that are not fully understood and cost and schedule
estimates that are based on overly optimistic assumptions rather than
on sufficient knowledge. Once a program begins, it too often moves
forward with inadequate technology, design, testing, and manufacturing
knowledge, making it impossible to successfully execute the program
within established cost, schedule, and performance targets.
Furthermore, DOD officials are rarely held accountable for poor
decisions or poor program outcomes.
DOD Lacks an Integrated Approach to Balance Weapon System Investments:
At the strategic level, DOD largely continues to define warfighting
needs and make investment decisions on a service-by-service and
individual platform basis, using fragmented decision-making processes.
This approach makes it difficult for the department to achieve a
balanced mix of weapon systems that are affordable and feasible and
that provide the best military value to the joint warfighter. In
contrast, we have found that successful commercial enterprises use an
integrated portfolio management approach to focus early investment
decisions on products collectively at the enterprise level and ensure
that there is a sound basis to justify the commitment of resources.
[Footnote 5] By following a disciplined, integrated process--during
which the relative pros and cons of competing product proposals are
assessed based on strategic objectives, customer needs, and available
resources, and where tough decisions about which investments to pursue
and not to pursue are made--companies minimize duplication between
business units, move away from organizational stovepipes, and
effectively support each new development program. To be effective,
integrated portfolio management must have strong, committed leadership;
empowered portfolio managers; and accountability at all levels of the
organization.
DOD determines its capability needs through the Joint Capabilities and
Integration Development System (JCIDS). While JCIDS provides a
framework for reviewing and validating needs, it does not adequately
prioritize those needs from a joint, departmentwide perspective and
lacks the agility to meet changing warfighter demands. We recently
reviewed JCIDS documentation related to new capability proposals and
found that almost 70 percent were sponsored by the military services
with little involvement from the joint community, including the
combatant commands, which are responsible for planning and carrying out
military operations.[Footnote 6] By continuing to rely on capability
needs defined primarily by the services, DOD may be losing
opportunities for improving joint warfighting capabilities and reducing
the duplication of capabilities in some areas. The JCIDS process has
also proven to be lengthy and cumbersome--taking on average up to 10
months to validate a need--thus undermining the department's efforts to
effectively respond to the needs of the warfighter, especially those
needs that are near term. Furthermore, the vast majority of capability
proposals that enter the JCIDS process are validated or approved
without accounting for the resources or technologies that will be
needed to acquire the desired capabilities. Ultimately, the process
produces more demand for new weapon system programs than available
resources can support.
The funding of proposed programs takes place through a separate
process, the department's Planning, Programming, Budgeting, and
Execution (PPBE) system, which is not fully synchronized with JCIDS.
While JCIDS is a continuous, need-driven process that unfolds in
response to capability proposals as they are submitted by sponsors,
PPBE is a calendar-driven process comprising phases occurring over a 2-
year cycle, which can lead to resource decisions for proposed programs
that may occur several years later. We recently reviewed the effect of
the PPBE process on major defense acquisition programs and found that
the process does not produce an accurate picture of the department's
resource needs for weapon system programs.[Footnote 7] The cost of many
of the programs we reviewed exceeded the funding levels planned for and
reflected in the Future Years Defense Program (FYDP)--the department's
long-term investment strategy (see fig. 1). Rather than limit the
number and size of programs or adjust requirements, DOD opts to push
the real costs of programs to the future. With too many programs under
way for the available resources and high cost growth occurring in many
programs, the department must make up for funding shortfalls by
shifting funds from one program to pay for another, reducing system
capabilities, cutting procurement quantities, or in rare cases
terminating programs. Such actions not only create instability in DOD's
weapon system portfolio, they further obscure the true future costs of
current commitments, making it difficult to make informed investment
decisions.
Figure 1: Funding Shortfalls at the Start of Development for Five
Weapon System Programs:
[Refer to PDF for image: stacked horizontal bar graph]
Program: MMA;
Level of funding in the FYDP in the year the program was initiated:
32%;
Level of funding the program needed to be fully funded in the initial
FYDP: 35%;
Funding required beyond the initial FYDP to complete development: 33%.
Program: WIN-T;
Level of funding in the FYDP in the year the program was initiated:
21%;
Level of funding the program needed to be fully funded in the initial
FYDP: 49%;
Funding required beyond the initial FYDP to complete development: 30%.
Program: FCS;
Level of funding in the FYDP in the year the program was initiated:
26%;
Level of funding the program needed to be fully funded in the initial
FYDP: 41%;
Funding required beyond the initial FYDP to complete development: 33%.
Program: JSF;
Level of funding in the FYDP in the year the program was initiated:
64%;
Level of funding the program needed to be fully funded in the initial
FYDP: 13%;
Funding required beyond the initial FYDP to complete development: 23%.
Program: Global Hawk;
Level of funding in the FYDP in the year the program was initiated:
31%;
Level of funding the program needed to be fully funded in the initial
FYDP: 48%;
Funding required beyond the initial FYDP to complete development: 21%.
Source: DOD (data); GAO (analysis and presentation).
[End of figure]
Initiating Programs with Inadequate Knowledge of Requirements and
Resources Often Results in Poor Outcomes:
At the program level, the key cause of poor outcomes is the approval of
programs with business cases that contain inadequate knowledge about
requirements and the resources--funding, time, technologies, and
people--needed to execute them. Our work in best practices has found
that an executable business case for a program 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. Over the past several
years, we have found no evidence of the widespread adoption of such an
approach for major acquisition programs in the department. Our annual
assessments of major weapon systems have consistently found that the
vast majority of programs began system development without mature
technologies and moved into system demonstration without design
stability.
The chief reason for these problems is the encouragement within the
acquisition environment of overly ambitious and lengthy product
developments that embody too many technical unknowns and not enough
knowledge about the performance and production risks they entail. The
knowledge gaps are largely the result of a lack of early and
disciplined systems engineering analysis of a weapon system's
requirements 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 the knowledge a product
developer needs to identify and resolve performance and resource gaps
before product development begins by either reducing requirements,
deferring them to the future, or increasing the estimated cost for the
weapon system's development. Because the government often does not
perform the proper up-front requirements analysis to determine whether
the program will meet its needs, significant contract cost increases
can and do occur as the scope of the requirements changes or becomes
better understood by the government and contractor. Not only does DOD
not conduct disciplined systems engineering prior to the beginning of
system development, it has allowed new requirements to be added well
into the acquisition cycle. We have reported on the negative effect
that poor systems engineering practices have had on several programs,
such as the Global Hawk Unmanned Aircraft System, F-22A, Expeditionary
Fighting Vehicle, and Joint Air-to-Surface Standoff Missile.[Footnote
8]
With high levels of uncertainty about requirements, technologies, and
design, program cost estimates and related funding needs are often
understated, effectively setting programs up for cost and schedule
growth. We recently assessed the service and independent cost estimates
for 20 major weapon system programs and found that while the
independent estimates were somewhat higher, both estimates were too low
in most cases.[Footnote 9] In some of the programs we reviewed, cost
estimates have been off by billions of dollars. For example, the Army's
initial cost estimate for the development of the Future Combat System
(FCS) was about $20 billion, while DOD's Cost Analysis and Improvement
Group's estimate was $27 billion. The department began the program
using the $20 billion estimate, but development costs for the FCS are
now estimated to be $28 billion and the program is still dealing with
significant technical risk. Estimates this far off the mark do not
provide the necessary foundation for sufficient funding commitments and
realistic long-term planning.
The programs we reviewed frequently lacked the knowledge needed to
develop realistic cost estimates. For example, program Cost Analysis
Requirements Description documents--used to build the program cost
estimate--often lack sufficient detail about planned program content
for developing sound cost estimates. Without this knowledge, cost
estimators must rely heavily on parametric analysis and assumptions
about system requirements, technologies, design maturity, and the time
and funding needed. A cost estimate is then usually presented to
decision makers as a single, or point, estimate that is expected to
represent the most likely cost of the program but provides no
information about the range of risk and uncertainty or level of
confidence associated with the estimate.
Lack of Accountability for Making Weapon System Decisions Hinders
Achieving Successful Outcomes:
DOD's requirements, resource allocation, and acquisition processes are
led by different organizations, thus making it difficult to hold any
one person or organization accountable for saying no to a proposed
program or for ensuring that the department's portfolio of programs is
balanced. DOD's 2006 Defense Acquisition Performance Assessment study
observed that these processes are not connected organizationally at any
level below the Deputy Secretary of Defense and concluded that this
weak structure induces instability and inhibits accountability.
Frequent turnover in leadership positions in the department exacerbates
the problem. The average tenure, for example, of the Under Secretary of
Defense for Acquisition, Technology and Logistics over the past 22
years has been only about 20 months.[Footnote 10]
When DOD's strategic processes fail to balance needs with resources and
allow unsound, unexecutable programs to move forward, program managers
cannot be held accountable when the programs they are handed already
have a low probability of success. Program managers are also not
empowered to make go or no-go decisions, have little control over
funding, cannot veto new requirements, and have little authority over
staffing. At the same time, program managers frequently change during a
program's development, making it difficult to hold them accountable for
the business cases that they are entrusted to manage and deliver.
Recent DOD Policy Changes Could Improve Future Performance of Weapon
System Programs:
DOD understands many of the problems that affect acquisition programs
and has recently taken steps to remedy them. It has revised its
acquisition policy and introduced several initiatives based in part on
direction from Congress and recommendations from GAO that could provide
a foundation for establishing sound, knowledge-based business cases for
individual acquisition programs. However, to improve outcomes, DOD must
ensure that its policy changes are consistently implemented and
reflected in decisions on individual programs--not only new program
starts but also ongoing programs. In the past, inconsistent
implementation of existing policy has hindered DOD's efforts to execute
acquisition programs effectively. Moreover, while policy improvements
are necessary, they may be insufficient unless the broader strategic
issues associated with the department's fragmented approach to managing
its portfolio of weapon system investments are also addressed.
In December 2008, DOD revised its policy governing major defense
acquisition programs in ways intended to provide key department leaders
with the knowledge needed to make informed decisions before a program
starts and to maintain disciplined development once it begins. The
revised policy recommends the completion of key systems engineering
activities before the start of development, includes a requirement for
early prototyping, and establishes review boards to evaluate the effect
of potential requirements changes on ongoing programs. The policy also
establishes early reviews for programs going through the pre-systems
acquisition phase. In the past, DOD's acquisition policy may have
encouraged programs to rush into systems development without sufficient
knowledge, in part because no formal milestone reviews were required
before system development. If implemented, these policy changes could
help programs replace risk with knowledge, thereby increasing the
chances of developing weapon systems within cost and schedule targets
while meeting user needs.
As part of its strategy for enhancing the roles of program managers in
major weapon system acquisitions, DOD has established a policy that
requires formal agreements among program managers, their acquisition
executives, and the user community setting forth common program goals.
According to DOD, these agreements are intended to be binding and to
detail the progress the program is expected to make during the year and
the resources the program will be provided to reach these goals. DOD
also requires program managers to sign tenure agreements so that their
tenure will correspond to the next major milestone review closest to 4
years. DOD acknowledges that any actions taken to improve
accountability must be based on a foundation whereby program managers
can launch and manage programs toward successful performance, rather
than focusing on maintaining support and funding for individual
programs. DOD acquisition leaders have also stated that any
improvements to program managers' performance depend on the
department's ability to promote requirements and resource stability
over weapon system investments.
Over the past few years, DOD has also been testing portfolio management
approaches in selected capability areas--command and control, net-
centric operations, battlespace awareness, and logistics--to facilitate
more strategic choices for resource allocation across programs. The
department recently formalized the concept of capability portfolio
management, issuing a directive in 2008 that established policy and
assigned responsibilities for portfolio management. The directive
established nine joint capability-area portfolios, each to be managed
by civilian and military coleads. While the portfolios have no
independent decision-making authority over requirements determination
and resource allocation, according to some DOD officials, they provided
key input and recommendations in this year's budget process. However,
without portfolios in which managers have authority and control over
resources, the department is at risk of continuing to develop and
acquire systems in a stovepiped manner and of not knowing if its
systems are being developed within available resources.
Concluding Observations on What Remains to Be Done:
A broad consensus exists that weapon system problems are serious and
that their resolution is overdue. With the federal budget under
increasing strain from the nation's economic crisis and long-term
fiscal challenges looming, the time for change is now. Achieving
successful and lasting improvements in weapon program outcomes will
require changes to the overall acquisition environment and the
incentives that drive it. Acquisition problems are likely to persist
until DOD's approach to managing its weapon system portfolio (1)
prioritizes needs with available resources, thus eliminating unhealthy
competition for funding and the incentives for making programs look
affordable when they are not; (2) ensures that programs that are
started can be executed by matching requirements with resources; and
(3) balances the near-term needs of the joint warfighter with the long-
term need to modernize the force. Establishing a single point of
accountability for managing DOD's weapon system portfolio could help
the department make these changes. Congress can also support change
though its own decisions about whether to authorize and appropriate
funds for individual weapon programs.
From an acquisition policy perspective, DOD is off to a good start with
its recent policy revisions. However, DOD could do more in this regard
too by requiring new programs to have manageable development cycles,
requiring programs to establish knowledge-based cost and schedule
estimates, and requiring contractors to perform detailed systems
engineering analysis before proceeding to system 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.
DOD's conventional acquisition process often requires as many as 10 or
15 years to get from program start to production as programs strive to
provide revolutionary capability. Constraining cycle times to 5 or 6
years would force programs to adopt more realistic requirements and
lend itself to fully funding programs to completion, thereby increasing
stability and the likelihood that capability can be delivered to the
warfighter within established time frames and available resources.
Recently proposed acquisition reform legislation addresses some of
these areas. Provisions increasing the emphasis on systems engineering,
requiring early preliminary design reviews, and strengthening
independent cost estimates and technology readiness assessments should
make the critical front end of the acquisition process more
disciplined. Establishing a termination criterion for critical cost
breaches could help prevent the acceptance of unrealistic cost
estimates at program initiation. Having greater combatant command
involvement in determining requirements and greater consultation
between the requirements, budget, and acquisition processes could help
improve the department's efforts to balance its portfolio of weapon
system programs. However, while legislation and policy revisions may
lead to improvements, they will not be effective without changes to the
overall acquisition environment. The department has tough decisions to
make about its weapon systems and portfolio, and stakeholders,
including the DOD Comptroller, military services, industry, and
Congress, have to play a constructive role in the process toward
change. It will also require strong leadership and accountability
within the department.
Mr. Chairman, this concludes my prepared statement. I would be happy to
answer any questions you may have at this time.
Contacts and Acknowledgments:
For further information about this statement, please contact Michael J.
Sullivan at (202) 512-4841 or sullivanm@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this statement. Individuals who made key contributions
to this statement include Ann Borseth, Dayna Foster, Matt Lea, Susan
Neill, John Oppenheim, Ken Patton, Sharon Pickup, Ron Schwenn, Charlie
Shivers, Bruce Thomas, and Alyssa Weir.
[End of section]
Related GAO Products:
Defense Acquisitions: DOD Must Balance Its Needs with Available
Resources and Follow an Incremental Approach to Acquiring Weapon
Systems. [hyperlink, http://www.gao.gov/products/GAO-09-413T].
Washington, D.C.: March 3, 2009.
Defense Acquisitions: Perspectives on Potential Changes to DOD's
Acquisition Management Framework. [hyperlink,
http://www.gao.gov/products/GAO-09-295R]. Washington, D.C.: February
27, 2009.
Defense Management: Actions Needed to Overcome Long-standing Challenges
with Weapon Systems Acquisition and Service Contract Management.
[hyperlink, http://www.gao.gov/products/GAO-09-362T]. Washington, D.C.:
February 11, 2009.
Status of Recommendations to the Department of Defense (Fiscal Years
2001-2007). [hyperlink, http://www.gao.gov/products/GAO-09-201R].
Washington, D.C.: December 11, 2008.
Defense Acquisitions: Fundamental Changes Are Needed to Improve Weapon
Program Outcomes. [hyperlink,
http://www.gao.gov/products/GAO-08-1159T]. Washington, D.C.: September
25, 2008.
Defense Acquisitions: DOD's Requirements Determination Process Has Not
Been Effective in Prioritizing Joint Capabilities. [hyperlink,
http://www.gao.gov/products/GAO-08-1060]. Washington, D.C.: September
25, 2008.
Defense Acquisitions: A Knowledge-Based Funding Approach Could Improve
Major Weapon System Program Outcomes. [hyperlink,
http://www.gao.gov/products/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/products/GAO-08-782T].
Washington, D.C.: June 3, 2008.
Defense Acquisitions: Assessments of Selected Weapon Programs.
[hyperlink, http://www.gao.gov/products/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/products/GAO-08-294]. Washington, D.C.:
February 1, 2008.
Best Practices: An Integrated Portfolio Management Approach to Weapon
System Investments Could Improve DOD's Acquisition Outcomes.
[hyperlink, http://www.gao.gov/products/GAO-07-388]. Washington, D.C.:
March 30, 2007.
Defense Acquisitions: Major Weapon Systems Continue to Experience Cost
and Schedule Problems under DOD's Revised Policy. [hyperlink,
http://www.gao.gov/products/GAO-06-368]. Washington, D.C.: April 13,
2006.
Best Practices: Better Support of Weapon System Program Managers Needed
to Improve Outcomes. [hyperlink,
http://www.gao.gov/products/GAO-06-110]. Washington, D.C.: November 1,
2005.
[End of section]
Footnotes:
[1] GAO, High-Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: January
2009).
[2] GAO, Status of Recommendations to the Department of Defense (Fiscal
Years 2001-2007), [hyperlink, http://www.gao.gov/products/GAO-09-201R]
(Washington, D.C.: Dec. 11, 2008).
[3] We consider a recommendation to be open when action has not been
taken but may be taken in the future, action is in the planning stage,
or action has been taken on only part of the recommendation. We
consider a recommendation to be closed-implemented when the action is
fully implemented or action has been taken that essentially meets the
recommendation's intent, that is, the action meets the spirit--rather
than the letter--of the recommendation, or all parts of the
recommendation have been implemented. We consider a recommendation to
be closed-not implemented if DOD has no intention of implementing the
recommendation or circumstances have changed and the recommendation is
no longer valid.
[4] In many, but not all, cases our findings and recommendations
produce measurable financial benefits for the federal government after
Congress acts on or agencies such as DOD implement them and the funds
are made available to reduce government expenditures or are reallocated
to other areas.
[5] GAO, Best Practices: An Integrated Portfolio Management Approach to
Weapon System Investments Could Improve DOD's Acquisition Outcomes,
[hyperlink, http://www.gao.gov/products/GAO-07-388] (Washington, D.C.:
Mar. 30, 2007).
[6] GAO, Defense Acquisitions: DOD's Requirements Determination Process
Has Not Been Effective in Prioritizing Joint Capabilities, [hyperlink,
http://www.gao.gov/products/GAO-08-1060] (Washington, D.C.: Sept. 25,
2008).
[7] GAO, Defense Acquisitions: A Knowledge-Based Funding Approach Could
Improve Major Weapon System Program Outcomes, [hyperlink,
http://www.gao.gov/products/GAO-08-619] (Washington, D.C.: July 2,
2008).
[8] 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/products/GAO-08-294]
(Washington, D.C.: Feb. 1, 2008).
[9] GAO, Defense Acquisitions: A Knowledge-Based Funding Approach Could
Improve Major Weapon System Program Outcomes, [hyperlink,
http://www.gao.gov/products/GAO-08-619], (Washington, D.C.: July 2,
2008).
[10] The position of Under Secretary of Defense for Acquisition was
established in 1986 and the title was subsequently changed to the Under
Secretary of Defense for Acquisition, Technology, and Logistics in
1999. Since 1986, there have been 11 under secretaries.
[End of section]
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