Defense Acquisitions
Opportunities Exist to Position Army's Ground Force Modernization Efforts for Success Gao ID: GAO-10-406 March 15, 2010Since 2003, the Future Combat System (FCS) program has been the centerpiece of the Army's efforts to transition to a lighter, more agile, and more capable combat force. In 2009, however, concerns over the program's performance led to the Secretary of Defense's decision to significantly restructure and ultimately cancel the program. As a result, the Army has outlined a new approach to ground force modernization. This report (1) outlines the Army's preliminary post-FCS plans and (2) identifies the challenges and opportunities the Department of Defense (DOD) and the Army must address as they proceed with Army ground force modernization efforts. To meet these objectives, GAO reviewed key documents, performed analyses, visited test facilities where the Army evaluated FCS equipment, and interviewed DOD and Army officials.
With DOD having canceled the FCS acquisition program, the Army has moved away from FCS as the centerpiece of ground force modernization. Although the Army is still refining its post-FCS plans, it has already taken a number of actions to comply with DOD directions and define new modernization initiatives. For instance, the Army has terminated FCS vehicle development and is preparing for a new ground combat vehicle program. Also, Army officials convened a special task force to refine future force concepts and formulate an expedited fielding strategy. The Army also announced preliminary plans for new acquisition programs. With ground force modernization efforts at an early stage, DOD and the Army face the challenge of setting the emerging modernization efforts on the best possible footing by buying the right capabilities at the best value. They have an opportunity to position these efforts for success by effectively implementing the enhanced body of acquisition legislation and DOD policy reforms as well as lessons learned from the FCS program, including lessons that underscore the use of knowledge-based acquisition and disciplined contracting strategies. Preliminary plans suggest that the Army is moving in that direction, including expectations to begin future developments with mature technologies and utilizing competitive prototyping. However, DOD recently approved, with a number of restrictions, low-rate initial production of the first increment of FCS spinout equipment, such as new radios and sensors, despite having acknowledged that the systems were immature, unreliable, and not performing as required. The restrictions include required DOD reviews of Army progress toward improving the systems' maturity and reliability. The spin out equipment was being developed within the FCS program, and the decision to approve production reflects DOD and Army emphasis on providing new capabilities quickly to combat units. However, this decision runs the risk of delivering unacceptable equipment to the warfighter and trading off acquisition principles whose validity has been so recently underscored. Detailed plans for most of the Army's new modernization efforts are still being developed and may not be available until at least later in fiscal year 2010. That will be a limiting factor as the Congress considers the Army's fiscal year 2011 budget request for these modernization efforts.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-10-406, Defense Acquisitions: Opportunities Exist to Position Army's Ground Force Modernization Efforts for Success
This is the accessible text file for GAO report number GAO-10-406
entitled 'Defense Acquisitions: Opportunities Exist to Position Army's
Ground Force Modernization Efforts for Success' which was released on
March 15, 2010.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as
part of a longer term project to improve GAO products' accessibility.
Every attempt has been made to maintain the structural and data
integrity of the original printed product. Accessibility features,
such as text descriptions of tables, consecutively numbered footnotes
placed at the end of the file, and the text of agency comment letters,
are provided but may not exactly duplicate the presentation or format
of the printed version. The portable document format (PDF) file is an
exact electronic replica of the printed version. We welcome your
feedback. Please E-mail your comments regarding the contents or
accessibility features of this document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to the Subcommittee on Air and Land Forces, Committee on Armed
Services, House of Representatives:
United States Government Accountability Office:
GAO:
March 2010:
Defense Acquisitions:
Opportunities Exist to Position Army's Ground Force Modernization
Efforts for Success:
GAO-10-406:
GAO Highlights:
Highlights of GAO-10-406, a report to the Subcommittee on Air and Land
Forces, Committee on Armed Services, House of Representatives.
Why GAO Did This Study:
Since 2003, the Future Combat System (FCS) program has been the
centerpiece of the Army‘s efforts to transition to a lighter, more
agile, and more capable combat force. In 2009, however, concerns over
the program‘s performance led to the Secretary of Defense‘s decision
to significantly restructure and ultimately cancel the program. As a
result, the Army has outlined a new approach to ground force
modernization. This report (1) outlines the Army‘s preliminary post-
FCS plans and (2) identifies the challenges and opportunities the
Department of Defense (DOD) and the Army must address as they proceed
with Army ground force modernization efforts. To meet these
objectives, GAO reviewed key documents, performed analyses, visited
test facilities where the Army evaluated FCS equipment, and
interviewed DOD and Army officials.
What GAO Found:
With DOD having canceled the FCS acquisition program, the Army has
moved away from FCS as the centerpiece of ground force modernization.
Although the Army is still refining its post-FCS plans, it has already
taken a number of actions to comply with DOD directions and define new
modernization initiatives. For instance, the Army has terminated FCS
vehicle development and is preparing for a new ground combat vehicle
program. Also, Army officials convened a special task force to refine
future force concepts and formulate an expedited fielding strategy.
The Army also announced preliminary plans for new acquisition programs.
With ground force modernization efforts at an early stage, DOD and the
Army face the challenge of setting the emerging modernization efforts
on the best possible footing by buying the right capabilities at the
best value. They have an opportunity to position these efforts for
success by effectively implementing the enhanced body of acquisition
legislation and DOD policy reforms as well as lessons learned from the
FCS program, including lessons that underscore the use of knowledge-
based acquisition and disciplined contracting strategies. Preliminary
plans suggest that the Army is moving in that direction, including
expectations to begin future developments with mature technologies and
utilizing competitive prototyping. However, DOD recently approved,
with a number of restrictions, low-rate initial production of the
first increment of FCS spinout equipment, such as new radios and
sensors, despite having acknowledged that the systems were immature,
unreliable, and not performing as required. The restrictions include
required DOD reviews of Army progress toward improving the systems‘
maturity and reliability. The spin out equipment was being developed
within the FCS program, and the decision to approve production
reflects DOD and Army emphasis on providing new capabilities quickly
to combat units. However, this decision runs the risk of delivering
unacceptable equipment to the warfighter and trading off acquisition
principles whose validity has been so recently underscored.
Detailed plans for most of the Army‘s new modernization efforts are
still being developed and may not be available until at least later in
fiscal year 2010. That will be a limiting factor as the Congress
considers the Army‘s fiscal year 2011 budget request for these
modernization efforts.
What GAO Recommends:
GAO recommends that the Secretary of Defense instruct the Army to
correct the identified maturity and reliability issues prior to either
fielding equipment or approving additional system procurement. GAO
also recommends that the Secretary direct the Army to submit a
comprehensive report to the Congress on its modernization investment,
contracting, and management strategies. DOD concurred with GAO‘s
recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-10-406] or key
components. For more information, contact Michael J. Sullivan at (202)
512-4841 or sullivanm@gao.gov.
[End of section]
Contents:
Letter:
Background:
In Implementing DOD Direction, the Army Is Moving Away from Many of
Its FCS Approaches:
Acquisition Direction and FCS Lessons Learned Offer Opportunities to
Increase the Likelihood of Successful Outcomes:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Comparison of Controls Used in Best Practices Model and DOD
Policy:
Table 2: Acquisition Reforms and Their Potential Impact:
Figures:
Figure 1: FCS Acquisition Program (2003 versus 2009):
Figure 2: Increment 1 Systems:
Abbreviations:
DOD: Department of Defense:
FCS: Future Combat System:
GCV: Ground Combat Vehicle:
LSI: lead systems integrator:
MRAP: Mine Resistant Ambush Protected:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
March 15, 2010:
The Honorable Adam Smith:
Chairman:
The Honorable Roscoe Bartlett:
Ranking Member:
Subcommittee on Air and Land Forces:
Committee on Armed Services:
House of Representatives:
Since 2003, the Future Combat System (FCS) program has been at the
center of the Army's efforts to modernize by replacing existing combat
systems with a family of manned and unmanned vehicles and systems
linked by an advanced information network. However, the Army started
FCS without determining whether the concept could be successfully
developed with existing resources. Specifically, the Army had not
established firm system-level requirements, mature technologies, a
realistic cost estimate, or an acquisition strategy wherein knowledge
drives schedule. In our March 2009 report, we concluded that the Army
would be challenged to demonstrate the knowledge necessary to warrant
an unqualified commitment to FCS at a congressionally mandated 2009
milestone review.[Footnote 1],[Footnote 2]
In April 2009, the Secretary of Defense proposed restructuring the FCS
program to lower risk and address more near-term needs shortly before
FCS was to undergo the congressionally mandated review to determine
its future. The Secretary of Defense's recommendations served as a
preemptive "no-go" decision for this review, and the FCS acquisition
program was subsequently canceled in June 2009. As a result, the Army
has outlined a new approach to modernizing its ground forces. To
understand the Army's new approach to modernization, you asked us to
(1) outline the Army's preliminary post-FCS plans and (2) identify the
challenges and opportunities the Department of Defense (DOD) and the
Army will need to address as they proceed with ground force
modernization efforts.
In conducting our work, we met with Army and DOD officials responsible
for carrying out the FCS cancellation and formulating new approaches
for Army modernization. We reviewed the revised overarching Army
concept document and the preliminary plans for emerging acquisition
programs and assessed those against the earlier FCS concept. We
assessed the Army's preliminary modernization plans against lessons
learned from the FCS program, acquisition best practices, and the
latest acquisition policy. In addition, we drew from our body of past
work on weapon system acquisition practices and conducted our own
analyses of recent policy changes and acquisition reform legislation.
We conducted this performance audit from March 2009 to March 2010 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. Appendix I
further discusses our scope and methodology.
Background:
Since it started development in 2003, FCS was at the center of the
Army's efforts to modernize into a lighter, more agile, and more
capable combat force. The FCS concept involved replacing existing
combat systems with a family of manned and unmanned vehicles and
systems linked by an advanced information network. The Army
anticipated that the FCS systems, along with the soldier and enabling
complementary systems, would work together in a system of systems
wherein the whole provided greater capability than the sum of the
individual parts. The Army expected to develop this equipment in 10
years, procure it over 13 years, and field it to 15 FCS-unique
brigades--about one-third of the active force at that time. The Army
also had planned to spin out selected FCS technologies and systems to
current Army forces throughout the system development and
demonstration phase. In 2006, the Army established the Army Evaluation
Task Force to use, evaluate, and train with these FCS spinout
capabilities.
The Army used a management approach for FCS that centered on a lead
system integrator (LSI) to provide significant management services to
help the Army define and develop FCS and reach across traditional Army
mission areas. Army officials have stated that they did not believe
the Army had the resources or flexibility to use its traditional
acquisition process to field a program as complex as FCS under the
aggressive timeline established by the then-Army Chief of Staff.
As we have reported in the past, the FCS program was immature and
unable to meet DOD's own standards for technology and design from the
start (see the list of related GAO products at the end of this
report). Although adjustments were made, such as adding time and
reducing requirements, vehicle weights and software code grew, key
network systems were delayed, and technologies took longer to mature
than anticipated (see fig. 1). By 2009, after an investment of 6 years
and an estimated $18 billion, the viability of the FCS concept was
still unknown. As such, in our 2009 report, we concluded that the
maturity of the development efforts was insufficient and the program
could not be developed and produced within existing resources.
Figure 1: FCS Acquisition Program (2003 versus 2009):
[Refer to PDF for image: illustrated table]
Cost estimate (Fiscal year 2009 billions of dollars):
2003:
Research and development: $20.9 billion;
Procurement: $68.2 billion;
Total: $89.8 billion;
2009:
Research and development: $29.0 billion ($8.1 billion increase);
Procurement: $129.3 billion ($61.1 billion increase);
Total: $159.3 billion ($69.5 billion increase).
Schedule (Milestone B to initial operational capability):
2003: 7 year 6 months;
2009: 12 years, 3 months (over 4.5 years added).
Requirements:
2003: Undefined;
2009: System-level requirements not matched with emerging designs
(persistent gaps).
Software lines of code:
2003: 34 million;
2009: 114+ million (tripled in size).
Projected maturity date of critical technologies[A]:
2003: 2006;
2009: 2009 (3 years added).
Source: DOD (data); GAO (analysis and presentation).
[A] For FCS, the Army projected maturity based on a Technology
Readiness Level 6, which is a representative model or prototype that
has been tested in a relevant environment but requires additional work
for the appropriate form, fit, and function. Based on our best
practices work, technologies that have reached Technology Readiness
Level 7, which is a prototype demonstrated in a realistic environment,
are mature.
[End of figure]
In April 2009, the Secretary of Defense proposed a significant
restructuring of the FCS program in order to address more near-term
combat needs and incorporate a role for the Mine Resistant Ambush
Protected (MRAP) vehicles being used in today's conflicts. The
Secretary noted significant concerns that the FCS program's vehicle
designs--where greater information awareness was expected to
compensate for less armor and result in lower weight and higher fuel
efficiency--did not adequately reflect the lessons of
counterinsurgency and close-quarters combat operations in Iraq and
Afghanistan. As such, the Secretary recommended:
* accelerating fielding of ready-to-go systems and capabilities to all
combat brigades;
* canceling the vehicle component of the FCS program, reevaluating the
requirements, technology, and approach, and relaunching the Army's
vehicle modernization program; and:
* addressing fee structure and other concerns with current FCS
contracting arrangements.
Subsequently, in June 2009, DOD issued an acquisition decision
memorandum that canceled the FCS acquisition program, terminated
manned ground vehicle development efforts, and laid out plans for
follow-on Army brigade combat team modernization efforts. DOD directed
the Army to transition to an Army-wide modernization plan consisting
of a number of integrated acquisition programs, including one to
develop ground combat vehicles (GCV). The memorandum also instructed
the Army to transition away from an LSI management approach.
In recent months, the Army has been defining its ground force
modernization efforts per the Secretary's decisions and the June 2009
acquisition decision memorandum. Although the details are not yet
complete, the Army took several actions through the end of calendar
year 2009. It stopped all development work on the FCS manned ground
vehicles--including the non-line-of-sight cannon--in the summer of
2009 and recently terminated development of the Class IV unmanned
aerial vehicle and the countermine and transport variants of the
Multifunction Utility/Logistics and Equipment unmanned ground vehicle.
For the time being, the Army is continuing selected development work
under the existing FCS development contract, primarily residual FCS
system and network development. In October 2009, the Army negotiated a
modification to the existing contract that clarified the development
work needed for the brigade combat team modernization efforts.
In Implementing DOD Direction, the Army Is Moving Away from Many of
Its FCS Approaches:
The Army is implementing DOD direction and redefining its overall
modernization strategy as a result of the Secretary of Defense's
decision to significantly restructure the FCS program. It established
a key task force to refine its future force concepts and modernization
plans and has moved away from FCS as the centerpiece of ground force
modernization. Additionally, the Army is transitioning from the FCS
long-term acquisition orientation to a shorter-term approach that
biennially develops and fields new increments of capability within
capability packages. It now has one approved acquisition program that
will produce and field the initial increment of the FCS spinout
equipment, as well as preliminary plans for two other acquisition
programs that will define and develop follow-on increments and develop
a new GCV. The Army also plans to continue network development for all
the combat brigades and to develop and field upgrades to other
existing equipment.
The Army Has Established a New Operational Concept:
In response to the Secretary's recommendation to restructure FCS, the
Army established a Training and Doctrine Command-based task force to
reexamine current force capability gaps, make resource-informed
recommendations on how to fill them, and provide elements of planning
for future force modernization.[Footnote 3] Through that process, the
task force found that some assumptions were no longer valid, such as
reliance on networking for survivability, which essentially meant
trading heavy armor for better information or situational awareness.
The Army acknowledges that this is not the best trade for the way it
now has to fight. As a result of the task force's analysis, the Army
is implementing a new operational concept and brigade combat team
modernization strategy that will update all Army combat brigades for
full-spectrum operations. That is a significant contrast to the FCS
approach that would have created 15 new FCS-unique brigades.
The task force developed a concept of continual modernization of ready-
to-go capabilities through biennial deliveries of capability packages.
In addition to select FCS systems, these capability packages could
also include materiel and nonmateriel items developed outside the FCS
program. The concept also included plans to reallocate assets, divest
older technologies, and incrementally modernize the Army's information
network. The Army expects to field the first capability package in
fiscal years 2011 through 2012, followed by additional capability
packages delivered in 2-year increments. The Army plans to align
capability package fielding with an established equipment reset and
training process in order to provide these systems to deploying units.
A network effort, to include more advanced hardware, software, and
radios, will be included in each capability package. The Army's near-
term plan is to define, develop, produce, and field capabilities to
some of the Army's combat brigades, and the long-term plan is to field
those capabilities to all remaining combat brigades. The Army has
specified that the new capabilities will be tested and their
performance validated before they are deployed in the capability
packages.
The Army Has Started a Series of Development and Fielding Efforts:
In recent months, the Army has been defining its ground force
modernization efforts per the Secretary's decisions and the specifics
of the June 2009 acquisition decision memorandum. The Army has one
approved acquisition program as well as preliminary plans for starting
two other acquisition programs, integrating network capabilities
across the Army's combat brigade structure, and upgrading and fielding
existing ground force capabilities.
* The first program, Increment 1, is a continuation of previous FCS-
related efforts to spin out emerging capabilities and technologies to
current forces. Of the Army's post-FCS modernization initiatives,
Increment 1, which includes such FCS remnants as unmanned air and
ground systems, unattended ground sensors, the non-line-of-sight
launch system, and a network integration kit, is the furthest along in
the acquisition development cycle (see fig. 2). The network
integration kit includes, among other things, the integrated computer
system, an initial version of the system-of-systems common operating
environment, early models of the Joint Tactical Radio System and
waveforms, and a range extension relay[Footnote 4]. In December 2009,
the Army requested and DOD approved, with a number of restrictions,
the low-rate initial production of Increment 1 systems that are
expected to be fielded in the fiscal year 2011-12 capability package,
which will be discussed in more detail later in this report. The Army
will be continuing Increment 1 development over the next 2 years while
low-rate initial production proceeds. The projected development and
production cost to equip nine combat brigades with the Increment 1
network and systems, supported by an independent cost estimate, would
be about $3.5 billion.
Figure 2: Increment 1 Systems:
[Refer to PDF for image: illustrations of systems with accompanying
information]
Small Unmanned Ground Vehicle (SUGV) Block 1:
Provides enhanced situational awareness and force protection through
reduced exposure to hazards during soldier-intensive and/or high-risk
functions.
Network Integration Kit (NIK):
Provides enhanced communications and situational awareness through
radios with multiple software waveforms, connections to unattended
sensors, and links to existing networking capabilities.
Urban Unattended Ground Sensor (U-UGS):
Provides force protection in an urban setting through a leave-behind,
network-enabled reporting system of movement and/or activity in
cleared areas.
Class 1 Unmanned Aerial Vehicle Block 0:
Provides independent, soldier-level aerial reconnaissance,
surveillance, and target acquisition capability.
Non-Line-of-Sight Launch System (NLOS-LS):
Provides the ability to precisely attack armored, lightly armored, and
stationary or moving targets at extended ranges despite
weather/environmental conditions and/or presence of counter-measures.
Tactical Unattended Ground Sensor (T-UGS):
Provides enhanced situational awareness, force protection, and early
warnings in a tactical setting through cross-cues to sensors and
weapon systems.
Source: Army (data and photos); GAO (analysis and presentation).
[End of figure]
* For the second acquisition program, Increment 2 of brigade combat
team modernization, the Army has preliminary plans to mature Increment
1 capabilities--potentially demonstrating full FCS threshold
requirements--as well as contribute to further developments of the
system-of-systems common operating environment and battle command
software, and demonstrate and field additional capabilities. For
example, these may include the Armed Robotic Vehicle Assault (Light)--
an unmanned ground vehicle configured for security and assault support
missions--and the Common Controller, which will provide the dismounted
soldier a handheld device capable of controlling, connecting, and
providing data transfer from unmanned vehicles and ground sensors.
According to Army officials, they are currently working to define the
content, cost, and schedule for Increment 2 and are planning a Defense
Acquisition Board review in the third quarter of fiscal year 2010 and
a low-rate initial production decision for fiscal year 2013.
* The third acquisition program would develop a new GCV. The Army
reviewed current fighting vehicles across the force structure to
determine whether to sustain, improve, divest, or pursue new vehicles
based on operational value, capability shortfalls, and resource
availability. Per DOD direction, the Army also collaborated with the
Marine Corps to identify capability gaps related to fighting vehicles.
For development of a new GCV, the Army's preliminary plans indicate
the use of an open architecture design to enable incremental
improvements in modular armor; network architecture; and subcomponent
size, weight, power, and cooling. Preliminary funding and schedule
information for the proposed program was recently provided to the
defense committees by way of the Fiscal Year 2011 President's Budget
Request. According to a DOD official, in February 2010, DOD made a
materiel development decision for the Army's proposed GCV effort.
[Footnote 5] As a result of that decision, DOD authorized the Army's
release of a request for proposals for GCV technology development.
Over the next several months, the Army will be conducting an analysis
of alternatives to assess potential materiel solutions for the GCV.
The Army expects to follow the analysis with a Milestone A decision
review on whether to begin technology development in September
2010.[Footnote 6] After Milestone A, Army officials are proposing the
use of competitive prototyping with multiple contractors--the number
of which will depend on available funding--during the technology
development phase, which will feature the use of mature technologies
and the fabrication and testing of prototype subsystems. A preliminary
design review would be used to validate contractor readiness to enter
detailed design at Milestone B in fiscal year 2013. The Army's
preliminary plans indicate that the first production vehicles could be
delivered in late fiscal year 2017, about 7 years from Milestone A.
* The Army is planning to incrementally develop and field an
information network to all of its combat brigades in a decentralized
fashion--that is, not as a separate acquisition program. The Army has
defined a preliminary network strategy and is in the process of
defining what the end state of the network will need to be, as well as
how it may build up that network over an undefined period of time. In
the near term, the Army is working to establish a common network
foundation to build on and to define a common network architecture
based on what is currently available and expected to become available
in the near future. Current communications, command and control, and
networking acquisition programs will continue and will be expected to
build on to the current network foundation and architecture over time.
Networking capabilities will be expected to meet specific standards
and interface requirements. According to Army officials, the ongoing
incremental network and software development activities and
requirements will be dispersed to these acquisition programs, where
they will be considered for further development and possible fielding.
The only original FCS network development activities that the Army
plans to continue under the FCS development contract are those
supporting the network integration kit for Increment 1 and whatever
additional networking capabilities may be needed for Increment 2. DOD
expects the Army to present network development plans in March 2010.
* The Army has also outlined plans to upgrade existing ground force
capabilities and integrate the MRAP vehicle into its forces. The plans
include upgrades to the Abrams tank fleet, Paladin cannon, and Stryker
vehicles. They also include a role for MRAP vehicles within the
brigade combat team structure, in accordance with the Secretary of
Defense's April 2009 statement that the Army's vehicle program
developed 9 years ago did not include a role for the $25 billion
investment in MRAP being used to "good effect" in today's conflicts.
Using the recommendations from the task force, the Army drafted plans
to fully integrate MRAP vehicles into 20 combat brigades.
Acquisition Direction and FCS Lessons Learned Offer Opportunities to
Increase the Likelihood of Successful Outcomes:
The challenge facing both DOD and the Army is to set these ground
force modernization efforts on the best footing possible by buying the
right capabilities at the best value. In many ways, DOD and the Army
have set modernization efforts on a positive course by following
direction from DOD leadership, and they have an opportunity to reduce
risks by adhering to the body of acquisition legislation and policy
reforms--which incorporate knowledge-based best practices we
identified in our previous work--that have been introduced since FCS
started in 2003. The new legislation and policy reforms emphasize a
knowledge-based acquisition approach, a cumulative process in which
certain knowledge is acquired by key decision points before
proceeding. In essence, knowledge supplants risk over time.
Additionally, DOD and the Army can further reduce risks by considering
lessons learned from problems that emerged during the FCS development
effort. Initial indications are that the Army is moving in that
direction. These lessons span knowledge-based acquisition practices,
incremental development, affordability, contract management, and
oversight. However, in the first major acquisition decision for the
Army's post-FCS initiatives, DOD and the Army--because they want to
support the warfighter quickly--are proceeding with low-rate initial
production of one brigade set of Increment 1 systems despite having
acknowledged that the systems are immature, are unreliable, and cannot
perform as required.
New Acquisition Reforms Point Way to Lower Risk:
DOD's body of acquisition policy, which includes reforms introduced
since FCS started development in 2003, incorporates nearly all of the
knowledge-based practices we identified in our previous work (see
table 1). For example, it includes controls to ensure that programs
have demonstrated a certain level of technology maturity, design
stability, and production maturity before proceeding into the next
phase of the acquisition process. As such, if the Army proceeds with
preliminary plans for new acquisition programs, then adherence to the
acquisition direction in each of its new acquisition efforts provides
an opportunity to improve the odds for successful outcomes, reduce
risks for follow-on Army ground force modernization efforts, and
deliver needed equipment more quickly and at lower costs. Conversely,
acquisition efforts that proceed with less technology, design, and
manufacturing knowledge than best practices suggest face a higher risk
of cost increases and schedule delays.
Table 1: Comparison of Controls Used in Best Practices Model and DOD
Policy:
Knowledge point 1: Occurs as programs begin the engineering and
manufacturing development phase (Milestone B). Match exists between
requirements and resources. Technologies needed to meet essential
product requirements have been demonstrated to work in their intended
environments and the producer has completed a preliminary design of
the product.
Commercial best practices model: Demonstrate high technology readiness
levels;
May 2003 DOD policy: [Check];
December 2008 DOD policy: [Check].
Commercial best practices model: Ensure product requirements are
informed by the systems engineering process;
May 2003 DOD policy: [Check];
December 2008 DOD policy: [Check].
Commercial best practices model: Establish cost and schedule estimates
for product based on knowledge from preliminary design using systems
engineering tools;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Conduct decision review for program
launch;
May 2003 DOD policy: [Check];
December 2008 DOD policy: [Check].
Knowledge point 2: Occurs at the critical design review between
integration and demonstration. Design is stable and has been
demonstrated through prototype testing. Ninety percent of engineering
drawings are releasable to manufacturing organizations.
Commercial best practices model: Complete 90 percent of design
drawings;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [A].
Commercial best practices model: Complete subsystem and system design
reviews;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Demonstrate with prototype that
design meets requirements;
May 2003 DOD policy: [Check];
December 2008 DOD policy: [Check].
Commercial best practices model: Obtain stakeholder concurrence that
drawings are complete and producible;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [B].
Commercial best practices model: Complete failure modes and effects
analysis;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Identify key system characteristics;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Identify critical manufacturing
processes;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Establish reliability targets and
growth plan based on demonstrated reliability rates of components and
subsystems;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Conduct design review to enter system
demonstration;
May 2003 DOD policy: [Check];
December 2008 DOD policy: [Check].
Knowledge point 3: Occurs at low-rate initial production commitment.
Product is ready to be manufactured within cost, schedule, and quality
targets. All key manufacturing processes are under statistical control
and product reliability has been demonstrated.
Commercial best practices model: Demonstrate manufacturing processes;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Build production-representatives
prototypes;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Test production-representative
prototypes to achieve reliability goal;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [C].
Commercial best practices model: Test production-representative
prototypes to demonstrate the product in a realistic environment;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Collect statistical process control
data;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Demonstrate that critical processes
are capable and under statistical control;
May 2003 DOD policy: [Empty];
December 2008 DOD policy: [Check].
Commercial best practices model: Conduct decision review to begin
production;
May 2003 DOD policy: [Check];
December 2008 DOD policy: [Check].
Sources: DOD (data); GAO (analysis and presentation).
[A] DOD criteria do not specify the percentage of drawings to be
completed at the critical design review.
[B] DOD's revised policy includes the post-critical design review
assessment, which is the Milestone Decision Authority's assessment of
the program manager's critical design review. However, we could not
determine whether stakeholder concurrence was necessary to proceed.
[C] DOD criteria establish reliability goals, but do not specify
testing on production-representative prototypes.
[End of table]
As shown above, the cumulative building of knowledge consists of
information that should be gathered at three critical points over the
course of a program:
Knowledge point 1 (at the program launch or Milestone B decision):
Establishing a business case that balances requirements with
resources. At this point, a match must be made between the customer's
needs and the developer's available resources--technology,
engineering, knowledge, time, and funding. A high level of technology
maturity, demonstrated via a prototype in its intended environment,
indicates whether resources and requirements match. Also, the
developer completes a preliminary design of the product that shows
that the design is feasible and that requirements are predictable and
doable. FCS did not satisfy this criterion when it began in 2003, and
by 2009, 6 years into development, the Army still had not satisfied
this criterion as emerging designs did not meet requirements, critical
technologies were immature, and cost estimates were not realistic.
Knowledge point 2 (at the critical design review between design
integration and demonstration): Gaining design knowledge and reducing
integration risk. At this point, the product design is stable because
it has been demonstrated to meet the customer's requirements as well
as cost, schedule, and reliability targets. The best practice is to
achieve design stability at the system-level critical design review,
usually held midway through system development. Completion of at least
90 percent of engineering drawings at this point provides tangible
evidence that the product's design is stable, and a prototype
demonstration shows that the design is capable of meeting performance
requirements.
Knowledge point 3 (at production commitment or the Milestone C
decision): Achieving predictable production. This point is achieved
when it has been demonstrated that the developer can manufacture the
product within cost, schedule, and quality targets. The best practice
is to ensure that all critical manufacturing processes are in
statistical control--that is, they are repeatable, sustainable, and
capable of consistently producing parts within the product's quality
tolerances and standards--at the start of production.
In recent years, a number of specific changes have been made to DOD
acquisition policies. Further policy changes should be incorporated as
a result of the Weapon System Acquisition Reform Act of 2009. These
changes, if implemented properly, allow programs to achieve knowledge
at the right times by ensuring that any critical technologies to be
included in the weapon system are mature and ready for integration.
The changes provide support to program managers to keep requirements
reasonable and to keep changes at a minimum. The prototyping
provisions included in these changes call for developmental prototypes
beginning very early in the program. With FCS, the Army did not follow
knowledge-based acquisition practices, but reforms introduced since
FCS's start in 2003 incorporate nearly all of the knowledge-based
practices we identified in our previous work. For example, the reforms
include controls to ensure that programs have demonstrated a certain
level of technology maturity, design stability, and production
maturity before they proceed to the next phase of the acquisition
process. If the Army adheres to these acquisition practices, it has an
opportunity to increase the likelihood of successful outcomes for
follow-on Army ground force modernization efforts. Conversely,
acquisition efforts that deviate from knowledge-based practices face a
higher risk of cost increases and schedule delays. Table 2 lists some
of those acquisition reforms and their potential impact.
Table 2: Acquisition Reforms and Their Potential Impact:
Acquisition reform: Configuration steering boards;
Description: New annual or event-driven program reviews of all
requirements and significant technical configuration changes with the
potential to affect cost and schedule;
Potential impact: Moderating requirements, proposing options, or both
to reduce costs improves affordability and executability by ensuring
that requirements do not exceed resources, speeds up delivery of the
capability, and prevents reductions in purchased quantities.
Acquisition reform: Cost estimation;
Description: Added requirement for independent cost estimates
simultaneous with DOD component estimates at Milestone A, Milestone B,
full-rate production, and other points dictated by statute. Review and
concurrence of estimates, estimate choice, and confidence level
required by the Director of Cost Analysis and Program Evaluation. A
report on DOD's progress in improving estimate accuracy and compliance
with policies is due annually;
Potential impact: A reliable cost estimate helps ensure that the
program's projected funding needs are adequate to execute the program.
We have found independent estimates to be more reliable than DOD
component estimates.
Acquisition reform: Decision points and assessments;
Description: Decision points throughout the acquisition cycle;
Materiel development decision; Preliminary design review--required
before Milestone B; Post-preliminary design review assessment;
Critical design review; Post-critical design review assessment;
Potential impact: Decision points to assess progress and determine
whether to continue, change direction, or terminate efforts based on
risks, affordability, program trade-offs, acquisition strategy
updates, and the development of exit criteria for the next phase or
effort.
Acquisition reform: Competitive prototyping;
Description: New requirement for competing prototypes prior to, or
through, Milestone B and related provisions in the technology
development and acquisition strategies;
Potential impact: Technology demonstrated via prototypes provides a
stronger basis for analyzing and refining requirements, ensuring more
knowledgeable initial cost estimates, and making an appropriate match
between requirements and available resources could improve the
accuracy and predictability of cost and schedule estimates at program
initiation.
Acquisition reform: Statutory certifications;
Description: New statutory certifications at Milestone A and B that
necessitate development of critical knowledge (cost and schedule
estimates, funding availability, justification of duplicated
capabilities, and demonstration of technology) to proceed to the next
iteration in the acquisition cycle;
Potential impact: Requiring these demonstrations of knowledge could
increase program stability and predictability and reduce acquisition
cycle time. Further, eliminating programs with inadequate technology
and questionable affordability, funding, viability, and sustainability
early in the acquisition cycle could prevent DOD from unnecessarily
expending valuable resources.
Acquisition reform: Systems engineering;
Description: More robust technical approach to developing and
maintaining a capability, including key technical risks, processes,
resources, metrics, and applicable performance incentives;
Potential impact: Improved systems engineering can help ensure that a
product's requirements are achievable and designable, given available
resources, by defining and balancing system performance, cost,
schedule, and risk.
Sources: DOD Acquisition Policy and 2009 Weapon Systems Acquisition
Reform Act (data); GAO (analysis and presentation).
[End of table]
There are initial indications that DOD and the Army are moving forward
to implement the acquisition policy reforms as they proceed with
ground force modernization, including the Secretary of Defense's
statement about the ground vehicle modernization program--to "get the
acquisition right, even at the cost of delay." In addition, DOD
anticipates that the GCV program will comply with DOD acquisition
policy in terms of utilizing competitive system or subsystem
prototypes. According to a DOD official, DOD made a materiel
development decision for the GCV in February 2010, and the Army is
proposing to conduct a preliminary design review on GCV before
Milestone B. Additionally, a configuration steering board is planned
in 2010 to address reliability and military utility of infantry
brigade systems.
Lessons Learned from FCS Can Foster a Smoother Acquisition Strategy
Moving Forward:
The Army has the opportunity to reduce risks by incorporating lessons
learned from the FCS development effort. These key lessons span
several areas: knowledge-based acquisition principles, incremental
development, affordability, contract management, oversight, and
incentive fee structure. Considering these lessons give the Army an
opportunity to reduce risks by utilizing the things that worked well
on the FCS program, while avoiding the acquisition pitfalls that
plagued the program.
Always Follow Principles of Knowledge-Based Acquisition:
Lesson: The Army did not position the FCS program for success because
it did not establish a knowledge-based acquisition approach--a
strategy consistent with DOD policy and best acquisition practices--to
develop FCS. The Army started the FCS program in 2003 before defining
what the systems were going to be required to do and how they were
going to interact. It moved ahead without determining whether the FCS
concept could be developed in accordance with a sound business case.
Specifically, at the FCS program's start, the Army had not established
firm system-level requirements, mature technologies, a realistic cost
estimate, or an acquisition strategy wherein knowledge drives
schedule. By 2009, the Army still had not shown that emerging FCS
system designs could meet requirements, that critical technologies
were at minimally acceptable maturity levels, and that the acquisition
strategy was executable within estimated resources.
Actions being taken: In the first major acquisition decision for the
Army's post-FCS initiatives, DOD and the Army--because they want to
support the warfighter quickly--are proceeding with low-rate initial
production of Increment 1 systems despite having acknowledged that
systems are immature, are unreliable, and cannot perform as required.
In December 2009, the Under Secretary of Defense for Acquisition,
Technology and Logistics approved low-rate initial production of
Increment 1 equipment for one infantry brigade but noted that there is
an aggressive risk reduction plan to grow and demonstrate the network
maturity and reliability to support continued Increment 1 production
and fielding. In the associated acquisition decision memorandum, the
Under Secretary acknowledged the risks of pursuing Increment 1
production, including early network immaturity; lack of a clear
operational perspective of the early network's value; and large
reliability shortfalls of the network, systems, and sensors. The Under
Secretary also said that he was aware of the importance of fielding
systems to the current warfighter and that the flexibility to deploy
components as available would allow DOD to "best support" the
Secretary of Defense's direction to "win the wars we are in." Because
of that, the Under Secretary specified that a number of actions be
taken over the next year or more and directed the Army to work toward
having all components for the program fielded as soon as possible and
to deploy components of the program as they are ready. However, the
Under Secretary did not specify the necessary improvements that the
Army needed to make or that those improvements are a prerequisite for
approving additional production lots of Increment 1.
The approval for low-rate initial production is at variance with DOD
policy and Army expectations. DOD's current acquisition policy
requires that systems be demonstrated in their intended environments
using the selected production-representative articles before the
production decision occurs. However, the testing that formed the basis
for the Increment 1 production decision included surrogates and non-
production-representative systems, including the communications
radios. As we have previously noted, testing with surrogates and non-
production-representative systems is problematic because it does not
conclusively show how well the systems can address current force
capability gaps.[Footnote 7] Furthermore, Increment 1 systems--which
are slated for a fiscal year 2011-12 fielding--do not yet meet the
Army's expectations that new capabilities would be tested and their
performance validated before they are deployed in a capability
package. As noted in 2009 test results, system performance and
reliability during testing was marginal at best. For example, the
demonstrated reliability of the Class I unmanned aerial vehicle was
about 5 hours between failure, compared to a requirement for 23 hours
between failure. The Army asserts that Increment 1 systems' maturity
will improve rapidly but admits that it will be a "steep climb" and
not a low-risk effort.
While the Under Secretary took current warfighter needs into account
in his decision to approve Increment 1 low-rate initial production, it
is questionable whether the equipment can meet one of the main
principles underpinning knowledge-based acquisition--whether the
warfighter needs can best be met with the chosen concept. Test reports
from late 2009 showed conclusively that the systems had limited
performance, and that this reduced the test unit's ability to assess
and refine tactics, techniques, and procedures associated with
employment of the equipment. The Director, Operational Test and
Evaluation, recently reported that none of the Increment 1 systems
have demonstrated an adequate level of performance to be fielded to
units and employed in combat. Specifically, the report noted that
reliability is poor and falls short of the level expected of an
acquisition system at this stage of development. Shortfalls in meeting
reliability requirements may adversely affect Increment 1's overall
operational effectiveness and suitability and may increase life cycle
costs. In addition, in its 2009 assessment of the increment's limited
user test--the last test before the production decision was made--the
Army's Test and Evaluation Command indicated that the Increment 1
systems would be challenged to meet warfighter needs. The Evaluation
Command concluded that, with the exception of the non-line-of-sight
launch system, which had not yet undergone flight testing, all the
systems were considered operationally effective and survivable, but
with limitations, because they were immature and had entered the test
as pre-production representative systems, pre-engineering design
models, or both. Additionally, the command noted that these same
systems were not operationally suitable because they did not meet
required reliability expectations.
Develop the Advanced Information Network Incrementally as Technology
Becomes Available:
Lesson: The FCS concept depended heavily on the network to link
people, platforms, weapons, and sensors together within the 15 FCS
brigades and to help eliminate the "fog of war."[Footnote 8] There
were significant risks associated with network development, including
those related to performance and scalability, architecture, and tests
of network performance being performed only after designs for vehicles
carrying the network equipment already were set. The network never
matured to show that it could deliver expected performance and
reliability. Six years into network development efforts, it was still
not clear whether the network could be developed, built, and
demonstrated as planned.
Actions being taken: Under the Army's revised concept, rather than
build a new network all at once and field it only to the unique FCS
brigades, the Army's intent is to develop and field an information
network across the Army, building on current communications networks.
Full details of the Army's network strategy are still being developed,
including the desired end state, incremental steps to that end state,
and its costs. However, the Army anticipates that the new network will
be bounded by available funding as well as technology readiness. It
also expects, as with capability packages, to field network capability
sets on a biennial basis. Network capability sets feature multiple
pieces of the network that have been integrated and demonstrated. Near-
term goals for the network include starting to connect the individual
soldiers, expanding situational awareness to the company level, and
expanding interoperability. As the Army envisions the network
strategy, it will leverage network investments in systems already
procured for ongoing wars, build upon a core set of network-related
foundation products, and develop network packages that can be
customized in support of current and future force platforms. These
packages will include software, computers, and radios.
Ensure Affordability with More Knowledge and Realism Up Front:
Lesson: The affordability of FCS was always in doubt and, in the end,
was a contributing factor to the decision to cancel the program.
Ultimately, FCS affordability depended on two factors: the actual cost
of the program and the availability of funds. The Army could not
provide confident cost estimates for the actual costs of FCS because
of the low levels of knowledge within the program. Instead, it
indicated a willingness to accept the program's high risks and make
trade-offs in requirements for FCS and other programs to accommodate
FCS's growing costs. When the Army's predicted costs for FCS rose from
$92 billion in 2003 to $159 billion by 2009, the Army indicated that
it would defer upgrades to current force systems, such as the Abrams
Tank and Bradley Fighting Vehicle, to free up funds for FCS. In the
end, the competition for funds--within the Army, among Army programs
and other DOD programs, and among DOD programs and other federal
government needs--was a factor in the decision to end the FCS program.
According to a September 2009 letter from the Under Secretary of
Defense for Acquisition, Technology and Logistics, the FCS acquisition
could not be developed and produced within existing resources.
Additionally, the Under Secretary noted that based on an evaluation of
the overall priorities for Army modernization, developing and
procuring FCS brigades was not fiscally viable given DOD priorities.
Action being taken: The Army has not yet fully defined major
predictors--content, pace, and costs--for long-term affordability of
ground force modernization efforts. It has indicated that work is
ongoing to develop priorities and resource plans for fiscal years 2011
through 2015, including fielding capability packages, incrementally
improving the network, and establishing a new GCV program. The Army
has also indicated that funding will drive capability trades. For
example, the content and quantity of capability packages could be
decreased or increased depending on available funding. Additionally,
the Director of Cost Analysis and Program Evaluation prepared an
independent cost assessment for Increment 1. This independent estimate
was very close to the Army's cost position for Increment 1 development
and production.
In its fiscal year 2011 budget request, the Army asked the Congress to
approve funding for further Increment 1 development and production,
Increment 2 development, GCV development, and some network
development. As we have noted, at this time, detailed plans for these
efforts are still being developed and may not be available until at
least later in fiscal year 2010 as those plans are solidified and
approved.
Transition Away from Industry-Led Integration:
Lesson: In 2003, the Army contracted with an LSI for FCS because of
the program's ambitious goals and the Army's belief that it did not
have the capacity to manage the program. The Army did not have the
expertise to develop the FCS information network or enough people to
support the program had it been organized into separate program
offices. Through its relationship with the LSI, the Army believed that
it found a partner that could help to define and develop FCS and reach
across the Army's organizations. In our 2007 report, we pointed out
that the close partnerlike relationship between the Army and the LSI
posed risks to the Army's effective management and oversight of the
FCS program.[Footnote 9] As a result, the June 2009 acquisition
decision memorandum that outlined plans to cancel the FCS program also
articulated a desire to move away from industry-led integration
activities.
Action being taken: While Army officials have acknowledged the Under
Secretary's direction to transition away from reliance on the LSI and
affirmed their desire to comply with that direction, the transition
will not happen right away. The Army is beginning a deliberate process
to transition system engineering and integration activities from the
LSI to the government. For example, Army officials stated that the
Army will be contracting with the LSI for the procurement of the first
three brigade sets of Increment 1 equipment.[Footnote 10] When these
systems move into full-rate production, the Army may be in a better
position to contract directly with the original equipment
manufacturers and without the assistance of an LSI. According to the
Army, the development of Increment 2 may be jointly managed by the LSI
and the original equipment manufacturers. Likewise, the first lot of
Increment 2 production may be jointly managed by the LSI and the
original equipment manufacturers; the other production lots may be
managed directly by the original equipment manufacturers.
In September 2009, the Army established the Program Executive Office
for Integration to oversee coordination of the three separate but
integrated programs and the network development. Roles and
responsibilities have not yet been fully defined. According to Army
officials, the office will be modeling the various brigade
architectures and infrastructures to better understand how they
currently function and to facilitate adding capabilities to the
brigades. They also expect the office to work with the individual
acquisition programs to ensure that the programs are properly
integrated with other elements of each capability package and
equipment already fielded in the various brigades. As the integration
issues are addressed, the individual acquisition programs will be
responsible for execution. Additionally, the office will perform
system engineering and integration via in-house capabilities and
supplemented by federally funded research and development centers or
contractors for the capability packages. The Army is also establishing
an organization above the program executive office level to integrate
ongoing network acquisition efforts to better capture new network
technologies, expand technologies in the field so that they work
better together, and provide better networking capability to more
units. One way that the Army will be doing this is through
establishing network standards and interface requirements.
Improve Oversight:
Lesson: DOD largely accepted the FCS program and its changes as
defined by the Army, even though it varied widely with the best
practices embodied in DOD's own acquisition policies. Until late in
the FCS program, DOD passed on opportunities to hold the FCS program
accountable to more knowledge-based acquisition principles. Despite
the fact that the program did not meet the requisite criteria for
starting an acquisition program, DOD approved the program's entrance
into system development and demonstration in 2003. DOD later
reevaluated the decision and decided to hold a follow-on review with a
list of action items the program had to complete in order to continue.
However, this review never occurred, and the FCS program continued as
originally planned. In addition, DOD allowed the Army to use its own
cost estimates rather than independent--and often higher--cost
estimates when submitting annual budget requests.
Action being taken: DOD appears to be more resolute in some of its
oversight responsibilities for the emerging post-FCS efforts. For
instance, at an October 2009 DOD review, the Army offered preliminary
plans for post-FCS efforts. While DOD agreed to schedule an Increment
1 production decision and a GCV materiel development decision, DOD
also noted that additional clarity was needed for development and
procurement of follow-on items beyond Increment 1, as well as for
transition of the integration activities from the current FCS
contractors to the Army. DOD noted in its decision memorandum that it
requires these plans before it will approve any acquisition strategy
for modernization activities other than Increment 1 and GCV
development. Additionally, while DOD did not hold the Army accountable
to knowledge-based principles when it approved Increment 1 for low-
rate production, DOD did limit low-rate initial procurement quantities
to one brigade's worth of equipment. DOD also required the Army to
prepare for two additional reviews in 2010--one review to provide a
status report on non-line-of-sight launch system testing and a report
detailing the network maturity plan for Increment 1, and another
review for examining the results of additional testing performed on
Increment 1 systems. Additionally, DOD required the Army to fund
Increment 1 acquisition efforts to the cost estimate prepared by the
Director, Cost Assessment and Program Evaluation.
Create a Better Incentive and Award Fee Contract Structure:
Lesson: In the near future, the Army will likely be awarding
development contracts for the emerging post-FCS programs. As we noted
in 2005, DOD award fees do not always link to acquisition outcomes.
[Footnote 11] Additionally, prior defense acquisition contracts,
including the FCS contract, have not complied with preferred DOD
guidance for structuring incentive and award fees. In 2007, we
reported that the Army's contract with the FCS LSI contained fee
provisions that did not tie fees to demonstrated performance, and it
rewarded the LSI too early in the development process.[Footnote 12]
Specifically, we reported that the Army would be paying 80 percent of
the total incentive fee before the LSI conducted the critical design
review. We viewed this arrangement as risky because most of a
program's cost growth occurs after the critical design review.
Action being taken: In April 2009, when the Secretary of Defense
announced his plans to significantly change the FCS program, he noted
that he was troubled by the terms of the contract, particularly in its
very unattractive fee structure that gives the government little
leverage to promote cost efficiency. Previously, in an April 2008
memorandum, DOD stated that a more typical fee arrangement would be
significantly less than what the Army featured in the FCS contract,
and that fees should be based on demonstrated performance to the
government. In September 2009, DOD issued another memorandum to the
military services, instructing the acquisition officials to (1) be
more consistent in applying the department's guidance, (2) be more
judicious in their reviews of fees to ensure that they are tied to
demonstrated performance, and (3) collect additional fee data. These
two memorandums indicate that the department appears focused on
achieving more disciplined award and incentive fee practices. In
addition, DOD officials have recently stated that they expect future
Army contracts for ground force modernization to incorporate a fee
structure with a "more classic and reasonable" form, in accordance
with the Secretary's direction and the September 2009 memorandum.
In October 2009, the Army negotiated a contract modification for
additional development of Increment 1 systems. The Army will soon be
contracting for the procurement of those systems. Later, the Army will
be awarding contracts for GCV development. At this point, it is
unclear how and to what extent the Army will be applying the new fee
guidance.
Conclusions:
Army and DOD officials made a very difficult decision when they
canceled what was the centerpiece of Army modernization--the FCS
program. As they transition away from the FCS concept, both the Army
and DOD have an opportunity to improve the likely outcomes for the
Army's ground force modernization initiatives by adhering closely to
recently enacted acquisition reforms and by seeking to avoid the
numerous acquisition pitfalls that plagued FCS. As DOD and the Army
proceed, they should keep in mind the Secretary of Defense's
admonition about the new ground vehicle modernization program: "get
the acquisition right, even at the cost of delay." Based on the
preliminary plans, we see a number of good features. For example, we
applaud the Army's decision to pursue an incremental acquisition
approach for its post-FCS efforts. However, it is vitally important
that each of those incremental efforts adheres to knowledge-based
acquisition principles and strikes a balance between what is needed,
how fast it can be fielded, and how much it will cost. Moreover, the
acquisition community needs to be held accountable for expected
results, and DOD and the Army must not be willing to accept whatever
results are delivered regardless of military utility.
We are concerned that in their desire for speedy delivery of emerging
equipment to our warfighters in the field, DOD and the Army did not
strike the right balance in prematurely approving low-rate initial
production of Increment 1 of brigade combat team modernization.
Although the Army will argue that it needs to field these capabilities
as soon as possible, none of these systems has been designated as
urgent and it is not helpful to provide early capabilities to the
warfighter if those capabilities are not technically mature and
reliable. If the Army moves forward too fast with immature Increment 1
designs, this could cause additional delays as the Army and its
contractors concurrently address technology, design, and production
issues. Production and fielding is not the appropriate phase of
acquisition to be working on such basic design issues.
While the Army has not yet finalized its plans for its post-FCS
initiatives, one thing is certain--these programs are likely to
require significant financial investments. In its fiscal year 2011
budget request, the Army has asked the Congress to approve funding for
Increment 1 development and production, Increment 2 development, GCV
development, and some network development. At this time, detailed
plans for these efforts are still being developed and were not yet
available as of early January 2010. This means that the Congress will
have limited information on which to base its funding decisions. The
Army's fiscal year 2011 budget request does not provide sufficient
details to allay all concerns. DOD and the Army need to clearly define
and communicate plans in order to ensure broad agreement among all
stakeholders, including the Congress. It appears that the Army's plans
may not be solidified until well beyond the point when the
congressional defense committees will have marked up the fiscal 2011
defense authorization bill.
Recommendations for Executive Action:
In order to ensure that only technically mature and reliable
capabilities are fielded to the warfighters, we recommend that the
Secretary of Defense mandate that the Army correct the identified
maturity and reliability issues with the Increment 1 network and
systems prior to approving any additional lots of the Increment 1
network and systems for production. Specifically, the Army should
ensure that the network and the individual systems have been
independently assessed as fully mature, meet reliability goals, and
have been demonstrated to perform as expected using production-
representative prototypes. We also recommend that the Secretary of the
Army not field the Increment 1 network or any of the Increment 1
systems until the identified maturity and reliability issues have been
corrected.
In order to enhance congressional visibility into the Army's plans in
this area, we also recommend that the Secretary of Defense direct the
Army to submit a comprehensive report to the Congress before the end
of fiscal year 2010 on its ground force modernization investment,
contracting, and management strategies.
Agency Comments and Our Evaluation:
DOD concurred with, and provided comments to, all our recommendations.
Regarding our recommendation to correct Increment 1 maturity and
reliability issues prior to approving additional production, DOD
stated that the need to correct those issues has been communicated to
the Army. DOD also asserts that all Increment 1 systems will be tested
in their production configuration, and performance will be
independently assessed against capability requirements prior to
approving production of any additional lots of Increment 1 systems.
DOD's comments concisely summarize the instructions that the Under
Secretary of Defense for Acquisition, Technology and Logistics
included in his December 2009 acquisition decision memorandum that
approved low-rate initial production for the first brigade's worth of
infantry brigade combat team systems. The memorandum includes a number
of sensible provisions, such as (1) an aggressive risk reduction plan
to grow and demonstrate network maturity and reliability, (2) monthly
reporting requirements for network and system reliability
improvements, (3) a comprehensive precision mix analysis to
demonstrate the cost-effectiveness of the non-line-of-sight launch
system, (4) the use of a configuration steering board to examine
reliability and military utility, and (5) a plan to compare the
effectiveness of operational units with and without the Increment 1
systems and network. However, neither the memorandum nor DOD's
comments to this report indicated the minimally acceptable standards
that must be met in order to proceed with additional procurement lots
of the Increment 1 systems and network. The Army has many Increment 1
development and testing activities planned for the coming months and
we intend to monitor their progress closely.
Regarding our recommendation that the Army not field the Increment 1
systems and network until maturity and reliability issues had been
corrected, DOD stated that Increment 1 systems would not be fielded
until performance is sufficient to satisfy the warfighter's capability
requirements. We believe it will be vitally important that (1)
Increment 1 systems and network clearly demonstrate their ability to
fully satisfy the needs of the warfighter and (2) DOD and the Army not
be willing to accept whatever acquisition results are delivered
regardless of their military utility. Again, we intend to follow the
Army and DOD's activities and actions in the coming months.
Regarding our recommendation to submit a comprehensive report to the
Congress on Army ground force modernization investment, contracting,
and management strategies, DOD stated that the Army will provide its
annual Army Modernization Strategy no later than the third quarter of
fiscal year 2010. According to DOD, this strategy document, in
conjunction with the 2010 Army Weapons Systems Handbook and the 2011
budget request material, provides the Army's investment, contracting,
and management strategies for ground force modernization. In making
this recommendation, we felt that the Army had made significant
changes in its investment, contracting, and management strategies as
it moved away from the FCS program. We felt that a comprehensive
report on its new strategies for ground force modernization would be
enlightening to the Congress. In the coming months, we will review the
materials promised by the Army to determine if they provide adequate
knowledge to the Congress.
DOD's comments are reprinted in appendix II.
We received other technical comments from DOD, which have been
addressed in the report.
We are sending copies of this report to the Secretary of Defense; the
Secretary of the Army; and the Director, Office of Management and
Budget. This report also is available at no charge on the GAO Web site
at [hyperlink, http://www.gao.gov].
Please contact me on (202) 512-4841 or sullivanm@gao.gov if you or
your staff have any questions concerning this report. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. The major contributors are
listed in appendix III.
Signed by:
Michael J. Sullivan:
Director:
Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
To outline the Army's preliminary post-Future Combat System (FCS)
plans, we obtained and reviewed proposed plans for the Army's new
modernization approach. We compared those plans against the FCS
operational concept and acquisition approach. We interviewed officials
responsible for carrying out the FCS cancellation, including officials
from the Office of the Under Secretary of Defense for Acquisition,
Technology and Logistics and the Program Executive Office for
Integration (formerly the FCS Program Office). We also met with
officials responsible for reexamining current-force capability gaps
and formulating the new operational concept, including officials from
the Army's Training and Doctrine Command, the Future Force Integration
Directorate, and the Army Evaluation Task Force.
To identify the challenges and opportunities the Department of Defense
(DOD) and the Army will need to address as they proceed with Army
ground force modernization efforts, we reviewed relevant Army and DOD
documents, including the Secretary of Defense's April 6, 2009,
announcement on restructuring FCS and the June 23, 2009, acquisition
decision memorandum that implemented the Secretary's proposed
restructure; the Army Capstone Concept; the Director, Operational Test
and Evaluation's Fiscal Year 2009 Annual Report; the Comprehensive
Lessons Learned White Paper; and the Army Modernization White Paper.
Additionally, we reviewed recent acquisition reforms, including DOD
Instruction 5000.02, Operation of the Defense Acquisition System; the
Weapon Systems Acquisition Reform Act of 2009 (Public Law No. 111-23);
and other legislative initiatives. In developing lessons learned from
the FCS program, we reviewed current Army ground force modernization
plans and assessed them against FCS approaches and outcomes, best
practices, and the latest acquisition policies and reforms. In our
assessment of the Army's modernization approach, we used the knowledge-
based acquisition practices drawn from our body of past work as well
as DOD's acquisition policy and the experiences of other programs. We
interviewed officials responsible for providing independent
assessments of technologies, testing, networking, and systems
engineering. This included officials from the Office of the Secretary
of Defense's Cost Assessment and Program Evaluation Office; Office of
the Director, Defense Research and Engineering; Office of the
Assistant Secretary of Defense (Networks and Information Integration);
and Office of the Director, Operational Test and Evaluation.
We discussed the issues presented in this report with officials from
the Army and the Secretary of Defense and made changes as appropriate.
We conducted this performance audit from March 2009 to March 2010 in
accordance with generally accepted 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.
[End of section]
Appendix II: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
Acquisition, Technology And Logistics:
3000 Defense Pentagon:
Washington, DC 20301-3000:
March 11, 2010:
Mr. Michael J. Sullivan:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Sullivan:
This is the Department of Defense response to the GAO draft report,
GAO-10-406, "Defense Acquisitions: Opportunities Exist to Position
Army's Post-FCS Modernization Efforts for Success," dated February 8,
2010 (GAO Code 120824).
The report recommends that: (1) the Secretary of Defense instruct the
Army to correct the identified maturity and reliability issues with
the Increment 1 network and systems prior to approving additional
system procurement; (2) the Secretary of the Army not field the
Increment 1 network or systems until the identified maturity and
reliability issues have been corrected; and (3) the Secretary of
Defense direct the Army to submit a comprehensive report to Congress
on its ground force modernization investment, contracting, and
management strategies.
The Department concurs with the GAO recommendations and our comments
are enclosed. Detailed technical comments were provided separately.
The Department appreciates the opportunity to comment on the draft
report. For further questions concerning this report, please contact
Ms. Anne Swanek, Anne.Swanek@osd.mil, 703-693-9879.
Sincerely,
Signed by:
David G. Ahern:
Director:
Portfolio Systems Acquisition:
Enclosure: As stated:
[End of letter]
GAO Draft Report Dated February 8, 2010:
GAO Code 120824/GAO-10-406:
"Defense Acquisitions: Opportunities Exist To Position Army's Post-FCS
Modernization Efforts For Success"
Department Of Defense Comments To The GAO Recommendations:
Recommendation 1: The GAO recommended that the Secretary of Defense
mandate that the Army correct the identified maturity and reliability
issues with the Increment 1 network and systems prior to approving any
additional lots of the Increment 1 network and systems for production.
Specifically, the Army should ensure that the network and individual
systems have been independently assessed as fully mature, meet
reliability goals, and have been demonstrated to perform as expected
using production-representative prototypes.
DOD Response: Concur. The need to correct identified maturity and
reliability issues with the Increment 1 network and systems has been
communicated to the Army. Prior to approving any additional lots of
Increment 1 network and systems for production they will be tested in
their intended production configuration and performance of all systems
will be independently assessed relative to capability requirements.
Recommendation 2: The GAO recommended that the Secretary of the Army
not field the Increment 1 network or any of the Increment 1 systems
until the identified maturity and reliability issues have been
corrected.
DOD Response: Concur. The Army will not field the Increment 1 systems
until system performance is sufficient to satisfy the capability
requirements of the Warfighter.
Recommendation 3: The GAO recommended that the Secretary of Defense
direct the Army to submit a comprehensive report to the Congress
before the end of fiscal year 2010 on its ground force modernization
investment, contracting, and management strategies.
DOD Response: Concur. The Army will provide their annual Army
Modernization Strategy no later than 3rd quarter fiscal year 2010 that
will support the 2011 President's budget. This strategy, in
conjunction with the 2010 Army Weapons Systems Handbook and the 2011
budget materials related to ground force acquisitions, provides the
Army's investment, contracting, and management strategies for ground
force modernization. The investment, contracting and management
strategies for the acquisitions which will provide for ground force
modernization are established per acquisition law and policy for the
individual programs. Additionally, the Army Acquisition Executive has
recently established a Program Executive Officer for Integration with
responsibility for coordinating acquisitions to support the Army's
capability package fielding. The plans for contracting and management
strategies to support this integration effort are still maturing and
will be aligned with acquisition plans to support the Department's
fiscal year 2012 budget.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Michael J. Sullivan, (202) 512-4841 or sullivanm@gao.gov:
Acknowledgments:
In addition to the contact named above, the following staff members
made key contributions to the report: William R. Graveline, Assistant
Director; William C. Allbritton; Noah B. Bleicher; Helena Brink; Tana
M. Davis; Marcus C. Ferguson; and Robert S. Swierczek.
[End of section]
Related GAO Products:
Defense Acquisitions: Issues to be Considered for Army's Modernization
of Combat Systems. [hyperlink,
http://www.gao.gov/products/GAO-09-793T]. Washington, D.C.: June 16,
2009.
Defense Acquisitions: Assessments of Selected Weapon Programs.
[hyperlink, http://www.gao.gov/products/GAO-09-326SP]. Washington,
D.C.: March 30, 2009.
Defense Acquisitions: Key Considerations for Planning Future Army
Combat Systems. [hyperlink, http://www.gao.gov/products/GAO-09-410T].
Washington, D.C.: March 26, 2009.
Defense Acquisitions: Decisions Needed to Shape Army's Combat Systems
for the Future. [hyperlink, http://www.gao.gov/products/GAO-09-288].
Washington, D.C.: March 12, 2009.
Defense Acquisitions: 2009 Review of Future Combat System Is Critical
to Program's Direction. [hyperlink,
http://www.gao.gov/products/GAO-08-638T]. Washington, D.C.: April 10,
2008.
Defense Acquisitions: 2009 Is a Critical Juncture for the Army's
Future Combat System. [hyperlink,
http://www.gao.gov/products/GAO-08-408]. Washington, D.C.: March 7,
2008.
Defense Acquisitions: Future Combat System Risks Underscore the
Importance of Oversight. [hyperlink,
http://www.gao.gov/products/GAO-07-672T]. Washington, D.C.: March 27,
2007.
Defense Acquisitions: Key Decisions to Be Made on Future Combat
System. [hyperlink, http://www.gao.gov/products/GAO-07-376].
Washington, D.C.: March 15, 2007.
Defense Acquisitions: Improved Business Case Key for Future Combat
System's Success. [hyperlink,
http://www.gao.gov/products/GAO-06-564T]. Washington, D.C.: April 4,
2006.
Defense Acquisitions: Improved Business Case Is Needed for Future
Combat System's Successful Outcome. [hyperlink,
http://www.gao.gov/products/GAO-06-367]. Washington, D.C.: March 14,
2006.
Defense Acquisitions: Future Combat Systems Challenges and Prospects
for Success. [hyperlink, http://www.gao.gov/products/GAO-05-428T].
Washington, D.C.: March 16, 2005.
Defense Acquisitions: The Army's Future Combat Systems' Features,
Risks, and Alternatives. [hyperlink,
http://www.gao.gov/products/GAO-04-635T]. Washington, D.C.: April 1,
2004.
Issues Facing the Army's Future Combat Systems Program. [hyperlink,
http://www.gao.gov/products/GAO-03-1010R]. Washington, D.C.: August
13, 2003.
Best Practices: Better Matching of Needs and Resources Will Lead to
Better Weapon System Outcomes. [hyperlink,
http://www.gao.gov/products/GAO-01-288]. Washington, D.C.: March 8,
2001.
[End of section]
Footnotes:
[1] GAO, Defense Acquisitions: Decisions Needed to Shape Army's Combat
Systems for the Future, [hyperlink,
http://www.gao.gov/products/GAO-09-288] (Washington, D.C.: Mar. 12,
2009).
[2] The John Warner National Defense Authorization Act for Fiscal Year
2007, Pub. L. No. 109-364, § 214 (2006), required the Secretary of
Defense to perform a milestone (go/no-go) review of the FCS
acquisition program no later than 120 days after the preliminary
design review to determine whether (1) the warfighter's needs are
valid and can best be met with the concept of the program; (2) the
concept of the program can be developed and produced within existing
resources; and (3) the program should continue as currently
structured, continue in restructured form, or be terminated.
[3] The Training and Doctrine Command is the Army organization that
designs, develops, and integrates capabilities, concepts, and doctrine.
[4] The system-of-systems common operating environment is the
operating environment that serves as middleware between operating
systems and software applications.
[5] A materiel development decision is a review that is the formal
entry point into the acquisition process and is mandatory for all
programs. A successful materiel development decision may approve entry
into the acquisition management system at any point consistent with
phase-specific entrance criteria and statutory requirements.
[6] Milestone A is the point at which a program enters the technology
development phase, Milestone B is entry into the engineering and
manufacturing development phase, and Milestone C is entry into the
production and deployment phase.
[7] [hyperlink, http://www.gao.gov/products/GAO-09-288].
[8] "Fog of war" is the uncertainty and confusion before, during, and
after conflict caused by incomplete, inconsistent, late, too much, or
too little information.
[9] GAO, Defense Acquisitions: Role of Lead Systems Integrator on
Future Combat Systems Program Poses Oversight Challenges, [hyperlink,
http://www.gao.gov/products/GAO-07-380] (Washington, D.C.: June 6,
2007).
[10] The Boeing Company served as the LSI on the FCS contract.
According to Army officials, Boeing's role on ground force
modernization efforts will be more akin to that of a prime contractor.
Consequently, the Army no longer refers to Boeing as an LSI.
[10] GAO, Defense Acquisitions: DOD Has Paid Billions in Award and
Incentive Fees Regardless of Outcome, [hyperlink,
http://www.gao.gov/products/GAO-06-66] (Washington, D.C.: Dec. 19,
2005).
[12] [hyperlink, http://www.gao.gov/products/GAO-07-380].
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO‘s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO‘s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
