Missile Defense: Knowledge-Based Practices Are Being Adopted, but
Risks Remain (30-APR-03, GAO-03-441).				 
                                                                 
The Department of Defense (DOD) would like to build a capable	 
missile defense system that paces an ever-evolving threat. This  
is an expensive and risky endeavor because it requires a diverse 
set of technologies to be quickly developed, integrated, and	 
deployed across an array of platforms. DOD estimates that it will
need $50 billion for missile defense research and development	 
over the next 6 years and likely additional funds in subsequent  
years. GAO was asked to review the Missile Defense Agency's (MDA)
strategy for this investment and determine what knowledge-based  
practices characteristic of successful programs are being adopted
by MDA; what significant practices are not being adopted; and	 
whether MDA is following the practices that it has adopted.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-441 					        
    ACCNO:   A06761						        
  TITLE:     Missile Defense: Knowledge-Based Practices Are Being     
Adopted, but Risks Remain					 
     DATE:   04/30/2003 
  SUBJECT:   Ballistic missiles 				 
	     Internal controls					 
	     National defense operations			 
	     National preparedness				 
	     Program evaluation 				 
	     Strategic planning 				 
	     AN/SPY-1 Radar					 
	     Cobra Dane Radar					 
	     MDA Ballistic Missile Defense System		 

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GAO-03-441

Report to Congressional Requesters

United States General Accounting Office

GAO

April 2003 MISSILE DEFENSE Knowledge- Based Practices Are Being Adopted,
but Risks Remain

GAO- 03- 441

Our work has shown that programs are most successful when they evolve
products over time rather than try to make big leaps in capability and
when the programs adopt knowledge- based acquisition processes. Similarly,
MDA is taking an evolutionary approach to developing the missile defense
system by developing capabilities in spirals or *blocks* rather than
attempting to deliver all desired capabilities at one time. The agency
intends to facilitate this approach by keeping requirements flexible
before beginning activities to integrate technologies into a planned
block, following a knowledge- based development plan, and demonstrating
that technologies work as intended before beginning system integration of
a block. In addition, the agency is seeking to involve stakeholders* such
as the military services and operational testers* early in the development
effort.

However, MDA has not adopted some knowledge- based practices regarding
long- term investment decision making and, as a result, the missile
defense program*s success could be hampered. First, MDA is not making an
early determination of the full cost of a capability. Such an estimate
would help decision makers more effectively evaluate which technologies to
include because they offer the best capability for the funds invested.
Second, DOD is not allocating a *wedge* of funds in its Future Years
Defense Plan for system production and operations. Without this wedge, DOD
may not have the funds needed to procure and maintain the missile defense
system.

In addition, the President*s directive to begin fielding a missile defense
capability by 2004 places MDA in danger of getting off track early and
impairing the effort over the long term. This danger is highlighted by
MDA*s decision to not follow some of its knowledge- based practices as it
develops the first block of the system. For example, MDA is beginning
system integration of its first block with immature technology and limited
testing. While doing so may help MDA meet the President*s deadline, it
also increases the potential that some elements may not work as intended.

Examples of Missile Defense Elements

The Department of Defense (DOD) would like to build a capable missile
defense system that paces an ever- evolving threat. This is an expensive
and risky endeavor

because it requires a diverse set of technologies to be quickly developed,
integrated, and deployed across an array of platforms. DOD estimates that
it will need $50 billion for missile defense research and development

over the next 6 years and likely additional funds in subsequent years. GAO
was asked to review the Missile Defense Agency*s (MDA) strategy for this
investment and determine what knowledgebased practices characteristic of
successful programs are being adopted by MDA; what significant practices
are not being adopted;

and whether MDA is following the practices that it has adopted. GAO is
recommending that DOD prepare life cycle cost estimates for missile
defense elements before beginning integration activities and explore the
option of setting aside

funds to produce and operate the missile defense system over the long
term.

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 441. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Robert Levin at (202) 512- 4841 or levinr@ gao. gov.
Highlights of GAO- 03- 441, a report to

Congressional Requesters

April 2003

MISSILE DEFENSE

Knowledge- Based Practices Are Being Adopted, but Risks Remain

Page i GAO- 03- 441 Missile Defense Letter 1 Results in Brief 3 Background
4 Acquisition Strategy Adopts Many Knowledge- Based Practices 8 Two
Knowledge- Based Practices Have Not Been Adopted 15 MDA Is Not Following
Some Knowledge- Based Practices in

Developing 2004 Capability 17 Conclusion 20 Recommendations for Executive
Action 21 Agency Comments and Our Evaluation 22 Scope and Methodology 22
Appendix I Comments from the Department of Defense 24

Table

Table 1: Events and Accomplishments within MDA*s Integrated Master Plan 12
Figures

Figure 1: Examples of Missile Defense Programs Transferred from Services
into MDA 5 Figure 2: Notional Architecture of Future Ballistic Missile
Defense

System 7 Abbreviations

BMDS Ballistic Missile Defense System DOD Department of Defense MDA
Missile Defense Agency Contents

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Page 1 GAO- 03- 441 Missile Defense

April 30, 2003 The Honorable Carl Levin Ranking Member Committee on Armed
Services United States Senate

The Honorable Jack Reed United States Senate

The threat from foreign ballistic missiles has grown steadily since the
end of the Cold War. At least 25 countries now have or are in the process
of acquiring missiles capable of delivering nuclear, biological, or
chemical weapons. Countering this threat demands not only that the
Department of Defense (DOD) develop cutting- edge technology, but also
that it acquire and deploy complex systems more rapidly and effectively.

DOD faces significant technical challenges in building a missile defense
program. So far, DOD has had mixed results in achieving a *hit- to- kill*
capability to destroy enemy warheads reliably, and DOD is still completing
development of the components needed to detect and track a missile in all
phases of its flight* from the boost phase, through the midcourse, and
into the terminal phase. As it works to develop and prove these
capabilities, DOD must also make sure that all missile defense elements
can work together as an integrated system* a complex task in itself, given
the number and diversity of elements involved in missile defense. Once

these basic hurdles have been overcome, DOD still faces a far greater
technical challenge in achieving target discrimination* that is, the
capability to distinguish real warheads from decoys* to defeat more
sophisticated threats.

DOD also faces the challenge of delivering a weapon system with the
capability promised and within the time and cost promised. For example,
previous efforts to develop an airborne laser system and a space- based
tracking and surveillance system encountered substantial delays, cost

overruns, and other difficulties because DOD undertook these efforts

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 441 Missile Defense

without fully understanding the effort that would be needed to mature
technologies critical to developing the systems* required capabilities. 1
Lastly, the development of missile defense weapon systems will also

be costly. DOD estimates that it will need about $50 billion for missile
defense research and development between fiscal years 2004 and 2009, or an
average of over $8 billion per year. This investment does not include
funding after 2009 to complete development of those systems, let alone the
funding needed before and after 2009 to produce and operate the systems.

In January 2002, facing these challenges, the Secretary of Defense
directed the Missile Defense Agency (MDA) to orchestrate the integration
of DOD*s diverse missile defense elements into one layered *system of
systems* and to change its acquisition strategy as needed in doing so. In
response, MDA has sought to implement practices that have proven
successful in other DOD and commercial- sector programs. Taken together,
these practices demand a high level of knowledge about a product at key
junctures during development and that this knowledge be used to make
prudent investment decisions. For example, developers should know that a
technology has been demonstrated to work as intended before it is
integrated into a product.

The importance of making the best decisions possible is underscored by the
time- critical nature of MDA*s efforts. In December 2002, the President
directed DOD to begin fielding an initial capability in 2004 to protect
the

United States against missile attacks. To help ensure that MDA is using
its resources wisely to develop the best possible system, you asked us to
determine the extent to which the agency*s acquisition strategy
incorporates the knowledge- based practices characteristic of successful
development programs. To better answer your question, we separated it into
three parts: (1) What knowledge- based practices are being adopted by MDA?
(2) What significant practices are not being adopted? and (3) Is

MDA following the knowledge- based practices that it has adopted? 1 U. S.
General Accounting Office, Missile Defense: Knowledge- Based Decision
Making Needed to Reduce Risks in Developing Airborne Laser, GAO- 02- 631
(Washington, D. C.: July 12, 2002). U. S. General Accounting Office,
Defense Acquisitions: Space- Based Infrared System- low at Risk of Missing
Initial Deployment Date, GAO- 01- 6 (Washington, D. C.: Feb. 28, 2001).

Page 3 GAO- 03- 441 Missile Defense

MDA has adopted practices that offer the best opportunity to develop a
complex weapon system successfully. Similar to the successful product
development practices of leading commercial organizations, MDA is
developing the missile defense system in *blocks,* rather than trying to
make a big leap in capability. The agency intends to facilitate this
evolutionary approach by keeping the system*s requirements flexible before
beginning activities to integrate technologies into a planned block of the
missile defense system, following a knowledge- based development plan, and
maturing technology before beginning system integration of a block. In
addition, the agency is seeking to involve stakeholders* such as the
military services and the operational testers* early in the development
effort.

However, MDA has not adopted two significant practices regarding long-
term investment decision making, and, as a result, the program*s success
could be hampered. First, MDA is not making an early determination of the
full cost of a capability. Specifically, before beginning system
integration, MDA does not estimate the total costs for development,
production, operations, and sustainment of that block. Such an estimate
would help decision makers in evaluating which technologies to include
because they offer the best capability for the funds invested. MDA
officials told us that they are considering steps to provide such
estimates earlier. Second, DOD is not allocating a *wedge* of funds in its
Future Years Defense Plan (fiscal years 2004 through 2009) for system
production and operations. MDA officials told us that such a wedge has

not been set aside because MDA*s acquisition strategy does not presume
that a decision will be made to produce and operate the system. DOD risks,
however, that when it is ready to procure and maintain the missile defense
system, it will not have the funds to do so unless it reduces or
eliminates its investment in other important weapon systems. This approach
brings little transparency to future investment choices and may constrain
options for decision makers.

The President*s directive to begin fielding an initial defensive
capability in 2004 also places MDA in danger of getting off track early
and introducing more risk into the missile defense effort over the long
term. This danger is highlighted by MDA*s decision to not follow some of
its knowledge- based practices as it develops the first block of the
missile defense system, which will provide the initial capability. Because
of time pressures, MDA must include components that have not been
demonstrated as mature and ready for system integration into a particular
element, let alone the block overall. For example, MDA has encountered
considerable difficulty in

developing a new three- stage booster and has yet to flight test
interceptor Results in Brief

Page 4 GAO- 03- 441 Missile Defense

boosters in configurations planned for fielding in September 2004. Also,
MDA*s test program has been limited to date and is under considerable
schedule pressures. A knowledge- based approach to testing validates
whether components (1) work individually, (2) work together as a system in
a controlled setting, and (3) work together as a full system in a
realistic setting. MDA*s integrated flight tests to date have used
surrogate and prototype components and have been executed under non-
stressing conditions. As a result, testing to date has provided only
limited data for determining whether the system will work as intended in
2004. Also, MDA has no plans to demonstrate through flight testing the
upgraded primary radar in Alaska that will be used to detect and track
enemy missiles.

We are making recommendations to DOD for providing decision makers with
more timely information on the cost and funding needs of missile defense.
In commenting on a draft of this report, DOD concurred with our
recommendations.

In January 2002, the Secretary of Defense refocused the ballistic missile
defense program. The Secretary delegated to MDA authority to manage all
ballistic missile defense systems under development and shifted such
programs controlled by the military services* such as the Army*s Theater
High Altitude Area Defense program* to the agency. Other programs moved to
MDA are highlighted in figure 1. These programs, previously recognized by
DOD as major defense acquisition programs, are now considered *elements*
and have been consolidated into one overall major program called the
Ballistic Missile Defense System (BMDS). Future architectures of the BMDS
may also include *stand- alone* components (primarily sensors) that would
operate in concert with the various missile defense elements. Background

Page 5 GAO- 03- 441 Missile Defense

Figure 1: Examples of Missile Defense Programs Transferred from Services
into MDA

Source: DOD.

In December 2002, President Bush directed the Department of Defense to
begin fielding the first block of the ballistic missile defense system for
operational use in 2004. That is, in addition to focusing resources on the
development of a testbed for developmental testing of missile defense
elements, he instructed MDA to build in an operational capability that
would protect the United States against missile attacks. The fielding of
such capabilities is referred to as an *initial defensive operations*
capability, and, in a statement by the Secretary of Defense, ** would be a
very preliminary, modest capability.* The initial capability will be based
on the testbed and augmented with additional developmental assets.

When fully deployed, the BMDS will include (1) space- and ground- based
sensors to provide early warning and tracking of missile launches; (2)
ground- based radars to identify and refine the tracks of threatening
reentry vehicles and associated objects; (3) ground- and sea- based
interceptors to destroy enemy missiles through *hit- to- kill* impacts;
and (4) fire control nodes for battle management and execution of the
ballistic missile defense mission. A notional architecture of future BMDS
blocks is illustrated in figure 2. For example, the initial capability for
defense of the United States against long- range missiles would come

Page 6 GAO- 03- 441 Missile Defense

from the Ground- Based Midcourse Defense element and BMDS sensors, as
follows:

 Ground- Based Midcourse Defense Element. The principal components of the
Ground- Based Midcourse Defense element for defensive operations include
interceptors sited at Fort Greely, Alaska, and Vandenberg Air

Force Base, California; a fire control node for battle management and
execution located at Schriever Air Force Base, Colorado, with a backup
node at Fort Greely; an upgraded Cobra Dane radar at Eareckson Air

Station in Shemya, Alaska; and an upgraded early warning radar at Beale
Air Force Base, California.  BMDS Sensors. Sensors external to the
Ground- Based Midcourse

Defense element and available for defensive operations include Defense
Support Program satellites for missile warning and forward- deployed Aegis
AN/ SPY- 1 radars on existing Navy cruisers.

The above assets comprise the initial configuration, which is scheduled
for fielding at the end of September 2004. The agency*s near- term
intention is to expand this capability by adding more interceptors at Fort
Greely, Alaska; a sea- based X- band radar deployed in the Pacific for use
in flight testing; and an upgraded early warning radar at Fylingdales,
England, by the end of 2005.

Page 7 GAO- 03- 441 Missile Defense

Figure 2: Notional Architecture of Future Ballistic Missile Defense System

Page 8 GAO- 03- 441 Missile Defense

To ensure the delivery of high- quality products on time and within
budget, successful developers have adopted acquisition strategies that are
anchored in knowledge. Specifically, they establish decision points for
moving forward from technology development to product development and on
to production. 2 At each decision point, decision makers ask themselves
whether they have gained the knowledge they need to proceed into the next
acquisition phase. For example, they determine whether the work can be
completed with the money and time available and whether the product will
be worth the required investment. If any of these questions are answered
negatively, the program does not go forward. Other practices that
facilitate successful outcomes include developing systems in stages rather
than attempting to deliver all desired capabilities at one time, keeping
requirements flexible so that the system can be produced within available
resources, making sure technology is proven before incorporating it into a
development program, and involving the right people at the right time in
decision making. Commercial and DOD programs that have successfully
implemented these practices have found that they help curb the incentive
to rely on immature technologies and to

over- promise the capability that can be delivered. Moreover, these
programs found that keeping stakeholders involved in decision making
ensured that the developed product better met the customers* needs.

MDA realizes the value of these practices and is seeking to incorporate
them into its acquisition strategy. Specifically, as discussed below, MDA
plans to evolve the missile defense system over time, rather than trying
to make a big leap in its capability. MDA is also planning to keep the
system*s

requirements flexible before beginning system integration and to follow a
knowledge- based development plan. In addition, MDA is seeking to involve
stakeholders* such as the military services and the operational testers*
early in the development effort.

2 The three acquisition phases are distinguished by the activities that
occur during each of the three phases. During technology development,
scientists apply scientific knowledge to a practical engineering problem
and demonstrate that components with desired capabilities can be
developed. Product development includes integrating those components into
a stable system design and demonstrating that the design will result in a
product that meets the customer*s needs and can be produced with the time
and money available.

Production is the manufacturing of the product. Acquisition Strategy

Adopts Many Knowledge- Based Practices

Page 9 GAO- 03- 441 Missile Defense

Historically, many new development programs in DOD have sought to achieve
a great leap ahead in capabilities. Because the technology was often not
available to make such leaps, programs were often in development for years
while engineers tried to develop and mature the needed technologies. As
the time required to develop a system increased, so did the cost of the
system.

In contrast, development programs are most successful when they take an
evolutionary, or phased, approach. In doing so, they establish time-
phased plans to develop new products in increments. The first increment
often has a limited capability because it incorporates technology that is
already mature or can be matured quickly. As new technology is developed,
it is incorporated into subsequent increments so that the product*s
capability evolves over time. This approach reduces risks by introducing
less new content and technology into a program*s design and development
effort. An evolutionary strategy also enables developers to deliver a
series of interim capabilities to the customer more quickly. Recognizing
the benefits of evolving systems, DOD recently revised its acquisition
system policy to encourage evolutionary development.

The Missile Defense Agency*s new strategy for developing the ballistic
missile defense system adopts evolutionary development. At the beginning
of each block, the agency intends to predict the capability that can be
developed given a *tool box* 3 of currently available technology and then
to design that system. As additional technology matures, the agency can

incorporate it into the next block being developed. Two key practices
adopted by MDA can be expected to help the agency in taking an
evolutionary approach. They include (1) keeping requirements flexible and
(2) following a knowledge- based development plan with specific decision
points and criteria for moving forward.

Customers generally want new products that are high performance at low
cost, delivered as soon as possible. But developing and producing such a
product may exceed the developer*s technology or engineering expertise, or
may be too costly and time- consuming for the customer to accept.
Therefore, what a customer needs in a product and what a developer can
produce given available resources must be matched to

3 All possible elements/ components and interfaces that could be used in a
ballistic missile defense system. Evolutionary Development

Flexible requirements

Page 10 GAO- 03- 441 Missile Defense

form an achievable set of product requirements before development begins.
To make this match, both the customer and the developer must be flexible
so that potential gaps between needs and resources can be closed.
Flexibility represents the customer*s ability and willingness to lower
product expectations, coupled with the product developer*s willingness and
ability to invest more resources to reduce technical risks before
beginning system integration. Without flexibility, resources and needs can
still be matched, but the options for closing the gaps between the two are
limited to additional investments on the developer*s part. In fact, our
past reviews have found that many traditional DOD acquisition programs
incurred substantial cost increases and schedule delays because
requirements by the military services were unrealistic and inflexible.

Because of its flexibility, MDA*s new *capabilities- based approach* for
the development of missile defense elements provides a greater opportunity
to resolve this potential gap between resources and needs. 4 Instead of
proceeding with the development of a solution based on firm operational
requirements set by the services, the agency, in coordination with the
warfighter, considers a number of system architectural options that can be
developed given the mature technologies that are available. Decision
makers evaluate the alternative architectures according to the potential
military utility that each offers, given the constraints of cost and
schedule.

For example, decision makers would compare the regions of the world that
each architecture could defend from missile launches (defended area) or
each architecture*s probability of engagement success. This acquisition
approach eliminates any possible gap between resources and needs; the

customer (warfighter) accepts the best capability that the developer can
deliver given available resources and assumes enhanced capabilities will
be built into future blocks.

In the early stages of a major defense acquisition program, DOD
establishes a master schedule for moving through development and into
production. Historically, once these milestones have been established,
they have often been an impetus for moving forward even if requisite
knowledge had not been attained* an action that invariably caused
schedules to slip and costs to rise. By contrast, we have found that
successful developers place more importance on capturing specific

4 At the beginning of systems integration, MDA plans to establish system
capability specifications. As in any organization, these specifications
may change if testing shows that they are unattainable or that meeting
them will be too costly or take too much time. Knowledge- based
development plan

Page 11 GAO- 03- 441 Missile Defense

technology, design, and manufacturing knowledge than meeting milestones
and they use this knowledge to make investment decisions. Moreover, these
developers identify and use specific markers or criteria* such as
technology readiness levels, percentage of engineering drawings released
to the manufacturer, or the percentage of manufacturing processes under
statistical control* to ensure that the program has sufficient knowledge
to move forward.

MDA has similarly adopted a structured plan, called the Integrated Master
Plan, for moving forward with requisite knowledge. Every block would move
through eight formal *events,* each of which would include an identified
set of accomplishments that should be completed before the program moves
on to the next event. (See table 1 for a list of events and their
associated accomplishments.) As a block moves through the events,

MDA plans to use quantitative criteria whenever possible to enhance
decisions on whether to continue developing the block as it is or to make
changes. At the end of a block*s development, MDA expects to recommend one
of four alternative actions to decision makers. Officials could recommend
that the elements be (1) transferred to the services to be produced and
fielded in its current configuration, (2) further developed in a
subsequent block, (3) retained as a test asset in the missile defense
testbed, with some capability available for operational use, or (4)
terminated.

One such quantitative criterion adopted by MDA is technology readiness
levels. Our reviews have found that successful developers often use
technology readiness levels as an analytical tool to assess the maturity
of technology being considered for inclusion in a product. There are nine
levels of maturity. The level increases as the technology becomes closer
in form, fit, and function to the actual system and is demonstrated in
more realistic environments. For example, technology is least mature, or
least ready for inclusion in a product, when it is an idea being explored
in paper studies. Conversely, technology is most mature when it has been
incorporated into the intended product and that product has been
demonstrated in its intended environment. The lower the level of
technology readiness, the more ground that must be covered to bring the
technology to the point at which it can meet the intended product*s cost,
schedule, and performance requirements with little risk. We found that
most successful developers insert new technology into a product only when
the technology has been incorporated into prototype hardware and that
hardware has been demonstrated to work in the environment in which it is
expected to be used.

Page 12 GAO- 03- 441 Missile Defense

MDA*s knowledge- base development plan incorporates the use of technology
readiness levels at Event 1 to assess the maturity of technology proposed
for a block configuration. The strategy calls for including new technology
at system integration (Event 4) if that technology has been proven in
prototype hardware that works in the environment in which it is expected
to be used. While the incorporation of mature technology at system
integration is MDA*s preferred approach, the strategy retains the

flexibility to include less mature technology if it offers a significant
benefit and the risk of including it is acceptable. In such instances, MDA
expects to develop a plan for reducing the risk of moving forward with
immature technology and to remove the technology from the block if the
risk has not been reduced at subsequent decision points.

Table 1: Events and Accomplishments within MDA*s Integrated Master Plan
Event 0* Block Capability Alternatives

Block planning process completed Long lead targets, tests, and exercises
identified Affordability Analysis completed Preliminary block plan
approved

Event 1* Preliminary Configuration Definition

Preliminary block description approved Technology readiness levels
assessed Performance assessments updated Preliminary concept of operations
and operational architecture drafted Risks assessed and mitigation
programs established Detailed cost estimates for elements/ components
available Cost/ benefit analysis updated Integration/ test objectives
defined

Element/ component preliminary design reviews completed Required funding
identified Integrated master schedule completed

Event 2* Configuration Definition

Critical design reviews for all element/ component/ targets programs
completed Performance/ cost assessments updated Risks assessed and
mitigation programs updated Military utility characterized and concept of
operations refined Preliminary integration test plan available Funding
available and resources allocated Block definition updated Integrated
master schedule updated Event 3* First Development Article

First development article built and initial tests completed Targets built
and initial tests completed

Page 13 GAO- 03- 441 Missile Defense

Test range and support planning completed Concept of operations defined
and operational architecture available Funding and Estimate at Completion
assessed

Event 4* Integrated Test Readiness Review Block integration test planning
completed Element/ component test and checkout completed Target test and
checkout completed Ballistic missile defense system tactics, techniques,
and procedures for designated user defined Funding and Estimate at
Completion updated Operational characterization of each element completed

Operational certification of element completed

Event 5* Interim Test and Progress Review 50 percent of system test
objectives accomplished Support systems defined Training systems defined
Funding updated and Estimate at Completion verified Initial transition
plans completed

Initial operational characterization completed

Event 6* Element/ component transition decision points

System/ element/ component testing completed Operational characterization
completed Support systems planned and budgeted Training systems planned
and budgeted Transition plans completed and funded

Production plans available Updated block definition available Element/
component certification of military utility completed Service total
obligation authority available

Event 7* Block Certification of military utility

Military utility assessed and system element/ component offered for
transition Ballistic missile defense system capability demonstrated Life
cycle cost estimate indicates long- term affordability Reliability,
maintainability, and availability, and support requirements characterized
Block certification of military utility completed Integration of declared
block capability of ballistic missile defense system

Source: DOD. Note: The events and accomplishments in MDA*s Integrated
Master Plan are being revised. This set was in effect as of February 2003.

Developers have found that if they are to be successful, all groups that
have a stake in the product should be involved at all appropriate stages
in the development effort. For example, cost analysts are needed to
accurately estimate the cost of the product, experts in test and
evaluation are needed to objectively assess the performance of product
prototypes, Involvement of

Stakeholders

Page 14 GAO- 03- 441 Missile Defense

and others are needed to enhance understanding of the customer*s needs. By
involving these groups from the time a product design is created and
keeping them involved throughout the product integration and demonstration
phases, a program can ensure that it has a complete perspective. A key
forum for stakeholder input is the Missile Defense Support Group,

which includes representatives from the Joint Air and Missile Defense
Organization; the Comptroller*s Office; the Director, Operational Test and
Evaluation; and other units across DOD. The support group provides advice
on such subjects as policy, operations, testing, acquisition, and
resources to the Director of the Missile Defense Agency and the Under
Secretary of Defense for Acquisition, Technology and Logistics, and
supports the Senior Executive Council 5 in decision making. In addition,
an analytical working group remains in close contact with MDA management
so that it can collect information for the Missile Defense Support Group
as well as conduct independent analyses of the missile defense program*s
work.

Initially, not all members of the Missile Defense Support Group and its
working group believed that MDA*s approach to stakeholder involvement
would be successful. Soon after the support group was established,

members voiced concern that they were not getting sufficient access to
agency information. Members said that communication with MDA was poor and
that access to knowledgeable MDA individuals was limited, all of which
made it difficult to provide timely advice. For example, in April 2002,
the agency presented options to the support group to address capability
shortfalls in sea- based terminal defense caused by the loss of the Navy
Area missile defense program. 6 Members of the group questioned why a
successor to the Navy Area program was needed. MDA planned additional
briefings pertaining to this issue; however, the group was never briefed
and MDA, without additional group input, went directly to the Under
Secretary of Defense for Acquisition, Technology and Logistics to obtain
approval for a particular approach to sea- based terminal missile

5 The Senior Executive Council is led by the Deputy Secretary of Defense,
and its members are the Under Secretary of Defense for Acquisition,
Technology and Logistics, and the Secretaries of the Army, Navy, and Air
Force. The Council provides oversight of MDA*s activities and is
responsible for making program adjustments and deciding to transition or
transfer a capability to the services. Furthermore, the Council approves
MDA*s investment

strategy and decisions. 6 DOD cancelled the Navy Area program in 2001 due
to cost overruns.

Page 15 GAO- 03- 441 Missile Defense

defense. DOD officials told us that they did not seek further input from
the group because there was insufficient time for it to fully understand
and evaluate the issue before a decision had to be made.

Shortly after this, support group members provided comments and
suggestions to the Under Secretary and the MDA director on increasing
communication, obtaining access to MDA personnel, and receiving timely
information. Subsequently, MDA made progress in addressing the support

group*s suggestions and concerns relating to these issues. As a result,
according to support group members, the level of interaction,
communication, and involvement has improved. In particular, support group
members attend weekly system and element review meetings and have regular
interaction with agency personnel outside of the Missile Defense Support
Group forum.

While MDA has adopted many of the practices of successful acquisition
programs, it has not incorporated two particularly significant ones.
Specifically, before beginning system integration, successful developers
reduce their investment risk by estimating total costs and determining
that funding is available for developing, producing, and operating the
system. (We recently reported on the significance of DOD*s costs for
operating its weapon systems and keeping them ready for action over many
years. 7 )

In MDA*s case, decision makers would benefit from having this knowledge
available before MDA begins system integration because decision makers
would be better positioned to consider whether to delay until subsequent
blocks those elements that currently have unaffordable production,
operation, or maintenance costs and whether costs might be lowered in the
future by inserting new technology or implementing better engineering
solutions. The information would also help decision makers to compare all
elements* costs and decide which elements should be included in a planned
block of the missile defense system because they offer the best capability
for the funds invested.

As of February 2003, MDA*s draft Integrated Master Plan did not call for
an element*s life cycle cost to be estimated at the beginning of system 7
U. S. General Accounting Office, Best Practices: Setting Requirements
Differently Could Reduce Weapon Systems* Total Ownership Costs, GAO- 03-
57 (Washington, D. C.: Feb. 11, 2003). Two KnowledgeBased

Practices Have Not Been Adopted

Page 16 GAO- 03- 441 Missile Defense

integration (Event 4) but rather at the point when that element is
considered for transfer to a military service for production, operation,
and maintenance (Event 7). Moreover, MDA may never estimate the full cost
of some elements because, according to officials, some elements may never
be transferred to a military service for production and operation. For

example, MDA plans to continually upgrade elements such as the Ground-
Based Midcourse Defense element in the missile defense test bed even
though it would be available for combat use. In such cases, MDA plans to
estimate only the element*s development costs* not its production,
operation, and maintenance costs.

Also, DOD has not allocated funds in its Future Years Defense Plan (fiscal
years 2004 through 2009) for the production, operation, and maintenance of
any elements that might be transferred in the future to the military
services. MDA has established optional decision points called *off ramps*
where elements such as Theater High Altitude Area Defense could be
transferred to the military services, but DOD has not set aside a *wedge*
of funding for the element*s production and operating costs.

MDA officials told us that the agency is considering revisions to its
Integrated Master Plan so that it can provide decision makers with
complete life cycle cost information on each element prior to beginning
system integration activities for each block of the missile defense
system.

For example, MDA anticipates defining each element*s training and support
systems before it begins system integration activities. The officials said
that that they are still, however, in the process of determining the cost
information that needs to be collected and the timing of its collection.
In terms of setting aside a wedge of funding in the Future Years Defense
Plan for production and operations costs, MDA officials told us that no
such action is planned at this time because MDA*s acquisition strategy
does not presume that a decision will be made to transfer the element to
the military service. They told us that they expect funding would be made
available.

However, we believe that unplanned operation and maintenance costs could
be a particular problem for DOD because its budget for these expenses is
already stressed by the rising cost to operate and maintain many aging
weapon systems. Also, when DOD is at the point of deciding whether to
transfer elements of the missile defense system to a military service for
production and operation, DOD could find that it does not have the funds
available for missile defense without reducing or eliminating funding for
other important weapon systems.

Page 17 GAO- 03- 441 Missile Defense

Because the President directed that a missile defense capability be
fielded beginning in 2004, MDA will not be able to follow some knowledge-
based practices in developing the initial capability in this brief time.
As noted earlier, MDA*s draft Integrated Master Plan recommends that when
a block enters system integration it include mature technology but the
plan allows for the inclusion of less mature technology if the benefits
are significant and if risks can be mitigated. Given the Presidential
direction, MDA must include components in the block that have not been

demonstrated as mature and ready for integration into a particular
element, let alone the block overall. MDA*s plan also calls for rigorous
testing before the agency recommends that the system or its elements be
available for fielding. However, MDA*s test program has been limited to
date and is under considerable time pressures.

Our past reviews of DOD and commercial product development programs have
shown that programs are in a much better position to succeed if components
that incorporate new technologies are matured to a high level before being
integrated into a product. Conversely, developers that initiated product
developments with immature technology increased the risk that their
products would fail tests and that some aspects of the products* design
would have to be reworked because components did not perform as predicted.
The overall impact of such problems was often that products did not
deliver the promised capability or the developers had to

spend additional time and money to develop that capability. While its
draft Integrated Master Plan recommends that system integration begin with
mature technologies (Event 4), MDA has begun including components into the
Block 2004 configuration that are not yet mature. Two examples are the
Cobra Dane radar and the boosters for the Ground- Based Midcourse Defense
interceptors.

 The Cobra Dane radar is located at Eareckson Air Station in the western
end of the Aleutian Islands chain in Alaska. Planned hardware and software
upgrades intended to provide the radar with real- time acquisition and
tracking capabilities are expected to be completed in fiscal year 2004.
MDA has no plans, however, to demonstrate the expected functionality of
the radar through integrated flight tests.

 MDA has encountered considerable difficulty in developing a three- stage
booster for the Ground- Based Midcourse Defense element and has yet to
flight test interceptor boosters in configurations planned for fielding in

September 2004. By the time the new booster was flight tested in August
2001, it was already about 18 months behind schedule. The first booster
MDA Is Not

Following Some Knowledge- Based Practices in Developing 2004 Capability

System Integration of Block 2004 Begins with Some Immature Technologies

Page 18 GAO- 03- 441 Missile Defense

flight test was successful, but the second booster drifted off course and
had to be destroyed 30 seconds after launch. Subsequently, the agency

authorized two new contracts for developing boosters for use in the Block
2004 capability. While this strategy should reduce risk in the program,
the first demonstrations of these boosters will occur in the flight tests
scheduled later this year. MDA officials told us that they could not
deploy an initial capability in the

timeframe directed by the President if they did not continue to develop
the technology while designing the system. MDA officials told us that they
expect to follow their knowledge- based development plan as they develop
the next block (Block 2006) of the missile defense system.

The fundamental purpose of testing is to gauge the progress being made
when an idea or concept is translated into an actual product and,
ultimately, to make sure the product works as intended. Leading commercial
firms conduct testing to discover potential developmental problems early.
The firms focus on validating that their products have reached increasing
levels of product maturity at given points in time. The firms* products
have three maturity levels in common: components work individually,
components work together as a system in a controlled setting, and
components work together as a full system in a realistic setting. Testing
in this systematic manner helps ensure that problems are identified and
corrected early, when the cost of solving problems is lower and more
options are available. Over time, disciplined testing helps confirm that
the product eventually produced will meet the customer*s needs.

In the past, when DOD programs have been schedule* rather than event*
driven, program managers have found it difficult to slow the program if
problems were identified during testing. MDA has been placed in a similar,
pressured position as it prepares to field an initial capability by
September 2004. Also, only limited test data is available for determining
whether a credible capability will be available at that date.

The capability that MDA expects to deploy is essentially a collection of
elements that are connected by battle management software. Initially, the
mission of the software will be to hand off data from the radars that
detect and track enemy missiles to the shooters that launch interceptors
to kill the missiles. For example, the battle management software could
communicate to the Ground- Based Midcourse element data on the position of
an intercontinental ballistic missile being tracked by the Aegis Testing
under Pressure

and Limited to Date One system- level test is planned prior to fielding

Page 19 GAO- 03- 441 Missile Defense

Ballistic Missile Defense radar. MDA has begun the development of battle
management hardware/ software and has completed some ground tests of its
capability. However, MDA plans to deploy the block although the battle
management software*s ability to interoperate with the elements as an
integrated missile defense system will not be flight tested until the
Spring of 2004.

Integrated flight tests to date have demonstrated that the Ground- Based
Midcourse Defense and Aegis Ballistic Missile Defense elements can defeat
a mock warhead in a test environment. However, the tested elements did not
include all of the same components that will be part of the elements
deployed in 2004. Instead these elements were tested using some surrogate
and prototype components. For example, all tests of the Ground- Based
Midcourse element have included a surrogate booster and a prototype kill
vehicle. In addition, tests of this element have not included the Cobra
Dane radar that will be used in September 2004 to detect and track
intercontinental ballistic missiles. The Cobra Dane radar will not
actively participate in integrated flight tests at least through September
2007.

Element flight tests have also been executed under nonstressing conditions
that are not fully representative of the environments that the elements
would experience in combat. All flight tests completed to date have been
limited to a single corridor and intercept region, that is all targets
have been launched from Vandenberg Air Force Base, California, and
interceptors have been launched from the Reagan Test Site in the Marshall
Islands. As a result, flight- test engagement conditions are limited to
those with slower closing velocities and shorter intercept ranges. Testing
under conditions such as these significantly limit the data MDA can
collect on system effectiveness and readiness.

An operational test assesses the effectiveness of the system against the
known threat and its suitability for combat use. U. S. law requires that
such tests be carried out on major defense acquisition programs and
assessed by DOD*s Director, Operational Test and Evaluation, before a
full- rate production decision is made. The purpose of the Director*s
assessment is to advise the Secretary of Defense and Congress on the
effectiveness of the system against the known threat and its suitability
for combat use.

MDA does not plan to operationally test the Block 2004 Ground- Based
Missile Defense element before it is available for initial defensive
operations. The September 2004 fielding is not connected with a full- rate
production decision that would clearly trigger statutory operational
testing Element flight- test data

is limited Operational test data is limited

Page 20 GAO- 03- 441 Missile Defense

requirements. Nonetheless, according to DOD officials, MDA plans to
incorporate both developmental and some operational test requirements in
integrated flight tests.

The Director, Operational Test and Evaluation, will provide comments on an
element*s operational effectiveness and suitability as demonstrated in
these tests. 8 However, Operational Test and Evaluation officials said
that because developmental tests are scripted, planned events, they do not
provide the opportunity to assess how the equipment and its operators will
function under unforeseen conditions.

MDA is attempting to build a ballistic missile defense capability that
paces an ever- evolving threat. This is an expensive and risky endeavor,
because it requires a diverse set of technologies that must be quickly
developed, integrated, and deployed across an array of land-, air-, sea-,
and spacebased platforms. Whether MDA can successfully meet the challenge
of quickly developing an effective and suitable missile defense system
depends in large part on its willingness to adopt practices that have made

other developers successful and to implement those practices as it
develops each block.

Certainly, the presidential directive has already caused MDA to not follow
some of the knowledge- based practices that it had adopted as it develops
Block 2004. Giving up this approach opens the door to greater cost and
performance risks. Beginning system integration of Block 2004 with
immature technology increases the potential that some element may not work
as intended. If this happens, MDA will be faced either with fielding a
less than credible system or likely spending more money in an attempt to
develop the desired capability within the time allowed. In addition to the
challenge it faces in Block 2004, MDA faces the challenge of getting its
acquisition program back on track. Because the ballistic missile threat is

8 The National Defense Authorization Act for Fiscal Year 2002 (P. L. 107-
107) requires the Director of Operational Test and Evaluation to (1)
annually assess, and report to Congress on, the adequacy and sufficiency
of MDA*s test program during the preceding fiscal year, (2) monitor the
development of MDA*s plan for ensuring that each critical technology for a
missile defense program is successfully demonstrated in an appropriate
environment before that technology enters into operational service (and
provide the Director of MDA with appropriate comments), and (3) review, on
an ongoing basis, the development of

MDA*s annual program goals (including testing goals) and annual program
plan (including schedules for flight tests and other significant testing
activities) and provide any resulting comments on the plans to the
Secretary of Defense and the Director of MDA. Conclusion

Page 21 GAO- 03- 441 Missile Defense

rapidly increasing, MDA could always believe it is operating in an
emergency environment. Yet, it has never been proven that it takes longer
to acquire a weapon system if a knowledge- based acquisition plan is
followed. Instead, the opposite should be true, because such a plan
decreases the likelihood that deadlines will be missed because critical
elements do not work as intended.

MDA and DOD also need to address the long- term implications of their
investment strategy. Both are assuming increased investment risk by not
having the right information available for decision makers at the right
time. The level of anticipated spending magnifies this risk. MDA officials
told us they are considering changes to MDA*s Integrated Master Plan to
identify life cycle costs at the beginning of system integration
activities so that tradeoff decisions can be made in a more timely manner.
However, because DOD has not yet set aside funds to cover its long- term
costs, the department could find that it cannot afford to procure and
maintain that system unless it reduces or eliminates its investment in
other important weapon systems. By setting aside funds in the Future Years
Defense Plan, we believe DOD would bring needed visibility to the
impending trade- offs

between missile defense and other weapon system spending for procurement
and operations.

To assist MDA and DOD decision makers in determining which elements or
components should be included in each new block of the Ballistic Missile
Defense System, we recommend that the Missile Defense Agency, before
beginning integration activities, prepare a life cycle cost estimate

for configuring the element or component that the agency is considering
including in the block.

To help ensure that funds are available to produce and operate the
elements of the missile defense system when a decision is made to transfer
elements to the military services, we recommend that the Secretary of
Defense explore the option of requiring the services to set aside funds
for this purpose in the Future Years Defense Plan. Recommendations for

Executive Action

Page 22 GAO- 03- 441 Missile Defense

In commenting on a draft of this report, the DOD concurred with our
recommendations.

Regarding our recommendation that MDA prepare life cycle cost estimates
before beginning integration activities, DOD said that MDA will prepare
its best estimate of life cycle costs based upon projected hardware life,
operational cost drivers, and initial capability quantities prior to
integration activities for each block.

Regarding our recommendation that DOD set aside funds in its Future Years
Defense Plan in anticipation of the transfer of missile defense system
elements to the military services, DOD said that there is benefit in
budgeting funds when such a transfer is anticipated. Doing so would
promote budget stability and improve the likelihood that an element or
component would actually be fielded.

DOD also suggested technical changes, which we incorporated as
appropriate. DOD*s comments are reprinted in appendix I.

To address our objectives, we analyzed documents that detailed the Missile
Defense Agency*s new acquisition practices and compared the practices to
those of successful development programs. We also obtained detailed
briefings from Missile Defense Agency officials regarding the agency*s
plan for the implementation of these practices and contrasted that plan to
the implementation plan of successful programs. In addition, we discussed
the challenges and risks that the agency faces as it implements its new
plan with the Institute of Defense Analyses, Alexandria, Virginia. We also
discussed these issues with all members of the Missile Defense Support
Group, including the Office of the Undersecretary for Acquisition,
Technology and Logistics; Office of the Undersecretary for Policy; Office
of the Undersecretary (Comptroller); General Counsel; Office of the
Assistant Secretary (Command, Control, Communications, and Intelligence);
Office of the Director, Operational Test and Evaluation; Office of the
Director, Program Analysis and Evaluation; Office of the Director, Cost
Analysis Improvement Group, in Washington, D. C.; and the Joint Staff;
Department of the Army; Department of the Air Force; Department of the
Navy; and the Missile Defense Agency in Arlington, Virginia. Agency
Comments

and Our Evaluation Scope and Methodology

Page 23 GAO- 03- 441 Missile Defense

We conducted our review from March 2002 to March 2003 in accordance with
generally accepted government auditing standards.

As arranged with your staff, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
its issue date. At that time, we plan to provide copies of this report to
the Chairmen and Ranking Minority Members of the Senate Committee on Armed
Services; the Senate Committee on Appropriations, Subcommittee on Defense;
the House Committee on Armed Services; the House Committee on
Appropriations, Subcommittee on Defense; the Secretary of Defense; and the
Director, Missile Defense Agency. We will make copies available to others
upon request. In addition, the report will be available at

no charge on the GAO Web site at http:// www. gao. gov/. If you or your
staff have any questions concerning this report, please contact me on
(202) 512- 4841. Major contributors to this report were Katherine
Schinasi, Barbara Haynes, Cristina Chaplain, David Hand, Alan Frazier,
Randy Zounes, Adam Vodraska, Jose Ramos, and Greg Lagana. R. E. Levin

Director Acquisition and Sourcing Management

Appendix I: Comments from the Department of Defense

Page 24 GAO- 03- 441 Missile Defense

Appendix I: Comments from the Department of Defense

Appendix I: Comments from the Department of Defense

Page 25 GAO- 03- 441 Missile Defense (120135)

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