Defense Acquisitions: Improvements Needed in Space Systems	 
Acquisition Policy to Optimize Growing Investment in Space	 
(18-NOV-03, GAO-04-253T).					 
                                                                 
The Department of Defense is spending nearly $18 billion annually
to develop, acquire, and operate satellites and other		 
spacerelated systems. The majority of satellite programs that GAO
has reviewed over the past 2 decades experienced problems that	 
increased costs, delayed schedules, and increased performance	 
risk. In some cases, capabilities have not been delivered to the 
warfighter after decades of development. DOD has recently	 
implemented a new acquisition policy, which sets the stage for	 
decision making on individual space programs. GAO was asked to	 
testify on its assessment of the new policy.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-253T					        
    ACCNO:   A08885						        
  TITLE:     Defense Acquisitions: Improvements Needed in Space       
Systems Acquisition Policy to Optimize Growing Investment in	 
Space								 
     DATE:   11/18/2003 
  SUBJECT:   Satellites 					 
	     Space exploration					 
	     Policy evaluation					 
	     Procurement policy 				 
	     Cost overruns					 
	     Schedule slippages 				 
	     Research and development				 

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GAO-04-253T

United States General Accounting Office

GAO Testimony

Before the Subcommittee on Strategic Forces, Committee on Armed Services,
U.S. Senate

For Release on Delivery Expected at 2:00 p.m. EST

Tuesday, November 18, 2003 DEFENSE ACQUISITIONS

  Improvements Needed in Space Systems Acquisition Policy to Optimize Growing
                              Investment in Space

Statement of Robert E. Levin, Director Acquisition and Sourcing Management

GAO-04-253T

Highlights of GAO-04-253T, a report to Subcommittee on Strategic Forces,
Committee on Armed Services, U.S. Senate

The Department of Defense is spending nearly $18 billion annually to
develop, acquire, and operate satellites and other spacerelated systems.
The majority of satellite programs that GAO has reviewed over the past 2
decades experienced problems that increased costs, delayed schedules, and
increased performance risk. In some cases, capabilities have not been
delivered to the warfighter after decades of development.

DOD has recently implemented a new acquisition policy, which sets the
stage for decision making on individual space programs. GAO was asked to
testify on its assessment of the new policy.

GAO did not make recommendations in its testimony. However, it reiterated
a previous recommendation that DOD modify its policy to separate
technology development from product development. DOD disagreed with our
earlier recommendation because it believes that the modification would
slow down acquisitions, increase risks, and keep DOD from taking advantage
of cutting edge technology. Our past work, however, has consistently shown
that time and risk are reduced and capability is increased when programs
begin with knowledge that technologies can work as intended.

www.gao.gov/cgi-bin/getrpt?GAO-04-253T.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Katherine Schinasi or Bob
Levin at (202) 512-4841 or [email protected] or [email protected].

November 18, 2003

DEFENSE ACQUISITIONS

Improvements Needed in Space Systems Acquisition Policy to Optimize Growing
Investment in Space

Similar to all weapon system programs, we have found that the problems
being experienced on space programs are largely rooted in a failure to
match the customer's needs with the developer's resources-technical
knowledge, timing, and funding-when starting product development. In other
words, commitments were made to satellite launch dates, cost estimates,
and delivering certain capabilities without knowing whether technologies
being pursued could really work as intended. Time and costs were
consistently underestimated. DOD has recognized this problem and recently
revised its acquisition policy for non-space systems to ensure that
requirements can be matched to resources at the time a product development
starts. The space community, however, in its newly issued policy for space
systems, has taken another approach.

As currently written, and from our discussions with DOD officials about
how it will be implemented, the policy will not result in the most
important decision, to separate technology development from product
development to ensure that a match is made between needs and resources.
Instead, it allows major investment commitments to be made with unknowns
about technology readiness, requirements, and funding. By not changing its
current practice, DOD will likely perpetuate problems within individual
programs that require more time and money to address than anticipated.
More important, over the long run, the extra investment required to
address these problems will likely prevent DOD from pursuing more advanced
capabilities and from making effective tradeoff decisions between space
and other weapon system programs.

Overview of Key Decision Points

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss the Department of Defense's (DOD)
new space acquisition policy. This policy will be critical as DOD strives
to optimize its investment in space-which currently stands at more than
$18 billion1 annually, and is expected to grow considerably over the next
decade. DOD's space acquisitions have experienced problems over the past
several decades that have driven up costs by hundreds of millions, even
billions of dollars, stretched schedules by years, and increased
performance risks. In some cases, capabilities have not been delivered to
the war fighter after decades of development.

Similar to all weapon system programs, we have found that the problems
being experienced on space programs are largely rooted in a failure to
match the customer's needs with the developer's resources-technical
knowledge, timing, and funding-when starting product development. While
DOD's new policy for space acquisitions may help to illuminate gaps
between needs and resources, it will not help DOD to close this gap. More
specifically, the policy allows programs to continue to develop
technologies after starting product development, which not only means that
costs and schedule will be more difficult to estimate, but that there will
be more risk that DOD will encounter technical problems that could disrupt
design and production and require more time and money to address than
anticipated. More important, over the long run, the extra investment
required to address these problems may likely prevent DOD from pursuing
more advanced technologies and from making effective tradeoff decisions
between space and other weapon system programs.

By contrast, DOD is taking steps to better position its other acquisition
programs for success. Its revised acquisition policy for non-space systems
separates technology development and product development.

DOD's current space network is comprised of constellations of satellites,
ground-based systems, and associated terminals and receivers. Among other
things, these assets are used to perform intelligence, surveillance, and
reconnaissance functions; perform missile warning; provide communication
services to DOD and other government users; provide

  The Importance of DOD's Space Systems is Growing

1 This includes research, development and testing; procurement; and
operations and maintenance accounts.

weather and environmental data; and provide positioning and precise timing
data to U.S. forces as well as national security, civil, and commercial
users.

All of these systems are playing an increasingly important role in
military operations. According to DOD officials, for example, in Operation
Iraqi Freedom, approximately 70 percent of weapons were precision-guided,
most of those using Global Positioning System (GPS) capabilities. Weather
satellites enabled war fighters to not only prepare for, but also take
advantage of blinding sandstorms. Communication and intelligence
satellites were also heavily used to plan and carry out attacks and to
assess post-strike damage. Some of DOD's satellite systems-such as
GPS-have also grown into international use for civil and military
applications and commercial and personal uses. Moreover, the demand for
space-based capabilities is outpacing DOD's current capacity. For example,
even though DOD has augmented its own satellite communications capacity
with commercial satellites, in each major conflict of this past decade,
senior military commanders reported shortfalls in capacity, particularly
for rapid transmission of large data files, such as those created by
imagery sensors.

DOD is looking to space to play an even more pivotal role in future
military operations. As such, it is developing several families of new,
expensive, and technically challenging satellites, which are expected to
require dramatically increased investments over the next decade. For
example, DOD is building new satellites that will use laser optics to
transport information over long distances in much larger quantities than
radio waves. The system, known as the Transformational Satellite, or TSAT,
is to be the cornerstone of DOD's future communications architecture. Many
space, air, land, and sea-based systems will depend on TSAT to receive and
transmit large amounts of data to each other as DOD moves toward a more
"network centric" war-fighting approach. DOD is also building a new
space-based radar (SBR) system, which is to employ synthetic aperture
radar2 and other advanced technologies to enable DOD to have 24-hour
coverage over a large portion of the Earth on a continuous basis and allow
military forces a "deep-look" into denied areas of interest,

2Synthetic Aperture Radar (SAR) "synthesizes" an antenna - a very long
antenna - by taking radar samples looking sideways along a flight path of
an aircraft or satellite, taking advantage of the fact that the ground and
objects on the ground are essentially stationary during the fly-by time.
The synthesized radar signals can be used to generate quality resolution
ground imagery.

on a non-intrusive basis without risk to personnel or resources. SBR
itself is expected to generate large amounts of imagery data, and it will
rely on TSAT to deliver this data to war fighters.

As figure 1 shows, the costs of these and other new efforts will increase
DOD's annual space investment significantly. For example, based on the
2003 President's budget, acquisition costs for new satellite programs and
launch services in the next 4 years are expected to grow by 115 percent-
from $3.5 billion to about $7.5 billion. Costs beyond that period are as
yet unknown. While DOD's budget documents show a decrease in 2009 for
these systems to $6.4 billion-they do not include procurement costs for
some of the largest programs, including TSAT, GPS III, SBR, Space Tracking
and Surveillance System (STSS), and Space-Based Surveillance System
(SBSS), which DOD will begin fielding beginning 2011. Nor do these numbers
reflect the totality of DOD's investment in space. For example, ground
stations and user equipment all require significant investment and that
investment will likely increase as the new programs mature.

Figure 1: DOD's Investment in New Programs through 2009

Table 1 identifies specific programs factored into our analysis of
upcoming investments. It also shows that DOD will be fielding many of the
new programs within just a few years of each other.

 Table 1: Satellites and Launch Services Currently Being Developed and Planned

                                                               Year DOD plans 
                                                                           to 
                                                              start launching 
          Program              Description          Status      satellites or 
                                                                     services 
                         Acquisition of                       
    Evolved Expendable   commercial launch                    
          Launch         services from two        Development 
      Vehicle (EELV)     competitive families of              
                             launch vehicles                  
                         Satellites based almost              
    Wideband Gapfiller        exclusively on      Production  
         Satellite              commercial                    
           (WGS)         parts being developed by             
                         the Air Force to provide             
                          interim communications              
                                 support                      
                            Ballistic missile                 
                          detection system being              
Space Based Infrared         developed         Development 
                           by the Air Force to                
    System (SBIRS)-High     replace its legacy                
                                detection                     
                                  system                      
    Advanced Extremely   Communications satellite             
           High           system being developed  Development 
     Frequency (AEHF)      by the Air Force to                
                         replace legacy protected             
      Communications          communications                  
         Satellite              satellites                    

Space Tracking and Two satellites that were developed under the
SBIRS-Development
Surveillance System (STSS) Low program that are going to be used as
technology
Block 2006 demonstrators in 2006-2007 missile defense tests to

assess whether missiles can be effectively tracked from space

    National Polar-orbiting  Weather satellites being developed   Development 
                             by the National                      
Operational Environmental       Oceanic and Atmospheric        
                                     Administration, the          
Satellite System (NPOESS) National Aeronautics and Space       
                             Administration, and                  
                              DOD to replace those in use by the  
                                           agencies               

    Mobile User Objective    Navy effort to develop a       Concept      
                              family of unprotected,                     
                              narrow-band satellites                     
        System (MUOS)        that can support mobile                     
                                       and                               
                            fixed-site users worldwide                   
                            A new constellation of                       
                            ballistic missile                            
      Space Tracking and    detection and                 Pre Concept    
     Surveillance System    tracking satellites being                    
            (STSS)           developed by the Missile                    
          Block 2010              Defense Agency                         
       Transformational     Communications satellites                    
          Satellite           being developed by the   Concept. Expected 
            (TSAT)             Air Force to employ         to enter      
                             advanced technologies in                    
                             support of DOD's future   development late  
                                  communications                         
                                   architecture              2003.       
                            A constellation of                           
                            satellites to be developed                   
Space Based Surveillance that can                      Pre Concept    
                            detect, track, and                           
        System (SBSS)       characterize man-made                        
                            objects in                                   
                                      space                              
                            Reconnaissance satellites                    2012 
Space Based Radar System   being developed by the        Concept      
            (SBR)              Air Force to provide                      
                             24-hour global coverage                     
      Global Positioning     New version of GPS being                    2012 
            System               developed to add           Concept      
          (GPS) III           advanced jam resistant                     
                             capabilities and provide                    
                             higher quality and more                     
                               secure navigational                       
                                  capabilities.                          

  Grounding Decisions in Knowledge is Vital for DOD's Space Investment

For the past 6 years, we have been examining ways DOD can get better
outcomes from its investment in weapon systems, drawing on lessons learned
from the best, mostly commercial, product development efforts.3 Our work
has shown that leading commercial firms expect that their managers will
deliver high quality products on time and within budgets. Doing otherwise
could result in losing a customer in the short term and losing the company
in the long term. Thus, these firms have adopted practices that put their
individual programs in a good position to succeed in meeting these
expectations on individual products. Collectively, these practices ensure
that a high level of knowledge exists about critical facets of the product
at key junctures and is used to make decisions to deliver capability as
promised. We have assessed DOD's space acquisition policy as well as its
revised acquisition policy for other weapon systems against these
practices.

Our reviews have shown that there are three critical junctures at which
firms must have knowledge to make large investment decisions. First,
before a product development is started, a match must be made between the
customers' needs and the available resources-technical and engineering
knowledge, time, and funding. Second, a product's design must demonstrate
its ability to meet performance requirements and be stable about midway
through development. Third, the developer must show that the product can
be manufactured within cost, schedule, and quality targets and is
demonstrated to be reliable before production begins. If the knowledge
attained at each juncture does not confirm the business case on which the
acquisition was originally justified, the program does not go forward.
These precepts hold for technically complex, high volume programs as well
as low volume programs such as satellites.

In applying the knowledge-based approach, the most-leveraged investment
point is the first: matching the customer's needs with the developer's
resources. The timing of this match sets the stage for the eventual
outcome-desirable or problematic. The match is ultimately achieved in
every development program, but in successful development programs, it

3 For example, see U.S. General Accounting Office, Best Practices: Better
Matching of Needs and Resources Will Lead to Better Weapon System
Outcomes, GAO-01-288 (Washington, D.C.: March 8, 2001). Best Practices:
Better Management of Technology Development Can Improve Weapon System
Outcomes, GAO/NSIAD-99-162 (Washington, D.C.: July 30, 1999). Best
Practices: Capturing Design and Manufacturing Knowledge Early Improves
Acquisition Outcomes, GAO-02-701 (Washington, D.C.: July 15, 2002).

occurs before product development begins. When the needs and resources
match is not made before product development, realistic cost and schedule
projections become extremely difficult to make. Moreover, technical
problems can disrupt design and production efforts. Thus, leading firms
make an important distinction between technology development and product
development. Technologies that are not ready continue to be developed in
the technology base-they are not included in a product development.

With technologically achievable requirements and commitment of sufficient
resources to complete the development, programs are better able to deliver
products at cost and on schedule. When knowledge lags, risks are
introduced into the acquisition process that can result in cost overruns,
schedule delays, and inconsistent product performance. As we recently
testified,4 such problems, in turn, can reduce the buying power of the
defense dollar, delay capabilities for the war fighter, and force
unplanned-and possibly unnecessary-trade-offs in desired acquisition
quantities and an adverse ripple effort among other weapon programs or
defense needs. Moreover, as DOD moves more toward a system-ofsystems
approach-where systems are being designed to be highly interdependent and
interoperable-it is exceedingly important that each individual program
stay on track.

began. When technology did not perform as planned, adding resources in
terms of time and money became the primary option for solving problems,
since customer expectations about the products' performance already became
hardened.

Decisions on Space Our past work5 has shown that space programs have not
typically achieved Programs Have Not Been a match between needs and
resources before starting product Sufficiently Grounded in development.
Instead, product development was often started based on a

rigid set of requirements and a hope that technology would develop on
aKnowledge schedule. At times, even more requirements were added after the
program

4 U.S. General Accounting Office. Best Practices: Better Acquisition
Outcomes Are Possible If DOD Can Apply Lessons from F/A-22 Program,
GAO-03-645T (Washington, D.C.: April 11, 2003).

5 U.S. General Accounting Office. Military Space Operations: Common
Problems and Their Effects on Satellite and Related Acquisitions,
GAO-03-825R (Washington, D.C.: June 2, 2003).

For example, after starting its Advanced Extremely High Frequency (AEHF)
communications satellite program, DOD substantially and frequently changed
requirements. In addition, after the launch failure of one of DOD's legacy
communications satellites, DOD decided to accelerate its plans to build
AEHF satellites. The contractors proposed, and DOD accepted, a high risk
schedule that turned out to be overly optimistic and highly compressed,
leaving little room for error and depending on a precise chain of events
taking place at certain times. Moreover, at the time DOD decided to
accelerate the program, it did not have funding needed to support the
activities and manpower needed to design and build the satellites quicker.
The effects of DOD's inability to match needs to resources were
significant. Total program cost estimates produced by the Air Force
reflected an increase from $4.4 billion in January 1999 to $5.6 billion in
June 2001-a difference of 26 percent. Although considered necessary, many
changes to requirements were substantial, leading to cost increases of
hundreds of millions of dollars because they required major design
modifications. Also, schedule delays occurred when some events did not
occur on time, and additional delays occurred when the program faced
funding gaps. Scheduling delays eventually culminated into a 2-year delay
in the launch of the first satellite. We also reported that there were
still technical and production risks that need to be overcome in the AEHF
program, such as a less-than-mature satellite antenna system and
complications associated with the production of the system's information
security system.

Another example can be found with DOD's Space-Based Infrared System
(SBIRS)-High program, which is focused on building high-orbiting
satellites that can detect ballistic missile launches. Over time, costs
have more than doubled for this program. Originally, total development
costs for SBIRS-High were estimated at $1.8 billion. In the fall of 2001,
DOD identified potential cost growth of $2 billion or more, triggering a
mandatory review and recertification under 10 U.S.C. section 2433.6
Currently, the Air Force estimates research and development costs for
SBIRS-High to be $4.4 billion. We reported that when DOD's SBIRS-High

6 This unit cost reporting mechanism, which also applies to procurement
unit cost for procurement programs, originated with the Nunn-McCurdy
Amendment to the Department of Defense Authorization Act, 1982. The
amendment, as revised, was made permanent law in the following year's
authorization act. Known as Nunn-McCurdy "breaches," program unit cost
increases of 15 percent or more trigger a requirement for detailed
reporting to Congress about the program. Increases of 25 percent or more
also trigger the requirement for Secretary of Defense certification.

satellite program began in 1994, none of its critical technologies were
mature. Moreover, according to a DOD-chartered independent review team,
the complexity, schedule, and resources needed to develop SBIRS-High, in
hindsight, were misunderstood when the program began. This led to an
immature understanding of how requirements translated into detailed
engineering solutions. We recently reported7 to this subcommittee that
while the SBIRS restructuring implemented a number of needed management
changes, the program continues to experience problems and risks related to
changing requirements, design instability, and software development
concerns. We concluded that if the Air Force continues to add new
requirements and program content while prolonging efforts to resolve
requirements that cannot be met, the program will remain at risk of not
achieving, within schedule, its intended purposes-to provide an early
warning and tracking system superior to that of its current ballistic
missile detection system.

DOD has also initiated several programs and spent several billion dollars
over the past 2 decades to develop low-orbiting satellites that can track
ballistic missiles throughout their flight. However, it has not launched a
single satellite to perform this capability. We have reported8 that a
primary problem affecting these particular programs was that DOD and the
Air Force did not relax rigid requirements to more closely match technical
capabilities that were achievable. Program baselines were based on
artificial time and/or money constraints. Over time, it became apparent
that the lack of knowledge of program challenges had led to overly
optimistic schedules and budgets that were funded at less than what was
needed. Attempts to stay on schedule by approving critical milestones
without meeting program criteria resulted in higher costs and more slips
in technology development efforts. For example, our 1997 and 2001 reviews
of DOD's $1.7 billion SBIRS-Low program (which was originally a part of
the SBIRS-High program) showed that the program would enter into the
product development phase with critical technologies that were immature
and with optimistic deployment schedules. Some of these technologies were
so critical that SBIRS-Low would not be able to perform its mission if

7 U.S. General Accounting Office. Defense Acquisitions: Despite
Restructuring, SBIRS High Program Remains at Risk of Cost and Schedule
Overruns, GAO-04-48 (Washington, D.C.: October 31, 2003).

8 U.S. General Accounting Office, Missile Defense: Alternate Approaches to
Space Tracking and Surveillance System Need to Be Considered, GAO-03-597
(Washington, D.C.: May 23, 2003) and Defense Acquisitions: Space-Based
Infrared System-Low At Risk of Missing Initial Deployment Date, GAO-01-6
(Washington, D.C.: February 28, 2001).

  New Space Policy Allows Programs to Go Forward with Key Unknowns

they were not available when needed. DOD eventually restructured the
SBIRS-Low program because of the cost and scheduling problems, and it put
the equipment it had partially built into storage. In view of the
program's mismatch between expectations and what it could achieve, the
Congress directed DOD to restructure the program (now under the
responsibility of the Missile Defense Agency) as a research and
development effort.

DOD's new space acquisition policy may help increase insight into gaps
between needs and resources, but it does not require programs to close
this gap before starting product development. In other words, the new
policy does not alter DOD's practice of committing major investments
before knowing what resources will be required to deliver promised
capability.

There are tools being adopted under the new policy that can enable DOD to
better predict risks and estimate costs. Similar tools are also being
adopted by other weapon system programs. For example:

o  	DOD is requiring that all space programs conduct technology maturity
assessments before key oversight decisions to assess the maturity level of
technology.

o  	DOD is requiring space programs to more rigorously assess
alternatives, consider how their systems will operate in the context of
larger families of systems, and think through operational, technical, and
system requirements before programs are started.

o  	The new policy seeks to improve the accuracy of cost estimates by
establishing an independent cost estimating process in partnership with
DOD's Cost Analysis Improvement Group (CAIG) and by adopting methodologies
and tools used by the National Reconnaissance Office. To ensure timely
cost analyses, the CAIG will augment its own staff with cost estimating
personnel drawn from across the entire national security space cost
estimating community.

Moreover, to facilitate faster decision-making on programs, the policy
also calls for independent program assessments to be performed on space
programs nearing key decision points. The teams performing these
assessments are to be drawn from experts who are not directly affiliated
with the program, and they are to spend about 8 weeks studying the
program, particularly the acquisition strategy, contracting information,
cost analyses, system engineering, and requirements. After this study, the
team is to conclude its work with recommendations to the Under

Secretary of the Air Force, as DOD's milestone decision authority for all
DOD major defense acquisition programs for space, on whether or not to
allow the program to proceed, typically using the traditional "red,"
"yellow", and "green" assessment colors to indicate whether the program
has satisfied key criteria in areas such as requirements setting, cost
estimates, and risk reduction.

The benefits that can be derived from tools called for by the space
acquisition policy, however, will be limited since the policy allows
programs to continue to develop technologies while they are designing the
system and undertaking other product development activities. As
illustrated below, this is a very different and important departure from
DOD's acquisition policy for other weapon systems.

Figure 2: Key Decision Points for DOD's Acquisition Policies for Weapon
Systems and Space Systems

Note: According to DOD officials, while technology development is expected
to ramp down during phase B, in some instances technology development
could even continue after key decision point C or critical design review.
Thus, technology development is depicted in a lighter shade after decision
point C.

As we reported9 last week, the revised acquisition policy for non-space

systems establishes mature technologies-that is, technologies

demonstrated in a relevant environment-as critical before entering

product development. By encouraging programs to do so, the policy puts

programs in a better position to deliver capability to the war fighter in
a

timely fashion and within funding estimates because program managers

can focus on the design, system integration, and manufacturing tasks

needed to produce a product. By contrast, the space acquisition policy

9 U.S. General Accounting Office. Defense Acquisitions: DOD's Revised
Policy Emphasizes Best Practices But More Controls Are Needed, GAO-04-53
(Washington, D.C.: November 10, 2003).

increases the risk that significant problems will be discovered late in
development because programs are expected to go into development with many
unknowns about technology. In fact, DOD officials stated that technologies
may well enter product development at a stage where basic components have
only been tested in a laboratory, or an even lower level of maturity. This
means that programs will still be grappling with the shapes and sizes of
individual components while they are also trying to design the overall
system and conduct other program activities. In essence, DOD will be
concurrently building knowledge about technology and design-an approach
with a problematic history that results in a cycle of changes, defects,
and delays. Further, the consequences of problems experienced during
development will be much greater for space programs since, under the new
space acquisition policy, critical design review occurs at the same time
as the commitment to build and deliver the first product to a customer. It
is thus possible that the design review will signify a greater commitment
on a satellite program at the same time less knowledge will be available
to make that commitment.

An upcoming decision by DOD on the new TSAT program represents the
potential risks posed by the new space acquisition policy. The $12 billion
program is scheduled to start product development in December 2003,
meaning that the Air Force will formally commit to this investment and, as
required by law,10 set goals on cost, schedule and performance. However,
at present, TSAT's critical technologies are underdeveloped, leaving the
Air Force without the knowledge needed to build an effective business case
for going forward with this massive investment. In fact, most of the
technologies for TSAT are at a stage where most of the work performed so
far has been based on analytical studies and a few laboratory tests or, at
best, some key components have been wired and integrated and have been
demonstrated to work together in a laboratory environment. The program
does not know yet whether TSAT's key technologies can effectively work,
let alone work together in the harsh space environment for which they are
intended. Yet the space acquisition policy allows the Air Force to move
the program forward and to set cost, schedule, and performance goals in
the face of these unknowns. Moreover, the Air Force has scaled back its
AEHF program, whose technologies are more mature, to help pay for TSAT's
development. Making tradeoff decisions between alternative investments is
difficult at best. Yet doing so without a solid knowledge basis only

10 10 U.S.C. Sections 2220 and 2435.

  Changes Needed to Optimize DOD's Investment in Space

compounds the risk of failures. Our work on program after program has
demonstrated that DOD's optimism has rarely been justified.

The growing importance of space systems to military and civil operations
requires DOD to achieve timely delivery of high quality capability. New
space systems not only need to support important missions such as missile
defense and reconnaissance, they need to help DOD move toward a more
"network centric" warfighting approach. At the same time, given its desire
to transform how military operations are conducted, DOD must find ways to
optimize its overall investment on weapon systems since the transformation
will require DOD to develop new cutting edge systems while concurrently
maintaining and operating legacy systems-a costly proposition. Recognizing
the need to optimize its investment, DOD has expressed a desire to move
toward an "effects-based" investment approach, where decisions to acquire
new systems are made based on needs and joint interests versus annual
budgets and parochial interests.

Changing the new space acquisition policy to clearly separate technology
development from product development is an essential first step toward
optimizing DOD's space investment and assuring more timely delivery of
capability since it enables a program to align customer expectations with
resources, and therefore minimize problems that could hurt a program in
its design and production phase. Thus, we recommended that DOD make this
change in our recent report on the new space acquisition policy.11 DOD did
not agree with our recommendation because it believed that it needs to
keep up with the fast-paced development of advanced technologies for space
systems, and that its policy provides the best avenue for doing so. In
fact, it is DOD's long-standing and continuous inability to bring the
benefits of technology to the war fighter in a timely manner that
underlies our concerns about the policy for space acquisitions. In our
reviews of numerous DOD programs, including many satellite developments,
it has been clear that committing to major investments in design,
engineering, and manufacturing capacity without knowing a technology is
mature and what resources are needed to ensure that the technology can be
incorporated into a weapon system has consistently resulted in more money,
time, and talent spent than either

11 U.S. General Accounting Office. Defense Acquisitions: Improvements
Needed in Space Systems Acquisition Management Policy, GAO-03-1073
(Washington, D.C.: September 15, 2003).

was promised, planned for, or necessary. The impact of such high risk
decisions has also had a damaging effect on military capability as other
programs are taxed to meet unplanned cost increases and product units are
often cut because unit costs increase and funds run out. Moreover, as it
moves toward a more interdependent environment, DOD can simply no longer
afford to misestimate the cost and time to field capabilities-such as
TSAT-since they are needed to support other applications.

Further, policy changes are just a first step toward optimizing DOD's
investment in space and other weapon systems. There are also some changes
that need to be made at a corporate level to foster a knowledgebased
acquisition approach. As we have reported in the past, DOD needs to remove
incentives that drive premature product development decisions. This means
embracing a willingness to invest in technology development outside a
program as well as alleviating pressures to get new acquisition programs
approved and funded on the basis of requirements that must beat out all
other alternatives. Other changes-some of which have been recognized by
recent DOD studies on space acquisitions-include:

o  	Keeping key people in place long enough so that they can affect
decisions and be held accountable. Part of the solution would be to
shorten product development times.

o  	Providing program offices with the capability needed to craft
acquisition approaches that implement policy and to effectively oversee
the execution of programs by contractors.

o  	Realigning responsibilities and funding between science and technology
organizations and acquisition organizations to enable the separation of
technology development from product development.

o  	Bringing discipline to the requirements-setting process by demanding a
match between requirements and resources.

o  	Designing and implementing test programs that deliver knowledge when
needed, including reliability testing early in design.

Lastly, DOD leadership can use this knowledge-based approach to
effectively rebalance its investment portfolio. For programs whose
original justification was based on assumptions of cost, schedule and
performance that have not been realized, having a consistent set of
standards allows DOD and the Congress to reevaluate alternatives and make
investment

decisions across programs that increase the likelihood that the war
fighter will have the best possible mix of capabilities in a timely
fashion.

In conclusion, using an approach for managing weapon system investments
based on knowledge instead of promises can help DOD fully leverage the
value of its investment dollars. At a time when the nation is facing a
large and growing fiscal gap, DOD's $150 billion annual investment in the
acquisition of new weapons is the single largest area of discretionary
spending. While there are differing views on what weapons DOD should or
should not invest in and how much should be invested, there cannot be any
disagreement that within this fiscal environment, once a consensus has
been reached on the level of investment and the specific weapons to be
acquired, we should get those weapons for what was estimated in the
budget. While DOD's revised acquisition policy for nonspace systems puts
DOD on a better footing toward this end, DOD's acquisition policy for
space systems does not because it allows programs to proceed into product
development before knowing what their true costs will be. Therefore, we
continue to recommend that DOD modify its policy to separate technology
development from product development so that needs can be matched with
available technology, time, and money at the start of a new development
program.

Mr. Chairman and Members of the Subcommittee, this concludes my statement.
I would be happy to respond to any questions that you or other members of
the Subcommittee may have.

Scope and 	In preparing for this testimony, we relied on previously issued
GAO reports on DOD's space acquisition policy, common problems affecting

Methodology 	space acquisitions, SBIRS-High and other individual programs,
as well as our reports on best practices for weapon systems development.
We also analyzed DOD's Future Years Defense Program to assess investment
trends. In addition, we reviewed DOD reports on satellite acquisition
problems. We conducted our review between October 29 and November 14, 2003
in accordance with generally accepted government auditing standards.

Contacts and Acknowledgements

For future information, please contact Katherine Schinasi or Bob Levin at
(202) 512-4841 or by email at [email protected] or [email protected]
Individuals making key contributions to this testimony include Cristina
Chaplain, Jean Harker, and Art Gallegos.

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