Defense Acquisitions: Despite Restructuring, SBIRS High Program  
Remains at Risk of Cost and Schedule Overruns (31-OCT-03,	 
GAO-04-48).							 
                                                                 
In 1996, the Department of Defense (DOD) initiated the		 
Space-Based Infrared System (SBIRS) to provide greater long-range
ballistic missile detection capabilities than its current system.
The initial SBIRS architecture included "High" and "Low" orbiting
space-based components and ground processing segments. SBIRS has 
been technically challenging, and in October 2001, SBIRS Low was 
transferred from the Air Force to the Missile Defense Agency. The
Air Force expected to field SBIRS High by 2004, but numerous	 
problems have led to schedule overruns. In the fall of 2001, DOD 
identified potential cost growth of $2 billion. To determine the 
causes of the significant cost growth, DOD convened an		 
Independent Review Team. In August 2002, the Air Force		 
restructured the program to address the findings of the team's	 
assessment. Our report (1) describes the key elements of the	 
restructured program and (2) identifies problems and potential	 
risks still facing the program. 				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-48						        
    ACCNO:   A08803						        
  TITLE:     Defense Acquisitions: Despite Restructuring, SBIRS High  
Program Remains at Risk of Cost and Schedule Overruns		 
     DATE:   10/31/2003 
  SUBJECT:   Air Force procurement				 
	     Contract costs					 
	     Cost overruns					 
	     Electronic surveillance				 
	     Geosynchronous satellites				 
	     Military satellites				 
	     Schedule slippages 				 
	     Weapons research and development			 
	     Cost analysis					 
	     Contract modifications				 
	     Contract oversight 				 
	     DOD Space-Based Infrared System High		 
	     Component						 
                                                                 

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GAO-04-48

United States General Accounting Office

GAO

Report to the Subcommittee on

           Strategic Forces, Committee on Armed Services, U.S. Senate

October 2003

DEFENSE ACQUISITIONS

 Despite Restructuring, SBIRS High Program Remains at Risk of Cost and Schedule
                                    Overruns

GAO-04-48

Highlights of GAO-04-48, a report to
the Subcommittee on Strategic Forces,
Committee on Armed Services,
U.S. Senate

In 1996, the Department of Defense (DOD) initiated the Space-Based
Infrared System (SBIRS) to provide greater long-range ballistic missile
detection capabilities than its current system. The initial SBIRS
architecture included "High" and "Low" orbiting space-based components and
ground processing segments.

SBIRS has been technically challenging, and in October 2001, SBIRS Low was
transferred from the Air Force to the Missile Defense Agency. The Air
Force expected to field SBIRS High by 2004, but numerous problems have led
to schedule overruns. In the fall of 2001, DOD identified potential cost
growth of $2 billion.

To determine the causes of the significant cost growth, DOD convened an
Independent Review Team. In August 2002, the Air Force restructured the
program to address the findings of the team's assessment. Our report (1)
describes the key elements of the restructured program and (2) identifies
problems and potential risks still facing the program.

GAO is recommending that DOD convene a task force to assess the
restructured program with an emphasis on providing concrete guidance for
the program to address its underlying problems. DOD agrees that another
review of the program is warranted.

www.gao.gov/cgi-bin/getrpt?GAO-04-48.

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

October 2003

DEFENSE ACQUISITIONS

Despite Restructuring, SBIRS High Program Remains at Risk of Cost and Schedule
Overruns

In an effort to get the SBIRS High program on track, the most recent
program restructuring provided contractor incentives and oversight
measures, as recommended by the Independent Review Team. Under the current
contract, the prime contractor's award fees are now tied to the
incremental delivery of specific system capabilities. DOD also modified
the contract to prescribe tighter management controls, improve reporting
of contractor information, and add formal review processes by DOD
management. This increased oversight is intended, in part, to minimize
further changes in requirements and improve management of software
development, both of which have been particularly problematic. The
restructuring also added funding and other resources to the program and
extended the scheduled delivery of certain components. At the time of the
restructuring, the Air Force believed the modified contract established an
executable schedule, a realistic set of requirements, and adequate
funding.

However, the restructuring did not fully address some long-standing
problems identified by the Independent Review Team. As a result, the
program continues to be at substantial risk of cost and schedule
increases. Key among the problems is the program's history of moving
forward without sufficient knowledge to ensure that the product design is
stable and meets performance requirements and that adequate resources are
available. For example, a year before the restructuring, the program
passed its critical design review with only 50 percent of its design
drawings completed, compared to 90 percent as recommended by best
practices. Consequently, several design modifications were necessary,
including 39 to the first of two infrared sensors to reduce excessive
noise created by electromagnetic interference-a threat to the host
satellite's functionality-delaying delivery of the sensor by 10 months or
more. Software development underlies most of the top 10 program risks,
according to the contractor and the SBIRS High Program Office. For
example, testing of the first infrared sensor revealed several
deficiencies in the flight software involving the sensor's ability to
maintain earth coverage and track missiles while orbiting the earth.
Program officials stated that they are coordinating the delivery of the
first sensor with the delivery of the host satellite to mitigate any
schedule impacts, but they agreed that these delays put the remaining
SBIRS High schedule at risk.

Illustration of geosynchronous earth-orbiting satellite

Contents

  Letter

Results in Brief
Background
Restructured Program Focused on Contract Management and

Program Oversight Restructuring Did Not Address Long-Standing Problems
That Put

the Program at Risk Conclusions Recommendations for Executive Action
Agency Comments Scope and Methodology

                                       1

                                      2 4

                                       9

13 22 22 23 24

Appendix I Comments from the Department of Defense

Appendix II SBIRS High Performance in Mission Areas

Appendix III Key Events in the SBIRS High Program

  Appendix IV GAO Contacts and Staff Acknowledgments

Tables                                                                  
           Table 1: Nunn-McCurdy Criteria and DOD's Supporting Information 
                       for SBIRS High Certification, May 2002               8 
           Table 2: Effectivities and Their Utilities in Relation to SBIRS 
                             High Launch/Delivery Dates                    10 
Figure                                                                  
                  Figure 1: Space-Based Infrared System Description         5 

Abbreviations

CMMI Capability Maturity Model Integration
DCMA Defense Contract Management Agency
DOD Department of Defense
DSP Defense Support Program
EMI electromagnetic interference
EVMS Earned Value Management System
GEO geosynchronous earth orbit
HEO highly elliptical orbit
IRT Independent Review Team
ITW/AA integrated tactical warning/attack assessment
LEO low earth orbit
M3P multimission mobile processor
MCS mission control station
ORD operational requirements document
OSD Office of the Secretary of Defense
SBIRS Space-Based Infrared System
TES theater event system
TSPR Total Systems Performance Responsibility
USD (AT&L) Under Secretary of Defense for Acquisition, Technology,

and Logistics

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separately.

United States General Accounting Office Washington, DC 20548

October 31, 2003

The Honorable Wayne Allard
Chairman
The Honorable Bill Nelson
Ranking Minority Member
Subcommittee on Strategic Forces
Committee on Armed Services
United States Senate

Since the early 1980s, the Department of Defense (DOD) has initiated
several long-range ballistic missile detection programs aimed at providing
greater capabilities than the Defense Support Program (DSP), the
currently operating strategic-surveillance and early warning satellite
system.1 In 1996, DOD initiated the most recent of these efforts: the
Space-
Based Infrared System (SBIRS). SBIRS has proven to be a technically
challenging program, intended to combine all military infrared
surveillance
requirements into a single, integrated system, or "system of systems," to
provide accurate and timely warning and tracking of a ballistic missile
attack. The initial SBIRS architecture included "High" and "Low" orbiting
space-based components2 and ground processing segments. In October
2001, the Low component was transferred from the Air Force to the
Missile Defense Agency and in 2002 was renamed the Space Tracking and
Surveillance System.3 The Air Force continues to develop SBIRS High and
its related ground segment-now one of DOD's highest priority space
programs-as an upgrade and eventual replacement for DSP.

Originally, SBIRS High was expected to be fielded between 1999 and 2004,
under a research and development contract with an estimated value of
$1.8 billion. However, since the program began, it has encountered a

1 The detection programs DOD initiated were the Advanced Warning System
(early 1980s); the Boost Surveillance and Tracking System (late 1980s);
the Follow-On Early Warning System (early 1990s); and the Alert, Locate,
and Report Missiles System (mid-1990s).

2 The High component has elements in highly elliptical orbit and
geosynchronous earth orbit; the Low component has elements in low earth
orbit.

3 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).

number of problems, including immature technologies and changing
requirements, that have resulted in cost and schedule overruns. In the
fall of 2001, DOD identified cost growth of at least $2 billion, which,
because it exceeded a statutory threshold, triggered a Nunn-McCurdy review
and certification of the program as required by law.4

To determine the underlying causes of the significant cost growth, DOD
convened an Independent Review Team (IRT), and in August 2002, the Air
Force restructured the program to address the findings of the IRT
assessment. Currently, the amount under contract for the SBIRS High
program is $4.4 billion. Concerned that cost, schedule, and performance
problems may persist, you asked us to (1) describe the key elements of the
restructured program and (2) identify problems and potential risks still
facing the program.

                                Results in Brief

In an effort to get the SBIRS High program on track, the most recent
program restructuring provided additional resources, contractor
incentives, and oversight measures. DOD modified its contract with
Lockheed Martin Space Systems Company,5 the prime contractor, to prescribe
tighter management controls, improve reporting of contractor information,
and add formal review processes by DOD management. This increased
oversight is intended, in part, to minimize further changes in
requirements and improve management of software development, both of which
have been particularly problematic in the development of SBIRS High.
Additionally, Lockheed Martin's award fees have been tied to the
incremental delivery of specific system capabilities. At the time of the
restructuring, the Air Force believed the contract, as modified,
established an executable schedule, a realistic set of requirements, and
adequate funding to address the underlying factors that led to the cost
growth and Nunn-McCurdy review.

While the restructuring implemented a number of needed management changes,
it did not fully address some long-standing problems in the development of
SBIRS High identified by the IRT. As a result, the program continues to be
at substantial risk of cost and schedule increases. Key among the problems
is the program's history of moving forward with system development before
requirements are set and sufficient knowledge

4 10 U.S.C. S: 2433.
5 An operating unit of the Lockheed Martin Corporation.

is gained. For example, a year before the restructuring, the program
passed its critical design review with only 50 percent of its design
drawings completed, compared to 90 percent as recommended by the best
practices that we have found characterize successful programs.
Consequently, several design modifications have been necessary, including
39 modifications to the first of two infrared sensors to reduce excessive
noise created by electromagnetic interference-a threat to the host
satellite's functionality-delaying delivery of the sensor by 10 months.
Software development also remains problematic. For example, Defense
Contract Management Agency (DCMA) officials report that testing of the
first infrared sensor in May 2003 revealed several deficiencies in the
flight software involving the sensor's ability to maintain earth coverage
and track missiles while orbiting the earth. According to the contractor
and SBIRS High Program Office, software development underlies most of the
top 10 program risks. Moreover, delays in the development of the first
sensor have had a cascading effect. For example, the continuing design and
software development work on the first sensor is now competing for staff
and other resources that were scheduled to be used for follow-on
developmental tasks. Program officials stated that they are coordinating
the delivery of the first sensor with the delivery of the host satellite
to mitigate any schedule impacts, but they agreed that these delays put
the remaining SBIRS High schedule at risk.

We are recommending that DOD reassess the SBIRS High program with the aim
of making the best decisions for proceeding with the procurement of a
system that meets this nation's need for strategic surveillance and early
warning satellite data. DOD agrees that a thorough review of the SBIRS
High program is warranted but would like the flexibility to consider other
approaches before making a final decision on assigning responsibilities
for conducting a review. (DOD's comments are reprinted in app. I.) We
agreed and modified our recommendations accordingly.

Background

    SBIRS High Program Description

SBIRS High is designed to contribute to four defense mission areas:
missile warning, missile defense, technical intelligence, and battle-space
characterization. (See app. II for a description of the program's
contribution to each.) SBIRS High is intended to replace the DSP satellite
constellation, which has provided early missile warning information for
more than 30 years, and to provide better and more timely data to the
Unified Combatant Commanders, U.S. deployed forces, U.S. military
strategists, and U.S. allies.

As currently planned, SBIRS High will be comprised of four satellites in
geosynchronous earth orbit (GEO), two infrared sensors that are to be
placed on separate host satellites in highly elliptical orbit (HEO)6-known
as "HEO sensors"-and a ground segment for mission processing and control.
These elements are illustrated in figure 1. The Air Force plans to acquire
a fifth GEO satellite to serve as a spare that would be launched when
needed.

6 A GEO satellite's revolution is synchronized with the earth's rotation
giving it a seemingly stationary position above a fixed point on the
equator. At an altitude of about 22,300 miles above the equator, three or
four strategically spaced satellites can view the entire globe with the
exception of the polar regions. HEO satellites, which linger over a
designated area of the earth, can provide polar coverage.

Figure 1: Space-Based Infrared System Description

a

Once a product decision is made, the operational constellation will
consist of 20 plus satellites for continuous coverage.

SBIRS High is intended to provide taskable sensors with improved
sensitivity and revisit rate allowing them to see dimmer objects and
provide more accurate estimates of missile launch and impact point than
the sensors in the existing satellite constellation. SBIRS High sensors
are also expected to view particular areas of interest and to revisit
multiple areas of interest as directed by ground controllers. In addition
to covering the shortwave infrared spectrum like their predecessor, SBIRS
High

sensors are also expected to cover midwave infrared bands and
see-to-the-ground bands7 allowing them to perform a broad set of missions.

SBIRS High is being developed in two increments. Increment 1, which
achieved initial operational capability in December 2001, consolidated DSP
and Attack and Launch Early Reporting to Theater ground stations into a
single mission control station, which is currently operating using DSP
data. Through spiral development,8 Increment 2 (now in the systems design
and development phase) will develop the HEO sensors and first two GEO
satellites and will upgrade Increment 1 hardware and software to operate
and process data from the HEO and GEO elements. The remaining three GEO
satellites are to be procured at some future date.

                                 Past Problems

Since the SBIRS program's inception in 1996, it has been burdened by
immature technologies, unclear requirements, unstable funding,
underestimated software complexity, and other problems that have resulted
in mounting cost overruns and delays. In addition, the program has been
restructured several times. Most notably, in 1998, the SBIRS High Program
Office had to restructure the program around an Air Force directive to
delay the GEO satellite launches by 2 years in order to fund other DOD
priorities. This contributed to program instability since the contractor
had to stop and restart activities and devise interim solutions that would
not otherwise have been required. In early 2001, there were growing cost
and schedule variances and a related decrease in contractor management
reserve funding. Primary drivers of these problems were technical issues
with the HEO sensors and associated test failures.

In November 2001, the Assistant Secretary of the Air Force (Acquisition)
and the Executive Vice President of Lockheed Martin Space Systems Company
formed the IRT-comprised of various specialists in acquisition,

7 Midwave infrared bands provide the below-the-horizon launch phase and
missile tracking. See-to-the-ground bands provide below-the-horizon
tracking of slow or static dim targets below 6.2 miles.

8 Spiral development is an iterative process for developing defined
capabilities within each increment (that is, a desired capability is
identified, but the end-state requirements are not known at program
initiation). This process provides the opportunity for interaction among
the user, tester, and developer. The requirements are refined through
experimentation and risk management; there is continuous feedback, and the
user is provided the best possible capability within the increment. The
requirements for future increments depend on feedback from users and
technology maturation. Each increment may include a number of spirals.

operations, engineering, and business management from industry and the
federal government-to conduct a comprehensive, independent review of the
SBIRS High program. In February 2002, the IRT issued a candid and critical
report identifying three primary causes that led to the significant cost
growth:

o  	The program was too immature to enter the system design and
development phase. Program activation was based on faulty and overly
optimistic assumptions about software reuse and productivity levels, the
benefits of commercial practices, management stability, and the level of
understanding of requirements.

o  	The complexity of developing engineering solutions to meet system
requirements was not well understood by program and contracting officials.
The systems integration effort was significantly underestimated in terms
of complexity and the associated impacts. In addition, the requirements
refinement process was ad hoc, creating uncertainty on the status of
program priorities and affecting cost and schedule.

o  	Breakdown in execution and management. Overly optimistic assumptions
and unclear requirements eventually overwhelmed government and contractor
management. The 2-year delay of the GEO satellite launches, which occurred
in 1998, contributed to management instability and was a factor in the
Program Office and the contractor having to spend 25 of the first 60
months of the contract on replanning activities.

The IRT also made a number of recommendations to address these problems.
These included establishing accurate baselines for cost, schedule, and
technology; revising the contract fee structure; and redefining Program
Office and contractor management roles and responsibilities.

    Nunn-McCurdy Breach and Certification

A preliminary effort to capture a realistic estimate of total program
costs conducted in the fall of 2001 suggested potential cost growth in
excess of $2 billion, or a 70-percent program acquisition unit cost
increase. A major defense acquisition program that incurs a unit cost
growth of at least 25 percent in the acquisition program baseline triggers
a statutory requirement that the Secretary of Defense9 certify to the
Congress that four criteria have been met in order to continue the
program-a process

9 The Secretary of Defense delegated this responsibility to the Under
Secretary of Defense for Acquisition, Technology, and Logistics.

known as Nunn-McCurdy.10 See table 1 for a list of the criteria and the
information DOD used to support certification for the SBIRS High program.

Table 1: Nunn-McCurdy Criteria and DOD's Supporting Information for SBIRS
High Certification, May 2002

Criteria DOD supporting information

System is essential to U.S. Strategic Command is required to maintain
space and

                               national security.

missile warning/defense resources and to provide the President and
military leaders with missile warning and defense information; the Joint
Requirements Oversight Council revalidated the SBIRS Operational
Requirements Document in January 2002; SBIRS High is needed to replace
DSP.

There are no alternatives Many alternatives were reviewed but none could
provide that will provide equal or equal or greater military capability at
the same cost as greater military capability SBIRS High. Additionally, all
alternatives had greater at less cost. technical and schedule risk.

New cost estimates are reasonable.

Cost estimates from various entities, including Lockheed Martin, the SBIRS
High Program Office, and the Air Force Cost Analysis Agency, were close
and the engineering manufacturing development estimate was mature, had
high fidelity, and appeared reasonable.

 Program management is The contractor has established an effective organization
                                      and

adequate to manage and control costs.

                          instituted positive changes.

Source: U.S. Air Force.

Based on the information submitted to the Under Secretary of Defense for
Acquisition, Technology, and Logistics (USD (AT&L)), the SBIRS High
program was officially certified on May 2, 2002, with the contingencies
that the Air Force fully fund the program to the cost estimate developed
by the Office of the Secretary of Defense (OSD) and to reestablish a
baseline to OSD's schedule for the GEO satellites. USD (AT&L) also
directed that a revised acquisition strategy and program baseline be
approved by the end of August 2002. These revisions and the new contract
with Lockheed

10 10 U.S.C. S: 2433. 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.

Martin Space Systems Company represent the most recent program
restructuring. (App. III provides a chronology of key events in the
development of SBIRS High.)

  Restructured Program Focused on Contract Management and Program Oversight

In August 2002, the SBIRS High program was restructured to address a
number of the problems that led to the Nunn-McCurdy breach. In
implementing changes, the Air Force relied heavily on the findings and
recommendations of the IRT. The restructuring increased program oversight
and provided additional resources as well as incentives intended to
improve contractor performance.

As part of the program's recertification after the Nunn-McCurdy breach,
USD (AT&L) directed the Air Force to reestablish a baseline for the
program's cost and schedule estimates. The value of the restructured
development contract increased by $2 billion to $4.4 billion. The first
GEO satellite (GEO 1) launch was replanned from September 2004 to October
2006 and the GEO 2 launch from September 2005 to October 2007. The
procurement start of GEO satellites 3 through 5 was replanned from fiscal
year 2004 to fiscal year 2006. The SBIRS High budget for fiscal years 2006
and 2007 has identified funding for GEO satellites 3 through 5 totaling
$1.3 billion-these satellites are not yet on contract. In addition to
increased funding, the restructuring added 656 staff to the program-
including increased staff for software development-bringing the total
number of personnel to 2,305 by June 2003.

Under the restructuring, DOD's contract with Lockheed Martin was modified
from a cost-plus-award fee structure to a cost-plus-award-and-incentive
fee structure. The objective of this change was to encourage timely
delivery of accepted capabilities by providing the incentive of the full
potential profit or fee for the contractor. At the time of the
restructuring, the Air Force believed the modified contract established an
executable schedule, a realistic set of requirements, and adequate
funding, and addressed the underlying factors that led to the Nunn-McCurdy
breach.

The restructured contract was planned around 10 "effectivities"-
milestones at which an incremental system capability is delivered by the
developer and accepted by the operator as shown in table 2. Delivery of
these effectivities is tied to the contractor's award and incentive fees.
Lockheed Martin met the first effectivity and was awarded 100 percent of
its fee (about $1.4 million).

      Table 2: Effectivities and Their Utilities in Relation to SBIRS High
                             Launch/Delivery Dates

Effectivity            Event            Milestone date   Operational and   
                                                           military utility   
               Interim mission control       Oct. 2002    Provides an interim 
               station (MCS)                (completed)      catastrophic     
                     backup-1 system                         peacetime backup 
                      certification                        capability for the 
                                                           Increment 1 MCS at 
                                                            another location. 
                                             Feb. 2003    
                     HEO 1 delivery          (delayed)    

Integrated training suite Sept. 2003 (completed) 	Provides the ability to
train the integrated SBIRS High missions; provides better-trained crew
members, crew coordination, and utilization of training resources.

                       HEO 2 delivery Jan. 2004 (delayed)

HEO message certification Nov. 2004 (delayed to Apr. 2005) 	Provides an
interim test center for HEO launch and early on-orbit testing operations;
would signify interim operations of the HEO sensor; missile warning and
missile tracking information would be reported to MCS; both real time and
off-line technical intelligence data gathering would be performed.

            DSP multimission mobile Apr. 2005    Improves maintainability and 
                          processor           
(M3P) theater event system (TES)                  supportability; sustains 
                                                                      theater 
            certification                              performance.           
             GEO 1 launch           Oct. 2006 

GEO message certification Aug. 2007 	Provides an interim test center for
GEO launch and early on-orbit testing operations; GEO scanner-only
mono-track event data released to MCS; increases capabilities to better
meet the technical intelligence mission.

                             GEO 2 launch Oct. 2007

Effectivity Event Milestone date

Operational and military utility

6        GEO Air Force M3P         Oct. 2008      Fuses available DSP, HEO 
                                                                      sensor, 
     survivable/endurable integrated               and GEO satellite infrared 
                                                                      data to 
              tactical warning/attack              detect events and generate 
                           assessment                                reports; 
      (ITW/AA) system certification                      improves Increment 2 
                                                                   detection, 
                                                   reporting, and accuracy of 
                                                                      missile 
                                                       events (where M3Ps are 
                                                                    deployed) 
                                                             and battle-space 
                                                             characterization 
                                                         capability.          

GEO 3 launch Jan. 2009 (rescheduled to Sept. 2010)

             Interim MCS backup-2 Jan. 2009 First opportunity at a fixed site 
                   multisatellite                                          to 
        system certification                    provide multisatellite fusion 
                                                                   capability 
                                              for DSP, HEO, and GEO; improves 
                                                 tactical parameters, such as 
                                                                     location 
                                            of launch point, impact area, and 
                                                                        state 
                                                    vector accuracy.          

MCS-2 system certification Oct. 2009 	Fully integrates MCS operations;
improves accuracy and detection of events for war-fighting operations.

GEO 4 launch Jan. 2010 (rescheduled to Sept. 2011)

GEO Army M3P survivable/endurable Apr. 2010 Improves detection and
reporting of

ITWW/AA system and TES infrared events; fuses DSP, HEO, and

certification 	GEO track data relayed from MCS and the interim backup;
improves tactical parameters from in-theater assets, such as launch point,
impact area, and state vector accuracy.

Increment 2 complete Apr. 2010 	Concludes the Increment 2 development and
deployment of the SBIRS High full constellation; additional follow-on GEO
satellites provide multitheater/worldwide coverage.

Source: U.S. Air Force.

The restructured contract also prescribed tighter management controls,
improved reporting of contractor information, and added formal review
processes. For example, the modified contract removed Total Systems
Performance Responsibility (TSPR)11 from the contractor, transferring more
oversight back to the government because, according to the IRT, this
concept was not properly understood or implemented within the

11 TSPR is a contract condition that obligates the prime contractor to
assume total responsibility for the integration of an entire weapon
system. This is to ensure that the government receives an integrated
system that meets the performance requirements as defined in the system
specifications.

SBIRS High program. This was evidenced by the numerous instances
where the contractor was asked by program participants to accomplish
work under TSPR guidelines without going through the appropriate
management processes. In addition, since requirements were not
prioritized or well-defined below the Operational Requirements Document
(ORD) level, the contractor's refinement of requirements was ad hoc,
creating uncertainty on the status of program priorities and impacting
cost
and schedule.

The restructuring also modified the program's use of DOD's Earned Value
Management System (EVMS).12 Specifically, Lockheed Martin and its
subcontractors standardized EVMS procedures in an effort to provide
more accurate and up-to-date reporting on the status of the program. In
addition, an EVMS oversight team was established to focus on process
improvements, and Lockheed Martin and its subcontractors developed a
surveillance plan to review the EVMS data. The contractor is now
monitoring EVMS data more closely through monthly meetings and
reviews of specific cost accounts. Changes to the reporting of EMVS data
also help identify risks more effectively.

The contractor and SBIRS High Program Office have also increased
oversight and established a more formal risk management process within
the restructuring. For example, the prime contractor placed three vice
presidents in charge of the program as program director, deputy for
ground segment development, and deputy for systems integration. In
addition, the Air Force established a program management board
consisting of high-level Air Force officials to prevent uncontrolled
changes
in the SBIRS High program. Risks are now monitored and reported during
weekly risk management meetings. On a monthly basis, these risks are
also discussed with government and contractor senior management.

Finally, program officials reported that Lockheed Martin has employed
a more structured software development process that focuses on
building the software in increments, thereby helping to spread out risks.
A vice president is now overseeing the ground segment development,
including software development. Further, Lockheed Martin has
reorganized the ground software development group under its
Management and Data Systems, which is known for its software expertise.

12 EVMS is a tool used by the program manager to monitor the technical,
schedule, and cost parameters of the contract.

This component of Lockheed Martin achieved a Capability Maturity Model
Integration (CMMI) level 5-the highest rating-for its software management
and procedures.13 The ground software group does not have a formal CMMI
rating-Lockheed Martin Management and Data Systems was brought in to help
improve this group's processes.

  Restructuring
  Did Not Address
  Long-Standing
  Problems That Put the
  Program at Risk

While the new oversight processes under the restructured program should
help managers identify and address problems as they arise, the
restructuring does not fully account for earlier program decisions made
without sufficient systems engineering and design knowledge. As a result,
the program continues to experience problems and risks related to changing
requirements, design instability, and software development concerns. In
particular, design problems have delayed the delivery of the first HEO
sensor (HEO 1). Because development of the GEO satellites and possible
additional HEO sensors are tied to the completion of HEO 1, the schedules
for the subsequent components could slip, continuing to put the program at
significant risk of cost and schedule overruns.

    Requirements Modifications Continue

As we reported in June 2003, the majority of DOD satellite programs that
GAO has reviewed over the past 2 decades, including SBIRS, have cost more
than expected and have taken longer to develop and launch than planned
because performance requirements were not adequately defined at the
beginning of the program or were changed significantly once the program
had already begun.14 The numerous changes to the SBIRS High requirements
contributed to the cost and schedule overruns early in the program.
Although a more defined requirements management process is now in place,
changes to both the operational requirements and the contract are being
proposed that could impact the program's cost and schedule.

Before the restructuring, a total of 94 requirements changes were made to
the SBIRS High program-16 of which were added after the critical design

13 The CMMI rating standards, developed by the Software Engineering
Institute at Carnegie Mellon University, range from 1 through 5. A CMMI
rating of 1, called "performed," means that company's process is
unpredictable, poorly controlled, and reactive. A CMMI rating of 5
indicates that the company's process is at the "optimizing" level, which
focuses on continuous process improvement.

14 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).

review in August 2001.15 The effect that these changes may continue to
have on the program was not addressed in the August 2002 restructuring
efforts. Since restructuring, an Air Force program management board- which
was established to oversee requirements changes and help ensure
appropriate use of funds-has approved 34 actions that will require
contract modifications. If funded, these changes, identified as "urgent
and compelling,"16 would total $203.8 million and come from the Program
Manager's discretionary funds (also known as management reserve) or be
paid by the user who needs the new capability. The majority of these
dollars would be used to cover the following four changes

o  	earlier implementation of HEO mission processing in the mission
control station at an estimated cost of $15 million,

o  	full implementation of the mission management component of HEO for the
technical intelligence community at an estimated cost of $33 million,

o  	implementation and fielding of an operational mission control station
backup to meet Increment 1 ITW/AA requirements in fiscal year 2006 at an
estimated cost of $97 million, and

o  	the Army's implementation of a capability for DSP M3Ps to receive and
process HEO tracking data at an estimated cost of $27 million.

In addition to these pending changes, the Air Force is considering
acquiring a third and possibly a fourth HEO sensor and accelerating the
procurement schedule for GEO satellites 3 through 5.17 If procured
together, the estimated cost (including integration and testing) is $283
million for the third HEO sensor and $238 million for the fourth HEO
sensor. The funding for these sensors has yet to be determined. The
potential acceleration of the acquisition of GEO satellites 3 through 5 is
similarly placing added pressures on the program. Plans to accelerate the
acquisition of these GEO satellites is in response to a recent concern by

15 While the requirements in the SBIRS High ORD have not changed, the
contractor has needed clarifications and refinements to understand what
certain requirements entailed. According to Air Force officials, most of
the changes earlier in the program can be attributed to weaknesses in
earlier program management processes under the TSPR model of program
management.

16 Under the current restructuring, proposed program changes must be
designated as "urgent and compelling"-that is, extremely important to
mission needs and requiring near-term action to meet the need on time.

17 The acquisition of additional HEO sensors comes as a result of delays
with the Space Tracking and Surveillance System. See GAO-03-597.

the Senate Armed Services Committee18 that an Air Force decision to delay
the acquisition of satellites 3 through 5 would create a 3-year gap
between the launch of the second and third satellites. As a result, the
committee directed the Air Force to develop a plan to reduce the
production gap in the SBIRS High program from 2 years to 1. The committee
also directed the Air Force to assess the program's technical, schedule,
and cost risks associated with a 2-year delay, compare the operational
risk of a 1-year delay with a 2-year delay, and describe steps to mitigate
the impact of a 1-year production gap.

In April 2002, a group comprised of DOD subject matter experts reviewed
the SBIRS High requirements and concluded that four operational
requirements will not fully be met by the current design under certain
scenarios. While these requirements are only 4 of 140, they are important
to the system's overall missile defense and warning capability:

o  	threat typing-the ability to identify a certain type of missile
launched under certain scenarios;

o  	impact point prediction-the ability to predict where a particularly
stressing theater-class missile will hit the earth;

o  	theater state vector velocity-the ability to track the path of a
particularly stressing theater-class missile; and

o  	strategic raid count-the ability to count and discriminate the number
of true incoming missiles for a certain scenario.

Program officials said that these four requirements were poorly written,
defined, or described in the ORD and that efforts are underway to rewrite,
seek waivers, or clarify them and negotiate deviations with users.

    Design and System Integration Continue to Be Unstable

Achieving a stable design before entering product demonstration is
critical to maintaining cost and schedule goals.19 However, at the SBIRS
High critical design review-1 year before the restructuring-only 50
percent of

18According to the Senate Armed Services Committee, a delay in acquiring
GEO satellites 3 through 5 would (1) increase costs because production
lines will have to close and reopen and subcontractors will have to be
requalified, (2) increase technical risk due to a loss of key personnel
and subcontractor base, and (3) increase operational risk due to the age
of the current satellite constellation. See Senate Report 108-46
accompanying S. 1050, National Defense Authorization Act for Fiscal Year
2004, at 244-245 (May 13, 2003).

19 U.S. General Accounting Office, Best Practices: Capturing Design and
Manufacturing
Knowledge Early Improves Acquisition Outcomes, GAO-02-701 (Washington,
D.C.:
July 15, 2002).

design drawings were complete, compared to 90 percent as recommended by
best practices.20 In addition, the IRT report found that the program did
not invest enough time and resources in basic systems engineering
analysis. Despite these problems, the program passed the critical design
review. As a result, persistent problems with and changes to the design-
especially of HEO 1-continue to impact the program's cost and schedule.

The HEO 1 sensor is the first major deliverable for Increment 2 and the
only near-term deliverable to measure the program's progress. As a part of
the restructuring, the delivery of this sensor to the host satellite was
delayed from its original date in February 2002 to February 2003. At that
time, program officials were confident of meeting the new delivery date.
However, significant deficiencies were revealed during systems tests in
November 2002 making it apparent that the February 2003 date would not be
met, and delivery was postponed another 2 months. At this writing, the
first HEO sensor has yet to be delivered. In May 2003, the Program
Director reported that the delays were due to a series of design
deficiencies. For example, the design to control the sensor's
electromagnetic interference (EMI) was inadequate.21 Specifically,
Lockheed Martin identified 148 offending EMI frequencies that exceeded the
tolerances established by the host satellite. These excessive frequencies
could interfere with the operations of the host satellite and jeopardize
its mission. Thirty-nine design modifications to the HEO sensor were made,
which eliminated 80 percent of these noise conditions. However, the final
EMI test, completed in early July 2003, identified seven remaining EMI
frequencies that were not within tolerance-two of which appear to be
attributable to the HEO sensor. Since the problems cannot be resolved and
there is no expected impact on performance, the Program Director requested
waivers for the offending frequencies to allow the sensor to be integrated
onto the host satellite. According to a program official, the waivers have
been approved and the first HEO sensor is now

20 GAO reviews of best practices have found that successful commercial
firms require a high level of knowledge at key junctures during a
product's development and use this knowledge to make informed investment
decisions. These firms place more importance on capturing specific
technology, design, and manufacturing knowledge than on meeting
milestones. Moreover, these firms identify and use specific criteria to
ensure that the program has sufficient knowledge to move forward. For
example, the release of 90 percent or more of the engineering drawings
indicates that the product design is stable and meets performance
requirements.

21 Two other design problems encountered were associated with the outer
tiles of the spacecraft and the Common Gyro Reference Assembly.

expected to be delivered on December 6, 2003, provided no additional
testing is needed.

The Program Director reported that the HEO 1 design problems were
attributable to weaknesses in earlier program management processes. Under
these processes, the program tried to achieve efficiencies by cutting back
on detailed design analyses and component testing. The exact costs
associated with these weaknesses are unclear. Our independent
estimate-using data from the contractor's June 2003 cost performance
report-indicates that the development of HEO 1 will overrun the contract
amount at completion by about $25 million to $54 million, and that
additional costs associated with HEO 2 rework would be between $20 million
and $80 million.22 The Program Office is currently assessing estimates of
total cost impact.

Since the critical design review in August 2001, the Air Force also
determined that two late design changes to the GEO satellites were
necessary to improve the program's chances of success. In January 2003,
the Air Force directed the contractor to replace the 80 ampere-hour
battery with a 100 ampere-hour battery to improve the satellites'
operational reliability. Program officials estimate that the new battery
will cost about $15 million, but the June 2003 cost performance report
shows that the contractor is having difficulty assessing and establishing
specifications for the battery, which has resulted in schedule delays and
could result in even greater costs. The second design change to the GEO
satellites is to resolve a power deficiency by modifying the solar cell
panel. The expected cost of this change has not yet been determined.

In April 2002, 4 months before the restructuring, a report prepared by
subject matter experts determined that while there were no significant
technical barriers to eventually meeting the key requirements for SBIRS
High, technology integration was a high risk owing to insufficient time.
In restructuring the program, the Air Force implemented earlier
integration and testing activities to mitigate this risk. However, we
found that these mitigation measures may not be sufficient to avoid
delays. For example, as of June 2003, the contractor has completed about
58 percent of the GEO

22 Our analysis was based on the earned value statistics from the latest
available cost performance report. The upper bound of the estimate is a
worst case scenario cost based on the contractor's cost performance for
that month.

  sensor integration, assembly, test and checkout work, but it is still behind
    schedule with about $2 million of the planned work not yet accomplished.

    Software Development Is Still High Risk

The development of software for the HEO sensors and GEO satellites (known
as "flight" software) and the ground facility was a major factor that led
to the Nunn-McCurdy breach. Despite the restructuring, the contractor and
Program Office continue to report that software development underlies most
of the top 10 program risks. Flight and ground software have already
experienced difficulties, delaying delivery and putting program
accomplishments at further risk.

Most of the software for SBIRS High is for the ground stations to operate
and command the satellites, process and display missile warning data, and
perform mission management functions. Additional flight software is being
developed for the HEO sensors and GEO satellites to control the infrared
sensors and optical telescope and to process infrared data onboard the
satellite.23 Another set of software elements will be used to test and
simulate the performance of the SBIRS High system before it is put into
operation. According to Lockheed Martin officials, the risks associated
with the development of these software elements would be minimal because
the majority of the software would be reused and modified. 24

However, the risk associated with software development and reuse in
Increment 1 was underestimated, which led to significant delays and cost
overruns. This problem was not fully addressed by the restructuring and
the time needed to develop the software continues to be underestimated.
For example, in the current phase (Increment 2), delivery of the HEO
flight software has been delayed because software item qualification
testing-which was completed in May 2003 after a 3-month delay- revealed
three deficiencies. One deficiency involved the HEO sensor's ability to
maintain earth coverage and track missiles while orbiting the earth.
Delivery of the HEO ground software has also been delayed, and according
to a program official, did not meet a revised delivery date of August 2003
because several ground software issues must still be resolved. While the
problems encountered with the development of the flight and

23 Signal processing software is responsible for collecting and formatting
infrared digital data which will be transmitted and further processed at
the ground station.

24 Software reuse involves previously developed software that is to be
integrated with other new, modified or other reuse software.

ground software have only resulted in delays of a few months, the delays
signal weaknesses that could put the program at further risk of cost and
schedule overruns.

The remaining computer memory margin on the onboard satellites is also a
concern. The SBIRS High program requirements mandate that the memory
margin be at least 50 percent. This is to ensure there is sufficient
remaining memory to accommodate future software code growth. However,
inefficient coding for onboard satellite operations has resulted in an
estimated current memory margin of 35 percent. Since rewriting the code
would be too costly to the program, Lockheed Martin is requesting a waiver
from this requirement to allow the 35-percent margin.

According to DCMA officials, the HEO software delays are the result of an
overly aggressive software development schedule and a lack of management's
understanding of the complexity of the software task. A program official
stated the contractor's software productivity and efficiency metrics have
recently begun to reflect a negative trend in the program due to the
delays in software development and increases in software defects. These
officials stated that the program suffered from a lack of skilled computer
personnel with infrared space systems knowledge. After the August 2002
restructuring, DCMA officials stated that Lockheed Martin committed more
personnel and approved overtime when necessary to achieve schedules and
has been cooperative in making changes recommended by DCMA and the SBIRS
High Program Office. Although these actions should improve the schedule
status, they will have a negative cost impact because of the additional
resources that will need to be committed to recover and meet the program's
future schedule.

    HEO Delays Affect the Total SBIRS High Program

Delays in the development and delivery of the HEO 1 sensor will likely
have long-term consequences for the remainder of the program. According to
DOD officials, until tasks leading to HEO message certification are
complete, the program will not have "turned the corner" to achieving its
objectives. However, some schedule milestones for these tasks have begun
to slip due to problems in developing the HEO 1 sensor. As a result, the
HEO message certification milestone, scheduled for November 2004, will
slip 5 months or more.

Program officials stated that they are coordinating the delivery of HEO 1
and the host satellite to mitigate any schedule impacts, but they agreed
that these delays put the remaining SBIRS High schedule at risk. For
example, the continuing HEO 1 sensor and software work is now

competing for staff and other resources dedicated to HEO 2 and GEO tasks.
As a result, the HEO 2 sensor and the first GEO satellite are unlikely to
maintain their current development and launch schedules already revised
under the restructuring. Program officials now estimate the HEO 2 sensor
delivery will be delayed from February 2004 to June 2004-or as much as a
year later-to implement more in-depth modifications to correct EMI
problems, as recommended by a technical review team. According to program
officials, the development schedule for the first GEO satellite has
sufficient margin-approximately 300 days-to avoid delays in the first GEO
launch. However, delivery and integration of the GEO flight software-a
high-risk effort-did not begin in August 2003 as scheduled. While DCMA
officials report that they are monitoring Lockheed Martin's progress to
maintain the software development schedule, any delays will affect the
entire GEO schedule and could jeopardize the delivery and launch of the
first GEO satellite.

In an attempt to avoid delays, the program has compressed schedules and
implemented work-around plans. However, in compressing original schedules,
the program creates other risks because the time allotted to test and
analyze the software and to train personnel to operate the SBIRS High
ground processing system has been significantly reduced. In addition,
work-around plans to overcome delays, even if feasible, would be difficult
and costly to accomplish. At the same time, valuable on-orbit information
of the HEO sensor's performance may not be available in a timely manner
for the GEO development efforts. Since HEO and GEO have common components,
including the infrared sensor subsystem, HEO on-orbit data would improve
the knowledge base for GEO development.

Increased cost is also a risk. Although the contractor forecasts that the
contract will be within cost at completion, significant cost overruns are
likely. In analyzing data from the contractor's cost performance reports
from February 2003 through June 2003, we found that the cumulative cost
overrun increased by more than 800 percent, from approximately $3 million
to approximately $31.7 million, due to the significant overtime worked
over a number of months. Moreover, as the program works to accomplish the
almost $40 million worth of planned work that is behind schedule, the
negative cumulative cost variance of approximately $31.7 million will
continue to grow. Specifically, we predict that at contract completion,
the program will have a cost overrun ranging from roughly $80 million to
$432 million. DCMA similarly predicts significant

cost overruns-officials reported an estimated overrun ranging from $34
million to $210 million at completion and gave an overall assessment of
"red"25 for the SBIRS High earned value management status.

Finally, as the program works to remedy problems-particularly those
associated with the HEO sensors-management reserves are diminishing. For
fiscal year 2003, reserves have been depleted, and Air Force and program
officials are concerned that fiscal year 2004 reserves are insufficient to
address contingencies. As a result, some planned development tasks may be
delayed to fiscal year 2005.

The Program Director stated that the program is applying lessons learned
from HEO 1 to the HEO 2 sensor, the first GEO satellite, and other parts
of the program. The knowledge gained from correcting problems on HEO 1
will be necessary if the Air Force decides to procure additional HEO
sensors and accelerate procurement of the third, fourth, and fifth GEO
satellites. The Program Office is also assessing the overall program
impacts from the HEO 1 delay but has yet to complete the analysis.

25 A "red" rating is issued for any current negative cost or schedule
variance that is greater than 10 percent.

Conclusions

Recommendations for Executive Action

DOD has invested billions of dollars in an effort to develop a system that
will provide greater long-range detection capabilities than DSP, its
current missile tracking system. Yet more than a year after the most
recent restructuring, the SBIRS High program continues to experience
problems that have existed since its inception: cost overruns, schedule
delays, and performance limitations. While the Air Force has taken a
number of actions as recommended by the IRT to improve program oversight,
it has become increasingly evident that the underlying factors that led to
the Nunn-McCurdy breach-particularly the lack of critical knowledge-
continue to cause problems, and additional cost and schedule slips beyond
the revised acquisition program baseline appear inevitable. Without
sufficient knowledge to ensure that the product design is stable and meets
performance requirements and that adequate resources are available, there
is no assurance that technical problems-such as those experienced with the
HEO 1 sensor-will not surface on other major program components once they
go through systems integration and testing. Moreover, the inability of the
Air Force and its contractor to deliver HEO 1 as scheduled has put into
question whether the restructuring has provided the right mechanisms to
achieve program objectives. 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 purpose-to provide an early warning
and tracking system superior to that of DSP.

Given the considerable investment yet to come, the Congress and the
Secretary of Defense would benefit from an assessment of whether the
Program Office and contractor are doing everything necessary and feasible
to achieve program objectives and to minimize future cost and schedule
growth and address the underlying factors that are causing these problems.
Therefore, we recommend that the Secretary of Defense reconvene the IRT or
similar independent task force with substantial program knowledge to
provide an assessment of the restructured program and concrete guidance
for addressing the program's underlying problems. Such a review should
include determining whether the

o  	SBIRS High development schedule is executable within current cost and
schedule estimates in light of the recent HEO 1 delays and other risks
(such as software development),

o  program design is stable and sufficient to meet performance
requirements,

o  	contractor's software development procedures and practices have
reached at least a CMMI level 326 in relation to the Software Engineering
Institute's standards,

o  	appropriate management mechanisms are in place to achieve intended
program objectives, and

o  pending requirements changes should be funded.

We further recommend that the Secretary of Defense put in place a
mechanism for ensuring that the knowledge gained from the assessment is
used to determine whether further programmatic changes are needed to
strengthen oversight, adjust current cost and schedule estimates, modify
contract mechanisms, and address requirements changes.

                                Agency Comments

In commenting on a draft of this report, DOD agreed that another thorough
review of the SBIRS High program is warranted, and that the results of
this review should be used to bring about needed program changes. However,
DOD only partially agreed with our recommendations because it would like
the option to consider other approaches for assigning responsibility for
conducting a review. Given the complexity of this program, we agree that
the Secretary of Defense should have this flexibility. We have modified
our recommendations accordingly. DOD also provided technical comments,
which we have incorporated as appropriate. DOD's written comments-provided
by the Deputy Under Secretary of Defense for Policy, Requirements, and
Resources within the Office of the Under Secretary of Defense for
Intelligence-are reprinted in appendix I.

26 A CMMI 3, called "defined," means the company's process is
characterized for the organization and is defined.

  Scope and Methodology

To identify the key elements of the restructured SBIRS High program, we
reviewed the program's operational requirements document, acquisition
program baseline, single acquisition management plan, cost analysis
requirements description, technical reports, and status documents; the
restructured contract with Lockheed Martin Space Systems Company; and
Nunn-McCurdy certification documents. We discussed the restructured
program with representatives from the SBIRS High Program Office, Space and
Missile Systems Center, Los Angeles Air Force Base, El Segundo,
California; Secretary of the Air Force, Space Force Enhancement,
Washington, D.C.; Office of the Assistant Secretary of Defense, Networks
and Information Integration, Washington, D.C.; Office of the Secretary of
Defense, Director of Program Analysis and Evaluation, Washington, D.C.;
Lockheed Martin Space Systems Company, Missile and Space Operations,
Sunnyvale, California; and Lockheed Martin Management and Data Systems,
Boulder, Colorado. We also discussed requirements and mission needs with
officials from Air Force Space Command and U.S. Strategic Command (West),
Peterson Air Force Base, Colorado Springs, Colorado and Air Force
Headquarters, Directorate of Operational Capability Requirements, Space
Capability, Arlington, Virginia.

To determine the problems and potential risks relating to cost, schedule,
and performance that are still facing the SBIRS High program, we reviewed
technical reports and program briefings and held discussions with program
and contractor officials regarding ongoing challenges. To gain an
understanding of these challenges, we reviewed monthly acquisition
reports, Air Force Space Command's urgent and compelling needs lists, the
contractor's top program risks lists, and recent congressional language
concerning delivery schedules. To determine the program's ability to meet
cost and schedule projections, we examined schedule and funding
information for developing hardware and software. We compared information
from the SBIRS High Program Office to other independent reports including
those from the IRT, a commissioned technology review, and DCMA. We also
reviewed the report from the Baseline Update-1, a formal program review,
and other program assessment reports. In addition, we performed our own
analysis of cost and schedule projections using Lockheed Martin's 2003
cost performance report data. We discussed all of these issues with
representatives from the SBIRS High Program Office; Lockheed Martin Space
Systems Company, Missile and Space Operations; Lockheed Martin Management
and Data Systems; Office of the Secretary of Defense, Director of
Operational Test and Evaluation, Alexandria, Virginia; and the Defense
Contract Management Agency, Sunnyvale, California.

We performed our work from October 2002 through September 2003 in
accordance with generally accepted government auditing standards.

We plan to provide copies of this report to the Secretary of Defense, the
Secretary of the Air Force, and interested congressional committees. 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 at (202) 512-4841 or John Oppenheim at (202) 512-3111.
Key contributors to this report are listed in appendix IV.

R. E. Levin
Director, Acquisition and Sourcing Management

Page 26 GAO-04-48 Defense Acquisitions

Appendix I: Comments from the Department of Defense

                     Page 27 GAO-04-48 Defense Acquisitions

Appendix I: Comments from the Department of Defense

Note: Page numbers in the draft report may differ from those in this
report.

                     Page 28 GAO-04-48 Defense Acquisitions

Appendix II: SBIRS High Performance in Mission Areas

o  	Missile Warning: SBIRS High is expected to provide reliable,
unambiguous,1 timely, and accurate missile warning information to the
President of the United States, the Secretary of Defense, Unified
Combatant Commanders, and other users. This mission includes both global
and theater requirements to provide strategic and theater ballistic
missile warning in support of passive defense and force posturing.

o  	Missile Defense: SBIRS High is expected to provide reliable, accurate,
and timely information to defensive systems. This mission includes both
strategic and theater functional requirements to enable active missile
defense and attack operations against hostile forces.

o  	Technical Intelligence: SBIRS High is expected to provide reliable,
accurate, and timely infrared target signature and threat performance data
to warfighters, the intelligence community, weapon system developers, and
other users. This data may be used for target classification and
identification templates and algorithm development for SBIRS High
operational missions. SBIRS High also monitors activities and provides
information to policy makers and other users on observed military tactics,
new foreign technology development, arms control compliance, and
proliferation activities.

o  	Battle-space Characterization: SBIRS High provides reliable, accurate,
and timely data to enhance situational awareness, non-ballistic missile
threat warning, decision support, battle damage assessment and
intelligence information (for land, sea, air, and space) for the Unified
Combatant Commanders, Joint Task Force Commanders, and other users.
Battle-space characterization applies the SBIRS High product to the
immediate need of the warfighters.

1 Unambiguous warning is a valid mission level requirement that, to date,
has been accomplished primarily through dual phenomenology and human
in-the-loop concepts of operations. SBIRS will contribute to but will not,
by itself, provide unambiguous warning.

Appendix III: Key Events in the SBIRS High Program

                                Date Key events

1994 September  o  OSD issues the Space-Based Warning Summer Study.

November  o  SBIRS is named an Air Force lead program for acquisition
reform.

1995           o  U.S. Space Command SBIRS Capstone Requirements Document  
         January                    is validated by the Joint                 
                                 Requirements Oversight Council.              
        February  o   SBIRS Single Acquisition Management Plan is approved.   
                  o   Air Force awards two pre-engineering and manufacturing  
         August                development contracts to Hughes and            
                                      Lockheed Martin teams.                  
                  o   Changes to the SBIRS Capstone Requirements Document are 
1996   April                           validated by the Joint Requirements 
                                        Oversight Council.                    
        September o    SBIRS System Threat Assessment Report is validated.    
         October  o      SBIRS is authorized to proceed to milestone II.      
        November  o     Air Force awards one engineering and manufacturing    
                             development contract to Lockheed Martin.         
1997  January  o   Construction begins on the Mission Control Station at   
                                Buckley Air Force Base, Colorado.             
        December  o       SBIRS High preliminary design review is held.       

      1998 July  o  SBIRS System Threat Assessment Report is revalidated.

December  o  	DOD removes $150 million from the SBIRS High program to fund
other DOD priorities and directs the delay of the GEO launches by 2 years.

1999          o  Based on the DOD directive, a joint estimate team reviews 
          May                          the program to determine an attainable 
                               and affordable program restructure.            
2000   June   o    SBIRS System Threat Assessment Report is revalidated.   
2001  August  o            SBIRS critical design review is held.           
        December o           SBIRS ground Increment 1 is certified.           

o  Secretary of the Air Force notifies Congress of the Nunn-McCurdy
breach.

        October  o     SBIRS Low is transferred to Missile Defense Agency.    
2002          o  SBIRS ORD is revalidated by the Joint Requirements        
        January     Oversight Council for the Nunn-McCurdy                    
                                             review.                          
                 o   IRT report is issued identifying the underlying causes   
        February            for the cost growth that led to the Nunn-         
                                         McCurdy breach.                      
                 o      SBIRS High Acquisition Decision Memorandum is signed, 
          May                          certifying the program after the Nunn- 
                                         McCurdy breach.                      
                 o  Revised SBIRS High Single Acquisition Management Plan is  
          June                              approved.                         

o  Construction begins on the Mission Control Station Backup at Schriever
Air Force Base, Colorado. August  o  Revised SBIRS High contract with
Lockheed Martin goes into effect. September  o  SBIRS High Acquisition
Program Baseline (restructuring) is approved. November  o  Interim Mission
Control Station Backup in Boulder, Colorado, is certified.

Appendix III: Key Events in the SBIRS High Program

                                Date Key events

2003 January  o  Air Force Space Command identifies need for HEO 3 and possibly
                                     HEO 4.

o  DCMA reports HEO 1 schedule slip.

o  Air Force provides USD (AT&L) with SBIRS High program assessment.

February  o  	Assistant Secretary of Defense for Command, Control,
Communications, and Intelligence issues memorandum to Air Force calling
for another review in November 2003.

Source: U.S. Air Force.

Appendix IV: GAO Contacts and Staff Acknowledgments

GAO Contacts 	Robert Levin (202) 512-4841 John Oppenheim (202) 512-3111

Acknowledgments 	In addition to those listed above, Maricela Cherveny,
Steve Martinez, Karen A. Richey, Nancy Rothlisberger, Karen M. Sloan, Hai
V. Tran, Dale M. Yuge, and Randolph S. Zounes made key contributions to
this report.

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