    Defense Aquisitions: Status of Ballistic Missile Defense Program
    in 2004 (31-MAR-05, GAO-05-243).

    Since 1985, the Department of Defense (DOD) has invested $85
    billion in ballistic missile defense programs, with $66.5 billion
    more anticipated over the next 7 years through 2011. As a major
    result of this investment, the Department is on the verge of
    activating our nation's first missile defense system for
    protecting the United States from intercontinental ballistic
    missile attacks out of Northeast Asia. This initial
    capability--referred to as Limited Defensive Operations (LDO)--is
    the first step of a national priority to develop, field, and
    evolve over time an overarching ballistic missile defense system
    (BMDS). To fulfill a congressional mandate, GAO assessed how well
    the Missile Defense Agency (MDA) met its cost, schedule, testing,
    and performance goals during fiscal year 2004. GAO assessed the
    program last year and will continue to provide assessments of MDA
    progress through 2006.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-05-243
        ACCNO:   A20537
      TITLE:     Defense Aquisitions: Status of Ballistic Missile Defense
    Program in 2004
         DATE:   03/31/2005
      SUBJECT:   Air defense systems
    	     Ballistic missiles
    	     Budget activities
    	     Cost analysis
    	     Cost overruns
    	     Defense appropriations
    	     Defense capabilities
    	     Defense cost control
    	     Defense procurement
    	     Intercontinental ballistic missiles
    	     Internal controls
    	     National defense operations
    	     Operational testing
    	     Performance management
    	     Performance measures
    	     Schedule slippages
    	     Strategic planning
    	     Budget requests
    	     DOD Ground-based Midcourse Defense
    	     Element

    	     DOD Space Tracking and Surveillance
    	     System

    	     MDA Aegis Ballistic Missile Defense
    	     Program

    	     MDA Airborne Laser Program
    	     MDA Ballistic Missile Defense System
    	     MDA Kinetic Energy Interceptor System
    	     MDA Terminal High Altitude Area Defense
    	     System

    	     SDI Battle Management/Command, Control,
    	     and Communication System

    	     SPY-1 Radar
    	     SM-3 Missile
    	     Patriot-MEADS Missile Defense Program

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    GAO-05-243

    United States Government Accountability Office

    GAO

                           Report to Congressional Committees

    March 2005

    DEFENSE ACQUISITIONS

                  Status of Ballistic Missile Defense Program in 2004

    GAO-05-243

    [IMG]

    March 2005

    DEFENSE ACQUISITIONS

    Status of Ballistic Missile Defense Program in 2004

                                     What GAO Found

    By the end of fiscal year 2004, MDA carried out activities needed to field
    an initial missile defense capability, as planned. These included delivery
    and emplacement of Ground-based Midcourse Defense interceptors; upgrades
    of ground-based radars; enhancements to Aegis Navy ships for improved
    surveillance and tracking; development of command and control software for
    system operation; and tests to verify that components of this initial
    capability can communicate as part of an integrated whole. However, the
    performance of the system remains uncertain and unverified, because a
    number of flight tests slipped into fiscal year 2005 and MDA has not
    successfully conducted an end-to-end flight test using
    operationallyrepresentative hardware and software. Additionally, based on
    our analysis of prime contractor cost and schedule performance, the
    development of BMDS elements cost approximately $370 million more than
    planned during fiscal year 2004. To cover much of this cost overrun, MDA
    deferred work planned for fiscal year 2004, redirected funds earmarked for
    other programs, and requested additional funds in its fiscal year 2005
    budget to cover the cost of deferred work.

    In the future, MDA will likely face increased funding risks. MDA plans to
    request about $10 billion annually from DOD for BMDS development,
    procurement, and sustainment. However, DOD's acquisition programs are
    likely to be competing for a decreasing share of the total federal budget
    and MDA's programs are competing against hundreds of other DOD programs.
    Also, MDA continues to budget for unanticipated cost growth. For example,
    the Airborne Laser program plans to spend an additional $1.5 billion to
    develop and demonstrate a prototype aircraft. Furthermore, procurement and
    sustainment will demand increased funding as more missile defense
    components are fielded over time.

    MDA policy defines a block as an integrated set of capabilities fielded
    during the 2-year block cycle, but we observed that MDA's fielding goals
    do not consistently match its cost goals. For example, Block 2004 funds
    are used to procure 32 Aegis Ballistic Missile Defense missiles, but of
    these missiles, 11 will be delivered in 2004-2005 and the remaining
    missiles will be delivered during 2006-2007. MDA officials intend to
    clarify the block policy in the near future to better align the cost and
    fielding goals.

    Elements of Ballistic Missile Defense System

    First fielded block Future blocks

    Aegis Ballistic Missile Defense Airborne Laser

    Command, Control, Battle Management, and Kinetic Energy
    InterceptorsCommunications

    Ground-based Midcourse Defense Space Tracking and Surveillance System

    Patriot Terminal High Altitude Area Defense

    Sources: MDA (data); GAO (presentation).

    United States Government Accountability Office

    Contents

    Letter

    Results in Brief
    Background
    Assessment of Scheduled Activities in Fiscal Year 2004
    Assessment of Testing in Fiscal Year 2004
    Assessment of System Performance in Fiscal Year 2004
    Assessment of System Cost in Fiscal Year 2004
    Funding Risks Expected to Increase for Ballistic Missile Defense

    Program
    MDA Is Not Consistently Matching Cost and Fielding Goals
    Conclusion
    Recommendation for Executive Action
    Agency Comments and Our Evaluation

    1

    3

    4 10 14 18 22

    26 29 30 31 31

    Appendix I Comments from the Department of Defense

    Appendix II Summary

    Appendix II Aegis Ballistic Missile Defense

    Element Description
    History
    Developmental Phases
    Planned Accomplishments for Fiscal Year 2004
    Assessment of Scheduled Activities
    Assessment of Element Performance
    Assessment of Element Cost

    36

    37

    37 37 37 39 39 46 47

    Appendix III Summary 52

    Appendix III Airborne Laser 53

    Element Description 53
    History 54
    Developmental Phases 54
    Fiscal Year 2004 Planned Accomplishments 56
    Assessment of Scheduled Activities 56
    Assessment of Element Performance 58
    Assessment of Element Cost 59

    Appendix IV
    Appendix IV

    Summary

    Command, Control, Battle Management, and
    Communications

    Element Description
    History
    Developmental Phases
    Planned Accomplishments for Fiscal Year 2004
    Assessment of Scheduled Activities
    Assessment of Element Performance
    Assessment of Element Cost

    64

    65

    65 65 66 67 67 69 69

    Appendix V
    Appendix V

    Summary

    Ground-Based Midcourse Defense

    Element Description
    History
    Developmental Phases
    Planned Accomplishments for Fiscal Year 2004
    Assessment of Scheduled Activities
    Assessment of Element Performance
    Assessment of Element Cost

    74

    75

    75 76 77 78 78 85 86

    Appendix VI Summary 90

    Appendix VI Kinetic Energy Interceptors 91

    Element Description 91
    History 91
    Developmental Phases 92
    Planned Accomplishments for Fiscal Year 2004 93
    Assessment of Scheduled Activities 93
    Assessment of Element Performance 96
    Assessment of Element Cost 97

    Appendix VII Appendix VII Summary

    Space Tracking and Surveillance System

    Element Description
    History
    Developmental Phases
    Planned Accomplishments for Fiscal Year 2004
    Assessment of Scheduled Activities
    Assessment of Element Performance
    Assessment of Element Cost

    100

    101

    101 101 102 102 102 104 105

                              Appendix VIII Appendix VIII

    Summary

    Terminal High Altitude Area Defense

    Element Description
    History
    Developmental Phases
    Planned Accomplishments for Fiscal Year 2004
    Assessment of Scheduled Activities
    Assessment of Element Performance
    Assessment of Element Cost

    110

    111

    111 111 112 113 113 116 117

    Appendix IX Information on the Army's Missile Defense Programs 120

    Background 120 Combined Aggregate Program 121 Patriot/MEADS CAP Funding
    122

    Appendix X Scope and Methodology

                 Appendix XI GAO Contact and Staff Acknowledgments 127

    Tables

    Table 1: BMDS Elements 6 Table 2: MDA Block 2004 Fielded Configuration
    Goals 9 Table 3: Progress toward Achieving LDO 11

    Table 4: Progress toward Achieving Block 2004 Fielded

    Configuration Goals\ 12
    Table 5: Status of Element Testing-Planned and Achieved 14
    Table 6: Prime Contractor Cost and Schedule Performance in

    Fiscal Year 2004 23
    Table 7: Status of Aegis BMD Fiscal Year 2004 Planned

    Accomplishments-Fielding Activities 40
    Table 8: Aegis Ship Availability for the BMD Mission (Block 2004) 41
    Table 9: SM-3 Missile Deliveries 41
    Table 10: Aegis BMD Fiscal Year 2004 Planned Accomplishments-

    Flight Test and LRS&T Activities 44
    Table 11: Planned Aegis BMD Fiscal Year 2005 Accomplishments-
    Remaining Block 2004 Flight Tests 45
    Table 12: Aegis BMD Fiscal Year 2004 Planned Accomplishments-

    Design Reviews 45
    Table 13: Aegis BMD Cost 47
    Table 14: Status of ABL Fiscal Year 2004 Planned

    Accomplishments-BC/FC Segment 56
    Table 15: Status of ABL Fiscal Year 2004 Planned

    Accomplishments-Laser Segment 57
    Table 16: ABL Cost 59
    Table 17: C2BMC Fiscal Year 2004 Accomplishments-Software

    Development and Testing 68
    Table 18: C2BMC Fiscal Year 2004 Planned Accomplishments-

    Making System Operational 69
    Table 19: C2BMC Cost 70
    Table 20: Status of GMD Fiscal Year 2004 Component Development 79
    Table 21: Status of Major GMD Flight Tests (Fiscal Year 2004) 81
    Table 22: Status of GMD Fiscal Year 2004 Planned

    Accomplishments-Fielding Initial Capability 84
    Table 23: GMD Cost 86
    Table 24: Status of KEI Fiscal Year 2004 Planned

    Accomplishments-Contract Award and Planning 94

    Table 25: Status of KEI Fiscal Year 2004 Planned
    Accomplishments-Design Activities

    Table 26: Status of KEI Fiscal Year 2004 Planned
    Accomplishments-Key Test Activities

    Table 27: Status of KEI Fiscal Year 2004 Planned
    Accomplishments-Risk Reduction Activities

    Table 28: KEI High-Risk Areas

    Table 29: KEI Cost

    95

    95

    96 96 98

    Table 30: Status of STSS Fiscal Year 2004 Planned Accomplishments-Space
    Segment

    Table 31: Status of STSS Fiscal Year 2004 Planned Accomplishments-Ground
    Segment

    Table 32: STSS Cost

    Table 33: Status of THAAD Fiscal Year 2004 Planned Accomplishments-Design
    Activities

    Table 34: Status of THAAD Fiscal Year 2004 Planned Accomplishments-Build
    Activities

    Table 35: Status of THAAD Fiscal Year 2004 Planned

                                          103

                                        104 106

                                          113

                                          114

    Accomplishments-Integration and Test Activities 114 Table 36: Planned
    THAAD Flight Testing 116 Table 37: THAAD Cost 117 Table 38: Patriot/MEADS
    CAP Planned Costs 123

    Figures

    Figure 1: Phases of a Ballistic Missile's Trajectory
    Figure 2: Breakout of MDA Budget
    Figure 3: Aegis BMD Fiscal Year 2004 Cost and Schedule

    Performance Figure 4: ABL Block 2004 Prime Contract Figure 5: ABL Fiscal
    Year 2004 Cost and Schedule Performance Figure 6: C2BMC Fiscal Year 2004
    Cost and Schedule Performance Figure 7: Components of the GMD Element
    Figure 8: GMD Fiscal Year 2004 Cost and Schedule Performance Figure 9:
    STSS Fiscal Year 2004 Cost and Schedule Performance Figure 10: THAAD
    Fiscal Year 2004 Cost and Schedule

    Performance 5 9

                                                            49 61 62 72 76 88 107

    119

    Abbreviations

    ABL Airborne Laser
    Aegis BMD Aegis Ballistic Missile Defense
    AI&T Assembly, Integration, and Testing
    BC/FC Beam Control / Fire Control
    BILL Beacon Illuminator Laser
    BMC2 Battle Management, Command and Control
    BMC4I Battle Management, Command, Control,

    Communications, Computer, and Intelligence BMDS Ballistic Missile Defense
    System

    BV Booster Validation
    C2BMC Command, Control, Battle Management, and

    Communications CAP Combined Aggregate Program COIL Chemical Oxygen-Iodine
    Laser CONOPS Concept of Operations CONUS Continental United States CTF
    Control Test Flight DOD Department of Defense DOT&E Director, Operational
    Test and Evaluation EVM Earned Value Management FM Flight Mission FT
    Flight Test FY fiscal year GMD Ground-based Midcourse Defense IBR
    Integrated Baseline Review ICBM Intercontinental Ballistic Missile IFICS
    In-Flight Interceptor Communications System IFT Integrated Flight Test IGT
    Integrated Ground Test IT Integrated Test KEI Kinetic Energy Interceptors
    LDO Limited Defensive Operations LRS&T Long-Range Surveillance and
    Tracking MEADS Medium Extended Air Defense System MDA Missile Defense
    Agency MRBM Medium Range Ballistic Missile MSE Missile Segment Enhancement
    NFIRE Near Field Infrared Experiment O&S Operations and Support OSC
    Orbital Sciences Corporation OTA Other Transaction Agreement PAC-3 Patriot
    Advanced Capability-3 PMRF Pacific Missile Range Facility RDT&E Research,
    Development, Test, and Evaluation SBIRS Space-Based Infrared System SBX
    Sea-Based X-band Radar SCF Seeker Characterization Flight SDACS Solid
    Divert and Attitude Control System SICO System Integration and Checkout
    SIL System Integration Laboratory SM Standard Missile SRBM Short Range
    Ballistic Missile SRR System Requirements Review

    STSS Space Tracking and Surveillance System
    TILL Target Illuminator Laser
    THAAD Terminal High Altitude Area Defense
    UEWR Upgraded Early Warning Radar
    USNORTHCOM U.S. Northern Command
    USPACOM U.S. Pacific Command
    USSTRATCOM U.S. Strategic Command
    VAFB Vandenberg Air Force Base
    WSMR White Sands Missile Range

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    United States Government Accountability Office Washington, DC 20548

    March 31, 2005

    Congressional Committees

    Our nation's first missile defense system for protecting the United States
    from intercontinental ballistic missile (ICBM) attacks is expected to be
    activated for defensive operations in the coming months. This initial
    capability is the culmination of efforts on the part of the Missile
    Defense Agency (MDA) and other Department of Defense (DOD) components in
    response to the President's December 2002 directive to begin fielding an
    initial set of missile defense capabilities to meet the near-term
    ballistic missile threat to our nation. It also represents a major result
    of the $85 billion invested in ballistic missile defense programs since
    fiscal year 1985. DOD's investment in missile defense continues, as
    indicated by proposed budgets for the next few years. The Department
    estimates MDA will need $66.5 billion between fiscal years 2005 and 2011
    to continue work in this area, with fiscal year 2005 appropriations of
    $8.8 billion accounting for 13 percent of DOD's total research and
    development budget.1

    The initial capability, which DOD refers to as Limited Defensive
    Operations (LDO), is the first step of a national priority to develop,
    field, and evolve over time an overarching Ballistic Missile Defense
    System (BMDS). While DOD envisions a BMDS capable of protecting the United
    States, deployed forces, friends, and allies from ballistic missile
    attacks of all ranges, the LDO capability is primarily designed to provide
    some protection of the United States against long-range ballistic missile
    attacks out of Northeast Asia.

    In developing the BMDS, MDA is attempting to follow an evolutionary
    acquisition strategy in which the development and fielding of capabilities
    is pursued in 2-year blocks. The configuration of a given block builds on
    the work completed in previous blocks. Block 2004, being deployed during
    the calendar years 2004-2005, is the first biennial increment of the BMDS

    1DOD also funds missile defense activities outside of MDA. The Army
    requested approximately $4.5 billion for the development and procurement
    of its Combined Aggregate Program-consisting of Patriot and the Medium
    Extended Air Defense System- during fiscal years 2006 through 2011.
    Appendix IX provides additional information on this program.

    to provide an integrated set of capabilities. LDO represents an interim
    capability on the path to full Block 2004 fielding.

    The National Defense Authorization Act for Fiscal Year 2002 directed DOD
    to establish schedule, testing, performance, and cost goals for its
    ballistic missile defense programs.2 As established by DOD, the goals
    highlight, by block, overall cost, schedule, and performance objectives
    for BMDS development and specify the quantities and locations of specific
    BMDS components3 planned for operational use. The act also directed us to
    assess, at the conclusion of each of fiscal years 2002 and 2003, the
    extent to which MDA achieved the goals it established. We delivered an
    assessment covering fiscal year 2003 to Congress in April 2004.4

    Congress has since continued to require our assessment through fiscal year
    2006.5 To fulfill this mandate, we examined the progress that MDA made in
    fiscal year 2004 toward its stated goals. For example, many activities
    completed in fiscal year 2004 by the various element programs pertain to
    the completion of the LDO capability, which is an integral part of the
    Block 2004 goals. While conducting this review, we identified issues
    associated with MDA's ability to fund future development and fielding of
    its missile defense capabilities and with MDA's application of the block
    approach. Our report includes these observations.

    The accomplishment of MDA program goals is ultimately achieved through the
    efforts of individual BMDS elements, such as Ground-based Midcourse
    Defense and Airborne Laser. Therefore, we based our assessment on the
    progress made in fiscal year 2004 by those elements that are under the
    management of MDA and that are being developed as part of a block
    capability. The elements we reviewed accounted for 72 percent of MDA's
    fiscal year 2004 research and development budget. Details of our scope and
    methodology can be found in appendix X.

    2 Pub. L. No. 107-107, section 232.

    3 Functional pieces of system equipment, such as radars and interceptors,
    are referred to as "components."

    4 GAO, Missile Defense: Actions Are Needed to Enhance Testing and
    Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004).

    5 Ronald W. Reagan National Defense Authorization Act for Fiscal Year
    2005, Pub. L. No. 108-375, section 233.

    Results in Brief

    By the end of fiscal year 2004, MDA carried out activities needed to field
    an initial missile defense capability, as planned. This included delivery
    and emplacement of Ground-based Midcourse Defense interceptors; upgrades
    of ground-based radars; enhancements to Aegis Navy ships for improved
    surveillance and tracking; development of command and control software for
    system operation; and tests to verify that components of this initial
    capability can communicate as part of an integrated whole. However, the
    performance of the system remains uncertain and unverified, because MDA
    has not successfully completed a flight test using
    operationallyrepresentative hardware and software. Additionally, the
    development of system elements cost approximately $370 million more than
    planned during fiscal year 2004. To cover much of this cost overrun, MDA
    deferred work planned for fiscal year 2004, redirected funds earmarked for
    other programs, and requested additional funds in its fiscal year 2005
    budget to cover the cost of deferred work.

    Two issues have relevance for decision makers in Congress and DOD when
    considering future budget decisions for the missile defense program.
    First, although MDA has received nearly all funding requested in the past
    few years, the agency is expected to face increased funding risks-arising
    from sources both outside and within DOD-in the years ahead. MDA plans to
    request, on average, about $10 billion in research and development funding
    per year over the 2006-2011 time period to support continued development,
    procurement, and sustainment of hardware and software that MDA is
    fielding.6 However, DOD's acquisition programs are likely to be competing
    for a decreasing share of the total federal budget that is allocated to
    discretionary (non-mandatory) spending. Also, within DOD, MDA's programs
    are competing against hundreds of technology development and acquisition
    programs for DOD's research and development budget-$70 billion in fiscal
    year 2005-and cost growth of existing weapon programs7 puts even more
    pressure on MDA's share of research and development dollars. Additionally,
    funding risks can be expected from cost growth of ongoing MDA programs.
    For example, as part of the restructuring of MDA's Airborne Laser program,
    the cost to

    6 Congress authorized DOD's use of funds appropriated for MDA research,
    development, test, and evaluation for the fielding of ballistic missile
    defense capabilities. Pub. L. No. 108-136, section 222; Pub. L. No.
    108-375, section 231.

    7 We found, for example, that research and development cost estimates grew
    $6.7 billion for the Joint Strike Fighter in calendar year 2003 and $9.2
    billion for the Future Combat System in fiscal year 2004.

    accomplish the objective of developing and demonstrating a prototype
    aircraft increased by $1.5 billion. Finally, procurement and sustainment
    will demand increasing levels of MDA's funding as more components are
    fielded over time.

    Second, we observed that MDA's cost goal for a given block-which, by
    definition, is MDA's budget for all developmental and fielding activities
    associated with the block-is not aligned with the block's fielding goals.
    According to MDA policy, for example, interceptors identified with the
    Block 2004 fielding goals and fielded during calendar years 2004-2005
    should be funded as part of the Block 2004 cost goal. However, we found
    that MDA has not been consistently matching a block's cost and fielding
    goals. For example, Block 2004 funds are used to procure 32 Aegis
    Ballistic Missile Defense missiles, but of these missiles, 11 will be
    delivered in 2004-2005 and the remaining missiles will be delivered during
    2006-2007. Also, counter to the definition of a block as an integrated set
    of capabilities fielded during the 2-year block window, the Airborne Laser
    program will not field any capabilities during Block 2004 although Block
    2004 funds are used in the program's development.

    We are recommending that MDA clarify its block policy to ensure that a
    block's cost and fielding goals are consistently aligned. DOD concurred
    with our recommendation.

    Background 	Ballistic missile defense is a challenging mission for DOD,
    requiring a unique combination of defensive components-space-based
    sensors, surveillance and tracking radars, advanced interceptors, command
    and control, and reliable communications-working together as an integrated
    system. A typical scenario to engage an ICBM is expected to unfold as
    follows:

    o  	Overhead satellites detect a missile launch and alert the command
    authority of a possible attack.

    o  	Upon receiving the alert, the BMDS directs its land- and sea-based
    radars to track the missile complex and (if so designed) to identify the
    warhead from decoys and associated objects.

    o  	Based on accurate track data, an interceptor-consisting of a "kill
    vehicle" mounted atop a booster-is launched. The interceptor boosts itself
    toward the predicted intercept point and releases its kill vehicle to
    engage the threat.

    o  	The kill vehicle uses its onboard sensors and divert thrusters to
    acquire, identify, and steer itself into the warhead. With a combined
    closing speed on the order of 10 kilometers per second (22,000 miles per
    hour), the warhead is destroyed through a "hit-to-kill" collision with the
    kill vehicle.

    To meet this challenge, DOD intends to develop and field a ballistic
    missile defense system capable of defeating ballistic missiles during all
    phases of flight (see fig. 1).

    Booster Burnout Boost phase Midcourse phase Midcourse phase Boost phase is
    the first phase of a ballistic missile's trajectory, during which a
    missile's rocket motors are thrusting. This phase typically lasts 3-5
    minutes for intercontinental ballistic missiles. Midcourse phase is the
    phase after which the missile has stopped thrusting and the deployed
    warhead and associated objects (e.g., decoys) travel through space on a
    predictable path. This phase can last 20 minutes for intercontinental
    ballistic missiles and provides the largest window of opportunity for
    intercepting the enemy missile. Terminal phase is the final phase of a
    ballistic missile's trajectory, lasting about a minute or less. This is
    when the warhead reenters the atmosphere. To defend against a ballistic
    missile attack during this phase, the defensive capability must be
    positioned close to the warhead's intended target. (100 km
    altitude)Reentry
                                     Terminal phase

    Source: MDA (data); GAO (presentation).

    Under the evolutionary, capabilities-based acquisition strategy being
    pursued by DOD, the BMDS has no fixed design or final architecture, and
    there are no firm requirements. According to DOD, this approach gives MDA
    increased flexibility to develop a system that can more readily respond to
    a changing threat and more easily insert new technologies for enhancing
    system performance.

    The missile defense capability of Block 2004 is primarily one for
    defending the United States against ICBM attacks from Northeast Asia and
    the Middle East. It is built around the Ground-based Midcourse Defense
    (GMD) element, augmented by shipboard Aegis Ballistic Missile Defense
    (Aegis BMD) radars, and integrated by the Command, Control, Battle
    Management, and Communications (C2BMC) element. The Block 2004

    BMDS also includes the Army's Patriot element for point defense of
    deployed U.S. forces against short-and medium-range ballistic missiles.
    The Block 2006 program builds directly upon Block 2004. It continues
    element development and funds the next increment of fielding that adds
    interceptors, new radars, and enhanced battle management capabilities.

    MDA is also carrying out an extensive research and development effort to
    expand its current operational capability into future blocks. During
    fiscal year 2004, MDA funded the development of four other major BMDS
    elements-Airborne Laser (ABL), Kinetic Energy Interceptors (KEI), Space
    Tracking and Surveillance System (STSS), and Terminal High Altitude Area
    Defense (THAAD)-in addition to those elements comprising the Block 2004
    defensive capability. MDA intends to integrate these elements, when ready,
    into future BMDS blocks. Table 1 provides a brief description of these
    elements, and more information about them is provided in appendixes II
    through VIII of this report.8

                  Table 1: BMDS Elements Element Missile defense role

    Aegis Ballistic Missile Defense	Aegis BMD is a ship-based system designed
    to destroy short- and mediumrange ballistic missiles during the midcourse
    phase of flight. Its mission is twofold: to protect deployed U.S. forces,
    allies, and friends against ballistic missile attacks, and to serve as a
    forward-deployed BMDS sensor, especially in support of the GMD mission.
    MDA has plans to deliver up to 66 Aegis BMD missiles- the Standard Missile
    3-and 18 ships by the end of fiscal year 2009.

    Airborne Laser 	ABL is an air-based system designed to destroy all classes
    of ballistic missiles during the boost phase of flight. ABL employs a
    high-energy chemical laser to rupture a missile's motor casing, causing
    the missile to lose thrust or flight control. MDA plans to demonstrate
    proof of concept in a system demonstration no earlier than 2008. The
    availability of a militarily useful capability is contingent on the
    success of the demonstration.

    Command, Control, Battle Management, and C2BMC is the integrating and
    controlling element of the BMDS. Although it is

    Communications 	part of the Block 2004 defensive capability, its role
    during this period is limited to mission planning and situational
    awareness-monitoring system status and missile trajectories.

    8 Table 1 lists those elements of the BMDS for which we completed a
    detailed review of progress achieved in fiscal year 2004. Because we were
    directed to assess MDA's progress in achieving its program goals and MDA
    does not have funding and management responsibility for the Patriot
    system, our review of this program-provided in appendix IX-is not as
    detailed. Rather, we provide information on how Patriot's eventual
    replacement, Medium Extended Air Defense System (MEADS), will be inserted
    into fielded Patriot units.

                              Element Missile defense role

    Ground-based Midcourse Defense 	GMD is a ground-based system designed to
    destroy ICBMs during the midcourse phase of flight. Its mission is to
    protect the U.S. homeland against ballistic missile attacks from Northeast
    Asia and the Middle East. GMD is part of the Block 2004 defensive
    capability and has plans to field 18 interceptors by 2005. MDA plans to
    field 20 additional interceptors in Alaska by 2010.

    Kinetic Energy Interceptors	KEI is a land-based element designed to
    destroy ICBMs during the boost and ascent phases of flight. MDA expects to
    demonstrate a defensive capability through flight testing during Block
    2012 and expand this capability to sea basing in subsequent blocks.

    Space Tracking and Surveillance System	The Block 2006 STSS element
    consists of a constellation of two demonstration satellites. MDA intends
    to use these satellites for testing missile warning and tracking
    capabilities. Any real operational capability of next-generation
    satellites, however, will not be available until the next decade.

    Terminal High Altitude Area Defense 	THAAD is a ground-based element
    designed to destroy short- and mediumrange ballistic missiles during the
    late-midcourse and terminal phases of flight. Its mission is to defend
    deployed U.S. forces and population centers. MDA plans to field a Block
    2006/2008 unit consisting of 24 missiles in 2009.

    Sources: MDA (data); GAO (presentation).

    As part of MDA's planning process, MDA defines overarching program goals
    for the development and fielding of BMDS block configurations. The goals
    describe the composition of a block (components and elements under
    development and planned for fielding), provide the costs and schedules
    associated with element development and fielding, and summarize
    performance capabilities at the component and system levels.9 A block's
    cost goal is the portion of MDA's budget dedicated to development and
    fielding activities associated with the block.

    MDA has established Block 2004 and 2006 "Development Goals" for the
    continued development and testing of six BMDS elements-ABL, Aegis BMD,
    C2BMC, GMD, STSS, and THAAD-and stand-alone components such as
    forward-deployed radars.10 These goals identify the developmental areas
    MDA is funding as part of the Block 2004 and 2006 programs. The associated
    cost goals, which are the planned budgets for these activities, are
    approximately $5.7 billion and $12.2 billion for Block 2004 and 2006,
    respectively.

    9 MDA goals are formally detailed in the agency's budget estimates and in
    the top-level MDA document, Statement of Goals.

    10 The KEI program is funded by the Block 2012 program and, accordingly,
    is not part of the Block 2004 and 2006 goals.

    MDA also established a complementary set of goals-referred to as "Fielded
    Configuration" Goals11-in response to the President's December 2002
    direction to begin fielding a limited ballistic missile defense
    capability. The fielding goals build directly upon the Development Goals
    but aim to deliver an operational missile defense capability during a
    given block's time frame. For example, Block 2004 goals identify the
    components of the BMDS available for defensive operations by the end of
    December 2005. MDA states that the cost goals associated with the Block
    2004 and 2006 fieldings are $1.7 billion and $3.8 billion, respectively.
    Therefore, the total cost goals for Block 2004 and 2006 are $7.4 billion
    and $16.0 billion, respectively.

    Figure 2 depicts MDA's total budget between fiscal years 2005 and 2011
    broken out by block.12 As illustrated, funding for a given block spans
    more than the 2-year period. For example, MDA estimates it will need about
    $12.0 billion to fund Block 2008 activities over the next 7 years through
    2011.

    11 In budget documentation submitted in February 2004, MDA referred to
    these goals as "Operational Alert Configuration" Goals. "Fielded
    Configuration" is new terminology.

    12 Mission area investment noted in figure 2 represent funding of major
    mission areas that contribute to the development and enhancement of all
    blocks. For example, these investments fund system design and engineering
    activities, testing, advanced concept development, and other special
    programs.

                            Figure 2: Breakout of MDA Budget

                                  Dollars in millions

    10,000

                                         8,000

                                         6,000

                                         4,000

                                         2,000

                                           0

    2005 2006 2007 2008 2009 2010

                           Block 2014 Mission area investment

    Block 2008 Block 2006 Block 2004

    Block 2012

    Block 2010 Source: MDA (data); GAO (presentation).

    Note: MDA's total budget for a given fiscal year is represented by the
    expenditures for all block activities plus mission area investments. For
    example, MDA's fiscal year 2005 budget of $8.806 billion is comprised of
    $1.605 billion for mission area investments, $2.854 billion for Block 2004
    activities, $3.216 billion for Block 2006 activities, $817 million for
    Block 2008 activities, $48 million for Block 2010 activities, and $267
    million for Block 2012 activities.

    Many activities completed in fiscal year 2004 by the various element
    programs pertain to the completion of the LDO capability-the initial
    capability fielded by MDA. Although LDO is not formally listed by MDA as a
    Block 2004 goal, it does include the delivery of a capability on the path
    to meeting the fielding goals. Table 2 summarizes MDA's fielding goals.

                  Table 2: MDA Block 2004 Fielded Configuration Goals

    LDO Block 2004 BMDS element Functionality (Sept. 30, 2004) (Dec. 31, 2005)

    GMD        Defend the U.S. o    5 Interceptors    o     20 Interceptors
                 homeland against
                ICBM attacks      o  Upgraded Cobra Dane o   Upgraded Cobra Dane
                                            radar                   radar
                                  o   1 Upgraded early   o       2 Upgraded early
                                        warning radar              warning radars
                                           (Beale)          (Beale, Fylingdales)
                                  o  Fire control nodes  o    Sea-based X-band
                                                                    radar
                                                         o   Fire control nodes

    LDO Block 2004 BMDS element Functionality (Sept. 30, 2004) (Dec. 31, 2005)

    Aegis BMD Sea-based engagement capability  o  3 Aegis destroyers
    (long-range  o  Up to 9 missiles

    against short- and medium-range surveillance and tracking only)  o  10
    Aegis destroyers (long-rangeballistic missiles; early tracking of
    surveillance & tracking only)ICBMs as a BMDS sensor

    o  3 Aegis cruisers (engagement)

    C2BMC Integrating element of the BMDS;  o  Software Build 4.3  o  Software
    Build 4.5

    situational awareness; mission  o  Suites (command centers) and  o  Suites
    (command centers) and planning supporting hardware at various supporting
    hardware at various locations locations

    Assessment of Scheduled Activities in Fiscal Year 2004

    Sources: MDA (data); GAO (presentation).

    Note: Performance goals are not presented in this report because they are
    classified.

    The GMD, Aegis BMD, and C2BMC programs completed scheduled activities in
    fiscal year 2004 necessary to support the fielding of LDO, an integral
    part of Block 2004. Most notably, the GMD program completed construction
    activities at GMD sites, delivered and emplaced five GMD interceptors in
    their silos at Fort Greely, Alaska, and completed the upgrade of the Cobra
    Dane radar. The Aegis BMD program upgraded three destroyers for the
    long-range surveillance and tracking mission that supports homeland
    defense against ICBMs. In addition, the C2BMC program completed software
    development, activated control centers, and worked to integrate elements
    of the system.

    These programs also continued developmental and fielding activities in
    early fiscal year 2005 to enhance LDO so that the full Block 2004
    capability could be realized by the end of calendar year 2005. For
    example, the GMD program delivered a sixth interceptor at Fort Greely in
    October and two interceptors at Vandenberg Air Force Base in December,
    completed the upgrade of the Beale early warning radar, and initiated the
    upgrade of the Fylingdales early warning radar. In addition, the Aegis BMD
    program completed the assembly of five missiles and continued with
    software development in the upgrade of its cruisers and destroyers.
    Similarly, the C2BMC program continued with software development and
    testing leading to the final Block 2004 version.

    Progress made toward achieving program goals relative to the fielding of
    the LDO and Block 2004 capabilities is summarized in tables 3 and 4,
    respectively. Detailed evaluations of activities completed in fiscal year
    2004 by all BMDS elements are given in appendices II through VIII of this
    report.

    Table 3: Progress toward Achieving LDO

    BMDS LDO
    element Functionality (Sept. 30, 2004) Progress assessment

    GMD	Defend the U.S. homeland  o  5 Interceptors against ICBM attacks from
    o  Upgraded Cobra Dane Northeast Asia radar

    o  	1 Upgraded early warning radar (Beale)

    o  Fire control nodes

    Aegis BMD	Early tracking of ICBMs as  o  3 Aegis destroyers (longa BMDS
    sensor range surveillance and

    The GMD program emplaced 5 interceptors at Fort Greely, Alaska, by
    September 2004. Many site preparation activities, including the
    construction of facilities and interceptor silos at Fort Greely to prepare
    the system for LDO, were completed.

    The GMD program completed the upgrade of the Cobra Dane radar on Shemya
    Island, Alaska. The upgrades, which consist of hardware and software
    improvements, enable the radar to more accurately track launched missiles
    for the planning of intercept engagements.

    The upgrade of the early warning radar at Beale Air Force Base,
    California, was completed in December 2004. Although radar hardware
    installation is complete, final software installation and testing are
    ongoing with completion expected in the middle of fiscal year 2005.

    Aegis BMD will be used as a forward-deployed sensor to provide
    surveillance and early tracking of long-range ballistic missiles to
    support the GMD mission. This is being accomplished through the
    improvement of Aegis BMD software and hardware. The Aegis BMD program
    office completed the upgrade of 2 destroyers for this role in September
    2004; a third destroyer became available in October 2004. All 3 destroyers
    are available for operations.

                                     tracking only)

    C2BMC Integrating element of o        Software Build 4.3 The C2BMC program
             the                            office completed activities needed to
                                         Suites (command centers) ready the C2BMC
               BMDS; situational        element for LDO. Of significance, the and
               awareness; mission   o       supporting hardware at LDO "build" of
                    planning            C2BMC, known as spiral 4.3, was delivered
                                               various locations and C2BMC suites
                                              activated. The program also carried
                                         out a number of activities enabling BMDS
                                                                  integration and
                                                  warfighter training.

                        Sources: MDA (data); GAO (presentation).

    Table 4: Progress toward Achieving Block 2004 Fielded Configuration Goals\

    BMDS Block 2004
    element Functionality (Dec. 31, 2005) Progress assessment

    GMD	Defend the U.S. homeland against ICBM attacks from Northeast Asia and
    the Middle East  o  20 Interceptors

    o  Upgraded Cobra Dane radar

    o  	2 Upgraded early warning radars (Beale, Fylingdales)

    o  Sea-based X-band radar

    o  Fire control nodes The GMD program continued to add interceptors to its
    inventory. As of December 2004, 6 interceptors are in silos at Fort
    Greely, Alaska, and 2 at Vandenberg Air Force Base, California. The GMD
    program aims to increase its inventory of interceptors for the Block 2004
    defensive capability to 20 by December 2005. However, MDA designated 2
    interceptors as test assets. Therefore, the Block 2004 GMD inventory will
    consist of 18 interceptors.

    The GMD program began upgrading the early warning radar at Fylingdales
    Airbase in England. Facility modifications are on track to be completed by
    the first quarter of fiscal year 2006.

    The GMD program office completed a variety of activities in the
    development of the sea-based X-band radar but assesses its planned
    completion by the first quarter of fiscal year 2006 as high risk.

    Aegis BMD	Sea-based engagement capability against short-and medium-range
    ballistic missiles; early tracking of ICBMs as a BMDS sensor  o  Up to 9
    missiles

    o  	10 Aegis destroyers (longrange surveillance & tracking only)

    o  3 Aegis cruisers (engagement) As of December 2004, the Aegis BMD
    program completed assembly of 5 missiles, which are available for
    fielding. Program officials stated that the program expects to have
    available a slightly smaller inventory of missiles by December 2005 than
    was originally planned.

    The Aegis BMD program aims to increase to 10 by December 2005 the number
    of upgraded destroyers providing surveillance and early tracking of
    long-range ballistic missiles in support of the GMD mission. As of January
    2005, 5 had been upgraded.

    The Aegis BMD program is also upgrading Aegis cruisers for the element's
    engagement role; that is, to defend against short- and medium-range
    ballistic missiles. This requires physical modification to the ships as
    well as software upgrades for the engagement role. As of December 2004, 1
    cruiser-a ship dedicated to testing- has been upgraded. The program
    expects to complete the upgrade of 1 additional cruiser (rather than 2) by
    December 2005.

    C2BMC Integrating element o  Software Build 4.5  The C2BMC program office
                              of                        continued with activities
                                                        needed to ready the C2BMC
             the BMDS;                                       element for the full
             situational            Suites (command     Block 2004 capability. In
             awareness; mission  o  centers) and          particular, development
             planning               supporting hardware     of the interim build,
                                    at various          spiral 4.4, was completed
                                    locations               in November 2004. The
                                                        program office
                                                        anticipates that
                                                        development of the final
                                                        Block 2004 build, spiral
                                                        4.5, will be completed in
                                                        March
                                                        2005, after which testing
                                                               will begin.

    Sources: MDA (data); GAO (presentation).

    DOD did not activate the LDO capability MDA developed and fielded.
    Although the LDO capability was expected to be placed on alert by the end
    of September 2004, officials from the office of the Commander of U.S.
    Strategic Command (USSTRATCOM) told us that September 30, 2004, was a
    planning date rather than a "hard date." The officials indicated that the
    system had not been put on alert for the following reasons:

    o  	Shakedown. Since October 2004, the system has been undergoing a
    "shakedown"-a necessary transition phase between development and
    operations. During this time, the system is exercised as though an attack
    is under way. It enables the warfighter to become familiar with the system
    and, importantly, to plan for unexpected failures.

    o  	Training. While initial training of operators has been completed, more
    is needed. For weapon systems in general, the warfighter does not have a
    military capability without trained operators, and training cannot begin
    until a weapon system is delivered (or at least far along in development).

    o  	Policy. USSTRATCOM must receive an Execution Order from the Secretary
    of Defense before the LDO capability is declared operational. This order,
    which would reflect DOD policy, is to include a clear identification of
    command and control relationships. USSTRATCOM plans to advise the
    Secretary of Defense on the military utility of the system and could
    advise against declaring the system operational if, for example, more
    testing were needed to increase the command's confidence in the system's
    effectiveness. Also, the concept of operations (CONOPS) was not finalized,
    and issues such as the integration of defensive and offensive operations
    still had to be worked out.

    USSTRATCOM officials further explained that the declaration of LDO may or
    may not mean the system is "on alert" for defensive operations-LDO
    operation is more complicated than "being on" or "being off" alert. For
    example, the system could be in "developmental mode" when operated by MDA
    for testing but capable of being transitioned to an "operational mode" for
    defensive operations given sufficient time.13 As of March 2005, DOD had
    not announced a specific date for activating the initial missile defense
    capability.

    13 Additional details on system availability and readiness are classified.

    Assessment of Testing in Fiscal Year 2004

    MDA completed a number of ground tests and exercises in fiscal year 2004,
    but key flight tests using LDO-configured components were delayed. For
    example, MDA verified integration and connectivity between its GMD, Aegis
    BMD, and C2BMC elements, and the warfighter participated in several
    missile defense exercises (wargames) as part of their training to
    understand and operate the system. However, the GMD program office
    conducted two booster tests (non-intercept attempts) in fiscal year 2004
    even though six flight tests were planned. As a result, GMD interceptors
    were emplaced in silos before flight testing was completed to verify that
    LDO hardware and software could function in an operational environment.

    Significant Testing Was A summary of significant testing completed during
    fiscal year 2004 by each

    Completed 	of the respective element programs is presented in table 5.
    More thorough discussions of element testing are given in appendices II
    through VIII of this report.

                Table 5: Status of Element Testing-Planned and Achieved

    Element Key testing accomplished

    Aegis BMD	The Aegis BMD program conducted Flight Mission 6 (FM-6) in
    December 2003, during which an SM-3 missile successfully intercepted a
    short-range ballistic missile target. In addition, the Aegis BMD element
    participated in non-intercept test events to assess the element's
    long-range tracking and surveillance (LRS&T) function-that is, using its
    shipboard SPY-1 radar to track long-range ballistic missiles-and to verify
    connectivity with the BMDS, that is, pass track data to the C2BMC and GMD
    elements.

    The program also conducted a series of ground tests focused on validating
    design updates to its Solid Divert and Attitude Control System (SDACS)-a
    collection of solid-fuel thrusters used to steer the kinetic warhead (kill
    vehicle) into its designated target. In response to a flight test failure
    in 2003, the program modified the design of this subcomponent to improve
    its performance and reliability during high-energy pulse operation.

    ABL 	The ABL program demonstrated "First Light"-the combined operation of
    individual laser modules to generate a single laser beam-in the first
    quarter of fiscal year 2005 (Nov. 2004). Although the achievement of
    "First Light" is a key milestone for the program, it was not intended to
    be an operational demonstration of a high-power laser, that is, at full
    power and for the length of time needed to shoot down a boosting missile.
    Rather, the laser's operation for a fraction of a second demonstrated
    successful integration of subsystems.

    The ABL program also completed "First Flight" in the first quarter of
    fiscal year 2005 (Dec. 2004). Also a key milestone for the program, "First
    Flight" demonstrated the flight worthiness of the demonstrator aircraft
    with its newly installed laser beam control system.

    C2BMC	The C2BMC program conducted system-level testing of its LDO
    software, spiral 4.3, during fiscal year 2004 and into fiscal year 2005.
    Spiral 4.3 was tested in a number of venues, including Pacific

    ac

    Explorer III, Glory Trip 185,b a GMD-focused System Integration and
    Checkout, and wargames that enabled the warfighter to exercise the C2BMC
    in a simulated operational environment.

    Element Key testing accomplished

    GMD	During fiscal year 2004, the GMD program conducted two non-intercept
    flight tests-one for each of its Lockheed and Orbital Sciences Corporation
    (OSC) boosters. Booster objectives were achieved in both flight tests,
    however, the mock kill vehicle failed to deploy from the Lockheed booster.
    The Lockheed booster test was conducted 11 months late because of problems
    with a propellant vendor. The OSC booster test was conducted 6 months
    late.

    GMD conducted a series of integrated ground tests in fiscal year 2004.
    These tests employed

    actual GMD-component processors integrated together in a
    hardware-in-the-loop facility that

    emulated GMD operation in a simulated environment. They also included
    warfighter participation to

    aid in the development of operational concepts. c

    Finally, the GMD program performed a series of System Integration and
    Checkouts of its fielded components. While these checkouts did not assess
    element performance, they demonstrated connectivity, functionality, and
    integration as part of final preparations for defensive operations.

    KEI 	The KEI program initiated element development in December 2003 when
    MDA selected Northrop Grumman as the prime contractor. At this early stage
    of development, no significant testing has been conducted by the program
    office.

    Because of the need to restructure the prime contract in response to
    reduced funding, KEI's first integrated flight test is planned for no
    earlier than 2010, depending on the outcome of the program's re-planning.

    STSS 	MDA is currently working on the first increment of STSS, which is
    focused on the preparation and launch of two demonstration satellites
    partially built under the former Space Based Infrared System Low program.
    MDA plans to launch these satellites in 2007. At that time, testing will
    be conducted to assess how well the satellites perform surveillance and
    tracking functions.

    THAAD	The THAAD flight-test program consists of 15 flight-test events
    divided among Blocks 2006 and 2008. Because of delays in booster
    deliveries arising from the need for a new propellant vendor, the first
    set of flight tests have been delayed 3-5 months. The element's first
    test, a control test flight of the missile (non-intercept attempt), is
    planned to be conducted in the third quarter of fiscal year 2005, a
    two-quarter slip. The element's first intercept attempt, Flight Test 4, is
    scheduled to be conducted during the second quarter of fiscal year 2006, a
    two-quarter slip.

    Sources: MDA (data); GAO (presentation).

    aPacific Explorer exercises are field exercises to demonstrate BMDS
    connectivity. An Aegis destroyer participates by tracking an actual
    missile (or a simulated target) and passes track data to the C2BMC.

    bGlory Trips are live flight tests during which a Minuteman III missile is
    launched from Vandenberg Air Force Base as part of Follow-on Test and
    Evaluation.

    cSystem Integration and Checkouts are conducted by the GMD program to
    verify connectivity, functionality, and integration of system components.
    They are not used to assess system performance.

                                Delays and Cancellations
                                of GMD Flight Tests Slow
                                Attainment of Knowledge

    The GMD program conducts integrated flight tests (IFT) to realistically
    demonstrate element operation using actual hardware and software. MDA
    planned to conduct several flight tests during fiscal year 2004 to gain
    knowledge about the element's effectiveness and operation under realworld
    conditions. However, only two of six flight tests scheduled to occur in
    fiscal year 2004 were conducted. As noted in table 5, these were
    nonintercept tests of the Lockheed and OSC boosters. A second Lockheed
    booster test (IFT-13A) was deferred indefinitely; two intercept attempts

    utilizing LDO-configured hardware and software (IFT-14 and -15) were
    either delayed or cancelled; and, IFT-13C, the first flight test in 2
    years with the potential for an intercept,14 was delayed 9 months. When
    IFT-13C was conducted in December 2004, the interceptor failed to launch,
    which precluded the fulfillment of key test objectives associated with the
    LDOconfigured interceptor.

    IFT-13C was of particular significance because it was to have demonstrated
    operational aspects of the LDO capability for the first time in a flight
    test environment. For example:

    o  	IFT-13C was the first flight test to utilize LDO hardware and
    software. Previous intercept attempts employed a surrogate booster and an
    earlier configuration of the kill vehicle. In particular, IFT-13C was to
    have launched a GMD interceptor comprised of the operational kill vehicle
    mated to an OSC booster.

    o  	IFT-13C offered the opportunity to exercise Aegis BMD tracking and
    connectivity in a manner consistent with an actual defensive mission, that
    is, to demonstrate Aegis BMD's ability to serve as a fire-control radar15
    for ICBM engagements. However, because weather exceeded peacetime
    operational safety limits, Navy commanders withdrew Aegis BMD
    participation from IFT-13C; the program office concurred with the
    decision.

    The delay of IFT-13C by 9 months demonstrates that MDA is responsibly
    following an event-driven test program, that is, conducting tests only
    when ready. IFT-13C was delayed more than once to correct technical
    problems with the interceptor and to upgrade the test interceptor to a
    configuration that matches the ones deployed. However, the event-driven
    approach was not carried over into fielding. Eight GMD interceptors were
    in their silos by the end of December 2004 before flight testing was
    completed to verify that LDO hardware and software could function in an
    operational environment. If future flight testing identifies problems with
    the

    14 IFT-13C was a "zero-offset flyby." Although intercepting the target was
    not a test objective, no action was taken to prevent an intercept.

    15 The fire control radar is the primary radar for providing the necessary
    targeting data to the fire control node (battle management component). In
    particular, data provided by the fire control radar are used to generate
    an interceptor flyout solution that guides the interceptor to the target.

    interceptor, MDA could incur added costs to recall and update fielded
    assets.

    Aegis BMD Conducted Limited Testing of Its Long-Range Surveillance and
    Tracking Capability

    In anticipation of fielding for LDO, the Aegis BMD flight test program
    focused on long-range surveillance and tracking-that is, to operate the
    element as a forward-deployed BMDS sensor-in support of the GMD mission.
    To this end, by October 2004, the Aegis BMD program completed software
    development and upgraded three Aegis destroyers for this role; they are
    available for operations. However, the surveillance and tracking function
    has only been partially demonstrated. For example:

    o  	Aegis BMD participated in Glory Trip 185, during which an Aegis
    destroyer successfully tracked a Minuteman III ICBM launched from
    Vandenberg Air Force Base. However, the test did not exercise Aegis BMD
    tracking and connectivity in a manner needed for an actual defensive
    mission, that is, as an integral part of the system during which the
    destroyer acts as a fire control radar. In addition, the software tested
    was not the version installed on fielded destroyers.

    o  	During the Pacific Explorer II field exercise, a destroyer in the Sea
    of Japan successfully passed track data of a simulated target, thereby
    demonstrating connectivity with the BMDS. In Pacific Explorer III, an
    Aegis destroyer planned to track an actual missile and pass track data to
    the BMDS. Although the destroyer tracked the live target missile, a
    malfunction with the target limited the amount of data collected by the
    Aegis destroyer. Specifically, the target ended its flight before Aegis
    BMD could send the GMD element all of the information needed for engaging
    the target.

    o  	Finally, delays in the GMD flight test program precluded Aegis BMD
    from participating in two planned integrated flight tests, IFT-13C and
    IFT-14, during fiscal year 2004. Without these tests, MDA has not verified
    that the element's long-range surveillance and tracking capability will
    perform as desired in an actual defensive mission.

    MDA Mandated to Conduct Operationally Realistic Testing

    The 2005 Defense Authorization Act, section 234, directed DOD to conduct
    an operationally realistic test of the BMDS by October 1, 2005, and
    required the Secretary of Defense, in consultation with the Director,
    Operational Test and Evaluation (DOT&E),16 to prescribe appropriate test
    objectives. Such a test is expected to exercise the LDO and Block 2004
    configuration in a more realistic manner. Officials from the office of
    DOT&E told us that the test would be derived from an existing flight test
    with objectives focused more on operational than developmental aspects.

    DOT&E recently approved the operational test portion of MDA's Integrated
    Master Test Plan. The Integrated Master Test Plan establishes the
    framework for BMDS ground and flight testing through Block 2006. It is an
    overarching document that defines the test plans for the BMDS and its
    elements, identifies operational test objectives to support continuous
    characterization of demonstrated operational capability, and identifies
    associated test resources.

    Assessment of System Performance in Fiscal Year 2004

    MDA has conducted various ground and flight tests that provide some degree
    of confidence that the LDO capability-consisting of the GMD element, Aegis
    BMD destroyers for surveillance and tracking, and C2BMC for command and
    control-will operate as intended. In addition, MDA predicts that the LDO
    capability, although limited in inventory, will be effective17 in
    providing some protection of the United States against ICBM attacks from
    Northeast Asia. However, the agency has not verified that the LDO
    capability can operate as an integrated system without range-test
    limitations and artificialities (for example, using surrogate components
    to emulate missile defense functions), and operational testers within DOD
    state that there is not enough data to accurately characterize system
    performance.

    16 DOT&E is responsible for providing independent oversight of operational
    test and evaluation of major defense acquisition programs to verify their
    operational effectiveness and suitability for combat use. The Director is
    the principal operational test and evaluation official within DOD and
    advises the Secretary of Defense and Under Secretary of Defense for
    Acquisition, Technology, and Logistics on operational test and evaluation.
    The Director also provides responsible officials with advice on
    developmental testing.

    17 The term "effective" means that the BMDS can destroy an ICBM with a
    high probability of success. The exact figures, which depend on scenario,
    are classified.

    Assessment of LDO Effectiveness Subject to Interpretation

    MDA and DOT&E differ on derived estimates of LDO effectiveness. Both
    offices employed similar methodologies-that is, they identified critical
    functions needed to carryout a BMD engagement, estimated the probability
    of success for each function, and combined results into a "probability
    chain" to calculate a total probability of success for a given scenario.
    However, the assessments made by MDA and DOT&E differ in that they are
    based on different types and sources of information.

    MDA's assessment is based on the output from BMDS-level simulations using
    data derived from a variety of sources, including design specifications
    and output from high-fidelity simulations of various components (such as
    radars and interceptors). By employing digital simulations, estimates of
    system effectiveness are obtained over a wide range of conditions,
    scenarios, and system architectures. These simulations are anchored by
    data collected during flight testing so that their underlying models are
    reflective of real-world operation.

    DOT&E generated its estimates of system effectiveness by also
    approximating each factor of the "probability chain," but it relied on
    historical data and results from recent ground and flight tests. Based on
    this methodology, DOT&E concluded that there is not enough test data to
    accurately characterize system effectiveness-that is, the estimates are
    too uncertain to make definitive conclusions. In commenting on MDA's
    methodology, DOT&E officials made the following points:

    o  	MDA's computer-based assessments are appropriate for a developmental
    program, but there could be difficulty in interpreting results for
    operational considerations.

    o  	A noteworthy limitation of MDA's assessment is the lack of systemlevel
    performance data. Although its models provide a good representation of the
    system being built, fundamentally they are not predictive of actual system
    performance.

    The uncertainty in LDO effectiveness has a direct impact on how the
    warfighter operates the system. As noted by officials from USSTRATCOM, the
    uncertainty limits the warfighter's ability to formulate tactics and
    procedures in operating the system, especially with limited inventory.

    In addition, knowledge of component performance can play a useful role in
    fielding decisions by assisting decision makers in determining whether the
    capability available at the time warrants the cost of fielding, operating,

    and sustaining the system, or whether additional investment and
    development to enhance the capability are needed.

    Integrated Operation of LDO Capability Remains Unverified

    MDA has conducted a variety of tests that provide some degree of
    confidence that the LDO capability will operate as intended. For example,
    since 1999, the GMD program has conducted eight flight tests (intercept
    attempts)18 that emulated system operation against ICBM attacks. In
    addition, based on MDA documentation, the various functions of the BMD
    engagement-such as launch detection, tracking, interceptor launch, and
    intercept-have been demonstrated in a variety of venues, including
    simulations, ground tests, and flight tests. Technical indicators
    monitored by GMD, Aegis BMD, and C2BMC show that the elements' various
    components are on track to function as expected during a BMD engagement.
    For example, the Aegis BMD program projects that the Aegis SPY-1 radar is
    able to deliver adequate performance in support of the GMD mission.
    Furthermore, based on past flight tests, MDA states that discrimination
    performance of the GMD kill vehicle is adequate to meet system-level
    objectives relative to the Block 2004 threat.

    However, collectively, these accomplishments do not verify integrated
    system operation of the LDO capability because of inherent limitations and
    artificialities. An end-to-end test of system operation-beginning with
    launch detection and ending with intercept confirmation-should incorporate
    operational test objectives such as test realism, lack of scripting, and
    the utilization of production-representative hardware. Although MDA has
    progressed in demonstrating such objectives in a ground-test setting, they
    have yet to be demonstrated in end-to-end flight tests. As we reported in
    February 2004,19 GMD flight tests to date have demonstrated basic
    functionality of a representative missile defense system using surrogate
    and prototype components. In addition, they have shown success in
    intercepting a mock reentry vehicle in a developmental test environment.
    However, as developmental tests, they were scripted, did not use
    production-representative hardware and software, and

    18 GMD's December 2004 flight test, IFT-13C, and its February 2005 flight
    test, IFT-14, are not counted.

    19 GAO, Missile Defense: Actions Being Taken to Address Testing
    Recommendations, but Updated Assessment Needed, GAO-04-254 (Washington,
    D.C.: Feb. 26, 2004).

    required the placement of a C-band transponder20 on the target reentry
    vehicle. The transponder was essential for the execution of the flight
    tests-no ground radar of sufficient accuracy for guiding the interceptor
    to the intercept point was available.

    Although MDA has conducted many tests to exercise separate functions of
    the BMD mission, component-level testing in preparation for LDO has been
    incomplete. For example, MDA conducted wargames that enabled the
    warfighter to exercise the C2BMC in a simulated operational environment to
    gain insight in and provide feedback on C2BMC capabilities. Also, GMD
    radars and Aegis BMD destroyers took advantage of other DOD missions21
    that enabled these elements to exercise radar and battle management
    operations. However, some components have not been fully tested:

    o  	The Cobra Dane radar is located at Eareckson Air Station in Shemya,
    Alaska, at the western end of the Aleutian chain. Its close proximity to
    Russia allows it to perform its primary mission of collecting data on
    ICBMs and submarine-launched ballistic missiles launched into the
    Kamchatka impact area. In fiscal year 2004, the GMD program completed
    hardware installation and software upgrades to the Cobra Dane radar. To
    test these upgrades, Cobra Dane tracked a foreign missile launch and
    participated in an integrated ground test. However, the upgraded Cobra
    Dane radar has not participated in a flight test event as the primary fire
    control radar-a role it would need to fill in the event of a real threat.
    MDA may conduct a test during the third quarter of fiscal year 2005 using
    a long-range air-launched target to demonstrate the upgraded Cobra Dane
    under more operationally realistic conditions.

    o  	Aegis destroyers upgraded for the long-range surveillance and tracking
    capability have not been exercised in a manner consistent with an actual
    defensive mission. That is, the Aegis BMD element has not provided track
    data of a target, in real time, for use in planning a BMD mission against
    a target ICBM. Aegis BMD will first participate in a

    20 A transponder is a receiver-transmitter that will generate a reply
    signal under proper interrogation. The missile defense community also
    refers to the transponder as the "C-band beacon."

    21 Most notably are Glory Trips, which are live flight tests during which
    a Minuteman III missile is launched from Vandenberg Air Force Base as part
    of Follow-on Test and Evaluation.

    Assessment of System Cost in Fiscal Year 2004

    GMD flight test in this role in fiscal year 2005.22 Despite this concern,
    DOT&E officials believe that Aegis BMD can adequately perform its
    detection and tracking functions.

    We used contractor Cost Performance Reports in combination with Earned
    Value Management (EVM)23 analysis to assess progress made by the various
    element prime contractors toward MDA's cost and schedule goals during
    fiscal year 2004. The government routinely uses such reports to
    independently evaluate these aspects of the prime contractors'
    performance. Generally, the reports detail deviations in cost and schedule
    relative to expectations established under the contract. Contractors refer
    to deviations as "variances." Positive variances are generally associated
    with the accomplishment of activities under cost or ahead of schedule,
    while negative variances are often associated with the accomplishment of
    activities over cost or behind schedule. Cost Performance Reports provide
    program mangers and others with information on a contractor's ability to
    perform work within estimated cost and schedule. When reports show that
    the contractor is encountering problems that cause cost growth, program
    officials can then take actions to prevent further growth.

    We assessed MDA fiscal year 2004 cost performance by reviewing the cost
    performance of each system element, which, in turn, is based on the cost
    performance of its element prime contractor. We used this methodology
    because a large percentage of MDA's budget is allocated to prime
    contractors that develop the various BMDS elements. As summarized in table
    6, prime contractors responsible for developing three of the seven BMDS
    elements we reviewed-C2BMC, KEI, and THAAD-completed their fiscal year
    2004 work at or near budgeted costs. Activities cost more than budgeted
    for the ABL, GMD, and the STSS elements by $114 million, $220 million, and
    $35 million, respectively. Also, our analysis of cost and schedule
    performance for the entire Aegis BMD element could not be conducted,
    because Cost Performance Reports for the Standard Missile 3 contract were
    not issued until September 2004. Our detailed findings are presented in
    appendices II through VIII of this report.

    22 With the objective of acting as the fire control radar for an ICBM
    engagement, Aegis BMD planned to participate in GMD flight test IFT-14 in
    February 2005. The test could not be fully executed because the GMD
    interceptor failed to launch.

    23 The EVM system is a management tool widely used by DOD to compare the
    value of a prime contractor's work performed to the work's actual cost.
    The tool measures the contractor's actual progress against its expected
    progress and enables the government and contractor to estimate the
    program's remaining cost.

      Table 6: Prime Contractor Cost and Schedule Performance in Fiscal Year 2004

    Dollars in millions

    Percent of BMDS Cost Schedule contract element variance variancea
    completed Comments

    ABL ($114.4) ($47.6) N/Ab	Variances reflect cumulative prime contractor
    cost and schedule performance for the first half of fiscal year
    2004-October 2003 through March 2004. Program officials indicated that
    hardware delivery delays, design problems, and integration issues were the
    primary drivers of the cost variances. After this time, the program was
    restructured and the prime contract rebaselined. Program officials
    directed the contractor to suspend normal contractor performance reporting
    between April and July 2004, during which the contractor expended $129
    million. During this time, the contractor provided forecasts of
    expenditures to the program. The contractor resumed normal cost
    performance reporting in August 2004. As of September 2004, the contractor
    was performing work under budget but slightly behind schedule.

    As part of the restructuring, the prime contract's cost increased by $1.5
    billion and its term extended over 3 years to accomplish the objective of
    developing a prototype aircraft. In total, ABL prime contract costs have
    increased from $1.0 billion at the time of contract award in 1996 to $3.6
    billion in 2004.

    Aegis BMD 3.5 (2.0) 43	The Aegis BMD element has two prime contracts: the
    Aegis Weapon System contract, consisting of software and hardware upgrades
    of existing Navy cruisers and destroyers to make them BMD capable; and the
    Standard Missile 3 (SM-3) contract for the development of the element's
    missile. Both were awarded in the second half of 2003. Variances shown are
    of the Aegis Weapon System contract only, which shows that the contractor
    completed fiscal year 2004 work under budget. The contractor who develops
    the SM-3 missile began reporting cost and schedule performance in the last
    month of fiscal year 2004; therefore, this contractor's cost and schedule
    performance for the year is not reported.

    C2BMCc (3.6) (5.7) 100 (Part 2) Overall, the prime contractor is under
    budget. But when considering 31 (Part 3) performance in fiscal year 2004
    alone, the contractor performed work slightly over budget and behind
    schedule. The declining performance is largely attributed to issues
    pertaining to algorithm development and site integration.

    GMD (219.6) (59.9) 69	Developmental issues with the GMD
    interceptor-booster and kill vehicle- remain the leading cause of negative
    cost and schedule variances. In fiscal year 2004, interceptor-related work
    cost $204 million more than budgeted, of which the kill vehicle accounted
    for 40 percent of the variance. Flight test delays also contributed to
    unfavorable cost and schedule performance.

    KEI 0.04 (1.6) 1	The KEI prime contractor performed work in fiscal year
    2004 near its budgeted costs. Program officials indicated that the
    slightly unfavorable schedule variance was the result of the contractor
    delaying activities so that it could conduct trade studies on new
    requirements imposed by MDA.

    Because of plans to restructure the KEI program-to defer the land-based
    capability from Block 2010 to Block 2012-the long-term performance
    measurement baselined is no longer relevant. In August 2004, the program
    suspended contractor cost and schedule performance reporting until a
    reliable baseline to reflect the full extent of the program's restructure
    became available. The contractor is reporting actual costs until program
    restructure efforts are complete.

    Dollars in millions

    Percent of BMDS Cost Schedule contract element variance variancea
    completed Comments

    STSS (34.6) (20.7)e 29	Prime contract cost and schedule performance eroded
    throughout fiscal year 2004. The erosion in cost performance was largely
    attributed to cost overruns by a subcontractor who had a number of quality
    and systems-engineering problems. Delays in software and hardware
    deliveries were the major causes for the unfavorable schedule variance.
    Despite these issues, the program office maintains that the prime
    contractor is expected to complete the contract early and with minimal
    cost overruns.

    THAAD $0.7 $8.1 61	Overall, the prime contractor is under budget and ahead
    of schedule. However, the contractor's favorable cost and schedule
    performance eroded somewhat during the second half of fiscal year 2004.
    The declining performance was largely driven by issues in missile
    development. Specifically, two explosions at a subcontractor's propellant
    mixing facility resulted in the need to find a new vendor.

    Sources: Contractors (data); GAO (analysis).

    Note: Negative variances are shown with parentheses around the dollar
    amounts.

    aSchedule variance represents the value of planned work by which the prime
    contractor is behind schedule.

    bAs of March 2004, the program completed 88 percent of the contract under
    the former contract structure. However, because the prime contract was
    extended over 3 years, this figure is no longer accurate.

    cC2BMC development is being carried out through a contractual vehicle
    known as an Other Transaction Agreement, which functions much like a prime
    contract. Values reflect the combined variances incurred during fiscal
    year 2004 by parts 2 and 3 of the C2BMC contract.

    dA performance measurement baseline identifies and defines work tasks,
    designates and assigns organizational responsibilities for each work task,
    schedules the work tasks in accordance with established targets, and
    allocates budget to the scheduled work.

    eThe contractor implemented a performance measurement baseline that
    reflects a 6-month accelerated schedule. This means the contractor might
    be performing work on schedule, allowing it to complete all the work by
    the end of the contract, but schedule performance data would show
    otherwise.

    Negative Cost Variances Incurred by ABL, GMD, and STSS Prime Contractors

    ABL incurred a negative cost variance of $114 million during the first
    half of fiscal year 2004, before the program was restructured to make its
    cost and schedule targets more realistic. This variance stemmed primarily
    from two sources. First, the program encountered unanticipated complexity
    in manufacturing and in integrating advanced optics and laser components
    for the prototype system. Second, the push to rapidly develop the
    prototype aircraft caused the program to limit testing of subcomponents,
    which, in turn, generated rework and modified requirements. To address the
    negative variance for ABL, program officials told us that they redirected
    funds originally earmarked for other program efforts.

    GMD incurred a negative cost variance of $220 million. The contractor
    originally underestimated the cost of readying the element for LDO and
    experienced unexpected problems requiring some rework of its kill vehicle.
    Additionally, in response to explosions at a subcontractor's propellant
    mixing facility, the program incurred cost to transition operations to a
    new vendor. To address its negative cost variance for GMD, MDA deferred
    some work planned for completion in fiscal year 2004 into fiscal year
    2005, and, to cover these increased costs, requested and received
    additional money in its fiscal year 2005 budget. MDA also directed other
    programs within the agency, such as Test and Evaluation, to pick up GMD's
    portion of the cost of work tasks that benefited both programs. Employing
    established EVM analysis techniques, we estimate that the GMD
    contract-which ends in September 2007-will overrun its budget by between
    $593 million and $950 million at its completion assuming no corrective
    actions are taken.

    The negative STSS cost variance was largely attributed to a subcontractor
    who had a number of quality and systems-engineering problems in developing
    the payload-sensors and supporting subsystems-onboard the two STSS
    demonstration satellites. The program office maintains that there is
    enough management reserve to cover the overrun at the end of the contract,
    assuming that the reserve is not used for other purposes before then.

    Lack of Cost Performance Data for ABL, Aegis BMD, and KEI Elements
    Prevented Full Assessment

    ABL program officials' insight of their prime contractor's cost and
    schedule performance between April and July 2004 was somewhat limited.
    During this time, program officials directed the contractor to suspend
    normal cost performance reporting while they restructured the ABL prime
    contract to make its target cost and schedule more realistic. In lieu of
    providing normal Cost Performance Reports, the contractor provided the
    program office with monthly forecast expenditure plans, detailed work
    activities, and the number of staff needed to complete planned tasks. The
    program office relied on these metrics to determine the program's status
    and to provide insight into the contractor's cost and schedule
    performance. In the 5 months since cost reporting resumed, the cost and
    schedule variance has been relatively stable.

    We could not fully assess cost performance for the Aegis BMD program in
    fiscal year 2004. The prime contractor developing the SM-3 missile did not
    generate Cost Performance Reports until September 2004, even though the
    prime contract was awarded in August 2003. Program officials told us that,
    instead, they monitored contractor performance through monthly

    management and business meetings where cost performance, milestones, and
    future performance were reviewed. Program officials indicated that the
    delay in issuing Cost Performance Reports stemmed from the late
    establishment of the contract's performance management baseline. It was
    established 7 months after contract award because of the need for the
    program office to react to funding issues. In addition, the program
    suspended contractor cost and schedule performance reporting until after
    the Aegis BMD program office completed an integrated baseline review24 5
    months later.

    KEI program officials also had reduced insight into its prime contractor's
    work efforts for a portion of fiscal year 2004. After contract award in
    December 2003, the prime contractor began submitting Cost Performance
    Reports in May 2004. Program officials suspended cost performance
    reporting after August 2004 because of the need to restructure the prime
    contract in response to reduced funding. Program officials told us that
    the contractor will resume reporting in 2005 after a reliable baseline
    that reflects the full extent of the program's restructure is available.

    Funding Risks Expected to Increase for Ballistic Missile Defense Program

    A number of factors portend an increasing level of funding risk for the
    ballistic missile defense program in the years ahead. Based on DOD's
    Future Years Defense Plan for fiscal years 2006-2011, MDA plans to
    request, on average, Research, Development, Test, and Evaluation (RDT&E)
    funding of about $10 billion annually. This funding supports continued
    development, procurement, and sustainment of hardware and software that
    MDA is fielding.25 However, sources outside and within DOD are expected to
    put pressure on MDA's share of research and development dollars.

    24 An integrated baseline review is the program manager's review of a
    contractor's performance measurement baseline. The review is conducted by
    the program manager and the manager's technical staff. It verifies the
    technical content of the baseline and ensures that contractor personnel
    understand and have been adequately trained to collect earned value
    management data. The review also verifies the accuracy of the related
    budget and schedules, ensures that risks have been properly identified,
    assesses the contractor's ability to implement earned value management
    properly, and determines if the work identified by the contractor meets
    the program's objective.

    25 Congress authorized DOD's use of funds appropriated for MDA research,
    development, test, and evaluation for the fielding of ballistic missile
    defense capabilities. Pub. L. No. 108-136, section 222; Pub. L. No.
    108-375, section 231.

    One factor for the increasing pressure is that DOD's acquisition programs
    such as ballistic missile defense are likely to be competing for a
    decreasing share of the federal budget. These programs are categorized as
    "discretionary spending" as opposed to "mandatory spending," such as
    Social Security, Medicare, and Medicaid. In fiscal year 2004,
    discretionary spending accounted for about 39 percent of the federal
    budget. The Congressional Budget Office projects that discretionary
    spending is likely to decrease to 36 percent of the federal budget by
    fiscal year 2009 and to 32 percent in by fiscal year 2014.26

    A second factor is competing demands for funding within DOD. For example,
    although missile defense is seen as a national priority and has been
    funded nearly at requested levels in the past few years, MDA is facing
    budget cuts. Indeed, DOD's Program Budget Direction of December 2004
    called for MDA to plan for a $5 billion reduction in funding over fiscal
    years 2006-2011. In addition, MDA is receiving about 13 percent of the $70
    billion RDT&E budget in fiscal year 2005 but must continue to compete with
    hundreds of existing and planned technology development and acquisition
    programs for RDT&E funding. Cost growth of existing weapon programs puts
    additional pressure on MDA's share. We found, for example, that RDT&E cost
    estimates grew $6.7 billion for the Joint Strike Fighter in calendar year
    2003 and $9.2 billion for the Future Combat System in fiscal year 2004.

    The third factor comes from within MDA itself. The agency continues to
    respond to cost growth of ongoing programs to enhance the components and
    elements of the BMDS. As noted above, ABL, GMD, and STSS incurred a
    collective negative cost variance of approximately $370 million in fiscal
    year 2004 and, as we reported last year, MDA elements incurred a
    collective negative cost variance of about $380 million in fiscal year
    2003.27 Unless MDA can mitigate these cost variances, significant cost
    overruns could occur on these contracts in the future. Estimating cost and
    schedule targets of new and complex technologies can be difficult and, as
    demonstrated, are often underestimated. Furthermore, hardware made
    available for operational purposes is not being fully tested before being

    26 Congressional Budget Office, The Budget and Economic Outlook: An Update
    (Washington, D.C.: Sept. 2004).

    27 GAO, Missile Defense: Actions Are Needed to Enhance Testing and
    Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004).

    fielded. If the need arises to correct problems identified in subsequent
    testing, removing and recalling this hardware could prove costly.

    A fourth factor for the increasing pressure on MDA's RDT&E budget is that
    MDA is starting to field components of the BMDS, whose production,
    operation, and sustainment are also funded by RDT&E dollars. A flat RDT&E
    budget combined with growing fielding costs would result in a decrease in
    investment in research and development-MDA's primary mission. According to
    program documentation, MDA's budget for its fielding activities between
    fiscal years 2006 and 2011 includes an average of $1.76 billion per year
    for procuring BMDS assets and an additional $400 million per year for
    sustaining the fielded capability. However, the fielding costs can be
    expected to increase in the years to come as more components of GMD, Aegis
    BMD, and THAAD are integrated into the BMDS.

    Operations and support (O&S) costs of fielded systems are generally
    significant and can be expected to be substantial for operational
    capabilities of the BMDS. In our 2003 report on total-ownership
    (life-cycle) cost,28 we found that the cost to develop and procure a
    weapon system usually represents about 28 percent of the weapon system's
    life-cycle cost; O&S costs typically account for the remaining 72 percent
    of a weapon's systems total life-cycle cost. The only BMDS element thus
    far with a lifecycle cost estimate, the Army's Patriot-MEADS missile
    defense program, has comparable life-cycle cost percentages. According to
    the Army's Lower-Tier Project Office, the Patriot-MEADS development cost
    accounts for 6.4 percent, procurement accounts for 21.2 percent, and O&S
    costs account for 72.4 percent of the total life-cycle cost of $151
    billion.

    DOD officials cautioned us that estimating life-cycle costs of missile
    defense capabilities involves considerable uncertainty. For example, O&S
    costs depend on the state of readiness of the fielded system, which is
    difficult to predict. In addition, historical data of component
    reliability in the field and the cost to repair operational missile
    defense assets are essentially nonexistent. Furthermore, life-cycle cost
    estimates of standard DOD weapon systems assume O&S costs apply for long
    periods of time, on the order of 20 years. Components of the BMDS,
    however, might be in the

    28 GAO, Best Practices: Setting Requirements Differently Could Reduce
    Weapon Systems' Total Ownership Costs, GAO-03-57 (Washington, D.C.: Feb.
    11, 2003).

    MDA Is Not Consistently Matching Cost and Fielding Goals

    field for shorter durations. Finally, our previous work29 recognized that
    life-cycle cost estimates for revolutionary systems such as the ABL
    program, which utilize new technologies in unproven applications, are
    unknown. When fielded, operation and support efforts for ABL could be
    substantial because ABL will require unique support for its laser and
    beam-control components and ground infrastructure for chemical storage,
    mixing, and handling.30

    In assessing the extent MDA achieved its stated goals in fiscal year 2004,
    we observed that MDA's cost goal for a given block is not consistently
    aligned with that block's fielding goals. According to MDA policy, for
    example, interceptors identified with the Block 2004 fielding goals and
    fielded during calendar years 2004-2005 should be funded as part of the
    Block 2004 cost goal. As originally designed, the block approach would
    provide MDA with the flexibility to deliver a basic capability initially
    and enhance it during subsequent blocks to respond to the changing threat
    and to insert new technologies for enhanced performance. The block
    approach also would provide for accountability, because MDA would identify
    for decision makers the promised capabilities to be delivered by the end
    of each block for a specified investment of funds.

    In the following instances, however, we found that MDA has not been
    consistently matching a block's cost and fielding goals thereby obscuring
    the relationship between requested funding and delivered capabilities:

    o  	Funds accounted for in the Block 2004 cost goal are being used to
    procure 32 Aegis BMD SM-3 missiles. Of these missiles, 11 will be
    delivered in 2004-2005, and the remaining missiles will be delivered
    during 2006-2007. Similarly, funds accounted for in the Block 2006 cost
    goal are being used to procure 40 missiles. Of these missiles, 7 will be
    delivered in 2006-2007, and the remaining delivered during 2008-2009.

    29 GAO, Uncertainties Remain Concerning the Airborne Laser's Cost and
    Military Utility, GAO-04-643R (Washington, D.C.: May 17, 2004).

    30 The ABL program manager agrees that operating costs of the ABL element
    are not well defined due to its technical maturity. However, as with the
    fielding of any new technology, the initial operating costs may be
    substantial. As the support concept matures, the ABL program manager
    expects these costs to decrease and be comparable with other Air Force
    high-value assets.

    Conclusion

    o  	The THAAD program is funding a "fire unit" as part of its Block 2006
    program. Operated by the Army, it will consist of a radar, a battle
    management unit, 3 launchers, 24 missiles, and equipment for support,
    maintenance and training. Even though MDA refers to this fire unit as a
    Block 2006 fielding, it will not be delivered until 2009 (i.e., during
    Block 2008).31

    In addition, counter to the definition of a block as an integrated set of
    capabilities fielded during the 2-year block window, the Airborne Laser
    program will not field any capabilities during Block 2004 although Block
    2004 funds are used in the program's development. Rather, the ABL program
    is focused on developing a prototype aircraft for use in a lethality
    demonstration-a flight test in which the ABL aircraft will attempt to
    shoot down a short-range ballistic missile. However, ABL's funding is
    broken out by block-2004, 2006, and 2008-even though the program is
    developing a single configuration of the element that will not be
    integrated into the BMDS earlier than Block 2008.

    MDA delivered much of what it planned in fiscal year 2004, and DOD is on
    the verge of standing up an initial capability against long-range
    ballistic missiles launched from Northeast Asia. Despite this success, the
    performance of the system remains uncertain and unverified because of
    recurrent test delays and failures. Also, Ground-based Midcourse Defense
    developmental costs continue to increase and the Airborne Laser program
    was restructured when it became clear that much more time and money would
    be needed to develop and demonstrate a prototype aircraft.

    Looking to the future, decision makers in Congress and DOD face billion
    dollar investment decisions in allocating funds both within MDA's RDT&E
    activities and between MDA and other DOD programs. In exercising their
    funding and oversight responsibilities, these decision makers would
    benefit from a consistent implementation of a block policy for which
    delivered capability is aligned with tax dollars received.

    31 With the submission of the fiscal year 2006 President's Budget in
    February 2005, MDA implemented a new BMDS baseline approach for the THAAD
    program. The agency now refers to the fielding of the fire unit as a Block
    2006/2008 fielding.

    Recommendation for Executive Action

    Agency Comments and Our Evaluation

    To assist decision makers in Congress and DOD in exercising their
    oversight of MDA's acquisition plans and in evaluating MDA's budget
    requests, we recommend that the Director, MDA, clarify and modify, as
    needed, its block policy to ensure that a block's cost and fielding goals
    are consistently aligned.

    DOD's comments on our draft report are reprinted in appendix I. DOD
    concurred with our recommendation. Acknowledging our observations, the
    Department noted that the policy for ballistic missile defense block
    definitions should provide for consistent accounting of the various
    features of each block. MDA is taking steps to clarify and modify the
    block definitions for that purpose.

    We are sending copies of this report to the Secretary of Defense and to
    the
    Director, MDA. 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. The major contributors to this report are
    listed in appendix XI.

    Robert E. Levin
    Director
    Acquisition and Sourcing Management

    List of Congressional Committees

    The Honorable John Warner
    Chairman
    The Honorable Carl Levin
    Ranking Minority Member
    Committee on Armed Services
    United States Senate

    The Honorable Ted Stevens
    Chairman
    The Honorable Daniel K. Inouye
    Ranking Minority Member
    Subcommittee on Defense
    Committee on Appropriations
    United States Senate

    The Honorable Duncan Hunter
    Chairman
    The Honorable Ike Skelton
    Ranking Minority Member
    Committee on Armed Services
    House of Representatives

    The Honorable C. W. Bill Young
    Chairman
    The Honorable John P. Murtha
    Ranking Minority Member
    Subcommittee on Defense
    Committee on Appropriations
    House of Representatives

    Appendix I: Comments from the Department of Defense

    An Element of the Ballistic Missile Defense System

    Appendix II Summary

    Aegis Ballistic Missile Defense

    Fiscal Year 2004 Progress Assessment

    The Aegis BMD program completed work planned for fiscal year 2004
    generally on schedule and is largely on track to upgrade system software
    and expand missile inventory for an enhanced capability by the end of
    December 2005 (Block 2004). However, Aegis destroyers upgraded for the
    long-range surveillance and tracking (LRS&T) mission had limited
    opportunities to be exercised in a manner consistent with an actual
    defensive mission.

    Schedule: In fiscal year 2004 and early 2005, the Aegis BMD program
    completed the upgrade of three Aegis destroyers for the LRS&T mission-all
    are available for operations. In addition, the program delivered five
    missiles, known as the Standard Missile 3 (SM-3), in the first quarter of
    fiscal year 2005 for the element's Block 2004 engagement capability.
    Because of funding constraints and ship availability, missile deliveries
    and ship upgrades were delayed. In particular, the program expects to have
    available a slightly smaller inventory of SM-3 missiles by December 2005
    than was originally planned. Also, the program expected to upgrade three
    cruisers by the end of Block 2004, but only two will be completed by this
    time.

    Testing: Aegis BMD flight testing conducted in fiscal year 2004 focused on
    the LRS&T mission, including the element's connectivity with the BMDS.
    Because there were limited opportunities to track actual targets using the
    fielded version of the LRS&T system, this capability was only partially
    demonstrated prior to the destroyers' fielding. The Aegis BMD program also
    conducted one successful intercept attempt against a short-range ballistic
    missile target during fiscal year 2004. Finally, design changes to the
    missile's divert system underwent ground testing and are planned to be
    tested in flight in fiscal year 2005.

    Performance: The Aegis BMD program has demonstrated the capability to
    intercept a non-separating target through its successes in five of six
    flight tests. The root cause of a failure in the missile's divert system
    during the one unsuccessful attempt is understood, and design changes are
    expected to be tested in flight in fiscal year 2005. Although the program
    has exercised the element's LRS&T capability in a small number of
    flight-test events, it has not yet used the fielded version of the system
    software to provide real-time track data of a target for use in planning a
    BMD mission, as it would need to do in an actual defensive operation.

    Cost: We could not fully assess cost performance for the Aegis BMD program
    in fiscal year 2004 based on an analysis of prime contractor Cost
    Performance Reports. We found that the contractor responsible for
    upgrading existing Aegis ships for the BMD mission completed fiscal year
    2004 work $3.5 million under budget but was unable to complete $2.0
    million worth of work. However, we were unable to assess cost and schedule
    performance of the prime contractor who develops the SM-3 missile because
    Cost Performance Reports were not available during fiscal year 2004.

                     United States Government Accountability Office

    Appendix II: Aegis Ballistic Missile Defense

    Element Description 	The Aegis Ballistic Missile Defense (Aegis BMD)
    element is a sea-based missile defense system being developed to protect
    deployed U.S. forces, allies, and friends from short-and medium-range
    ballistic missile attacks. It will also be used as a forward-deployed
    Ballistic Missile Defense System (BMDS) sensor, employing its shipboard
    SPY-1 radar, to perform surveillance and tracking of long-range ballistic
    missiles in support of the Ground-based Midcourse Defense (GMD) mission.

    The Aegis BMD element builds upon the existing capabilities of
    Aegisequipped Navy cruisers and destroyers. Planned hardware and software
    upgrades to these ships will enable them to carry out the missile defense
    mission in addition to their current role of protecting U.S. Navy ships
    from air, surface, and subsurface threats. The program is also developing
    the Standard Missile 3 (SM-3)-the system's interceptor missile, which is
    designed to destroy enemy warheads through hit-to-kill collisions above
    the atmosphere. The SM-3 is comprised of a kill vehicle1 mounted atop a
    3-stage booster.

    History 	In 1996, the Department of Defense (DOD) initiated the Navy
    Theater Wide program, the predecessor to Aegis BMD. The Navy Theater Wide
    system was to be a ship-based missile defense system capable of destroying
    shortrange ballistic missiles above the atmosphere. At the time, plans
    called for deploying the first increment of the Navy Theater Wide system
    in 2010 and a final increment with an improved kill vehicle at a later,
    undefined date.

    Developmental 	The Missile Defense Agency (MDA) currently manages and
    funds the Aegis BMD program, although the U.S. Navy has a role in its
    development and

    Phases 	management. Accordingly, the Aegis BMD element is being developed
    under MDA's acquisition approach, which delivers system capabilities in
    2-year block increments. The first increment of the Aegis BMD element,
    Block 2004, is expected to deliver a limited operational capability in the
    2004-2005 time frame. It provides for surveillance and tracking of
    longrange ballistic missiles and an intercept capability (engagement role)
    against shorter-range ballistic missiles. The Block 2004 capability is
    being rolled out in three phases:

    1 The program office refers to the kill vehicle as the "kinetic warhead."

    Appendix II: Aegis Ballistic Missile Defense

    o  	Initial fielding of the surveillance and tracking capability. By
    October 2004, the program office upgraded three Aegis destroyers with the
    ability to perform the long-range surveillance and tracking (LRS&T)
    function as a BMDS sensor in support of the GMD mission. All three
    destroyers are available for operations. This capability is the element's
    contribution to MDA's fielding of Limited Defensive Operations (LDO),
    MDA's first increment of fielded capability.

    o  	Initial fielding of an intercept capability. By April 2005, MDA plans
    to have available two cruisers, along with a combined inventory of
    approximately five SM-3 missiles. The cruisers are expected to be capable
    of performing its two BMD missions, LRS&T and the engagement of short-and
    medium-range ballistic missiles. This configuration could be deployed
    operationally if so directed in an emergency.

    o  	Completion of the Block 2004 element. The program expects to increase
    the number of Aegis destroyers capable of providing LRS&T from 3 to 10 by
    the end of December 2005.2 In addition, the program plans to deliver eight
    SM-3 missiles available to be deployed on upgraded cruisers available for
    the engagement role.3

    Future block configurations of the Aegis BMD element build upon the Block
    2004 capability. In Block 2006, MDA plans to add the capability to defeat
    intermediate-range ballistic missiles with limited countermeasures and to
    increase Aegis BMD's role as a remote sensor by upgrading radar
    capabilities. The Aegis BMD Block 2008 configuration will incorporate
    upgrades to the SPY-1 radar to improve the radar's discrimination
    capability and to enhance the element's command and control component so
    that the element can engage multiple threats simultaneously. Finally, the
    Aegis BMD Block 2010 and 2012 configurations are expected to incorporate
    missile enhancements, improve discrimination capability against advanced
    countermeasures, and improve planning and coordination as part of the
    BMDS.

    2 Five additional destroyers will be upgraded during Block 2006, bringing
    the total number of upgraded destroyers to 15, which was MDA's original
    Block 2004 goal.

    3 MDA program goals called for the delivery of nine SM-3 missiles by the
    end of calendar year 2005.

                      Appendix II: Aegis Ballistic Missile Defense

    Planned Accomplishments for Fiscal Year 2004

    Assessment of Scheduled Activities

    The Aegis BMD program establishes annual element-level goals by outlining
    specific activities the program plans to complete during a given fiscal
    year. In fiscal year 2004, the program focused largely on delivering the
    LRS&T capability for LDO and continuing with activities leading to the
    full Block 2004 capability. These activities can be grouped into three
    categories: fielding, testing, and design reviews.

    o  	Fielding. The Aegis BMD program planned to install the initial version
    of the operational computer program and make associated hardware upgrades
    on three Aegis destroyers enabling them to perform the LRS&T mission. In
    addition, the program planned to continue its activities leading to the
    initial delivery of SM-3 missiles during fiscal year 2005.

    o  	Testing. The Aegis BMD program office planned to conduct an intercept
    attempt against a short-range ballistic missile-Flight Mission 6
    (FM-6)-and to participate in other events that exercise the system's LRS&T
    functionality and connectivity with the BMDS.

    o  	Design reviews. The program planned to conduct design reviews of the
    final Block 2004 Aegis Weapon System software, the final Block 2004
    missile configuration, and the SM-3 missile's shipboard launch system.

    In fiscal year 2004, the Aegis BMD program completed the upgrade of three
    Aegis destroyers4 for the LRS&T mission. In addition, the program was
    completing the final assembly of the first five SM-3 missiles for the
    Block 2004 engagement capability, which were delivered in early fiscal
    year 2005. The program is largely on track to upgrade software, expand
    missile inventory, and conduct flight tests to deliver an enhanced
    capability for Block 2004 by the end of December 2005. However, funding
    modifications and ship availability delayed final missile deliveries and
    ship upgrades. In particular, although the program expected to field nine
    SM-3 missiles by the end of Block 2004, only eight will be delivered by
    this time. Also, the program expected to upgrade three cruisers by the end
    of Block 2004, but only two will be completed by this time. Specific
    progress made in fiscal year 2004 relative to fielding, testing, and
    design is given in the narrative below and summarized in tables 7 to 12.

                  4 The third destroyer was upgraded in October 2004.

                      Appendix II: Aegis Ballistic Missile Defense

                                  Fielding Activities

    The Aegis BMD program has plans to eventually upgrade 18 Aegisequipped
    Navy ships (15 destroyers and 3 cruisers) with enhanced planning,
    surveillance, tracking, and engagement functions to make them capable of
    performing the BMD mission. These upgrades will improve the capability of
    the element's SPY-1 radar to discriminate a missile's warhead from decoys,
    enable tracking of long-range ballistic missiles as a BMDS sensor, plan
    engagements, and launch SM-3 missiles to engage ballistic missiles. To
    achieve this enhanced functionality, the Aegis BMD program office is
    upgrading the Aegis Weapon System on designated ships through a series of
    software builds and hardware upgrades, referred to as BMD 3.0E, BMD 3.0,
    and BMD 3.1.

    Each BMD upgrade will increase the element's capability. The Aegis BMD
    program has successfully installed BMD 3.0E in three destroyers, which
    enables the ships to carry out long-range surveillance and tracking.
    However, the ships are not yet capable of launching missiles to engage
    ballistic missiles. Rather, the next software build, BMD 3.0, will be
    needed to provide the preliminary engagement capability for Aegis
    cruisers. It is expected to be approved for use in April 2005 and could be
    deployed operationally if so directed in an emergency. The third version
    of the BMD upgrade-BMD 3.1-will eventually enable the destroyers to also
    launch missiles, but because other hardware upgrades are needed, only
    Aegis cruisers will be equipped to do so by the end of Block 2004. BMD 3.1
    is the last weapon system upgrade planned for the Block 2004 time frame.
    Table 7 summarizes the principal software development and installation
    activities completed in fiscal year 2004.

     Table 7: Status of Aegis BMD Fiscal Year 2004 Planned Accomplishments-Fielding
                                       Activities

    Activity Description/Progress assessment

    Complete and deliver long-range surveillance and tracking (LRS&T) software
    BMD 3.0E

    The program completed BMD 3.0E development for the initial fielding of the
    LRS&T capability.

                         Install LRS&T BMD 3.0E on three Aegis

    destroyers The program installed BMD 3.0E on two Aegis destroyers by
    September 30, 2004, and on a third Aegis destroyer in October 2004.

                      Begin training Aegis destroyer crews for the

    LRS&T mission Crew training was completed on schedule, which included
    tactical operations and team certification, personnel standards, and BMD
    3.0E familiarization.

    Sources: MDA (data); GAO (presentation).

    As software builds and hardware upgrades are completed and installed, Navy
    cruisers and destroyers will become available to perform their expected
    missions. Table 8 summarizes the availability of Aegis ships for the BMD
    mission in the Block 2004 time frame. Although MDA program

                      Appendix II: Aegis Ballistic Missile Defense

    goals specified that three cruisers would be available by the end of Block
    2004 (December 2005), only two are expected to be upgraded by this time;
    the third is expected to be upgraded in early 2006, depending on ship
    availability.

           Table 8: Aegis Ship Availability for the BMD Mission (Block 2004)

    September December April December Ship function 2004 2004 2005

    c

    Destroyers 3b 5b 9 10

    Capable of only LRS&T. Engagement capability will be added starting in
    2006.

    a

    Cruisers 0 1 2 Capable of surveillance, tracking, and engagement.

    Total destroyers and cruisers available for BMD mission 3 6 11

    Source: MDA.

    aThe total number of Aegis cruisers includes one being used as a test
    ship, which was scheduled to begin installation of BMD 3.0 in December
    2004.

    bThe third LRS&T ship was completed in October 2004, and the fifth was
    completed in January 2005.

    c15 LRS&T "equipment sets" will be available at this time, but
    installations may not be completed owing to the ships' operational
    schedules. The remaining five upgrades are planned for the Block 2006 time
    frame.

    In fiscal year 2004, the Aegis BMD program office continued to procure
    SM-3 missiles for delivery in the 2004-2005 time frame. In particular, 11
    "Block I" SM-3 missiles are expected to be delivered by the end of
    calendar year 2005, some of which will be used in flight testing. Table 9
    summarizes the status of SM-3 deliveries through December 2005.

                            Table 9: SM-3 Missile Deliveries

    Sept. 2004 -Dec. 2004 -Apr. 2005 -Total Dec. 2004 Apr. 2005 Dec. 2005
    (Dec. 2005)

                                SM-3 deliveries 5 1 5 11

    Source: MDA.

    Prior to September 2004, three SM-3 missiles of an earlier configuration
    were delivered and subsequently used in flight missions (intercept
    attempts), FM-4, FM-5, and FM-6. "Block I" SM-3 missiles, which are being
    fielded during 2004-2005, are an operational configuration that evolved
    from this earlier design. Fiscal year 2004 funding modifications impacted
    SM-3 missile integration and delivery; consequently, the Aegis BMD

                      Appendix II: Aegis Ballistic Missile Defense

    program expects to have available a slightly smaller inventory of SM-3
    missiles by December 2005 than was originally planned.

                                   Testing Activities

    Ground Testing

    Flight Testing

    The Aegis BMD program conducts both ground and flight tests to demonstrate
    and validate element performance. Ground tests serve to reduce risk and,
    in some cases, are conducted under conditions that are difficult to
    replicate in flight. Flight tests verify the element's ability to engage
    ballistic missile targets using actual equipment, computer programs, and
    an operational ship with a Navy crew.

    Ground tests completed during fiscal year 2004 included those focused on a
    subcomponent of the missile's divert system-the Solid Divert and Attitude
    Control System (SDACS). This subcomponent is a collection of solid-fuel
    thrusters used to steer the kill vehicle into its designated target. When
    an updated SDACS design proved successful in earlier ground tests, the
    program flight-tested it during Flight Mission 5 (FM-5) in June 2003.
    However, during this test, the subassemblies supporting the energetic
    pulse-mode failed, causing the kill vehicle to be less maneuverable and
    miss its target. Program officials stated that the failure likely stemmed
    from a "diverter ball" in the SDACS, which acts as a valve to control
    pulses that allow the missile to maneuver quickly. The exercising of the
    high-energy pulse mode of the SDACS increased internal operating
    pressures, and, under the thermal stress, the protective coating of the
    diverter ball cracked, disabling normal SDACS operation. The root cause of
    this failure has been traced to a material failure under intense
    temperature and pressure.

    In response to this failure, during fiscal year 2004, the program modified
    the SDACS design to improve its switching performance and reliability
    during high-energy pulse operation. A series of ground tests and
    engineering analysis is ongoing to validate the design updates. Following
    completion of ground tests and analysis, future flight tests are planned
    to demonstrate operation of the SDACS using its high-energy pulse mode.

    Since 1999, there have been six intercept attempts using variants of the
    SM-3 missile. In five of the six, the SM-3 successfully intercepted
    targets. In fiscal year 2004, the program conducted one of these
    successful intercept attempts-FM-6.5 Additionally, the Aegis BMD element

    5 The program also conducted FM-7 in February 2005, which resulted in a
    successful intercept of a short-range ballistic missile target.

    Appendix II: Aegis Ballistic Missile Defense

    participated in other non-intercept test events to assess the Aegis
    destroyer's ability to track targets of opportunity and pass data to the
    BMDS. Because of the technical issues associated with the SDACS
    reliability that arose in FM-5, the program office delayed FM-6 from
    September 2003 to December 2003 and did not exercise the SDACS highenergy
    pulse mode as originally planned.

    After the FM-6 flight mission in December 2003, Aegis BMD flight testing
    conducted in fiscal year 2004 focused on the LRS&T mission although there
    were limited opportunities to track actual targets using the fielded
    version of the LRS&T software, BMD 3.0E. For example, delays in the GMD
    flight test program prevented Aegis BMD from participating in two
    integrated flight tests, IFT-13C and IFT-14, during fiscal year 2004. In
    addition, the Aegis BMD program participated in Glory Trip 185, during
    which an Aegis destroyer successfully tracked a Minuteman III ICBM
    launched from Vandenberg Air Force Base. However, it exercised an earlier
    version of the LRS&T software, rather than BMD 3.0E, which is installed on
    fielded destroyers. Finally, in Pacific Explorer III, an Aegis destroyer
    planned to track an actual missile and pass track data to the BMDS.
    Although the destroyer tracked the live target missile, a malfunction with
    the target limited the amount of data collected by the Aegis destroyer.
    Specifically, the target ended its flight before Aegis BMD could send the
    GMD element enough information needed for engaging the target.

    Although there were limited opportunities to track actual targets, Aegis
    BMD participated in other tests that verified connectivity with the BMDS.
    For example, in Pacific Explorer II, Glory Trip 185, Pacific Explorer III,
    and Pacific Explorer IV (conducted in fiscal year 2005), simulated or real
    ballistic missile target track data was successfully transmitted to the
    BMDS.

    Table 10 summarizes the flight test and LRS&T activities completed in
    fiscal year 2004 by the Aegis BMD program.

                      Appendix II: Aegis Ballistic Missile Defense

      Table 10: Aegis BMD Fiscal Year 2004 Planned Accomplishments-Flight Test and
                                    LRS&T Activities

    Activity Description/Progress assessment

    Flight Mission 6 (FM-6) An SM-3 missile successfully intercepted a short
    range ballistic missile (SRBM) target Occurred: Dec. 2003 (SDACS used in
    sustain-mode only).

    Participate in GMD integrated flight tests GMD flight tests were deferred
    until fiscal year 2005. IFT-13C was conducted in as a surveillance and
    tracking sensor December 2004 and would have offered Aegis BMD the
    opportunity to exercise its LRS&T Planned: Throughout FY2004 role.
    However, because of rough seas caused by severe weather that exceeded
    safety

    limits, the element did not participate. IFT-14 was conducted in February
    2005, but this test failed to execute fully because the interceptor did
    not launch from its silo.

    Pacific Explorer II An Aegis destroyer in the Sea of Japan and an Aegis
    destroyer in Hawaii established full

    Occurred: Mar. 2004 	satellite communication connectivity with the BMDS
    across the Pacific Ocean to multiple land-based participants in Hawaii and
    the Continental United States. Although no actual target was launched, the
    ship successfully passed track data of a simulated target to exercise
    system connectivity.

    Glory Trip 185 Aegis BMD successfully exercised its role as a
    forward-deployed sensor. During this test,

    Occurred: June 2004 	an Aegis destroyer detected and tracked a Minuteman
    III ICBM launched from Vandenberg Air Force Base and provided track and
    covariance data to GMD. However, the test did not exercise Aegis BMD
    tracking and connectivity in a manner consistent with an actual defensive
    mission; that is, as an integral part of the system during which the
    destroyer acts as a fire control radar. In addition, the Aegis destroyer
    was not upgraded with the newer, LDO version of the long-range
    surveillance and tracking software.

    Pacific Explorer III This event provided exposure and training to the crew
    of an Aegis BMD destroyer.

    Occurred: July 2004 	Although the destroyer tracked the live target
    missile, a malfunction with the target limited the amount of data
    collected by the Aegis destroyer-the target's flight was terminated early.

    Sources: MDA (data); GAO (presentation).

    In fiscal year 2005, the program office scheduled three more Block 2004
    flight tests, all of which are planned as intercept attempts. These tests
    aim to progressively demonstrate the element's capability against
    short-and medium-range unitary and separating targets, as well as
    demonstrate that Aegis BMD can support the BMDS as a forward-deployed
    sensor. FM-7 was the first flight test to use BMD 3.0 and the Block I SM-3
    missile, which is the configuration of the first set of SM-3 missiles that
    will be made available for fielding. Table 11 provides a summary of the
    Block 2004 flight tests the program expects to conduct through fiscal year
    2005.

                      Appendix II: Aegis Ballistic Missile Defense

      Table 11: Planned Aegis BMD Fiscal Year 2005 Accomplishments-Remaining Block
                         2004 Flight Tests Activity Description

    FTM 04-1 (FM-7) FM-7 was successfully conducted. An SM-3 missile
    intercepted an SRBM target Date: Feb 24, 2005 (SDACS used in sustain-mode
    only).

                            FTM 04-2 (FM-8) Date: 3Q FY2005a

    FM-8 is an intercept attempt against a separating, medium-range ballistic
    missile (MRBM) target. The target will fly a trajectory more distant from
    the Aegis cruiser than in previous tests. Pending the results of ground
    testing, the SDACS will be tested in highenergy pulse mode.

    FTM 04-3 (FM-9)

                                    Date: 4Q FY2005

    FM-9 is an intercept attempt against a separating, MRBM target. The target
    will include additional decoys and clutter. The SDACS could be tested in
    high-energy pulse mode.

    Sources: MDA (data); GAO (presentation).

    aWe use the notation "3Q FY2005" to mean the third quarter of fiscal year
    2005 and an identical format for other time periods.

    Design Reviews 	The Aegis BMD program scheduled four component-level
    design reviews in fiscal year 2004 to evaluate the design maturity of the
    Aegis Weapon System software, launch system, and upgraded SM-3 missile,
    known as "Block IA." The program successfully completed three of these
    design reviews but delayed the fourth until early 2005. Table 12
    summarizes the principal activities related to each review.

    Table 12: Aegis BMD Fiscal Year 2004 Planned Accomplishments-Design
    Reviews

    Activity Description/Progress assessment

    Aegis BMD 3.1 The system design disclosure for the final version of Block
    2004 software, BMD 3.1, was System Design Disclosure successfully
    completed. This review evaluated the performance of BMD 3.1 for the
    Completed Jan. 2004 LRS&T mission as well as engagement scenarios with
    both sustain-mode and pulse

    mode SDACS.

    Vertical Launch System Phase I Critical Design Review

    Completed Feb. 2004

    Vertical Launch System Phase II Preliminary Design Review

    Completed June 2004

    SM-3 Block IA Critical Design Review

    Completed Oct. 2004 The critical design review of the vertical launch
    system phase I was successfully completed. The review examined the
    expected performance of the Vertical Launch System associated with BMD
    3.0.

    The preliminary design review of the vertical launch system phase II was
    successfully completed. This review presented requirements (design
    specifications) and early designs for the Vertical Launch System
    associated with BMD 3.1.

    The initial critical design review of the SM-3 Block IA-the upgraded
    configuration of the Block I missile-was successfully completed and gave
    the program permission to begin missile assembly and testing. This review
    examined the maturity of the design and expected performance of the Block
    IA SM-3 missile configuration. A "close out" critical design review is
    planned to be conducted in April 2005.

    Sources: MDA (data); GAO (presentation).

                      Appendix II: Aegis Ballistic Missile Defense

    Assessment of Element Performance

    We identified areas for which the Aegis BMD program has not fully
    demonstrated element performance and reliability. First, the program has
    demonstrated its intercept capability under limited conditions; second,
    the program has not successfully demonstrated, in a flight test, SDACS
    operation using its high-energy pulse mode; and third, the program has
    only exercised the element's LRS&T capability in a small number of
    flighttest events.

    The Aegis BMD program demonstrated the capability to intercept a
    nonseparating target through its successes in FM-2, FM-3, FM-4, FM-6, and
    FM-7. Although these tests were scripted, they are noteworthy, given the
    difficulty of "hit-to-kill" intercepts. Officials with the office of
    Director, Operational Test and Evaluation (DOT&E), pointed out that the
    Aegis BMD program has conducted the most operationally realistic testing
    of all BMDS elements, especially because they utilize an operational U.S.
    Navy cruiser. They recognize, however, that the targets in FM-2 and FM-3
    flew trajectories that facilitated radar detection and tracking. More
    realistic engagement scenarios will be tested in Block 2006, for example,
    tests with multiple simultaneous engagements.

    As we reported last year,6 the Aegis BMD program faced challenges with
    ensuring the reliability of SDACS operation; the issue continues to be
    relevant. The root causes of the SDACS failure in FM-5 are understood and
    the program is implementing four design changes to correct the problem.
    After completing ground tests to verify these changes, the program plans
    to flight test the modified multi-pulse SDACS no earlier than FM-8,
    scheduled for the third quarter of fiscal year 2005. Even if the design
    changes prove to resolve the SDACS issue, program officials do not expect
    to implement any design changes in the first 11 Block 2004 missiles being
    delivered. Program officials believe that these missiles provide a
    credible defense against a large population of the threat even with
    reduced divert capability.

    The program has exercised the element's LRS&T capability in a limited
    number of flight-test events, as noted above. Nonetheless, the Aegis BMD
    program predicts that the Aegis SPY-1 radar is able to deliver adequate
    performance in support of the BMD mission, and DOT&E officials believe
    that Aegis BMD can adequately perform its detection and tracking

    6 GAO, Missile Defense: Actions Are Needed to Enhance Testing and
    Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004).

                      Appendix II: Aegis Ballistic Missile Defense

    functions. Although the Aegis destroyers have been upgraded for the LRS&T
    capability, they have not been exercised in a manner consistent with an
    actual defensive mission. That is, the Aegis BMD element has not provided
    track data of a target, in real time, to plan a BMD mission and launch GMD
    interceptors.

    DOD's planned investment in the Aegis BMD program from program inception
    in 1996 through 2011 is approximately $10 billion. As broken out in table
    13, DOD expended $3.67 billion between fiscal years 1996 and 2004,7
    Congress appropriated $1.14 billion for fiscal year 2005, and MDA is
    budgeting about $5.22 billion between fiscal years 2006 and 2011 for Aegis
    BMD development, procurement, and operations. Budgeted activities in the
    "cooperative work" column include SM-3 component development between the
    United States and Japan.

    Assessment of

    Element Cost

    Table 13: Aegis BMD Cost

                        Dollars in millions of then-year dollars

                               Other Block 2004 Block 2006 Block 2008       Total
                                     Block 2010 Cooperative work
         FY 1996a - FY 2003   $2,985                       $0 $0 $0 $0 $0  $2,985
         FY 2004 (Actuals)         0                      606 24 0 0 51.8
    FY 2005 (Appropriated)      0                     943 122 0 0 71.3   1,136
              FY 2006              0                   101 575 135 0 24.8
              FY 2007              0                    15 547 354 0 52.8
              FY 2008              0                    0 69 637 20 112.5
              FY 2009              0                   0 15 546 185 131.5
              FY 2010              0                    0 0 205 576 129.5
              FY 2011              0                     0 0 44 644 100.0
         FY 1996 - FY 2011    $2,985     $1,665 $1,352 $1,921 $1,425 $674 $10,022
                                                 Source: MDA.
                                            Notes: Aegis BMD budget as of
                                       February 2005. Numbers may not add
                                                         due to rounding.
                                        aProgram inception (FY 1996).

    Contract Activities 	In the second half of 2003, two new prime contracts
    for the Aegis BMD element were awarded, one for the Aegis Weapon System
    and one for the

    7 Includes funds expended to develop the Navy Theater Wide system.

                      Appendix II: Aegis Ballistic Missile Defense

    SM-3 missile. Aegis Weapon System efforts, previously part of five Navy
    contracts, were merged into one contract, which was awarded to Lockheed
    Martin in October 2003. This contract covers Block 2004 activities,
    including upgrades to BMD software, upgrades to the SM-3 missile launch
    system, and planning activities for future blocks. The two previous Navy
    SM-3 contracts were merged into a new contract, which was awarded to
    Raytheon in August 2003. It covers development and delivery of SM-3
    missiles and related engineering efforts.

    Prime Contractor Cost and Schedule Performance

    The government routinely uses contractor Cost Performance Reports to
    independently evaluate a prime contractor's cost and schedule performance.
    Generally, the reports detail deviations in cost and schedule relative to
    expectations established under the contract. Contractors refer to
    deviations as "variances." Positive variances are generally associated
    with the accomplishment of activities under cost or ahead of schedule,
    while negative variances are often associated with the accomplishment of
    activities over cost or behind schedule.

    We used the Cost Performance Reports to evaluate the cost and schedule
    performance of the Aegis Weapon System prime contractor but had
    insufficient data to assess the performance of the SM-3 contractor. Our
    analysis of the Aegis Weapon System found that the prime contractor
    performed at or near budgeted cost and schedule during fiscal year 2004.
    Specifically, since contract inception in October 2003 through September
    2004, the prime contractor was $3.5 million under budget. However, it was
    unable to complete $2 million of work because of fluctuations in ship and
    testing schedules (see fig. 3).

    Appendix II: Aegis Ballistic Missile Defense

    Figure 3: Aegis BMD Fiscal Year 2004 Cost and Schedule Performance

    Dollars in millions

    Jan. Feb. Mar. Apr. May June July Aug. Sept.

                                          2004

    Cumulative cost variance

    Cumulative schedule variance

    Sources: Contractor (data); GAO (analysis).

    The Defense Contract Management Agency is concerned with the delay that
    occurred in the implementation of the SM-3 contract's performance
    measurement baseline,8 which reflects the schedule and budget for all work
    tasks that must be performed to meet contract objectives. Although the
    contract was awarded to the prime contractor, Raytheon, in August 2003,
    the contract's baseline was not reviewed at an Integrated Baseline Review
    (IBR)9 until almost a year after contract award. Program officials
    indicated that the delay stemmed from the late establishment of the

    8 A performance measurement baseline identifies and defines work tasks,
    designates and assigns organizational responsibilities for each task,
    schedules the work tasks in accordance with established targets, and
    allocates budget to the scheduled work.

    9 An integrated baseline review is the program manager's review of a
    contractor's performance measurement baseline. The review is conducted by
    the program manager and the manager's technical staff. It verifies the
    technical content of the baseline and ensures that contractor personnel
    understand and have been adequately trained to collect earned value
    management data. The review also verifies the accuracy of the related
    budget and schedules, ensures that risks have been properly identified,
    assesses the contractor's ability to implement earned value management
    properly, and determines if the work identified by the contractor meets
    the program's objectives.

    Appendix II: Aegis Ballistic Missile Defense

    contract's performance management baseline, which was established 7 months
    after contract award because of the need for the program office to react
    to funding issues. Raytheon was allowed to postpone issuing Cost
    Performance Reports until after the Aegis BMD program office held an IBR 5
    months after establishment of the baseline.

    Until the completion of the Raytheon IBR, program officials monitored
    contractor performance through monthly management and business meetings
    where cost and performance data, milestones, and projections of future
    performance were reviewed. The program office stated that these monthly
    meetings provided sufficient data to monitor contractor performance.
    Nonetheless, without these reports, it is difficult for the program office
    (and other independent agencies) to monitor cost and schedule performance
    of the contract's various components and, therefore, to identify areas in
    need of corrective action. Additionally, although we are aware of past
    problems with SDACS performance on the SM-3 contract, we did not have any
    data to evaluate its impact on the contract's cost and schedule.

                   An Element of the Ballistic Missile Defense System

    Appendix III Summary

    Airborne Laser

    Fiscal Year 2004 Progress Assessment

    During fiscal year 2004, MDA restructured the ABL program to focus on
    nearterm milestones and to improve confidence in longer-term schedule and
    cost projections. The restructuring placed the near-term focus on two
    events: (1) the combined operation of individual laser modules to generate
    a single laser beam, known as "First Light," and (2) a flight test of the
    prototype aircraft with an installed laser beam control system, known as
    "First Flight." In light of the program's restructure, ABL completed most
    of its planned fiscal year 2004 activities on schedule. However, total
    contract costs through calendar year 2008 increased by approximately $1.5
    billion, and the program's schedule was extended over 3 years.

    Schedule: The program completed on schedule most of its fiscal year 2004
    activities associated with the preparation for "First Light" and "First
    Flight." However, as a result of the recent program restructuring, the
    demonstration to shoot down a short-range ballistic missile-the focus of
    the program-was delayed from 2005 and is now scheduled to occur no earlier
    than 2008.

    Testing: Both "First Light" and "First Flight" were achieved in early
    fiscal year 2005. Although the achievement of "First Light" is a key
    milestone for the program, it was not intended as an operational
    demonstration of a high-power laser, that is, at full power and for the
    length of time needed to shoot down a boosting missile. Rather, the
    laser's operation for a fraction of a second demonstrates successful
    integration of subsystems. "First Flight" is also a key milestone for the
    program. It is the first of a series of flights to demonstrate the
    completion of design, safety, and verification activities that are
    necessary to assure flight worthiness of the aircraft with the laser beam
    control system installed.

    Performance: At this stage of ABL development-before the laser has been
    operated at full power or critical technologies have been demonstrated in
    flight tests-any assessment of effectiveness is questionable. Nonetheless,
    the program office monitors performance indicators to assess the element's
    readiness for successfully completing the lethality demonstration. One
    indicator in particular-atmospheric compensation, the process whereby a
    system of deformable mirrors and electronics is used to minimize the
    degradation of the laser beam as it travels through the atmosphere-is not
    meeting its performance objectives. Program officials told us that a
    recovery plan for this indicator is in place.

    Cost: ABL program costs continue to grow. During the first half of fiscal
    year 2004, prior to the restructuring of the program, the ABL prime
    contractor incurred a negative cost variance of $114 million and could not
    complete $47 million of planned work. MDA's restructuring of the ABL
    program increased program cost by about $1.5 billion-the prime contract is
    currently valued at approximately $3.6 billion, more than three times its
    original value of $1.02 billion-although overall program objectives did
    not change.

                     United States Government Accountability Office

    Appendix III: Airborne Laser

    Element Description 	The Airborne Laser (ABL) is a missile defense system
    designed to shoot down enemy missiles during the boost phase of flight,
    the period after launch during which the missile's rocket motors are
    thrusting. By engaging ballistic missiles during the boost phase, ABL
    destroys enemy missiles early in their trajectory before warheads and
    countermeasures can be released. ABL plans to use a high-energy chemical
    laser to defeat enemy missiles by rupturing a missile's fuel or oxidizer
    tanks, causing the missile to lose thrust or flight control. ABL's
    objective is to prevent the delivery of the missile's warhead to its
    intended target.

    ABL was initially conceived as a theater system to defeat short- and
    medium-range ballistic missiles. However, its role has been expanded to
    include the full range of ballistic missile threats, including
    intercontinental ballistic missiles (ICBM).1 In addition, ABL could be
    used as a forwarddeployed Ballistic Missile Defense System (BMDS) sensor
    to provide launch point, impact point, and trajectory data of enemy
    missiles in support of engagements by other system elements.

    The ABL element consists of the following three major components
    integrated onboard a highly modified Boeing 747 aircraft. In addition, the
    element includes ground support infrastructure for storing, mixing, and
    handling the chemicals used in the laser.

    o  	High-energy chemical oxygen-iodine laser (COIL). The laser, which
    generates energy through chemical reactions, consists of six laser modules
    linked together to produce megawatt levels of power. Because the laser
    beam travels at the speed of light, ABL is expected to destroy missiles
    quickly, giving it a significant advantage over conventional boost-phase
    interceptors.

    o  	Beam control/fire control (BC/FC). The BC/FC component's primary
    mission is to maintain the beam's quality as it travels through the
    aircraft and atmosphere. Through tracking and stabilization, the BC/FC
    ensures that the laser's energy is focused on a targeted spot of the enemy
    missile.

    o  	Battle management/command and control (BMC2). The BMC2 component plans
    and executes the element's defensive engagements. It is being designed to
    work autonomously using its own sensors for launch

    1 The terms "intercontinental ballistic missile" and "long-range ballistic
    missile" are used interchangeably.

                              Appendix III: Airborne Laser

    History

    Developmental Phases

    detection, but it could also receive early warning data from other
    external sensors.

    In 1996, the Air Force initiated the ABL program to develop a defensive
    system that could destroy enemy missiles from a distance of several
    hundred kilometers. Developmental testing of the first prototype aircraft
    was originally planned to conclude in 2002 with an attempt to shoot down a
    short-range ballistic missile target.

    In 2002, management authority and funding responsibility transferred from
    the Air Force to the Missile Defense Agency (MDA). In accordance with MDA
    planning, the ABL program restructured its acquisition strategy to conform
    to an evolutionary, capabilities-based approach.

    The ABL program is focused on developing a prototype aircraft for use in a
    lethality demonstration-a flight test in which the ABL aircraft will
    attempt to shoot down a short-range ballistic missile. If this test is
    successful, MDA believes it will prove out the concept of using directed
    energy for missile defense. Although ABL's funding is broken out by
    block-2004, 2006, 2008, and 2010-the program is developing a single
    configuration of the element leading to the lethality demonstration, which
    will occur no earlier than 2008. A specific date for the demonstration has
    not been scheduled and depends on the success of ground testing.
    Furthermore, there is uncertainty as to when ABL will provide an initial
    operational capability. MDA plans to provide this capability through the
    development of a second aircraft, but the purchase of this aircraft is
    contingent upon the successful test of the prototype aircraft.

    In January 2004, MDA restructured the ABL program to focus on near-term
    milestones and to improve confidence in longer-term schedule and cost
    projections. The near-term focus of the program was shifted toward two
    events: (1) the achievement of a key laser demonstration known as "First
    Light"-the first demonstration of the integration of six individual laser
    modules to produce a single beam of laser energy-and (2) the initial
    flight test of the prototype aircraft with the BC/FC installed, which is
    referred to

    Appendix III: Airborne Laser

    as "First Flight."2 Key provisions of the restructure call for the program
    office to complete the following activities during the next few years:

    o  	Ground test and flight test the BC/FC segment independent of
    highenergy laser testing activities. BC/FC testing would utilize a
    low-power, substitute laser in place of the high-energy laser, as needed.

    o  	Ground test the high-energy laser independent of BC/FC testing
    activities.

    o  	Integrate and ground test the complete ABL weapon system (i.e.,
    combined laser, BC/FC, and battle management segments).

    o  	Flight test the ABL weapon system, culminating in a lethality
    demonstration against a boosting missile.

    The lethal demonstration has been delayed by about 6 years. This event was
    originally scheduled to occur in 2002 and, as we reported last year,3 was
    later rescheduled to be conducted in early 2005. However, as a result of
    the January 2004 restructuring of the program, the event is now scheduled
    to occur no earlier than 2008.

    In its report accompanying the 2005 Defense Authorization Act, the House
    Armed Services Committee noted its approval of the restructured program.
    However, the Committee also recognized that the future of the ABL program
    depended upon successful completion of "First Light" and "First Flight."
    The Committee stated that these milestones must be completed in order for
    the Committee to further support the program after fiscal year 2005.

    2 "First Flight" was planned as a "passive" flight test, that is, without
    the use of the Track Illuminator Laser (TILL) and the Beacon Illuminator
    Laser (BILL). The TILL and BILL are part of the laser-beam control system
    used to focus the laser beam on the target and to mitigate the effects of
    the atmosphere on beam quality.

    3 GAO, Missile Defense: Actions Are Needed to Enhance Testing and
    Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004).

                              Appendix III: Airborne Laser

    Fiscal Year 2004 Planned Accomplishments

    Assessment of Scheduled Activities

    The program planned to complete several activities during fiscal year 2004
    commensurate with the program's restructuring. As noted above, the program
    shifted its near-term focus toward key demonstrations within the BC/FC and
    laser segments. The following activities were identified as the key
    milestones for the fiscal year.

    o  	BC/FC Segment. Complete ground integration and testing of the BC/FC
    segment and begin integration of beam control segment into the ABL
    prototype aircraft in preparation for "First Flight."

    o  	Laser Segment. Complete integration of the six laser modules in the
    System Integration Laboratory (SIL)-a ground-test facility located at
    Edwards Air Force Base, California-in preparation for "First Light."

    In fiscal year 2004, the program completed most of its planned activities
    on schedule. Tables 14 and 15 summarize the progress made toward
    completing BC/FC and laser activities in fiscal year 2004.

    Table 14: Status of ABL Fiscal Year 2004 Planned Accomplishments-BC/FC
    Segment

    Activity Description/Progress assessment

    Complete ground integration and testing of In September 2004, the program
    completed this activity, which is comprised of a BC/FC

    the BC/FC	ground test and a test of the aircraft's flight turret. These
    tests were conducted in an effort to demonstrate the functionality of the
    full-up BC/FC and turret segments with flight hardware.

                        Begin integration of BC/FC segment into

    the ABL aircraft In October 2004, the last major BC/FC component-the
    flight turret-was installed on the aircraft at Edwards Air Force Base in
    preparation for "First Flight."

    Aircraft Readiness for Flight 	In November 2004, the program verified the
    air-worthiness of the ABL with the BC/FC and BMC4I components installed.

    Conduct "First Flight" 	"First Flight" was conducted in December 2004, the
    first of 22 planned flight tests with the BC/FC segment. The flight test
    was originally planned for 2- 1/2 hours but was terminated early due to
    erroneous instrument readings. These readings were corrected and a full
    duration flight was achieved the following week. One of its objectives was
    to demonstrate that all necessary design, safety, and verification
    activities to assure flight worthiness had been completed. "First Flight"
    also began the process of expanding the aircraft flight envelope-types and
    combinations of flight conditions-in which the ABL can operate. Finally,
    "First Flight" was designed to measure the environment of the BC/FC system
    while the aircraft is in flight.

                        Sources: MDA (data); GAO (presentation).

                              Appendix III: Airborne Laser

     Table 15: Status of ABL Fiscal Year 2004 Planned Accomplishments-Laser Segment

    Activity Description/Progress assessment

    Complete integration of the 6 laser The integration of individual modules
    in preparation for "First Light" was completed

    modules in the SIL 	successfully. The completion of this activity enabled
    testing of the six integrated modules in the ground-test facility.

    Achieve "First Light" in the SIL "First Light" was successfully conducted
    in fiscal year 2005 (November 2004).

    "First Light" refers to the ABL ground-test event during which individual
    laser modules are successfully integrated and operated to generate a
    single laser beam.

    Continue large optics fabrication and Efforts to complete studies of
    technologies are ongoing.

    optical coating efforts 	Long-lead optics production is ongoing and
    improvements to the production process are being studied.

    Continue jitter reduction and illuminator Efforts to upgrade hardware to
    reduce jitter-vibrations onboard the ABL aircraft that improvement
    degrades the focus of the high-energy laser beam-are still ongoing.

    Use of advanced cooling methods to improve the power, efficiency, beam
    quality, and start-up time of the illuminator laser are also still
    ongoing.

    Demonstration of "First Light"

    Sources: MDA (data); GAO (presentation).

    The demonstration of "First Light"-to prove that individual laser modules
    can be successfully integrated and operated to generate a single laser
    beam-was achieved on November 10, 2004, at the SIL ground facility. In
    general, "First Light" is an important milestone for any laser system
    because it demonstrates the ability to get all major laser subsystems to
    work together.

    Although the achievement of "First Light" is a key milestone for the
    program, it was not intended as an operational demonstration of a
    highpower laser, that is, at full power and for the length of time needed
    to shoot down a boosting missile. Rather, the laser's operation for a
    fraction of a second demonstrates successful integration of subsystems.
    "First Light" demonstrated that the six modules are aligned optically and
    the flow system is functioning, but program officials noted that the
    operation of the laser was too short to make meaningful predictions of
    power and beam quality.4 The program plans to conduct a series of tests
    that will gradually increase the length and power of the laser operation
    until full power lasing objectives are achieved.

    4 The quality of a laser beam is measured by attributes such as beam
    width, coherency, and sustained power.

                              Appendix III: Airborne Laser

    Demonstration of "First Flight"

    The achievement of "First Flight"-the first of 22 planned tests-is also a
    key milestone for the program. This flight test was conducted on December
    3, 2004, and served as the functional check of the aircraft with its newly
    installed laser beam control system. This event is critical because:

    o  	It demonstrates that all necessary design, safety, and verification
    activities to assure flight worthiness have been completed.

    o  	It begins the process of expanding the aircraft flight envelope-types
    and combinations of flight conditions-in which the ABL can operate.

    o  	It offers the program the opportunity to collect data on the effects
    of the environment on the BC/FC system while the aircraft is in flight.
    The data gathered during this test will be used to address jitter issues.

    Although "First Flight" was conducted, the program was unable to achieve
    all of its intended test objectives. The test was originally planned for
    2- 1/2 hours but was terminated early due to some erroneous
    instrumentation readings. Program officials made several attempts to
    resolve the readings in flight but were unsuccessful and the aircraft was
    landed early. However, the instrumentation anomalies were all fixed and
    the program conducted a second flight test on December 9, 2004, which
    lasted the intended duration of 2- 1/2 hours. The primary objective of the
    second test was the same as that for "First Flight"-to perform all
    necessary in-flight functional checks to ensure flight worthiness of the
    aircraft. The flight test was completed and all remaining test points not
    completed during "First Flight" were completed successfully.

    Assessment of Element Performance

    The program office monitors performance indicators to determine the
    program's readiness for successfully completing the lethality
    demonstration in 2008. Based on its assessment, 11 of 15 of these
    indicators point to some risk in achieving this goal. For example, one
    indicator-atmospheric compensation5-is not meeting its performance
    objectives. Program officials identified a shortfall in the bandwidth of
    the adaptive optics control system-the system of deformable mirrors and
    electronics that focus the laser beam on the target-as the primary cause

    5 Atmospheric compensation is the process whereby the high-energy laser
    beam uses a system of deformable mirrors to minimize the degradation of
    the laser caused by distortions in the atmosphere.

                              Appendix III: Airborne Laser

    of this deficiency. Program officials told us that a recovery plan for
    this indicator is already in place and that the contractor is in the
    process of fixing the shortfall.

    Another important indicator pertaining to the technology of controlling
    and stabilizing the high-energy laser beam so that vibration unique to the
    aircraft does not degrade aimpoint-a phenomenon referred to as
    "jitter"-was identified as a risk item by the program office early on and
    continues to be a program risk. Jitter control is crucial to the operation
    of the laser because the laser beam must be stable enough to impart
    sufficient energy on a fixed spot of the missile target to rupture its
    fuel or oxidizer tank. Because jitter is among the least mature of ABL's
    critical technologies, the program office is conducting ground tests and,
    in the future, flight tests to learn more about jitter control.

    DOD's planned investment in the ABL program from program inception in 1996
    through 2011 is approximately $7.3 billion. As broken out in table 16, DOD
    expended $2.52 billion between fiscal years 1996 and 2004, Congress
    appropriated $458 million for fiscal year 2005, and MDA is budgeting about
    $4.32 billion between fiscal years 2006 and 2011 for ABL research and
    development.

    Assessment of
    Element Cost

                                   Table 16: ABL Cost

                        Dollars in millions of then-year dollars

                             Other   Block     Block     Block     Block    Total
                                     2004      2006      2008      2010
        FY 1996a - FY 2003  $2,058        $0        $0        $0        $0 $2,058
        FY 2004 (Actuals)        0       459         0         0         0
             FY 2005             0       458         0         0         0
          (Appropriated)
             FY 2006             0         0       465         0         0
             FY 2007             0         0       630         0         0
             FY 2008             0         0         0       601         0    601
             FY 2009             0         0         0       669         0    669
             FY 2010             0         0         0         0       792    792
             FY 2011             0         0         0         0     1,163  1,163
        FY 1996 - FY 2011   $2,058      $917    $1,095    $1,270    $1,955 $7,295

    Source: MDA.
    Note: ABL budget as of February 2005.
    aProgram inception (FY 1996).

                              Appendix III: Airborne Laser

    ABL was funded as an Air Force program from 1996 through 2001 and during
    that time a little over $1 billion was spent. After the program was
    transferred to MDA in fiscal year 2002, MDA expended approximately $1
    billion in fiscal years 2002 and 2003 on ABL development.

    Major Contracting Activity in Fiscal Year 2004

    The cost of the ABL program continues to grow. In May 2004, we reported
    that the prime contractor's costs for developing ABL had nearly doubled
    from the Air Force's original estimate.6 In addition, the program incurred
    cost overruns. In fiscal year 2003 alone, the contractor overran its
    budget by $242 million, which resulted primarily from integration and
    testing issues.

    The program office recognized that the contractor's unfavorable cost and
    schedule performance would eventually cause the contract to reach its
    ceiling price by May 2004. Consequently, MDA considered three alternatives
    to the contract: (1) continue to work toward the planned schedule, (2)
    develop a new schedule that scaled back planned activities, or (3)
    discontinue the contract. Agency officials decided to continue with the
    existing contract and refocus the program on near-term technical progress.
    In an effort to continue with the current contract, program officials
    reevaluated the program schedule and extended the contract period of
    performance, established a new estimate to complete the contract, and
    increased the contract cost ceiling by about $1.5 billion. Prior to the
    recent program restructure, the Block 2004 prime contract was valued at
    approximately $2.1 billion and was scheduled to end six months after the
    lethality demonstration in June 2005. However, as a result of the recent
    program changes, the lethality demonstration is now expected to occur no
    earlier than 2008 and the contract's period of performance was extended
    through December 2008. The prime contract to conduct the lethality
    demonstration is currently valued at approximately $3.6 billion-more than
    three times its original value of $1.02 billion. Figure 4 summarizes the
    major activity for the program's prime contract since inception.

    6 GAO, Uncertainties Remain Concerning the Airborne Laser's Cost and
    Military Utility, GAO-04-643R (Washington, D.C.: May 17, 2004).

                              Appendix III: Airborne Laser

                        Figure 4: ABL Block 2004 Prime Contract

                        Source: MDA (data); GAO (presentation).

    Prime Contractor Fiscal Year 2004 Cost and Schedule Performance

    The government routinely uses contractor Cost Performance Reports to
    independently evaluate prime contractor performance relative to cost and
    schedule. Generally, the reports detail deviations in cost and schedule
    relative to expectations established under the contract. Contractors refer
    to deviations as "variances." Positive variances are generally associated
    with the accomplishment of activities under cost or ahead of schedule,
    while negative variances are often associated with the accomplishment of
    activities over cost or behind schedule.

    Our analysis of prime contractor Cost Performance Reports indicates that
    ABL cost and schedule performance declined during the first half of fiscal
    year 2004 even though the program implemented a new performance
    measurement baseline7 at the beginning of the fiscal year. As illustrated
    in figure 5, the program incurred a negative cost variance of $114 million
    and a negative schedule variance of $47 million during the first 6 months
    of fiscal year 2004. Program officials indicated that delays in hardware
    delivery, design problems, and integration issues were the primary drivers
    of cost growth.

    7 A performance measurement baseline identifies and defines work tasks,
    designates and assigns organizational responsibilities for each task,
    schedules the work tasks in accordance with established targets, and
    allocates budget to the scheduled work.

    Appendix III: Airborne Laser

    Figure 5: ABL Fiscal Year 2004 Cost and Schedule Performance

    Dollars in millions

    0

    -20

    -40

    -60

    -80

    -100

    -120

    Oct. Nov. Dec. Jan. Feb. Mar.

                                       2003 2004

    Cumlative cost variance

    Cumlative schedule variance

    Sources: Contractor (data); GAO (analysis).

    Note: Insufficient data is available to perform earned value management
    analysis beyond March 2004. Contractor performance reporting was suspended
    from April 2004 through July 2004 because the program was re-planning its
    efforts and implementing a new performance measurement baseline.

    Between April and July 2004, while the contractor was re-planning its work
    effort, the program was unable to fully evaluate the contractor's progress
    against its cost and schedule objectives. During this time, program
    officials directed the contractor to suspend normal cost performance
    reporting and redirected resources to complete the replanning effort.
    Since the contractor was not required to provide program officials with
    full Cost Performance Reports, the program was unable to perform
    meaningful Earned Value Management (EVM) analysis.8 However, in the
    absence of these reports, program officials took steps to ensure that some
    insight into the contractor's progress was maintained throughout the

    8 The EVM system is a management tool widely used by DOD to compare the
    value of the prime contractor's work performed to the work's actual cost.
    The tool measures the contractor's actual progress against its expected
    progress and enables the government and contractor to estimate the
    program's remaining cost.

                              Appendix III: Airborne Laser

    re-planning effort. For example, the program measured schedule progress by
    comparing actual progress against the completion of detailed activities
    associated with "First Light" and "First Flight" and gauged the
    contractor's cost performance by comparing contractor forecasted
    expenditures to the actual costs of the work performed.

    The contractor resumed normal cost performance reporting in August 2004.
    As of September 2004, the contractor was performing work under budget but
    slightly behind schedule-the program had a positive cost variance of $6.6
    million and a negative schedule variance of $1.6 million. According to
    Cost Performance Reports, the program experienced delays associated with
    the integration and checkout of the turret assembly-a subcomponent of the
    BC/FC system-which caused schedule slips through the end of the fiscal
    year. The late delivery of laser spare material and assembly parts caused
    additional schedule delays for the program.

    Award Fee Plan Although the program was restructured in spring 2004 and
    the ABL prime

    Unchanged 	contract modified to extend the contract period and increase
    its value, the associated award fee plan was not adjusted. Therefore, the
    contractor currently has no opportunity to earn any fee for successful
    demonstration, since the current award fee plan was tied to a successful
    completion of shoot down by December 2004.

    An Element of the Ballistic Missile Defense System

    Appendix IV Summary

    Command, Control, Battle Management, and Communications

    Fiscal Year 2004 Progress Assessment

    The C2BMC team executed the program within budget but slightly behind
    schedule in fiscal year 2004. Important activities-such as the completion
    of software development and testing, integration activities, and operator
    training continued in fiscal year 2004 to ready the element for Limited
    Defensive Operations (LDO)-were completed.

    Schedule: By the end of September 2004, the C2BMC program office completed
    activities needed to ready the C2BMC element for LDO. The LDO software
    "build" (spiral 4.3) was delivered. The program office also carried out a
    number of activities enabling BMDS integration and communications.
    Finally, C2BMC suites at U.S. Strategic Command and U.S. Northern Command
    were activated, and "web browsers" providing summary screens of the
    unfolding battle (such as trajectories of attacking missiles and launched
    interceptors) were installed at U.S. Pacific Command and locations in the
    National Capital Region.

    Testing: Testing to evaluate C2BMC functionality, interoperability, and
    system-level integration for LDO was completed. For example, Cycle-3
    testing-the third of four cycles of testing to verify that C2BMC
    interfaces with each BMDS element individually-was completed in August
    2004. Cycle-4 testing, which is ongoing, is the final cycle of testing to
    verify system-level integration. During these tests, the C2BMC element
    participates in flight tests planned and conducted by MDA.

    Performance: During testing of its software, the C2BMC program uncovered a
    performance issue with its "track correlation and association" algorithm
    in scenarios involving multiple tracks. The program monitored this issue
    as a high-risk item because it had the potential to impact situational
    awareness. In particular, threat information could be displayed
    differently at C2BMC suites and GMD fire control nodes, possibly causing
    confusion within the command structure. The problem was resolved with
    software fixes and the issue retired in July 2004.

    Cost: Our analysis of the prime contractor's Cost Performance Reports
    shows that the contractor continued to carry a positive cost variance,
    that is, in total it completed work under budget. However, the contractor
    experienced a modest erosion in cost performance in fiscal year 2004. In
    particular, it completed fiscal year 2004 activities slightly over budget,
    incurring a negative cost variance of $3.6 million. The prime contractor's
    schedule performance was slightly, yet consistently, behind schedule for
    most of fiscal year 2004. In total, the contractor incurred a negative
    schedule variance of $5.7 million because of unanticipated technical
    issues.

                     United States Government Accountability Office

    Appendix IV: Command, Control, Battle Management, and Communications

    Element Description 	The Command, Control, Battle Management, and
    Communications (C2BMC) element is being developed as the integrating and
    controlling entity of the Ballistic Missile Defense System (BMDS). It is
    designed to provide connectivity between the various BMDS elements and to
    manage their operation as part of an integrated, layered missile defense
    system.

    C2BMC has neither a sensor nor weapon. As a software system housed in
    command centers known as suites,1 C2BMC provides network-centric warfare
    capabilities that provide the warfighter with the capability to plan and
    monitor the missile defense mission. The C2BMC element will track
    ballistic missile threats-utilizing all available sensors from the various
    elements-and direct weapons systems to engage the threat.

    As the name indicates, the C2BMC is comprised of three major components:

    o  	Command and control. The command and control component enables the
    warfighter to monitor the operational status of each BMDS component,
    display threat information, such as missile trajectory and impact point,
    and control defensive actions. In other words, it provides the situational
    awareness and planning tools to assist the command structure in
    formulating and implementing defensive actions.

    o  	Battle management. The battle management component formulates the
    detailed instructions (task plans) for executing various missile defense
    functions, such as tracking enemy missiles, discriminating the warhead
    from decoys and associated objects, and directing the launch of
    interceptors. Once implemented, the battle manager will direct the
    operation of system elements and components, especially under evolving
    battle conditions.

    o  	Communications. Leveraging existing infrastructure, the communications
    component manages the exchange and dissemination of information necessary
    for carrying out the battle management and command and control objectives.

    History 	The Missile Defense Agency (MDA) initiated the C2BMC program in
    2002 as a new element of the BMDS. Program officials noted that initial

    1 The C2BMC element also consists of supporting hardware, such as
    workstations and communications equipment.

    Appendix IV: Command, Control, Battle Management, and Communications

    Developmental Phases

    versions of C2BMC software are based on existing Air Force and
    GMDdeveloped fire control (battle management) software.

    The C2BMC element is being developed under MDA's evolutionary acquisition
    approach, which delivers system capabilities in 2-year blocks, beginning
    with Block 2004. Within each block, C2BMC software is developed
    incrementally through a series of software builds known as "spirals." Over
    time, the C2BMC element will be enhanced to provide overarching control
    and execution of missile defense engagements with the aim of implementing
    layered defense through the collective use of individual BMDS elements.

    The principal function of the Block 2004 C2BMC element is to provide
    situational awareness, that is, to monitor the operational status of each
    BMDS component and to display threat information such as missile
    trajectories and impact points. The program expects to develop this
    capability incrementally through spirals 4.1 - 4.5. The interim delivery,
    spiral 4.3, is available for Limited Defensive Operations (LDO) and is on
    the path to full Block 2004 functionality.

    The incorporation of battle management capabilities in the C2BMC element
    begins with Block 2006. In the 2006-2007 time frame, the element is
    expected to track that ballistic missile threat throughout its entire
    trajectory and select the appropriate elements to engage the threat. For
    example, the Block 2006 C2BMC configuration would be able to generate a
    single, more precise track from multiple radars and to transmit it to the
    other elements. Together, this functionality enables each element to "see
    farther" than it could using its own radar system. This allows elements to
    launch interceptors earlier, which provides more opportunity to engage
    incoming ballistic missiles.

    Block 2006 is also expected to make a significant improvement over Block
    2004 with respect to BMDS communications. During this time, the C2BMC
    program office will work to establish communications to all elements of
    the BMDS, overcome limitations of legacy satellite communications
    protocols, and establish redundant communications links to enhance
    robustness. Such upgrades serve to improve operational availability and
    situational awareness.

    Appendix IV: Command, Control, Battle Management, and Communications

    Planned Accomplishments for Fiscal Year 2004

    o

    o

    o

    Assessment of Scheduled Activities

    Planned accomplishments for the C2BMC program in fiscal year 2004 centered
    on completing activities to ready the element for LDO by the end of
    September 2004. To achieve this goal, the C2BMC element planned to
    complete the following specific activities:

    Software development. Complete the design, development, and testing of LDO
    C2BMC software spirals 4.1 - 4.3.

    BMDS integration and communications. Integrate the C2BMC element into the
    BMDS; install and activate global communications capabilities.

    Make BMDS operational. Complete and activate C2BMC suites; train
    operators.

    By the end of September 2004, the C2BMC program office completed
    activities needed to ready the C2BMC element for LDO. The LDO "build" of
    C2BMC (spiral 4.3) was delivered and installed at the various suites. The
    program office also carried out a number of activities enabling BMDS
    integration and communications. Finally, C2BMC suites at U.S. Strategic
    Command (USSTRATCOM) and U.S. Northern Command (USNORTHCOM) were
    activated, and "web browsers" providing summary screens of the unfolding
    battle (such as trajectories of attacking missiles and launched
    interceptors) were installed at U.S. Pacific Command (USPACOM) and
    locations in the National Capital Region (such as the White House).

    Status of C2BMC Software Development

    Table 17 summarizes the principal development and testing activities for
    the first three spirals of Block 2004 C2BMC element software. Most
    notably, development of the LDO build, spiral 4.3, was completed in May
    2004. Testing to evaluate C2BMC functionality, interoperability, and
    system-level integration was also completed. For example, Cycle-3
    testing-the third of four cycles of testing to verify that C2BMC
    interfaces with each BMDS element individually-was completed in August
    2004. Cycle-4 testing, the final cycle of testing to verify system-level
    integration, is ongoing. During these tests, the C2BMC element
    participates in flight tests planned and conducted by MDA.

    Appendix IV: Command, Control, Battle Management, and Communications

    Table 17: C2BMC Fiscal Year 2004 Accomplishments-Software Development and
                                        Testing

    Software build Activity Completion date Comments

    Spiral 4.1 	Development Mar. 2003 All functional and performance testing
    was completed successfully. Testing Oct. 2003

    Spiral 4.2 Development Sept. 2003 Spiral 4.2 was tested in a number of
    venues, including Missile Testing Cycle-3: Feb. 2004 Defense Integration
    Exercise 04a (Mar. 2004), Integrated Missile Defense War Game 03.2 (Nov.
    2003), and Pacific Explorer II

    a,b,c

                                      (Mar. 2004).

    Spiral 4.3 Development May 2004 Spiral 4.3 is the LDO build. It was tested
    in Pacific Explorer III (Jul. Testing Cycle-3: Aug. 2004 2004), Glory Trip
    185 (June 2004), Integrated Missile Defense War Games 04.2 - 04.4 (June -
    Sept 2004), System Integration and Cycle-4: Ongoing Checkout 6A (Sept.
    2004), and other tests.b,c,d

    Sources: MDA (data); GAO (presentation).

    aMissile Defense Integration Exercises are hardware-in-the-loop ground
    tests conducted to characterize the degree of integration and
    interoperability between BMDS elements.

    bIntegrated Missile Defense War Games are ground tests that enable the
    warfighter to exercise the C2BMC in a simulated operational environment.
    In general, the warfighter community uses them to gain insight in, and
    provide feedback on, C2BMC capabilities.

    cPacific Explorers are field exercises to demonstrate BMDS connectivity.
    An Aegis destroyer participates by tracking an actual missile (or a
    simulated target) and passes track data to the C2BMC.

    dGlory Trips are live flight tests during which a Minuteman III missile is
    launched from Vandenberg Air Force Base as part of Follow-on Test and
    Evaluation. C2BMC objectives are geared to evaluating the element's
    interfacing with, and processing of track data from, forward-deployed
    radars.

    The program office plans to complete, by the end of calendar year 2005,
    key activities pertaining to the development and testing of spirals 4.4
    and 4.5-the final two builds of Block 2004 C2BMC element software. For
    example, development of spiral 4.4 was completed in November 2004 and
    Cycle-3 testing is expected to be completed in April 2005. In addition,
    the program office expects to complete development of spiral 4.5 in March
    2005 and begin Cycle-3 testing in June 2005. Cycle-4 testing of spiral 4.5
    is scheduled to begin during the first quarter of fiscal year 2006 with
    completion coinciding with the completion of Block 2004.

    Status of BMDS The C2BMC program office carried out a number of activities
    in fiscal year Integration and 2004 related to C2BMC's role in BMDS
    integration and communications. Communications For example, interface
    specifications between C2BMC and other elements

    were completed. In addition, communications software and hardware were
    installed at the various C2BMC sites, including USSTRATCOM, USNORTHCOM,
    and USPACOM. Finally, the C2BMC element participated in a number of MDA
    test events to verify system integration.

    Appendix IV: Command, Control, Battle Management, and Communications

    Status of Steps Taken to The C2BMC program completed a variety of
    activities in fiscal year 2004 to

    Make BMDS Operational 	make the BMDS operational. These activities
    included activation of C2BMC suites at the various command sites and the
    training of military operators for conducting ballistic missile defense
    missions. Table 18 summarizes the program's efforts in making the system
    available for LDO.

    Table 18: C2BMC Fiscal Year 2004 Planned Accomplishments-Making System
    Operational

    Activity Description/Progress assessment

    Site Activation	C2BMC suites at USSTRATCOM and USNORTHCOM were fully
    activated to support defensive operations. Furthermore, so-called "web
    browsers" that provide situational awareness are ready to support LDO at
    USPACOM and three National Capital Region sites. At all sites, hardware
    installation, software installation, testing, and a readiness review were
    completed by Sept. 30, 2004.

    Training 	C2BMC operator training was completed at USNORTHCOM, USSTRATCOM,
    USPACOM, and three National Capital Region sites by Sept. 30, 2004, to
    support LDO. The warfighter completed a number of training courses-Joint
    Defense Planner Class, Situational Awareness Class, and Flag Officer
    Class-at all locations and participated in training events. Operator
    training continued through the beginning of fiscal year 2005 as part of
    the "shakedown" process.

    Assessment of Element Performance

    Assessment of Element Cost

    Source: MDA.

    During testing of C2BMC software, the C2BMC program uncovered a
    performance issue with its "track correlation and association" algorithm
    in scenarios involving multiple tracks. During a portion of fiscal year
    2004, the program monitored this issue as a high-risk item because it had
    the potential to impact situational awareness. In particular, threat
    information could be displayed differently at C2BMC suites and GMD fire
    control nodes, possibly causing confusion within the command structure.2
    The program implemented a mitigation plan to resolve this issue, including
    the formation of a "Blue Ribbon Panel" in June 2004 to analyze the
    problem. The problem was resolved with software fixes and the issue
    retired in July 2004.

    DOD's planned investment in the C2BMC program from program inception in
    2002 through 2011 is approximately $2.2 billion. As broken out in table
    19, DOD expended $343 million between fiscal years 2002 and 2004, Congress
    appropriated $191 million for fiscal year 2005, and MDA is

    2 Details of this issue are classified.

          Appendix IV: Command, Control, Battle Management, and Communications

    budgeting $1.65 billion for C2BMC development and operations between
    fiscal years 2006 and 2011.

                                  Table 19: C2BMC Cost

                        Dollars in millions of then-year dollars

                          Other  Block    Block    Block   Block  Core b    Total
                                  2004     2006    2008    2010
         FY 2002a - FY   $179.4       $0       $0      $0      $0     $0   $179.4
             2003
    FY 2004 (Actuals)      0     92.4     52.5     0.7       0  18.3     163.9
            FY 2005           0    154.0     24.0    10.8       0  1.7      190.5
        (Appropriated)
            FY 2006           0     22.5    142.2    75.9       0      0    240.6
            FY 2007           0     16.2    153.0   100.0    11.5      0    280.7
            FY 2008           0        0     23.8   197.0    60.6      0    281.4
            FY 2009           0        0     16.7   166.0   104.6      0    287.3
            FY 2010           0        0        0    65.7   217.8      0    283.5
            FY 2011           0        0        0    56.0   223.7      0    279.7
    FY 2002 - FY 2011 $179.4   $285.1   $412.2  $672.1  $618.2 $20.0  $2,187.0

    Source: MDA.

    Note: C2BMC budget as of February 2005.

    aProgram inception (FY 2002).

    bCore funding is part of Program Element 0603890C, "BMD Project." Core
    activities involve the hiring of skilled individuals to aid in the
    development of the C2BMC element.

    Prime Contractor Cost and Schedule Performance

    C2BMC development is being carried out through a contractual vehicle known
    as an Other Transaction Agreement (OTA),3 which functions much like a
    prime contract. MDA believes that an OTA allows the C2BMC element to take
    advantage of more collaborative relationships between industry, the
    government, Federally Funded Research and Development Centers, and
    University Affiliated Research Centers. OTAs generally are not subject to
    federal procurement laws and regulations. The OTA did implement the earned
    value management system used to assess the cost and schedule performance
    of contractors developing large weapon systems. The C2BMC Missile Defense
    National Team, for which Lockheed

    3 An OTA refers to transactions other than contracts, grants, or
    cooperative agreements. OTAs are entered into under the authority of 10
    U.S.C. S: 2371 (2000 & Supp. II 2004) for basic, applied, and advanced
    research projects or under the authority of section 845 of the National
    Defense Authorization Act for Fiscal Year 1994 (10 U.S.C. S: 2371 note)
    for prototype projects.

    Appendix IV: Command, Control, Battle Management, and Communications

    Martin Integrated System and Solutions serves as the industry lead, is
    developing and fielding the C2BMC element of the BMDS.

    The government routinely uses contractor Cost Performance Reports to
    independently evaluate a prime contractor's cost and schedule performance.
    Generally, these reports detail deviations in cost and schedule relative
    to expectations established under the contract. Contractors refer to
    deviations as "variances." Positive variances are usually associated with
    the accomplishment of activities under cost or ahead of schedule, while
    negative variances are often associated with the accomplishment of
    activities over cost or behind schedule.

    During fiscal year 2004, C2BMC development was performed under two parts
    of the existing OTA-Part 2, for which work was completed in March 2004,
    and Part 3, for which work began in March 2004. As illustrated in figure
    6, Cost Performance Reports show that Lockheed Martin, the industry lead
    for the OTA, continued to carry a positive cost variance, that is, in
    total it completed work under budget. However, Lockheed experienced a
    modest erosion in cost performance in fiscal year 2004. In particular, it
    completed fiscal year 2004 activities slightly over budget, incurring a
    negative cost variance of $3.6 million on combined Part 2 and Part 3 work
    efforts.

    Appendix IV: Command, Control, Battle Management, and Communications

    Figure 6: C2BMC Fiscal Year 2004 Cost and Schedule Performance

    Dollars in millions

    Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept.

    2003 2004

    Cumulative cost variance

    Cumulative schedule variance

    Sources: Contractor (data); GAO (analysis).

    The prime contractor's schedule performance was slightly, yet
    consistently, behind schedule for most of fiscal year 2004. However,
    beginning in May 2004, schedule performance sharply declined. In total,
    Lockheed incurred a negative schedule variance of $5.7 million for
    combined Part 2 and Part 3 work performed in fiscal year 2004.

    The C2BMC program office reported the following two drivers as
    contributing to fiscal year 2004 cost and schedule variances.

    o  	Track association algorithm. As noted in the performance section, the
    C2BMC program uncovered a performance issue with its "track correlation
    and association" algorithm during spiral testing. Resources allocated to
    spiral 4.4 development were used to address this problem, including the
    convening of a Blue Ribbon panel to analyze it. In the course of analyzing
    and correcting this issue, more time and money were needed for additional
    testing of spiral 4.3 and associated risk reduction efforts on developing
    an alternative algorithm.

    o  	Site activation. C2BMC suites are being integrated with existing
    systems at USSTRATCOM, USNORTHCOM, and USPACOM. The

    Appendix IV: Command, Control, Battle Management, and Communications

    integration efforts, particularly those aspects pertaining to information
    assurance, were considerably more difficult that anticipated. The result
    was the need for more travel by the engineering team to field, install,
    and troubleshoot problems at the three activation sites.

    An Element of the Ballistic Missile Defense System

    Appendix V Summary

    Ground-Based Midcourse Defense

    Fiscal Year 2004 Progress Assessment

    By the end of fiscal year 2004, GMD carried out planned activities needed
    to field an initial missile defense capability, including, as summarized
    below, the emplacement of interceptors at Fort Greely, Alaska. However,
    delays of flight tests prevented MDA from demonstrating the operation of
    the integrated system in a realistic environment before placing
    interceptors in silos for defensive operations. The program also showed
    unfavorable trends in contractor cost and schedule performance in fiscal
    year 2004.

    Schedule: The GMD program completed construction of missile silos and
    facilities at Fort Greely, Alaska, and Vandenberg Air Force Base,
    California; emplaced five GMD interceptors in their silos at Fort Greely
    by the end of September 2004; and completed the upgrade of the Cobra Dane
    radar. MDA is on track to add additional interceptors and radar
    capabilities throughout Block 2004, although there is some risk that the
    sea-based X-band radar will not be completed by the first quarter of
    fiscal year 2006, as planned.

    Test: The GMD program office conducted two flight tests (non-intercept
    booster tests) in fiscal year 2004 out of six events that were planned-no
    intercept attempts were conducted. Accordingly, GMD interceptors were
    fielded before flight testing was performed to verify that LDO hardware
    and software could function in an operational environment. In preparation
    for defensive operations, the GMD program also completed a series of
    System Integration and Checkouts that demonstrated connectivity,
    functionality, and integration of its fielded components.

    Performance: While ground and flight tests have demonstrated each step of
    the missile defense engagement sequence-detect, track, launch/engage, and
    intercept-collectively, these accomplishments do not verify integrated
    operation of the GMD capability. For example, BMDS and GMD radars have not
    performed their primary function as a fire control radar in a flight test
    event.

    Cost: Our analysis of the prime contractor's Cost Performance Reports
    shows that the contractor overran its budgeted costs in fiscal year 2004
    by $219.6 million and was unable to complete $59.9 million worth of
    scheduled work. Developmental issues with the interceptor's booster and
    kill vehicle remain the leading causes of cost overruns and schedule
    slips. For example, interceptor development cost $204 million more in
    fiscal year 2004 than the contractor budgeted. Flight test delays also
    contributed to unfavorable cost and schedule performance.

                     United States Government Accountability Office

    Appendix V: Ground-Based Midcourse Defense

    Element Description 	The Ground-based Midcourse Defense (GMD) element is a
    missile defense system designed to protect the U.S. homeland against
    intercontinental ballistic missile (ICBM)1 attacks. As an integral part of
    the Ballistic Missile Defense System (BMDS), GMD functions to destroy
    long-range ballistic missiles during the midcourse phase of flight, the
    period after booster burnout when the warhead travels through space on a
    predictable path.

    The GMD element relies on a broad array of components, including (1)
    space-and ground-based sensors to provide early warning and tracking of
    missile launches; (2) ground-and sea-based radars to identify and refine
    the tracks of threatening objects; (3) ground-based interceptors to
    destroy enemy missiles through "hit-to-kill" impacts outside the
    atmosphere; and (4) fire control and communications nodes for battle
    management and execution of the GMD mission. Figure 7 illustrates GMD
    components, current and planned, which are situated at several locations
    within and outside of the United States.

    The program office produced, emplaced, and upgraded all GMD components
    needed for an initial capability by the end of September 2004 and is
    working to augment this initial capability with additional interceptors
    and radars by the end of calendar year 2005. This first block of
    capability-Block 2004-is estimated to provide the U.S. with protection
    against ICBMs launched from Northeast Asia and the Middle East.

    1 The terms "intercontinental ballistic missile" and "long range ballistic
    missile" are used interchangeably. They are, by definition, ballistic
    missiles with ranges greater than 5,500 kilometers (3,400 miles).

    Appendix V: Ground-Based Midcourse Defense

                        Figure 7: Components of the GMD Element

    History

    MDA (data); GAO (presentation).

    The Department of Defense (DOD) established the National Missile Defense
    program in 1996 to develop a missile defense system capable of protecting
    the United States from ICBM attacks. The program was to be in a position
    to deploy the system by 2005, if the threat warranted. Many of the
    components used in the current GMD program are based directly on the
    research and development conducted by the National Missile Defense
    program.

    In response to the President's December 2002 directive to field a missile
    defense system, the Missile Defense Agency (MDA) accelerated its
    developmental activities to make the GMD element operational-that is, to

                       Appendix V: Ground-Based Midcourse Defense

    Developmental Phases

    field a working system operated by trained warfighters. GMD remains a
    capabilities-based research and development program with enhanced
    capabilities delivered periodically in block upgrades.

    GMD's development and fielding are proceeding in a series of planned 2year
    blocks, which incrementally increase the element's capability by maturing
    the design of element components and upgrading software. Block 2004, the
    first increment, is being rolled out in two major phases:

    o  	Limited Defensive Operations (LDO). The GMD program completed an
    initial capability in September 2004, which is available for limited
    defensive operations. The principal components include five interceptors
    at Fort Greely, Alaska; GMD fire control and communications nodes for
    battle management and execution at Fort Greely and Schriever Air Force
    Base, Colorado; an upgraded Cobra Dane radar at Eareckson Air Station,
    Alaska; and connectivity to Aegis BMD for additional radar tracking. DOD
    will use this initial capability to provide the United States with
    protection against a limited ballistic missile attack launched from
    Northeast Asia. This capability was expanded by the end of calendar year
    2004 with the addition of three interceptors-one at Fort Greely and two at
    Vandenberg Air Force Base (VAFB), California-and an upgraded early warning
    radar (UEWR) at Beale Air Force Base, California.

    o  	Block 2004 Defensive Capability. By the end of calendar year 2005, MDA
    plans to augment the LDO capability by installing 10 additional
    interceptors at Fort Greely (for a total of 18 interceptors at Fort Greely
    and VAFB); deploying a sea-based X-band radar; and upgrading the early
    warning radar at Fylingdales, England. These enhancements are expected to
    provide additional protection against ICBMs launched from the Middle East.

    Future block configurations of the GMD element build upon the Block 2004
    capability. As part of its Block 2006 program, MDA expects to field 10
    additional interceptors at Fort Greely and upgrade the early warning radar
    located at Thule Airbase, Greenland. MDA also plans to conduct more
    realistic flight tests to demonstrate performance against more complex
    missile threats and environments.

    Appendix V: Ground-Based Midcourse Defense

    Planned Accomplishments for Fiscal Year 2004

    Assessment of Scheduled Activities

    The GMD element plays a central role in the Block 2004 BMDS. In general,
    planned accomplishments for GMD in fiscal year 2004 centered on continuing
    development of element components, conducting ground and flight testing,
    and fielding components for LDO. Specific planned accomplishments include:

    o  	Component Development. The program office planned to continue
    development of all element components for LDO, Block 2004, and the
    incremental improvement of block capability.

    o  	Testing. The program planned to conduct six flight tests (three
    booster tests, one "fly-by" test, and two intercept attempts), two
    integrated ground tests, and System Integration and Checkouts in
    preparation for LDO.

    o  	Fielding Initial Capability. The program planned to complete
    construction of facilities and the installation of five ground-based
    interceptors at Fort Greely, complete upgrades of the Cobra Dane radar,
    and activate its fire control and communications component.

    MDA met its fielding goals for LDO and is on track, with some schedule
    risk, to add additional interceptors and radar capabilities throughout
    Block 2004. Ground tests were conducted to ensure interoperability of
    element components and to verify operation and performance of component
    software. However, several key flight tests needed to verify the
    effectiveness of LDO hardware and software, originally scheduled for
    fiscal year 2004, were delayed into fiscal year 2005.

    GMD Component In fiscal year 2004, a large portion of the GMD program
    focused on the

    Development 	development of its Block 2004 components, some of which will
    be fielded as part of LDO. Summaries of progress made by the GMD program
    office during fiscal year 2004 in developing its components are given in
    table 20.

                       Appendix V: Ground-Based Midcourse Defense

             Table 20: Status of GMD Fiscal Year 2004 Component Development

    Component Description Fiscal Year 2004 progress

    GMD Fire Control and The fire control component integrates and controls
    Communications the other components of the GMD element. With Component
    input from operators, the fire control software plans

    engagements and directs GMD components, such as its radars and
    interceptors, to carry out a mission to destroy enemy ballistic missiles.
    The in-flight interceptor communications system (IFICS), which is part of
    the fire control component, enables the fire control component to
    communicate with the kill vehicle while it is en route to engage a threat.

    Upgraded Early Warning The early warning radar is an upgraded version of
    Radars existing Ultra High Frequency surveillance radars (Beale and
    Fylingdales) used by the Air Force for strategic warning and

    attack assessment. For Block 2004, the GMD program is upgrading two early
    warning radars- one at Beale AFB and another at Fylingdales Airbase-to
    enable the radars to more accurately track enemy missiles. The upgrades
    include improvements to both the hardware and software.

    Upgraded Cobra Dane The Cobra Dane radar, located at Eareckson Air Radar
    Station on Shemya Island, Alaska, was primarily In fiscal year 2004, the
    GMD program completed software development and testing of the LDO build.
    MDA also completed construction of IFICS Data Terminals at Shemya and Fort
    Greely and activated the CONUSa fiber optic ring, which connects all the
    command, control, and communications networks of the GMD element.
    Additionally, connectivity to Aegis BMD and the C2BMC were completed.

    In fiscal year 2004, Beale UEWR ground support facilities and radar
    hardware installation were completed. Although radar hardware installation
    is complete, final software installation and testing are ongoing with
    completion expected in the middle of fiscal year 2005.

    MDA also began facility construction and upgrades to the early warning
    radar at Fylingdales, which is on track to be completed by the first
    quarter of fiscal year 2006.

    In fiscal year 2004, the GMD program completed hardware installation and
    software upgrades to the Cobra Dane radar. The radar also tracked a
    foreign missile launch and participated in an integrated ground test.
    While Cobra Dane met most of the data collection objectives in these
    tests, the upgraded Cobra Dane radar has not participated in a flight test
    event as the primary fire control radar- a role it would need to fill in
    the event of a real threat. MDA may perform a radar certification flight
    test using a long-range air-launched target during the third quarter of
    2005. The primary objective of this test is to demonstrate the upgraded
    Cobra Dane in a more operationally realistic environment.

    being used to collect data on ICBM test launches out of Russia. Cobra
    Dane's surveillance mission did not require real-time communications and
    dataprocessing capabilities; therefore, it was upgraded to be capable of
    performing the missile defense mission as part of the Block 2004
    architecture. As an upgraded radar, Cobra Dane is expected to operate much
    like the upgraded early warning radar at Beale AFB. Although its hardware
    required minor modifications, Cobra Dane's mission software is being
    revised for its new application. The program plans to use existing
    software and develop new software to integrate Cobra Dane into the GMD
    architecture. It is also modifying the Cobra Dane facility to accommodate
    enhanced communications functions.

    Appendix V: Ground-Based Midcourse Defense

                    Component Description Fiscal Year 2004 progress

    Sea-Based X-Band Radar 	The GMD program office is managing the development
    of a sea-based X-band radar (SBX) to be delivered and integrated into the
    BMDS by the end of Block 2004. SBX will consist of an X-band radar-based
    on the technologies of the X-band radar prototype located at Reagan Test
    Site- positioned on a sea-based platform, similar to those used for
    offshore oil drilling. The radar is designed to track and discriminate
    enemy missiles with high accuracy and assess whether an intercept was
    successful.

    During fiscal year 2004, MDA completed most platform modifications and
    assembly of the radar structure. Key electronic components have been
    completed, and all software design reviews conducted.

    The program office assesses the delivery of SBX by the first quarter of
    fiscal year 2006 as the program's only significant risk item. If
    complications occur in final integration, checkout, or verification,
    delivery could be delayed.

    MDA plans to exercise the SBX in flight tests beginning in fiscal year
    2006.

    Ground-Based Interceptor 	The ground-based interceptor-the weapon In
    fiscal year 2004, MDA placed the first five component of the GMD
    element-consists of a kill interceptors into silos at Fort Greely; a sixth
    vehicle mounted atop a three-stage booster. The interceptor was delivered
    in October 2004. booster, which is essentially an ICBM-class missile, MDA
    continued to work toward building anddelivers and deploys the kill vehicle
    into a trajectory integrating pieces of additional missiles that will be
    to engage the threat. Once deployed, the kill vehicle delivered throughout
    2005. For example, uses its onboard guidance, navigation, and control
    interceptors #7 and #8 were placed into VAFB silossubsystem (along with
    target updates from the fire control node component) to detect, track, and
    steer during December 2004, as scheduled. itself into the enemy warhead,
    destroying it above the atmosphere through a hit-to-kill collision.

    Sources: MDA (data); GAO (presentation).

    aCONUS refers to the Continental United States, i.e., the lower 48 states.

    In our April 2004 report on missile defense,2 we noted that MDA is
    pursuing the development of two types of boosters for the GMD interceptor,
    one referred to as the Lockheed BV+ booster and the other known as the
    Orbital Sciences Corporation (OSC) booster. We also described how problems
    with the development and delivery of Lockheed's BV+ booster contributed to
    cost growth and schedule slips for the program. For example, BV+
    production was temporarily suspended because of two separate explosions at
    a subcontractor's propellant-mixing facility.

    Despite these problems, MDA is dedicated to pursuing a dual-booster
    strategy. However, the problems with Lockheed's booster in fiscal year
    2003 had ramifications for the program's fiscal year 2004 activities. For
    example, MDA planned to use BV+ boosters in alternating Block 2004 flight
    tests and in about half of the interceptors fielded. However, because

    2 GAO, Missile Defense: Actions Are Needed to Enhance Testing and
    Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004).

    Appendix V: Ground-Based Midcourse Defense

    of BV+ development and production problems, MDA deferred BV+ participation
    in integrated flight tests into Block 2006, and the Block 2004 inventory
    of GMD interceptors will consist entirely of those utilizing OSC boosters.
    MDA plans to restart the manufacturing of BV+ boosters in fiscal year 2005
    and to field the first BV+ booster in 2007.

                                      GMD Testing

    The GMD program conducts a variety of tests, the most visible being flight
    test events. For example, the program conducted booster validation (BV)
    flight tests to assess the operation of GMD's two booster designs. In
    addition, the program conducts integrated flight tests (IFT) to more
    realistically demonstrate the GMD element using actual hardware and
    software. IFTs are reflective of the environment in which the GMD element
    would operate for a given threat trajectory and given set of conditions.

    Although MDA hoped to gain knowledge about the element's effectiveness by
    conducting several integrated flight tests throughout fiscal year 2004,
    only two of six scheduled tests-non-intercept tests of the Lockheed BV+
    booster and the OSC booster-were executed. Table 21 summarizes the major
    GMD flight tests that MDA planned to conduct in fiscal year 2004.

             Table 21: Status of Major GMD Flight Tests (Fiscal Year 2004)

    Test event      Date             Description               Outcome
         BV-5a                       BV+ Booster Test      All booster objectives
                  Original date:                                   were achieved.
                  Feb. 20, 2003                            However, the mock kill
                                                                   vehicle failed
                                        Objectives:              to deploy.
                   Actual date:  o  Characterize
                                 Lockheed's BV+ booster
                   Jan. 9, 2004         performance

    IFT-13A Original date:        BV+ Booster Test        The program deferred
                                                                  this test until
                  May 2003                                      BV+ production
                                                                   resumes.
                                        Objectives:
                Planned date:   o  Characterize booster and
                                       kill vehicle
                  Deferred             environments
                indefinitely
                               o  Engage simulated target as
                               part of an
                                     integrated system

    Appendix V: Ground-Based Midcourse Defense

                          Test event Date Description Outcome

    IFT-13B Original date:     OSC Booster Testb     The test was a successful
                 July 2003                               demonstration of the OSC
                                                                         booster-
                                                        all test objectives were
                                     Objectives:        achieved.
                Actual date:   o  Characterize booster
                                  and kill vehicle
               Jan. 26, 2004        environments
                              o  Engage simulated
                              target as part of an
                                  integrated system

                                  Non-intercept attempt  Because the interceptor
    IFT-13C Original date: (zero-offset flyby)c with         failed to
                                                    the
                 Mar. 2004           OSC booster        launch from its silo,
                                                        test objectives
                                                         associated with booster
                                                                and kill
                                                        vehicle functioning could
                                                        not be assessed. The root
                Actual date:       Configuration:               cause of the test
               Dec. 14, 2004    o  Target launch from   failure was attributed to
                                       Kodiak                   a timing
                              o  Interceptor launch     problem with the
                              from Reagan Test Site  o  interceptor's flight
                              Interceptor: LDO          computer, which caused
                              configuration             the interceptor to abort
                                                        its launch.

    IFT-14 Original date:    System test (intercept  Because the interceptor
                             attempt) with OSC booster         failed to
                Oct. 2003                              launch from its silo, test
                                                       objectives
                                                        associated with booster
                                                                and kill
                             Configuration:  o  Target  vehicle functioning could
               Actual date:  launch from Kodiak  o           not be assessed. The
              Feb. 14, 2005  Interceptor launch from        reason for the launch
                             Reagan Test Site                    failure is under
                                                                   investigation.
                                o  Interceptor: LDO
                                   configuration

    FTG-04-1 Planned date:        System test (intercept attempt) with OSC TBD
                                                                      booster
                4Q FY2005d
                              Configuration:
                              o  Target launch from Kodiak
                              o  Interceptor launch from VAFB
                              o  Interceptor: LDO configuration

    Sources: MDA (data); GAO (presentation).

    Note: Test schedule as of October 2004.

    aBV-5 was the last flight test to use Lockheed's BV+ booster.

    bOrbital Sciences Corporation builds the OSC boost vehicle. MDA
    accelerated the production of OSC boosters to compensate for the
    undelivered BV+ boosters. All of the Block 2004 interceptors use OSC
    boosters.

    cA "zero-offset flyby" means that intercepting the target is not a test
    objective. However, no action is taken to prevent an intercept.

    dWe use the notation "4Q FY2005" to mean the fourth quarter of fiscal year
    2005 and an identical format for other time periods.

    Appendix V: Ground-Based Midcourse Defense

    IFT-13C, which was the first flight test in 2 years with the potential for
    an intercept,3 was delayed several times during fiscal year 2004. Part of
    the delay was attributed to technical problems with the interceptor. In
    addition, MDA upgraded the test interceptor to a configuration that more
    closely matches the ones deployed. The test was conducted in December
    2004, but failed to execute fully because the interceptor did not launch
    from its silo. IFT-13C was of particular significance, because it was to
    have demonstrated operational aspects of the LDO capability for the first
    time in a flight test environment. For example, it was to have
    demonstrated: (1) the operation of LDO hardware and software; (2) the
    operation of the kill vehicle mated with an OSC booster; and (3)
    "real-time" connectivity between Aegis destroyers and the C2BMC. IFT-14
    was conducted in February 2005 as a repeat of IFT-13C but with the added
    objective to achieve an intercept. However, as in IFT-13C, it failed to
    execute fully because the interceptor did not launch from its silo.

    MDA relies heavily on its ground test program to characterize element and
    system performance (especially under a broad set of conditions not
    testable in flight), to demonstrate interoperability, and to develop
    operational doctrine. MDA conducted two integrated ground tests (IGT) in
    fiscal year 2004, IGT-2 and IGT-4a. These tests employed actual
    GMDcomponent processors integrated together in a hardware-in-the-loop
    facility that emulated GMD operation in a simulated environment. They also
    included warfighter participation to aid in the development of operational
    concepts. Although the tests demonstrated that GMD components could work
    together, its utility in assessing element performance was limited.
    Officials in the office of DOT&E told us that such assessments should be
    anchored by flight test data so that models and simulations accurately
    characterize the system. Delays in the GMD flight test program precluded
    these tests from being adequately anchored and, therefore, limited its
    usefulness in assessing element performance.

    The GMD program also participated in a series of System Integration and
    Checkouts (SICO) of its fielded components. While these checkouts do not
    assess element performance, they do demonstrate connectivity,
    functionality, integration, and configuration in preparation for defensive
    operations. During fiscal year 2004, MDA successfully conducted SICOs 1,
    3, 5, and 6A. SICO 3 demonstrated the integration of non-LDO interceptor

    3 Technically, IFT-13C was a "zero-offset flyby." Although intercepting
    the target was not a test objective, no action was taken to prevent an
    intercept.

                       Appendix V: Ground-Based Midcourse Defense

    equipment at Fort Greely into the overall BMDS; SICO 5 confirmed that the
    upgraded Cobra Dane radar was properly connected to the Communications
    Network; and SICO 6A confirmed integration of LDO interceptor equipment at
    Fort Greely into the BMDS. Finally, SICO 6B was successfully conducted in
    the beginning of fiscal year 2005 (December 2004). It demonstrated the
    integration of interceptor equipment at Vandenberg into the BMDS.

                              Fielding Initial Capability

    The GMD program completed the development, emplacement, and/or upgrade of
    element components planned for LDO, including ground-based interceptors,
    the Cobra Dane radar, the Beale UEWR (in fiscal year 2005), and the GMD
    fire control and communications. Most notably, five interceptors were
    placed in silos at Fort Greely and are available for defensive operations.
    GMD also completed hardware and software upgrades to the Cobra Dane and
    Beale radars, both of which met objectives in ground tests and tracked
    targets of opportunity. Fire control and communications nodes have been
    activated and linked to all GMD locations. Finally, facility construction
    at Fort Greely and other GMD sites was completed. Table 22 summarizes main
    accomplishments made in fiscal year 2004 for each activity.

    Table 22: Status of GMD Fiscal Year 2004 Planned Accomplishments-Fielding
                                   Initial Capability

    Activity Description/Progress assessment

    Ground Based Interceptor: 	Five interceptors were delivered and installed
    at Fort Greely by September 30, 2004. Three additional interceptors were
    delivered (1 to Fort Greely; 2 to VAFB) by December 2004.

    Deliver and install 5 interceptors at Fort MDA plans to have 18
    interceptors available for defensive operations by the end of the

    Greely 	first quarter of fiscal year 2006, two less than the agency's
    Block 2004 fielding goal. Of the 20 interceptors originally planned, two
    were designated as test assets.

    Cobra Dane Radar: 	Installation and checkout of Cobra Dane's mission
    equipment was completed ahead of schedule. Cobra Dane software development
    was also completed. The radar successfully tracked a foreign missile
    launch but has not participated in any BMDS flight

    Complete upgrades, checkout, and tests that demonstrate real-time tracking
    and communications as part of an integrated activation system.

    Beale UEWR: 	All planned hardware upgrades and GMD software for LDO were
    completed. The Beale UEWR is now integrated with the BMDS. Although radar
    hardware installation is complete, final software installation and testing
    are ongoing with completion expected in

    Complete upgrades, checkout, and the middle of fiscal year 2005.

    activation The upgraded radar successfully tracked a Titan missile
    launched out of VAFB and several satellites but has not participated in
    any MDA-dedicated tests like radar certification flights or integrated
    flight tests in its upgraded configuration. The full checkout of the
    upgraded software will not be verified in a flight test until fiscal year
    2005.

    Appendix V: Ground-Based Midcourse Defense

    Activity Description/Progress assessment

    GMD fire control and communications: 	GMD fire control and communications
    were completed on schedule to support fielding of the GMD element. The
    CONUS fiber optic ring and spurs to all GMD locations were activated.
    Satellite communication links were established and all IFICS Data
    Terminals

    Complete installation, checkout, and were completed.

    activation

    Construction: 	All facilities required for alert at Fort Greely were
    completed, including the first missile field, Readiness and Control
    Building, Mechanical Electrical Building, and the on-site IFICS Data
    Terminals. The Missile Assembly Building and the interim power plant,

    Complete construction and installation at although not required for LDO,
    were also completed. Fort Greely and Shemya

    Assessment of Element Performance

    Sources: MDA (data); GAO (presentation).

    GMD, the centerpiece of the BMDS Block 2004 defensive capability, has
    demonstrated its ability to intercept target warheads in several flight
    tests since 1999. Indeed, the program has achieved five successful
    intercepts out of eight attempts.4 In addition, according to MDA
    officials, ground and flight tests have demonstrated each step of the
    engagement sequence- detect, track, launch/engage, and
    intercept-collectively, although these accomplishments do not verify
    integrated operation of the GMD capability.

    Although GMD flight tests have demonstrated basic functionality of a
    representative missile defense system using surrogate and prototype
    components, the tests were developmental in nature and relied on
    artificialities to overcome test-range limitations. For example, flight
    tests required the placement of a C-band transponder and Global
    Positioning System instrumentation on the target reentry vehicle. In
    addition, engagement conditions were limited to low closing velocities and
    short interceptor fly-out ranges. Finally, the tests were scripted and did
    not use production-representative hardware and software.

    In its push to field the first eight GMD interceptors by the end of
    December 2004, MDA is assuming both performance and cost risk. As noted
    above, the GMD program emplaced interceptors in silos before successfully
    conducting a flight test utilizing components with the LDO configuration.
    For example, the program did not demonstrate that the kill vehicle could
    operate with the OSC booster prior to placing it in the silo for future
    operational use (even though this booster puts more stress on the kill
    vehicle). If future flight testing identifies problems with fielded

    4 The December 2004 flight test, IFT-13C, and the February 2005 flight
    test, IFT-14, are not counted.

    Appendix V: Ground-Based Midcourse Defense

    interceptors, the need for corrective actions could be costly, but
    confidence would increase as corrections are made and capability is
    understood.

    DOD's planned investment in the GMD program from program inception in 1996
    through 2011 is approximately $31.6 billion. As broken out in table 23,
    DOD expended $15.3 billion between fiscal years 1996 and 2004,5 Congress
    appropriated $3.3 billion for fiscal year 2005, and MDA is budgeting about
    $13.0 billion between fiscal years 2006 and 2011 for GMD development,
    procurement, and operations.

                                     Assessment of

                                      Element Cost

                        Dollars in millions of then-year dollars

                                   Table 23: GMD Cost
                                          FY                                                                                                                                                                                                                                                                              FY
     Other Block Block Block Block Total 1996a $12,370 $0 $0 $0 $0 $12,370  FY 2004  0 1,357 1,587 0 0 2,944    FY 2005     0 2,756 563 0 0 3,319  FY  0 0 2,224 74 0 2,298  FY  0 0 2,232 281 189 2,702  FY  0 0 331 1,425 717 2,473  FY  0 0 234 1,176 655 2,065  FY  0 0 0 338 1,557 1,895  FY  0 0 0 213 1,350 1,563 1996
           2004  2006  2008  2010        - FY                              (Actuals)                         (Appropriated)                       2006                      2007                         2008                         2009                         2010                       2011                       - FY
                                         2003                                                                                                                                                                                                                                                                            2011 $12,370 $4,113 $7,171 $3,507 $4,468 $31,629

    Source: MDA. Note: GMD budget as of February 2005. aProgram inception (FY
    1996).

    Prime Contractor Fiscal GMD's prime contract consumes the bulk of the
    program's budget. The Year 2004 Cost and contract originally covered Block
    2004 and Block 2006 developmental Schedule Performance activities, not the
    procurement and fielding of interceptors for the initial

    defensive capability. Therefore, the program significantly modified the
    contract in October 2003. The $823 million modification directed the
    delivery of Block 2004 interceptors 6-20. The program is expected to

    5 Includes funds expended to develop the National Missile Defense system.

    Appendix V: Ground-Based Midcourse Defense

    modify the contract again to procure additional interceptors. The added
    cost of these interceptors is already reflected in the planned GMD budget
    and MDA cost goals.

    The government routinely uses contractor Cost Performance Reports to
    independently evaluate prime contractor performance relative to cost and
    schedule. Generally, the reports detail deviations in cost and schedule
    relative to expectations established under the contract. Contractors refer
    to deviations as "variances." Positive variances are usually associated
    with the accomplishment of activities under cost or ahead of schedule,
    while negative variances are often associated with the accomplishment of
    activities over cost or behind schedule.

    The GMD program showed an unfavorable trend in contractor performance in
    fiscal year 2004. According to our analysis, the contractor exceeded its
    budgeted costs during fiscal year 2004 by $219.6 million, which equates to
    11.6 percent of the contract value over the fiscal year. In addition, the
    contractor fell behind schedule in its work plan. In fiscal year 2004, the
    contractor was unable to complete $59.9 million of planned work. Figure 8
    shows how the contractor's cumulative cost and schedule performance
    declined during fiscal year 2004.

    Appendix V: Ground-Based Midcourse Defense

    Figure 8: GMD Fiscal Year 2004 Cost and Schedule Performance

    Dollars in millions

    Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept.

    2003 2004

    Cumulative cost variance

    Cumulative schedule variance Sources: Contractor (data); GAO (analysis).

    Our analysis shows that developmental issues with the interceptor continue
    to be the leading contributor to cost overruns and schedule slips.
    Interceptor-related work cost $204 million more than budgeted in fiscal
    year 2004, with the kill vehicle accounting for approximately 40 percent
    of this overrun. Delays in flight tests IFT-13C and IFT-14 also caused
    unfavorable cost and schedule variances.

    Based on the contractor's cost and schedule performance in fiscal year
    2004, we estimate that the current GMD contract-which ends in September
    2007-will overrun its budget by between $593 million and $950 million. The
    contractor, in contrast, estimates a $200 million overrun at contract
    completion. However, as of the end of fiscal year 2004, the contractor had
    already incurred a negative cumulative cost variance of approximately $348
    million. In order for the prime contractor to complete the contract within
    the established budget, the contractor must not incur any additional cost
    overruns through contract completion and recoup at least $148 million. The
    Defense Contract Management Agency believes that the prime contractor is
    optimistic in projecting that it can limit further cost growth and
    schedule slips. Indeed, the Defense Contract Management

    Appendix V: Ground-Based Midcourse Defense

    Agency predicts that the contractor will continue to fall behind and be
    unable to recover from past cost growth and schedule slips.

    An Element of the Ballistic Missile Defense System

    Appendix VI Summary

    Kinetic Energy Interceptors

    Fiscal Year 2004 Progress Assessment

    KEI program activities completed in fiscal year 2004 include the selection
    of Northrop Grumman as prime contractor for KEI development, associated
    planning activities, and experimental work geared toward collecting data
    of boosting missiles. Of significance, the amount appropriated by Congress
    for missile defense in fiscal years 2004 and 2005 did not include the
    amount of funding for KEI that was requested in the President's Budget. As
    a result, the program delayed its land-based capability from the
    originally planned Block 2008 time frame to Block 2012.

    Schedule: In December 2003, MDA awarded Northrop Grumman a $4.6 billion
    prime contract to develop and test the KEI element over the next 8 years.
    The award follows an 8-month concept design effort between competing
    contractor teams, each of which was awarded $10 million contracts to
    design concepts for KEI.

    Testing: In fiscal year 2004, the KEI program office continued with
    activities designed to reduce technical risks in developing the KEI
    interceptor. In particular, the program office is working on an experiment
    to collect data on boosting missiles, known as the Near Field Infrared
    Experiment. At this early stage of development, however, no significant
    testing of the land-based capability has been conducted by the program
    office.

    Performance: Because this element is still in its infancy, data are not
    yet available to make a performance assessment. However, the program
    office identified areas of high risk that could have an impact on the
    element's future performance. All risks are associated with interceptor
    development- including motor development and plume-to-hardbody
    handover-stemming from the demands required of the boost phase intercept
    mission.

    Cost: Our analysis of the prime contractor's cost performance report shows
    that the contractor completed planned work under budget but was slightly
    behind schedule in performing planned activities. Specifically, during
    fiscal year 2004, the contractor could not complete about $1.6 million
    worth of work. The program was unexpectedly tasked to complete trade
    studies of how to incorporate new requirements being imposed by MDA. Due
    to plans to restructure the KEI program, the prime contract's long-term
    baseline is no longer relevant; a reliable baseline will not be available
    until 2005.

                     United States Government Accountability Office

    Appendix VI: Kinetic Energy Interceptors

    Element Description 	The Kinetic Energy Interceptors (KEI) element is a
    missile defense system designed to destroy ballistic missiles during the
    boost phase of flight, the period after launch during which the missile's
    rocket motors are thrusting. KEI is also planned to engage enemy missiles
    in the early ascent-phase, the period after booster burnout before the
    missile releases warheads and countermeasures. Unlike the Airborne Laser
    element, which utilizes directed energy to disable boosting missiles, the
    KEI element launches interceptors to engage and destroy these threats
    through hit-to-kill collisions.

    The KEI program is currently focused on developing a mobile, land-based
    system-to be fully demonstrated by the Block 2012 time frame-to protect
    the United States against long-range ballistic missile attacks.1 The
    land-based system will be a deployable unit consisting of a command and
    control/battle management unit, mobile launchers, and interceptors. The
    KEI element has no sensor component, such as radars, for detecting and
    tracking boosting missiles. Instead, it will rely on Ballistic Missile
    Defense System (BMDS) sensors, such as space-based infrared sensors and
    forward-deployed radars, for such functions.

    Concurrent with KEI development, the program is proceeding with its Near
    Field Infrared Experiment (NFIRE). The experiment consists of launching an
    experimental satellite in fiscal year 2006 to collect infrared imagery of
    boosting intercontinental ballistic missiles (ICBM). The data it collects
    will support the program's efforts in developing the software that
    operates the interceptor's kill vehicle, in addition to enhancing plume2
    models and boost-phase simulations.

    History 	In fiscal year 2003, MDA initiated the KEI program as part of its
    Boost Defense Segment. To select a contractor and a concept for the
    element, the KEI program office awarded competitive contracts to teams
    headed by Northrop Grumman and Lockheed Martin. Each contractor was given
    the flexibility to design a system that met only one broad
    requirement-that

    1 In our report, GAO, Missile Defense: Actions Are Needed to Enhance
    Testing and Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004),
    we stated that the landbased system would be available in the Block 2010
    time frame. Because of budget cuts and a restructuring of the program, the
    land-based KEI capability will not be available until Block 2012.

    2 The plume is the hot exhaust gas emanating from the missile during boost
    phase.

                        Appendix VI: Kinetic Energy Interceptors

    Developmental Phases

    the KEI element be capable of reliably intercepting missiles in their
    boost/ascent phases. MDA did not set cost or schedule requirements or
    specify how the contractors should design the system.

    MDA initially requested funds for the KEI element along with other
    boostphase defense elements, such as the Airborne Laser, in its Boost
    Defense Segment. However, in fiscal year 2004, MDA budgeted the KEI
    program under a new area known as BMDS Interceptors.

    The KEI element is being developed under MDA's acquisition approach, which
    delivers system capabilities in 2-year block increments. When the KEI
    concept was first being pursued in fiscal year 2003-during which Northrop
    Grumman and Lockheed Martin were competing for the prime contract-the
    program planned on developing a mobile, land-based system to be available
    in the Block 2008 time frame and expanding it to sea-based platforms in
    Block 2010. However, the amount appropriated by Congress for missile
    defense in fiscal year 2004 did not include the amount of funding for KEI
    that was requested in the President's Budget. As a result, the program
    delayed completion of its land-based capability into Block 2010 and
    delayed the expansion of the sea-based capability into Block 2012.

    In fiscal year 2004, the KEI program underwent a second re-plan to
    compensate for anticipated fiscal year 2005 funding cuts and the addition
    of new requirements (such as nuclear hardening) imposed by MDA. In the
    re-plan, the land-based capability was combined with the sea-based
    capability of Block 2012, both of which utilize the same interceptor.

    The KEI program has undergone further restructuring, as reflected in the
    fiscal year 2006 President's Budget submitted in February 2005. Based on
    revised funding levels beyond fiscal year 2005, the program deferred the
    sea-based capability into Block 2014 (2014-2015 time frame), removed the
    international program, and initiated plans for a Space Test Bed.

    The program now expects to develop KEI capabilities as follows:

    o  	Block 2012-land. MDA envisions that the first-generation land based
    interceptors would be launched from trucks that can be driven up close to
    the border of the threatening nation. An initial land-based capability
    will be declared after the final flight test, Integrated Test 5 (IT-5), is
    conducted by the end of 2013.

                        Appendix VI: Kinetic Energy Interceptors

    Planned Accomplishments for Fiscal Year 2004

    Assessment of Scheduled Activities

    o  	Block 2014-sea. This block increment expands KEI's land-based
    capabilities to include the capability to launch KEI interceptors from
    sea-based platforms, such as Aegis cruisers. The sea-based capability will
    use the same interceptor as the land-based capability.

    o  	Blocks 2012/2014-space test bed. Development of the space test bed is
    planned to be carried out concurrently with the development of KEI's
    terrestrial (land and sea) capabilities. Consisting of a limited
    constellation of space-based interceptors, the test bed is envisioned to
    provide an additional layer of defense against ICBMs. MDA plans to
    initiate a concept design phase in fiscal year 2008 and conduct spacebased
    intercept tests in the Block 2012/2014 time frame.

    The KEI program planned to accomplish several activities during fiscal
    year 2004 associated with the land-based capability, with its primary
    focus being the selection of a prime contractor for KEI's developmental
    phase. In the first quarter of fiscal year 2004, the program selected
    Northrop Grumman as its prime contractor and awarded the company a
    contract valued at $4.6 billion that covers a 98-month performance period.

    The program office also planned to complete design, test, and risk
    reduction efforts in fiscal year 2004. However, budget reductions forced
    Northrop Grumman to delay several of these planned activities until fiscal
    year 2005. The program office originally told the contractor to plan for a
    $90 million budget during fiscal year 2004, but only $47 million was
    available. Because program funding in fiscal year 2004 was much less than
    requested, several design and test activities were postponed into fiscal
    year 2005. For example, the program's System Requirements Review (SRR)-a
    review during which mission objectives are documented, critical components
    are identified, and program planning is established-was postponed into
    fiscal year 2005.

    While the program completed a number of its planned activities, overall,
    the KEI program progressed much more slowly than anticipated. As noted
    above, Northrop Grumman was forced to re-plan several scheduled activities
    because of reduced funding for the KEI program in fiscal years 2004 and
    2005. Progress made toward achieving scheduled activities is summarized in
    tables 24 through 27.

    A key program accomplishment in fiscal year 2004 was the selection of
    Northrop Grumman as the KEI prime contractor. The KEI program office

                        Appendix VI: Kinetic Energy Interceptors

    employed a unique acquisition strategy in the award of the contract by
    making mission assurance-the successful operation of the element to
    perform its mission-the basis for the amount of the contractor's profit
    from the performance of the contract. MDA built incentives into the
    contract that require the prime contractor to assure mission assurance
    through a disciplined execution of quality processes. For example, the
    contractor earns an award fee only if flight tests are successful, and the
    percentage of the award fee earned is determined by whether the tests are
    conducted on schedule. The program's intention is to maximize the
    contractor's incentives to develop a quality product on schedule and at
    the originally proposed price.

    Table 24: Status of KEI Fiscal Year 2004 Planned Accomplishments-Contract Award
                                      and Planning

    Activity Description/Progress assessment

    Award KEI Block 2010 Development and In December 2003, Northrop Grumman
    was awarded the prime contract for KEI

    Test Contract 	development. The cost-plus-award-fee contract is valued at
    $4.6 billion and covers a 98month performance period (Dec. 2003 to Jan.
    2012).

    Conduct Integrated Baseline Review (IBR)a	The IBR for the Development and
    Test Contract was completed in March 2004. The review concluded with a
    decision to re-plan work given the funding constraints and to have the
    contractor address the cost of adding additional MDA-imposed requirements,

    b

    such as anti-tampering, nuclear hardening, and insensitive munitions.

    Conduct Block 2010 System Requirements The SRR is being deferred until
    April 2005. At that time, program officials will set specific Review (SRR)
    requirements for the KEI element based on detailed design trades, risk
    reduction tests, and performance assessments at both the element and
    component level.

    Conduct "Continuation Review" 	The fiscal year 2004 Continuation Review-a
    review to assess whether the program should continue-was deferred until
    the 4th quarter of fiscal year 2005. The program office reasoned that the
    value offered by such a review would be limited with only eight months of
    performance toward a 98-month contract.

    Sources: MDA (data); GAO (presentation).

    aAn integrated baseline review is the program manager's review of a
    contractor's performance measurement baseline. The review is conducted by
    the program manager and the manager's technical staff. It verifies the
    technical content of the baseline and ensures that contractor personnel
    understand and have been adequately trained to collect earned value
    management data. The review also verifies the accuracy of the related
    budget and schedules, ensures that risks have been properly identified,
    assesses the contractor's ability to implement earned value management
    properly, and determines if the work identified by the contractor meets
    the program's objectives.

    bAn insensitive munition is one that will not detonate under any condition
    other than its intended mission to destroy a target.

                        Appendix VI: Kinetic Energy Interceptors

    Table 25: Status of KEI Fiscal Year 2004 Planned Accomplishments-Design
    Activities

    Activity Description/Progress assessment

    Develop element simulations and models 	The Kinetic Energy Interceptors
    Simulation was delivered by Northrop Grumman to MDA in July 2004. The
    simulation will be used to evaluate the end-to-end performance of the KEI
    element.

    Develop interface requirements between KEI and C2BMC

    The KEI program completed an initial draft of the KEI-to-C2BMC Interface
    Control Document in June 2004.

                        Finalize acquisition plans for sea-based

    test bed platform The KEI program is investigating the use of a CG-47
    class vessel to be used as a test asset so that a better understanding of
    the effects of the sea environment on KEI operation is gained. A survey is
    underway to determine the condition of the vessel and whether the vessel
    could accommodate a launcher.

                        Initiate Concept of Operations (CONOPS)

    development with the warfighter

    The KEI program provided a draft CONOPS to the Army community for review
    in May 2004. Additionally, the program office commissioned the Navy to
    conduct a CONOPS study to determine the feasibility of integrating and
    operating KEI from cruisers, destroyers, and/or submarines. The Navy
    completed this study in August 2004.

    Initiate launcher control electronic As a result of program re-planning,
    this activity was deferred into fiscal year 2005. assembly development

    Design and fabricate Special Test As a result of program re-planning, this
    activity was deferred into fiscal year 2005.
    Equipment for interceptor design
    verification testing

    Establish interceptor manufacturing As a result of program re-planning,
    this activity was deferred into fiscal year 2005. process laboratory

                        Sources: MDA (data); GAO (presentation).

    Table 26: Status of KEI Fiscal Year 2004 Planned Accomplishments-Key Test
                                       Activities

    Activity Description/Progress assessment

    Initiate range planning 	Northrop Grumman continues to work on facilities
    as well as environmental and commercial support agreements with the
    ranges.

    Establish target requirements 	The KEI program office initiated a draft
    Target System Requirements Document in January 2004. Working with Northrop
    Grumman, KEI will deliver the final version to the MDA Configuration
    Control Board following the SRR in April 2005.

    Establish Developmental Master Test Plan	The delay in the SRR resulted in
    a delay in Developmental Master Test Plan delivery. Based on the current
    schedule, the program expects to deliver the test plan in July 2005, 90
    days after the SRR.

    Static booster motor firing 	This activity, which would have been the
    first firing of booster motors for the interceptor, was deferred into
    fiscal year 2005.

                        Sources: MDA (data); GAO (presentation).

                        Appendix VI: Kinetic Energy Interceptors

    Table 27: Status of KEI Fiscal Year 2004 Planned Accomplishments-Risk
    Reduction Activities

    Activity Description/Progress assessment

    Continue collection of boost/ascent The KEI program received
    high-resolution data sets from several Target of Opportunity phenomenology
    data data collections during fiscal year 2004. These series of data
    collections provide realistic, high-resolution data sets of plumes for a
    variety of missile launches.

    NFIRE activities	MDA directed the program to proceed with the experiment
    but remove the kill vehicle payload from the experiment's satellite,
    thereby reducing funding needs for fiscal year 2005.

    Liquid Divert and Attitude Control System As a result of program
    re-planning, this activity was deferred into fiscal year 2005.
    demonstration activities

    Sources: MDA (data); GAO (presentation).

    Assessment of 	At this early stage of element development, data are not
    available to evaluate element performance through the use of technical
    indicators.

    Element Performance 	However, the program office identified areas of high
    risk3 that may have an impact on the element's future performance. Table
    28 summarizes these risks. All risks are associated with interceptor
    operation for the boostphase intercept mission.

             Table 28: KEI High-Risk Areas Technology Risk/Area of concern

    Motor Development 	According to program officials, there is significant
    risk in achieving the required booster thrust and burn time performance to
    meet element requirements.

    a

    Plume-to-hardbody handover	The risk pertaining to plume-to-hardbody
    handover arises from a lack of phenomenology data. The program initially
    planned to utilize a 1-color infrared seeker for the kill vehicle, a plan
    driven by schedule constraints. However, because of program changes
    resulting in more time for element development, the program is proceeding
    with a 2-color seeker that enables the kill vehicle to better
    differentiate between the plume and hardbody.

    Thrust Vector Control 	The thrust vector control component of the booster
    is used to steer the interceptor during its boost phase. Program officials
    rated its development as a high-risk item. The risk stems from the need
    for highly capable steering of the boosting interceptor under stressing
    scenarios.

    Predicted Impact Point / Divert Trades 	This risk pertains to maintaining
    a balanced design trade to enable the kill vehicle to intercept the
    missile given targeting uncertainty. The design trade is between (1)
    predicted impact point accuracy (achieved by the KEI battle manager
    component) and (2) kill-vehicle divert requirements to compensate for
    targeting errors.

    Sources: MDA (data); GAO (presentation).

    aPlume-to-hardbody handover refers to the identification of the actual
    missile from among the plume of hot exhaust gas that obscures the body of
    the boosting missile.

    3 High risk means that the program will not meet its objectives without
    priority management actions and risk reduction activities.

                        Appendix VI: Kinetic Energy Interceptors

    In its July 2003 report on the boost-phase intercept mission,4 the
    American Physical Society indicated that "time line" is a major challenge
    for boost phase defense systems. In particular, boost phase defense
    against ICBMs hinges (in large part) on the length of time an attacking
    missile is in boost phase and on the speed of the defending interceptor.
    Accordingly, KEI program officials recognize the time constraints of the
    boost phase intercept mission and the challenge in developing quicker
    interceptors-as is evident by the first high-risk item of table 28.

    This same report also questions the feasibility of a land-based
    boost-phase intercept concept, especially against large nations. For
    example, the report states that a boost-phase intercept system employing
    terrestrial-based interceptors would generally be ineffective against
    ICBMs launched from the interiors of large countries-those having
    dimensions greater than 1,000 kilometers. Nonetheless, the program office
    contends sufficient coverage is possible given adequate numbers and
    stationing of KEI units. Furthermore, sea basing, which offers more
    options for boost phase defense, builds directly upon the investments
    being made in the landbased capability.

    Finally, a scientific study on boost phase defense commissioned by MDA5

    focused on selected issues of high risk. Plume-to-hardbody handover was

    identified as high risk because of a lack of plume phenomenology data

    available for determining the appropriate sensor combination for the

    interceptor. The program office recognizes this challenge, as noted in
    table

    28. As a result, the KEI program is proceeding with a 2-color seeker,
    better enabling the kill vehicle to differentiate between the plume and
    hardbody of a missile. In addition, the program is sponsoring NFIRE and
    participating in targets of opportunity to collect data of boosting
    missiles.

    Assessment of DOD's planned investment in the KEI program from program
    inception in 2003 through 2011 is approximately $6.0 billion. As broken
    out in table 29,Element Cost DOD expended $192 million between fiscal
    years 2003 and 2004, Congress appropriated $267 million for fiscal year
    2005, and MDA is budgeting about

    4 Report of the American Physical Society Study Group on Boost Phase
    Defense Intercept Systems for National Missile Defense (July 2003).

    5 Battleson, Kirk, et al., Phase One Engineering Team, Parameters
    Affecting Boost Phase Intercept System (February 2002).

                        Appendix VI: Kinetic Energy Interceptors

    $5.5 billion for KEI research and development between fiscal years 2006
    and 2011.

                                   Table 29: KEI Cost

                        Dollars in millions of then-year dollars

                              Other Block 2010 Block 2012 Space Test Bed    Total
              FY 2003a        $91.5         $0         $0             $0    $91.5
         FY 2004 (Actuals)        0      100.6          0              0    100.6
    FY 2005 (Appropriated)     0          0   267.4                 0    267.4
              FY 2006             0          0   218.7                 0    218.7
              FY 2007             0          0   420.2                 0    420.2
              FY 2008             0          0   604.6              45.0    649.6
              FY 2009             0          0   961.1             150.0  1,111.1
              FY 2010             0          0  1,189.3            248.0  1,437.3
              FY 2011             0          0  1,453.5            230.0  1,683.5
         FY 2003 - FY 2011    $91.5     $100.6  $5,114.8          $673.0 $5,978.9

    Source: MDA.

    Note: KEI budget as of February 2005.

    aProgram inception (FY 2003).

    Table 29 reflects the planned funding profile of the KEI program as
    presented in the President's Budget for fiscal year 2006, which was
    submitted in February 2005. When compared with the fiscal year 2005
    President's Budget-submitted last year in February 2004-KEI's current
    funding level is considerably less. Indeed, last year MDA budgeted $7.87
    billion for KEI program activities between fiscal years 2004 and 2009. The
    current budget of $2.77 billion over the same time period represents a 65
    percent reduction in program funding.

    Prime Contractor Cost and The government routinely uses contractor Cost
    Performance Reports to

    Schedule Performance 	independently evaluate prime contractor performance
    relative to cost and schedule. Generally, the reports detail deviations in
    cost and schedule relative to expectations established under the contract.
    Contractors refer to deviations as "variances." Positive variances are
    usually associated with the accomplishment of activities under cost or
    ahead of schedule, while negative variances are often associated with the
    accomplishment of activities over cost or behind schedule.

    Appendix VI: Kinetic Energy Interceptors

    The KEI prime contractor performed work in fiscal year 2004 near its
    budgeted costs. From contract inception through August 2004 (which covers
    less than 1 percent of the contract), the contractor completed work
    slightly under budget but was behind schedule in performing about $1.6
    million worth of planned work. Program officials indicated that the
    negative schedule variance was the result of the contractor delaying
    activities so that it could conduct trade studies on new requirements
    imposed by MDA. For example, the contractor has been directed to determine
    the cost of adding requirements for anti-tampering, nuclear hardening, and
    insensitive munitions.

    Because of plans to restructure the KEI program, the long-term performance
    measurement baseline6 is no longer relevant. Near-term work is still being
    performed according to plan, but the program suspended contractor cost and
    schedule performance reporting for current work efforts after August 2004.
    As a result, KEI program officials had reduced insight into its prime
    contractor's work efforts for a portion of fiscal year 2004. The program
    office told us that the contractor will resume reporting in 2005 after a
    reliable baseline that reflects the full extent of the program's
    restructure is available.

    6 A performance measurement baseline identifies and defines work tasks,
    designates and assigns organizational responsibilities for each task,
    schedules the work tasks in accordance with established targets, and
    allocates budget to the scheduled work.

    An Element of the Ballistic Missile Defense System

    Appendix VII Summary

    Space Tracking and Surveillance System

    Fiscal Year 2004 Progress Assessment

    The STSS program office accomplished all but one of the principal Block
    2006 activities planned for completion in fiscal year 2004 and initiated
    work planned for completion in fiscal year 2005. Although the prime
    contractor is working to an accelerated delivery schedule, quality and
    systemsengineering problems with a subcontractor are jeopardizing the
    early delivery of a satellite's payload.

    Schedule: Program activities completed in fiscal year 2004 include the
    complex tasks of systems integration, testing, and software development.
    The program office completed a critical design review on time. Hardware
    modifications to the satellites were completed, but a heat problem
    resulting from the redesign of the electrical power subsystem caused a
    delay of three months. Software development activities were also
    completed, and reviews to ensure that the design for the STSS ground
    system could accommodate a larger constellation of satellites were
    conducted.

    Testing: Functional tests on components of the second technology
    demonstration satellite were completed several months late because of
    minor problems with the spacecraft's computer processor and other
    components. Planned integration tests on the track sensor were not
    completed, and integration testing of an interim version of the software
    that controls the sensors onboard the satellites took longer than planned.
    Although final acceptance testing for the ground software is expected to
    be completed 2 months late, all software development tasks are scheduled
    to be completed two years before satellite launch.

    Performance: Data provided by MDA indicate that two STSS performance
    indicators do not meet their respective requirements-one pertaining to the
    acquisition sensor and a second pertaining to the tracking sensor. Program
    officials stated that degradation in performance is within acceptable
    limits. The program considers the demonstration of STSS functionality more
    critical than verifying the effectiveness of the demonstrator satellites.

    Cost: Our analysis of prime contractor Cost Performance Reports shows that
    the contractor completed work in fiscal year 2004 over budget by about
    $34.6 million. In addition, the contractor could not complete $20.7
    million of scheduled work (relative to a 6-month accelerated schedule).
    Quality and systems-engineering problems with a subcontractor contributed
    to the overruns in cost and schedule.

                     United States Government Accountability Office

    Appendix VII: Space Tracking and Surveillance System

    Element Description 	The Space Tracking and Surveillance System (STSS) is
    being developed as a space-based sensor for the Ballistic Missile Defense
    System (BMDS). As envisioned by the Missile Defense Agency (MDA), the full
    STSS element will be comprised of a constellation of low-orbiting
    satellites1 designed to detect and track enemy missiles throughout all
    phases of flight. Each satellite making up the program's "space segment"
    includes a space vehicle and a payload of two infrared sensors-the
    acquisition sensor to watch for the bright plumes (hot exhaust gas) of
    boosting missiles, and the tracking sensor to follow the missile through
    midcourse and reentry. The STSS element also has supporting ground
    infrastructure, known as the "ground segment," which includes a ground
    station and mission software to support the processing and communication
    of data from the satellites to the BMDS.

    MDA is currently working on the first increment of STSS, known as Block
    2006, which is focused on the preparation and launch of two technology
    demonstration satellites2 partially built under the Space Based Infrared
    System Low (SBIRS-Low) program. MDA plans to launch these satellites in
    2007, in tandem, in an effort to assess how well they perform surveillance
    and tracking functions. Using data collected by the satellites, MDA will
    determine what capabilities are needed and what goals should be set for
    the next generation of STSS satellites. Any real operational capability,
    however, would not be realized until the next decade.

    Initiated in 1996, SBIRS-Low was the latest in a series of Department of
    Defense (DOD) satellite programs attempting to deliver an operational
    capability for detecting and tracking missiles from low-earth orbits. The
    program experienced cost and schedule growth and performance shortfalls.
    In response, DOD cancelled the accompanying demonstration program in 1999
    and put the partially constructed satellite equipment into storage.

    In October 2000, Congress directed the Air Force to transfer the SBIRS-Low
    program to the Ballistic Missile Defense Organization (MDA's predecessor).
    When MDA inherited SBIRS-Low, the agency decided to

    1 The satellites are expected to orbit the earth at an altitude much less
    than satellites in geo-synchronous orbit.

    2 The two technology demonstration satellites were part of the Flight
    Demonstration System.

    History

    Appendix VII: Space Tracking and Surveillance System

    Developmental Phases

    Planned Accomplishments for Fiscal Year 2004

    Assessment of Scheduled Activities

    make use of the equipment that was partially built under the SBIRS-Low
    technology demonstrator program. By completing the assembly of the two
    satellites and launching them in 2007, MDA intends to use the satellites
    in missile defense flight tests. At the end of 2002, the SBIRS-Low program
    was renamed STSS.

    STSS's development is proceeding in a series of 2-year blocks, namely,
    Blocks 2006, 2008, and beyond. As noted above, Block 2006 involves the
    assembly, integration, testing, and launch of two research and development
    satellites in 2007. The first satellite is expected to be ready in
    September 2005 and the second in early fiscal year 2007. Block 2008 is
    primarily an upgrade of the Block 2006 ground stations, which are used to
    collect and analyze data from the two satellites. As technology matures
    and as lessons are learned from the first satellites, more capable
    satellites will be designed and launched in subsequent blocks.3

    The STSS program office intended to accomplish several activities during
    fiscal year 2004 related to the preparation of the two demonstration
    satellites for launch in 2007. Specifically, the program office planned to
    complete the following space- and ground-segment activities:

    o  	Space Segment. The program planned to complete a design review to
    ensure the STSS design can support the BMDS mission; complete the
    reactivation of hardware components for the second satellite; modify two
    satellite hardware components to enhance spacecraft performance; continue
    to develop the payload software; and start the assembly, integration, and
    testing of satellite components.

    o  	Ground Segment. The program planned to complete activities to ensure
    that the STSS element has a mature ground system design and to continue
    with the development of software for the ground segment of the program.

    The STSS program office completed all but one of the principal Block 2006
    activities planned for fiscal year 2004, including the complex tasks of
    systems integration, testing, and software development. Moreover, the

    3 Program content of Block 2010 and beyond is classified.

                  Appendix VII: Space Tracking and Surveillance System

    program office initiated work planned for completion in fiscal year 2005.
    The contractor has been performing to an accelerated delivery schedule,
    that is, attempting to complete all contracted activities six months
    earlier than required by the contract. However, according to the program
    office, quality and systems-engineering problems at the payload
    subcontractor are jeopardizing the early delivery. Progress made toward
    achieving the space-and ground-segment activities is summarized in tables
    30 and 31, respectively.

        Table 30: Status of STSS Fiscal Year 2004 Planned Accomplishments-Space
                                        Segment
                                                                                      quarter of
                                                                                          fiscal
                                                                                      year 2004.
                                                                                         Sixteen
                                                                                          issues
                                                                                            were
                                                                                      identified
                                                                           (Completed during the
     Actual/Planned  Activity completion Comments          Nov.            on            review,
                                 date                      2003 The STSS   schedule)     and all
                                                                 program                    were
                                                                 office                satisfied   program
                                                                conducted             and closed   office, the
                                                                    a                     out in   review was
                                                                critical                   March   on time and
                                                  Critical       design                    2004.   the outcome
                                                   Design       review in              According   was
                                                   Review       the first                 to the   successful.

    Reactivation of   Oct. 2003   The second satellite has been completely
          Satellite                  reactivated, which involved the
                                     contractor taking 58 hardware components out
         #2 Hardware   (Completed 5       of storage and running tests on them to
                       months late)   determine if they still worked. All but one
                                                                of the components
                                       passed the appropriate functional tests.
                                            Functional tests for the final
                                     component-the spacecraft computer
                                     processor-are being deferred until
                                                the next higher-level of hardware
                                     integration. During the reactivation of this
                                      hardware, the contractor experienced minor
                                                  problems with some
                                      components. Though these issues have since
                                                 been resolved, they
                                     contributed to the five-month delay in the
                                     reactivation schedule. Overall,
                                       however, the components survived storage
                                              rather well, according to
                                                  program officials.

    Hardware Modifications 	Performance modifications to the Sun Shield were
    completed as planned, but modifications to the Electrical Power Subsystem
    were completed three months later than expected. Although the upgrades to
    the power system are

    o  Electrical Power  o  Sept. 2003 (Completed 3 to result in a 200 percent
    improvement in on-orbit operation, the redesign

    Subsystem months late) was more complex than originally planned and
    resulted in the problem of removing excess heat produced by the power
    system. To resolve the heat

    o  	Sun Shield  o  Sept. 2004 (Completed problem, the contractor had to
    use $2-3 million from its management on schedule) reserve to add air ducts
    to the spacecraft.

    Payload Software

    o  	Build 2  o  July 2004 (Completed 1 month late)

    o  May 2005 (Ongoing)

    o  	Closed Loop Testing of Sensor Payload Software Software builds for the
    space and ground segments are proceeding as planned. The program office
    characterized software development as being the "gem" of the program.
    Version 2 of the software that controls the sensors onboard the satellite
    was completed in mid-August 2004. Although the software team encountered
    problems while integrating and testing this version, the problems were
    resolved in time to limit the delay to one month in building the software.
    At the end of fiscal year 2004, the contractor had completed about half of
    Version 3 software for the payload data processor. A partial build of this
    version is undergoing integration testing and is scheduled for completion
    in May 2005. According to the program office, the software is on schedule
    to be completed two years before the satellites are launched.

                  Appendix VII: Space Tracking and Surveillance System

    Actual/Planned Activity completion date Comments

    Assembly, Integration, and Testing (AI&T)

    o  Track Sensor  o  Aug. 2004 (Ongoing)

    o  	Spacecraft #1  o  July 2004 (Completed 1 month late)

    o  Payload #1  o  Jan. 2005 (Ongoing) The STSS program scheduled several
    assembly, integration, and testing activities for completion in fiscal
    years 2004 and 2005, which were (or expected to be) completed behind
    schedule. First, the program office had planned to assemble, integrate,
    and test the track sensor for the first satellite by the end of August
    2004. Second, the program office had planned to integrate and test the
    spacecraft for the first payload by the end of July 2004, but did not
    complete the task until mid-August 2004. The objective of the tests was to
    demonstrate the electrical integration of the spacecraft. Third, the
    program office planned to start integrating and testing the payload for
    the first STSS space vehicle. The testing of the payload components was
    expected to be completed by January 2005. However, the program office
    reported that the schedule will be tight and will likely slip by a couple
    of months primarily because of quality and systems engineering problems at
    the payload subcontractor.

                        Sources: MDA (data); GAO (presentation).

    Table 31: Status of STSS Fiscal Year 2004 Planned Accomplishments-Ground Segment

    Actual/Planned Activity completion date Comments

    Mature Ground     Oct. 2003      Reviews were conducted to ensure that the
          System                        STSS program has a mature
                                          ground system design. Because of issues
          Design     (Completed 1 month    related to paperwork, the reviews were
                     late)                     completed about a month later than
                                                planned. The contractor presented
                                            a detailed design for the STSS ground
                                             system at the November 2003 critical
                                        design review, and according to the
                                        program office, the proposed design is
                                        robust enough to accommodate a larger
                                        STSS constellation in the future.

    Develop Ground Dec. 2005          The STSS ground software development was
                                                      completed in December 2005.
          Software              The contractor is following a "build a little"
                                and "test a little" approach in
                                order to catch defects early in the process
                                before they are costly to fix,
                                         according to program officials.

    Assessment of Element Performance

    Sources: MDA (data); GAO (presentation).

    The Block 2006 STSS satellites will be used as technology demonstrators
    (rather than for operational missions) and have an in-orbit life of 18-24
    months. To keep costs within budget, the program considers the
    demonstration of STSS functionality more critical than the demonstration
    of STSS effectiveness in performing the functions. MDA decided to fly
    these demonstration satellites before developing and producing them in
    larger numbers to see how components and subsystems work together as a
    system in a realistic environment before a greater investment of resources
    is made, thereby reducing program risk. As noted above, each satellite
    contains two infrared sensors-an acquisition sensor to detect a missile
    launch and a tracking sensor to track the missile through space once it
    has been detected. The tracking sensor would continue tracking

    Appendix VII: Space Tracking and Surveillance System

    Assessment of
    Element Cost

    the missile after the acquisition sensor has completed its detection
    function. The ability of one satellite to detect or "acquire" a missile
    launch and to transmit this data to its internal tracking sensor has not
    yet been demonstrated in space, although DOD has had successes in
    demonstrating some related on-orbit capabilities through experimental
    satellites.

    Even with a focus on system functionality over effectiveness, the prime
    contractor continues to track 12 system level technical parameters that
    are critical to the performance of the sensors onboard the Block 2006
    satellites. Data provided to us by MDA indicate that 2 of the 12
    indicators do not meet their respective requirements. The details on these
    issues, including the impact on STSS performance, are classified. However,
    shortfalls in performance involve both sensors. The ability of the
    acquisition sensors to properly detect a missile launch is falling below
    performance margins and the accuracy of the tracking sensor is getting
    close to the margin. Program officials stated that the degradation in
    acquisition sensor performance is within allowable limits and steps are
    being taken to improve tracking sensor performance.

    DOD's planned investment in the STSS program from program inception in
    2002 through 2011 is approximately $4.5 billion.4 As broken out in table
    32, DOD expended $819 million between fiscal years 2002 and 2004, Congress
    appropriated $302 million for fiscal year 2005, and MDA is budgeting about
    $3.35 billion between fiscal years 2006 and 2011 for element development.
    MDA's planned budget for the next 6 years through 2011 funds activities
    associated with the assembly and launch of the two demonstrator satellites
    (Block 2006), ground segment upgrades (Block 2008), and the development of
    an operational constellation of satellites (Block 2012).

    4 Prior to 2002, the SBIRS-Low program invested $686 million to develop
    the demonstration satellites that are now part of the STSS program.

                  Appendix VII: Space Tracking and Surveillance System

                                  Table 32: STSS Cost

                        Dollars in millions of then-year dollars

                             Other Block 2006   Block    Block     Block    Total
                                                2008      2010     2012
        FY 2002a - FY 2003    $544         $0        $0       $0        $0   $544
         FY 2004 (Actuals)       0        263         0       12         0
              FY 2005            0        254         0       48         0
          (Appropriated)
              FY 2006            0        231         0        0         1
              FY 2007            0        208        45        0       167
              FY 2008            0         65        29        0       440
              FY 2009            0         11        24        0       579
              FY 2010            0          8        14        0       737
              FY 2011            0          7        14        0       773
         FY 2002 - FY 2011    $544     $1,046      $127      $60    $2,697 $4,474

    Source: MDA.
    Note: STSS budget as of February 2005. Numbers may not add due to
    rounding.
    aProgram inception (FY 2002).

    Prime Contractor Cost and Schedule Performance

    The government routinely uses contractor Cost Performance Reports to
    independently evaluate prime contractor performance relative to cost and
    schedule. Generally, the reports detail deviations in cost and schedule
    relative to expectations established under the contract. Contractors refer
    to deviations as "variances." Positive variances are usually associated
    with the accomplishment of activities under cost or ahead of schedule,
    while negative variances are often associated with the accomplishment of
    activities over cost or behind schedule.

    Figure 9 shows the STSS contractor's cost and schedule performance during
    fiscal year 2004. According to Cost Performance Reports, the work
    completed during this time cost more than budgeted and was behind schedule
    relative to a 6-month accelerated schedule. Specifically, during fiscal
    year 2004, the work cost about $34.6 million more than expected, and the
    contractor could not complete approximately $20.7 million of scheduled
    work.

    Appendix VII: Space Tracking and Surveillance System

    Figure 9: STSS Fiscal Year 2004 Cost and Schedule Performance

    Dollars in millions

    Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept.

    2003 2004

    Cumulative cost variance

    Cumulative schedule variance Sources: Contractor (data); GAO (analysis).

    The erosion of cumulative cost variance throughout fiscal year 2004 was
    largely attributed to cost overruns by the payload subcontractor, whose
    costs comprise about one-third of the total STSS contract. During the past
    year, the subcontractor has had a number of quality and systemsengineering
    problems that contributed to overruns in cost and schedule. These problems
    are largely the result of unclear systems engineering procedures and the
    subcontractor's lack of experience with space hardware. In response to
    these problems, the prime contractor conducted a thorough review of the
    subcontractor's quality assurance program for the assembly, integration,
    and testing of satellite components. In addition, the subcontractor added
    technicians who have more experience working with space hardware and
    brought in systems engineers to work with the technicians. Despite these
    issues, the program office still expects the prime contractor to complete
    the contract early and with minimal cost overruns.

    The cumulative schedule variance also eroded during fiscal year 2004. The
    delay in the delivery of the payload is the major driver of the
    unfavorable schedule variance. In addition to these drivers, performance
    upgrades to

    Appendix VII: Space Tracking and Surveillance System

    the Electrical Power Subsystem were completed three months later than
    planned due to a heat-removal problem. A factor complicating our analysis
    of schedule variance is that the contractor implemented a performance
    measurement baseline5 that reflects a six-month accelerated schedule. This
    means the contractor might be performing work on a schedule that would
    allow it to complete all the work by the end of the contract, but schedule
    performance data would show that work was falling behind schedule.

    Our assessment of fiscal year 2004 activities did not identify any
    evidence that the STSS program would be unable to launch the two
    demonstration satellites in 2007. Although the payload subcontractor
    experienced schedule delays and cost overruns arising from quality issues,
    the program office is still confident that the satellites will be
    delivered early. In addition, the reactivation of components from storage
    went better than anticipated and, accordingly, the program office reduced
    the risk level associated with hardware and software furnished by the
    government. Furthermore, the prime contractor is making progress on the
    parts obsolescence issue. For example, the prime contractor located most
    replacement parts and is assembling a database to track them.

    5 A performance measurement baseline identifies and defines work tasks,
    designates and assigns organizational responsibilities for each task,
    schedules the work tasks in accordance with established targets, and
    allocates budget to the scheduled work.

    An Element of the Ballistic Missile Defense System

    Appendix VIII Summary

    Terminal High Altitude Area Defense

    Fiscal Year 2004 Progress Assessment

    The bulk of fiscal year 2004 activities focused on developing and
    groundtesting THAAD components in preparation for the first round of
    flight tests in mid-fiscal year 2005. At the end of fiscal year 2004 with
    61 percent of the THAAD prime contract completed, THAAD's prime contractor
    was under budget and ahead of schedule. However, the contractor's
    favorable cost and schedule performance eroded somewhat during fiscal year
    2004. Our analysis indicates that problems with missile development were a
    major driver of the deteriorating performance.

    Schedule: During fiscal year 2004, the THAAD program accomplished key
    activities ahead, on, or slightly behind schedule. The program conducted
    the missile-component design readiness review ahead of schedule, completed
    radar assembly on schedule, but was behind schedule on missile delivery
    for the element's first flight test, Flight Test 1. In addition, the
    program successfully conducted ground tests in preparation for the initial
    flight test.

    Testing: Two explosions in the summer of 2003 at a subcontractor's
    propellant mixing facility impacted THAAD's fiscal year 2004 funding,
    delayed the start of flight testing, and led to a revision of the flight
    test program.

    Performance: The program office told us that key indicators show that
    THAAD is on track to meet operational performance goals. However, an
    assessment of THAAD's effectiveness remains uncertain until the program
    conducts flight tests with updated hardware and software. Data from flight
    testing are needed to "anchor" simulations of THAAD's performance and to
    more confidently predict the element's effectiveness.

    Cost: Our analysis of prime contractor cost performance reports shows that
    the contractor's favorable cost and schedule performance eroded somewhat
    during fiscal year 2004. The declining schedule performance was largely
    driven by unfavorable performance in the missile component-caused by two
    separate explosions at a subcontractor's propellant mixing facility-but
    offset by other THAAD components with favorable performance. Overall, the
    prime contractor is under budget and ahead of schedule.

                     United States Government Accountability Office

    Appendix VIII: Terminal High Altitude Area Defense

    Element Description 	The Terminal High Altitude Area Defense (THAAD)
    element1 is being developed as a ground-based missile defense system to
    protect forward-

      History

    deployed military forces, population centers, and civilian assets from
    short-and medium-range ballistic missile attacks. THAAD provides the
    opportunity to engage ballistic missiles-outside or inside the earth's
    atmosphere-not destroyed earlier in the boost or midcourse phases of
    flight by other elements of the Ballistic Missile Defense System (BMDS).

    A THAAD unit consists of a command, control, battle management, and
    communications (C2/BMC) component for controlling and executing a
    defensive mission, truck-mounted launchers, ground-based radar,
    interceptor missiles, and ground support equipment. The ground-based radar
    is a solid-state, phased-array, X-band radar that performs search, track,
    discrimination, and other fire-control functions. The THAAD missile is
    comprised of a kill vehicle mounted atop a single-stage booster and is
    designed to destroy enemy warheads through hit-to-kill collisions.

    The THAAD program entered the Program Definition and Risk Reduction phase
    of acquisition in 1992 but was plagued by missed intercepts in its first
    six attempts. As noted in our 1999 report,2 THAAD's failures were caused
    by a combination of a compressed test schedule and quality control
    problems. The Director, Operational Test and Evaluation (DOT&E), reported
    in his Fiscal Year 1999 Annual Report to the Congress that the sense of
    urgency to deploy a prototype system resulted in an overly optimistic
    development schedule.

    The THAAD program conducted two successful intercept attempts in 1999
    after devoting substantial time to pretest activities. The program then
    transitioned to the product development phase3 of acquisition, in which
    program activities shifted from technology development and demonstration
    to missile redesign and engineering. The Department of

    1 In early 2004, MDA changed the name of the THAAD element from "Theater
    High Altitude Area Defense" to "Terminal High Altitude Area Defense."

    2 GAO, THAAD Restructure Addresses Problems but Limits Early Capability,
    GAO/NSIAD-99-142 (Washington, D.C.: June 30, 1999).

    3 "Product development" is referred to by DOD as the "System Development
    and Demonstration" phase of acquisition and formerly as "Engineering and
    Manufacturing Development."

    Appendix VIII: Terminal High Altitude Area Defense

      Developmental Phases

    Defense (DOD) transferred the THAAD program from the U.S. Army to the
    Ballistic Missile Defense Organization (now MDA) on October 1, 2001.

    The THAAD program is pursuing its goals within the MDA block approach,
    which incrementally increases the element's capability against the
    ballistic missile threat. We reported4 last year that THAAD's development
    was structured around a Block 2004-2006-2008 program, with program funding
    aligned accordingly. However, with the submission of the fiscal year 2006
    President's Budget in February 2005, MDA implemented a new BMDS baseline
    approach for the THAAD program. Under this new program, THAAD development
    is structured around a Block 2006-2008-2010 program, with funding broken
    out by Block 2006/2008 and Block 2010.

    o  	Block 2006. Block 2006 incorporates the activities of the former Block
    2004 program. The Block 2006 THAAD program is expected to demonstrate an
    engagement capability against short- and mediumrange ballistic missiles
    above the atmosphere.

    o  	Block 2008. By the end of Block 2008, the THAAD element will have
    completed additional flight tests (including attempts employing a
    salvofiring doctrine), demonstrated an engagement capability inside and
    above the atmosphere, and be configured to accept data from other BMDS
    sensors for launching its interceptor missiles. THAAD's integration with
    the BMDS is expected to increase its defended area by more than a factor
    of three.

    The THAAD program includes a "fire unit" for delivery in fiscal year 2009.
    Operated by the Army, it will consist of a radar, a C2/BMC unit, 3
    launchers, 24 missiles, and equipment for support, maintenance and
    training. The Army has "signed on" to receive the equipment and is
    planning to allocate nearly 100 soldiers for training and operations.

    o  	Block 2010. The THAAD program plans to enhance the element's ability
    to interoperate with other elements and sensors of the BMDS. By engaging
    threats with external BMDS data, THAAD is expected to increase its
    defended area by more than a factor of ten.

    4 GAO, Missile Defense: Actions Are Needed to Enhance Testing and
    Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004).

    Appendix VIII: Terminal High Altitude Area Defense

    Planned Accomplishments for Fiscal Year 2004

      Assessment of Scheduled Activities

    The bulk of the fiscal year 2004 activities focused on developing and
    ground-testing THAAD components in preparation for the first round of
    flight tests in mid-fiscal year 2005. We grouped activities into three
    categories: (1) design, (2) build, and (3) integration and test. Progress
    on key activities scheduled for fiscal year 2004 is discussed below.

    During fiscal year 2004, the THAAD program accomplished key activities
    ahead, on, or slightly behind schedule. As examples, the program conducted
    the missile-component design readiness review ahead of schedule, completed
    radar assembly on schedule, but delivery of the missile for Flight Test 1
    slipped into fiscal year 2005. Specifics regarding progress in achieving
    these and other key scheduled activities are summarized below in tables 33
    through 35.

    Table 33: Status of THAAD Fiscal Year 2004 Planned Accomplishments-Design
    Activities

    Activity Description/Progress assessment

    Missile-component This event was accomplished ahead of schedule. The
    missile component design readiness design readiness review review
    demonstrated that the missile-component design, including internal and
    external interfaces, met all applicable design requirements with
    acceptable risk.

    Planned: 1Q FY2004a Completed: 4Q FY2003

    THAAD element This event was accomplished on schedule. The stakeholders
    agreed during the design

    design readiness review	readiness review that they understood the THAAD
    system and its final integrated design, and that the design met BMDS
    objectives. Stakeholders included the THAAD Project Office, supporting
    contractors, representatives of the Army Air Defense School, and MDA.

    Planned: 1Q FY2004

    Completed: 1Q FY2004

    Radar This event was accomplished on schedule. The radar block process
    validation examined

    block process validation 	the contractor's operations to determine
    adequacy of production planning, processes, and controls; the existence of
    suitable production facilities; and the radar's design stability.

    Planned: 2Q FY2004

    Completed: 2Q FY2004

    C2/BMC The C2/BMC block process validation was delayed to address
    defective government

    block process validation 	furnished C2/BMC shelters and was somewhat
    behind schedule at the end of fiscal year 2004. Significant progress was
    made toward its completion, but the remaining work is planned to carry
    over into fiscal year 2005. The purpose of the validation is to assess the

    Planned: 4Q FY2004 contractor's ability to manufacture C2/BMC production
    representative hardware to support Completed: Under revision future
    fielding decisions.

    Sources: MDA (data); GAO (presentation).

    aWe use the notation "1Q FY2004" to mean the first quarter of fiscal year
    2004 and an identical format for other time periods.

                   Appendix VIII: Terminal High Altitude Area Defense

        Table 34: Status of THAAD Fiscal Year 2004 Planned Accomplishments-Build
                                       Activities

    Activity Description/Progress assessment

    Radar assembly 	This event was accomplished on schedule. The radar was
    assembled in the first quarter of fiscal year 2004.

    Planned: 1Q FY2004

    Completed: 1Q FY2004

    Missile delivery for Delivery of the FT-01 missile to White Sands Missile
    Range (WSMR)a was delayed to

    Flight Test 1 (FT-01) 	respond to a new program schedule that addresses
    funding shortfalls and two separate explosions at a subcontractor's
    propellant mixing facility. Delivery is now scheduled for the second
    quarter of fiscal year 2005.

    Planned: 4Q FY2004

    Scheduled: 2Q FY2005

    WSMR activation This event was accomplished on schedule. All THAAD facilities at
             WSMR were activated by March 2004 and are preparing for FT-01.

    Planned: 2Q FY2004

    Completed: 2Q FY2004

    WSMR safety qualification tests 	Although this event was completed 1
    quarter behind schedule, there was no impact on FT-01's schedule.

    Planned: 3Q FY2004

    Completed: 4Q FY2004

    Sources: MDA (data); GAO (presentation).

    aWSMR is a U.S. Army missile test range in New Mexico. Because of test
    range limitations at WSMR, flight testing will be conducted at the Pacific
    Missile Range Facility, a U.S. Navy missile test range in Kauai, Hawaii,
    beginning with FTT-06-1 (formerly FT-05) in the fourth quarter of fiscal
    year 2006.

     Table 35: Status of THAAD Fiscal Year 2004 Planned Accomplishments-Integration
                                  and Test Activities

    Activity Description/Progress assessment

    Kill vehicle destruct test

    Planned: 1Q FY 2004

    Completed: 1Q FY2004

    Integrate launch and test support equipment at SILa

    Planned: 2Q FY2004 Completed: 3Q FY2004

    This event was accomplished on schedule. Testing of the kill vehicle
    flight termination system met objectives.

    Because of two separate explosions at a subcontractor's propellant mixing
    facility in the summer of 2003, this event was accomplished about one
    quarter behind schedule. The launch and test support equipment completed
    its system checkout in June 2004. The THAAD program reports that the
    launch and test support equipment is on schedule to support the revised
    schedule of FT-01 planned for the third quarter of fiscal year 2005.

    Appendix VIII: Terminal High Altitude Area Defense

                        Activity Description/Progress assessment

    Kill vehicle qualification tests 	Kill vehicle qualification testing in
    preparation for FT-01 was completed in September 2004.

    Planned: 4Q FY2004

    Completed: 4Q FY2004

    Sources: MDA (data); GAO (presentation).

    aThe System Integration Lab (SIL) refers to ground facilities at Lockheed
    Martin Space Systems Company, Sunnyvale, California.

    THAAD Flight Test Program Delayed 3-5 Months

    The THAAD flight-test program consists of 15 flight-test events divided
    among Blocks 2006 and 2008. Two explosions in the summer of 2003 at a
    subcontractor's propellant mixing facility impacted THAAD's fiscal year
    2004 funding, delayed the start of flight testing, and led to revisions of
    the flight test plans.

    The first set of flight tests have been delayed 3-5 months. The first
    flight test, referred to as a control test flight (CTF), is a
    missile-only, nonintercept test that focuses on how the missile operates
    under high endoatmospheric environmental conditions. The second flight
    test is an integrated system test with a "virtual target" to demonstrate
    system performance under conditions comparable to the next flight test
    (first flight test utilizing a real target). The third flight test is a
    seeker characterization flight (SCF), which ensures proper functioning of
    the seeker. This SCF is also a non-intercept test, but the seeker will
    demonstrate the ability to view a real target. The fourth flight test,
    FT-04, is the first intercept attempt with a configuration-target and
    engagement geometry-comparable to that used in flight tests conducted
    during the Program Definition and Risk Reduction phase of development.
    Table 36 summarizes the first six flight test events, including current
    and prior flight test dates with their objectives.

    Compared to test plans of fiscal year 2004, the THAAD program deferred two
    test events. A second control test flight conducted at WSMR- formerly
    FT-02-and an intercept attempt against a threat-representative target at
    the Pacific Missile Range Facility (PMRF)-formerly FT-05-have been
    deferred to a later time.

                   Appendix VIII: Terminal High Altitude Area Defense

                         Table 36: Planned THAAD Flight Testing

          Flight test event        Date                  Objectives
                                 Current:   o  Validate missile performance in a
         FT-01 (CTF) at WSMR                high-endoatmospheric flight
        Non-intercept flight    3Q FY2005      environment  o  Verify missile
    test (missile only / no Previously:          integration with WSMR
               target)
                                1Q FY2005
            FT-02 at WSMR        Current:     o  Integrated system test dry run
                                                      (virtual target)
    Integrated system test   4Q FY2005       o  Demonstrate missile launch and
          - virtual target     Previously:   control for conditions comparable to
                                                                            FT-03
                                   N/A
             (New test)

    FT-03 (SCF) at WSMR   Current:   o   Characterize seeker in flight against
                                                   a high-endoatmospheric unitary
    Non-intercept flight  1Q FY2006  o  target Verify element integration with
               test                                         WSMR
                            Previously:
                             3Q FY2005

           FT-04 at WSMR       Current:   o            Demonstrate exoatmospheric
                                                discrimination and intercept of a
    First intercept flight                   separating target Demonstrate
                test           2Q FY2006      lethality assessment of recovered
                                          o                 debris
                              Previously:
                               4Q FY2005

                             Current:   o   Characterize missile performance in a
    FT-05 (CTF) at WSMR                             low-endoatmospheric flight
    Non-intercept flight  2Q FY2006      environment Assesses effects of heat
               test                     o             on seeker window
                                        o   Tests performance in a high dynamic
         (Formerly FT-02)   Previously:               pressure fly-out
                             2Q FY2005

    FTT-06-1 at PMRF Current:  o  Demonstrate exoatmospheric aimpoint
    selection and intercept Second intercept flight test 4Q FY2006 against a
    non-separating liquid-fueled target

    o  Demonstrate integration with PMRF

    (Formerly FT-05) Previously: 1Q FY2006

    Sources: MDA (data); GAO (presentation).

                        Note: Test schedule as of December 2004.

    Assessment of Any assessment of THAAD's effectiveness is uncertain at this
    time. The program office told us that key indicators show that THAAD is on
    track to Element Performance meet operational performance goals. However,
    the THAAD program has not conducted any recent flight tests and, as a
    result, performance

    Appendix VIII: Terminal High Altitude Area Defense

    indicators5 used to gauge progress toward meeting performance objectives
    are based only on engineering analysis and ground testing. Until data
    collected during flight tests are used to "anchor" simulations of THAAD
    operation, the program cannot be confident that current indicators
    accurately predict THAAD's performance in actual combat conditions.

    DOD's planned investment in the THAAD program from program inception in
    1992 through 2011 is approximately $12.3 billion. As broken out in table
    37, DOD expended $7.2 billion between fiscal years 1992 and 2004, Congress
    appropriated $760 million for fiscal year 2005, and MDA is budgeting about
    $4.3 billion for THAAD development and procurement between fiscal years
    2006 and 2011.

                                     Assessment of

                                      Element Cost

                                  Table 37: THAAD Cost

                        Dollars in millions of then-year dollars

                                                      Block      Block
                                          Other  2006/2008        2010      Total
                    FY 1992a - FY 2003   $6,500          $0         $0     $6,500
                     FY 2004 (Actuals)        0       717.9          0      717.9
                FY 2005 (Appropriated)        0       759.7          0      759.7
                               FY 2006        0   1,046.1            0    1,046.1
                               FY 2007        0       931.0          0      931.0
                               FY 2008        0       779.4          0      779.4
                               FY 2009        0       353.0      168.0      521.0
                               FY 2010        0           0      635.1      635.1
                               FY 2011        0           0      395.0      395.0
                     FY 1992 - FY 2011   $6,500  $4,587.1    $1,198.1   $12,285.2

    Source: MDA.

    Note: THAAD budget as of February 2005. MDA implemented a new BMDS
    baseline approach that redirected funding from Block 2004 and 2006 to
    Block 2006/2008.

    aProgram inception (FY 1992).

    5 The THAAD program monitors numerous performance indicators as part of
    its management process. For example, element effectiveness, as measured by
    the probability of a successful kill, is one such indicator.

    Appendix VIII: Terminal High Altitude Area Defense

    Prime Contractor Fiscal Year 2004 Cost and Schedule Performance

    The government routinely uses contractor Cost Performance Reports to
    independently evaluate the prime contractor's performance relative to cost
    and schedule. Generally, the reports detail deviations in cost and
    schedule relative to expectations established under the contract.
    Contractors refer to deviations as "variances." Positive variances are
    usually associated with the accomplishment of activities under cost or
    ahead of schedule, while negative variances are often associated with the
    accomplishment of activities over cost or behind schedule. At the end of
    fiscal year 2004, the THAAD prime contractor was carrying a positive
    cumulative cost and schedule variance of $3.9 million and $14.7,
    respectively.6 That is, overall, the prime contractor was under budget and
    ahead of schedule.

    As figure 10 shows, declining cumulative schedule variance during the
    latter portion of fiscal year 2004 was eroding overall performance. The
    decline in the positive schedule variance was largely caused by problems
    with the missile component, which were the result of two explosions at a
    subcontractor's propellant mixing facility. In January 2004, these
    incidents and efforts to reestablish booster production caused MDA to
    revise THAAD's baseline.7 The new baseline recognizes the inevitable delay
    to initial flight testing and all supporting tasks.8 It also provides a
    new starting point for measuring the prime contractor's schedule
    performance. Therefore, even though the prime contractor completed $8.1
    million worth above that scheduled for fiscal year 2004 (that is, incurred
    a positive schedule variance of $8.1 million), the variance would have
    been less favorable had the contractor not established a new baseline.

    6 The cost and schedule variance incurred during fiscal year 2004 was
    $0.673 million and $8.1 million, respectively.

    7 A performance measurement baseline identifies and defines work tasks,
    designates and assigns organizational responsibilities for each task,
    schedules the work tasks in accordance with established targets, and
    allocates budget to the scheduled work.

    8 The explosions caused the program to seek an alternate source. According
    to the program office's current risk assessment, "source replacements have
    the potential for delaying booster delivery during the fight test program
    and into production."

    Appendix VIII: Terminal High Altitude Area Defense

    Figure 10: THAAD Fiscal Year 2004 Cost and Schedule Performance

    Dollars in millions

    Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept.

    2003 2004

    Cumulative cost variance

    Cumulative schedule variance Sources: Contractor (data); GAO (analysis).

    The favorable cumulative cost variance incurred during fiscal year 2004
    masks problems with the cost variance incurred by the missile component,
    which was unfavorable for the year. Major factors contributing to the
    missile's unfavorable cost variance include explosions at a
    subcontractor's facility used to mix missile propellant and the cost of
    efforts to reestablish booster production, as noted above; delays in
    activating a test facility at the Air Force Research Laboratory; and
    re-design efforts on a faulty valve thrust vector assembly. Favorable cost
    variances in other THAAD areas, such as the radar segment, offset the
    missile's unfavorable cost variance.

    Appendix IX: Information on the Army's Missile Defense Programs

    Background 	The Army is responsible for funding and managing two missile
    defense programs. The programs-which ultimately will be fielded as a
    single missile defense system-include the Patriot missile defense system
    including its newest missile variant, the Patriot Advanced Capability-3
    (PAC-3), and the Medium Extended Air Defense System (MEADS), which is
    currently under development. The Army intends to incrementally replace
    fielded Patriot components with more-capable MEADS components as they
    become available. The resulting system is expected to better protect
    deployed U.S. forces and critical assets from short-and medium-range
    tactical ballistic missile attacks. The Army's Lower Tier Project Office
    manages Patriot and MEADS development, procurement, and fielding.

    Now operational with the U.S. Army, Patriot with its PAC-3 missiles is the
    latest evolution of the Patriot air and missile defense system. The
    Patriot system has four basic components: (1) ground-based radar to detect
    and track targets; (2) engagement control station to provide command,
    control, and communications; (3) launcher; and (4) interceptor missiles.
    Compared with earlier versions of the Patriot missile, PAC-3 provides
    improved performance against short-and medium-range tactical ballistic
    missiles, cruise missiles, and aircraft. The PAC-3 missile is in
    production and successfully achieved initial fielding1 in September 2001.

    MEADS is an international co-development program between the United
    States, Germany, and Italy with a cost share of 58, 25, and 17 percent,
    respectively. MEADS expands upon Patriot capability with four new
    components: (1) a launcher; (2) battle management, command, control,
    communications, computer and intelligence (BMC4I) equipment; (3) a
    surveillance radar; and (4) a multi-function fire control radar. MEADS is
    expected to offer significant improvements in tactical mobility and
    strategic deployability over existing Patriot units. In addition, MEADS is
    designed to be interoperable with other airborne and ground-based sensors
    and utilize a netted architecture to provide a robust, 360-degree defense
    against cruise missiles, unmanned-aerial-vehicles, tactical air to surface
    missiles, rotary-wing and fixed-wing threats, and very short and medium
    range theater ballistic missiles.

    1 Initial fielding, sometimes called First Unit Equipped, refers to the
    date a system and support elements are issued to the designated unit and
    specified training has been accomplished.

    Appendix IX: Information on the Army's Missile Defense Programs

      Combined Aggregate Program

    In 2003, the Under Secretary of Defense for Acquisition, Technology, and
    Logistics approved plans for combining management, development, and
    fielding of the Patriot and MEADS programs.2 The approach calls for
    incremental fielding and early insertion of MEADS components within
    existing Patriot batteries rather than delivering MEADS as a single
    system. The Army uses the term "Combined Aggregate Program (CAP)" to refer
    to the transitional activities leading up to full fielding of the MEADS
    and replacement of Patriot components. CAP also includes an enhanced PAC-3
    missile-funded 100 percent by the United States-called the Missile Segment
    Enhancement (MSE). The MSE missile is intended to operate at higher
    altitudes and longer ranges than existing PAC-3 missiles.

    The plan calls for MEADS components to be inserted into Patriot battalions
    in three time-phased increments, as follows:

    o  	Increment one. Scheduled for initial fielding in fiscal year 2009,
    increment one consists of the insertion of the MEADS BMC4I to begin
    replacing the Patriot engagement control station component and associated
    equipment. This increment is considered the highest acquisition priority
    because it (a) integrates with existing sensors to provide 360-degree
    coverage to counter cruise missiles, and (b) supports targeting by using
    data from external sensors, which is referred to as "engage on remote."

    o  	Increment two. Scheduled for initial fielding in fiscal year 2011,
    increment two consists of the insertion of the MEADS launcher to begin
    replacing the Patriot launcher. This increment is expected to enhance
    system mobility and be capable of firing either the existing PAC-3 missile
    or the new MSE missile. The MSE missile is scheduled for initial fielding
    in 2011. It does not replace the PAC-3 missile but, rather, supplements
    fielded inventory.

    o  	Increment three. Scheduled for initial fielding in fiscal year 2015,
    increment three consists of the insertion of the MEADS Ultra High
    Frequency surveillance radar and the X-band multifunction fire control
    radar to replace the Patriot C-band radars. These radars are expected to
    provide (a) 360-degree coverage for defense against cruise missiles and
    fire control to engage low-altitude, stressing targets; and

    2 Evolution from Patriot to MEADS-Acquisition Decision Memorandum, dated
    August 12, 2003.

            Appendix IX: Information on the Army's Missile Defense Programs

      Patriot/MEADS CAP Funding

    (b) surveillance and fire control for high-value asset defense against
    short-range ballistic missiles.

    The overall Patriot/MEADS CAP is scheduled for initial fielding in 2015
    when increment three is available. MEADS production is scheduled to
    continue through fiscal year 2028. The 2015 fielding date, approved by the
    Under Secretary for Defense, represents a three-year delay from the
    fielding date planned in the previous MEADS program. According to a Lower
    Tier Project Office spokesperson, constraints in developmental funding
    caused the delay in initial fielding of MEADS components. Specifically,
    out-year Research, Development, Test and Evaluation (RDT&E) funding was
    insufficient to field MEADS in fiscal year 2012.

    The Army's Lower Tier Project Office estimates that the life-cycle cost
    for the United States' portion of the Patriot/MEADS CAP program-which
    includes PAC-3 and MEADS-component development, procurement, and
    operations and support (O&S) costs-will be $150.6 billion through
    approximately fiscal year 2048. Of this amount:

    o  $109 billion (72.4 percent) is for O&S.

    o  $31.9 billion (21.2 percent) is for procurement.

    o  $9.7 billion (6.4 percent) is for RDT&E.

    Operations and support costs are a large proportion of the total cost
    largely because of the length of time a fielded unit is supported.
    Although production is scheduled to end in fiscal year 2028, these newest
    units are expected to be in the field for another 20 years.

    Table 38 summarizes the funding requested by the U.S. Army to fund
    development and missile procurement of the Patriot/MEADS Combined
    Aggregate Program over the Future Years Defense Plan (fiscal years
    20062011). The requested funding supports the procurement of 108 PAC-3
    missiles per year.

    Appendix IX: Information on the Army's Missile Defense Programs

                       Table 38: Patriot/MEADS CAP Planned Costs

    Dollars in millions of then-year dollars

                               RDT&E Missile procurement

                              FY 2006        $288.8                        $489.7
                              FY 2007         326.4                         494.8
                              FY 2008         454.5                         466.0
                              FY 2009         510.7                         471.8
                              FY 2010         510.4                           N/A
                              FY 2011         490.4                           N/A

    Source: Department of the Army.

    Note: Budget as of February 2005.

                           Appendix X: Scope and Methodology

    The accomplishment of Missile Defense Agency (MDA) program goals is
    ultimately achieved through the efforts of individual Ballistic Missile
    Defense System (BMDS) elements. Therefore, we based our assessment on the
    progress made in fiscal year 2004 by those seven elements that (1) are
    under the management of MDA and (2) are being developed as part of a block
    capability. The elements we reviewed accounted for 72 percent of MDA's
    fiscal year 2004 research and development budget. We compared each
    element's completed activities, test results, demonstrated performance,
    and prime contractor cost and schedule performance in fiscal year 2004
    with those planned for the year. We also completed an abbreviated
    evaluation of an eighth BMDS element, the U.S. Army's Combined Aggregate
    Program, which consists of Patriot and the Medium Extended Air Defense
    System.

    Many activities completed in fiscal year 2004 by the various element
    programs pertained to the completion of Limited Defensive Operations,
    which is an integral part of the Block 2004 goals. To assess progress
    toward schedule goals-that is, program activities including test events
    scheduled for completion in fiscal year 2004-we examined each element's
    prime contractor Cost Performance Reports, Defense Contract Management
    Agency's analyses of these reports (if available), quarterly reviews of
    element progress (known as System Element Reviews), and other agency
    documents to determine whether key activities were accomplished as
    planned. We also developed a data collection instrument, which was
    submitted to MDA, to gather detailed information on completed program
    activities, including tests, design reviews, prime contracts, and
    estimates of element performance.

    We assessed MDA's fiscal year 2004 cost performance by separately
    reviewing the cost performance of each BMDS element's prime contractor. We
    used this methodology because MDA allocates a large percentage of its
    budget to fund prime contractors that develop system elements. To make
    these assessments, we applied established earned value management
    techniques to data captured in contractor Cost Performance Reports.
    Results were presented in graphical form to determine trends. We also used
    established earned value management formulas to project the likely costs
    of the contracts at completion.

    To assess MDA's progress toward its performance goals, we analyzed data
    provided by MDA on the Ground-based Midcourse Defense, Aegis Ballistic
    Missile Defense, and Command, Control, Battle Management, and
    Communications elements-the elements that comprise the Block 2004
    defensive capability. We supplemented this information by holding

    Appendix X: Scope and Methodology

    discussions with, and attending overview briefings presented by, various
    program office officials. Furthermore, we interviewed officials from the
    office of the Director, Operational Test and Evaluation, within the
    Department of Defense (DOD) to learn more about their assessment of the
    operational capability of the initial BMDS. Finally, we met with officials
    from U.S. Strategic Command to discuss the initial capability's military
    utility from the warfighter's perspective.

    During our review, we observed that MDA is expected to face increasing
    funding risks-arising from sources both within and outside DOD-in the
    years ahead as MDA attempts to enhance and field its missile defense
    capabilities. To examine this issue further, we reviewed life-cycle cost
    documentation from the U.S. Army Lower Tier Project Office, our report on
    total ownership costs,1 a Congressional Budget Office report,2 and MDA
    documentation on the agency's plans for development and fielding.

    We also observed inconsistencies in how MDA is implementing its block
    approach. To gain insight into this issue, we examined element-level
    documents and answers to a data collection instrument that we generated to
    extract specific information on planned deliveries of fielded assets. We
    also examined MDA's Statement of Goals, budget statements for fiscal years
    2004 and 2005, and other documents provided by MDA, such as Missile
    Defense Plan II.

    To ensure that MDA-generated data used in our assessment are reliable, we
    evaluated the agency's internal management control processes. We discussed
    these processes extensively with MDA upper management. In addition, we
    confirmed the accuracy of MDA-generated data with multiple sources within
    MDA and, when possible, with independent experts. To assess the validity
    and reliability of prime contractors' Earned Value Management systems and
    reports, we analyzed audit reports prepared by the Defense Contract Audit
    Agency. Finally, we assessed MDA's internal accounting and administrative
    management controls by reviewing MDA's Federal Managers' Financial
    Integrity Report for Fiscal Years 2003 and 2004.

    1 GAO, Best Practices: Setting Requirements Differently Could Reduce
    Weapon Systems' Total Ownership Costs, GAO-03-57 (Washington, D.C.: Feb.
    11, 2003).

    2 Congressional Budget Office, The Budget and Economic Outlook: An Update
    (Washington, D.C.: Sept. 2004).

    Appendix X: Scope and Methodology

    Our work was performed primarily at MDA headquarters in Arlington,
    Virginia. At this location, we met with officials from the Kinetic Energy
    Interceptors Program Office; Aegis Ballistic Missile Defense Program
    Office; Airborne Laser Program Office; Command, Control, Battle
    Management, and Communications Program Office; and Ground-based Midcourse
    Defense Program Office. In addition, we met with officials from the Space
    Tracking and Surveillance System Program Office, Los Angeles, California;
    Terminal High Altitude Area Defense Project Office, Huntsville, Alabama;
    and the U.S. Army Lower Tier Program Office, Huntsville, Alabama. We also
    interviewed officials from the office of the Director, Operational Test
    and Evaluation, Arlington, Virginia; U.S. Strategic Command, Omaha,
    Nebraska; and the Joint Theater Air Missile Defense Organization,
    Arlington, Virginia.

    We conducted our review from May 2004 through February 2005 in accordance
    with generally accepted government auditing standards.

    Appendix XI: GAO Contact and Staff Acknowledgments

    GAO Contact Acknowledgments

    (120360)

    Barbara Haynes (256) 922-7500

    In addition to the individual named above, Tony Beckham, Ivy Hu:bler, Stan
    Lipscomb, LaTonya Miller, Karen Richey, Adam Vodraska, Jonathan Watkins,
    and Randy Zounes (Analyst-in-Charge) made key contributions to this
    report.

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