Defense Acquisitions: Future Combat Systems Challenges and	 
Prospects for Success (16-MAR-05, GAO-05-428T). 		 
                                                                 
FCS is the core of Army efforts to create a lighter, more agile, 
capable force: a $108 billion investment to provide a new	 
generation of 18 manned and unmanned ground vehicles, air	 
vehicles, sensors, and munitions linked by an information	 
network. Although system development and demonstration began in  
May 2003, the program was restructured in July 2004, including	 
processes to make FCS capabilities available to current forces.  
GAO has been asked to assess (1) FCS technical and managerial	 
challenges; (2) prospects for delivering FCS within cost and	 
scheduled objectives; and (3) options for proceeding.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-428T					        
    ACCNO:   A19498						        
  TITLE:     Defense Acquisitions: Future Combat Systems Challenges   
and Prospects for Success					 
     DATE:   03/16/2005 
  SUBJECT:   Combat readiness					 
	     Cost analysis					 
	     Defense capabilities				 
	     Defense procurement				 
	     Military cost control				 
	     Procurement planning				 
	     Program evaluation 				 
	     Program management 				 
	     Projections					 
	     Strategic planning 				 
	     Weapons research and development			 
	     Weapons systems					 
	     Program goals or objectives			 
	     Abrams Tank					 
	     Army Future Combat Systems 			 
	     Army Warfighter Information Network		 
	     Bradley Fighting Vehicle				 
	     C-130 Aircraft					 
	     Crusader Artillery System				 
	     DOD Airborne Laser Program 			 
	     DOD Critical Design Review 			 
	     DOD Mounted Combat System				 
	     F/A-22 Aircraft					 
	     Joint Strike Fighter				 
	     Joint Tactical Radio System			 
	     Space Based Infrared System-High			 
	     M1 Tank						 
	     Lead System Integrator				 

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GAO-05-428T

United States Government Accountability Office

GAO Testimony

Before the Subcommittee on Tactical Air and Land Forces, Committee on
Armed Services, House of Representatives

For Release on Delivery Expected at 2:30 p.m. EST

Wednesday, March 16, 2005 DEFENSE ACQUISITIONS

           Future Combat Systems Challenges and Prospects for Success

Statement of Paul L. Francis, Director Acquisition and Sourcing Management

GAO-05-428T

[IMG]

March 2005

DEFENSE ACQUISITIONS

Future Combat Systems Challenges and Prospects for Success

  What GAO Found

In its unprecedented complexity, FCS confronts the Army with significant
technical and managerial challenges in its requirements, development,
finance, and management. Technical challenges include the need for FCS
vehicles to be smaller, weigh less, and be as lethal and survivable as
current vehicles, which requires (1) a network to collect and deliver vast
amounts of intelligence and communications information and (2) individual
systems, such as manned ground vehicles, that are as complex as fighter
aircraft. Its cost will be very high: its first increment-enough to equip
about 1/3 of the force-will cost over $108 billion, with annual funding
requests running from $3 billion to $9 billion per year. The program's
pace and complexity also pose significant management challenges. The Army
is using a Lead System Integrator to manage FCS and is using a contracting
instrument-Other Transaction Agreement-that allows for more flexible
negotiation of roles, responsibilities, and rights with the integrator.

The FCS is at significant risk for not delivering required capability
within budgeted resources. Currently, about 9 1/2 years is allowed from
development start to production decision. DOD typically needs this period
of time to develop a single advanced system, yet FCS is far greater in
scope. The program's level of knowledge is far below that suggested by
best practices or DOD policy: Nearly 2 years after program launch and with
$4.6 billion invested, requirements are not firm and only 1 of over 50
technologies are mature. As planned, the program will attain the level of
knowledge in 2008 that it should have had in 2003, but things are not
going as planned. Progress in critical areas-such as the network,
software, and requirements-has in fact been slower, and FCS is therefore
likely to encounter problems late in development, when they are very
costly to correct. Given the scope of the program, the impact of cost
growth could be dire.

To make FCS an effective acquisition program different approaches must be
considered, including (1) setting the first stage of the program to
demonstrate a worthwhile military capability, mature technology, and firm
requirements; and (2) bundling its other capabilities into advanced
technology demonstrators until they can be put in a future stage, which
will provide guidance for decisions on requirements, lower the cost of
development, and make for more reasonable cost and schedule estimates for
future stages.

                 United States Government Accountability Office

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss the Department of the Army's
Future Combat Systems (FCS), a networked family of weapons and other
systems. FCS is the centerpiece of the Army's plan to transform to a
lighter, more agile, and more capable force. It consists of an information
network linking a new generation of 18 manned and unmanned ground
vehicles, air vehicles, sensors, and munitions. FCS began system
development and demonstration in May 2003. In July 2004, the Army
announced a major restructuring of the program, including plans for
transitioning FCS capabilities to current forces. Total costs of the
restructured program have not yet been estimated but will be at least $108
billion, in fiscal year 2005 dollars. The fiscal year 2005 budget provides
$2.8 billion in research and development funds for FCS; the fiscal year
2006 budget requests an increase to $3.4 billion.

Today, I would like to discuss (1) the technical and managerial challenges
of the FCS program; (2) the prospects for delivering FCS capabilities
within cost and scheduled objectives; and (3) considerations on how to
proceed.

                                    Summary

The FCS program faces significant challenges in setting requirements,
developing systems, financing development, and managing the effort. The
Army has set the bar for requirements very high. FCS vehicles are to be a
fraction of the weight of current vehicles, yet are to be as lethal and
survivable. Their light weight and small size are critical to meeting the
other Army goals: more mobile forces that are easier to sustain in combat.
For FCS-equipped units to see and hit the enemy first, rather than to rely
on heavy armor to survive, the Army must develop (1) a network to collect,
process, and deliver vast amounts of intelligence and communications
information and (2) individual systems, such as manned ground vehicles,
that have been likened in complexity to fighter aircraft. FCS is a
development of unprecedented complexity for the Army. From a financial
standpoint, the first increment of FCS-enough to equip about 1/3 of the
force-will cost at least $108 billion. Funding requests will run from over
$3 billion per year to about $9 billion per year at a time when the Army
faces the competing demands of sustaining current operations,
recapitalizing the current force, and paying for modularization. Finally,
because of the management challenge the program's pace and complexity
pose, the Army has turned to a Lead System Integrator to manage the entire
effort and is making use of a contracting instrument known as Other

Transaction Agreement, which allows the parties to negotiate contract
terms based on the program requirements and their needs.

As restructured, the FCS strategy includes 4 additional years to reduce
risk, increase the demonstration of FCS capabilities, and harvest
successes for the current force. Even with these improvements, the FCS is
still at significant risk for not delivering planned capability within
budgeted resources. This risk stems from the scope of the program's
technical challenges and the low level of knowledge demonstrated at this
point. The current schedule allows about 9 1/2 years from development
start to the production decision. FCS is developing multiple systems and a
network within a period of time that DOD typically needs to develop a
single advanced system. The FCS has demonstrated a level of knowledge far
below that suggested by best practices or DOD policy. Nearly 2 years after
program launch and about $4.6 billion invested to date, requirements are
not firm and only 1 of over 50 technologies are mature-activities that
should have been done before the start of system development and
demonstration. If everything goes as planned, the program will attain the
level of knowledge in 2008 that it should have had before it started in
2003. But things are not going as planned. Progress in critical areas,
such as the network, software, and requirements has been slower than
planned. Proceeding with such low levels of knowledge makes it likely that
FCS will encounter problems late in development, when they are costly to
correct. The relatively immature state of program knowledge at this point
provides an insufficient basis for making a good cost estimate.
Independent estimates should provide more information but are not yet
completed. If the cost estimate for FCS is no more accurate than
traditional estimates, the impact of cost growth could be substantial,
given the program's magnitude.

At this point, the FCS provides a concept that has been laid out in some
detail, an architecture or framework for integrating individual
capabilities, and an investment strategy for how to acquire those
capabilities. It is not yet a good fit as an acquisition program. If
FCS-like capabilities are to be made acquirable-for which the Army has
made a compelling case-then different approaches for FCS warrant
consideration because they offer building higher levels of knowledge and
thus lower risk. One approach, in keeping with DOD acquisition policy and
best practices, would be to set the first spiral as the program of record
for system development and demonstration. To make such a spiral
executable, it should meet the standards of providing a worthwhile
military capability, having mature technology, and having firm
requirements. Other capabilities currently in the FCS program could be
taken out of system development and

demonstration and instead be bundled into advanced technology
demonstrations that could develop and experiment with advanced
technologies in the more conducive environment of science and technology
until they are ready to be put into a future spiral. Advancing
technologies in this way will enable knowledge to guide decisions on
requirements, lower the cost of development, and make for more reasonable
cost and schedule estimates for future spirals.

                                   Background

Army Transformation and the FCS Concept

A decade after the cold war ended, the Army recognized that its combat
force was not well suited to perform the operations it faces today and is
likely to face in the future. The Army's heavy forces had the necessary
firepower but required extensive support and too much time to deploy. Its
light forces could deploy rapidly but lacked firepower. To address this
mismatch, the Army decided to radically transform itself into a new
"Future Force."

The Army expects the Future Force to be organized, manned, equipped, and
trained for prompt and sustained land combat. This translates into a force
that is responsive, technologically advanced, and versatile. These
qualities are intended to ensure the Future Force's long-term dominance
over evolving, sophisticated threats. The Future Force is to be
offensively oriented and will employ revolutionary operational concepts,
enabled by new technology. This force is to fight very differently than
the Army has in the past, using easily transportable lightweight vehicles,
rather than traditional heavily armored vehicles. The Army envisions a new
way of fighting that depends on networking the force, which involves
linking people, platforms, weapons, and sensors seamlessly together.

The Army has determined that it needs more agile forces. Agile forces
would possess the ability to seamlessly and quickly transition among
various types of operations from support operations to warfighting and
back again. They would adapt faster than the enemy thereby denying it the
initiative. Agile forces would allow commanders of small units the
authority and high quality information to act quickly to respond to
dynamic situations.

To be successful, therefore, the transformation must include more than new
weapons. It must be extensive, encompassing tactics and doctrine as well
as the very culture and organization of the Army.

The FCS Solution

FCS will provide the majority of weapons and sensor platforms that
comprise the new brigade-like modular units of the Future Force known as
Units of Action. Each unit is to be a rapidly deployable fighting
organization about the size of a current Army brigade but with the combat
power and lethality of the current larger division. The Army also expects
FCS-equipped units of action to provide significant warfighting
capabilities to the overall joint force. The Army is reorganizing its
current forces into modular, brigade-based units akin to units of action.

FCS is a family of 18 manned and unmanned ground vehicles, air vehicles,
sensors, and munitions that will be linked by an information network.
These include, among other things, eight new ground vehicles to replace
current vehicles such as tanks, infantry carriers and self-propelled
howitzers, four different unmanned aerial vehicles, several unmanned
ground vehicles, and attack missiles that can be positioned in a box-like
structure.

FCS Program Has Been Restructured During the Last Year

The essence of the FCS concept itself-to provide the lethality and
survivability of the current heavy force with the sustainability and
responsiveness of a force that weighs a fraction as much-has the intrinsic
attraction of doing more with less. The FCS concept has a number of
progressive features, which demonstrate the Army's desire to be proactive
in its approach to preparing for potential future conflicts and its
willingness to break with tradition in developing an appropriate response
to the changing scope of modern warfare. If successful, the program will
leverage individual capabilities of weapons and platforms and will
facilitate interoperability and open system designs. This is a significant
improvement over the traditional approach of building superior individual
weapons that must be netted together after the fact. Also, the
system-ofsystems network and weapons could give managers the flexibility
to make best value tradeoffs across traditional program lines. This
transformation of the Army, both in terms of operations and equipment, is
underway with the full cooperation of the Army warfighter community. In
fact, the development and acquisition of FCS is being accomplished using a
collaborative relationship between the developer (program manager), the
contractor, and the warfighter community.

The FCS program was approved to start system development and demonstration
in May 2003. On July 21, 2004, the Army announced its plans to restructure
the program. The restructuring responded to direction from the Army Chief
of Staff and addresses risks and other issues identified by external
analyses. Its objectives include:

o  Spinning off ripe FCS capabilities to current force units;

o  Meeting Congressional language for fielding the Non-Line of Sight
Cannon;

o  Retaining the system-of-systems focus and fielding all 18 systems;

o  Increasing the overall schedule by 4 years; and

o  Developing a dedicated evaluation unit to demonstrate FCS capabilities

The program restructuring contained several features that reduce risk-
adding four additional years to develop and mature the manned ground
vehicles; adding demonstrations and experimentation; and establishing an
evaluation unit to demonstrate FCS capabilities. The program restructuring
also adds scope to the program by reintroducing four deferred systems,
adding four discrete spirals of FCS capabilities to the current force, and
accelerating the development of the network. About $6.1 billion was added
to the system development and demonstration contract and the Army has
recently announced that the detailed revision of the contract has been
completed.

  Objectives, Scope, and Methodology

The FCS Program Is An Unprecedented Challenge

To develop the information on whether the FCS program was following a
knowledge-based acquisition strategy and the current status of that
strategy, we interviewed officials of the Office of the Under Secretary of
Defense (Acquisition, Technology, and Logistics); the Secretary of
Defense's Cost Analysis Improvement Group; the Assistant Secretary of the
Army (Acquisition, Logistics, and Technology); the Army's Training and
Doctrine Command; Surface Deployment and Distribution Command; the Program
Manager for the Unit of Action (previously known as Future Combat
Systems); the Future Combat Systems Lead Systems Integrator; and LSI One
Team contractors. We reviewed, among other documents, the Future Combat
Systems' Operational Requirements Document, the Acquisition Strategy
Report, the Baseline Cost Report, the Critical Technology Assessment and
Technology Risk Mitigation Plans, and the Integrated Master Schedule. We
attended the FCS Management Quarterly Reviews, In-Process Reviews, and
Board of Directors Reviews.

In our assessment of the FCS, we used the knowledge-based acquisition
practices drawn from our large body of past work as well as DOD's
acquisition policy and the experiences of other programs. We discussed the
issues presented in this statement with officials from the Army and the
Secretary of Defense, and made several changes as a result. We performed
our review from May 2004 to March 2005 in accordance with generally
accepted auditing standards.

The FCS program faces significant challenges in setting requirements,
developing systems, financing development, and managing the effort. It is
the largest and most complex acquisition ever attempted by the Army.

The Requirements Challenge

The Army wants the FCS-equipped unit of action to be as lethal and
survivable as the current heavy force, but to be significantly more
responsive and sustainable. For the unit of action to be lethal, it must
have the capability to address the combat situation, set conditions,
maneuver to positions of advantage, and to engage enemy formations at
longer ranges and with greater precision than the current force. To
provide this level of lethality and reduce the risk of detection, FCS must
provide high singleshot weapon effectiveness. To be as survivable as the
current heavy force, the unit of action must find and kill the enemy
before being seen and identified. The individual FCS systems will also
rely on a layered system of protection involving several technologies that
lowers the chances of a

vehicle or other system being seen and hit by the enemy. To be responsive,
the unit of action must be able to rapidly deploy anywhere in the world
and be rapidly transportable by various means-particularly by the C-130
aircraft-and ready to fight upon arrival. To facilitate rapid
transportability on the battlefield, FCS vehicles are to match the weight
and size constraints of the C-130 aircraft. The unit of action is to be
capable of sustaining itself for periods of 3 to 7 days depending on the
level of conflict-necessitating a small logistics footprint. This requires
subsystems with high reliability and low maintenance, reduced demand for
fuel and water, highly effective weapons, and a fuel-efficient engine.

Meeting all these requirements is unprecedented not only because of the
difficulty each represents individually, but because the solution for one
requirement may work against another requirement. For example, solutions
for lethality could increase vehicle weight and size. Solutions for
survivability could increase complexity and lower reliability. It is the
performance of the information network that is the linchpin for meeting
the other requirements. It is the quality and speed of the information
that will enable the lethality and survivability of smaller vehicles. It
is smaller vehicles that enable responsiveness and sustainability.

The Development Challenge

In the Army's own words, the FCS is "the greatest technology and
integration challenge the Army has ever undertaken." It intends to
concurrently develop a complex, system-of-systems-an extensive information
network and 18 major weapon systems. The sheer scope of the technological
leap required for the FCS involves many elements. For example:

o  	First-of-a-kind network will have to be developed that will entail
development of unprecedented capabilities-on-the-move communications,
high-speed data transmission, dramatically increased bandwidth, and
simultaneous voice, data and video;

o  	The design and integration of 18 major weapon systems or platforms has
to be done simultaneously and within strict size and weight limitations;

o  	At least 53 technologies that are considered critical to achieving
FCS' critical performance capabilities will need to be matured and
integrated into the system-of-systems;

o  	Synchronizing the development, demonstration, and production of as
many as 157 complementary systems with the FCS content and schedule.

This will also involve developing about 100 network interfaces so the FCS
can be interoperable with other Army and joint forces; and

o  	At least an estimated 34 million lines of software code will need to
be generated (about double that of the Joint Strike Fighter, which had
been the largest defense undertaking in terms of software to be
developed).

                            The Financial Challenge

Based on the restructured program, the FCS program office initially
estimated that FCS will require $28.0 billion for research and development
and around $79.9 billion for the procurement of 15 units of action. The
total program cost is expected to be at least $107.9 billion. These are
fiscal year 2005 dollars. Since this estimate, the Army has released an
updated research and development cost estimate of $30.3 billion in
then-year dollars. An updated procurement estimate is not yet available.
The Army is continuing to refine these cost estimates. As estimated, the
FCS will command a significant share of the Army's acquisition budget,
particularly that of ground combat vehicles, for the foreseeable future.
In fiscal year 2006, the FCS budget request of $3.4 billion accounts for
65 percent of the Army's proposed spending on programs in system
development and demonstration and 35 percent of that expected for all
research, development, test and evaluation activities.

As the FCS begins to command large budgets, it will compete with other
major financial demands. Current military operations, such as in
Afghanistan and Iraq, require continued funding. Since September 2001, DOD
has needed over $240 billion in supplemental appropriations to support the
global war on terrorism. Current operations are also causing faster wear
on existing weapons, which will need refurbishment or replacement sooner
than planned. The equipment used by the current force, such as Abrams
tanks and Bradley Fighting Vehicles, is expected to remain in the active
inventory until at least 2030. The cost to upgrade and maintain this
equipment over that length of time has not been estimated but could be
substantial. Also, the cost of converting current forces to new modular,
brigade-based units is expected to be at least $48 billion. Further, FCS
is part of a significant surge in the demand for new weapons. Just 4 years
ago, the top 5 weapon systems cost about $280 billion; today, in the same
base year dollars, the top 5 weapon systems cost about $521 billion. If
megasystems like FCS are estimated and managed with traditional margins of
error, the financial consequences are huge, especially in light of a
constrained discretionary budget.

The Management Challenge

The Army has employed a management approach that centers on a Lead System
Integrator (LSI) and a non-standard contracting instrument, known as an
Other Transaction Agreement (OTA). The Army advised us that it did not
believe it had the resources or flexibility to use its traditional
acquisition process to field a program as complex as FCS under the
aggressive timeline established by the then-Army Chief of Staff.

Although there is no complete consensus on the definition of LSI, those we
are aware of appear to be prime contractors with increased program
management responsibilities. These responsibilities have included greater
involvement in requirements development, design and source selection of
major system and subsystem subcontractors. The government also has used
the LSI approach on programs that require system-of-systems integration.

The Army selected Boeing as the LSI for the FCS system development and
demonstration in May 2003. The Army and Boeing established a One-Team
management approach with several first tier subcontractors to execute the
program. According to the Army, Boeing has awarded 20 of 24 first tier
subcontracts, to 17 different subcontractors. The One-Team members and
their responsibilities are depicted in table 1.

Table 1: One-Team Members

One-Team Member Responsibility

Army Program Oversight and Insight

Boeing/SAIC	Program Management (including source selection), Development
of System-of-Systems Common Operating Environment, System Integration
General Dynamics Land Manned Ground Vehicles Systems

General Dynamics C4 Planning and Preparation Services, Sensor Data Systems
Management

General Dynamics Robotics Autonomous Navigation System Systems

General Dynamics Advanced Integrated Computers Information Systems

        United Defense, LP Manned Ground Vehicles, Armed Robotic Vehicle

iRobot Corporation Small Unmanned Ground Vehicle

Lockheed Martin Missiles and Fire Control

             Multifunction Utility/Logistics and Equipment Vehicle

Lockheed Martin, Orincon 	Intelligence, Surveillance and Reconnaissance
Sensor Fusion

Austin Information Systems Situational Understanding

BAE Systems CNI Ground Platform Communication

BAE Systems IESI Air Platform Communication

Computer Sciences Training Support Corporation

Dynamics Research Training Support Corporation

Honeywell Defense and Space Electronic Systems

Platform Soldier Mission Readiness System

Northrop Grumman 	Air Sensor Integrator, Class IV Unmanned Aerial Vehicle,
Logistics Decision Support Systems, Network Management, Training Support

Raytheon Network Centric Battle Command and Mission Execution, Ground
Sensor IntegratorSystems

Textron Systems 	Unattended Ground Sensors, Tactical and Urban Sensors

Source: U.S. Army

Boeing was awarded the LSI role under an OTA which is not subject to the
Federal Acquisition Regulation (FAR). Consequently, when using an OTA, DOD
contracting officials have considerable flexibility to negotiate the
agreement terms and conditions. This flexibility requires DOD to use good
business sense and to incorporate appropriate safeguards to protect the

government's interests. The OTA used for FCS includes several FAR or
Defense FAR Supplement clauses, many of which flow down to subcontracts.
The value of the agreement between the Army and Boeing is approximately
$21 billion. It is a cost reimbursement contract.

Congress has incrementally expanded the use and scope of other transaction
authority since first authorizing its use more than a decade ago. In 1989,
Congress gave DOD, acting through the Defense Advanced Research Projects
Agency, authority to temporarily use other transactions for basic,
applied, and advanced research projects. In 1991, Congress made this
authority permanent and extended it to the military departments. In 1993,
Congress enacted Section 845 of the National Defense Authorization Act for
Fiscal Year 1994, which provided DARPA with authority to use, for a 3-year
period, other transactions to carry out prototype projects directly
relevant to weapons or weapon systems proposed to be acquired or developed
by DOD. Subsequent amendments have extended this authority to the military
departments and other defense agencies. Most recently, the National
Defense Authorization Act for Fiscal Year 2004 extended the prototype
project authority until 2008 and provided for a pilot program to
transition some other transaction prototype projects to follow-on
production contracting.

According to program officials, under the LSI and OTA arrangement on FCS,
the Army primarily participates in the program through Integrated Product
Teams that are used to make coordinated management decisions in the
program about issues related to requirements, design, horizontal
integration and source selection.

During the past year, the FCS underwent a significant restructuring, which
added 4 years to the schedule for reducing risk, increasing the
demonstration of FCS capabilities, and harvesting successes for the
current force. Yet, even with these improvements, the FCS is still at
significant risk for not delivering planned capability within budgeted
resources. This risk stems from the scope of the program's technical
challenges and the low level of knowledge demonstrated thus far.

  FCS Remains At Risk of Not Delivering Planned Capability Within Estimated
  Resources

High Levels of Our previous work has shown that program managers can
improve their Demonstrated Knowledge chances of successfully delivering a
product if they employ a knowledge-Are Key to Getting Desired based
decision-making process. We have found for a program to deliver a Outcomes
successful product within available resources, managers should build high

levels of demonstrated knowledge before significant commitments are

made.1 In essence, knowledge supplants risk over time. This building of
knowledge can be described in three levels that should be attained over
the course of a program:

o  	First, at program start, the customer's needs should match the
developer's available resources-mature technologies, time, and funding. An
indication of this match is the demonstrated maturity of the technologies
needed to meet customer needs.2

o  	Second, about midway through development, the product's design should
be stable and demonstrate that it is capable of meeting performance
requirements. The critical design review is the vehicle for making this
determination and generally signifies the point at which the program is
ready to start building production-representative prototypes.

o  	Third, by the time of the production decision, the product must be
shown to be producible within cost, schedule, and quality targets and have
demonstrated its reliability. It is also the point at which the design
must demonstrate that it performs as needed through realistic system level
testing.

The three levels of knowledge are related, in that a delay in attaining
one delays those that follow. Thus, if the technologies needed to meet
requirements are not mature, design and production maturity will be
delayed. On the successful commercial and defense programs we have
reviewed, managers were careful to conduct development of technology
separately from and ahead of the development of the product. For this
reason, the first knowledge level is the most important for improving the
chances of developing a weapon system within cost and schedule estimates.
DOD's acquisition policy has adopted the knowledge-based approach to
acquisitions. DOD policy requires program managers to provide knowledge
about key aspects of a system at key points in the

1GAO, Best Practices: Capturing Design and Manufacturing Knowledge Early
Improves

Acquisition Outcomes. GAO-02-701. (Washington, D.C.: July 15, 2002); Best
Practices:

Better Management of Technology Development Can Improve Weapon System
Outcomes.

GAO/NSIAD-99-162. (Washington, D.C.: July 30, 1999); Best Practices:
Successful

Application to Weapon Acquisition Requires Changes in DOD's Environment.

GAO/NSIAD-98-56. (Washington, D.C.: February 24, 1998).

2Technology readiness levels are a way to measure the maturity of
technology. According to best practices, technology is considered
sufficiently mature to start a program when it reaches a readiness level
of 7. This involves a system or prototype demonstration in an operational
environment. The prototype is near or at the planned operational system.

acquisition process. Program managers are also required to reduce
integration risk and demonstrate product design prior to the design
readiness review and to reduce manufacturing risk and demonstrate
producibility prior to full-rate production.

DOD programs that have not attained these levels of knowledge have
experienced cost increases and schedule delays. We have recently reported
on such experiences with the F/A-22, the Joint Strike Fighter, the
Airborne Laser, and the Space Based Infrared System High. For example, the
$245 billion Joint Strike Fighter's acquisition strategy does not embrace
evolutionary, knowledge-based techniques intended to reduce risks. Key
decisions, such as its planned 2007 production decision, are expected to
occur before critical knowledge is captured. If time were taken now to
gain knowledge it could avoid placing sizable investments in production
capabilities at risk of expensive changes.

FCS Strategy Will Not Demonstrate High Levels of Knowledge Consistent With
DOD Policy or Best Practices

The FCS program has proceeded with low levels of knowledge. In fact, most
of the activities that have taken place during its first 2 years should
have been completed before starting system development and demonstration.
It may be several years before the program reaches the level of knowledge
it should have had at program start. Consequently, the Army is depending
on a strategy that must concurrently define requirements, develop
technology, design products, and test products. Progress in executing the
program thus far does not inspire confidence: the requirements process is
taking longer that planned, technology maturity may actually have
regressed, and a program that is critical for the FCS network has recently
run into problems and has been delayed. Figure 2 depicts how the FCS
strategy compares with the best practices described above.

Figure 2: Comparison of FCS Strategy with Best Practices

Demonstrated knowledge

Production process maturity

Stable design

Mature technology and requirements

2002 2004 2006 2008 2010 2012 2014

Years for FCS acquisition events Desired level of knowledge FCS
acquisition event that has taken place

FCS acquisition event scheduled Source: U.S. Army and GAO (data); GAO
(presentation).

The white space in figure 2 suggests the knowledge between best practices
and the FCS program. Clearly, the program has a tremendous amount of
ground to cover to close its knowledge gaps to the point that it can hold
the design reviews as scheduled and make decisions on building prototypes,
testing, and beginning production with confidence.

Several other observations can be made from the figure:

o  	A match between mature technologies and firm requirements was not made
at program start.

Requirements and Resources Gap

o  	The preliminary design review, which ideally is conducted near the
program start decision to identify disconnects between the design and the
requirements, will be held 5 years into the program.

o  	The critical design review, normally held midway through development,
is scheduled to take place in the seventh year of a nine-year program.

o  	The first test of all FCS elements will take place after the
production decision.

The FCS program entered system development and demonstration without
demonstrating a match between resources and requirements, and will not be
in a position to do so for a number of years. The Army now expects to have
a reasonably well defined set of requirements by the October 2006 interim
preliminary design review. The Army has been working diligently to define
these requirements, but the task is very difficult given that there are
over 10,000 specific system-of-systems requirements that must collectively
deliver the needed lethality, survivability, responsiveness, and
sustainability. For example, the Army is conducting at least 120 studies
to identify the design tradeoffs necessary before firming up requirements.
As of December 2004, 69 remain to be completed. Those to be completed will
guide key decisions on the FCS, such as the weight and lethality required
of the manned ground vehicles.

On the resources side, last year we reported that 75 percent of FCS
technologies were immature when the program started in 2003; a September
2004 independent assessment has since shown that only one of the more than
50 FCS critical technologies is fully mature. The Army employed lower
standards than recommended by best practices or DOD policy in determining
technologies acceptable for the FCS program3. As a result, it will have to
develop numerous technologies on a tight schedule and in an environment
that is designed for product development. If all goes as planned, the Army
estimates that most of the critical technologies will reach a basic level
of maturity by the 2010 Critical Design Review and full maturity by the
production decision. This type of technical knowledge is critical to the
process of setting realistic requirements, which are needed now. In
addition, a program critical to the FCS network and a key

3To achieve full maturity at TRL 7, the technology should be in the form,
fit, and function needed for the intended product and should be
demonstrated in a realistic environment. For a basic level of maturity at
TRL 6, the technology is not necessarily in the form, fit, and function
for the intended product.

element of FCS' first spiral, the Joint Tactical Radio System, recently
encountered technical problems and may be delayed 2 years. We provide more
detail on this program later.

Late Demonstrations of FCS Performance Could Prove Costly

The FCS strategy will result in much demonstration of actual performance
late in development and early in production, as technologies mature,
prototypes are tested, and the network and systems are brought together as
a system-of-systems. A good deal of the demonstration of the FCS design
will take place over a 3-year period, starting with the critical design
review in 2010 through the first system level demonstration of all 18 FCS
components and the network in 2013. This compression is due to the desired
fielding date of 2014, coupled with the late maturation of technologies
and requirements previously discussed.

Ideally, a critical design review should be held midway through
development-around 2008 for FCS-to confirm the design is stable enough to
build production representative prototypes for testing. DOD policy refers
to the work up to the critical design review as system integration, during
which individual components of a system are brought together. The policy
refers to the work after the critical design review as system
demonstration, during which the system as a whole demonstrates its
reliability as well as its ability to work in the intended environment.
The building of production representative prototypes also provides the
basis to confirm the maturity of the production processes. For the FCS,
the critical design review will be held just 2 years before the production
decision. The FCS program is planning to have prototypes available for
testing prior to production but they will not be production-representative
prototypes. The Army does not expect to have even a preliminary
demonstration of all elements of the FCS system-of-systems until sometime
in 2013, the year after the production decision.

This makes the program susceptible to "late cycle churn," a condition that
we reported on in 20004. Late-cycle churn is a phrase private industry has
used to describe the efforts to fix a significant problem that is
discovered late in a product's development. Often, it is a test that
reveals the problem. The "churn" refers to the additional-and
unanticipated-time, money, and effort that must be invested to overcome
the problem. Problems are

4GAO, Best Practices: A More Constructive Approach is Key to Better Weapon
System Outcomes, GAO/NSIAD-00-199 (Washington, D.C., July 31, 2000).

most serious when they delay product delivery, increase product cost, or
"escape" to the customer. The discovery of problems in testing conducted
late in development is a fairly common occurrence on DOD programs, as is
the attendant late-cycle churn. Often, tests of a full system, such as
launching a missile or flying an aircraft, become the vehicles for
discovering problems that could have been found out earlier and corrected
less expensively. When significant problems are revealed late in a weapon
system's development, the reaction-or churn-can take several forms:
extending schedules to increase the investment in more prototypes and
testing, terminating the program, or redesigning and modifying weapons
that have already made it to the field. While DOD has found it acceptable
to accommodate such problems over the years, this will be a difficult
proposition for the FCS given the magnitude of its cost in an increasingly
competitive environment for investment funds.

The Army has made some concrete progress in building some of the
foundation of the program that will be essential to demonstrating
capabilities. For example, the System-of-Systems Integration Lab-where the
components and systems will be first tested-has been completed. Initial
versions of the System-of-Systems Common Operating Environment, the
middleware that will provide the operating system for FCS software, have
been released. Several demonstrations have taken place, including the
Precision Attack Munition, the Non-Line of Sight Cannon, and several
unmanned aerial vehicles.

The Army has embarked on an impressive plan to mitigate risk using
modeling, simulation, emulation, hardware in the loop, and system
integration laboratories throughout FCS development. This is a credible
approach designed to reduce the dependence on late testing to gain
valuable information about design progress. However, on a first-of-a-kind
system like the FCS that represents a radical departure from current
systems, actual testing of all the components integrated together is the
final proof that the system works both as predicted and as needed.

Examples of Execution Challenges for Two Key FCS Elements

Network

The risks the FCS program faces in executing the acquisition strategy can
be seen in the information network and the manned ground vehicles. These
two elements perhaps represent the long poles in the program and upon
which the program's success depends.

The Joint Tactical Radio System (JTRS) and Warfighter Information
Network-Tactical (WIN-T) are central pillars of the FCS network. If they
do not work as intended, battlefield information will not be sufficient
for

the Future Force to operate effectively. They are separate programs from
the FCS, and their costs are not included in the costs of the FCS. Both
JTRS and WIN-T face significant technical challenges and aggressive
schedules, which threaten the schedule for fielding Future Force
capabilities and make their ultimate ability to perform uncertain.

JTRS is a family of radios that is to provide the high capacity,
high-speed information link to vehicles, weapons, aircraft, and soldiers.
Because they are software-based, they can also be reprogrammed to
communicate with the variety of radios currently in use. JTRS is to
provide the warfighter with the capability to access maps and other visual
data, communicate onthe-move via voice and video with other units and
levels of command, and obtain information directly from battlefield
sensors. JTRS can be thought of as the information link or network to
support FCS units of action and the combat units on the scene that are
engaged directly in an operation. In particular, its wideband networking
waveform provides the "pipe" that will enable the FCS vehicles to see and
strike first and avoid being hit. The WIN-T program is to provide the
information network for higher military echelons. WIN-T will consist of
ground, airborne, and space-based assets within a theater of operations
for Army, joint, and allied commanders and provide those commanders with
access to intelligence, logistics, and other data critical to making
battlefield decisions and supporting battlefield operations. This is
information the combat units can access through WIN-T developed equipment
and JTRS.

The JTRS program to develop radios for ground vehicles and helicopters-
referred to as Cluster 1-began system development in June 2002 with an
aggressive schedule, immature technologies, and lack of clearly defined
and stable requirements. These factors have contributed to significant
cost, schedule, and performance problems from which the program has not
yet recovered. The Army has not been able to mature the technologies
needed to provide radios that both generate sufficient power as well as
meeting platform size and weight constraints. Changes in the design are
expected to continue after the critical design review, and unit costs may
make the radios unaffordable in the quantities desired. Given these
challenges, the Army has proposed delaying the program 24 months and
adding $458 million to the development effort. However, before approving
the restructure, the Office of the Secretary of Defense directed a partial
work stoppage, and the program is now focusing its efforts on a scheduled
operational assessment of the radio's functionality to determine the
future of the program. Consequently, the radio is not likely to be
available for the first spiral of the FCS network, slated for fiscal year
2008, and surrogate radios may be needed to fill the gap.

                             Manned Ground Vehicles

A second JTRS program, to develop small radios including those that
soldiers will carry (referred to as Cluster 5), also entered system
development with immature technologies, lack of well-defined requirements,
and faces even greater technical challenges due to the smaller size,
weight, power, and large data processing requirements for the radios. For
example, the Cluster 5 program has a requirement for a wideband networking
waveform despite its demanding size and power constraints. In addition,
the program was delayed in starting system development last year because
of a contract bid protest. Consequently, the Cluster 5 radios are not
likely to be available for the first FCS spiral either. The Army has
acknowledged that surrogate radios and waveforms may be needed for the
first spiral of FCS.

The WIN-T program also began with an aggressive acquisition schedule and
immature technologies that are not scheduled to mature until after
production begins. Backup technologies have been identified, but they
offer less capability and most are immature as well. In addition, the
schedule leaves little room for error correction and rework that may
hinder successful cost, schedule and performance outcomes. More recently,
the program strategy was altered to identify a single architecture as soon
as possible and to deliver networking and communications capabilities
sooner to meet near term warfighting needs. Specifically, the Army dropped
its competitive strategy and is now having the two contractors work
together to develop the initial network architecture. A plan for how to
develop and field capabilities sooner is still to be determined.

FCS includes eight manned ground vehicles, which require critical
individual and common technologies to meet required capabilities. For
example, the Mounted Combat System will require, among other new
technologies, a newly developed lightweight weapon for lethality; a hybrid
electric drive system and a high-density engine for mobility; advanced
armors, an active protection system, and advanced signature management
systems for survivability; a Joint Tactical Radio System with the wideband
waveform for communications and network connection; a computergenerated
force system for training; and a water generation system for
sustainability. At the same time, concepts for the manned ground vehicles
have not been decided and are awaiting the results of trade studies that
will decide critical design points such as weight and the type of drive
system to be used. Under other circumstances, each of the eight manned
ground systems would be a major defense acquisition program on par with
the Army's past major ground systems such as the Abrams tank, the Bradley
Fighting Vehicle, and the Crusader Artillery System. As such, each

requires a major effort to develop, design, and demonstrate the individual
vehicles.

Developing these technologies and integrating them into vehicles is made
vastly more difficult by the Army's requirement that the vehicles be
transportable by the C-130 cargo aircraft. However, the C-130 can carry
the FCS vehicles' projected weight of 19 tons only 5 percent of the time.
In 2004, GAO reported a similar situation with the Stryker vehicles. The
19ton weight of these vehicles significantly limits the C-130's range and
the size of the force that can be deployed5. Currently, FCS vehicle
designs are estimated at over 25 tons. To meet even this weight, the
advanced technologies required put the sophistication of the vehicles on a
par with fighter aircraft, according to some Army officials. This is
proving an extremely difficult requirement to meet without sacrificing
lethality, survivability, and sustainability. Currently, program officials
are considering other ways to meet the C-130 weight requirement, such as
transporting the vehicles with minimal armor and with only a minimal
amount of ammunition. As a result, vehicles would have to be armored and
loaded upon arrival to be combat ready.

FCS Cost and Affordability Still to Be Determined

The low levels of knowledge in the FCS program provide an insufficient
basis for making cost estimates. The program's immaturity at the time
system development and demonstration began resulted in a relatively
lowfidelity cost estimate and open questions about the program's long-term
affordability. Although the program restructuring provides more time to
resolve risk and to demonstrate progress, the knowledge base for making a
confident estimate is still low. If the FCS cost estimate is not better
than past estimates, the likelihood for cost growth will be high while the
prospects for finding more money for the program will be dim.

The estimates for the original FCS program and the restructured program
are shown in table 2 below.

5GAO, Military Transformation: Fielding of Army's Stryker Vehicles Is Well
Under Way, but Expectations for Their Transportability by C-130 Aircraft
Need to Be Clarified, GAO-04-925 (Washington, D.C., August 12, 2004).

Table 2: Increased Cost from Original to Restructured FCS Program

           2005 BY$ (millions)  Research and Development Procurement    Total 
                      Original                    18,574       60,647 79,836a 
                  Restructured                   28,007b       79,960 107,967 
               Dollar increase                     9,433       19,313  28,131 
              Percent increase                    50.79%       31.84%  35.24% 

Sources: GAO.

aBoth the original and the restructured figures are for about 15 Units of
Action (i.e., 1/3 of the current active force).

bIncludes four originally deferred systems, a lengthened schedule,
additional tests, and the addition of the four spirals.

At this point, the FCS cost estimate represents the position of the
program
office. The Army and the Office of the Secretary of Defense's Cost
Analysis
Improvement Group will provide their independent estimates for the
May 2005 Milestone B update review. It is important to keep in mind that
the FCS program cost estimate does not reflect all of the costs needed to
field FCS capabilities. The costs of the complementary programs are
separate and will be substantial. For example, the research and
development and procurement costs for the JTRS (Clusters 1 and 5) and
the WIN-T programs are expected to be about $34.6 billion (fiscal year
2005 dollars).

In addition, by April 2005, the Army has been tasked to provide an
analysis
of FCS affordability considering other Army resource priorities, such as
modularity. This will be an important analysis given that estimates of
modularity costs have been put at about $48 billion, and costs of current
operations and recapitalizing current equipment have been covered by
supplemental funding.

As can be seen in table 3, substantial investments will be made before key
knowledge is gained on how well the system can perform. For example, by
the time of the critical design review in 2010, over $20 billion of
research
and development funds will have been spent.

Table 3: Annual and Cumulative FCS Funding and Planned Events and
Achievements ($millions)

Cumulative Annual Research Research and and Development Development
Planned

Fiscal year Funding Funding Events/Achievements

                    2003     158.9              158.9 Systems development and 
                                                          demonstration Start 
                    2004    1,637.3         1,796.2 Program restructured      
                    2005    2,800.8        4,597.0 Contract redefinitized     
                                                           Milestone B Update 
                                                        Updated cost estimate 

2006 3,404.8 8,001.8 Requirements firmed up

Interim preliminary design review

2007 3,742.0 11,743.8

2008 3,682.3 15,426.1 	System preliminary design review

Interim critical design review

               2009   3,460.0                                        18,886.1 
               2010   3,181.5         22,067.6 Technologies reach basic       
                                             maturity; system critical design 
                                                    review                    
               2011   2,690.7          24,758.3 Design readiness review       
               2012   1,949.6          26,707.9 Technologies reach full       
                                                   maturity                   
                                             Production decision              
               2013   1,412.0         28,119.9 Initial System-of-Systems      
                                                demonstration                 
               2014   1,169.0         29,288.9 Initial Operational Capability 
               2015    901.0                                         30,189.9 
               2016    111.0     30,300.9 Full Operational Capability         

Source: U.S. Army.

The consequences of even modest cost increases and schedule delays for the
FCS would be dramatic. For example, a one-year delay late in FCS
development, not an uncommon occurrence for other DOD programs, could cost
over $3 billion. Given the size of the program, financial consequences of
following historical patterns of cost and schedule growth could be dire.

  Alternatives to Current FCS Acquisition Strategy Still Warrant Consideration

For any acquisition program, two basic questions can be asked. First, is
it worth doing? Second, is it being done the right way? On the first
question, the Army makes a compelling case that something must be done to
equip its future forces and that such equipment should be more responsive
but as effective as current equipment. The answer to the second question
is problematic. At this point, the FCS presents a concept that has been
laid out in some detail, an architecture or framework for integrating
individual capabilities, and an investment strategy for how to acquire
those capabilities. There is not enough knowledge to say whether the FCS
is doable, much less doable within a predictable frame of time and money.
Yet making confident predictions is a reasonable standard for a major
acquisition program given the resource commitments and opportunity costs
they entail. Against this standard, the FCS is not yet a good fit as an
acquisition program.

That having been said, another important question that needs to be
answered is: if the Army needs FCS-like capabilities, what is the best way
to advance them to the point to which they can be acquired? Efforts that
fall in this area-the transition between the laboratory and the
acquisition program-do not yet have a place that has right organizations,
resources, and responsibilities to advance them properly.

At this point alternatives to the current FCS strategy warrant
consideration. For example, one possible alternative for advancing the
maturity of FCS capabilities could entail setting the first spiral or
block as the program of record for system development and demonstration.
Such a spiral should meet the standards of providing a worthwhile military
capability, having mature technology, and having firm requirements. Other
capabilities currently in the FCS program could be moved out of system
development and demonstration and instead be bundled into advanced
technology demonstrations that could develop and experiment with advanced
technologies in the more conducive environment of "preacquisition" until
they are ready to be put into a future spiral. Advancing technologies in
this way will enable knowledge to guide decisions on requirements, lower
the cost of development, and make for more reasonable cost and schedule
estimates for future spirals.

Mr. Chairman, this concludes my prepared statement. I would be happy to
answer any questions that you or members of the subcommittee may have.

Contacts and Staff 	For future questions about this statement, please
contact me at (202) 512-4841. Individuals making key contributions to this
statement include

Acknowledgements 	Lily J. Chin, Marcus C. Ferguson, Lawrence D. Gaston,
Jr., William R. Graveline, John P. Swain, Robert S. Swierczek, and Carrie
R. Wilson.

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