Defense Acquisitions: Improved Business Case Is Needed for Future
Combat System's Successful Outcome (14-MAR-06, GAO-06-367).	 
                                                                 
The Department of Defense (DOD) anticipates that the Future	 
Combat System (FCS) will modernize the U.S. Army's ability to	 
move, shoot, and communicate on the battlefield. It is an	 
impressive concept that is the product of holistic,		 
non-traditional thinking. The Army describes FCS as one of the	 
most complex weapon acquisition programs ever executed because it
involves developing and integrating a family of 18 systems and an
information network. Army leadership started the program early as
part of its effort to change Army culture and believes that the  
program risks are manageable. GAO is required by law to review	 
the program annually. In this report, GAO analyzes FCS's	 
acquisition business case and assesses requirements stability,	 
technology maturity, soundness of the acquisition strategy, and  
reasonableness and affordability of program costs.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-367 					        
    ACCNO:   A48957						        
  TITLE:     Defense Acquisitions: Improved Business Case Is Needed   
for Future Combat System's Successful Outcome			 
     DATE:   03/14/2006 
  SUBJECT:   Army procurement					 
	     Defense capabilities				 
	     Military systems analysis				 
	     Procurement planning				 
	     Program evaluation 				 
	     Requirements definition				 
	     Systems design					 
	     Systems evaluation 				 
	     Technology 					 
	     Weapons research and development			 
	     Weapons systems					 
	     Schedule slippages 				 
	     Policy evaluation					 
	     Procurement policy 				 
	     Cost estimates					 
	     Program costs					 
	     Army Future Combat Systems 			 
	     C-130 Aircraft					 
	     Hercules Aircraft					 

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GAO-06-367

     

     * Results in Brief
     * Background
          * FCS Restructures the Program and Changes Contracting Approac
          * Elements of a Business Case
     * Army Has Made Progress but Feasibility and Affordability of
          * Army Has Largely Completed the Definition of FCS System of S
          * FCS System-Level Requirements Are Not Yet Firm
          * Cumulative Effects of Individual Requirement Trade-Offs Must
     * FCS Success Hinges on Numerous Undemonstrated Technologies a
          * Critical Technologies Are a Long Way from Reaching Maturity
          * Technology and Integration Challenges for Manned Ground Vehi
          * Many Complementary Programs Are at Risk
               * JTRS
               * WIN-T
               * Funding Issues Cloud Future of Other Complementary Programs
     * FCS Acquisition Strategy Will Demonstrate Design Maturity Af
          * FCS Acquisition Strategy Involves Concurrent Development and
     * As FCS's Higher Costs Are Recognized, Funding Availability B
          * FCS Costs Have Increased as Army Attains More Information, b
          * Army Has Taken Steps to Control FCS Program Costs
          * Future Funding May Not Be Sufficient to Cover Projected FCS
     * Conclusions
     * Recommendations for Executive Action
     * Matters for Congressional Consideration
     * Agency Comments and Our Evaluation
     * GAO's Mission
     * Obtaining Copies of GAO Reports and Testimony
          * Order by Mail or Phone
     * To Report Fraud, Waste, and Abuse in Federal Programs
     * Congressional Relations
     * Public Affairs

                 United States Government Accountability Office

Report to Congressional Committees

GAO

March 2006

DEFENSE ACQUISITIONS

 Improved Business Case Is Needed for Future Combat System's Successful Outcome

GAO-06-367

DEFENSE ACQUISITIONS

Improved Business Case Is Needed for Future Combat System's Successful
Outcome

  What GAO Found

The FCS entered the development phase in 2003 and has not yet reached the
level of knowledge it should have attained in the pre-development stage.
The elements of a sound business case-firm requirements, mature
technologies, a knowledge-based acquisition strategy, a realistic cost
estimate, and sufficient funding-are still not demonstrably present. The
Army will continue building basic knowledge in areas such as requirements
and technologies for several more years.

Requirements stability. The Army has reached agreement on FCS system of
systems requirements-about 11,500-that help define how FCS units are
expected to work as a whole. But the Army must continue to work out the
technical feasibility and expected costs of the requirements for
individual FCS systems. These requirements may not be completely
stabilized until 2008. Until then, the Army expects the system-level
requirements to change and to make trade-offs to offset technical risks
and cost.

Technology maturity. None of FCS's 49 critical technologies was at a level
of maturity recommended by DOD policy at the start of a program. Some
technologies may not reach full maturity until after production starts.
Not having firm requirements matched with mature technologies at the start
of development is a key indicator of program risk. Also, the Army is
depending on 52 complementary programs, each of which is essential for FCS
to perform as intended. Some of these programs have significant technical
challenges; some do not have the funding needed to complete development.

Soundness of acquisition strategy for design and production. The current
acquisition strategy for FCS is improved over the original strategy but
still calls for maturing technologies, designing systems, and preparing
for production at the same time. Even if requirements and technologies
proceed without incident, FCS design and production process maturity will
not be demonstrated until after the production decision is made. Although
production representative prototypes will not be available, the Army plans
to test all FCS systems before committing to production. If problems are
discovered in testing at that stage, they will be very expensive to
correct.

Reasonableness and affordability of program costs. The estimated cost of
the FCS program now stands at $160.7 billion, a 76 percent increase since
program start. This is a better estimate than the original, as it embodies
a more realistic schedule and scope. Including the total investment for
the 52 essential complementary programs, the FCS program cost estimate
would reach the $200 billion range. The Army has taken steps it believes
will control FCS costs. Yet, the current level of knowledge about FCS is
low, which makes it difficult to have a solid basis for cost projections.
FCS's longterm affordability depends on the accuracy of cost estimates, an
increased level of procurement funding, and the level of competing
demands.

                 United States Government Accountability Office

Contents

  Letter 1

Results in Brief 2 Background 4 Army Has Made Progress but Feasibility and
Affordability of

System-level Requirements Remain Uncertain 10 FCS Success Hinges on
Numerous Undemonstrated Technologies

and Complementary Programs 16 FCS Acquisition Strategy Will Demonstrate
Design Maturity After

Production Begins 25 As FCS's Higher Costs Are Recognized, Funding
Availability

Becomes a Greater Challenge 29 Conclusions 36 Recommendations for
Executive Action 38 Matters for Congressional Consideration 39 Agency
Comments and Our Evaluation 40

Appendix I Scope and Methodology

Appendix II Comments from the Department of Defense

Appendix III Critical Technologies' Current Status and Projections for
Reaching Technology Readiness Level 6 (TRL 6) 47

Appendix IV Technology Readiness Levels

Related GAO Products

  Tables

Table 1: Number of FCS Critical Technologies Sorted by TRLs 17 Table 2:
Comparison of Original Cost Estimate and Current Cost

Estimate for FCS Program (in billions of then-year dollars) 29 Table 3:
Annual and Cumulative FCS Funding and Planned Events

and Achievements 32

    Page i GAO-06-367 FCS Business Case

Figures 
           Figure 1: FCS's Core Systems                                     5 
                       Figure 2: Flow of FCS's Overarching Requirements to 
                                                              System-level 
           Requirements                                                    11 
           Figure 3: Comparison of Projected Dates for Technology Maturity 18 
               Figure 4: FCS Acquisition Compared with Commercial Best     
                                 Practices' Approach                       26 
           Figure 5: Comparison of Original Cost Estimate and Current Cost 
                    Estimate for FCS Program between Fiscal Years 2003 and 
                       2026 (in millions of then-year dollars)             30 
            Figure 6: Comparison of FCS Budget with Total Army Procurement 
                      Budget (in billions of then-year dollars)            35 

Abbreviations

DOD                   Department of Defense                                
FCS                   Future Combat System                                 
JTRS                  Joint Tactical Radio System                          
TRL                   technology readiness level                           
WIN-T                              Warfighter Information Network-Tactical 

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United States Government Accountability Office Washington, DC 20548

March 14, 2006

Congressional Committees

The Department of the Army (Army) is in the midst of transforming itself
into a lighter, more agile, and more capable combat force that will be
better equipped to meet the defense challenges of the future. One of the
centerpieces of the Army's transformation is the Future Combat System
(FCS), a weapon systems acquisition program that embraces a new concept of
operations, new technologies, and a new information network of numerous
ground and air vehicles, sensors, and munitions. The Army itself calls
this the "greatest technology and integration challenge the Army has ever
undertaken." The FCS concept demonstrates the Army's desire to be
proactive in preparing for the changing scope of modern warfare. When
factoring in other Army programs needed to deliver FCS's full capability,
the total investment costs are on the order of $200 billion. Spending of
this magnitude has drawn attention in Congress because the nation is
facing a large and growing deficit. Fiscal realities are putting pressure
on the Army and the rest of the Department of Defense (DOD) to take a hard
look at how it is managing its resources for weapon acquisition programs,
such as FCS.

Given the Army's challenges to date and the cost and scope of the FCS
program, the National Defense Authorization Act for Fiscal Year 2006
requires GAO to report annually on the product development phase of the
FCS's acquisition. Congressional Committees and GAO agreed that this
report should analyze FCS against the basic elements of an acquisition
business case, namely: (1) firmness of requirements, (2) maturity of
critical technologies, (3) soundness of the acquisition strategy as it
relates to design and production, and (4) reasonableness and affordability
of program costs.

In conducting our work, we have contacted numerous DOD and Army offices.
We reviewed many documents pertaining to the FCS program, attended
meetings at which DOD and Army officials reviewed program progress, and we
held discussions with key DOD and Army officials on various aspects of the
program. Officials from DOD and the Army have provided us access to
sufficient information to make informed judgments on the matters in this
report. In addition, we drew from our large body of past work on weapon
systems acquisition practices. We reviewed DOD's acquisition policy, the
experiences of successful and unsuccessful DOD programs, and the best
acquisition practices of leading commercial firms.

                                Results in Brief

We performed our work from June 2005 to March 2006 in accordance with
generally accepted government auditing standards. Appendix I further
discusses our scope and methodology.

Today, about one-third of the way and $4.7 billion through FCS's
development, the Army does not yet have the level of knowledge-such as
firm requirements and mature technologies-it needed three years ago when
it began product development. Army leadership started the program early as
part of an overall effort to change the culture of the Army and believes
that the risks in the program are manageable. While progress has been made
and efforts are continuing in the requirements and technologies areas, the
Army has not yet fulfilled the basic elements of a sound business case for
a weapon system acquisition, including firm requirements, mature
technologies, a sound strategy for attaining design and production
maturity, realistic program cost estimates, and sufficient funding.

The Army has made significant progress defining the initial FCS system of
systems requirements, having reached agreement on nearly 11,500. However,
FCS requirements are not yet matched with program resources because the
Army still faces the daunting task of defining about 90,000 more
requirements for FCS's 18 individual systems. Although firm requirements
should have been established at the start of the program, the process of
setting and refining FCS system-level requirements may not be complete
until 2008. The initial system-level requirements defined to date are
likely to change as technical feasibility and expected costs of the
system-level requirements become clearer. The Army plans to trade off
system requirements to offset technical risks and cost, but this
flexibility is not unlimited as FCS overall capabilities are still
expected to be as good as or better than those of the current Army forces
in terms of lethality, survivability, responsiveness, and sustainability.

None of the FCS's 49 critical technologies were at an acceptable level of
maturity 1 when the product development began. Since the FCS program
began, projected dates for maturing critical technologies have slipped,
and some technologies are not expected to mature until very late-well into

1

According to DOD policy, technology maturity means a technology must have
been demonstrated in a relevant environment (or, preferably, in an
operational environment) and considered mature enough to use for product
development in systems integration.

    Page 2 GAO-06-367 FCS Business Case

the design phases of the program and possibly into production. Other
challenges have arisen as well. Several of 52 complementary systems
considered essential to FCS may not be able to complete development when
needed. Some of these programs have not yet been fully funded, and others
are facing their own technical challenges. For example, the Joint Tactical
Radio System could be a deciding factor in FCS's overall success, but it
is being restructured because of significant development problems.

The FCS acquisition strategy is not knowledge-based: the strategy calls
for maturing technologies, designing systems, and preparing for production
concurrently. Even if requirements definition and technology maturity
proceed without incident, FCS design and production maturity will not be
demonstrated under the current acquisition strategy until after the
production decision is made. At this point, the critical design review is
planned for the seventh year in a nine-year development, leaving little
time to demonstrate the design will work as intended before the scheduled
decision to begin production. In fact, the Army does not plan to build and
test production-representative prototypes before committing to low-rate
initial production. Design integration promises to be a major challenge,
particularly for FCS's manned ground vehicles, which have been likened in
sophistication to fighter aircraft. The late accumulation of design and
production knowledge called for by the FCS acquisition strategy increases
the likelihood that problems will be discovered in late development and
early production, when the costs of fixes will be very high.

The low level of knowledge available today on requirements and
technologies makes FCS cost projections very uncertain. Costs of the FCS
program are estimated at $160.7 billion-an increase of 76 percent since
the program began. The growth is attributable, in part, to the
restructuring that increased the program's scope and extended the
development schedule by four years. The projected costs also rose as
program managers attained more knowledge about system of systems
requirements. While the latest estimate may be better than earlier
estimates, the essential complementary programs are not included.
Including the costs of these programs would bring the required total
investment to the $200 billion range. DOD has not yet prepared an
independent estimate to validate the Army's current cost estimate. The
Army is taking steps to control the costs of the program, but these steps
may require changing or eliminating some requirements. The long-term
affordability of FCS depends on the soundness of several key assumptions,
including the accuracy of the cost estimate, the overall level of
development and procurement funding available to the Army, and the level
of competing demands.

                                   Background

We are making several recommendations to the Secretary of Defense to take
a number of actions, prior to DOD's long-term commitment to the program,
to improve the FCS business case and establish knowledgebased measures to
guide oversight of FCS progress. DOD concurred with the intent of our
recommendations; however, it did not agree to limit its commitment to the
FCS program or to do much beyond what it had already planned to do. As a
result, this report also contains matters for congressional consideration
to ensure FCS has a sound business case before future funding commitments
are made.

The FCS concept is part of a pervasive change toward what the Army refers
to as the Future Force. The Army is reorganizing its current forces into
modular brigade combat teams, meaning troops can be deployed on different
rotational cycles as a single team or as a cluster of teams. The Future
Force is designed to transform the Army into a more rapidly deployable and
responsive force and enables the Army to move away from the large
division-centric structure of the past. Each FCS brigade combat team is
expected to be highly survivable and the most lethal brigade-sized unit
the Army has ever fielded. The Army expects FCS-equipped brigade combat
teams to provide significant warfighting capabilities to DOD's overall
joint military operations. The Army is implementing its transformation
plans at a time when current U.S. ground forces are playing a critical
role in the ongoing conflicts in Iraq and Afghanistan.

The FCS family of weapons includes 18 manned and unmanned ground vehicles,
air vehicles, sensors, and munitions that will be linked by an information
network. The systems include

     o eight new types of manned ground vehicles to replace current tanks,
       infantry carriers, and self-propelled howitzers;
     o four classes of unmanned aerial vehicles;
     o several unmanned ground vehicles; and
     o an attack missile.

At a fundamental level, the FCS concept is to replace mass with superior
information-that is, to see and hit the enemy first rather than to rely on
heavy armor to withstand a hit. This solution attempts to address the
mismatch that has posed a dilemma to the Army for decades. 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. If the Future Force becomes a reality, then the Army
would be better organized, staffed, equipped, and trained for prompt and
sustained land combat. This is expected to translate 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 concepts of operations, enabled by new
technology. The Army envisions a new way of fighting that depends on
networking the force, which involves linking people, platforms, weapons,
and sensors seamlessly together in a system of systems.

                          Figure 1: FCS's Core Systems

                               Source: U.S. Army.

         FCS Restructures the Program and Changes Contracting Approach

If successful, the FCS system of systems concept will leverage individual
capabilities of weapons and platforms and will facilitate interoperability
and open system designs. This would be a significant improvement over the
traditional approach of building superior individual weapons that must be
retrofitted and netted together after the fact. This transformation, in
terms of both operations and equipment, is under way with the full
cooperation of the Army warfighter community. In fact, the development and
acquisition of FCS is being accomplished using a uniquely collaborative
relationship between the Army's developers, the participating contractors,
and the warfighter community.

The Army has employed a management approach that centers on a lead systems
integrator. Although there is no complete consensus on the definition of a
lead systems integrator, 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. Boeing is the lead systems integrator for the FCS system
development and demonstration phase of acquisition. The FCS lead systems
integrator acts on behalf of the Army to optimize the FCS capability,
maximize competition, ensure interoperability, and maintain commonality in
order to reduce life cycle costs. 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. The Army
will maintain oversight and final approval of the lead systems
integrator's subcontracting and competition plans.

As a key element of its efforts to transform itself, the Army has
recognized FCS from its outset as the greatest technology and integration
challenge it has ever undertaken. In May 2003, DOD approved the FCS
program to begin the system development and demonstration phase, a
milestone that ideally marks the completion of technology development and
the start of product development. However, FCS's entry into this phase was
premature given that the program had failed to satisfy basic tenets of DOD
acquisition policy. We have reported that, as FCS started product
development, it did not have mature technologies or adequately defined
requirements.

Responding to direction from the Army Chief of Staff, the Army announced
in July 2004 its plans to restructure the FCS program. The Army added four
years to develop and mature the manned ground vehicles, added more
demonstrations and experiments, and established an evaluation unit to
demonstrate FCS capabilities. The restructuring reintroduced four systems
that previously had been left unfunded, raising the total number of
FCS-related systems to 18. The restructure also included plans to spin off
mature FCS capabilities as they become available to current force units.
With the restructuring, the FCS program now plans to achieve initial
operational capability in fiscal year 2015 and full operational capability
in fiscal year 2017. FCS low-rate production is expected to start in
fiscal year 2012, and full-rate production in fiscal year 2016. The Army
intends to continue FCS procurement through fiscal year 2025, eventually
equipping 15 brigade combat teams.

The restructuring was not the only major modification to the FCS program.
Because of congressional concerns that the Army's contracting approach
incorporated insufficient safeguards to protect the government's
interests, the Army is preparing a new contract that is to be completed
and finalized in March 2006 and is based on the Federal Acquisition
Regulation, which governs acquisitions within the federal government. The
new contract will incorporate standard Federal Acquisition Regulation
clauses such as those relating to procurement integrity, Truth in
Negotiations, and Cost Accounting Standards. Previously, the lead systems
integrator had been performing FCS work for the Army under a contractual
instrument called an "other transaction agreement" that was not subject to
the Federal Acquisition Regulation. The other transaction agreement gave
the Army considerable flexibility to negotiate the terms and conditions
for contractors involved in FCS development. The Army's purpose for using
such an agreement was to encourage innovation and to use its wide latitude
in tailoring business, organizational, and technical relationships to
achieve the program goals. In April 2005, the Army decided to incorporate
into its agreement the procurement integrity, Truth in Negotiations, and
Cost Accounting Standards clauses from the regulation.

After the Congress raised questions about the Army using an other
transaction agreement for the development of a program as large and risky
as FCS and about the Army's choice not to include standard Federal
Acquisition Regulation clauses in the agreement, the Secretary of the Army
directed that the other transaction agreement be converted to a Federal

    Elements of a Business Case

Acquisition Regulation-based contract. 2 All of the work performed under
the product development phase as of September 2005 will be accounted for
under the prior other transaction agreement, and all work after September
2005 will be performed under the new contract. The Army expects the
content of the program-its statement of work-will remain largely the same,
and it does not expect the cost, schedule, and performance of the overall
development effort to change materially.

We have frequently reported on the importance of using a solid, executable
business case before committing resources to a new product development
effort. In the case of DOD, a business case should be based on DOD
acquisition policy and lessons learned from leading commercial firms and
successful DOD programs. The business case in its simplest form is
demonstrated evidence that (1) the warfighter's needs are valid and that
they can best be met with the chosen concept, and (2) the chosen concept
can be developed and produced within existing resources-that is, proven
technologies, design knowledge, adequate funding, and adequate time to
deliver the product when it is needed. A program should not go forward
into product development unless a sound business case can be made. If the
business case measures up, the organization commits to the development of
the product, including making the financial investment.

At the heart of a business case is this knowledge-based approach to
product development that is both a best practice among leading commercial
firms and the approach preferred by DOD in its acquisition regulations.
For a program to deliver a successful product within available resources,
managers should demonstrate high levels of knowledge before significant
commitments are made. In essence, knowledge supplants risk over time. This
building of knowledge can be described as three levels or knowledge points
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. The ability of the

2

In Section 212 of the Fiscal Year 2006 Defense Authorization Act, the
Congress also stipulated that the Secretary of the Army procure the FCS
through a Federal Acquisition Regulation contract.

Page 8 GAO-06-367 FCS Business Case

government acquisition workforce to properly manage the effort

should also be an important consideration at program start.

     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
       systemlevel testing.

The three knowledge points are related in that a delay in attaining one
delays the points 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 point 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 certain aspects of a system at key points in the 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.

The FCS program is about one-third of the way into its scheduled product
development. At this stage, it should have attained knowledge point one,
with a strategy for attaining knowledge points two and three. Accordingly,
we analyze the FCS business case first as it pertains to firming
requirements and maturing technologies, which indicate progress against
the first knowledge point. We then analyze FCS's strategy for attaining
design and production maturity. Finally, we analyze the costs and funding
estimates made to execute the FCS business case.

  Army Has Made Progress but Feasibility and Affordability of System-level
  Requirements Remain Uncertain

The Army has made significant progress defining FCS's system of systems
requirements, particularly when taking into account the daunting number of
requirements involved-nearly 11,500-at this level. Yet system-level
requirements are not yet stabilized and will continue to change,
postponing the needed match between requirements and resources. Now, the
Army and its contractors are working to complete the definition of
system-level requirements, and the challenge is in determining if those
requirements are technically feasible and affordable. Army officials say
it is almost certain that some FCS system-level requirements will have to
be modified, reduced, or eliminated; the only uncertainty is by how much.
We have previously reported that unstable requirements can lead to cost,
schedule, and performance shortfalls. Once the Army gains a better
understanding of the technical feasibility and affordability of the
systemlevel requirements, trade-offs between the developer and the
warfighter will have to be made, and the ripple effect of such trade-offs
on key program goals will have to be reassessed.

    Army Has Largely Completed the Definition of FCS System of Systems
    Requirements

The Army has completed an FCS operational requirements document, a
mandatory step in the DOD acquisition process. This document outlines 552
requirements intended to meet the warfighter's needs and discusses the
characteristics needed for the FCS-equipped brigade combat teams to
achieve the Army's desired tactical concepts and capabilities. 3 FCS is
described in this document as a family of systems comprising advanced,
networked air- and ground-based maneuver, maneuver support, and
sustainment systems. The program has seven key performance parameters:
network-ready, networked battle command, networked lethality,
transportability, sustainability/reliability, training, and survivability.
In simpler terms, the Army has stated that the FCS-equipped brigade combat
teams must be as good as or better than current Army forces in terms of
lethality, responsiveness, sustainability, and survivability. Since the
FCS program started in May 2003, the Army and the lead systems integrator
have been working to translate those warfighter requirements first into
system of systems requirements at the FCS level. Having this information
in hand gives the Army a good understanding of what FCS brigade combat
teams should be capable of, but more detailed knowledge is needed for each
of the 18 individual systems. Now, the Army

3

The Army's concept for future warfighting is documented in The United
States Army Future Combat Force Operational and Organizational Plan for
the Future Combat System Brigade Combat Team. The FCS operational
requirements document was derived from the operational and organizational
plan.

Page 10 GAO-06-367 FCS Business Case

and the lead systems integrator are delving much deeper and more precisely
to translate system of systems requirements into more specific
requirements for individual systems within FCS. Figure 2 illustrates how
the requirements laid out in the operational requirements document flow
down to the FCS's system of systems and later to the individual system
level.

Figure 2: Flow of FCS's Overarching Requirements to System-level
Requirements Done Done Not done Not done

      552 requirements11, 500 Requirements with System and platform

...

threshold and objective functionality

      7 key performance parametersvalues

8 types of Manned Ground Vehicles

                                       .

Net ready

.

Brigade combat team 4 types of Unmanned Aerial Vehicles

                                       .

Networked battle command functionality

.

1 unattended sensor

                                       .

Networked lethality

2 unattended munitions

                                       .

Transportability 3 types of Unmanned Ground Vehicles

                                       .

Sustainability/reliability Information network

                                       .

Training

Soldier systems

                                       .

Survivability

Training systems

.

Logisticssystems

.

Plus complementary and associated programs

.

Source: U.S. Army (data); GAO (analysisand presentation).

During the requirements definition process, the Army, its lead systems
integrator, and other contractors provided feedback on the feasibility of
the requirements being proposed. The feedback sometimes resulted in
several rounds of negotiations and trade-offs before requirements could be
finalized. For example, the Army has invested much time and effort in
deciding how best to meet the FCS transportability requirements while
continuing to meet its lethality and survivability requirements. A series
of design concepts were used to examine the possibilities, and the Army
and the lead systems integrator have conducted numerous design trade
studies. Since program start, the Army has made a number of design
trade-offs that have been incorporated into the current design concepts.
For example, the current manned ground vehicle design concepts feature a
basic, lightly armored vehicle (each weighing about 19 tons) and
additional armor (bringing the total vehicle weight up to about 24 tons).
This trade-off was intended to achieve an acceptable level of
survivability while maintaining a limited capability for the vehicles to
be transported on the C-130 Hercules air lifter. The Army also decided to
accept a higher weight to achieve the lethality of the 120-mm cannon for
the mounted combat system. Finally, the Army decided to accept a reduction
in range inherent in the lighter weight 38-caliber 155-mm cannon for the
non-line-of-sight cannon vehicle.

In August 2005, the Army and the lead systems integrator conducted the
System of Systems Functional Review, which is a multi-disciplined
technical review used to ensure that a system can proceed into preliminary
design. The review is conducted to ensure that all system of systems
requirements have been defined and are consistent with program budget,
schedule, risk, and other constraints. The Army and the lead systems
integrator demonstrated that they had (1) essentially completed the
definition of the system of systems level requirements, (2) established
the functional baseline for the program, and (3) made an initial
allocation of functional requirements down to the individual FCS system
level. As shown in figure 2 above, at the system of systems level, there
are about 11,500 requirements. The Army anticipates that there eventually
could be eight times the number of requirements at the FCS system level,
or roughly 90,000 requirements.

For the System of Systems Functional Review, the Army prepared a number of
performance evaluations, including assessments of the entire brigade
combat team's capabilities as well as more focused evaluations of
individual FCS design concepts or requirements. The Army is conducting
performance evaluations while continuing to evaluate requirement tradeoffs
and refine system-level requirements. These evaluations will be valuable
in understanding the impact of individual requirement trade-off decisions
on FCS capabilities as well as the Army's pledge that FCS would be as good
as or better than the current Army forces in terms of lethality,
survivability, responsiveness and sustainability.

FCS System-Level The Army deserves credit for having decided on so many
requirements at Requirements Are Not Yet the system of systems level and
for beginning the process allocating Firm functional requirements to the
individual system level. However,

according to DOD policy and best practices, requirements should be

Page 12 GAO-06-367 FCS Business Case

firmed up at the beginning of the product development phase. System
requirements-how big, how heavy, how fast, how strong-can each be
expressed in multiple ways. In deciding how best to address those
systemlevel requirements, trade-offs may be necessary. Ideally, solutions
go through a prioritization and refinement process before final decisions
can be agreed upon. But continuing to define and refine system-level
requirements three years after product development began creates a real
challenge for the other elements of the FCS business case.

Signs of instability in FCS system-level requirements are already evident.
At the System of Systems Functional Review, an initial assessment was made
of the technical feasibility of the functional requirements allocated to
the individual FCS systems. While many are expected to be achievable,
there would be technical risk in the full achievement of some system-level
requirements including

     o mine detection;
     o automatic target recognition for weapon terminal guidance;
     o real-time battle damage assessment;
     o chemical and radiation detection;
     o weapon self-loading for some of the unmanned ground vehicles;
     o manned ground vehicle countermine capabilities;
     o safe operation of unmanned ground vehicles;
     o network latency, quality of service, and intrusion detection;
     o improvised explosive device detection and suppression;
     o reliability, availability, maintainability, and testing;
     o unmanned air vehicle size and weight;
     o hidden target detection; and
     o sensor data fusion.

The Army's System of Systems Functional Review also underscored how
critical the FCS information network is to the achieving of many of FCS's
requirements. For example, FCS survivability depends on the brigade-wide
availability of network-based situational awareness plus the inherent
survivability of the FCS platforms. There is hardly any aspect of FCS
functionality that is not predicated on the network, and for many key
functions, the network is essential. As we will discuss later in this
report, there is considerable technical uncertainty surrounding several
key aspects of the FCS network.

In the coming months, FCS teams working on individual systems will
continue to evaluate the technical feasibility of addressing the allocated
requirements within their current design concepts. Program officials also
will be conducting functional reviews at the system level. According to
Army officials, it is almost certain that some of the FCS system-level
requirements will have to be changed; it is only uncertain by how much.
The Army does have the ability to reallocate a requirement from one system
to another. The Army plans to evaluate its progress in defining and
refining FCS system-level requirements at the August 2006 initial
preliminary design review, which signals the start of the systems
engineering process as well as the beginning of preliminary design work.
However, the Army may not have a stabilized set of technically feasible
and affordable system-level requirements until 2008.

Concurrently, the system-level teams will be evaluating the affordability
of fully developing and producing each of the FCS systems and platforms to
meet the allocated requirements. The Army has stated it will not exceed
the target cost of $20.9 billion for the lead systems integrator's
development contract and will attempt to produce the FCS systems and
platforms within specific procurement cost targets. Key FCS program
officials have indicated to us that additional system-level requirements
changes will be needed to meet these targets.

Applying the discipline of affordability is a good step, but it can make
the requirement definition process more difficult. For example, to meet
the weight goals for the manned ground vehicles, the Army expects to use
advanced, light weight materials, such as ceramics, rather than
traditional steel for armor protection. However, these materials are
expected to be much more costly to produce than steel. To meet the
individual manned ground vehicle's survivability requirements, each
vehicle will have to be equipped for detection avoidance, target
acquisition avoidance, hit avoidance, ballistic protection, and kill
avoidance. Further, each manned ground vehicle would have to carry sensors
that can detect, classify, recognize, identify, and locate enemy
combatants. All of these capabilities will add to the cost of developing
and producing the manned ground vehicles. Finally, the FCS concept
depends, among other things, on the capabilities of the unmanned ground
vehicles and unmanned air vehicles to enhance the survivability of the
rest of the brigade combat team. However, a high number of unmanned ground
vehicles and unmanned air vehicles themselves are expected to be lost to
enemy fire. In the end, the Army may have to either provide additional
unmanned ground vehicles and/or unmanned air vehicles or risk the loss of
even more valuable manned ground vehicles and soldiers. Either option
would involve additional costs.

    Cumulative Effects of Individual Requirement Trade-Offs Must Be Measured

Since the start of the program, the Army has already made some
requirements trade-offs. The Army realizes that the ripple effects of
requirements trade-offs on the anticipated FCS capabilities will need to
be thoroughly assessed to determine if the fundamental tenets of the
program-such as being as lethal and survivable as the current Army
force-are still intact. For example, in deciding to maintain a requirement
for the manned ground vehicles to be transportable on C-130 aircraft, the
Army determined that the vehicles could still meet their survivability and
lethality requirements while meeting the size and weight restrictions
needed to be compatible with the C-130 operating limitations. This
solution involves, in part, the use of additional armor that would be put
on the vehicle after it had been flown by a C-130 to its new operating
location. The Army made this decision with the knowledge that the C-130
aircraft's capability to transport the FCS vehicles would be very limited
and that the solution would require more C-130s to transport vehicles than
previously planned. Also, as we pointed out in our March 2005 testimony,
the development and integration of manned ground vehicle technologies was
made vastly more difficult by the Army's decision to retain the C-130
transportability requirement. As the FCS development effort proceeds, the
Army will have to regularly assess whether the manned ground vehicles will
still be able to meet their lethality, survivability, and other
requirements as well as the assumed operational value of maintaining the
C-130 transportability requirement. Decision makers need to be kept
informed on the status of the program's basic tenets, such as FCS
capabilities being as good as or better than those of current Army forces.

As the technical feasibility and affordability of requirements are better
understood, additional FCS requirements trade-offs will have to be made
and their ripple effects identified. For example, if the requirements for
FCS missile and munition terminal guidance are changed due to feasibility
or cost issues, that may not have an impact only on lethality, but also on
overall FCS survivability because the Army maintains that FCS
survivability will be enhanced if it is able to see first and kill first.
Also, if the FCS weapon terminal guidance requirements are changed, the
brigade combat teams may have to carry and use more weapons than expected,
which would have an impact on the team's sustainability. As another
example, if the FCS countermine requirements are changed, then FCS manned
ground vehicles may be less survivable and mobile. The Army may have to
add additional armor to the manned ground vehicles, directly affecting
their weight and impacting their transportability and sustainability.
Finally, if the reliability, availability, maintainability, and testing
requirements are adjusted, the brigade combat teams may have to

  FCS Success Hinges on Numerous Undemonstrated Technologies and Complementary
  Programs

carry more spare parts and use more maintenance personnel than originally
anticipated.

The Army is aiming to field FCS systems and platforms that meet all of its
minimally acceptable threshold requirements, but according to program
officials, that may not be possible for all requirements. Further, it is
unclear at this point if the resulting set of system-level requirements
will yield an overall FCS capability that will be acceptable to the Army
as a whole and its user representative, the Training and Doctrine Command.
The Training and Doctrine Command has had extensive involvement in the
program to date and would have to approve any major changes in FCS
requirements. At the System of Systems Functional Review, the Training and
Doctrine Command representatives pledged their continuing cooperation in
the process but also vowed to appeal to the Army leadership if the FCS
design concepts do not provide sufficient capabilities to meet their
wartime needs.

According to the latest independent assessment, 4 the Army has not fully
matured any of the technologies critical to FCS's success. Some of FCS's
critical technologies may not reach a high level of maturity until the
final major phase of acquisition, the start of production. The Army
considers a lower level of demonstration as acceptable maturity, but even
against this standard, only one-third of the technologies are mature. We
have reported that proceeding into product development without
demonstrating mature technologies increases the risk of cost growth and
schedule delays throughout the life of the program. The Army is also
facing challenges with several of the complementary programs considered
essential for meeting FCS's requirements. Some complementary programs are
experiencing technology difficulties, and some have not been fully funded.
These difficulties underscore the gap between requirements and available
resources that must be closed if the FCS business case is to be
executable.

Critical Technologies Are a Technology readiness levels (TRL) are measures
pioneered by the Long Way from Reaching National Aeronautics and Space
Administration and adopted by DOD to Maturity determine whether
technologies were sufficiently mature to be incorporated into a weapon
system. Our prior work has found TRLs to be

4

Technology Readiness Assessment Update, Office of the Deputy Assistant
Secretary of the Army for Research and Technology, April 2005.

Page 16 GAO-06-367 FCS Business Case

a valuable decision-making tool because they can presage the likely
consequences of incorporating a technology at a given level of maturity
into a product development. The maturity level of a technology can range
from paper studies (level 1), to prototypes that can be tested in a
realistic environment (level 7), to an actual system that has proven
itself in mission operations (level 9). The definitions of each TRL can be
found in appendix

IV. According to DOD acquisition policy, a technology should have been
demonstrated in a relevant environment (TRL 6) or, preferably, in an
operational environment (TRL 7) to be considered mature enough to use for
product development in systems integration. Best practices of leading
commercial firms and successful DOD programs have shown that critical
technologies should be mature to at least a TRL 7 before the start of
product development.

In the case of the FCS program, the latest independent technology
assessment shows that none of the critical technologies are at TRL 7, and
only 18 of the 49 technologies currently rated have demonstrated TRL 6.
None of the critical technologies may reach TRL 7 until the production
decision in fiscal year 2012, according to Army officials. Five
technologies that the Army previously considered to be critical to FCS are
no longer being monitored for technology maturity, although those
technologies continue to be under development by either the Army or
another military service. Table 1 sorts FCS's critical technologies
according to readiness levels, and their progression over the last two
years.

          Table 1: Number of FCS Critical Technologies Sorted by TRLs

Critical technology Critical technology TRL assessment as of April 2003
assessment as of April 2005

                              TRL 7 and higher 1 0

                                   TRL 6 7 18

                             TRL 5 and lower 24 31

                                  Total 32 49

Source: U.S. Army (data); GAO (analysis and presentation)

Note: The April 2003 assessment was organized into 31 technology areas,
one of which had two different TRL ratings for separate technologies. For
the April 2005 assessment, the original 31 technology areas were
subdivided into 54 individual technologies. Five of the original
technologies are no longer being tracked, leaving a total of 49.

Projected dates for FCS technologies to reach TRL 6 have slipped
significantly since the start of the program, as shown in figure 3.

Figure 3: Comparison of Projected Dates for Technology Maturity

Percentage at TRL 6 100 90

80

70

60

50

40

30

20

10

      0 20032004 2005 2006 2007 2008 2009 Years

April 2003 assessment

April 2005 assessment Source: U.S. Army (data); GAO (analysisand
presentation).

In the 2003 technology assessment, 87 percent of FCS's critical
technologies were projected to be mature to a TRL 6 by 2005. In April
2005, 31 percent of the technologies were expected to mature to a TRL 6 by
2005, and all technologies are not expected to be mature to that level
until 2009. Several key technologies have slipped. For example, to meet
FCS survivability and sustainability requirements, the Army requires High
Density Packaged Power, a technology designed to provide high-output,
constant-level, stored power to the FCS manned ground vehicles. This
technology was originally projected to reach TRL 6 maturity by fiscal year
2003. In the latest assessment, however, that date slipped nearly five
years to fiscal year 2008. Another technology, Quality of Service
Algorithms, which are protocols implemented in network software and used
to determine how information is moved and tracked to users, was originally
expected to reach TRL 6 by fiscal year 2004, but now projected maturity
has slipped three years. The Army originally anticipated the Lightweight
Hull and Vehicle Armor to reach TRL 6 by fiscal year 2003; however, this
has been delayed by five years. Appendix III lists all 54 critical
technologies, their current TRL status, and the projected date for
reaching TRL 6.

    Technology and Integration Challenges for Manned Ground Vehicles

FCS features eight types of manned ground vehicles, each requiring the
development of numerous technologies that must be brought together in an
integrated design to deliver required capabilities. The Mounted Combat
System will require 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; and the Joint Tactical Radio System
with the wideband networking waveform for communications and network
connectivity. FCS manned ground vehicles are expected to be revolutionary,
not only because of their proposed capabilities but also in terms of their
size and weight. They have been likened in complexity to fighter aircraft.
Under other circumstances, each of the eight manned ground systems would
be a major defense acquisition program in its own right.

Since 2003, the Army has been working to develop a series of design
concepts and is currently evaluating the technical feasibility and
affordability of the system-level requirements that have been allocated to
each of the eight vehicles. By August 2006, the Army expects to decide
which of those requirements will be pursued in the preliminary design, and
which ones will have to be changed or deleted. Among many others, the
achievement of the following manned ground vehicles requirements have been
identified as involving technical and design challenges:

     o engine,
     o silent watch (which relates to battery capacity),
     o 14.5-mm survivability,
     o signature management,
     o lightweight track, and
     o power distribution.

As we noted earlier, several critical technologies are not projected to
mature to a TRL 6 until fiscal year 2008 or 2009, at or around the point
when the program should be starting detailed designs for each vehicle.
Further, it should be noted that the step to mature technologies from a
TRL 6 to a TRL 7 is often difficult and unpredictable. All told, the Army
is unlikely to be able to match requirements with technical and design
solutions until at least fiscal year 2008.

In addition, manned ground vehicles face several technology and
integration challenges.

     o The Active Protection System is expected to protect manned ground
       vehicles by sensing and destroying such threats as incoming tank
       rounds and rocket-propelled grenades. However, technology assessments
       have recognized that (1) it may not be possible to have a single,
       integrated active protection system that protects against all threats,
       (2) the Threat Warning System, a technology used to detect and track
       incoming threats at extended ranges, will not be mature to TRL 6 until
       fiscal 2009, (3) the part of the system to defeat kinetic energy
       threats will require significant effort from the science and
       technology community, 5 and (4) protection technology may have limited
       utility in urban environments due to collateral effects.
     o The Army is considering integrating an electromagnetic armor as a
       defense layer for manned ground vehicles. However, electromagnetic
       armor is still an immature technology and poses integration issues,
       including requiring a large amount of power storage capability that
       may not be possible within vehicle design and weight constraints.
       Component maturation and size reduction will be needed to keep
       electromagnetic armor as a viable survivability approach.
     o The integration of the 120-mm cannon on the Mounted Combat System
       vehicle poses design challenges. While the lightweight 120-mm cannon
       has achieved TRL 6 maturity that meets baseline requirements for the
       gun, this testing was conducted on a stationary hardstand and not on a
       turret or vehicle prototype. Those tests are planned for fiscal years
       2007 and 2009, respectively. Realistic testing is important because
       program officials cannot be certain whether the turret and vehicle
       design will be able to withstand the gun blast without damage to the
       vehicle.
     o The integration of the Lightweight Hull and Vehicle Armor in manned
       ground vehicles may also prove to be difficult, and there is a risk
       that the proposed lightweight armor will not satisfy transportability
       requirements while providing adequate protection. The design and
       integration issues must be addressed by large-scale ballistic testing,
       particularly for the cutting-edge ceramic armors being considered.

Defeating kinetic energy threats is an objective, not a threshold, FCS
requirement.

    Many Complementary Programs Are at Risk

FCS Information Network Depends on Complementary Programs

o  Mine protection technology, intended to protect manned ground vehicles
and occupants from mine blast, is still immature and has significant
challenges that include blast armor development, armor repair, and
structural and weight integration. Because of its immature status, the
program is considering alternatives for its development.

The acceptable resolution of at least some of these issues-such as those
involving the active protection system, lightweight hull and armor, and
mine protection-may be important enough that they represent "go/no go"
markers in the development of manned ground vehicles. For example, if the
active protection system technology and integration issues cannot be
acceptably resolved and its capabilities may be less than needed, it is
unclear if the FCS program will be able to complete the detailed designs
of the manned ground vehicles and meet the expectations for critical
design review.

To meet the program's goal to have manned ground vehicle prototypes
available in late fiscal year 2010 or early fiscal year 2011, their
fabrication would probably have to start well before design stability is
achieved. If technology and integration issues identified to date are not
resolved by that point, it is questionable whether the level of system
integration that may be available for the prototype designs and if their
demonstration will be able to yield acceptable results.

The FCS program may have to interoperate or integrate with as many as 170
programs, some of which are in development and many are currently fielded
programs. Many complementary programs are not being developed exclusively
for FCS and are outside the direct control of the FCS program. Because of
the complementary programs' importance to FCS, the Army closely monitors
how well those efforts will synchronize with the FCS program. Of all the
complementary programs, 52 are considered essential to meeting FCS key
performance parameters. However, many of these programs have technical or
funding problems and generally have uncertain futures.

We reported in June 2005 that two key systems of the FCS network, the
Joint Tactical Radio System (JTRS) and Warfighter Information
Network-Tactical (WIN-T), were struggling to meet ambitious user
requirements, steep technical challenges, and aggressive schedules, which
raised uncertainty about the ability of the FCS network to perform as
intended and threatened the schedule for fielding Future Force
capabilities. 6 We recommended that the Secretary of Defense establish
low-risk schedules for JTRS and WIN-T and synchronize the FCS schedule
with a demonstration of JTRS and WIN-T capabilities. DOD generally
concurred and indicated it has begun taking action to address our
recommendations. Since our report, JTRS has been undergoing a major
restructuring to reduce technical and programmatic risks. In addition,
WIN-T is being rebaselined to address the Army's recent shift in focus to
meet both near- and future-term requirements, as well as to better
synchronize with FCS. The results of the JTRS and WIN-T program
restructurings are not expected to be completed and approved until later
this year, however; preliminary indications are that the programs will
focus on delivering incremental capabilities to support the needs of FCS
and other users.

JTRS JTRS is a family of software-based radios that is to provide the high
capacity, high-speed information link to vehicles, weapons, aircraft, and
soldiers. The JTRS program to develop radios for ground vehicles and
helicopters-referred to as Cluster 1-began product development in June
2002 with an aggressive schedule, immature technologies, and lack of
clearly defined and stable requirements. The Army has not been able to
mature the technologies needed to provide radios that both generate
sufficient power as well as meet platform size and weight constraints. In
addition, the radio design is not sufficient to meet security requirements
for operating in an open network environment. These factors have
contributed to significant cost and schedule problems. In early 2005, the
Office of the Secretary of Defense directed the Army to stop work on
portions of the Cluster 1 development and have a newly established JTRS
Joint Program Executive Office 7 conduct an assessment of the program and
develop options for restructuring the program.

A second JTRS program-referred to as Cluster 5-to develop different
variants of small radios that will be carried by soldiers and be embedded
in several FCS core systems, also entered product development with
immature technologies and a lack of well-defined requirements. Since the

6

GAO, Defense Acquisitions: Resolving Development Risks in the Army's
Networked Communications Capabilities is Key to Fielding Future Force .
GAO-05-669. (Washington, D.C.: June 15, 2005).

7

Joint Program Executive Office was established in February 2005 in
response to the fiscal year 2004 National Defense Authorization Act which
directed DOD to strengthen the joint management of all the JTRS program
components.

Page 22 GAO-06-367 FCS Business Case

program began in 2004, it has faced significant technical challenges due
to the small size, weight, power, and large data processing requirements
for the radios. As a result, the Army recognized in 2005 that the Cluster
5 program was not sufficiently synchronized with the FCS program and it
began assessing the feasibility of accelerating the development of some of
the small form Cluster 5 radios. However, in light of the problems
encountered with the Cluster 1 program, DOD directed the JTRS Joint
Program Executive Office to conduct a broad assessment of all the JTRS
components and identify more well defined and executable increments for
Cluster 5.

In December 2005, DOD approved a preliminary plan for restructuring the
JTRS program, including Clusters 1 and 5. Details of the restructuring,
however, are still to be worked out and the new program is not expected to
be formally approved by DOD until late 2006. According to JTRS Joint
Program Executive Office officials, the proposed program will address many
of the concerns we raised in our July 2005 report and be structured to
deliver capabilities in increments rather than all at once. The first
increment is intended to support the FCS schedule. However, there are
still cost, schedule, and technical risks associated with the planned
delivery of increment one capabilities, and therefore it is unclear
whether the capabilities will be available in time for the first spin-out
of FCS capabilities to current forces in 2008.

WIN-T The WIN-T program is intended to provide an integrated
communications

network to connect Army units on the move with higher levels of

command and provide the Army's tactical extension to the Global

Information Grid, a separate, DOD-wide networked force. The WIN-T

program began with an aggressive acquisition schedule and entered

product development with only three of its 12 critical technologies close
to

full maturity. The program office expects that all 12 critical
technologies

demonstrated during a November 2005 developmental test/operational test

event will be assessed as close to fully mature. In August 2005, the

Department of the Army conducted a study which explored options for

better synchronizing three of its major system development efforts-

FCS, JTRS, and WIN-T. As a result of this study, the WIN-T program will be

rebaselined to meet emerging requirements. A new WIN-T capability

development document will support the rebaselining of the program and is

currently under review. A milestone B reexamination to rebaseline the

program is planned for July 2006, and a new date for the WIN-T production

decision will be established then.

Funding Issues Cloud Future of Other Complementary Programs

The restructuring of the JTRS and WIN-T programs and the success in
developing these capabilities could well be deciding factors in the
overall success of the FCS program. If JTRS and WIN-T do not work as
intended, there will not be sufficient battlefield information for the FCS
units to operate effectively. Because the network is so crucial to the
overall success of FCS, we have suggested that its development and
demonstration should precede major commitments to other elements of the
FCS program, particularly the manned ground vehicles. However, the Army
has admitted that the development of the network is several years behind
the development of other elements of the FCS program.

The future of other complementary programs is in doubt primarily because
of funding issues. The Compact Kinetic Energy Missile was to provide
superior lethality against current tanks, bunkers, buildings, and future
threat armor. The Joint Common Missile was to provide line-of-sight and
beyond-line-of-sight capabilities and could be employed in a
fire-and-forget mode or a precision attack mode. The Army has not yet
decided if it will fund the full development of the Compact Kinetic Energy
Missile. In December 2004, a DOD program budget decision deleted all
procurement funding for the Joint Common Missile. 8 The absence of these
systems could reduce the brigade combat teams' ability to fight at stand
off ranges, thereby reducing lethality and the ability to dictate the
terms of the engagement. The Mid-Range Munition is to provide
beyond-line-of-sight precision munitions for the mounted combat system,
but its development is unfunded after fiscal year 2007. Elimination of the
Mid-Range Munition would compromise the beyond-line-of-sight
capability------which is a FCS threshold operational requirement------as
well as the Army's ability to shape the battle space and dictate the terms
of the engagement. The Precision Guidance Kit is a technology for
projectiles that provides greater accuracy at extended ranges, but the
development of this technology is partially unfunded. If this technology
is not available for FCS, then long-range projectiles would be less
accurate, reducing their effectiveness and requiring additional rounds to
be fired at the threat. As a result, the brigade combat team may need to
carry additional munitions, an outcome that imposes a logistical and
transportability burden. The Army also concedes that there is no funding
to develop the following munitions needed to meet selected requirements:
Advanced Kinetic Energy munition,

8

In the fiscal year 2006 defense appropriation act, H.Report 109-359, page
372, Congress provided some funding to continue development of the Joint
Common Missile.

Page 24 GAO-06-367 FCS Business Case

  FCS Acquisition Strategy Will Demonstrate Design Maturity After Production
  Begins

Advance Multi-Purpose Munition, Javelin Block II missile, Loitering Attack
Missile, and non-lethal munitions.

Recognizing the multiple issues surrounding complementary programs, the
Army is reassessing its list of 52 essential programs. When that list is
finalized in the coming months, the Army will have to determine how to
replace any capabilities eliminated from the list. As with requirements,
the cumulative effects of changes in technologies and complementary
programs on overall FCS capabilities are important to measure. The Army's
inability to fund all essential complementary programs raises concerns
about the gap between requirements and resources.

The knowledge deficits for requirements and technologies have created
enormous challenges for devising an acquisition strategy that can
demonstrate the maturity of design and production processes. Even if
requirements setting and technology maturity proceed without incident, FCS
design and production maturity will still not be demonstrated until after
the production decision is made. Production is the most expensive phase in
which to resolve design or other problems. Several efforts within the FCS
program are facing significant problems that may eventually involve
reductions in promised capabilities and may lead to cost overruns and
schedule delays.

FCS Acquisition Strategy The Army's acquisition strategy for FCS does not
reflect a knowledgebased approach. Figure 4 shows how the Army's strategy
for acquiring

    Involves Concurrent

Development and Is Not FCS involves concurrent development, design reviews
that occur late, and other issues that are out of alignment with the
knowledge-based approach Knowledge-Based outlined in DOD policy.

  Figure 4: FCS Acquisition Compared with Commercial Best Practices' Approach

Ideally, the preliminary design review occurs at or near the start of
product development. Activities leading up to the preliminary design
review include, among others, translating system requirements into design
specifics. Doing so can help reveal key technical and engineering
challenges and can help determine if a mismatch exists between what the
customer wants and what the product developer can deliver. Scheduling the
preliminary design review early in product development is intended to help
stabilize cost, schedule, and performance expectations. The critical
design review ideally occurs midway into the product development phase.
The critical design review should confirm that the system design performs
as expected and is stable enough to build production-representative
prototypes for testing. The building of production-representative
prototypes helps decision makers confirm that the system can be produced
and manufactured within cost, schedule, and quality targets. According to
the knowledge-based approach, a high percentage of design drawings should
be completed and released to manufacturing at critical design review. The
period leading up to critical design review is referred to as system
integration, when individual components of a system are brought together,
and the period after the review is called system demonstration, when the
system as a whole demonstrates its reliability as well as its ability to
work in the intended environment.

The Army has scheduled the preliminary design review in fiscal year 2008,
about five years after the start of product development. The critical
design review is scheduled in fiscal year 2010, just two years after the
scheduled preliminary design review and the planned start of detailed
design. 9 This is not to suggest that the two design reviews for the FCS
could have been scheduled earlier but rather that commitments to
production are scheduled too soon afterward. The timing of the design
reviews is indicative of how late knowledge will be attained in the
program, assuming all goes according to plan. The critical design review
is scheduled just two years before the initial FCS production decision in
fiscal year 2012, leaving little time for product demonstration and
correction of any issues that are identified at that time. The Army is
planning to have prototypes of all FCS systems available for testing prior
to low-rate initial production. For example, manned ground vehicle
prototypes are expected to be available in late 2010 and early 2011 for
developmental and qualification testing. However, these prototypes are not
expected to be production-representative prototypes and may not be fully
integrated. Whereas the testing of fully integrated,
productionrepresentative prototypes demonstrate design maturity and their
fabrication can demonstrate production process maturity, neither of these
knowledge points will be attained until after the production decision is
made.

The 2008 preliminary design review and the 2010 critical design review are
culminating events; system-level preliminary design reviews and critical
design reviews will be conducted prior to those dates.

Page 27 GAO-06-367 FCS Business Case

The FCS program is thus susceptible to late-cycle churn, a condition that
we reported on in 2000. 10 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. Churn refers to the
additional-and unanticipated-time, money, and effort that must be invested
to overcome problems discovered through testing. Problems are 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 is proceeding with its plans to mitigate FCS risks using
modeling, simulation, emulation, and system integration laboratories. This
approach is a necessary aspect of the Army acquisition strategy and is
designed to reduce the dependence on late testing to gain valuable
insights about many aspects of FCS development, including design progress.
However, on a first-of-a-kind system-like FCS-that represents a radical
departure from current systems and warfighting concepts, actual testing of
all the components integrated together is the final proof that the FCS
system of systems concept works both as predicted and as needed.

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

Page 28 GAO-06-367 FCS Business Case

  As FCS's Higher Costs Are Recognized, Funding Availability Becomes a Greater
  Challenge

The total cost for the FCS program, now estimated at $160.7 billion
(thenyear dollars), has climbed 76 percent from the Army's first estimate.
Because uncertainties remain regarding FCS's system-level requirements and
the Army faces significant challenges in technology and design maturity,
we believe the Army's latest cost estimate still lacks a firm knowledge
base. Furthermore, this latest estimate does not include complementary
programs that are essential for FCS to perform as intended, or the
necessary funding for spin-outs. The Army has taken some steps to help
manage the growing cost of FCS, including establishing cost ceilings or
targets for development and production. However, program officials told us
that setting cost limits may result in accepting lower capabilities. As
FCS's higher costs are recognized, it remains unclear whether the Army
will have the ability to fully fund the planned annual procurement costs
for the FCS current program of record. FCS affordability depends on the
accuracy of the cost estimate, the overall level of development and
procurement funding available to the Army, and the level of competing
demands.

    FCS Costs Have Increased as Army Attains More Information, but Firm
    Knowledge Base Still Lacking

At the start of product development, FCS program officials estimated that
the program would require about $20 billion in then-year dollars for
research, development, testing, and evaluation and about $72 billion to
procure the FCS systems to equip 15 brigade combat teams. At that time,
program officials could only derive the cost estimate on the basis of what
they knew then-requirements were still undefined and technologies were
immature. The total FCS program is now expected to cost $160.7 billion in
then-year dollars, a 76 percent increase. Table 2 summarizes the growth of
the FCS cost estimate.

Table 2: Comparison of Original Cost Estimate and Current Cost Estimate
for FCS Program (in billions of then-year dollars)

     Original Revised estimate Percentage estimate (as of 1/2006) increase

Research, development, testing, and evaluation $19.6 $30.5 56%

                          Procurement $71.8$130.2 81%

                             Total $91.4 $160.7 76%

Source: Army (data); GAO (analysis and presentation).

According to the Army, the current cost estimate is more realistic, better
informed, and based on a more reasonable schedule. The estimate accounts
for the restructure of the FCS program and its increased scope,

Page 29 GAO-06-367 FCS Business Case

the four-year extension to the product development schedule, the
reintroduction of four systems that had been previously deferred, and the
addition of a spin-out concept whereby mature FCS capabilities would be
provided, as they become available, to current Army forces. Under the
original estimate, the program planned to acquire enough FCS equipment for
an average of two brigade combat teams per year and to equip all 15 by
fiscal year 2020. Army officials told us that the current cost estimate
incorporates the lengthened development schedule and a more realistic
procurement plan under which the program will procure 1.5 brigade combat
teams per year (versus two per year in the original cost estimate),
reaching 15 complete brigade combat teams by fiscal year 2025. This cost
estimate has also benefited from progress made in defining the FCS system
of systems requirements.

Figure 5 compares the funding profiles for the original program and for
the latest restructured program.

Figure 5: Comparison of Original Cost Estimate and Current Cost Estimate
for FCS Program between Fiscal Years 2003 and 2026 (in millions of
then-year dollars)

Dollars in millions 16,000

14,000

                                      2005

                                 2007 2009 2011

3

                                       3

                                      2015

                                2017 2019 2021 3

                                      2025

200

                                      201

                                      202

      Year

Original estimate Current estimate Source: U.S. Army (data); GAO
(analysisand presentation).

The current FCS funding profile is lower than the original through fiscal
year 2013, but is substantially higher than the original after fiscal year
2013. Stretching out FCS development by four years freed up about $9
billion in funding through fiscal year 2011 for allocation to other Army
initiatives. Originally, FCS annual funding was not to exceed $10 billion
in any one year. Now, the cost estimate is expected to exceed $10 billion
in each of nine years. While it is a more accurate reflection of program
costs than the original estimate, the latest estimate is still based on a
low level of knowledge about whether FCS will work as intended. Also, the
latest cost estimate has not yet been independently validated, as called
for by DOD's acquisition policy. The Cost Analysis Improvement Group will
not provide its updated independent estimate until spring 2006, for the
planned Defense Acquisition Board review of the FCS program in May 2006.

The latest cost estimate does not include all the costs that will be
needed to field FCS capabilities. For instance, the costs of the 52
essential complementary programs are separate, and some of those costs
could be substantial. For example, the costs of the Joint Tactical Radio
System Clusters 1 and 5 programs were expected to be about $32.6 billion
(thenyear dollars). 11 Some complementary programs, such as the Mid-Range
Munition and Javelin Block II, are currently not funded for their full
development. These and other unfunded programs would have to compete for
already tight funding. Furthermore, program officials told us the
procurement of the spin-outs from the FCS program to current Army forces
is not yet entirely funded. Procuring the FCS items expected to be spun
out to current forces is expected to cost about $19 billion, and the
needed installation kits may add another $4 billion. Adding these items to
the FCS cost estimate brings the total required investment from the Army
to the $200 billion range.

The Army is planning to make substantial financial investments in the FCS
program before key knowledge is gained on requirements, technologies,
system designs, and system performance. Table 3 shows the annual and
cumulative funding and the level of knowledge to be attained each fiscal
year.

The operational assessment of the Joint Tactical Radio System
functionality has resulted in an ongoing program restructure, which could
have an impact on the program's costs.

Page 31 GAO-06-367 FCS Business Case

 Table 3: Annual and Cumulative FCS Funding and Planned Events and Achievements

      Annual research,

Percentage development, testing, Fiscal of funding and evaluation funding
year spent to date (in millions of dollars)

            Cumulative research, development, testing, and evaluation funding

      (in millions of dollars) Planned events and achievements

               2003 0.5 158.9 158.9 Start of product development

                 2004 5.9 1,637.3 1,796.2 Program restructured

2005 15.5 2,929.9 4,726.1 System of Systems Functional Review; system of
systems requirements stabilized; cost estimate updated

2006 26.7 3,398.4 8,124.5 Initial preliminary design review; initial
systemlevel requirements

                           2007 38.7 3,669.4 11,793.9

2008 50.7 3,655.6 15,449.5 Preliminary design review; most technologies
reach TRL 6; initial critical design review; final system-level
requirements

            2009 61.9 3,419.2 18,868.7 All technologies reach TRL 6

2010 72.6 3,256.0 22,124.7 Critical design review; limited user test 2;
some prototypes available

2011 81.82,799.9 24,924.6 Design readiness review; all system prototypes
available

2012 88.2 1,952.326,876.9 Technologies reach full TRL 7 maturity; initial
production decision; limited user test 3; initial system of systems
demonstration

                           2013 92.9 1,410.8 28,287.7

2014 96.7 1,167.329,455 Limited user test 4; full system of systems
demonstration; fielding start brigade combat teams

            2015 99.6 901.7 30,356.7 Initial operational capability

2016 100 108.330,465 Initial operational test and evaluation; full-rate
production decision

Full operational capability

Source: U.S. Army (data); GAO (analyst and presentation)

Through fiscal year 2006, about $8 billion will have been spent on FCS
development efforts. However, many pre-development activities, such as
requirements definition and technology development, were slated for this
period. About one-half of FCS's development funding, or about $15 billion,
will be spent by the time most critical technologies are mature to TRL 6
and the preliminary design review is conducted. About $22 billion, or over
70 percent of the total funding, will be spent by the expected time of the
critical design review. Further, about 88 percent will have been spent
before an initial demonstration of FCS capabilities is accomplished.

    Army Has Taken Steps to Control FCS Program Costs

The Army has taken several steps to help manage the growing cost of FCS.
Program officials told us they have budgeted for development risk by
building a total of $5 billion into the FCS cost estimates to cover risk.
Also, program officials have said that they will not exceed the $20.9
billion cost ceiling of the lead systems integrator's development
contract, but may have to modify, reduce, or delete FCS requirements to
stay within this target. For example, the Army has prioritized each of the
FCS requirements. If one or more of the highest priority requirements
ultimately cost more to develop than anticipated, the Army plans to
modify, reduce, or delete a lower priority requirement. In addition to the
ceiling on FCS development costs, the Army says it will focus on reducing
the average unit production cost of the FCS brigade combat teams. To do
this, the Army is evaluating and improving producibility of designs early
in the program and has given the contractor incentives to reduce the unit
costs.

The Army monitors the FCS program's development progress through its
earned value management system. This is a tool by which the program
manager can monitor the technical, schedule, and cost parameters of the
contract. As the program proceeds, the Army and the lead systems
integrator can determine the status of each portion and can take
corrective actions as problems occur. While the earned value system
currently shows that the program slightly exceeds schedule expectations
and is below estimated cost against the restructured baseline, program
officials said it is too early to broadly interpret these data in light of
the recent rebaseline of the program. At this point, the Army believes
that the data are not yet mature enough to develop trends and make
predictions.

In addition, the Deputy Secretary of Defense, in early fiscal year 2006,
asked each military service to provide additional adjustments to their
projected budgets. The Army, in particular, was asked to decrease its
budget by $11.7 billion from fiscal year 2007 to 2011. At this point, the
FCS funding profile has not been affected.

    Future Funding May Not Be Sufficient to Cover Projected FCS Procurement
    Costs

The affordability of the FCS program depends on several key assumptions.
First, the program must proceed without exceeding its currently projected
costs. Second, the Army's annual procurement budget is expected to grow,
from about $11 billion (then-year dollars) in fiscal year 2006 to at least
$20 billion in future years. The Army's projected budget also includes $5
billion per year from fiscal year 2007 through 2011 for its initiative to
convert current Army forces to modular units. The Army is counting on its
modularity initiative for brigade combat teams to be completed by fiscal
year 2014, just as FCS procurement dollars begin to ramp up. However,
recent GAO work 12 has indicated that modularity efforts to date have
exceeded original estimates and remain likely to further exceed current
cost estimates. Army officials further told us that they expect to rely on
supplemental funding for the war on terrorism and Operation Iraqi Freedom
for the duration of those efforts plus two additional years. Within that
supplemental funding, about $4 billion per year is projected to be needed
to refurbish Army equipment used in Iraq and Afghanistan. The Army also
assumes that (1) it will realize savings of about $5 billion per year from
fiscal year 2005 through 2011 from business process engineering and (2)
Congress will continue to provide additional annual funding of about $3
billion for higher Army troop levels.

Figure 6 compares the projected FCS budget with the funds the Army
projects for its total procurement budget.

GAO, Force Structure: Actions Needed to Improve Estimates and Oversight of
Costs for Transforming Army to a Modular Force. GAO-05-926. (Washington,
D.C.: September 29, 2005).

Page 34 GAO-06-367 FCS Business Case

Figure 6: Comparison of FCS Budget with Total Army Procurement Budget (in
billions of then-year dollars)

Dollar in billions 22

20

18

16

14

12

10

8

6

4

2

      0 2006 2007 2008 2009 2010 2011 2012 20132014 2015 2016 2017 2018 2019
      2020 2021 2022 20232024 2025 Year

FCS

Army Source: U.S. Army (data); GAO (analysisand presentation).

The Army's annual procurement budget-not including funds specifically
allocated for the modularity initiative-is expected to grow from about $11
billion in fiscal year 2006 to at least $20 billion by fiscal year 2011.
Even if this optimistic projection comes to pass, FCS annual procurement
costs will dominate the Army procurement funding. If the Army budget
remains at fiscal year 2011 levels, FCS procurement will represent about
60-70 percent of Army procurement from fiscal years 2014 to 2022. With the
remainder, the Army will have to address current force upgrades, including
spin-outs from FCS, the procurement of FCS complementary programs,
aviation procurement, trucks, ammunition, and other equipment. Further,
FCS will have to compete for funding with other Army "big-ticket" items,
such as missile defense systems and the future heavy lift helicopter.

The large annual procurement costs for FCS are expected to begin in fiscal
year 2012, which is beyond the current Future Years Defense Plan period
(fiscal years 2006-2011). This situation is typically called a funding bow
wave. The term bow wave is used to describe a requirement for more funds
just beyond the years covered in the current defense plan that are subject
to funding constraints. As it prepares the next defense plan, the

                                  Conclusions

Army will face the challenge of allocating sufficient funding to meet the
increasing needs for FCS procurement in fiscal years 2012 and 2013.
According to an Army official, if all the needed funding cannot be
identified, the Army will consider reducing the FCS procurement rate or
delaying or reducing items to be spun out to current Army forces. However,
reducing the procurement rate would increase the FCS unit costs and extend
the time needed to deploy FCS-equipped brigade combat teams.

The critical role played by U.S. ground combat forces is underscored today
in Operation Iraqi Freedom and the global war of terrorism. That the Army
should ensure its forces are well equipped with the capabilities they will
need in the coming years is unquestioned. Moreover, the top-level goals
the Army has set for its future force seem inarguable: to be as lethal and
survivable as the current force, but significantly more sustainable and
mobile. However, the Army's approach to meeting these needs-embodied in
the FCS and complementary systems-does raise questions.

On the one hand, the FCS is the result of the Army leadership's taking a
hard look at how it wants its forces to fight in the future. Army
leadership has had the courage to break with tradition on FCS; it would
have likely been much easier to win support for successor vehicles to the
Abrams and Bradley. Perhaps the most compelling aspect of the FCS solution
is the fact that the Army defined the larger context within which it wants
its new assets and capabilities to work, including command and
organizational changes. This holistic approach will facilitate designing
individual systems to operate together in a way that has not been done in
the past. In this sense, FCS is being designed to be much more than the
sum of its individual parts.

On the other hand, FCS does not present a good business case for an
acquisition program. It is necessary that a major new investment like FCS
have a compelling, well-thought out concept, but this alone is not
sufficient. FCS began product development prematurely in 2003, and today
is a long way from having the level of knowledge it should have had before
committing resources to a new product development effort. The elements of
a sound business case-firm requirements, mature technologies, a
knowledge-based acquisition strategy, a realistic cost estimate, and
sufficient funding-are not present. FCS has all the indicators for risks
that would be difficult to accept for any single system. They are even
more daunting in the case of FCS not only because of their multiplicity,
but because FCS represents a new concept of operations that is predicated
on technological breakthroughs. Thus, technical problems, which accompany
immaturity, not only pose traditional risks to cost, schedule, and
performance; they pose risks to the new fighting concepts envisioned by
the Army.

The Army sees the foregoing as risk-averse thinking. The Army does not see
immature technologies as an unacceptable risk, but as a "just in time"
approach that is necessary to guard against technological obsolescence.
The Army believes FCS technologies will mature predictably when needed and
that they must have much latitude to make trade-offs across systems in
case they do not mature. Similarly, the Army has set cost limitations for
FCS and is prepared to make trade-offs in capability to offset future cost
growth. Also, the Army is confident that advances in modeling and
simulation reduce the reliance on physical testing to demonstrate
performance.

It is possible that the Army's strategy for acquiring FCS could succeed as
planned. But counting on it would require suspending credence in the
lessons learned on other programs as well as the best practices of
successful programs. Committing to the strategy also means setting aside
DOD's acquisition policies-which espouse an evolutionary, knowledgebased
approach-for an entire generation of Army acquisitions. The Army has made
important progress on setting FCS system of systems requirements and
making key decisions, such as vehicle weights. But its progress thus far
seems to have done more to confirm risk than to have refuted it; setting
system-level requirements and maturing technologies have proven difficult
and are taking longer than planned.

In making decisions to commit additional resources to acquiring the
capabilities represented by FCS, DOD must recognize the immaturity of the
program and the amount of discovery that lies ahead. It is not a certainty
that FCS will work and enable the concept of operations the Army
envisions. A full commitment to the Army's strategy for acquiring FCS is
not yet warranted because the Army has not demonstrated sufficient
knowledge to provide confidence that it can deliver a fully capable FCS
within projected costs and time frames. Based on the Army's plans, there
should be sufficient progress on system-level requirements definition and
technology development by the time of its preliminary design review in
2008 to realistically assess whether the program's goals are achievable
and at what cost. As DOD proceeds with its decisions, it must preserve its
ability to change course on acquiring FCS capabilities to guard against a
situation in which FCS will have to be acquired at any cost. It must also
be able to hold the Army accountable for delivering FCS within budgeted
resources. In this vein, options are available to frame FCS capabilities
around a business case that comports with acquisition policies and best
practices and to minimize risk within the current acquisition strategy.
Alternatives to the current FCS acquisition strategy must also be kept
viable in the event that desired capabilities prove unattainable.

We recommend that the Secretary of Defense limit DOD's commitment to

  Recommendations for

the FCS product development phase and eventual production until a
Executive Action sound business case that is consistent with DOD
acquisition policy and best practices can be clearly demonstrated.

We also recommend that the Secretary of Defense lay the groundwork for the
Army's development of a sound FCS business case by tasking the spring 2006
Defense Acquisition Board to do the following:

     o Revaluate the FCS business case-including requirements, technologies,
       complementary programs, acquisition strategy, cost, and funding
       availability-in light of its own acquisition policies. In its
       reevaluation, the board should (1) assess both the program's prospects
       for success and the consequences of not delivering desired capability
       within budgeted resources and (2) ensure that the Army has a
       disciplined way to measure and assess the cumulative effects of
       individual requirements, technology, design, and cost changes on the
       primary FCS characteristics of lethality, survivability,
       responsiveness, and sustainability.
     o If the business case for FCS is found not to be executable, determine
       whether investments in FCS design- and production-related activities
       should be curbed until system-level requirements are firm and
       technologies are mature.
          * If the deficiencies in the FCS business case are judged to be
            recoverable, establish the incremental markers that are needed to
            demonstrate that FCS is proceeding on a knowledge-based approach
            and to hold the Army accountable, through periodic reporting or
            other means, for achieving those markers. The markers should
            include, but not be limited to
               o the schedules for all critical technologies to realistically
                 progress through TRL 7;
               o waypoints and criteria for reaching a set of system-level
                 requirements that are both technically feasible and
                 affordable;

  Matters for Congressional Consideration

     o the schedule and funding availability for developing essential
       complementary programs;
     o waypoints and criteria to be used to lead up to and complete the
       preliminary and critical design reviews;
     o waypoints and criteria to be used to lead up to and complete testing
       of fully integrated prototypes of all FCS systems, including the
       network; and
     o waypoints and criteria to be used to demonstrate that key production
       processes are in statistical control.

We recommend that the Secretary of Defense reassess the FCS cost estimate
and funding availability based on the independent cost estimate and any
program changes to improve its business case.

Finally, we recommend that the Secretary of Defense establish a milestone
review by the Defense Acquisition Board following the Army's preliminary
design review scheduled for 2008. This should be a go/no-go review of the
FCS program that is based on (1) the program's ability to demonstrate
whether it is meeting the knowledge markers outlined above at times
consistent with DOD policy and best practices and (2) whether the funds
can still be made available to afford its costs.

Based on its response to our report, it does not appear that DOD plans to
assess the FCS business case against best practices or its own policies.
Nor has DOD agreed to hold a go/no-go milestone review in 2008 based on
the preliminary design review. Congress will likely be asked to approve
fiscal years 2008 and 2009 funding requests before the FCS business case
is adequately demonstrated. In light of DOD's response, the Congress
should consider directing the Secretary of Defense to:

     o Report on the results of the May 2006 Defense Acquisition Board's
       review of the FCS program business case in the areas of requirements,
       technologies, acquisition strategy, cost, and funding.
     o Direct DOD to conduct and report the results of a milestone review in
       2008, following the preliminary design review, that will be a go/no-go
       review of the FCS program that is based on its demonstration of a
       sound business case.

The Congress should also consider restricting annual appropriations for
fiscal years 2008 and 2009 for the FCS program until definitive progress
in establishing a sound business case is demonstrated in terms of firm

                       Agency Comments and Our Evaluation

requirements, mature technologies, a knowledge-based acquisition strategy,
a realistic cost estimate, and sufficient funding. Importantly, the Army
must provide sufficient evidence that FCS will work.

DOD concurred with the intent of our recommendations but did not agree to
limit its commitment to the FCS program or to take any action beyond what
it had already planned to do. DOD stated it is committed to the Army's
transformation and that effort, and in particular the FCS program,
requires a disciplined, yet agile, acquisition construct. DOD added that
the Defense Acquisition Executive has determined that the FCS program is
based on a viable acquisition strategy. DOD stated that it would
reevaluate the FCS acquisition strategy and reassess FCS cost estimates
and funding in the spring 2006 Defense Acquisition Board review. DOD also
noted that a Defense Acquisition Board review would be held for the
timeframe (2008) of the FCS preliminary design review, but refrained from
committing to making it a milestone decision review.

DOD's response to our draft report did not specifically address our
findings on the FCS program's lack of a sound business case. DOD was also
not specific about what criteria or standards for knowledge it would use
in making its assessments, but referred to the incremental markers
contained in the FCS acquisition strategy and system engineering plan. It
is important that these markers reflect standards for knowledge that are
consistent with best practices and DOD policy. Thus far, the FCS program
has been judged by its own markers. As we have pointed out in this report,
these markers have allowed FCS to be judged as acceptable despite its
falling far short of the markers that represent best practices and DOD
acquisition policy. For example, the low state of technology maturity has
not prevented DOD from concluding that the FCS strategy is viable. Using
the program's markers as a basis for future reviews raises the question of
whether FCS will continue to be held to a lower standard than DOD policy.
Over time, as the program's markers are adjusted in light of actual
performance and more money is invested, it will become increasingly
difficult for the Army and DOD to conclude that program progress is
anything other than acceptable.

Regarding a commitment to a milestone review in 2008, we note that, in
recognition of the fact that the FCS was allowed to proceed into Systems
Development and Demonstration prematurely, DOD had directed a full
milestone review update be held in November 2004. However, that review has
not yet occurred and it now appears that it will not occur. Thus, there is
no commitment by DOD to review the FCS business case (including all
elements in addition to the acquisition strategy), culminating in a
go/no-go decision in 2008 based on the preliminary design review. The
increased responsibility of making a declarative decision adds a higher
level of discipline and accountability than a review implies. We maintain
our position that such a decision is warranted.

It is important to note that Congress will continue to be asked to make
funding commitments in advance of program events. Specifically, the budget
request for fiscal year 2008, which will support the preliminary design
review, will be presented to Congress for approval in January 2007.
Conceivably, the request for the fiscal year 2009 budget, which will be
presented in January 2008, will also precede the preliminary design
review. Congress should safeguard itself against a situation in which
budget decisions could preclude its ability to make adjustments to FCS as
warranted by actual demonstrated performance against the business case.
For example, the status of the FCS business case based on the knowledge
demonstrated in the 2008 preliminary design review should be used to guide
ensuing program activities and funding commitments. Accordingly, we have
raised these issues as matters for congressional consideration.

We also received technical comments from DOD which have been addressed in
the report, as appropriate.

We are sending copies of this report to the Secretary of Defense; the
Secretary of the Army; and the Director, Office of Management and Budget.
Copies will also be made available to others on request. Please contact me
on (202) 512-4841 if you or your staff has any questions concerning this
report. Contact points for our Offices of Congressional Relations and
Public Affairs may be found on the last page of this report. Other
contributors to this report were Assistant Director William R. Graveline,
Robert L. Ackley, Lily J. Chin, Noah B. Bleicher, Marcus C. Ferguson,
Michael J. Hesse, Guisseli Reyes, Lisa R. Simon, John P. Swain, and Carrie
R. Wilson.

Paul L. Francis Director Acquisition and Sourcing Management

List of Committees:

The Honorable John W. 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 L. 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: Scope and Methodology

To develop the information on the Future Combat System program's progress
toward meeting established goals, the contribution of critical
technologies and complementary systems, and the estimates of cost and
affordability, we interviewed officials of the Office of the Under
Secretary of Defense (Acquisition, Technology, and Logistics); the Army
G-8; the Office of the Under Secretary of Defense (Comptroller); the
Secretary of Defense's Cost Analysis Improvement Group; the Director of
Operational Test and Evaluation; 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 Future Combat System (Brigade Combat Team); the Future Combat
System Lead Systems Integrator; and LSI One Team contractors. We reviewed,
among other documents, the Future Combat System's 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 System of Systems
Functional Review, In-Process Reviews, Board of Directors Reviews, and
multiple system demonstrations. 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 report with officials from the
Army and the Secretary of Defense, and made several changes as a result.
We performed our review from June 2005 to March 2006 in accordance with
generally accepted auditing standards.

Appendix II: Comments from the Department of Defense

Appendix II: Comments from the Department of Defense

Appendix II: Comments from the Department of Defense

Appendix III: Critical Technologies' Current Status and Projections for Reaching
Technology Readiness Level 6 (TRL 6)

                                                              TRL       TRL 6 
FCS Critical Technologies and Associated Key           Ratings Projections 
Performance Parameters                                         
Network     Software programmable radio                        
ready                                                          
                1 JTRS Cluster 1                                5        2007 
                2 JTRS Cluster 5                                5        2007 
                3 WIN-T                                         5        2007 
             Interface and information exchange                   
              4 Army, joint, multinational Interface            4        2008 
              5 WIN-T strategic communication                   4        2008 
Networked    Security systems and algorithms                   
battle     6 Cross domain guarding solution                  4        2008 
command                                                        
                7 Intrusion detection-Internet Protocol         4        2008 
                  Network                                         
                8 Intrusion detection-Waveform                  4        2008 
               9 Mobile ad hoc networking protocols             5        2007 
              10 Quality of service algorithms                  5        2007 
              11 Unmanned systems relay                         5        2006 

       Wideband Waveforms                                                     
12                                           Wideband waveform-JTRS 5 2007 
13                         Wideband waveform-Soldier Radio Waveform 4 2007 
14  Advanced man-machine interfaces 6 Not applicable                       
15  Multi-spectral sensors and seekers 6 Not applicable                    
16  Decision aids/intelligent agents 6 Not applicable                      

Combat identification
          17 Air (rotary wing/Unmanned Aerial Vehicle)-to-ground      6        Not 
                                                                        applicable 
          18 Air (fixed wing)-to-ground (interim/robust             Not        Not 
             solutions)                                           rated applicable 
          19 Ground-to-air                                          Not        Not 
                                                                  rated applicable 
          20 Ground-to-ground (mounted)                               6        Not 
                                                                        applicable 
          21 Ground-to-soldier                                      Not        Not 
                                                                  rated applicable 
          22 Rapid battlespace deconfliction                          5       2008 
             Sensor/data fusion and data compression algorithms         
          23 Distributed fusion management                            4       2007 
          24 Level 1 fusion engine                                    6        Not 
                                                                        applicable 
          25 Data compression algorithms                              6        Not 
                                                                        applicable 
Networked 26 Dynamic sensor-shooter pairing algorithms and fire       6        Not 
             control                                                    applicable 
lethality    Line-of-Sight/Beyond-Line-of-Sight/Non-Line-of-Sight       
             Precision Munitions Terminal Guidance                      
          27 Precision Guided Mortar Munitions precision              5       2007 
             munitions,                                                 
             terminal guidance                                          

Appendix III: Critical Technologies' Current Status and Projections for
Reaching Technology Readiness Level 6 (TRL 6)

                                                             TRL        TRL 6 
FCS Critical Technologies and Associated Key          Ratings  Projections 
Performance Parameters                                        
                      28 Mid-Range-Munitions precision         5         2007 
                         munitions, terminal guidance            
                      29 Excalibur precision                   6          Not 
                         munitions, terminal guidance              applicable 
                      30 Non-Line-of-Sight Launch              6          Not 
                         System, terminal guidance                 applicable 
           Aided/automatic target recognition                    
                         Aided target recognition for                         
                      31 reconnaissance, surveillance,         5         2007
                         and                                     
                   target acquisition                            
                         Non-Line-of-Sight Launch                         Not 
                      32 System aided target                   6   applicable 
                         recognition for                         
seekers                                                       
                    33 Recoil management and                   6          Not 
                       lightweight components                      applicable 
                    34 Distributed collaboration of            5         2006 
                       manned/unmanned platforms                 
                    35 Rapid battle damage assessment  Not rated          Not 
                                                                   applicable 
Transportability    High-power                                
                       density/fuel-efficient                    
                       propulsion                                
                      36 High-power density engine             5         2007 
                      37 Fuel-efficient                        6          Not 
                         hybrid-electric engine                    applicable 
Sustainability/ 38  Embedded predictive logistics           5         2009 
                       sensors and algorithms                    
reliability     39  Water generation and            Not rated          Not 
                       purification                                applicable 
Training        40  Computer generated forces               6          Not 
                                                                   applicable 
                   41  Tactical engagement simulation          4         2008 
Survivability       Active Protection System                  
                      42 Active Protection System              5         2008 
                      43 Threat Warning System               4-5         2009 
                    44 Signature management                  5-6         2006 
                    45 Lightweight hull and vehicle            5         2008 
                       armor                                     
                    46 Health monitoring and casualty          6          Not 
                       care interventions                          applicable 
                    47 Power distribution and control          5         2006 
             Advanced countermine technology                     
                    48 Mine detection                          6          Not 
                                                                   applicable 
                    49 Mine neutralization                     6          Not 
                                                                   applicable 
                    50 Efficient resource allocation           6          Not 
                                                                   applicable 
                    51 Protection                              4         2008 
                    52 High-density packaged power             5         2008 
       Class 1 Unmanned Aerial Vehicle propulsion                
                       technology                                
                      53 Ducted fan                            4         2006 
                      54 Lightweight heavy fuel engine         4         2007 

Source: Technology Readiness Assessment Update, Office of the Deputy
Assistant Secretary of the Army for Research and Technology, April 2005
(data); GAO (analysis and presentation).

Page 48 GAO-06-367 FCS Business Case

                    Appendix IV: Technology Readiness Levels

Hardware and Demonstration Technology Readiness Level Description Software
Environment

    1. Basic principles observed and Lowest level of technology readiness.
        None (paper studies and None
    2. reported Scientific research begins to be analysis) translated into
        applied research and development. Examples might include paper
        studies of a technology's basic properties
    1. Technology concept and/or Invention begins. Once basic principles
        None (paper studies and None
    2. application formulated are observed, practical applications can
        analysis) be invented. The application is speculative and there is no
        proof or detailed analysis to support the assumption. Examples are
        still limited to paper studies.
1. Analytical and experimental critical function and/or characteristic
       proof of concept

Active research and development is initiated. This includes analytical
studies

and laboratory studies to physically validate analytical predictions of
separate elements of the technology. Examples include components that are
not yet integrated or representative.

Analytical studies and Lab demonstration of non-scale individual
components (pieces of subsystem).

4. Component and/or breadboard. Validation in laboratory environment Basic
technological components are integrated to establish that the pieces will
work together. This is relatively "low fidelity" compared to the eventual
system. Examples include integration of "ad hoc" hardware in a laboratory.

Low-fidelity breadboard. Lab Integration of non-scale components to show
pieces will work together. Not fully functional or form or fit but
representative of technically feasible approach suitable for flight
articles.

       5. Component and/or breadboard validation in relevant environment

Fidelity of breadboard technology increases significantly. The basic
technological components are integrated with reasonably realistic
supporting elements so that the technology can be tested in a simulated
environment. Examples include "high fidelity" laboratory Integration of
components.

High-fidelity breadboard. Functionally equivalent but not necessarily form
and/or fit (size, weight, materials, etc.). Should be approaching
appropriate scale. May include integration of several components with
reasonably realistic support elements/subsystems to demonstrate
functionality.

Lab demonstrating functionality but not form and fit. May include flight
demonstrating breadboard in surrogate aircraft. Technology ready for
detailed design studies.

6. System/subsystem model or prototype demonstration in a relevant
environment Representative model or prototype system, which is well beyond
the breadboard tested for TRL 5, is tested in a relevant environment.
Represents a major step up in a technology's demonstrated readiness.
Examples include testing a prototype in a highfidelity laboratory
environment or in simulated operational environment.

Prototype-Should be very close to form, fit, and function. Probably
includes the integration of many new components and realistic supporting
elements/subsystems if needed to demonstrate full functionality of the
subsystem.

High-fidelity lab demonstration or limited/restricted flight demonstration
for a relevant environment. Integration of technology is well defined.

                    Appendix IV: Technology Readiness Levels

                                      Hardware and           Demonstration    
Technology       Description       Software               Environment      
Readiness Level                                           
7. System        Prototype near or Prototype. Should be   Flight           
prototype        at planned        form, fit, and         demonstration in 
demonstration in operational       function integrated    representative   
an operational   system.           with other key         operational      
environment      Represents a      supporting             environment such 
                    major step up     elements/subsystems to as flying test   
                    from TRL 6,       demonstrate full       bed or           
                    requiring the     functionality of       demonstrator     
                    demonstration of  subsystem.             aircraft.        
                    an actual system                         Technology is    
                    prototype in an                          well             
                    operational                              substantiated    
                    environment, such                        with test data.  
                    as in an                                 
                    aircraft,                                
                    vehicle, or                              
                    space. Examples                          
                    include testing                          
                    the prototype in                         
                    a test bed                               
                    aircraft.                                

8. Actual system  Technology has been    Flight-qualified    Developmental 
completed and     proven to work in      hardware                 test and 
"flight           its final form and                         evaluation in 
qualified"        under expected                                the actual 
through test and                                          
demonstration     conditions. In almost                        system      
                     all cases, this TRL                       application    
                     represents the end of                   
                     true system                             
                     development. Examples                   
                     include                                 
                     developmental test and                  
                     evaluation of                           
                     the system in its                       
                     intended weapon                         
                     system to determine if                  
                     it meets design                         
                     specifications.                         
9. Actual system  Actual application of  Actual system in Operational test 
"flight proven"   the technology in      final form             and        
through           its final form and                         evaluation in 
successful        under mission                                operational 
mission                                                   
operations        conditions, such as                         mission      
                     those encountered                          conditions    
                     in operational test                     
                     and evaluation. In                      
                     almost all cases, this                  
                     is the end of the                       
                     last "bug fixing"                       
                     aspects of true system                  
                     development. Examples                   
                     include using                           
                     the system under                        
                     operational mission                     
                     conditions.                             

 Source: GAO and its analysis of National Aeronautics and Space Administration
                                     data.

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