Defense Acquisitions: Actions Needed to Get Better Results on	 
Weapons Systems Investments (05-APR-06, GAO-06-585T).		 
                                                                 
In the past 5 years, DOD has doubled its planned investments in  
weapons systems, but this huge increase has not been accompanied 
by more stability, better outcomes, or more buying power for the 
acquisition dollar. Rather than showing appreciable improvement, 
programs are experiencing recurring problems with cost overruns, 
missed deadlines, and performance shortfalls. GAO was asked to	 
testify on ways to obtain a better return on DOD's weapons	 
systems investments. This testimony identifies the following	 
steps as needed to provide a better foundation for executing	 
weapon programs: (1) developing a DOD-wide investment strategy	 
that prioritizes programs based on realistic and credible	 
threat-based customer needs for today and tomorrow, (2) enforcing
existing policies on individual acquisitions and adhering to	 
practices that assure new programs are executable, and (3) making
it clear who is responsible for what and holding people 	 
accountable when these responsibilities are not fulfilled. Past  
GAO reports have made similar recommendations.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-585T					        
    ACCNO:   A50900						        
  TITLE:     Defense Acquisitions: Actions Needed to Get Better       
Results on Weapons Systems Investments				 
     DATE:   04/05/2006 
  SUBJECT:   Accountability					 
	     Cost analysis					 
	     Cost overruns					 
	     Defense procurement				 
	     Performance measures				 
	     Procurement planning				 
	     Procurement practices				 
	     Schedule slippages 				 
	     Weapons research and development			 
	     Weapons systems					 
	     Policies and procedures				 
	     Timeliness 					 

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GAO-06-585T

     

     * A Mandate for Change
          * Dollars Available for Weapons Will Face Serious Budget Pre
          * Programs Are Seeking Larger Budgets
     * Problematic Acquisitions Continue to Reduce DOD's Buying Pow
     * Underlying Causes of Acquisition Problems
     * Solutions
          * Buy the Right Thing: Develop and Implement an Investment Str
          * Buy the Right Way: Ensure Individual Programs Are Executable
          * Hold People Accountable
     * Scope and Methodology
     * 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

Testimony Before the Armed Services Committee, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 10:00 a.m. EDT

Wednesday, April 5, 2006

DEFENSE ACQUISITIONS

Actions Needed to Get Better Results on Weapons Systems Investments

Statement of David M. Walker Comptroller General of the United States

Defense Acquisitions 

GAO-06-585T

Mr. Chairman and Members of the Committee:

I am pleased to be here today to discuss how to get better results from
the Department of Defense's (DOD) weapons systems investments and why we
must ensure that DOD be held accountable for doing so. DOD has a mandate
to deliver high-quality products to warfighters, when they need them and
at a price the country can afford. Quality and timeliness are especially
critical to maintain DOD's superiority over others, to counter quickly
changing threats, and to better protect and enable the warfighter. Cost is
also critical given DOD's stewardship over taxpayer money, long-term
budget forecasts which indicate that the nation will not be able to
sustain its currently planned level of investment in weapons systems, and
plans to increase investments in weapons systems that enable
transformation of various military operations. At this time, however, DOD
is simply not positioned to deliver high quality products in a timely and
cost-efficient fashion. It is not unusual to see cost increases that add
up to tens or hundreds of millions of dollars, schedule delays that add up
to years, and large and expensive programs continually rebaselined or even
scrapped after years of failing to achieve promised capability.

Recognizing this dilemma, DOD has tried to embrace best practices in its
policies, instill more discipline in requirements setting, strengthen
training for program managers, reorganize offices that support and oversee
programs, and require the use of independent cost estimates and systems
engineering. Yet despite these and many other actions, the Department
still has trouble distinguishing wants from needs, and many programs are
still running over cost and behind schedule.

Our work shows that poor performance and cost overruns will likely persist
until DOD provides a better foundation for executing its weapons programs.
As I will further discuss today, this foundation includes (1) a DOD-wide
investment strategy that prioritizes programs based on realistic and
credible threat-based customer needs for today and tomorrow ("Big A"
acquisition); (2) enforcing existing policies on individual acquisitions
and adhering to practices that assure new programs are executable ("little
a" acquisition); and (3) making it clear who is responsible for what and
holding people accountable when these responsibilities are not fulfilled.
While such steps represent basic and commonly accepted sound business
practices, they will be extremely difficult to implement within DOD, given
the myriad of missions that compete for the attention of DOD's leadership
and resources, frequent turnover in leadership and key personnel, DOD's
intricate and outdated organizational structure, outmoded and flawed
supporting business processes, as well as entrenched cultural behaviors
and internal pressures. As a result, solutions demand the highest levels
of leadership attention and commitment from DOD, the Administration, and
the Congress over a sustained period of years.

                              A Mandate for Change

Today we are at a key crossroad. In the next few decades, the nation will
be struggling with a large and growing structural deficit. At the same
time, however, weapons programs are commanding larger budgets as DOD
undertakes increasingly ambitious efforts to transform its ability to
address current and potential future conflicts. These costly current and
planned acquisitions are running head-on into the nation's unsustainable
fiscal path. In the past 5 years, DOD has doubled its planned investments
in weapons systems, but this huge increase has not been accompanied by
more stability, better outcomes, or more buying power for the acquisition
dollar. Rather than showing appreciable improvement, programs are
experiencing recurring problems with cost overruns, missed deadlines, and
performance shortfalls.

Dollars Available for Weapons Will Face Serious Budget Pressures

As I have testified previously, our nation is on an imprudent and
unsustainable fiscal path. Budget simulations by GAO, the Congressional
Budget Office, and others show that, over the long term, we face a large
and growing structural deficit due primarily to known demographic trends,
rising health care costs, and lower federal revenues as a percentage of
the economy. Continuing on this path will gradually erode, if not suddenly
damage, our economy, our standard of living, and ultimately our national
security. Federal discretionary spending, along with other federal
policies and programs, will face serious budget pressures in the coming
years stemming from new budgetary demands and demographic trends. Defense
spending falls within the discretionary spending accounts. Further,
current military operations, such as those in Afghanistan and Iraq,
consume a large share of DOD budgets and are causing faster wear on
existing weapons. Refurbishment or replacement sooner than planned is
putting further pressure on DOD's investment accounts.

It is within this context that we must engage in a comprehensive and
fundamental reexamination of new and ongoing investments in our nation's
weapons systems. Weapons systems are one of the single largest investments
the federal government makes. In the last 5 years, DOD has doubled its
planned investments in new systems from about $700 billion in 2001 to
nearly $1.4 trillion in 2006. Annual procurement totals are expected by
DOD to increase from about $75 billion to about $100 billion during 2006
to 2011.

Programs Are Seeking Larger Budgets

At the same time DOD is facing future budget constraints, programs are
seeking larger budgets. To illustrate, the projected cost of DOD's top
five programs in fiscal year 2001 was about $291 billion. In 2006, it was
$550 billion1. A primary reason why budgets are growing is that DOD is
undertaking new efforts that are expected to be the most expensive and
complex ever. Moreover, it is counting on these efforts to enable
transformation of military operations. The Army, for example, is
undertaking the Future Combat Systems (FCS) program in order to enable its
combat force to become lighter, more agile, and more capable. FCS is
comprised of a family of weapons, including 18 manned and unmanned ground
vehicles, air vehicles, sensors, and munitions, which will be linked by an
information network. These vehicles, weapons, and equipment will comprise
the majority of the equipment needed for a brigade combat team in the
future. When considering complementary programs, projected investment
costs for FCS are estimated on the order of $200 billion. Affordability of
the FCS programs depends on two key assumptions. First, the program must
proceed without exceeding its currently projected costs. Second, FCS has
expected large annual procurement costs beginning in 2012. FCS procurement
will represent 60 to 70 percent of Army procurement from fiscal years 2014
to 2022. As the Army prepares the next Defense Plan, it will face the
challenge of allocating sufficient funding to meet increasing needs for
FCS procurement in fiscal years 2012 and 2013. If all the needed funding
cannot be identified, the Army will have to consider reducing the FCS
procurement rate or delaying or reducing items to be spun out to current
Army forces.

At the same time, the Air Force is undertaking two new satellite programs
that are expected to play a major role in enabling FCS and other future
systems. The Transformational Satellite Communications System, which is to
serve as a linchpin in DOD's future communications network, and Space
Radar, which is focused on generating volumes of radar imagery data for
transmission to ground-, air-, ship-, and space-based systems. Together,
these systems are expected to cost more than $40 billion. The Department
has also been focused on modernizing its tactical aircraft fleet. These
efforts include the Joint Strike Fighter (JSF) aircraft program, currently
expected to cost more than $200 billion, and the Air Force's F-22A Raptor
aircraft, expected to cost more than $65 billion.

1The top five programs in 2001 were: the F-22A Raptor aircraft, DDG 51
class destroyer ship, Virginia class submarine, C-17 Globemaster airlift
aircraft, and the F/A-18 E/F Super Hornet fighter aircraft. The top 5
programs in 2006 are: the Joint Strike Fighter aircraft, Future Combat
Systems, Virginia class submarine, DDG 51 class destroyer ship, and the
F-22A Raptor aircraft.

Concurrently, the Navy is focused on acquiring new ships and submarines
with significantly advanced designs and technologies. These include the
Virginia Class Submarine, expected to cost about $80 billion, and the
DDG-51 class destroyer ship, expected to cost some $70 billion, and the
newer DD(X) destroyer program, which is focused on providing advanced land
attack capability in support of forces ashore and to contribute to U.S.
military dominance in the shallow coastal water environment. The Navy
shipbuilding plan requires more funds than may reasonably be expected.
Specifically, the plan projects a supply of shipbuilding funds that will
double by 2011 and will stay at high levels for years to follow.

         Problematic Acquisitions Continue to Reduce DOD's Buying Power

Despite doubling its investment the past 5 years, our assessments do not
show appreciable improvement in DOD's management of the acquisition of
major weapons systems. A large number of the programs included in our
annual assessment of weapons systems2 are costing more and taking longer
to develop than estimated. It is not unusual to see development cost
increases between 30 percent and 40 percent and schedule delays of
approximately 1, 2 or more years.

The consequence of cost and cycle-time growth is manifested in a reduction
of buying power of the defense dollar-causing programs to either cut back
on planned quantities, capabilities, or to even scrap multi-billion dollar
programs, after years of effort, in favor of pursing more promising
alternatives. Figure 1 illustrates seven programs with a significant
reduction in buying power; we have reported similar outcomes in many more
programs. This is not to say that the nation does not get superior weapons
in the end, but that at currently projected twice the level of investment,
DOD has an obligation to get better results.

2GAO, Defense Acquisitions: Assessments of Selected Major Weapon Programs,
GAO-06-391 (Washington, D.C.: Mar. 31, 2006).

Figure 1: Examples of Programs with Reduced Buying Power

Furthermore, the conventional acquisition process is not agile enough to
meet today's demands. Congress has expressed concern that urgent
warfighting requirements are not being met in the most expeditious manner
and has put in place several authorities for rapid acquisition to work
around the process. The U.S. Joint Forces Command's Limited Acquisition
Authority and the Secretary of Defense's Rapid Acquisition Authority seek
to get warfighting capability to the field quicker. According to U.S.
Joint Forces Command officials, it is only through Limited Acquisition
Authority that the command has had the authority to satisfy the
unanticipated, unbudgeted, urgent mission needs of other combatant
commands. With a formal process that requires as many as 5, 10, or 15
years to get from program start to production, such experiments are needed
to meet the warfighters' needs.

                   Underlying Causes of Acquisition Problems

Our reviews have identified a number of causes behind the problems just
described, but several stand out. First, DOD starts more weapons programs
than it can afford and sustain, creating a competition for funding that
encourages low cost estimating, optimistic scheduling, over promising, and
suppressing of bad news. Programs focus on advocacy at the expense of
realism and sound management. Invariably, with too many programs in its
portfolio, DOD and the Congress are forced to continually shift funds to
and from programs-undermining well-performing programs to pay for poorly
performing ones. Adding pressure to this environment are changes that have
occurred within the defense supplier base. Twenty years ago, there were
more than 20 fully competent prime contractors competing for multiple new
programs annually; today, there are only 6 that compete for considerably
fewer programs, according to a recent DOD-commissioned study. This adds
pressure on DOD to keep current suppliers in business and limits DOD's
ability to maximize competition.

Second, DOD has exacerbated this problem by not clearly defining and
stabilizing requirements before programs are started. At times, in fact,
it has allowed new requirements to be added well into acquisition
cycle-significantly stretching technology and creating design challenges,
and exacerbating budget overruns. For example, in the F-22A program, the
Air Force added a requirement for air-to-ground attack capability. In its
Global Hawk program, the Air Force added both signals intelligence and
imagery intelligence requirements. While experience would caution DOD not
to pile on new requirements, customers often demand them fearing there may
not be another chance to get new capabilities since programs can take a
decade or longer to complete. Yet, perversely, such strategies delay
delivery to the warfighter, oftentimes by years.

Third, DOD commits to its programs before it obtains assurance that the
capabilities it is pursuing can be achieved within available resources and
time constraints. Funding processes encourage this approach, since
acquisition programs attract more dollars than efforts concentrating
solely on proving out technologies. Nevertheless, when DOD chooses to
extend technology invention into acquisition, programs experience
technical problems that have reverberating effects and require large
amounts of time and money to fix. When programs have a large number of
interdependencies, even minor technical "glitches" can cause disruptions.
Only 10 percent of the programs in our latest annual assessment of weapons
systems had demonstrated critical technologies to best practice standards
at the start of development; and only 23 percent demonstrated them to
DOD's standards.3 The cost effect of proceeding without completing
technology development before starting an acquisition can be dramatic. For
example, research, development, test and evaluation costs for the programs
included in our review that met best practice standards at program start
increased by a modest average of 4.8 percent over the first full estimate,
whereas the costs for the programs that did not meet these standards
increased by a much higher average of 34.9 percent over the first full
estimate.

Fourth, officials are rarely held accountable when programs go astray.
There are several reasons for this, but the primary ones include the fact
that DOD has never clearly specified who is accountable for what, invested
responsibility for execution in any single individual, or even required
program leaders to stay until the job is done. Moreover, program managers
are not empowered to make go or no-go decisions, they have little control
over funding, they cannot veto new requirements, and they have little
authority over staffing. Because there is frequent turnover in their
positions, program managers also sometimes find themselves in the position
of having to take on efforts that are already significantly flawed.

Likewise, contractors are not always held accountable when they fail to
achieve desired acquisition outcomes. In a recent study,4 for example, we
found that DOD had paid out an estimated $8 billion in award fees on
contracts in our study population regardless of outcomes. In one instance,
we found that DOD paid its contractor for a satellite program-the
Space-Based Infrared System High-74 percent of the award fee available, or
$160 million, even though research and development costs increased by more
than 99 percent, the program was delayed for many years and was
rebaselined three times.5 In another instance, DOD paid its contractor for
the F-22A aircraft more than $848 million, 91 percent of the available
award fee, even though research and development costs increased by more
than 47 percent, the program has been rebaselined 14 times, and delayed by
more than 2 years.

3DOD's policy states technologies should be demonstrated in at least a
relevant environment before a program enters system development; whereas,
GAO utilizes the best practice standard that calls for technologies to be
demonstrated one step higher-demonstration in an operational environment.

4GAO, Defense Acquisitions: DOD Has Paid Billions in Award and Incentive
Fees Regardless of Outcomes, GAO-06-66 (Washington, D.C.: Dec. 19, 2005).

5When calculating the percentage of award fee paid (i.e., percentage of
award fee paid = total fee paid to date / (total fee pool - remaining fee
pool)), we included rolled-over fees in the remaining fee pool when those
fees were still available to be earned in future evaluation periods.

Fifth, these strategies work, because they win dollars. DOD and
congressional funding approval reinforces these practices and serves to
undercut reform efforts. Stated differently, typically no one is held
accountable for unacceptable outcomes and there are little or no adverse
consequences for the responsible parties. This is a shared responsibility
of both the executive and legislative branches of government.

Of course, there are many other factors that play a role in causing
weapons programs to go astray. They include workforce challenges, poor
contractor oversight, frequent turnover in key leadership, and a lack of
systems engineering, among others. Moreover, many of the business
processes that support weapons development-strategic planning and
budgeting, human capital management, infrastructure, financial management,
information technology, and contracting-are beset with pervasive,
decades-old management problems, including outdated organizational
structures, systems, and processes. In fact, these areas-along with
weapons system acquisitions-are on GAO's high risk list of major
government programs and operations.

DOD has long recognized such problems and initiated numerous improvement
efforts. In fact, since 1949, more than 10 commissions have studied issues
such as long cycle time and cost increases as well as deficiencies in the
acquisition workforce. This committee just last week heard testimony
regarding several of them.6 Among these recent studies, there is a
consensus that DOD needs to instill much stronger discipline into the
requirements setting process, prioritize its investments, seek additional
experienced and capable managers, control costs, strengthen
accountability, and enhance the basis for enterprise-wide decision making.

In response to past studies and recommendations, including our own, DOD
has taken a number of acquisition reforms. Specifically, DOD has
restructured its acquisition policy to incorporate best practices as the
suggested way of doing business. For example, policies embrace the concept
of closing gaps between requirements and resources before launching new
programs. DOD is also reviewing changes to requirements setting. DOD has
also strengthened training for program managers, required the use of
independent cost estimating, reemphasized the discipline of systems
engineering, and tried extracting better performance from contractors-by
alternately increasing and relaxing oversight.

6House Armed Services Committee, "Hearing on Department of Defense
Acquisition Reform," (Washington, D.C.: Mar. 29, 2006)

While all of these steps are well-intentioned, recent policy statements,
such as the Quadrennial Defense Review (QDR), and decisions on individual
programs have fallen far short of the needed fundamental review
reassessment, repriortization and reengineering efforts. For example, the
Office of the Secretary of Defense (OSD) does not seem to be pushing for
dramatic and fundamental reforms in its acquisition process. In fact, it
has either disagreed with recommendations we have made over the past year
or claimed that it was already addressing them. These include reports on
specific systems such as JSF, the Missile Defense program, FCS, and Global
Hawk as well as reports on cross-cutting issues, such as DOD's
rebaselining practices, acquisition policy, and support for program
managers. We believe DOD's recently issued QDR did not lay out a long
term, resource constrained, investment strategy. In fact, the gap between
wants, needs, affordability and sustainability seems to be greater than
ever.

                                   Solutions

Our work shows that acquisition problems will likely persist until DOD
provides a better foundation for buying the right things, the right way.
This involves making tough tradeoff decisions as to which programs should
be pursued, and more importantly, not pursued, making sure programs are
executable, locking in requirements before programs are ever started, and
making it clear who is responsible for what and holding people accountable
when these responsibilities are not fulfilled. These changes will not be
easy to make. They require DOD to reexamine the entirety of its
acquisition process-what we think of as the "Big A". This includes making
deep-seated changes to program requirements setting, funding, and
execution. It also involves changing how DOD views success, and what is
necessary to achieve success.

Buy the Right Thing: Develop and Implement an Investment Strategy

The first, and most important, step is implementing a revised DOD-wide
investment strategy for weapons systems. In a recent study on program
management best practices,7 we recommended that DOD determine the priority
order of needed capabilities based on assessments of the resources-that is
dollars, technologies, time, and people needed to achieve these
capabilities. We also recommended that capabilities not designated as a
priority should be set out separately as desirable but not funded unless
resources were both available and sustainable.

DOD's Under Secretary of Defense for Acquisition Technology and
Logistics-DOD's corporate leader for acquisition-should develop this
strategy in concert with other senior leaders, for example, combatant
commanders who would provide input on user needs; DOD's comptroller;
science and technology leaders, who would provide input on available
resources; and acquisition executives from the military services, who
could propose solutions. Finally, once priority decisions are made,
Congress will need to enforce discipline through various authorization and
appropriation decisions.

Table 1: Steps That Can Be Taken for Developing an Investment Strategy for
Acquiring New Systems

          Under Secretary of Defense for Acquisition, Technology and          
Who    Logistics in concert with other senior officials                    
Action    o  Analyze customer needs vs. wants based on available           
             technology and available resources                               
             o  Compare analysis to DOD's long-term vision                    
             o  Determine priorities for acquisitions based on this           
             comparison                                                       
             o  Separate other programs as "desirable," resources permitting  
             o  Enforce funding for priorities annually; measure success      
             against the plan                                                 

Buy the Right Way: Ensure Individual Programs Are Executable

Once DOD has prioritized capabilities, it should work vigorously to make
sure each new program is executable before the acquisition begins. This is
the "little a." More specifically, this means assuring requirements are
clearly defined and achievable given available resources and that all
alternatives have been considered. System requirements should be agreed to
by Service Acquisition Executives as well as Combatant Commanders. Once
programs begin, requirements should not change without assessing their
potential disruption to the program and assuring that they can be
accommodated within time and funding constraints. In addition, DOD should
prove that technologies can work as intended before including them in
acquisition programs. This generally requires a prototype to be tested in
an operational environment. More ambitious technology development efforts
should be assigned to the science and technology community until they are
ready to be added to future generations of the product. DOD should also
require the use of independent cost estimates as a basis for budgeting
funds. Our work over the past 10 years has consistently shown when these
basic steps are taken, programs are better positioned to be executed
within cost and schedule.

7GAO, Best Practices: Better Support of Weapon System Program Managers
Needed to Improve Outcomes, GAO-06-110 (Washington, D.C.: Nov. 30, 2005).

To further ensure that programs are executable, DOD should pursue an
evolutionary path toward meeting user needs rather than attempting to
satisfy all needs in a single step. This approach has been consistently
used by successful commercial companies we have visited over the past
decade because it provides program managers with more achievable
requirements, which, in turn, would facilitate shorter cycle times. With
shorter cycle times, the companies we have studied have also been able to
assure that program managers and senior leaders stay with programs
throughout the duration of a program. DOD has policies that encourage
evolutionary development, but programs often favor pursuing more exotic
solutions that will attract funds and support.

Lastly, to keep programs executable, DOD should demand that all go/no-go
decisions be based on quantifiable data and demonstrable knowledge. These
data should cover critical program facets such as cost, schedule,
technology readiness, design readiness, production readiness, and
relationships with suppliers. Development should not be allowed to proceed
until certain thresholds are met, for example, a high percentage of
engineering drawings completed at critical design review. DOD's current
policies encourage these sorts of metrics to be used as a basis for
decision making, but they do not demand it. DOD should also place
boundaries on time allowed for specific phases of development and
production.

Table 2: Steps That Can Be Taken for Making Sure Programs are Executable

Who    Military services and joint developers with support from USD AT&L   
Action    o  Keep technology discovery/invention out of acquisition        
             programs                                                         
             o  Follow an incremental path toward meeting user needs; assure  
             all alternatives are considered                                  
             o  Ensure system requirements are agreed to by service           
             acquisition executives and warfighters and that no additional    
             requirements are added during execution unless they are fully    
             resourced                                                        
             o  Use systems engineering to close gaps between requirements    
             and resources prior to launching the development process         
             o  Require the use of independent cost estimates as a basis for  
             budgeting funds; update cost estimates annually and track        
             against the original baseline estimate                           
             o  Use earned value data at each systems engineering technical   
             review in order to track program progress against original       
             baseline estimates                                               
             o  Use quantifiable data and demonstrable knowledge to make      
             decisions to move to next phases                                 
             o  Employ additional management reviews when deviations of cost  
             or schedule exceed a certain level (e.g. 10 percent) against     
             baseline estimates.                                              
             o  Place boundaries on time allowed for specific phases of       
             development                                                      

Hold People Accountable

To strengthen accountability, DOD will need to clearly delineate
responsibilities among those who have a role in deciding what to buy as
well as those who have role in executing, revising, and terminating
programs. Within this context, rewards and incentives will need to be
altered so that success can be viewed as delivering needed capability at
the right price and the right time, rather than attracting and retaining
support for numerous new and ongoing programs. After all, given our
current and projected fiscal imbalances, every dollar spent on a want
today may not be available for an important need tomorrow. To enable
accountability to be exercised at the program level, DOD will also need to
(1) match program manager tenure with development or the delivery of a
product;( 2) tailor career paths and performance management systems to
incentivize longer tenures; (3) strengthen training and career paths as
needed to ensure program managers have the right qualifications for run
the programs they are assigned to; (4) empower program managers to execute
their programs, including an examination of whether and how much
additional authority can be provided over funding, staffing, and approving
requirements proposed after the start of a program; and (5) develop and
provide automated tools to enhance management and oversight as well as to
reduce the time required to prepare status information.

DOD also should hold contractors accountable for results. As we have
recently recommended, this means structuring contracts so that incentives
actually motivate contractors to achieve desired acquisition outcomes and
withholding award fees when those goals are not met. In addition, DOD
should collect data that will enable it to continually assess its progress
in this regard.

Table 3: Steps That Can Be Taken to Instill Accountability

Who     The Secretary of Defense and military service secretaries          
Actions    o  Make it clear who is accountable on a program for what,      
              including program managers, their leaders, stakeholders, and    
              contractors                                                     
              o  Hold people accountable when these responsibilities are not  
              met                                                             
              o  Require program managers and others, as appropriate, to stay 
              with programs until a product is delivered or for system design 
              and demonstration                                               
              o  Empower program managers to execute their programs so that   
              they can be accountable; strengthen training and career paths   
              as needed to ensure that qualified program managers are being   
              assigned                                                        
              o  Improve the use of award fees in order to hold contractors   
              accountable                                                     

In closing, the past year has seen several defense reviews that include
new proposed approaches to improve the way DOD buys weapons. These reviews
contain many constructive ideas. If they are to produce better results,
however, they must heed the lessons taught-but perhaps not learned-by
acquisition history. Specifically, DOD must separate needs from wants in
the context of the nation's greater fiscal challenges. Policy must also be
manifested in decisions on individual programs or reform will be blunted.
DOD's current acquisition policy is a case in point. The policy supports a
knowledge-based, evolutionary approach to acquiring new weapons. The
practice-decisions made on individual programs-sacrifices knowledge and
executability in favor of revolutionary solutions. It's time to challenge
such solutions. Reform will not be real unless each weapons system is
shown to be both a worthwhile investment and an executable program.
Otherwise, we will continue to start more programs than we can finish,
produce less capability for more money, and create the next set of case
studies for future defense reform reviews.

Mr. Chairman and Members of the Committee, this concludes my statement. I
will be happy to take any questions.

                             Scope and Methodology

In preparing for this testimony, we relied on previously issued GAO
reports and analyzed recent acquisition reform studies from various
organizations. We conducted our review between March 20 and April 5, 2006,
in accordance with generally accepted government auditing standards.

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Highlights of GAO-06-585T , a testimony before the Armed Services
Committee, House of Representatives

April 5, 2006

DEFENSE ACQUISITIONS

Actions Needed to Get Better Results on Weapons Systems Investments

In the past 5 years, DOD has doubled its planned investments in weapons
systems, but this huge increase has not been accompanied by more
stability, better outcomes, or more buying power for the acquisition
dollar. Rather than showing appreciable improvement, programs are
experiencing recurring problems with cost overruns, missed deadlines, and
performance shortfalls. GAO was asked to testify on ways to obtain a
better return on DOD's weapons systems investments.

This testimony identifies the following steps as needed to provide a
better foundation for executing weapon programs: (1) developing a DOD-wide
investment strategy that prioritizes programs based on realistic and
credible threat-based customer needs for today and tomorrow, (2) enforcing
existing policies on individual acquisitions and adhering to practices
that assure new programs are executable, and (3) making it clear who is
responsible for what and holding people accountable when these
responsibilities are not fulfilled. Past GAO reports have made similar
recommendations.

DOD has a mandate to deliver high-quality products to warfighters, when
they need them and at a price the country can afford. Quality and
timeliness are especially critical to maintain DOD's superiority over
others, to counter quickly changing threats, and to better protect and
enable the warfighter. Cost is critical given DOD's stewardship
responsibility for taxpayer money, combined with long-term budget
forecasts which indicate that the nation will not be able to sustain its
currently planned level of investment in weapons systems, and DOD's plans
to increase investments in weapons systems that enable transformation of
various military operations. At this time, however, DOD is simply not
positioned to deliver high quality products in a timely and cost-efficient
fashion. It is not unusual to see cost increases that add up to tens or
hundreds of millions of dollars, schedule delays that add up to years, and
large and expensive programs frequently rebaselined or even scrapped after
years of failing to achieve promised capability.

Additional Investment: Top Five Programs in 2006 Plan, Billions in
Constant 2006 Dollars

Note: Estimate includes total research, development, test, and evaluation
(RDT&E); procurement; military construction; and acquisition, operation,
and maintenance.

Recognizing this dilemma, DOD has tried to embrace best practices in its
policies, and instill more discipline in requirements setting, among
numerous other actions. Yet it still has trouble distinguishing wants from
needs, and many programs are still running over cost and behind schedule.

Our work shows that acquisition problems will likely persist until DOD
provides a better foundation for buying the right things, the right way.
This involves making tough tradeoff decisions as to which programs should
be pursued, and more importantly, not pursued, making sure programs are
executable, locking in requirements before programs are ever started, and
making it clear who is responsible for what and holding people accountable
when these responsibilities are not fulfilled. These changes will not be
easy to make. They require DOD to re-examine the entirety of its
acquisition process-what we think of as the "Big A"-including requirements
setting, funding, and execution. Moreover, DOD will need to alter
perceptions of what success means, and what is necessary to achieve
success.
*** End of document. ***