Space Acquisitions: Improvements Needed in Space Systems	 
Acquisitions and Keys to Achieving Them (06-APR-06, GAO-06-626T).
                                                                 
DOD's space system acquisitions have experienced problems over	 
the past several decades that have driven up costs by hundreds of
millions, even billions of dollars, stretched schedules by years,
and increased performance risks. GAO was asked to testify on its 
findings on space acquisition problems and steps needed to	 
improve outcomes.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-626T					        
    ACCNO:   A50999						        
  TITLE:     Space Acquisitions: Improvements Needed in Space Systems 
Acquisitions and Keys to Achieving Them 			 
     DATE:   04/06/2006 
  SUBJECT:   Best practices					 
	     Best practices methodology 			 
	     Cost analysis					 
	     Cost overruns					 
	     Defense capabilities				 
	     Defense cost control				 
	     Defense procurement				 
	     Military research and development			 
	     Procurement planning				 
	     Procurement practices				 
	     Schedule slippages 				 
	     Space exploration					 
	     Strategic planning 				 
	     Weapons research and development			 
	     Investment planning				 
	     DOD Space Radar Program				 
	     DOD Transformational Satellite			 
	     Communications System Program			 
                                                                 
	     National Polar-Orbiting Operational		 
	     Environmental Satellite System			 
                                                                 
	     Space Based Infrared System-High			 

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GAO-06-626T

     

     * Space Acquisition Problems Persist
     * Underlying Causes of Acquisition Problems
     * DOD Has Expressed Its Commitment to Improve Its Approach to
     * Keys to Realizing DOD's New Goals for Space Acquisitions
     * Scope and Methodology
     * Contacts and Acknowledgments
     * 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 theSubcommittee on Strategic Forces, Senate Committee on
Armed Services

United States Government Accountability Office

GAO

For Release on Delivery Expected at 3:30 p.m. EDT

Thursday, April 6, 2006

SPACE ACQUISITIONS

Improvements Needed in Space Systems Acquisitions and Keys to Achieving
Them

Statement of Cristina T. Chaplain Acting Director, Acquisition and
Sourcing Management Team

Improvements in Space Systems Acquisitions 

GAO-06-626T

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss the Department of Defense's (DOD)
space acquisitions. Each year, DOD spends billions to acquire space-based
capabilities to support current military and other government operations
as well as to enable DOD to transform the way it collects and disseminates
information, gathers data on its adversaries, and attacks targets. In
fiscal year 2007 alone, DOD expects to spend almost $20 billion dollars to
develop and procure satellites and other space systems, including nearly
$7 billion on the major space systems.1 Despite its growing investment in
space, however, DOD's space system acquisitions have experienced problems
over the past several decades that have driven up costs by hundreds of
millions, even billions of dollars, stretched schedules by years, and
increased performance risks. In some cases, capabilities have not been
delivered to the warfighter after decades of development.

As a result of these problems, DOD is now contending with important
trade-off decisions such as whether to continue investing in long
beleaguered efforts or undertake more promising alternatives. At the same
time, leadership now recognizes the need to substantially change DOD's
current space acquisition approach and the value of adopting practices
that will lay a better foundation for program execution. Within this
context, I will discuss our findings on space acquisition problems, recent
steps DOD has taken in an effort to address these problems, and the
changes that still need to occur if DOD is to break the cycle of
acquisition problems.

                       Space Acquisition Problems Persist

The majority of satellite programs we have reviewed over the past 2
decades experienced problems during their acquisition that drove up costs
and schedules and increased technical risks. Several programs were
restructured by DOD in the face of delays and cost growth. At times, cost
growth has come close to or exceeded 100-percent, causing DOD to nearly
double its investment in face of technical and other problems without
realizing a better return on its investment. Along with the cost
increases, many programs are experiencing significant schedule delays-as
much as 6 years-postponing delivery of promised capabilities to the
warfighter. Outcomes have been so disappointing in some cases that DOD has
had to go back to the drawing board to consider new ways to achieve the
same capability. It is in such a position today, with its Space-based
Infrared System (SBIRS) High program and possibly its National
Polar-orbiting Operational Environmental Satellite System (NPOESS)
program, both of which have been mired in expanding cost and schedule
setbacks.

1Estimates of fiscal year 2007 spending are based on DOD's Fiscal Year
2006 Future Year Defense Program (FYDP) plan. The fiscal year 2007 FYDP
plan was not available to us at the time of this testimony.

More specifically, DOD's investment in SBIRS High, a critical missile
warning system, has been pushed to over $10.5 billion from the initial
$4.1 billion estimate made over 9 years earlier. This 160-percent increase
in estimated costs triggered a fourth Nunn-McCurdy2 breach (see 10 U.S.C.
2433), requiring a review by the Secretary of Defense and a report to
Congress, and resulted in the program being restructured for a third time,
in late 2005. With costs and timelines spiraling out of control, DOD
reduced the number of satellites it plans to procure-pushing the average
per unit procurement cost up to 224-percent above 2002 baseline costs-and
is now pursuing an alternative to SBIRS High while it continues with the
scaled back program.

Initial cost and schedule estimates for NPOESS-a new satellite
constellation intended to replace existing weather and environmental
monitoring satellites-have also proven unreliable. NPOESS is managed by a
tri-agency Integrated Program Office consisting of DOD, the National
Oceanic and Atmospheric Administration, and National Aeronautics and Space
Administration. In January 2006, the program reported a Nunn-McCurdy unit
cost breach, at the 25-percent threshold, due to continuing technical
problems, including problems with the development of key sensors.
Specifically, in early 2005, DOD learned that a subcontractor could not
meet cost and schedule targets due to significant technical issues on an
imaging sensor known as the visible/infrared imager radiometer suite
(VIIRS) sensor-including problems with the cryoradiator, excessive
vibration of sensor parts, and errors in the sensor's solar calibration.
These technical problems were further complicated by subcontractor
management problems. To address these issues, DOD provided additional
funds for VIIRS, capped development funding for other critical
technologies, and revised its schedule to keep the program moving forward.
We also reported that based on our own analysis of contractor trends, the
program will most likely overrun costs by $1.4 billion.3 Given the
challenges currently facing the program, the scheduled first launch date
slipped 17 months to September 2010.

210 U.S.C. S: 2433. This oversight mechanism originated with an amendment
to the Department of Defense Authorization Act, 1982. It was made
permanent in the following year's authorization act and has been amended
several times. Generally, the law requires DOD to review programs and
report to Congress whenever cost growth reaches specified thresholds. The
statute is commonly known as the Nunn-McCurdy amendment based on the names
of the sponsors of the original legislation.

Another recent example of problems is evident in the Advanced Extremely
High Frequency (AEHF) program. We reported in the past that this program
experienced cost increases due to requirements changes, inadequate
contract strategies, and funding shortfalls. We also reported that DOD had
to cut back its planned purchase of satellites from five to three as a
result. The outcome has been an 84-percent unit cost increase-each AEHF
satellite is now estimated to cost about $2.1 billion. More recently, we
reported that scheduling delays and the late delivery of cryptographic
equipment have culminated into nearly a 3-year delay in the launch of the
first satellite and that the program still faces schedule risk due to the
continued concurrent development of two critical path items managed and
developed outside the program.

Acquisition problems have not been limited to the development of
home-grown systems. DOD's purchase of an ostensible commercial satellite
for the use of communications, the Wideband Gapfiller Satellite (WGS), is
experiencing about a 70-percent cost growth, due in part to the problems a
subcontractor was experiencing in assembling the satellites. Improperly
installed fasteners on the satellites' subcomponents have resulted in
rework on the first satellite and extensive inspections of all three
satellites currently being fabricated. The cost for WGS has increased
about $746.3 million but DOD estimates that about $276.2 million of this
amount is largely due to cost growth associated with a production gap
between satellites three and four. The launch of the first satellite has
now been delayed for over 3 years and is currently scheduled for June
2007. The delay will increase program costs and add at least 22 months to
the time it takes to obtain an initial operational capability from the
system.

Figure 1 shows that, overall for fiscal years 2006 through 2011, estimated
costs for DOD's major space acquisition programs have increased a total of
about $12.2 billion-or nearly 44-percent in total-above initial estimates.
Figure 2 breaks out this trend among key major space acquisitions.

3GAO, Defense Acquisitions: Assessment of Selected Major Weapon Programs,
GAO-06-391 (Washington, D.C.: March 31, 2006).

Figure 1: Comparison between Original Cost Estimates and Current Cost
Estimates for Major Space Acquisition Programsa for Fiscal Years 2006
through 2011

aIncludes: AEHF, Evolved Expendable Launch Vehicle, Global Broadcast
Service, Global Positioning System II, Mobile User Objective System,
NPOESS, SBIRS High, TSAT, and WGS.

Figure 2: Cost Growth in Selected Current Space Programs in Base Year
Dollars

Notes: Original AEHF cost was for five satellites; the latest estimate for
AEHF is for three satellites. SBIRS High data is through the latest
Selected Acquisition Report, dated September 2005.

As both figures illustrate, cost increases have had a dramatic impact on
DOD's overall space portfolio. To cover the added costs of poorly
performing programs, DOD has shifted scarce resources away from other
programs, creating a cascade of cost and schedule inefficiencies. For
example, to fund other space programs, DOD has had to push off the start
of a new version of the Global Positioning System (GPS), which has forced
costs to increase for the current version under development. Meanwhile,
DOD is also contending with cost increases within its Evolved Expendable
Launch Vehicle (EELV) program. These are largely due to misjudgments about
the extent to which DOD could rely on commercial demand to leverage its
investment. Nevertheless, the resulting $12.6 billion increase has added
pressures to make tradeoffs.

At the same time that DOD is juggling resources on existing programs, it
is undertaking two new efforts-the Transformational Satellite
Communications System (TSAT) program and Space Radar program-which are
expected to be among the most ambitious, expensive, and complex space
systems ever. Moreover, DOD is relying heavily on their planned
capabilities to fundamentally enable DOD to transform how military
operations are conducted. In fact, many other weapon systems will be
interfaced with these satellites and highly dependent on them for their
own success. Together, these systems have been preliminarily estimated to
cost about $40 billion. While DOD is planning to undertake the new
systems, broader analyses of the nation's fiscal future indicate that
spending for weapon systems may need to be reduced, rather than increased,
to address growing deficits.

                   Underlying Causes of Acquisition Problems

Our reviews have identified a number of causes behind the problems just
described, but several consistently stand out. First, on a broad scale,
DOD starts more weapon programs than it can afford, creating a competition
for funding which encourages low cost estimating, optimistic scheduling,
over promising, suppressing bad news, and for space programs, forsaking
the opportunity to identify and assess potentially better alternatives.
Programs focus on advocacy at the expense of realism and sound management.
Invariably, with too many programs in its portfolio, DOD and even Congress
are forced to continually shift funds to and from programs-often
undermining well-performing programs to pay for poorly performing ones.

Second, DOD starts its space programs too early, that is, before it has
assurance that the capabilities it is pursuing can be achieved within
available resources and time constraints. This tendency is caused largely
by the funding process, 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
"glitches" can cause disruptions.

A companion problem for all weapon systems is that DOD allows new
requirements to be added well into the acquisition phase. Many times,
these significantly stretch the technology challenges (and consequently,
budgets) the program is already facing. This was particularly evident in
SBIRS High up until 2004. While experiences 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.

Third, space programs have historically attempted to satisfy all
requirements in a single step, regardless of the design challenge or the
maturity of the technologies to achieve the full capability. Increasingly,
DOD has preferred to make fewer, but heavier, larger, and complex
"Battlestar Galactica-like" satellites, that perform a multitude of
missions rather than larger constellations of smaller, less complex
satellites that gradually increase in sophistication. This has stretched
technology challenges beyond the capability of many potential contractors
and vastly increased the complexities related to software-a problem that
affected SBIRS High and AEHF, for example.

Our reviews have identified additional factors that contribute to space
acquisition problems, though less directly affecting cost and schedule
problems we have reported on. For example, consolidations within defense
supplier base for space programs have made it more difficult for DOD to
incorporate competition into acquisition strategies. Since 1985, there
were at least ten fully competent prime contractors competing for the
large programs and a number that could compete for subcontracts. Arguably
today, there are only two contractors that could handle DOD's most complex
space programs. DOD has exacerbated this problem by not seeking
opportunities to restructure its acquisitions to maximize competition,
particularly for the small suppliers who have a high potential to
introduce novel solutions and innovations into space acquisitions. In the
1990s, DOD also structured contracts in a way that reduced oversight and
shifted key decisionmaking responsibility onto contractors. DOD later
found that this approach-known as Total System Performance Responsibility,
or TSPR-magnified problems related to requirements creep and poor
contractor performance.

Another factor contributing to problems is the diverse array of officials
and organizations involved with a space program, which has made it even
more difficult to pare back and control requirements. The Space Radar
system, for example, is expected to play a major role in transforming
military as well as intelligence-collecting operations and other critical
governmental functions, such as homeland security. As a result, its
constituency includes combatant commanders, all of the military services,
intelligence agencies, and the Department of Homeland Security. The Global
Positioning System not only serves the military, it provides critical
services to civilian users, the transportation sector, the information
technology sector, among many other industries.

In addition, short tenures for top leadership and program managers within
the Air Force and the Office of the Secretary of Defense has lessened the
sense of accountability for acquisition problems and further encouraged a
short-term view of success, according to officials we have interviewed.
Though still in a pre-acquisition phase, TSAT and Space Radar have already
had one program director each. The SBIRS High program, meanwhile, has seen
at least three program directors. At the highest levels of leadership, for
many years, DOD did not invest responsibilities for its space activities
in any one individual-leaving no one in charge of establishing an
integrated vision for space or of mediating between competing demands. In
1994, it established such a position within the Office of the Secretary of
Defense, but dissolved this position in 1998. In 2002, DOD established a
space leadership position within the Under Secretary position in the Air
Force, combined it with the directorship of the National Reconnaissance
Office in order to better integrate DOD and intelligence space activities,
and allowed the Under Secretary to have milestone decision authority for
major space systems acquisitions. After the first Under Secretary of the
Air Force in charge of space retired in 2005, DOD split these
responsibilities and temporarily reclaimed milestone decision authority
for all major space programs. Changes in leadership and reorganizations
are common across DOD, but again, they make it more difficult to enforce
accountability and maintain the right levels of support for acquisition
programs.

Lastly, there are capacity shortfalls that have constrained DOD's ability
to optimize and oversee its space programs. These include: shortages in
the pipeline of scientists and engineers, shortages of experts in systems
and software engineering, and uneven levels of experience among program
managers. Contractors are also facing workforce pressures similar to those
experienced by the government, that is, not enough technical expertise to
develop complex space systems. In addition, we have reported that there is
a lack of low-cost launch opportunities, which are needed to increase the
level of experimental testing in space.

 DOD Has Expressed Its Commitment to Improve Its Approach to Space Acquisitions

DOD has recently expressed a commitment to improve its approach to space
acquisitions and embrace many of the recommendations we have made in the
past.

Our previous recommendations have been focused on providing a sound
foundation for program execution. Namely, we have recommended that DOD
separate technology discovery from acquisition, follow an incremental path
toward meeting user needs, match resources and requirements at program
start, and use quantifiable data and demonstratable knowledge to make
decisions to move to next phases. In addition, we have called on DOD to
develop an overall investment strategy for space in order to help DOD
rebalance its investments in space acquisition programs as it continues to
contend with cost increases from its programs.

These recommendations are based on a body of work that we have undertaken
over the last several years that examines weapon acquisition issues from a
perspective that draws upon lessons learned from best product development
practices. Leading commercial firms expect that their program managers
will deliver high-quality products on time and within budget. Doing
otherwise could result in the customer walking away. Thus, those firms
have created an environment and adopted practices that put their program
managers in a good position to succeed in meeting these expectations.
Collectively, these practices comprise a process that is anchored in
knowledge. It is a process in which technology development and product
development are treated differently and managed separately. The process of
developing technology culminates in discovery-the gathering of
knowledge-and must, by its nature, allow room for unexpected results and
delays. Leading firms do not ask their program or product managers to
develop technology. Rather, they give responsibility for maturing
technologies to science and technology organizations. The process of
developing a product culminates in delivery and, therefore, gives great
weight to design and production. The firms demand-and receive-specific
knowledge about a new product before production begins. A program does not
go forward unless a strong business case on which the program was
originally justified continues to hold true.

While the practices we have recommended represent commonly accepted sound
business practices, until recently, they have not been accepted by DOD's
space acquisition community for large space acquisitions. By contrast,
these practices were implemented for the development of a small,
experimental satellite, intended for direct use by a combatant command,
(known as TacSat 1). We recently reported that by including only mature
technologies and limiting new requirements, DOD was able to develop the
satellite for less than $10 million (including surplus hardware valued at
$5 million) and within 12 months.

In disagreeing with our recommendations, DOD asserted its desire to push
programs to advance technologies as far as possible. Other reasons that
space officials have given for extending technology development into
acquisition include the greater ability to secure funding for costly
technology development within an acquisition program versus a science and
technology program, a belief among the acquisition community that labs in
charge of developing space technologies do not understand their needs, as
well as communication gaps between the science and technology (S&T) and
acquisition communities.

Moreover, while DOD officials told us they were pursuing evolutionary
development for space systems, we found that they were beginning programs
by challenging programs managers to achieve significant leaps in
capability with the intention of abandoning those efforts later in the
development cycle should too many problems be encountered. This is not a
true evolutionary approach, as it leaves DOD facing increased technical
challenges at the beginning of a program and thus, increased risks, and it
raises the expectations on the part of stakeholders who may be unwilling
to accept less capability later on. Two of the systems we were most
concerned about in this respect were and TSAT and Space Radar -they were
already expected to cost about $40 billion. DOD was planning to start
these acquisitions even when many of their critical technologies were
still immature and it was pursuing a highly ambitious path in terms of the
technology push. Given that these systems were among the most complex
programs ever undertaken for space, they were being counted on to enable
wider DOD transformation efforts, and DOD was already contending with
highly problematic space efforts, we believed DOD could not afford to
pursue such risky approaches for TSAT and Space Radar.

Since we last testified before this subcommittee in July 2005, DOD has
appointed a new Under Secretary of the Air Force to be in charge of space
acquisitions, who, in turn, has embraced adopting best practices, or, as
he terms it, "going back to the basics." Specifically, the Under Secretary
has expressed a desire to

           o  Delegate the maturation of technologies-to the point of being
           tested in a relevant environment or operational environment, if
           appropriate-to the S&T community.
           o  Adopt an evolutionary development approach in which new systems
           would be developed in a series of increments, or blocks. Any
           desired technology that is not expected to be matured in time to
           start a new block would be assigned to a later block. Each block
           would have a discrete beginning and end point.
           o  Fund S&T appropriately so that significant technology
           breakthroughs can be continually pursued.
           o  Improve collaboration on requirements-consulting with
           warfighters on the content of each new block.

In addition, the Under Secretary is focused on estimating cost and funding
new acquisitions to an 80-percent confidence level; strengthening systems
engineering and strengthening the acquisition workforce.

Aspects of this approach have recently been incorporated in to DOD's TSAT
program. For the first block, satellites 1 and 2, the Air Force has
reduced its expectations in the level of sophistication of these
satellites to increase the confidence in the schedule for launching the
first satellite in 2014. Higher performing levels of the technologies to
support laser communications and an Internet-like processor router will be
pushed off to a subsequent block, along with the multi-access laser
communications-a more robust laser capable of transmitting vast amounts of
data within seconds. Program officials have also stated that the TSAT
program will not enter into product development, that is, formal
acquisition, until its critical technologies are proven.

These are good steps when looking at TSAT as an individual program. It is
important, however, that the Air Force ensure warfighters accept lower
capability and that it makes sense to pursue the current approach versus
the alternative of buying more AEHF or WGS satellites.

            Keys to Realizing DOD's New Goals for Space Acquisitions

DOD's desire to adopt best practices for space acquisition is a positive
and necessary first step toward reform. However, these changes will not be
easy to undertake. They require significant shifts in thinking about how
space systems should be developed; changes in incentives and perceptions;
as well as further policy and process changes. Moreover, they will need to
be made within a larger acquisition environment that still encourages a
competition for funding and consequently pressures programs to view
success as the ability to secure the next installment rather than the end
goal of delivering capabilities when and as promised. In addition, DOD's
space leaders will be challenged to sustain a commitment to adopting best
practices, given the myriad of missions and programs that compete for the
attention of DOD's leadership and resources, frequent turnover in
leadership positions, and potential resistance from the many diverse
organizations involved with space acquisitions.

There are steps, however, that DOD can take to substantially mitigate
these challenges.

           o  First, DOD can guide its decisions to start space acquisition
           programs with an overall investment strategy. More specifically,
           DOD could identify overall capabilities and how to achieve them,
           that is, what role space will play versus other air-, sea-, and
           land-based assets; identify priorities for funding space
           acquisitions; and implement mechanisms that would enforce the
           strategy and measure progress. Optimally, DOD would do this for
           its entire weapon system investment portfolio so that space
           systems that are expected to play a critical role in
           transformation could be prioritized along with other legacy and
           transformational systems and so that DOD could reduce pressures
           associated with competition for funding. But in the absence of a
           departmentwide strategy, DOD could reexamine and prioritize its
           space portfolio with an eye toward balancing investments between
           legacy programs and new programs as well as between S&T programs
           and acquisition programs. In addition, DOD could prioritize S&T
           investments. This is particularly important since DOD is
           undertaking a range of initiatives-collectively known as
           operationally responsive space (ORS)-designed to facilitate
           evolutionary development, more testing of technologies before
           acquisition, and ultimately enable DOD to deliver space-based
           capabilities to the warfighter much faster and quicker. While ORS
           investments hold great potential, there are other S&T projects
           competing for the same resources, including those focused on
           discovering and developing technologies and materials that could
           greatly enhance future capabilities, reduce costs, and maintain
           U.S. superiority in space.
           o  Second, DOD could revise policies and processes supporting
           space as needed to adopt the best practices being embraced. For
           example, DOD's space acquisition policy could be further revised
           to ensure that a true evolutionary approach is being pursued and
           that blocks, or increments, will include only technologies that
           have been sufficiently matured. DOD could also implement processes
           and policies, as needed, that stabilize requirements, particularly
           for acquisitions that are being shared with other stakeholders,
           such as the intelligence community, and that ensure warfighters
           are bought into capabilities being pursued for each new system
           increment. In recent years, it has instituted processes for some
           individual systems, such as SBIRS High, that could serve as a
           model.
           o  Third, DOD could continue to address other capacity shortfalls.
           These include shortages of staff with science and engineering
           backgrounds; shortages of experience within the program manager
           workforce; limited opportunities and funding for testing for space
           technologies; and the lack of low-cost launch vehicles. At the
           same time, DOD could continue to work toward strengthening
           relationships between the S&T and acquisition communities and
           coordination within the S&T community. The Under Secretary is
           uniquely positioned to do this given his previous position as
           DOD's Director of Defense Research and Engineering and his
           participation in previous efforts to develop a strategy for space
           S&T.
           o  Fourth, we have recommended that DOD take steps departmentwide
           to hold people and programs accountable when best practices are
           not pursued. This will require DOD to empower program managers to
           make decisions related to funding, staffing, and moving into
           subsequent phases and to match program manager tenure with
           development or delivery of a product. It may also require DOD to
           tailor career paths and performance management systems to
           incentivize longer tenures. Until these actions have been taken,
           space leaders could take steps now to ensure space program
           managers have the right levels of experience to execute large
           programs and have sufficient authority so that they can be held
           accountable. Likewise, DOD's space leaders can take steps to hold
           its contractors accountable by structuring contracts so that
           incentives actually motivate contractors to achieve desired
           acquisition outcomes and withholding award fees when those goals
           are not met.

In closing, we are encouraged with the acquisition approach being embraced
by DOD's space leadership. It can enable DOD to begin to match resources
to requirements before starting new programs and therefore, better
position programs for success. Successful implementation, however, will
hinge on the ability of DOD's current space leaders to instill and sustain
commitment to adopting best practices over the short and long term. In
doing so, best practice approaches should be reflected in policy and
manifested in decisions on individual programs or reform will be blunted.
They should also be accompanied by an investment strategy for space, and
ultimately DOD, to separate wants from needs and to alleviate
long-standing pressures associated with competition within DOD to win
funding. By embracing a model that incorporates all these elements, DOD
can achieve better outcomes for its space programs.

                             Scope and Methodology

In preparing for this testimony, we relied on previously issued GAO
reports on assessments of individual space programs, incentives and
pressures that drive space system acquisition problems, common problems
affecting space system acquisitions, space science and technology
strategy, and DOD's space acquisition policy, as well as our reports on
best practices for weapon systems development. We also analyzed DOD's
Selected Acquisition Reports to assess cost increases and investment
trends. In addition, we met with the Air Force Under Secretary to discuss
his "back to basics" approach. We conducted our review between March 6 and
April 3, 2006 in accordance with generally accepted government auditing
standards.

                          Contacts and Acknowledgments

For future information, please contact Cristina Chaplain at 202-512-4841
or [email protected] . Individuals making contributions to this testimony
include, Art Gallegos, Robert Ackley, Maricela Cherveny, Sharron Candon,
Jean Harker, Leslie Kaas Pollock, and Karen Sloan.

Table 1 highlights recent findings from our reports on cost and schedule
overruns for DOD's current and planned space programs. The table also
notes that many programs are still addressing past mistakes in acquisition
approaches and contractor oversight as well as technical, design, and
manufacturing problems.

Table 1: Highlights of Recent Findings for Current and Planned Space
Programs

Description                     Recent Findings                            
Space Based Infrared System     With unit cost increases of more than      
High (SBIRS High): Ballistic    315-percent over the 1996 initial          
missile warning system being    estimate, the program has undergone four   
developed by the Air Force to   Nunn-McCurdy unit cost breaches. Total     
replace its legacy warning      program costs have increased from about $4 
system.                         billion to more than $10 billion. The      
                                   launch schedule has slipped over 6 years;  
Development                     the first satellite is currently scheduled 
                                   to be delivered in September 2008. DOD     
Start4- October 1996            officials recently called for initiating   
                                   planning efforts for the development of a  
                                   new missile warning system, parallel to    
                                   SBIRS; it is unclear whether this program  
                                   will replace or compete against SBIRS.     
Global Broadcast Service (GBS): Total program costs have increased by      
Part of the overall DOD         72-percent since the contract was awarded  
military satellite              in 1997, largely due to the transition     
communication architecture      from a legacy system architecture to       
being developed by the Air      internet protocol, additional production   
Force for one-way transmission  quantities, and operation and maintenance  
of video, imagery and other     tasks. In June 2005, a quarterly exception 
high-bandwidth information to   selected acquisition report was submitted  
the warfighter.                 to reflect initial operational capability  
                                   delays of six months or more due to a      
Development                     delayed operational test schedule. GBS     
                                   currently uses broadcast payloads on three 
Start- November 1997            Ultra-High Frequency Follow-on (UFO)       
                                   satellites and will use broadcast payloads 
                                   on up to five Wideband Gapfiller           
                                   Satellites (WGS) satellites when they are  
                                   launched.                                  
Evolved Expendable Launch       The program cost has risen over            
Vehicle (EELV): Acquisition of  81-percent, with a cost per unit increase  
commercial launch services from of about 138-percent and triggered a       
two competitive families of     Nunn-McCurdy breach. A chief reason for    
launch vehicles.                cost increases is a decline in the         
                                   commercial launch market upon which the    
Development                     program's business case was based. In      
                                   2005, the two primary contractors agreed   
Start- October 1998             to form a joint venture to combine         
                                   production, engineering, test and launch   
                                   operations for U.S. government launches    
                                   that is under review by the Federal Trade  
                                   Commission.                                
Navstar Global Positioning      Total costs of the GPS II modernization    
System (GPS) Modernization: A   program have increased by over 20-percent, 
space-based radio-positioning   largely due to DOD's decision to delay the 
system that nominally consists  start of the follow-on GPS III program,    
of 24-satellite constellation   which will require DOD to buy additional   
providing navigation and timing GPS IIF satellites. The first GPS IIR-M    
data to military and civilian   satellite with the new military code       
users worldwide.                capability was launched in September 2005. 
                                   A total of 18 satellites with this code    
Development                     need to be on orbit to provide initial     
                                   operational capability to the warfighter   
Start- February 2000            and this number is expected to be reached  
                                   in fiscal year 2011. However, the software 
                                   for the control system needed to support   
                                   the operational capability of these        
                                   satellites will not be operational until   
                                   fiscal year 2012. Thus the satellites on   
                                   orbit with the new military code will not  
                                   be fully utilized.                         
Wideband Gapfiller Satellites   Total program costs increased about        
(WGS): Satellites based almost  70-percent from $1.06 billion in 2000 to   
exclusively on commercial parts $1.81 billion in 2005. The program office  
being developed by the Air      estimates an increase since last year of   
Force to provide interim        about $276.2 million for the program,      
communications support.         largely due to cost growth resulting from  
                                   a production gap between satellites three  
Development                     and four. Launch of the first satellite    
                                   has now been delayed for over 3 years and  
Start- November 2000            is currently scheduled for June 2007. The  
                                   delay will increase costs and add at least 
                                   22 months to the time it takes to obtain   
                                   an initial operational capability from the 
                                   system. The contractor continues to        
                                   experience problems assembling the         
                                   satellites.                                
Advanced Extremely High         Unit cost has increased by about           
Frequency (AEHF):               84-percent. In 2004, the program           
Communications satellite system experienced cost increases of more than    
being developed by the Air      15-percent, which required a Nunn-McCurdy  
Force to replace its legacy     notification to Congress. The program was  
protected communications        restructured in 2004 when key              
satellites.                     cryptographic equipment was not delivered  
                                   to the payload contractor in time to meet  
Development                     the launch schedule. Current plans are to  
                                   meet full operational capability with      
Start- September 2001           three AEHF satellites and the first        
                                   Transformational Satellite Communication   
                                   System (TSAT) satellite, but additional    
                                   AEHF satellites may be acquired if there   
                                   are deployment delays with TSAT.           
Space Tracking and Surveillance Total program costs have increased by      
System (STSS): Two satellites   about 35-percent due to the addition of    
that are going to be launched   funds for designing and developing the     
in 2007 as technology           program's operational constellation. The   
demonstrations for missile      initial increment of this program, which   
defense tests to assess whether started in 2002, is composed of two        
missiles can be effectively     demonstration satellites that were built   
tracked from space.             under the previous Space Based Infrared    
                                   System-Low (SBIRS Low) program. SBIRS Low  
Development                     had incurred cost increases and schedule   
                                   delays and other problems that were so     
Start- Restructured April 2002  severe, DOD abandoned the effort. The STSS 
                                   program has experienced system quality and 
                                   system engineering problems with the       
                                   payload, however, the program office still 
                                   expects early delivery and launch of the   
                                   satellites.                                
National Polar-orbiting         Unit costs increased by about 34-percent,  
Operational Environmental       triggering a Nunn-McCurdy review in        
Satellite System (NPOESS):      January 2006. The launch of the first      
Weather and environmental       satellite has been delayed by at least 17  
monitoring satellites being     months (until September 2010) and could    
developed by the National       result in a gap in satellite coverage of   
Oceanic and Atmospheric         at least 3 years. According to program     
Administration, the National    officials, every aspect of the program is  
Aeronautics and Space           being evaluated by internal and external   
Administration, and DOD to      groups and several options are being       
replace those in use by the     reviewed for technical viability and cost  
agencies.                       effectiveness. The program office noted    
                                   that any changes resulting from this       
Development                     process may produce substantial cost,      
                                   schedule, and technical performance        
Start- August 2002              changes, such as removing a key sensor     
                                   from the first satellite, delaying         
                                   launches of the first two satellites, and  
                                   not launching a preliminary risk-reduction 
                                   satellite.                                 
Transformational Satellite      Total program costs have increased about   
Communications System (TSAT):   3-percent from $15.5 billion in June 2004  
Communication satellites being  to nearly $16 billion in December 2004,    
developed by the Air Force to   and the initial launch of the first TSAT   
employ advanced technologies in satellite has slipped from 2011 to         
support of DOD's future         2014.The TSAT program is currently being   
communication architecture.     restructured to follow an incremental      
                                   development approach-an approach that is   
Program Initiation- January     intended to help it stay within projected  
2004                            costs and provide capabilities to the war  
                                   fighter sooner.                            
Mobile User Objective System    This is a relatively new effort. In June   
(MUOS): Navy effort to develop  2004, DOD delayed the first MUOS satellite 
a family of unprotected,        launch by one year to fiscal year 2010 due 
narrow-band satellites that can to a delay in awarding the development     
support mobile and fixed-site   contract and to mitigate schedule risk. We 
users worldwide.                reported that early procurement of long    
                                   lead items before achieving a stable       
Development                     design for this Navy communications system 
                                   could lead to cost increases and the       
Start- September 2004           program's development schedule remains     
                                   compressed-posing risks should software    
                                   development or other technical or design   
                                   problems be encountered.                   
Planned Programs                
GPS III: Next generation of GPS This is a relatively new effort. Initial   
being developed to add advanced plans were to develop these satellites and 
jam resistant capabilities and  begin launching them in 2012, but DOD has  
provide higher quality and more delayed the start of this program so the   
secure navigational             planned first satellite launch date is now 
capabilities.                   2013. Program officials intend to use an   
                                   incremental development approach for       
Planned Development Start Date- acquiring these satellites. A recent       
Third quarter of fiscal year    Defense Science Board study recommended a  
2007                            30 satellite, three plane constellation    
                                   for GPS III instead of the current 24      
                                   satellite, six plane constellation. The    
                                   same study also recommended that cost and  
                                   weight be key parameters in the design of  
                                   the GPS III satellites, and specifically   
                                   recommended measures to limit GPS III      
                                   weight so that two satellites could be     
                                   launched aboard a medium-class launch      
                                   vehicle.                                   
Space Radar (SR):               This is a relatively new effort with no    
Reconnaissance satellites being reported cost increases or schedule        
developed by the Air Force to   delays. The planned cost estimate is about 
find, identify, track and       $23 billion. A decision to develop         
monitor moving or stationary    on-orbit demonstration satellites to       
targets under all weather       validate technology maturity and cost      
conditions.                     won't be made until 2007. The program is   
                                   undergoing restructure, including a new    
Planned Development Start Date  Integrated Program Office, a new plan for  
-August 2008                    risk reduction activities and revised cost 
                                   estimates, and an acquisition strategy     
                                   that calls for development of a smaller    
                                   constellation of high performing, more     
                                   affordable satellites.                     

4The National Security Space Acquisition Policy specifies that key
decision point B (also referred to as Milestone B by the DOD 5000 series
or Product Development Start by GAO best practice work) is the official
program initiation point when programs develop a formal Acquisition
Program Baseline (APB) and submit Special Acquisition Reports (SAR) to the
Congress.

Source: GAO analysis of DOD data and previous GAO reports.

120541

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www.gao.gov/cgi-bin/getrpt? GAO-06-626T .

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Highlights of GAO-06-626T , a testimony before the Subcommittee on
Strategic Forces, Senate Committee on Armed Services

April 6, 2006

SPACE ACQUISITIONS

Improvements Needed in Space Systems Acquisitions and Keys to Achieving
Them

DOD's space system acquisitions have experienced problems over the past
several decades that have driven up costs by hundreds of millions, even
billions of dollars, stretched schedules by years, and increased
performance risks. GAO was asked to testify on its findings on space
acquisition problems and steps needed to improve outcomes.

What GAO Recommends

GAO does not make recommendations in this testimony. However, GAO
testified that there are steps DOD can take to ensure better outcomes for
its space acquisitions programs. They include developing an overall
investment strategy for space acquisition programs; revising policies
supporting space to incorporate best practices; and addressing human
capital and other shortfalls in capacity.

DOD's space acquisition programs continue to face substantial cost and
schedule overruns. At times, cost growth has come close to or exceeded
100-percent, causing DOD to nearly double its investment in face of
technical and other problems without realizing a better return on its
investment. Along with the cost increases, many programs are experiencing
significant schedule delays-as much as 6 years-postponing delivery of
promised capabilities to the warfighter. Outcomes have been so
disappointing in some cases that DOD has had to go back to the drawing
board to consider new ways to achieve the same capability.

These problems are having a dramatic effect on DOD's space investment
portfolio. Over the next 5 years, there will be about $12 billion less
dollars available for new systems as well as for the discovery of
promising new technologies because of cost growth. And while DOD is
pushing to start new, highly ambitious programs such as the
Transformational Satellite and Space Radar, broader analyses of the
nation's fiscal future indicate that spending for weapon systems may need
to be reduced, rather than increased, to address growing deficits.

GAO has identified a number of causes behind these problems, but several
stand out. First, DOD starts more space and weapons programs than it can
afford, which pressures programs to under estimate costs and over promise
capabilities. Second, DOD starts its space programs too early, that is,
before it is sure the capabilities it is pursuing can be achieved within
available resources and time constraints. DOD has also allowed new
requirements to be added well into the acquisition phase.

DOD has appointed a new leadership to oversee space acquisitions who
havecommitted to adopting practices GAO has recommended for improving
outcomes. These include delegating the maturation of technologies to the
S&T community; adopting an evolutionary development approach in which new
systems would be developed in a series of discrete increments, or blocks;
fund S&T appropriately so that significant technology breakthroughs can be
continually pursued; and improving collaboration on requirements.

Adopting best practices for space acquisitions will not be an easy
undertaking. DOD, as a whole, still operates in an environment that
encourages competition for funding, and thus, behaviors that have been
detrimental to meeting cost and schedule goals. Moreover, the changes
being proposed will require significant shifts in thinking about how space
systems should be developed and changes in incentives. By establishing
investment priorities, embedding best practices in policy, and addressing
capacity shortfalls, DOD can mitigate these challenges and better position
programs for success.
*** End of document. ***