Space Acquisitions: Actions Needed to Expand and Sustain Use of  
Best Practices (19-APR-07, GAO-07-730T).			 
                                                                 
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. DOD has recognized the need to  
change its approach to developing space systems and is attempting
to instill best practices in new efforts. GAO was asked to	 
testify on its findings on space acquisitions problems and steps 
needed to sustain and expand the use of best practices. In	 
preparing this testimony, GAO relied on its detailed reviews of  
space programs as well as cross-cutting work on cost estimating  
and best practices. GAO does not make recommendations in this	 
testimony. However, GAO has made recommendations on steps DOD can
take to ensure better outcomes for its space acquisitions	 
programs. These include developing an overall investment strategy
for acquisition programs, addressing human capital and other	 
shortfalls in capacity, and revising policies supporting space to
incorporate best practices.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-730T					        
    ACCNO:   A68464						        
  TITLE:     Space Acquisitions: Actions Needed to Expand and Sustain 
Use of Best Practices						 
     DATE:   04/19/2007 
  SUBJECT:   Accountability					 
	     Aerospace research 				 
	     Best practices					 
	     Cost analysis					 
	     Cost overruns					 
	     Defense cost control				 
	     Defense procurement				 
	     Procurement planning				 
	     Program evaluation 				 
	     Program management 				 
	     Schedule slippages 				 
	     Strategic planning 				 
	     Cost growth					 
	     Air Force Advanced Extremely High			 
	     Frequency Satellite Program			 
                                                                 
	     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-07-730T

   

     * [1]Space Acquisitions Continue to Face Cost and Schedule Increa
     * [2]Underlying Reasons for Cost and Schedule Growth
     * [3]DOD Is Implementing Best Practices on Two New Efforts
     * [4]Actions Needed to Sustain Commitment to Improvements
     * [5]GAO's Mission
     * [6]Obtaining Copies of GAO Reports and Testimony

          * [7]Order by Mail or Phone

     * [8]To Report Fraud, Waste, and Abuse in Federal Programs
     * [9]Congressional Relations
     * [10]Public Affairs

Testimony before the Subcommittee on Strategic Forces, Senate Committee on
Armed Services

United States Government Accountability Office

GAO

For Release on Delivery
Expected at 2:30 p.m. EDT
Thursday, April 19, 2007

SPACE ACQUISITIONS

Actions Needed to Expand and Sustain Use of Best Practices

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

GAO-07-730T

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 adversaries, and attacks targets. In fiscal
year 2008 alone, DOD expects to spend over $22 billion dollars to develop
and procure satellites and other space systems, including nearly $10
billion on selected 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.

In view of these problems, the Air Force, DOD's primary space system
acquirer, has been attempting to instill best practices in two newer space
programs--Space Radar and the Transformational Satellite Communications
System (TSAT). These steps can help better position the two programs for
success, but they will not work without adhering to commitments to delay
milestone decisions if there are still gaps between requirements and
resources, and to use more robust tools to analyze risks, costs, and
schedule. Moreover, other space programs--new and old--are still facing
setbacks, reflecting problems in technology development or design,
problems in managing contractors, and more broadly, funding shifts needed
to sustain the larger space portfolio. Such setbacks--common among all
weapons acquisitions--continue to hamper the Air Force's ability to
provide resources and support needed to deliver capabilities within cost,
schedule, and performance targets. My testimony today will highlight our
findings on space acquisitions as well as actions needed to address
persistent acquisition problems and to build on best practice approaches
being adopted in Space Radar and TSAT.

1Estimates of fiscal year 2008 spending on procurement and research,
development, test and evaluation, are based on DOD's Fiscal Year 2007
Future Years Defense Program (FYDP) plan. The fiscal year 2008 FYDP plan
was not available to us at the time we developed this testimony.

Space Acquisitions Continue to Face Cost and Schedule Increases

The majority of major acquisition programs in DOD's space portfolio have
experienced problems during the past two decades that have driven up cost
and schedules and increased technical risks. Several programs have been
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 the face of technical and other problems without
realizing a better return on investment. Along with the 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, or
less, capability. Some programs have been able to work through the bulk of
technical problems they were facing and are on track to meet revised
targets, albeit at higher costs and with delayed deliveries. Others,
however, continue to face setbacks.

The following chart compares original cost estimates and current cost
estimates for the broader portfolio of major space acquisitions for fiscal
years 2007 through 2012. The wider the gap between original and current
estimates, the fewer dollars DOD has available to invest in new programs.

Figure 1: Comparison between Original Cost Estimates and Current Cost
Estimates for Selected Major Space Acquisition Programsa for Fiscal Years
2007 through 2012

aIncludes: Advanced Extremely High Frequency (AEHF) satellites, Evolved
Expendable Launch Vehicle (EELV), Global Broadcast Service (GBS), Global
Positioning System II (GPS) , Mobile User Objective System (MUOS),
National Polar-orbiting Operational Environmental Satellite System
(NPOESS), Space Based Infrared System (SBIRS)High, and Wideband Global
SATCOM (WGS).

The next two figures reflect differences in unit costs and total costs for
satellites from the time the programs officially began to their most
recent cost estimate. As the second figure notes, in several cases, DOD
has had to cut back on quantity and capability in the face of escalating
costs. For example, two satellites and four instruments were deleted from
National Polar-orbiting Operational Environmental Satellite System
(NPOESS) and four sensors are expected to have fewer capabilities. This
will reduce some planned capabilities for NPOESS as well as planned
coverage. Likewise, the Space Based Infrared System (SBIRS) High missile
detection program deferred capabilities, such as mobile data processors
for the Air Force and the Army and a fully compliant backup mission
control facility, and it pushed off a decision to procure the third and
fourth satellites, which will not meet SBIRS High requirements for
coverage. Despite such measures, unit costs for both programs are still
considerably higher than originally promised. In addition to SBIRS High
and NPOESS, the programs featured in the figures include the Advanced
Extremely High Frequency (AEHF) satellites, the Wideband Global SATCOM
(WGS) and the Mobile User Objective System (MUOS), which are all
communications satellites, and the Global Positioning System (GPS) II.

Figure 2: Differences in Unit Life Cycle Cost from Key Decision Point
(KDP) B (Program Start) and Most Recent Estimate

Figure 3: Differences in Total Program Costs from Key Decision Point (KDP)
B and Most Recent Estimate

The next chart highlights the additional estimated months needed to
complete programs. These additional months represent time not anticipated
at the programs' start dates. Generally, the further schedules slip, the
more DOD is at risk of not sustaining current capabilities. For this
reason, DOD began an alternative infrared system effort, known as the
Alternative Infrared Satellite System (AIRSS), to run in parallel with the
SBIRS High program.

Figure 4: Additional Months Needed since Program Start

Some programs, such as AEHF and WGS, have worked through the bulk of
technical and other problems that were causing large schedule increases
and cost delays. For example, the AEHF program, which has been in the
final stages of development for almost 3 years, resolved issues related to
its cryptographic equipment and is on track to meet a revised date for
first launch. The WGS program completed rework on improperly installed
fasteners, and contractors have redesigned computers to rectify data
transmission errors. The program expects a first launch in June 2007. As
noted in our figures, the MUOS program, which began more recently than
AEHF and WGS, is generally meeting its targets, though it has yet to enter
into the more difficult stages of satellite production, integration and
test.

By contrast, the SBIRS High program still faces considerable risks. Recent
GAO work for this subcommittee, for example, shows that the program is
diverging from cost and schedule targets just months after rebaselining
due to problems related to assembly, integration, and testing and that the
contractor's estimates for addressing these issues are overly optimistic.
Defense Contract Management Agency reports also show that software
development efforts are behind schedule--by as much as 32 percent. In
addition, the contractor has already spent about 28 percent, or $66
million, of its management reserve from April 2006 to November 2006. This
reserve is designed to last until 2012, but at the current rate, is likely
to be depleted by May 2008. If this trend continues, $500 million in
additional reserve will be needed. As noted earlier, DOD initiated an
alternative effort--AIRSS--to ensure it would have continued capabilities.
However, we have questions as to whether AIRSS is being pursued as a "plan
B" program, as originally envisioned. Rather than seek to maintain
continuity of operations, the program is focused on advancing capabilities
because program managers believe there are no viable alternatives. We also
found that there was disagreement among DOD stakeholders as to whether
there were alternatives or not, and there was concern that the AIRSS
schedule may be too compressed. Our analysis also found that there was a
high degree of concurrency in the program's schedule, which may be
limiting DOD's ability to gain knowledge from planned demonstrations and
increased the potential for costly rework further in the program.

The GPS Block IIF program is also at a high risk of cost increases and
schedule delays. Since our last annual assessment of the GPS Block IIF
program, the program has revised its acquisition program baseline to
account for cost increases and schedule delays, and requested an
additional $151 million to cover these costs. The number of IIF satellites
to be procured was reduced from 19 to 12. Further, the launch date of the
first IIF satellite continues to slip. The original baseline showed an
initial launch availability date of December 2006, but DOD's current
baseline shows July 2009--a slip of about 2.5 years. The program also
learned that the contractor's earned value management reporting system was
not accurately reporting cost and schedule performance data. A DOD report
also recently found that development of user equipment has not been
synchronized with the development of satellites and control system,
increasing the risk of substantial delays in realistic operational testing
and fielding of capabilities. GPS is taking measures to address these
problems. For example, this year, it did not award its contractor $21.4
million in award fees. In December 2005, GAO recommended that DOD improve
its use of award fees for all weapon system contracts by specifically
tying them to acquisition outcomes. A review of a sample of programs,
including SBIRS High, found that this was generally not done.

The NPOESS program is also still at risk of more cost increases and
schedule delays. In June 2006, DOD certified the NPOESS program to
Congress, and with agreement from its program partners, DOD restructured
the program. Now the NPOESS program acquisition costs are estimated to be
about $11.5 billion--an increase of about $3 billion over the prior cost
estimate. Before the contract was awarded, in 2002, the life cycle cost
for the program was estimated to be $6.5 billion over the 24-year period
from the inception of the program in 1995 through 2018. The delivery of
the first two NPOESS satellites has been delayed by roughly 4 and 5 years,
and as noted earlier, the number of satellites to be produced has been
reduced from six to four. In addition, the number of instruments was
reduced from 13 (10 sensors and 3 subsystems) to 9 instruments (7 sensors
and 2 subsystems), and 4 of the remaining sensors will have fewer
capabilities. The NPOESS program will incorporate any number of the
deleted instruments if additional funding is provided from outside the
NPOESS program. The program restructure will result in reduced satellite
data collection coverage, requiring dependence on a European weather
satellite for coverage during midmorning hours. Although the program has
reduced the number of satellites it will produce, the cost per satellite
is more than 150 percent above the original approved program baseline. The
NPOESS program is now updating the cost, schedule, performance baselines
and acquisition strategy, and coordinating the changes with the three
agencies. The program expects these documents to be approved later this
year. While work is continuing on key sensors, the program still faces
potential problems in their development.

The Space Based Space Surveillance System (SBSS) system--not featured on
the charts above because it is not yet a formal acquisition program-- is
also encountering problems. The SBSS system is to replace an aging sensor
on an orbiting research and development satellite and improve the
timeliness of data on objects in geosynchronous orbit. As currently
planned, the initial block will consist of a single satellite and
associated command, control, communications, and computer equipment.
Subsequent SBSS efforts will focus on building a larger constellation of
satellites to provide worldwide space surveillance of smaller objects in
shorter timelines. In late 2005, an independent review team found that the
program's baseline was not executable; that the assembly, integration, and
test plan was risky; and that the requirements were overstated. The SBSS
program was restructured in early 2006 due to cost growth and schedule
delays. The restructuring increased funding and schedule margin;
streamlined the assembly, integration, and test plan; and relaxed
requirements. The launch of the initial satellite was delayed to April
2009--a delay of about 18 months. Cost growth due to the restructure is
about $130 million over initial estimates.

Last, additional cost increases are expected for the Evolved Expendable
Launch Vehicle (EELV) program, but for reasons that are different than the
ones being experienced on the satellite programs. In recent years, program
cost has risen 79 percent, with a cost per unit increase of 135 percent. A
chief reason for cost increases is a decline in the commercial launch
market upon which the program's business case was based. Cost increases
are also a result of additional program scope, including mission
assurance, assured access to space, and earned value management systems
reporting. In addition, satellite vehicle weight growth and satellite
launch delays have contributed to cost increases. In December 2006, Boeing
and Lockheed Martin initiated a joint venture (United Launch Alliance, or
ULA) that will combine the production, engineering, test, and launch
operations associated with U.S. government launches of Boeing Delta and
Lockheed Martin Atlas rockets. Though the EELV program office expects
long-term savings to be achieved through this arrangement, the cost per
launch under a recently negotiated Buy III acquisition strategy will be
higher than under Buy I. According to the Air Force, this is because the
contractors will incur additional costs to allow the government to perform
the necessary oversight not required under Buy I. (Exact estimates of the
new cost per launch have not been finalized by the program office yet.)
Under the new strategy, EELV will be transitioning from a fixed-price
arrangement, where launches were essentially procured as a service, to a
combination of a cost-plus and fixed-price contracts. The arrangement will
allow the government to exercise more oversight and to incentivize
contractors through the use of award fees. But to realize these benefits,
the Air Force will need to ensure it has resources (skills, expertise, and
tools) to begin accumulating and analyzing detailed cost, schedule,
performance, design, and technical data. In addition, it will be important
to assess progress in achieving longer-term savings envisioned under ULA
as well as to ensure that the combined assets of the contractors are
adequately protected.

Underlying Reasons for Cost and Schedule Growth

Our past work has identified a number of causes behind the cost growth and
related problems, but several consistently stand out. First, on a broad
scale, DOD starts more weapon programs than it can afford, creating a
competition for funding that encourages low cost estimating, optimistic
scheduling, overpromising, suppressing of 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 is forced to continually shift funds to and from
programs--particularly as programs experience problems that require
additional time and money to address. Such shifts, in turn, have had
costly, reverberating effects.

Figure 5 illustrates the negative cycle of incentives that come when
programs compete for funding. Table 1 highlights specific areas where we
found the original cost estimates of programs to be optimistic in their
assumptions.

Figure 5: Pressures Associated when Too Many Programs Are Competing for
Funding

Table 1: Areas where Space Programs Were Too Optimistic in Their Cost
Estimate Assumptions

                                                  Space programs affected
                                                         GPS                
Optimistic assumptions                      AEHF EELV IIF NPOESS SBIRS WGS
Industrial base would remain constant and              r    r      r   r r 
available                                                                  
Technology would be mature enough when          r           r      r   r r 
needed                                                                     
Acquisition reform efforts (implemented via            r    r      r   r   
Total System Performance Responsibility                                    
policy) would reduce cost and schedule                                     
Savings would occur from experience on          r                  r   r r 
heritage systems                                                           
No weight growth would occur                    r                  r   r r 
Funding stream would be stable                  r           r      r   r   
An aggressive schedule could be met             r                  r   r r 
No growth in requirements                       r           r          r   

Source: [11]GAO analysis.

Note: This table was developed as part of a larger review on DOD's space
cost-estimating function. Information was derived from discussions with
program and contractor officials and GAO analysis. In some cases, programs
may have ultimately experienced problems related to one of the categories,
but we did not have evidence to show that the original assumptions were
optimistic.2

Second, as we have previously testified and reported, DOD has tended to
start its programs too early, that is before it has the 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 technologies. Nevertheless, when DOD chooses to extend
technology invention into acquisition, programs experience technical
problems that require large amounts of time and money to fix. Moreover,
when the approach is followed, cost estimators are not well positioned to
develop accurate cost estimates because there are too many unknowns. Put
more simply, there is no way to estimate how long it would take to design,
develop, and build a satellite system when critical technologies planned
for that system are still in relatively early stages of discovery and
invention.

A companion problem for space systems is that programs have historically
attempted to satisfy all requirements in a single step, regardless of the
design challenge or the maturity of the technologies necessary to achieve
the full capability. Increasingly, DOD has preferred to make fewer but
heavier, larger, and more complex 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 current capabilities in some cases and vastly
increased the complexities related to software--a problem that affected
SBIRS High and AEHF, for example.

2GAO, Space Acquisitions: DOD Needs to Take More Action to Address
Unrealistic Initial Cost Estimates of Space Systems, GAO-07-96,
(Washington, D.C.: Nov. 17, 2006).

In addition, several of the space programs discussed above began in the
late 1990s, when DOD structured contracts in a way that reduced government
oversight and shifted key decision-making responsibility onto contractors.
This approach--known as Total System Performance Responsibility, or
TSPR--was intended to facilitate acquisition reform and enable DOD to
streamline a cumbersome acquisition process and leverage innovation and
management expertise from the private sector. However, DOD later found
that this approach magnified problems related to requirements creep and
poor contractor performance. In addition, under TSPR, the government
decided not to obtain certain cost data, a decision that resulted in the
government having even less oversight of the programs and limited
information from which to manage the programs. Further, the reduction in
government oversight and involvement led to major reductions in various
government capabilities, including cost-estimating and systems-engineering
staff. The loss of cost-estimating and systems-engineering staff in turn
led to a lack of technical data needed to develop sound cost estimates.

DOD Is Implementing Best Practices on Two New Efforts

Over the past decade, GAO has examined successful organizations in the
commercial sector to identify best practices that can be applied to space
and weapon system acquisitions. This work has identified a number of
practices, which we have recommended that DOD adopt. Generally, 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 demonstrable
knowledge to make decisions to move to next phases. DOD is making efforts
to instill these practices on two programs reviewed this year: the
Transformational Satellite Communications System and the Space Radar
program. Specifically:

           o Successful organizations we have studied ensure that
           technologies are mature, that is, proven to work as intended
           before program start. Both TSAT and Space Radar are attempting to
           do this. According to their plans, critical technologies should
           reach at least a Technology Readiness Level (TRL) 6 by program
           start, meaning the technologies have been tested in a relevant
           environment. This stands in sharp contrast to previous programs,
           which have started with immature technologies, such as SBIRS and
           NPOESS, and it reflects the implementation of a "back to basics"
           policy advocated this past year by the Under Secretary of the Air
           Force. If these programs adhere to the TRL 6 criteria, they will
           greatly reduce the risk of encountering costly technical delays,
           though not completely. There are still significant inherent risks
           associated with integrating critical technologies and with
           developing the software needed to realize the benefits of the
           technologies. Moreover, the best practice programs we have studied
           strive for a TRL 7, where the technology has been tested in an
           operational environment, that is, space.

           o Successful organizations defer more ambitious technology efforts
           to corporate research departments (equivalent to science and
           technology (S&T) organizations in DOD) until they are ready to be
           added to future increments. Both programs have deferred more
           ambitious technology development efforts to the science and
           technology environment. TSAT, for example, deferred the wide-field
           of view multi-access laser communication technology, and is
           contributing about $16.7 million for "off-line" maturation of this
           technology that could be inserted into future increments. It has
           laid out incremental advances in other capabilities over two
           increments. Space Radar has deferred lithium-ion batteries, more
           efficient solar cells, and onboard processing for its first
           increment, and like TSAT, is contributing toward their development
           by S&T organizations. At this time, Space Radar has not defined
           details of an increment beyond the first one.

           o Successful organizations extensively research and define
           requirements before program start to ensure that they are
           achievable, given available resources, and that they do not define
           requirements after starting programs. Both programs have also
           employed systems engineers to help determine achievability of
           requirements. The TSAT program has reached agreement on
           requirements with its users--primarily in terms of what will be
           included in the first several blocks of the program and what will
           not be included. The Space Radar program has instituted several
           processes designed to achieve consensus on requirements across a
           range of diverse users. It still needs to formalize agreements
           related to these processes and also identify key performance
           parameters. This is important because Space Radar is to be shared
           by the military and intelligence communities--each with different
           specific needs for the system and very specific roles and
           responsibilities with regard to the data being produced by Space
           Radar and its users. It has been reported recently that conflicts
           in roles and responsibilities have arisen on dissemination of data
           being produced by a small tactical satellite (TacSat 2) recently
           launched by DOD for use by military commanders.

It remains to be seen whether TSAT and Space Radar will take additional
steps that successful organizations take to position programs for success.
For example:

           o The organizations we have studied do not go ahead with program
           start milestone decisions if there are still gaps between
           requirements and resources. TSAT and Space Radar have indicated
           that they intend to do the same, but there are external pressures
           on both programs to provide needed capabilities.

           o The organizations we have studied hold program managers
           accountable for their estimates and require program managers to
           stay with a project to its end. We have made recommendations to
           DOD to instill similar practices departmentwide, but these have
           yet to be implemented. Further, there are still incentives in
           place to keep program managers' tenures relatively short.
           Promotions, for example, often depend on having varied management
           experience rather than sustained responsibility for one program.

           o The organizations we studied have developed common templates and
           tools to support data gathering and analysis and maintain
           databases of historical costs, schedule, quality, test, and
           performance data. Cost estimates themselves are continually
           monitored and regularly updated through a series of gates or
           milestone decisions that demand programs assess readiness and
           remaining risk within key sectors of the program as well as
           overall cost and schedules. We saw indications that TSAT and Space
           Radar were using more robust tools to analyze risks, costs, and
           schedule than programs have done in the past. However, it remains
           to be seen how these practices will be reflected in official cost
           estimates. In the past, we have found space program estimates were
           simply too optimistic and that independent estimates produced by
           DOD's Cost Analysis Improvement Group were not being used. DOD
           agreed with our findings and asserted it was taking actions to
           address them.

Actions Needed to Sustain Commitment to Improvements

The Air Force's continued efforts to instill best practices on Space Radar
and TSAT are good first steps toward addressing acquisition problems in
the space portfolio. They represent significant shifts in thinking about
how space systems should be developed as well as commitment from senior
leadership. But sustaining these reforms will not be easy. The programs
are not immune to funding pressures that have encouraged too much
optimism. They are also being undertaken as DOD is addressing shortfalls
in critical technical, business, and program management skills. Further,
processes and policies key to sustainment and broader use of best
practices have not been changed to further reflect the kinds of changes
taking place on Space Radar and TSAT.

First, new programs still must compete for limited funding. As DOD seeks
to fund Space Radar and TSAT, it will be (1) undertaking other new, costly
efforts, including GPS III, SBSS, and AIRSS; (2) addressing cost overruns
associated with programs like SBIRS High and GPS; and (3) facing increased
pressures to increase investments in assets designed to protect space
systems. In total, these efforts will increase DOD's investment for all
major space acquisitions from $6.31 billion to $9.22 billion, or about 46
percent over the next 3 years. More may be needed if technical, software,
and other problems on current programs worsen. At the same time,
investment needs for other weapon systems are also on the rise, while
long-term budget forecasts indicate that considerably fewer dollars will
be available for discretionary spending in coming years rather than more.

In prior reports, we have stated that as long as too many programs compete
for too few dollars in DOD, programs will be incentivized to produce
optimistic estimates and suppress bad news. They will view success as
securing the next installment of funds versus delivering capability within
cost and schedule goals. We have recommended that DOD guide its decisions
to start space and other weapons acquisition programs with an overall
investment strategy that would identify priorities for funding so that
space systems that are expected to play a critical role in transformation,
such as Space Radar and TSAT, could be prioritized along with other legacy
and transformational systems.

Let me take a moment to illustrate why an investment strategy is critical.
We have reported in the past that DOD and the Air Force have waited too
long to establish priorities or make trade-off decisions. We have also
reported that frequent funding shifts have hurt programs that were
performing well or further damaged troubled programs. We have also
reported cases where DOD and the Air Force have walked away from
opportunities to save costs in lot buys or leverage knowledge already
gained in legacy programs in favor of starting new programs that promise
much more advanced capability but have little knowledge to back up that
promise. Today, DOD is on track to cut short the AEHF program in order to
pursue TSAT. It has stated it may also do the same for SBIRS to pursue
AIRSS. In both cases, DOD would be forgoing savings that it had already
negotiated for lot buys and in effect, paying significantly more for
nonrecurring engineering. While these decisions have the potential to
enable DOD to obtain advanced capability sooner (provided best practices
are followed on the new programs), they should have been made much earlier
and more strategically in order to stem investment losses.

DOD's own reports recognize that investment planning needs to be instilled
in weapon acquisitions. A February 2007 report, in response to a
requirement in the John Warner National Defense Authorization Act for
Fiscal Year 2007, outlines steps that DOD is taking to better prioritize
and fund programs.3 The initiatives include (1) establishing a new concept
decision review to provide decision makers with an early opportunity to
evaluate trade-offs among alternative approaches to meeting a capability
need, (2) testing portfolio management approaches in selected capability
areas to facilitate more strategic choices about how to allocate resources
across programs, and (3) capital budgeting as a potential means to
stabilize program funding. While these developments are promising, we
recently reported that such initiatives do not fundamentally change DOD's
existing service-centric framework for making weapon system investment
decisions.4 Moreover, it will take some time to determine their success in
enabling more effective funding prioritization.

Second, space programs are facing capacity shortfalls. These include
shortages of staff with science and engineering backgrounds as well as
staff with program management and cost estimating experience. During our
review this year, the TSAT program cited shortages of space acquisition
personnel as a key challenge that increases risk for the program. Due to
broader Air Force cuts in workforce, the program did not expect to be able
to fill technical positions needed to accompany plans to ramp up spending.
During our review of DOD's space cost estimating function, Air Force space
cost estimating organizations and program offices said that they believed
their cost-estimating resources were inadequate to do a good job of
accurately predicting costs. Because of the decline in in-house
cost-estimating resources, space program offices and Air Force
cost-estimating organizations are now more dependent on support
contractors. At 11 of 13 program offices we informally surveyed,
contractors accounted for 64 percent of cost-estimating personnel. This
reliance raised questions from the cost-estimating community about whether
numbers and qualifications of government personnel were sufficient to
provide oversight of and insight into contractor cost estimates. In
addition to technical and cost estimating skills, DOD and GAO studies have
also pointed to capacity shortfalls in program management. According to
DOD's Young Panel report, government capabilities to lead and manage the
space acquisition process have seriously eroded, in part because of
actions taken in the acquisition reform environment of the 1990s. During
our 2005 review of program management, we surveyed DOD's major weapon
system program managers and interviewed program executive officers, who
similarly pointed to critical skill shortages in program management,
systems engineering, and software development. The Air Force and DOD
recognize these shortfalls and are taking actions to address them, but
these will take time to implement. It is important that in the interim,
the Air Force identify and take steps to grow or retain skill sets that
should be organic, such as highly specialized knowledge of certain
military space technologies. During both our cost estimating and space
system reviews, program officials noted that it can take several years for
new technical staff to build knowledge and skills unique to military
space.

3Department of Defense, Defense Acquisition Transformation Report to
Congress (Washington, D.C., 2007).

4GAO, Best Practices: An Integrated Portfolio Management Approach to
Weapon System Investments Could Improve DOD's Acquisition Outcomes,
[12]GAO-07-388 (Washington, D.C.: March 30, 2007).

Our past work has also pointed to capacity shortfalls that go beyond
workforce. For example, in 2006, we reported that cost estimation data and
databases are incomplete, insufficient, and outdated. And in our testimony
last year, we pointed to limited opportunities and funding for space
technologies, and the lack of low-cost launch vehicles. It is our
understanding that the Air Force and DOD are working to address all of
these shortfalls. Budget plans show, for example, an increase of nearly
$11 million in funding for the space test program beginning in 2009--
about 23 percent.

Last, policies that surround space acquisition need to be further revised
to ensure best practices are instilled and sustained. For example, DOD's
space acquisition policy does not require that programs such as TSAT and
Space Radar achieve a TRL 6 or higher for key technologies before being
formally started (KDP B). Instead, it is suggested that TRL 6 be achieved
at preliminary decision review (KDP C) or soon after. Given that there are
many pressures and incentives that are driving space and other weapon
programs to begin too early and to drive for dramatic rather than
incremental leaps in capability, DOD needs acquisition policies that
ensure programs have the knowledge they need to make investment decisions
and that DOD and Congress have a more accurate picture of how long and how
much it will take to get the capability that is being promised. In
addition, although the policy requires that independent cost estimates be
prepared by bodies outside the acquisition chain of command, it does not
require that they be relied upon to develop program budgets. Officials
within the space cost estimating community also believed that the policy
was unclear in defining roles and responsibilities for cost estimators. We
continue to recommend changes be made to the policy--not only to further
ingrain the shift in thinking about how space systems should be developed,
but to ensure that the changes current leaders are trying to make can be
sustained beyond their tenure.

In closing, we support efforts to instill best practices on programs like
Space Radar and TSAT. They are critical to enabling DOD to break the cycle
of space acquisition problems by matching resources to requirements before
program start. We encourage DOD to build on this momentum by extending a
best practice approach to its entire space portfolio. For newer efforts,
such as AIRSS, this means reexamining requirements and alternative means
of satisfying those requirements and clarifying the true purpose of the
program. For current programs, such as SBIRS, this means continuing to
track risks and dedicating resources necessary to mitigate those risks,
leveraging management tools such as earned value management analyses, and
finding ways to incentivize contractors to perform well. For the broader
portfolio, this means ensuring programs have all the right resources to
enable success. These include adequate levels of funding accompanied by
short- and long-term investment plans, adequate skills and capabilities,
as well as data, policy, and processes, accountability and leadership
support.

Appendix I: Scope and Methodology

In preparing for this testimony, we relied on previously issued GAO
reports on assessments of individual space programs, common problems
affecting space system acquisitions, and DOD's space acquisition policy.
We also relied on our best practices studies, which have examined
pressures and incentives affecting space system acquisition programs, the
optimal levels of knowledge needed to successfully execute programs, and
complementary management practices and processes that have helped
commercial and DOD programs to reduce costs and cycle time. In addition,
we analyzed DOD's Selected Acquisition Reports to assess cost increases
and investment trends. We conducted our review between March 19 and April
13, 2007 in accordance with generally accepted government auditing
standards.

Appendix II: Contacts and Acknowledgments

For in information, please contact Cristina Chaplain at 202-512-4841 or
[email protected] . Individuals making contributions to this testimony
include, Art Gallegos, Jeff Barron, Tony Beckham, Noah Bleicher, Greg
Campbell, Maricela Cherveny, Claire Cyrnak, Jean Harker, and Rich
Horiuchi.

Appendix III

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

Description                   Recent findings                              

Current programs              

Space Based Infrared System   With unit cost increases of more than 315    
High (SBIRS-High): Ballistic  percent, the program has undergone four      
missile detection system      Nunn-McCurdy reviews. Total program costs    
being developed by the Air    have increased from $4 billion to more than  
Force to replace its legacy   $10 billion. The launch schedule has slipped 
detection system.             at least 6 years; the first satellite is     
                                 currently scheduled to launch not earlier    
Development                   than October 2008. Several program elements  
                                 that were problematic before the restructure 
Start: October 1996 a         continue to pose risks for the program.      
                                 SBIRS High faces challenges in software      
                                 development and remains at risk of failing   
                                 to meet cost and schedule goals. The total   
                                 program cost is still not accounted for, in  
                                 part because of deferred capabilities, and   
                                 the contractor management reserve funds are  
                                 not sustainable at the current rate of       
                                 expenditure. In all likelihood, management   
                                 reserve dollars will need to be increased.   
                                 DOD officials recently began efforts to      
                                 develop a viable competing capability in     
                                 parallel with the SBIRS High program, known  
                                 as the Alternative Infrared Satellite System 
                                 (AIRSS). AIRSS is being designed in part to  
                                 provide an alternative to the SBIRS GEO 3    
                                 satellite. DOD awarded contracts to Raytheon 
                                 and Science Applications International       
                                 Corporation for sensor assembly development  
                                 for AIRSS.                                   

Global Broadcast Service      Program funding increased by over $100       
(GBS): Part of the overall    million for fiscal years 2008 through 2013   
military satellite            as a result of a decision to implement a new 
communication architecture    GBS architecture. The new architecture is to 
developed by the Air Force    be implemented beginning in fiscal year      
for one-way transmission of   2008, and will use existing defense programs 
video, imagery, and other     and computing centers to host GBS broadcast  
high-bandwidth information to content. A revised acquisition program       
the warfighter.               baseline is being developed to address the   
                                 unit cost increase. GBS currently uses       
Development                   broadcast payloads on two Ultra-High         
                                 Frequency Follow-on (UFO) satellites and     
Start: November 1997          three leased commercial satellite            
                                 transponders, and starting in fiscal year    
                                 2008, the constellation of five Wideband     
                                 Global SATCOM (WGS) satellites will also     
                                 carry GBS.                                   

Evolved Expendable Launch     The program cost has risen 79 percent, with  
Vehicle (EELV): Acquisition   a cost per unit increase of 135 percent, and 
of commercial launch services triggered a Nunn-McCurdy breach. A chief     
and associated infrastructure reason for cost increases is a decline in    
from two competitive families the commercial launch market upon which the  
of launch vehicles.           program's business case was based. In        
                                 December 2006, Boeing and Lockheed Martin    
Development                   initiated a joint venture (United Launch     
                                 Alliance, or ULA) that will combine the      
Start: October 1998           production, engineering, test, and launch    
                                 operations associated with U.S. government   
                                 launches of Boeing Delta and Lockheed Martin 
                                 Atlas rockets. The EELV program office is    
                                 budgeting for ULA savings (estimated at $150 
                                 million per year) that are to appear         
                                 starting in fiscal year 2011. The cost per   
                                 launch under the new Buy III acquisition     
                                 strategy will likely be higher than under    
                                 Buy I because the contractors will incur     
                                 additional costs to allow the government to  
                                 perform the necessary oversight not required 
                                 under Buy I. The contractors will incur      
                                 additional costs due to added program scope  
                                 (mission assurance, assured access to space, 
                                 and earned value management systems          
                                 reporting) and necessary government          
                                 oversight not required under Buy I. The      
                                 program office is revising the life cycle    
                                 cost estimate and acquisition program        
                                 baseline to reflect the transition from      
                                 Milestone II to Milestone III (production)   
                                 and incorporate the Buy III strategy and     
                                 contract structure. The expected completion  
                                 is summer 2007.                              

Global Positioning System     Total costs of the GPS II modernization      
(GPS) Modernization: A        program have increased by over 20 percent,   
space-based radio-positioning largely due to adding requirements after the 
system that nominally         contract award and using a contracting       
consists of a 24-satellite    approach that gave the contractor for the    
constellation providing       IIF satellites and control system full       
navigation and timing data to responsibility for the life cycle of the     
military and civilian users   program and allowed parallel development and 
worldwide.                    production efforts. The program requested    
                                 approximately $151 million in funds to be    
Development                   reprogrammed this year and did not award the 
                                 contractor $21.4 million in 2006 available   
Start: February 2000          award fees. The first IIF satellite          
                                 available for launch date has slipped about  
                                 2.5 years. The original program baseline had 
                                 the available for launch date of December    
                                 2006, but DOD's recent approval of a revised 
                                 baseline now shows July 2009 as the latest   
                                 available date. That baseline also calls for 
                                 the procurement of only 12 IIF satellites,   
                                 rather than the planned 19. The reduced      
                                 number of IIF satellites and a possible      
                                 increase in reprogrammed funding will        
                                 increase unit cost.                          

Wideband Global SATCOM (WGS): Total program costs have increased by more   
Previously known as Wideband  than 80 percent--increasing from $1.10       
Gapfiller Satellites and      billion in late 2000 to $2.01 billion in     
originally conceived to       2005 and reflect the purchase of two         
augment the near-term         additional satellites. In October 2006, the  
bandwidth gap in warfighter   Air Force awarded a $1.07 billion fixed      
communications needs. The Air price incentive fee with firm target         
Force is considering a        contract to Boeing Satellite Systems for     
three-block approach for      developing the Block 2 WGS satellites, or    
fielding WGS, which is to     satellites 4 and 5, with an unfunded option  
provide high data-rate        for WGS 6. Satellites 4 and 5 will have      
military satellite            enhanced capacity for supporting airborne    
communication services. Block intelligence, surveillance, and              
1 includes the first three    reconnaissance users and will complete the   
satellites.                   currently planned WGS constellation. The     
                                 program has made progress in integrating and 
Development                   testing the first satellite. For example,    
                                 rework on improperly installed fasteners is  
Start: November 2000          complete, and the contractor redesigned      
                                 computers to correct data transmission       
                                 errors. The program office conducted         
                                 low-level signal testing associated with     
                                 satellite launch and completed               
                                 interoperability testing on the first        
                                 satellite, in preparation for a June 2007    
                                 launch.                                      

Advanced Extremely High       Unit cost has increased by 78 percent. In    
Frequency (AEHF):             2004, the program experienced cost increases 
Communications satellite      of more than 15 percent, which required a    
system being developed by the Nunn-McCurdy notification to Congress. The   
Air Force to replace its      program was restructured in 2004 when key    
legacy protected              cryptographic equipment was not delivered to 
communications satellites.    the payload contractor in time to meet the   
                                 launch schedule. Although the AEHF program   
Development                   has overcome hurdles that plagued the        
                                 program through development, it still has to 
Start: September 2001         complete first-time integration and testing  
                                 of a very complex satellite. The program     
                                 expects to conduct thermal vacuum testing in 
                                 the fall of 2007. Current plans are to meet  
                                 full operational capability with three AEHF  
                                 satellites and the first Transformational    
                                 Satellite Communication System (TSAT)        
                                 satellite.                                   

Space Tracking and            Total program costs have increased by 35     
Surveillance System (STSS):   percent due to the addition of funds for     
Two satellites to be launched designing and developing the program's       
in 2007 as technology         operational constellation. As of 2006, total 
demonstrations for missile    program cost is estimated at almost $4.7     
defense tests to assess       billion. The initial increment of this       
whether missiles can be       program, which started in 2002, is composed  
effectively tracked from      of two demonstration satellites that were    
space.                        built under the previous Space Based         
                                 Infrared System-Low (SBIRS-Low) program.     
Development                   SBIRS-Low had incurred cost increases and    
                                 schedule delays and other problems that were 
Start: Restructured April     so severe, DOD abandoned the effort. The     
2002                          program office completed thermal vacuum      
                                 testing on the first demonstration           
                                 satellite's space vehicle. Test results show 
                                 performance of the integrated space vehicle  
                                 within specifications. However, the STSS     
                                 program has experienced quality issues at    
                                 the payload subcontractor, and technical     
                                 difficulties encountered by the prime        
                                 contractor during payload integration and    
                                 testing contributed to STSS's unfavorable    
                                 cost and schedule variances of $163.7        
                                 million and $104.4 million respectively. A   
                                 portion of the unfavorable cost and schedule 
                                 variance is related to work that does not    
                                 contribute to the demonstration satellite    
                                 effort. The program office expects to launch 
                                 both satellites in 2007. The Missile Defense 
                                 Agency (MDA) plans to initiate an effort to  
                                 build the next generation of satellites, and 
                                 the program office intends to award a        
                                 contract for the follow-on constellation in  
                                 the fall. If the contract is awarded in the  
                                 fall, the follow-on satellites are to be     
                                 launched in 2016 or 2017, resulting in a     
                                 potential coverage gap of 5 to 6 years.      

National Polar-orbiting       Unit costs increased by about 34 percent,    
Operational Environmental     triggering a Nunn-McCurdy review in January  
Satellite System (NPOESS):    2006. The revised program acquisition cost   
Weather and environmental     estimate is about $11.5 billion despite the  
monitoring satellites being   reduction of total satellites. As part of    
developed by the National     the mandatory certification process, the     
Oceanic and Atmospheric       program was restructured and will only       
Administration, the National  include the development of four satellites,  
Aeronautics and Space         down from six, and the deletion of a         
Administration, and DOD to    critical sensor. However, the program now    
replace those in use by the   includes the development of a competition    
agencies.                     for a new replacement sensor that will       
                                 coincide with the second developmental       
Development                   satellite. The launch of the first satellite 
                                 has been delayed by at least 45 months from  
Start: August 2002            contract award, and is now planned for early 
                                 2013.                                        

Mobile User Objective System  In June 2004, DOD delayed the first MUOS     
(MUOS): Navy effort to        satellite launch by 1 year to fiscal year    
develop a family of           2010 due to a delay in awarding the          
unprotected, narrow-band      development contract and to mitigate         
satellites that can support   schedule risk. MUOS development has become   
mobile and fixed-site users   time-critical due to the failures of two UHF 
worldwide.                    Follow-On satellites, one in June 2005 and   
                                 another in September 2006. In June 2008,     
Development                   narrow-band communications capabilities are  
                                 expected to drop below those required and    
Start: September 2004         may remain degraded until the first MUOS     
                                 satellite is available for operations in     
                                 March 2010. According to the program         
                                 manager, accelerating the MUOS schedule is   
                                 not an option because of the production,     
                                 integration and test activities that must    
                                 take place prior to launch. DOD is examining 
                                 options for addressing a communications      
                                 capability gap. Additionally, development    
                                 problems encountered under the Joint         
                                 Tactical Radio System (JTRS) program have    
                                 resulted in deferrals of requirements and    
                                 the increased risk of underutilization of    
                                 MUOS capabilities until MUOS-compliant JTRS  
                                 terminals are fielded. According to the      
                                 program office, MUOS must maintain its       
                                 schedule each spacecraft will help mitigate  
                                 the UFO availability gap until JTRS          
                                 terminals are fielded.                       

Planned programs              

Alternative Infrared          As a result of the Nunn-McCurdy              
Satellite System (AIRSS): The certification for the SBIRS High program,    
Air Force's AIRSS effort is   the Under Secretary of Defense for           
to provide a missile warning  Acquisition, Technology, and Logistics       
capability while also         directed the DOD Executive Agent for Space   
supporting missile defense,   to plan for a new program for space-based    
battlespace awareness, and    infrared capabilities that will pursue an    
technical intelligence.       approach with acceptable technical risk and  
                                 can ensure a launch availability date of     
Planned development start     fiscal year 2015. However, AIRSS is not      
date: Early third quarter     being pursued as a "plan B" for the SBIRS    
fiscal year 2008              program, as originally envisioned. Rather    
                                 than seeking to maintain continuity of       
                                 operations, the effort is focused on         
                                 advancing capabilities under highly          
                                 compressed time-frames. There is             
                                 disagreement within DOD about the likelihood 
                                 of meeting the target delivery date of 2015. 
                                 Results from the on-orbit demonstration      
                                 satellite will not be ready in time to fully 
                                 inform the development of the first AIRSS    
                                 satellite, and AIRSS officials plan to award 
                                 system contracts before data from key        
                                 on-orbit testing is completed. The latest    
                                 cost estimate for the effort through fiscal  
                                 year 2013 is over $3.3 billion; there is no  
                                 full estimate because the system is still    
                                 undefined.                                   

GPS III: Next generation of   Initial plans were to develop a new version  
GPS satellites and a new      of GPS that would add advanced jam-resistant 
control system (OCX) is to be capabilities and provide higher- quality and 
acquired using the block      more secure navigation capabilities.         
approach.                     However, the first block of GPS III          
                                 satellites will have baseline capabilities,  

Planned development start     with a launch date of 2013 for the first     
date: First quarter of 2008   satellite; second and third blocks will      
for satellites and fiscal     introduce new capabilities. Ongoing cost     
year 2007 for OCX             increases and schedule delays with the       
                                 control system for the GPS modernized        
                                 satellites (IIR-M and IIF) resulted in       
                                 reallocating requirements to the OCX. If the 
                                 first GPS III does not launch by 2013,       
                                 constellation sustainment will be at risk.   

Space-Based Space             The SBSS system is to replace an aging       
Surveillance (SBSS): Optical  sensor on an orbiting research and           
sensing satellites being      development satellite and improve the        
developed to search, detect,  timeliness of data on objects in             
and track objects in Earth    geosynchronous orbit. As currently planned,  
orbit.                        the initial block (Block 10) will consist of 
                                 a single satellite and associated command,   

Planned development start     control, communications, and computer        
date: Second quarter of       equipment. Subsequent SBSS efforts, referred 
fiscal year 2010              to as Block 20, will focus on building a     
                                 larger constellation of satellites to        
                                 provide worldwide space surveillance of      
                                 smaller objects in shorter timelines. In     
                                 early 2006, the effort was restructured due  
                                 to schedule delays and cost growth on Block  
                                 10 development efforts. The restructuring    
                                 increased funding and schedule margin;       
                                 streamlined the assembly, integration, and   
                                 test plan; and relaxed requirements. The     
                                 launch date for the Block 10 satellite has   
                                 been delayed about 18 months--to April 2009. 
                                 Cost has increased by about $130 million     
                                 over initial estimates.                      

Space Radar (SR): Satellites  Program estimates for total funding range    
being developed to provide    from $20 billion to $25 billion. In November 
global, persistent,           2006, the program revised its critical       
all-weather, day- and -night, technologies, and although the technology    
intelligence, reconnaissance, readiness levels-- or TRLs--are low (between 
and surveillance              TRL 3 and TRL 4), the program expects        
capabilities.                 critical technologies to be mature when the  
                                 product development phase begins in 2009.    

Planned development start     The program has strived to close knowledge   
date: April 2009              gaps between requirements and resources in   
                                 part by following an iterative approach, but 
                                 key performance parameters are yet to be     
                                 finalized. Furthermore, the program may not  
                                 have planned enough time for design,         
                                 integration, and production activities. For  
                                 example, program start to initial launch     
                                 capability for SR is shorter than what DOD   
                                 has achieved or estimated for some other     
                                 complex satellite systems that have had      
                                 major replan activities. Although there is a 
                                 cost sharing agreement in the FYDP, a        
                                 long-term cost-share agreement (beyond FYDP) 
                                 between DOD and the intelligence community   
                                 has not been established, which adds to      
                                 uncertainty about DOD's ability to afford    
                                 expensive programs such as SR. SR has        
                                 transferred its fiscal year 2008 budget      
                                 estimate into the Defense Reconnaissance     
                                 Support Activities budget, and it is now     
                                 classified.                                  

Transformational Satellite    The latest cost estimate for TSAT is $17.7   
Communications System (TSAT): billion (adjusted for inflation), and the    
Communication satellites      launch of the first satellite has slipped    
being developed by the Air    from 2011 to 2015. DOD rescinded approval to 
Force to employ advanced      begin preliminary design activities and      
technologies in support of    restructured the program to follow an        
DOD's future communication    incremental development approach. Early      
architecture.                 tests have revealed challenges in laser      
                                 communication and limited analyses of the    
Planned development           scalability of TSAT raises integration       
                                 risks. Final test results of Phase II        
Start: First quarter fiscal   testing will not be available until late     
year 2008                     fiscal year 2007.The program may not have    
                                 planned enough time for networking           
                                 activities between TSAT and other DOD        
                                 systems, and the schedule for the TSAT       
                                 Mission Operations System software code      
                                 development may be too optimistic. Even with 
                                 TSAT and other DOD satellites assets, gaps   
                                 between bandwidth needs and resources are    
                                 expected to continue to grow, requiring      
                                 continued dependence on commercial           
                                 bandwidth. Program officials said they will  
                                 need additional government personnel to      
                                 carry out oversight and management functions 
                                 in the long run.                             

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

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

(120644)

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Highlights of [21]GAO-07-730T , a testimony before the Subcommittee on
Strategic Forces, Senate Committee on Armed Services

April 19, 2007

SPACE ACQUISITIONS

Actions Needed to Expand and Sustain Use of Best Practices

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. DOD has recognized the need to change its approach to
developing space systems and is attempting to instill best practices in
new efforts. GAO was asked to testify on its findings on space
acquisitions problems and steps needed to sustain and expand the use of
best practices. In preparing this testimony, GAO relied on its detailed
reviews of space programs as well as cross-cutting work on cost estimating
and best practices.

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

The majority of major acquisition programs in DOD's space portfolio have
experienced problems during the past two decades that have driven up cost
and schedules and increased technical risks. At times, cost growth has
come close to or exceeded 100-percent, causing DOD to nearly double its
investment in the face of technical and other problems without realizing a
better return on investment. Along with the 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, or less, capability.

GAO's reviews of space acquisitions this year found that some ongoing
programs--for example, the Advanced Extremely High Frequency satellite
program and the Wideband Global SATCOM program--have been able to work
through the bulk of technical problems they were facing and are on track
to meet revised targets, albeit at higher costs and with delayed
capability. Others, however, including the Space-Based Infrared System
High program, the Global Positioning System IIF, and the National
Polar-orbiting Operational Environmental Satellite System, continue to
face setbacks and further risks.

In recognizing the need to reform space acquisitions, DOD has taken steps
to instill best practices in two new major space efforts--the
Transformational Satellite Communications System (TSAT) and the Space
Radar program--which are expected to be among the most complex and costly
space programs ever. For these programs, DOD has taken steps to separate
technology discovery from acquisition, establish an incremental path
toward meeting user needs, obtain agreements on requirements before
program start, and use quantifiable data and demonstrable knowledge to
make decisions to move to next phases. If these actions can be sustained,
DOD will greatly reduce technical risks, although not completely. There is
still significant inherent risk associated with integrating critical
technologies on board the satellites and with developing the software
needed to achieve the capabilities of the satellites.

Moreover, sustaining these reforms on these two programs and expanding
them to others will not be easy. Like all weapons programs, space programs
continue to face funding pressures that have encouraged too much optimism.
DOD has not prioritized its programs for funding even though its
investment for all major space acquisitions is expected to increase about
46 percent in the next 3 years. It is likely to continue to face cost
overruns on problematic programs, and it wants to undertake other major
new efforts in addition to Space Radar and TSAT. In addition, new programs
are being undertaken as DOD is addressing shortfalls in critical
technical, business, and program management skills. In other words, DOD
may not be able to obtain the right skills and experience to manage all of
the new efforts.

References

Visible links
  11. http://www.gao.gov/cgi-bin/getrpt?GAO-07-96
  12. http://www.gao.gov/cgi-bin/getrpt?GAO-07-388
  21. http://www.gao.gov/cgi-bin/getrpt?GAO-07-730T
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