Space Acquisitions: Major Space Programs Still at Risk for Cost  
and Schedule Increases (04-MAR-08, GAO-08-552T).		 
                                                                 
Each year, the Department of Defense (DOD) spends billions of	 
dollars 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 
2009 alone, DOD expects to spend over $10 billion to develop and 
procure satellites and other space systems. At the same time,	 
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. This testimony relies on the	 
extensive body of work GAO has produced reviewing DOD space	 
acquisitions. It comments on the persistent problems affecting	 
space acquisitions, the actions DOD has been taking to address	 
these problems, and what remains to be done.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-552T					        
    ACCNO:   A81214						        
  TITLE:     Space Acquisitions: Major Space Programs Still at Risk   
for Cost and Schedule Increases 				 
     DATE:   03/04/2008 
  SUBJECT:   Aerospace industry 				 
	     Cost analysis					 
	     Cost effectiveness analysis			 
	     Cost overruns					 
	     Data collection					 
	     Defense operations 				 
	     Defense procurement				 
	     Government information dissemination		 
	     Performance measures				 
	     Program management 				 
	     Risk assessment					 
	     Risk factors					 
	     Schedule slippages 				 
	     Strategic planning 				 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-08-552T

   

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Testimony: 

Before the Subcommittee on Strategic Forces, Committee on Armed 
Services, U.S. Senate: 

United States Government Accountability Office: 

GAO: 

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

Tuesday, March 4, 2008: 

Space Acquisitions: 

Major Space Programs Still at Risk for Cost and Schedule Increases: 

Statement of Cristina T. Chaplain, Director: 

Acquisition and Sourcing Management: 

GAO-08-552T: 

GAO Highlights: 

Highlights of GAO-08-552T, a testimony before the Subcommittee on 
Strategic Forces, Committee on Armed Services, U.S. Senate. 

Why GAO Did This Study:

Each year, the Department of Defense (DOD) spends billions of dollars 
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 2009 alone, DOD 
expects to spend over $10 billion to develop and procure satellites and 
other space systems. 

At the same time, however, DODï¿½s 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. 

This testimony relies on the extensive body of work GAO has produced 
reviewing DOD space acquisitions. It comments on the persistent 
problems affecting space acquisitions, the actions DOD has been taking 
to address these problems, and what remains to be done. 

What GAO Found: 

The majority of major acquisition programs in DODï¿½s 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. Along with the increases, many 
programs are experiencing significant schedule delaysï¿½as much as 7 
yearsï¿½postponing 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. 

Our past work has identified a number of causes behind the cost growth 
and related problems. These include: optimistic cost and schedule 
estimating; the tendency to start programs with too many unknowns about 
technology; inadequate contracting strategies; contract and program 
management weaknesses; the loss of technical expertise; capability gaps 
in the industrial base; tensions between labs that develop technologies 
for the future and acquisition programs; divergent needs in users of 
space systems; and diffuse leadership. 

DOD has taken a number of actions to address the problems that GAO has 
reported on. These include initiatives at the department level that 
will affect all major weapons programs, as well as changes in course 
within specific Air Force programs. Most notable, the Air Force has 
sustained its commitment to reduce technology risks in programs and 
acted to restructure new programs so that its space portfolio can be 
more affordable. These actions are a step in the right direction and 
will be effective, particularly if they are complemented by more 
accurate cost estimating; continued prioritization of investments; 
actions to address capacity shortfalls, such as low-cost launch and 
shortages of staff in program offices; and changes to acquisition 
policies to reflect the best practices the Air Force is committing to. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-08-552T]. For more information, contact 
Cristina Chaplain at (202) 512-4841 or [email protected]. 

[End of section] 

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 of dollars 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 2009 alone, DOD expects to spend over 
$10 billion to strengthen space-based capabilities and $7.6 billion of 
this amount is targeted for selected major space acquisition efforts. 
At the same time, 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. Today, we are here to comment on what problems affecting 
space acquisitions still persist, what actions DOD has been taking to 
address these problems and what remains to be done. In general, we 
found this year that space programs that have been troubled in recent 
years still face problems that are driving up costs and schedule. At 
the same time, senior leadership has remained committed to reducing 
technology risks and ensuring newer programs are more affordable. 
Investment prioritizing, realistic cost estimating, policy changes, and 
other actions we identify can help this commitment take further hold. 

Space Acquisition Problems Persist: 

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 7 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. 

As figures 1 and 2 below indicate, five programs that were begun in the 
late 1990s / early 2000s to replenish aging constellations of 
satellites have incurred substantial cost growth and schedule delays, 
including the (1) the Advanced Extremely High Frequency (AEHF) 
communications satellite program, (2) the National Polar-orbiting 
Operational Environmental Satellite System (NPOESS), which DOD is 
jointly developing with the National Oceanic and Atmospheric 
Administration, (3) the Space Based Infrared System (SBIRS), which 
detects missile launches, (4) the Wideband Global SATCOM (WGS), another 
communications satellite, and (5) the Global Positioning System (GPS) 
IIF program. Last year we reported that AEHF and WGS had worked through 
the bulk of their technical problems. Since our testimony, the first 
WGS satellite was launched, but the AEHF program experienced technical 
problems with hardware components that have pushed back its first 
launch date by 6 months. Also, this year, as described below, we found 
that NPOESS and SBIRS still face very high risks, even after recent 
acquisition replanning efforts. Further, GPS IIF has experienced 
additional technical problems. 

* SBIRS continues to face cost and schedule setbacks. Software problems 
have recently delayed the first satellite launch by about a year, which 
will likely increase the program's overall delay to roughly 7 years. 
Correcting the problems may necessitate hardware and software changes 
that could, according to the Air Force, also drive cost increases up to 
$1 billion, which would be in addition to the $6 billion cost growth 
already incurred. Management-reserves expenditure continues at an 
unsustainable rate. Program officials acknowledge that management 
reserves set aside to fix unexpected problems will likely be depleted 
in early 2009, even though the reserves were intended to last through 
2012. Given the complexity of the SBIRS satellites, it is possible that 
further design flaws may be discovered, leading to more cost and 
schedule increases. If management reserves are depleted and not 
replenished, the program will likely experience further cost and 
schedule problems. 

* In July 2007, the NPOESS program finalized its restructure in 
response to a Nunn-McCurdy (10 U.S.C. ï¿½ 2433) program acquisition unit 
breach of the critical cost growth threshold. The restructure included 
about an additional $4.1 billion, or about a 49 percent, life-cycle 
cost increase for fewer satellites to be acquired, delays in satellite 
launches, and deletions or replacements of satellite sensors. The 
restructure also included removing 7 of the original 14 critical 
technologies from the program. Furthermore, 3 of the remaining 
technologies remain immature and the program continues to experience 
development problems, increasing risks of further problems. At this 
point, the program has seen a 153 percent unit cost increase. 

* The GPS IIF program has faced technical challenges in completing 
development and production, causing another schedule delay in the 
launch of the first IIF satellite--over a 2-year slip from the original 
launch date of December 2006 to February 2009. Moreover, the program 
continues to face cost increases due to these technical problems. 
Specifically, the program has requested over $100 million for fiscal 
years 2008 and 2009 to cover the estimated cost overruns to complete 
production of the first three space vehicles. In addition, program 
officials are concerned that additional funds may be needed to complete 
this program if additional delays are incurred--the program has already 
spent $1.2 billion to date, which represents about 77-percent of the 
total cost originally estimated for the program. (Note: The chart below 
reflects a larger cost because it includes estimates for the GPS IIR, 
IIR-M, and IIF blocks of the GPS program.) 

Figure 1: Differences in Total Program Costs from Program Start and 
Most Recent Estimates: 

This figure is a combination bar graph showing the differences in total 
program costs from program start and most recent estimates. One bar 
represents the initial estimate, and the other bar represents the most 
recent estimate. 

[See PDF for image] 

Source: GAO analysis of DOD data. 

Note: MUOS is the Mobile User Objective System. 

[End of figure] 

Figure 2: Additional Months Needed since Program Start: 

This figure is a bar graph showing a additional months needed since 
program start. 

[See PDF for image] 

Source: GAO analysis of DOD data. 

[End of figure] 

Not all of DOD's space programs are facing the problems being 
experienced by GPS, NPOESS, and SBIRS. For example, the Navy's Mobile 
User Objective System (MUOS), another communications satellite program, 
is meeting cost and schedule goals. Further, as discussed later in this 
testimony, newer Air Force acquisition efforts such as the 
Transformational Satellite Communications System (TSAT) and Space Radar 
have been taking actions to ensure they can meet their cost and 
schedule goals, though their funding has been reduced in light of 
overall affordability of space acquisitions. These two efforts were 
highly complex and ambitious and were predicted to be the most 
expensive military satellite developments ever. 

In addition, in December 2005, the Air Force was directed to begin 
efforts to develop competing capability in parallel with the SBIRS 
program; this effort was previously known as the Alternative Infrared 
Satellite System (AIRSS). We reported in September 2007 that DOD had 
not positioned the AIRSS effort for success. DOD agreed, and revised 
the effort's development strategy to reflect best practices. The effort 
has a new name, the Third Generation Infrared Surveillance (Third Gen), 
and is now a follow on to the SBIRS program. The first sensor 
prototypes are expected later this month. 

Lastly, our annual weapons system assessment this year will be 
reporting on challenges faced by the Evolved Expendable Launch Vehicle 
(EELV) program, as the two providers--Boeing and Lockheed Martin-- 
undertake a joint venture that will provide U.S. government launches of 
medium-to heavy-lift rockets. The consolidation of production, 
engineering, test, and launch operations under the joint venture, 
called the United Launch Alliance or ULA, is expected to yield cost 
savings in the future, but when and how much remains unknown. ULA 
expects the consolidation to be nearly complete by the end of 2010, but 
there are preliminary indications that some elements of the 
consolidation are falling behind schedule. 

Furthermore, the Air Force revised its acquisition and contracting 
strategy for EELV in 2005, which among other things increased program 
office oversight responsibilities. The change in contracting strategy 
created new data analysis activities for the program and expanded the 
types of expertise needed by the program office to utilize the new 
information provided by contractors. Despite its increased 
responsibilities, the program office is experiencing staff reductions 
and expects staffing vacancies to continue in the near term. The 
current military staff lacks some of the technical expertise needed to 
fully analyze contractor performance data now being collected under the 
new contracting strategy. 

Causes of Acquisition Problems in Space Programs: 

Our work has identified a variety of reasons for this cost growth, most 
notably that weapons programs are incentivized to produce and use 
optimistic cost and schedule estimates in order to successfully compete 
for funding. We have also found that 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. 

We have also tied acquisition problems in space to inadequate 
contracting strategies; contract and program management weaknesses; the 
loss of technical expertise; capability gaps in the industrial base; 
tensions between labs that develop technologies for the future and 
current acquisition programs; divergent needs in users of space 
systems; diffuse leadership; and other issues that have been well 
documented in DOD and GAO studies. 

Figure 3: Key Underlying Problems: 

This figure is a chart showing key underlying problems. Broken 
acquisitions is positioned in the middle, with problems branching from 
the middle in a circular formation. 

Technology immature; 
Software needs poorly understood; 
Requirements unstable; 
Funding unstable; 
Inadequate contracting strategy; 
Inadequate contractor oversight; 
Alternatives not considered; 
Optimistic cost & schedule estimates. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Many of these underlying issues affect the broader weapons portfolio as 
well, though we have reported that space programs are particularly 
affected by the wide disparity of users, who include DOD, the 
intelligence community, other federal agencies, and in some cases, 
other countries and U.S. business and citizens. Moreover, problematic 
implementation of an acquisition strategy in the 1990s, known as Total 
System Performance Responsibility, for space systems resulted in losses 
of technical expertise and weaknesses in contracting strategies that 
space programs are still dealing with the effects of. 

Actions Needed to Address Space and Weapon Acquisition Problems: 

Over the past decade, we have identified best practices that DOD space 
programs can benefit from. DOD has taken a number of actions to address 
the problems that we have reported on. These include initiatives at the 
department level that will affect its major weapons programs, as well 
as changes in course within specific Air Force programs. Although these 
actions are a step in the right direction, additional leadership and 
support are still needed to ensure that reforms that DOD has begun will 
take hold. 

Our work--which is largely based on best practices in the commercial 
sector--has recommended numerous actions that can be taken to address 
the problems we identified. 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. We have also identified 
practices related to cost estimating, program manager tenure, quality 
assurance, technology transition, and an array of other aspects of 
acquisition program management that space programs could benefit from. 
Table 1 highlights these practices; appendix II provides more detail. 

Table 1: Highlights of Commercial Best Practices Identified in GAO 
Reports That Space Programs Can Benefit From: 

Before Undertaking New Programs. 

* Prioritize investments so that projects can be fully funded and it is 
clear where projects stand in relation to the overall portfolio. 

* Follow an evolutionary path toward meeting market needs rather than 
attempting to satisfy all needs in a single step. 

* Match requirements to resources--that is time, money, technology, and 
people--before undertaking a new development effort. 

* Research and define requirements before programs are started and 
limit changes after they are started. 

* Ensure cost estimates are complete, accurate, and updated regularly. 

* Commit to fully fund projects before they begin. 

* Ensure critical technologies are proven to work as intended before 
programs are started. 

* Assign more ambitious technology development efforts to research 
departments until they are ready to be added to future generations 
(increments) of a product. 

* Use systems engineering to close gaps between resources and 
requirements before launching the development process. 

During Program Development. 

* Use quantifiable data and demonstrable knowledge to make go/no-go 
decisions, covering critical facets of the program such as cost, 
schedule, technology readiness, design readiness, production readiness, 
and relationships with suppliers. 

* Do not allow development to proceed until certain thresholds are met-
-for example, a high proportion of engineering drawings completed or 
production processes under statistical control. 

* Empower program managers to make decisions on the direction of the 
program and to resolve problems and implement solutions. 

* Hold program managers accountable for their choices. 

* Require program managers to stay with a project to its end. 

* Hold suppliers accountable to deliver high-quality parts for their 
product through such activities as regular supplier audits and 
performance evaluations of quality and delivery, among other things. 

* Encourage program managers to share bad news, and encourage 
collaboration and communication. 

Source: GAO. 

[End of table] 

Constructive Actions Are Being Taken: 

DOD is attempting to implement some of these practices for its major 
weapons programs. For example, we recently reported that DOD released a 
strategy to enhance the role of program managers in carrying out its 
major weapon system acquisitions. As part of this strategy, DOD 
established a policy that requires formal agreements among program 
managers, their acquisition executives, and the user community intended 
to set forth common program goals. In addition, DOD plans a variety of 
actions to enhance development opportunities, provide more incentives, 
and arrange knowledge-sharing opportunities for its program managers. 
Within this strategy, the department also acknowledged that any actions 
taken to improve accountability must be based on a foundation from 
which program managers can launch and manage programs toward greater 
performance, and must include an overarching strategy and decision- 
making processes that prioritize programs based on a match between 
customer needs and available resources. DOD highlighted several 
initiatives that, if adopted and implemented properly, could provide 
such a foundation. Some of these include establishing an early decision 
gate to review proposed programs at the concept stage, testing 
portfolio management approaches in selected capability areas and using 
capital budgeting accounts for programs in development. 

Additionally, as we reported previously, the Air Force adopted a "back 
to basics" approach for space designed to reduce technology risk and 
ensure programs were more executable. Specifically, for its TSAT and 
Space Radar acquisition efforts, the Air Force committed to delaying 
product development until critical technologies could be demonstrated 
to work in a relevant environment. This stood in sharp contrast to 
previous programs, started with immature technologies, such as NPOESS 
and SBIRS. 

The Air Force also committed to deferring more ambitious technology 
efforts associated with these efforts to science and technology 
organizations until they are ready to be added to future increments. 
TSAT, for example, deferred the wide-field of view multi-access laser 
communication technology, and contributed about $16.7 million for "off- 
line" maturation of this technology that could be inserted into future 
increments. It 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, contributed toward their development by space and 
technology organizations. Further, both efforts have used systems 
engineers to help determine achievability of requirements. 

In our experience, the Navy has tended to follow good acquisition 
practices for its space programs, especially in relation to keeping 
technology risks out of programs. The Navy's Mobile User Objective 
System (MUOS) is an example. Specifically, the MUOS acquisition effort 
began development with almost all of its critical technologies mature. 
Additionally, about 95 percent of design drawings had been completed at 
the critical design review milestone in March 2007. Since MUOS's 
development start in September 2004, the program has been meeting its 
overall cost and schedule goals, with the first satellite expected to 
become operational in March 2010. 

Furthermore, the Air Force, U.S. Strategic Command, and other key 
organizations have made progress in implementing the Operationally 
Responsive Space (ORS) initiative. This initiative encompasses several 
separate endeavors with a goal to provide short-term tactical 
capabilities as well as identifying and implementing long-term 
technology and design solutions to reduce the cost and time of 
developing and delivering simpler satellites in greater numbers. ORS 
provides DOD with an opportunity to work outside the typical 
acquisition channels to more quickly and less expensively deliver these 
capabilities. In performing a review of ORS for this committee, we 
found that DOD has made progress in putting a program management 
structure in place for ORS as well as executing ORS-related research 
and development efforts, which include development of low-cost small 
satellites, common design techniques, and common interfaces. 

Other parts of DOD are also moving towards space programs with less 
risk and that have a greater chance of being more successful. The 
Missile Defense Agency's Space Tracking and Surveillance System (STSS) 
program office is seeking an operational constellation that would be 
easier to produce than originally envisioned for the constellation. The 
new development approach for the constellation would involve no 
technology breakthroughs or scientific discovery, and the program 
office wants to scale the system design so that it will only require 
only a 5-to 6-year build cycle. 

DOD has also pushed back the decisions to start the TSAT and Space 
Radar acquisitions so it could reformulate their acquisition schedules 
and approaches to make them more affordable within DOD's overall space 
portfolio. For example, TSAT is currently being assessed by the Office 
of the Secretary of Defense (OSD) to better ensure that proposed future 
funding levels for TSAT are affordable in the near term. In the 
meantime, the program office is continuing to fund risk-reduction 
efforts between two separate contractors to further reduce overall risk 
in TSAT. Similarly, the Space Radar program office told us that it is 
adjusting its acquisition approach to better balance affordability 
through incremental evolution of the Space Radar capability. In both of 
these cases, DOD will likely be better positioned with acquisition 
programs that are more affordable and executable in terms of meeting 
cost, schedule, and performance goals. 

Additional Actions Needed: 

The actions that the Air Force and OSD have been taking to address 
acquisition problems are good first steps. The back to basics policy 
and ORS, in particular, represent significant shifts in thinking about 
how space systems should be developed as well as commitment from senior 
leadership. But, there are still more, significant changes to 
processes, policies, and support needed to ensure reforms can take 
hold. 

First, while DOD pilot initiatives related to portfolio management are 
targeted at addressing funding pressures, there has not been a real 
commitment to prioritizing investments across DOD. For the past several 
years, we have emphasized that DOD starts more space and 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. 
This year, significant cuts were made to several major space programs 
including TSAT, Space Radar, and STSS largely in light of the 
realization that new, expensive programs were not affordable at a time 
when DOD was attempting to upgrade other capabilities and still 
contending with problematic programs like SBIRS. In the case of TSAT, 
resulting delays in capability could have a dramatic effect on other 
new programs, such as the Army's Future Combat System, which were 
counting on TSAT-like capabilities to enhance their performance. 

Second, as we have testified before, 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. Several of our reviews of major space 
programs have cited shortages of personnel as a key challenge that 
increases risk for the program, specifically in technical areas. In 
addition, 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. We recognize that there are actions being taken to 
strengthen the space acquisition workforce, but we have not yet seen 
the condition get much better at the individual program office level. 

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 
previous testimonies, we pointed to limited opportunities and funding 
for space technologies, and the lack of low-cost launch vehicles. The 
ORS initiative is designed to help alleviate shortfalls in launch and 
testing resources, but one concern raised in interviews with launch 
providers was that there was still not enough investment being directed 
toward low-cost launch. 

Furthermore, 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 
acquisition efforts such as TSAT and Space Radar achieve a technology 
readiness level (TRL) 6 (that is, testing in a relevant environment) or 
higher for key technologies before being formally started--key decision 
point B (KDP B). Instead, the policy suggests that TRL 6 be achieved 
later--at preliminary decision review (KDP C) or soon after. In fact, 
the back to basics approach that was adopted by the Air Force has not 
been incorporated into DOD's space acquisition policy. 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 extended 
beyond their tenure. 

Last, while DOD is planning many new practices that will provide 
program managers with more incentives, support and stability, the 
overall environment within which program managers perform their work is 
very difficult to change simply with policy initiatives. Policies 
similar to the one DOD issued in 2007 to increase accountability of 
program managers have existed for some time, but according to DOD and 
Air Force officials, they have not always been practiced. For example, 
while DOD policy provides for program managers of major defense 
acquisition programs to serve as close to a 4-year tenure as 
practicable,[Footnote 1] many serve for only 2 years. One example is 
the SBIRS program, which has had six program managers in 12 years. In 
fact, our work has shown that rather than lengthy assignment periods 
between key milestones as suggested by best practices, many of the 
programs we have reviewed had multiple program managers within the same 
milestone. 

Conclusions: 

In conclusion, senior leaders managing DOD's space portfolio are 
clearly working in a challenging environment. There are pressures to 
deliver new, transformational capabilities, but problematic older 
satellite programs continue to cost more than expected, constrain 
investment dollars, pose risks of capability caps, and thus require 
more time and attention from senior leaders than well-performing 
efforts. To best mitigate these circumstances and put future programs 
on a better path, DOD needs to continue with the actions it has begun 
undertaken. However, these measures should be complemented by realistic 
estimating of what it will take to complete space programs, 
prioritizing programs for investment, and strengthening DOD acquisition 
policy for space. At the same time, DOD should ensure its ORS program 
is well-supported and focused on alleviating capability gaps as well as 
developing longer-term solutions for space programs. Taken together, 
such actions, with the support of Congress, should help senior leaders 
negotiate acquisitions in a challenging environment and ensure their 
commitments to reform can be sustained into the next administration. 

[End of section] 

Mr. Chairman, this concludes my statement. I will be happy to answer 
any questions that you have. 

[End of section] 

Appendix I: Scope and Methodology: 

In preparing this testimony, we relied on our body of work in space 
programs, including previously issued GAO reports on assessments of 
individual space programs, common problems affecting space system 
acquisitions, and the Department of Defense's (DOD) space acquisition 
policy. We relied on our best practices studies, which comment on the 
persistent problems affecting space acquisitions, the actions DOD has 
been taking to address these problems, and what remains to be done. We 
also relied on work performed in support of our 2008 annual weapons 
system assessment. The individual reviews were conducted in accordance 
with generally accepted government auditing standards. We conducted 
this performance audit from February 26 to March 4, 2008, in accordance 
with generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives. 

[End of section] 

Appendix II Commercial Best Practices Identified in GAO Reports from 
Which Space Programs Can Benefit: 

Table 2: 

Practices That Can Reduce Acquisition Risk: Prioritizing investments; 
Practices That Can Reduce Acquisition Risk: Because there are more 
product ideas than there is funding to pursue them, successful 
organizations we have studied ensure that decisions to start new 
product developments fit within an investment strategy. The investment 
strategy determines project priority as well as providing a basis for 
trade-off decisions against competing projects. Program managers find 
their company's use of investment strategies helpful because it gives 
them confidence that their project has commitment from their 
organization and from their top leaders and managers, and clearly 
identifies where their project stands within the company's overall 
investment portfolio and funding priorities. 

Practices That Can Reduce Acquisition Risk: Evolutionary development; 
Practices That Can Reduce Acquisition Risk: Organizations we have 
studied generally follow an evolutionary path toward meeting market 
needs rather than attempting to satisfy all needs in a single step. In 
effect, the companies evolve products, continuously improving their 
performance as new technologies and methods allow. These evolutionary 
improvements to products eventually result in full desired capability, 
but in multiple steps, delivering enhanced capability to the customer 
more quickly through a series of interim products. The approach permits 
program managers to focus more on design and manufacturing with a 
limited array of new content and technologies in a program. 

Practices That Can Reduce Acquisition Risk: Matching resources to 
requirements; Practices That Can Reduce Acquisition Risk: The 
organizations we have studied are able to achieve their overall 
investment goals by matching requirements to resources--that is time, 
money, technology, and people--before undertaking a new development 
effort. Any gaps that existed are relatively small, and it is the 
program manager's job to quickly close them as development begins. 

Practices That Can Reduce Acquisition Risk: Defined requirements; 
Practices That Can Reduce Acquisition Risk: As part of the effort to 
build a business case, requirements are researched and defined before 
programs start to ensure that they are achievable given available 
resources. 

Practices That Can Reduce Acquisition Risk: Cost estimating; Practices 
That Can Reduce Acquisition Risk: Successful organizations ensure cost 
estimates are complete and accurate. They hold program managers 
accountable for their estimates. They also develop common templates and 
tools to support data gathering and analysis and maintain databases of 
historical cost, schedule, quality, test, and performance data. Cost 
estimates themselves are continually monitored and regularly updated 
through a series of numerous gates or milestone decisions that demand 
programs assess readiness and remaining risk within key sectors of the 
program as well as overall cost and schedule issues. 

Practices That Can Reduce Acquisition Risk: Funding; Practices That Can 
Reduce Acquisition Risk: Once cost estimates are complete, the 
organization commits to fully funding projects before they begin. 

Practices That Can Reduce Acquisition Risk: Technologies; Practices 
That Can Reduce Acquisition Risk: As part of the effort to build a 
business case, critical technologies are matured by the start of a 
program, that is, proven to work as intended. More ambitious technology 
development efforts are assigned to research departments until they are 
ready to be added to future generations (increments) of a product. In 
rare instances when less mature technologies are being pursued, the 
organization accepts and plans for the additional risk. 

Practices That Can Reduce Acquisition Risk: Systems engineering; 
Practices That Can Reduce Acquisition Risk: Systems engineering is used 
to close gaps between resources and requirements before launching the 
development process. As our previous work has shown, requirements 
analysis, the first phase of any robust systems engineering regimen, is 
a process that enables the product developer to translate customer 
wants into specific product features for which requisite technological, 
software, engineering, and production capabilities can be identified. 

Practices That Can Reduce Acquisition Risk: Knowledge-driven 
development decisions; Practices That Can Reduce Acquisition Risk: Once 
a new product development begins, program managers and senior leaders 
use quantifiable data and demonstrable knowledge to make go/no-go 
decisions. These cover critical facets of the program such as cost, 
schedule, technology readiness, design readiness, production readiness, 
and relationships with suppliers. Development is not allowed to proceed 
until certain thresholds are met, for example, a high proportion of 
engineering drawings completed or production processes under 
statistical control. Program managers themselves place high value on 
these requirements, as it ensures they are well positioned to move into 
subsequent phases and are less likely to encounter disruptive problems. 

Practices That Can Reduce Acquisition Risk: Program manager authority; 
Practices That Can Reduce Acquisition Risk: The organizations we have 
studied empower program managers to make decisions on the direction of 
the program and to resolve problems and implement solutions. The 
program managers can make trade-offs among schedule, cost, and 
performance features, as long as they stay within the confines of the 
original business case. When the business case changes, senior leaders 
are brought in for consultation--at this point, they could become 
responsible for trade-off decisions. 

Practices That Can Reduce Acquisition Risk: Accountability; Practices 
That Can Reduce Acquisition Risk: Program managers are held accountable 
for their choices. Sometimes this accountability is shared with the 
program team or senior leaders, or both. Sometimes, it resides solely 
with the program manager on the belief that the company provides the 
necessary levels of support. In all cases, the process itself clearly 
spells out what the program manager is accountable for--the specific 
cost, performance, schedule, and other goals that need to be achieved. 
In a recent study, we also noted that successful organizations hold 
their suppliers accountable to deliver high-quality parts for their 
product through such activities as regular supplier audits and 
performance evaluations of quality and delivery, among other things. 

Practices That Can Reduce Acquisition Risk: Program manager tenure; 
Practices That Can Reduce Acquisition Risk: To further ensure 
accountability, program managers are also required to stay with a 
project to its end. Sometimes senior leaders are also required to stay. 
At the same time, program managers are incentivized to succeed. If they 
meet or exceed their goals, they receive substantial bonuses or salary 
increases, or both. Awards can also be obtained if the company as a 
whole meets larger objectives. In all cases, companies refrain from 
removing a program manager in the midst of a program. Instead, they 
chose first to assess whether more support is needed in terms of 
resources for the program or support and training for the program 
manager. 

Practices That Can Reduce Acquisition Risk: Other noteworthy practices; 
Practices That Can Reduce Acquisition Risk: * Use of common tools and 
templates to support data gathering and analysis; * Implementation and 
adherence to formal lessons-learned processes; * Senior leaders stay 
committed to projects, mentor program managers, instill trust with 
their program managers, encourage program managers to share bad news, 
and encourage collaboration and communication. 

Source: GAO. 

[End of table] 

[End of section] 

Appendix III: Contact and Acknowledgments: 

For further information, please contact Cristina Chaplain at 202-512- 
4841or [email protected]. Individuals making contributions to this 
testimony include Art Gallegos, Greg Campbell, Claire Cyrnak, Anne 
Hobson, Rich Horiuchi, Sigrid McGinty, Angela Pleasants, Josie Sigl, 
and Alyssa Weir. 

[End of section] 

Footnotes: 

[1] DOD policy provides for the tenure of program managers of major 
defense acquisition programs to last until the completion of the major 
milestone that occurs closest in time to the date on which the person 
has served in the position for 4 years. 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability.  

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "Subscribe to Updates."  

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to:  

U.S. Government Accountability Office: 
441 G Street NW, Room LM: 
Washington, D.C. 20548:  

To order by Phone: 
Voice: (202) 512-6000: 
TDD: (202) 512-2537: 
Fax: (202) 512-6061:  

To Report Fraud, Waste, and Abuse in Federal Programs:  

Contact:  

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: [email protected]: 
Automated answering system: (800) 424-5454 or (202) 512-7470:  

Congressional Relations:  

Ralph Dawn, Managing Director, [email protected]: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548:  

Public Affairs: 

Chuck Young, Managing Director, [email protected]: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: 

*** End of document. ***