Defense Acquisitions: 2009 Review of Future Combat System Is	 
Critical to Program's Direction (10-APR-08, GAO-08-638T).	 
                                                                 
The Future Combat System (FCS) program--which comprises 14	 
integrated weapon systems and an advanced information network--is
the centerpiece of the Army's effort to transition to a lighter, 
more agile, and more capable combat force. The substantial	 
technical challenges, the Army's acquisition strategy, and the	 
cost of the program are among the reasons why the program is	 
recognized as needing special oversight and review. This	 
testimony is based on GAO's two March 2008 reports on FCS and	 
addresses (1) how the definition, development, and demonstration 
of FCS capabilities are proceeding, particularly in light of the 
go/no-go decision scheduled for 2009; (2) the Army's plans for	 
making production commitments for FCS and any risks related to	 
the completion of development; and (3) the estimated costs for	 
developing and producing FCS.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-638T					        
    ACCNO:   A81635						        
  TITLE:     Defense Acquisitions: 2009 Review of Future Combat System
Is Critical to Program's Direction				 
     DATE:   04/10/2008 
  SUBJECT:   Army procurement					 
	     Combat readiness					 
	     Cost analysis					 
	     Cost overruns					 
	     Defense capabilities				 
	     Defense cost control				 
	     Defense procurement				 
	     Developmental testing				 
	     Future budget projections				 
	     Military research and development			 
	     Military technology				 
	     Operational testing				 
	     Program evaluation 				 
	     Program management 				 
	     Research and development costs			 
	     Risk assessment					 
	     Risk management					 
	     Schedule slippages 				 
	     Strategic planning 				 
	     Systems integration				 
	     Weapons research and development			 
	     Weapons systems					 
	     Reporting requirements				 
	     Cost estimates					 
	     Program costs					 
	     Program implementation				 
	     Army Future Combat Systems 			 
	     Army Warfighter Information Network		 
	     DOD Joint Tactical Radio System			 

******************************************************************
** 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-08-638T

   

     * [1]Summary
     * [2]Background
     * [3]Definition, Development, and Demonstration of Capabilities W

          * [4]Requirements, Technologies, and Designs Are Not Yet Mature
          * [5]Significant Challenges in Developing And Demonstrating FCS N
          * [6]FCS Capabilities Will Be Demonstrated after Key Decision Poi

     * [7]Significant Commitments to Production Will Be Made Before FC

          * [8]Spin Out Procurement to Begin before Testing Completed
          * [9]NLOS-C Production to Begin Soon at Congress' Direction
          * [10]Army Commitment to LSI for Production Heightens Oversight Ch

     * [11]FCS Costs Likely to Grow beyond Army Estimates
     * [12]Conclusion
     * [13]Actions Recommended in Our Recent Reports
     * [14]Contacts and Staff Acknowledgements
     * [15]GAO's Mission
     * [16]Obtaining Copies of GAO Reports and Testimony

          * [17]Order by Mail or Phone

     * [18]To Report Fraud, Waste, and Abuse in Federal Programs
     * [19]Congressional Relations
     * [20]Public Affairs

This is the accessible text file for GAO report number GAO-08-638T 
entitled 'Defense Acquisitions: 2009 Review of Future Combat System Is 
Critical to Program's Direction' which was released on April 10, 2008.

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to [email protected]. 

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 Air and Land Forces, Committee on Armed 
Services, House of Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 2:00 p.m. EDT: 
Thursday, April 10, 2008: 

Defense Acquisitions: 

2009 Review of Future Combat System Is Critical to Program's Direction: 

Statement of Paul L. Francis: 
Director: 
Acquisition and Sourcing Management: 

GAO-08-638T: 

GAO Highlights: 

Highlights of GAO-08-638T, a testimony before the Subcommittee on Air 
and Land Forces, Committee on Armed Services, House of Representatives. 

Why GAO Did This Study: 

The Future Combat System (FCS) programï¿½which comprises 14 integrated 
weapon systems and an advanced information networkï¿½is the centerpiece 
of the Armyï¿½s effort to transition to a lighter, more agile, and more 
capable combat force. The substantial technical challenges, the Armyï¿½s 
acquisition strategy, and the cost of the program are among the reasons 
why the program is recognized as needing special oversight and review. 

This testimony is based on GAOï¿½s two March 2008 reports on FCS and 
addresses (1) how the definition, development, and demonstration of FCS 
capabilities are proceeding, particularly in light of the go/no-go 
decision scheduled for 2009; (2) the Armyï¿½s plans for making production 
commitments for FCS and any risks related to the completion of 
development; and (3) the estimated costs for developing and producing 
FCS. 

What GAO Found: 

Today, the FCS program is about halfway through its development phase, 
yet it is, in many respects, a program closer to the beginning of 
development. This portends additional cost increases and delays as FCS 
begins what is traditionally the most expensive and problematic phase 
of development. In the key areas of defining and developing FCS 
capabilities, requirements definition is still fluid, critical 
technologies are immature, software development is in its early stages, 
the information network is still years from being demonstrated, and 
complementary programs are at risk for not meeting the FCS schedule. It 
is not yet clear if or when the information network that is at the 
heart of the FCS concept can be developed, built, and demonstrated. 
Yet, the time frame for completing FCS development is ambitious; even 
if all goes as planned, the program will not test production-
representative prototypes or fully demonstrate the system of systems 
until after low rate production begins. 

Even though the development of FCS will finish late in its schedule, 
commitments to production will come early. Production funding for the 
first spinout of FCS technologies and the early version of the FCS 
cannon begin in fiscal years 2008 and 2009. Production money for the 
core FCS systems will be requested beginning in February 2010, with the 
DOD fiscal year 2011 budget requestï¿½just months after the go/no-go 
review and before the stability of the design is determined at the 
critical design review. In fact, by the time of the FCS production 
decision in 2013, a total of about $39 billion, which comprises 
research and development and production costs, will already have been 
appropriated for the program, with another $8 billion requested. Also, 
the Army plans to contract with its lead system integrator for the 
initial FCS production, a change from the Armyï¿½s original rationale for 
using an integrator. This increases the burden of oversight faced by 
the Army and the Office of the Secretary of Defense. 

While the Armyï¿½s cost estimates for the FCS program remain about the 
same as last yearï¿½$160.9 billionï¿½the content of the program has been 
reduced, representing a reduction in buying power for the Army. The 
level of knowledge for the program does not support a confident 
estimate, and cost estimates made by two independent organizations are 
significantly higher. Competing demands from within the Army and DOD 
limits the ability to fund higher FCS costs. Thus, the Army will likely 
continue to reduce FCS capabilities in order to stay within available 
funding limits. Accordingly, FCSï¿½s demonstrated performance, the 
reasonableness of its remaining work, and the resources it will need 
and can reasonably expect will be of paramount importance at the 2009 
milestone review for the FCS program. 

What GAO Recommends: 

In its March 2008 reports, GAO made several recommendations to the 
Secretary of Defense that included: establishing criteria that the FCS 
program will have to meet in the 2009 milestone review in order to 
justify continuation; identifying viable alternatives to FCS; and 
taking other actions. DOD concurred with GAOï¿½s recommendations. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-638T]. For more 
information, contact Paul Francis 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 the Army's 
Future Combat System (FCS), a networked family of weapons and other 
integrated systems. FCS is in the forefront of efforts to help the Army 
transform itself into a lighter, more agile, and more capable combat 
force by using a new concept of operations, new technologies, and a new 
information network linking whole brigades together in a system of 
systems. In 2009, FCS faces a congressionally mandated go/no-go 
decision review to determine the program's future. This review is 
crucial, as production funding and commitments will build rapidly after 
that point, limiting the government's ability to alter course. 

My statement today is based on the work we conducted over the past year 
in response to the National Defense Authorization Act for Fiscal Year 
2006, which requires GAO to report annually on the FCS 
program.[Footnote 1] Accordingly, this statement discusses (1) how the 
definition, development, and demonstration of FCS capabilities are 
proceeding, particularly in light of the go/no-go decision scheduled 
for 2009; (2) the Army's plans for making production commitments for 
FCS and any risks related to completing development; and (3) the 
estimated costs for developing and producing FCS and risks the Army 
faces in both meeting the estimate and providing commensurate funding. 
[Footnote 2] 

Summary: 

Definition, development, and demonstration of capabilities will finish 
late in the FCS schedule. At this point, requirements definition is 
still fluid, critical technologies are immature, software development 
is in its early stages, the information network is still years from 
being demonstrated, and complementary programs are at risk for not 
meeting the FCS schedule. Significant commitments to production will be 
made before FCS capabilities are demonstrated. Production money for the 
core FCS systems will be requested beginning in February 2010, with the 
DOD fiscal year 2011 budget request--just months after the go/no-go 
review and before the stability of the design is determined at the 
critical design review. By the time of the FCS production decision in 
2013, about $39 billion will already have been invested in the program. 
While the Army's cost estimates for the FCS program remain about the 
same as last year--$160.9 billion--the content of the program has been 
reduced. FCS costs are likely to grow as the current level of knowledge 
does not support a confident estimate, and cost estimates made by two 
independent organizations are significantly higher. Competing demands 
from within the Army and DOD limit the ability to fund higher FCS 
costs. Thus, the Army will likely continue to reduce FCS capabilities 
in order to stay within available funding limits. 

In our March 2008 reports, we made several recommendations to ensure 
that the 2009 FCS milestone review is positioned to be both well- 
informed and transparent. Specifically, we recommended that the 
Secretary of Defense, among other things, (1) establish objective and 
quantitative criteria that the FCS program will have to meet in order 
to justify its continuation and gain approval for the remainder of its 
acquisition strategy, (2) identify viable alternatives to FCS as 
currently structured that can be considered in the event that FCS does 
not measure up to the criteria set for the review, and (3) closely 
examine the oversight implications of the Army's decision to contract 
with the lead system integrator for early production of FCS spin outs, 
the non-line-of-sight cannon (NLOS-C), and low rate production for the 
FCS core program. In the area of FCS network and software, we 
recommended that the FCS program stabilize the network and software 
requirements of each software build to enable software developers to 
follow disciplined software practices and establish a clear set of 
criteria for acceptable network performance at each of the key program 
events. Finally, in setting expectations for the 2009 milestone review, 
we recommended that the expectations include an analysis of network 
technical feasibility and risks, synchronization of the network with 
other elements of FCS, and a reconciliation of cost estimates of 
network and software development scope and cost. 

DOD concurred with our recommendations and stated that criteria for the 
2009 FCS Defense Acquisition Board review will be established and will 
be reviewed and finalized at the 2008 Defense Acquisition Board review. 
The results of the analyses and assessments planned to support the 2009 
review will inform DOD's acquisition and budget decisions for FCS. 
These are positive steps toward informing the 2009 Defense Acquisition 
Board review. 

Background: 

The FCS concept is designed to be part of the Army's Future Force, 
which is intended to transform the Army into a more rapidly deployable 
and responsive force that differs substantially from the large division-
centric structure of the past. The Army is reorganizing its current 
forces into modular brigade combat teams, each of which is expected to 
be highly survivable and the most lethal brigade-sized unit the Army 
has ever fielded. The Army expects FCS-equipped brigade combat teams to 
provide significant warfighting capabilities to DOD's overall joint 
military operations. The Army has also instituted plans to spin out 
selected FCS technologies and systems to current Army forces throughout 
the program's system development and demonstration phase. 

The FCS program is recognized as being high risk and needing special 
oversight. Accordingly, in 2006, Congress mandated that the Department 
of Defense (DOD) hold a milestone review following its preliminary 
design review.[Footnote 3] Congress directed that the review include an 
assessment of whether (1) the needs are valid and can best be met with 
the FCS concept, (2) the FCS program can be developed and produced 
within existing resources, and (3) the program should continue as 
currently structured, be restructured, or be terminated. Congress 
required the Secretary of Defense to review and report on specific 
aspects of the program, including the maturity of critical 
technologies, program risks, demonstrations of the FCS concept and 
software, and a cost estimate and affordability assessment. 

This statement is based on work we conducted between March 2007 and 
March 2008 and is 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. 

Definition, Development, and Demonstration of Capabilities Will Finish 
Late in the FCS Schedule: 

Ideally, the Army should have entered development in 2003 with firm 
requirements and mature technologies. However, the FCS program will be 
challenged to meet these markers by the time of the preliminary design 
review in 2009. The Army has only recently formed an understanding of 
what will be expected of the FCS network. Complementary programs, 
necessary to the success of the FCS, are not yet fully synchronized 
with the FCS schedule and face funding and technical challenges. By 
2009, the Army will have spent 6 years and $18 billion on these initial 
efforts, with the costlier components of a development program still to 
come. It will be years before demonstrations validate that the FCS will 
provide needed capabilities. 

Requirements, Technologies, and Designs Are Not Yet Mature: 

While the Army should have firmed requirements at the outset of its 
development program, it now faces a daunting task in completing this 
work by the preliminary design review and subsequent milestone review 
in 2009--6 years into a 10-year development schedule. Many of FCS's 
thousands of requirements are almost certain to be modified as the 
program approaches these reviews. The Army's decision to restructure 
the program in early 2007, reducing the set of systems from 18 to 14, 
resulted in requirements modifications, deferrals, and redistributions 
that affected the requirements balance among the remaining systems. As 
this program adjustment is implemented, further requirements changes to 
the systems, as well as to the network, could be required. The Army 
also continues to make design trade-offs to accommodate restrictions 
such as space, weight, and power constraints; affordability; and 
technical risks, such as transport requirements for manned ground 
vehicles. FCS software development is hampered by incomplete 
requirements and designs for the information network. While the Army's 
user community expects that FCS will deliver capabilities that are as 
good as or better than current forces, this position is based on the 
results of modeling and simulation activities--it will be several years 
before field demonstrations validate the user community's position. 

FCS's critical technologies remain at low maturity levels. According to 
the Army's latest technology assessment, only two of FCS's 44 critical 
technologies have reached a level of maturity that, based on best 
practice standards, should have been demonstrated at program start. 
Even applying the Army's less rigorous standards, only 73 percent can 
be considered mature enough to begin system development today. The 
technological immaturity, coupled with incomplete requirements, is a 
mismatch that has prevented the Army from reaching the first critical 
knowledge point for this program--a precursor for cost growth. Many of 
these immature technologies may have an adverse cumulative impact on 
key FCS capabilities such as survivability. In addition, the Army is 
struggling to synchronize the schedules and capabilities of numerous 
essential complementary programs with the overall FCS program. The Army 
has identified problems that raise concerns about the likelihood that 
many complementary systems will deliver the required capabilities when 
needed. In some cases, complementary programs have been adversely 
affected by FCS demands, and in others, lack of coordination between 
FCS and complementary program officials has stalled efforts aimed at 
synchronizing programs and resolving cost, schedule, and technical 
issues. 

Significant Challenges in Developing And Demonstrating FCS Network and 
Software: 

It is not yet clear if or when the information network that is at the 
heart of the FCS concept can be developed, built, and demonstrated by 
the Army and lead system integrator (LSI). Significant management and 
technical challenges--owing more to the program's complexity and 
immaturity than to the approach to software--have placed development of 
the network and software at risk. These risks include network 
performance and scalability, immature network architecture, and 
synchronization of FCS with Joint Tactical Radio System (JTRS) and 
Warfighter Information Network-Tactical programs that have significant 
technical challenges of their own. The amount of estimated software 
code required for the FCS network and platforms has recently increased 
to 95.1 million lines. This is nearly triple the size of the original 
estimate in 2003, and the largest software effort by far for any weapon 
system. Software code is difficult to estimate, and underestimation is 
not unique to FCS. Compounding this inherent difficulty on FCS were the 
program's poorly defined requirements, indicative of its immaturity. 
Lines of code have grown as requirements have become better understood. 
The Army believes the latest increases will not substantially increase 
software development costs, but updated Army and independent cost 
estimates will not be available until next year. Previously, the 
independent estimates have differed sharply from the Army's in the area 
of FCS software development costs. 

Although several disciplined practices are being used to develop FCS's 
network and software, the program's immaturity and aggressive pace 
during development have delayed requirements development at the 
software developer level. For example, software developers for five 
major software packages that we reviewed report that high-level 
requirements provided to them were poorly defined, omitted, or late in 
the development process. These caused the software developers to do 
rework or defer functionality to future builds. In turn, these poor or 
late requirements had a cascading effect that caused other software 
development efforts to be delayed. 

It is unclear when or how it can be demonstrated that the FCS network 
will work as needed, especially at key program junctures. For example, 
in 2009, network requirements, including software, may not be well 
defined nor designs completed at the preliminary design review; and at 
the FCS milestone review later that year, network demonstration is 
expected to be very limited. The Army and LSI have identified and need 
to address numerous areas of high risk such as network performance and 
scalability. The first large scale FCS network demonstration--the 
limited user test in 2012--will take place at least a year after the 
critical design review and only a year before the start of FCS 
production. That test will seek to identify the impact of the 
contributions and limitations of the network on the ability to conduct 
missions. This test will be conducted after the designs have been set 
for the FCS ground vehicles, a situation that poses risks because the 
designs depend on the network's performance. A full demonstration of 
the network with all of its software components will not be 
demonstrated until at least 2013 when the fully automated battle 
command system is expected to be ready. 

FCS Capabilities Will Be Demonstrated after Key Decision Points: 

When FCS reaches its planned preliminary design review in 2009, the 
Army will have expended over 60 percent of its development funds and 
schedule. However, much will still need to be done in terms of 
technology maturation, system integration and demonstration, and 
preparing for production--all three knowledge points fundamental to a 
successful acquisition. Large scale demonstrations of the network will 
not occur until after manned ground vehicles, which depend on the 
performance of the network, are already designed and prototyped. The 
Army does not plan to demonstrate that the FCS system of systems 
performs as required until after the production decision for the core 
program in 2013. That would preclude opportunities to change course if 
warranted by test results and increasing the likelihood of costly 
discoveries in late development or during production. The cost of 
correcting problems in those stages is high because program 
expenditures and schedules are less forgiving than in the early stages 
of a program. Conversely, the test standards we apply reflect the best 
practice of having production-representative prototypes tested prior to 
a low rate production decision. This approach demonstrates the 
prototypes' performance and reliability as well as manufacturing 
processes--in short, that the program is ready to be manufactured 
within cost, schedule, and quality goals. 

Significant Commitments to Production Will Be Made Before FCS 
Capabilities Are Demonstrated: 

While the FCS production decision for the core FCS program is to be 
held in fiscal year 2013, production commitments will begin in fiscal 
years 2008 and 2009 with production for the first of a series of three 
planned spin out efforts and the early versions of the NLOS-C vehicle. 
When considering these activities, along with long-lead and 
facilitization investments associated with the production of FCS core 
systems, a total of $11.9 billion in production money will have been 
appropriated and another $6.9 billion requested by the time of the 
production decision for the FCS core systems in 2013. When development 
funds are included, $39 billion will have been appropriated and another 
$8 billion requested. As noted previously, key demonstrations will not 
yet have taken place by this time. Also, in April 2007, the Army 
announced its intention to contract with the LSI for the production for 
the first three brigade combat teams of FCS systems, the production of 
the FCS spin out items, and the early production of NLOS-C vehicles. 
This decision makes an already unusually close relationship between the 
Army and the LSI even closer, and heightens the oversight challenges 
FCS presents. 

Spin Out Procurement to Begin before Testing Completed: 

In 2004, the Army revised its acquisition strategy to bring selected 
technologies and systems to current forces via spin outs while 
development of the core FCS program is underway. The first of these 
spin out systems will be tested and evaluated in the coming year, and a 
production decision is planned in 2009. However, the testing up to that 
point will feature some surrogate subsystems rather than the fully 
developed subsystems that would ultimately be deployed to the current 
forces. For example, none of the tests will include fully functional 
JTRS radios or associated software. The Army believes this strategy is 
adequate; however, testing of surrogates may not provide quality 
measurements to gauge system performance, and the Army may have to 
redesign if JTRS radios have different form, fit, and function than 
expected. Taken together, these spin out 1 capabilities serve as a 
starting point for FCS but represent only a fraction of the total 
capability that the Army plans for FCS to provide. The Army has general 
plans for a second and third set of spin out items but, according to 
the Army, these have not yet been funded. 

NLOS-C Production to Begin Soon at Congress' Direction: 

Responding to congressional direction, the Army will begin procuring 
long lead production items for the NLOS-C vehicle in 2008.[Footnote 4] 
The Army will deliver six units per year in fiscal years 2010 through 
2012; however, these early NLOS-C vehicles will not meet threshold FCS 
requirements and will not be operationally deployable without 
significant modifications. Rather, they will be used as training assets 
for the Army Evaluation Task Force. 

To meet the early fielding dates, the Army will begin early production 
of the NLOS-C vehicles with immature technologies and designs. Several 
key technologies will not be mature for several years, and much 
requirements and design work remains on the manned ground vehicles, 
including the NLOS-C. Significant challenges involving integrating the 
technologies, software, and design will follow. To the extent these 
aspects of the manned ground vehicles depart from the early production 
cannons, costly rework of the cannons may be necessary. 

The Army is planning a seamless transition between NLOS-C production 
and core FCS production. However, beginning the production of NLOS-C 
vehicles 5 years before the start of FCS core production could create 
additional pressure to proceed with FCS core production. Moreover, to 
the extent that beginning NLOS-C production in 2008 starts up the 
manned ground vehicle industrial base, it could create a future need to 
sustain the base. If decision makers were to consider delaying FCS core 
production because it was not ready, a gap could develop when early 
NLOS-C production ends. Sustaining the industrial base could then 
become an argument against an otherwise justified delay. The Under 
Secretary of Defense for Acquisition, Technology, and Logistics 
recently took steps to keep the decisions on the NLOS-C early 
production separate from FCS core production. In approving procurement 
of long lead items for the NLOS-C vehicles in 2008, the Under Secretary 
designated the 18 early prototypes as a separate, special interest 
program for which he will retain authority for making milestone 
decisions. The Under Secretary will make a second decision in 2009 
whether to approve NLOS-C production and has put a cost limit of $505.2 
million (fiscal year 2003 dollars) on production of these vehicles. He 
also added that specific requirements be met at that time, such as a 
capability production document, technology readiness assessment, test 
plan, independent estimate of costs, and an approved acquisition 
program baseline. This is a positive step in ensuring that the Army's 
efforts to meet Congressional direction do not result in unfavorable 
consequences. 

Army Commitment to LSI for Production Heightens Oversight Challenges: 

The Army's April 2007 decision to contract with the LSI for FCS 
production makes an already close relationship closer, represents a 
change from the Army's original rationale for using an LSI, and may 
further complicate oversight. The specific role the LSI will play in 
production of spin outs, NLOS-C, and FCS core production are unclear at 
this point. According to program officials, the statements of work for 
the long lead items contracts for spin outs and NLOS-C have not yet 
been worked out. The statements of work for the production contract 
will also be negotiated later. The work the LSI does in actual 
production of FCS is likely to be small compared to the other hardware 
suppliers and assemblers. Thus, the production role of the LSI is 
likely to be largely in oversight of the first tier subcontractors. 

From the outset of the program, the LSI was to focus its attention on 
development activities that the Army judged to be beyond what it could 
directly handle. Army leadership believed that by using an LSI that 
would not necessarily have to be retained for production, the Army 
could get the best effort from the contractor during the development 
phase while at the same time making the effort profitable for the 
contractor. Nonetheless, the LSI's involvement in the production phase 
has been growing over time. The current LSI development contract for 
the core FCS systems extends almost 2 years beyond the 2013 production 
decision. The Army does not expect the initial brigades outfitted by 
FCS will meet the upper range of its requirements and has made the LSI 
responsible for planning future FCS enhancements during the production 
phase. Combined with a likely role in sustainment, the LSI will remain 
indefinitely involved in the FCS program. By committing to the LSI for 
early production, the Army effectively ceded a key point of leverage it 
had held--source selection--and is perhaps the final departure from the 
Army's initial efforts to keep the LSI's focus solely on development. 
This decision also creates a heightened burden of oversight in that 
there is now additional need to guard against the natural incentive of 
production from creating more pressure to proceed through development 
checkpoints prematurely. As we have previously reported, this is a 
burden that will need to be increasingly borne by the Office of the 
Secretary of Defense. 

FCS Costs Likely to Grow beyond Army Estimates: 

The Army's $160.9 billion cost estimate for the FCS program is largely 
unchanged from last year's estimate despite a program adjustment that 
reduced the number of systems from 18 to 14. This may mean a reduction 
in capabilities of the FCS program and thus represents a reduction in 
the Army's buying power on FCS. Further, two independent cost 
estimates--from DOD's Cost Analysis Improvement Group (CAIG) and the 
other from the Institute for Defense Analyses (IDA), a federally funded 
research and development center--are significantly higher than the 
Army's estimate. Both assessments estimate higher costs for software 
development, to which a recent increase in lines of code adds credence. 
The Army has not accepted either of the independent estimates on the 
grounds that they each include additional work scope, particularly in 
the later years of the development phase. Also, the CAIG and IDA both 
use historical growth factors in their estimates, based on the results 
of previous programs. It is reasonable to include such growth factors, 
based on our own analysis of weapon systems and the low level of 
knowledge attained on the FCS program at this time. 

Given the program's relative immaturity in terms of technology and 
requirements definition and demonstrations of capabilities to date, 
there is not a firm foundation for a confident cost estimate. The Army 
has not calculated confidence levels on its estimates, though this is a 
best practice and could reduce the probability of unbudgeted cost 
growth. Under its current structure, the Army will make substantial 
investments in the FCS program before key knowledge is gained on 
requirements, technologies, system designs, and system performance, 
leaving less than half its development budget to complete significantly 
expensive work, such as building and testing prototypes, after its 
preliminary design review. The Army maintains that if it becomes 
necessary, FCS content will be further reduced, by trading away 
requirements or changing the concept of operations, to keep development 
costs within available funding levels. As the Army begins a steep ramp- 
up of FCS production, FCS costs will compete with other Army funding 
priorities, such as the transition to modular organizations and 
recapitalizing the weapons and other assets that return from current 
operations. Together, the program's uncertain cost estimate and 
competing Army priorities make additional reductions in FCS scope and 
increases in cost likely. 

Conclusion: 

The deficiencies we cite in areas such as requirements and technology 
are not criticisms of progress in the sense that things should have 
gone smoother or faster. At issue, rather, is the misalignment of the 
program's normal progress with the events used to manage and make 
decisions on such acquisitions--key decisions are made well before 
sufficient knowledge is available. The decision in 2009 will provide an 
opportunity to realign the progress of knowledge in FCS with events 
such as the critical design review and tests of prototypes before the 
production decision. The 2009 decision may also be the government's 
last realistic opportunity to safeguard its ability to change course on 
FCS, should that be warranted. The first decision, as we see it, will 
have to determine whether FCS capabilities have been demonstrated to be 
both technically feasible and militarily worthwhile. If they have not, 
then DOD and the Army will need to have viable alternatives to fielding 
the FCS capability as currently envisioned. Depending on the results of 
the first decision, the second decision is to determine how to 
structure the remainder of the FCS program so that it attains high 
levels of knowledge before key commitments. 

Other aspects of the FCS program warrant attention that should not wait 
until the 2009 decision. Primary among these is the Army's decision to 
extend the role of the LSI into FCS production. This is a decision that 
will necessarily heighten the role the Office of the Secretary of 
Defense will have to play in overseeing the program and departs from 
the Army's philosophy of having the LSI focus on development without 
the competing demands and interests that production poses. A second 
aspect of the program warranting attention is the Army's approach to 
spin outs. It will be important for the Army to clearly demonstrate the 
military utility of the spin outs to current Army forces, based on 
testing high-fidelity, production-representative prototypes, before a 
commitment is made to their low rate production. This is not the 
current plan, as the Army plans to use some surrogate equipment in the 
testing that will support the production decision for spin out 1. 
Finally, it is important that the production investments in the spin 
outs and NLOS-C do not create undue momentum for production of the FCS 
core systems. As noted above, commitment to production of the FCS core 
systems must be predicated on attaining high levels of knowledge, 
consistent with DOD policy. 

Actions Recommended in Our Recent Reports: 

In our March 2008 reports, we made several recommendations to ensure 
that the 2009 FCS milestone review is positioned to be both well- 
informed and transparent. Specifically, we recommended that the 
Secretary of Defense establish objective and quantitative criteria that 
the FCS program will have to meet in order to justify its continuation 
and gain approval for the remainder of its acquisition strategy. The 
criteria should be set by at least July 30, 2008, in order to be 
prescriptive, and should be consistent with DOD acquisition policy and 
best practices. At a minimum, the criteria should include, among other 
things, the completion of the definition of all FCS requirements 
including those for the information network and the synchronization of 
FCS with all essential complementary programs. We also recommended that 
the Secretary of Defense, in advance of the 2009 milestone review, 
identify viable alternatives to FCS as currently structured that can be 
considered in the event that FCS does not measure up to the criteria 
set for the review. As we have previously reported, an alternative need 
not be a rival to the FCS, but rather the next best solution that can 
be adopted if FCS is unable to deliver the needed capabilities. For 
example, an alternative need not represent a choice between FCS and the 
current force, but could include fielding a subset of FCS, such as a 
class of vehicles, if they perform as needed and provide a militarily 
worthwhile capability. We further recommended that the Secretary of 
Defense (1) closely examine the oversight implications of the Army's 
decision to contract with the LSI for early production of FCS spin 
outs, NLOS-C, and low rate production for the core FCS program; (2) 
take steps to mitigate the risks of the Army's decisions, including the 
consideration of the full range of alternatives for contracting for 
production; and (3) evaluate alternatives to the LSI for long-term 
sustainment support of the FCS system of systems. 

Finally, regarding the FCS network and software development and 
demonstration efforts, we recommended that the Secretary of Defense (1) 
direct the FCS program to stabilize network and software requirements 
on each software build to enable software developers to follow 
disciplined software practices; (2) establish a clear set of criteria 
for acceptable network performance at each of the key program events; 
and (3) in setting expectations for the 2009 milestone review, include 
a thorough analysis of network technical feasibility and risks, 
synchronization of network development and demonstration with that of 
other FCS elements, and a reconciliation of the differences between 
independent and Army estimates of network and software development 
scope and cost. 

DOD concurred with our recommendations and stated that criteria for the 
2009 FCS Defense Acquisition Board review will be established and will 
be reviewed and finalized at the 2008 Defense Acquisition Board review. 
The results of the analyses and assessments planned to support the 2009 
review will inform DOD's acquisition and budget decisions for FCS. 
These are positive steps toward informing the 2009 Defense Acquisition 
Board review. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 
answer any questions you or members of the subcommittee may have. 

Contacts and Staff Acknowledgements: 

For future questions about this statement, please contact me on (202) 
512-4841 or [email protected]. Individuals making key contributions to 
this statement include William R. Graveline, Assistant Director; Martin 
G. Campbell; Ronald N. Dains; Tana M. Davis; Marcus C. Ferguson; John 
A. Krump, John M. Ortiz; and Carrie R. Wilson. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 109-163 ï¿½211 (2006). 

[2] GAO, Defense Acquisitions: 2009 Is a Critical Juncture for the 
Army's Future Combat System, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-408] (Washington, D.C.: Mar. 7, 2008); GAO, Defense 
Acquisitions: Significant Challenges Ahead in Developing and 
Demonstrating Future Combat System's Network and Software, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-08-409] (Washington, D.C.: Mar. 
7, 2008). 

[3] John Warner National Defense Authorization Act for Fiscal Year 
2007, Pub. L. No. 109-364, ï¿½ 214 (2006). 

[4] Department of Defense Appropriations Act, 2003, Pub. L. No. 107-248 
ï¿½ 8121 (2002), and similar provisions in subsequent defense 
appropriations acts. 

[End of section] 

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 "E-mail 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. ***