    Unmanned Aerial Vehicles: Questionable Basis for Revisions to Shadow 200
    Acquisition Strategy (Letter Report, 09/26/2000, GAO/NSIAD-00-204).

    Pursuant to a congressional request, GAO reviewed the Army's decision to
    revise its Shadow 200 tactical Unmanned Aerial vehicle acquisition
    strategy.

    GAO noted that: (1) the Army has a questionable basis for revising its
    acquisition strategy to procure four additional Shadow 200 systems in
    February before operational testing is conducted; (2) in contrast, the
    Army's original strategy, which would prove system capabilities before
    producing additional systems, was sound; (3) among its reasons to
    justify the revision, the Army contends that accelerating the program
    will enable it to field a much needed capability sooner; (4) also, the
    Army believes that risk associated with additional production prior to
    operational testing is substantially mitigated by significant
    developmental and other testing that is planned; (5) GAO is concerned
    that the Army cannot know whether the Shadow 200 system will be
    operationally effective before operational testing takes place; and (6)
    GAO's previous reviews of other unmanned aerial vehicle programs have
    shown that buying systems before successfully completing testing has
    repeatedly led to defective systems that were later terminated or
    required costly redesign and retrofit to achieve satisfactory
    performance.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  NSIAD-00-204
         TITLE:  Unmanned Aerial Vehicles: Questionable Basis for Revisions
    	     to Shadow 200 Acquisition Strategy
          DATE:  09/26/2000
       SUBJECT:  Army procurement
    	     Operational testing
    	     Procurement planning
    	     Military land vehicles
    	     Weapons systems
    	     Concurrency
    	     Defense capabilities
    	     Military aircraft
    IDENTIFIER:  Shadow 200 Unmanned Aerial Vehicle

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    GAO/NSIAD-00-204

    Report to the Chairman, Subcommittee on Military Research and Development,
    Committee on Armed Services, House of Representatives

    September 2000 UNMANNED AERIAL VEHICLES

    Questionable Basis for Revisions to Shadow 200 Acquisition Strategy

    GAO/ NSIAD- 00- 204

    Letter 3 Appendixes Appendix I: The Army Is Incorporating Lessons Learned

    From Previous Experience Into Its Shadow 200 Strategy 14

    Appendix II: Comments From the Department of Defense 16 Appendix III: GAO
    Contacts and Staff Acknowledgments 18

    Figures Figure 1: Shadow 200 Unmanned Aerial Vehicle System 6 Figure 2:
    Revised Schedule for Shadow 200 Acquisition Strategy 7

    National Security and International Affairs Division

    Let ter

    B- 285860 September 26, 2000 The Honorable Curt Weldon, Chairman
    Subcommittee on Military Research

    and Development Committee on Armed Services House of Representatives

    Dear Mr. Chairman: The Army plans to buy 44 Shadow 200 tactical unmanned
    aerial vehicle systems. Each system includes three unmanned aircraft
    (equipped with an imagery sensor 1 ); a vehicle to carry the aircraft; two
    ground control stations mounted on vehicles; and launch, recovery, and
    support equipment pulled on trailers behind the vehicles. From inside the
    ground control station, soldiers operating the unmanned aircraft will fly
    them over hostile or contested territory, collecting imagery of areas of
    interest for Army commanders so they can detect, identify, and locate enemy
    forces. The acquisition cost, including research and development costs, for
    the 44 systems is an estimated $430 million through 2004.

    Because the Army does not currently have enough unmanned aerial vehicle
    systems to meet its requirements, it devised an acquisition strategy in 1999
    focused on procuring and fielding the Shadow 200 system as quickly as
    possible. The Army's strategy called for acquiring a system that
    incorporated mature technologies, 2 which will be integrated and

    1 The sensor is the payload carried by the aircraft to accomplish its
    mission. Imagery sensors are generally electro- optical (for collecting
    television- type images) or infrared (for collecting images based on
    detected heat radiating from objects). Infrared capability is especially
    useful at night and in other low- light conditions. Combined electro-
    optical/ infrared sensors are available.

    2 Mature technologies are those that have been developed to the point where
    they can be integrated into a new product and counted on to meet product
    performance requirements.

    demonstrated before the Army commits to full- rate production. 3 The Army's
    acquisition strategy also included the low- rate initial production of four
    Shadow 200 systems to be used in developmental and operational testing. 4
    After evaluating the developmental and operational test results, the Army
    plans to decide in September 2001 whether to begin full- rate production of
    the Shadow 200 system.

    To field systems more quickly, the Army revised its Shadow 200 acquisition
    strategy in March 2000 by planning to increase the number of low- rate
    initial production systems from four to eight. The decision to produce these
    four additional systems would be made in February 2001– 2 months
    before operational testing and 7 months ahead of the scheduled full- rate
    production decision. As you requested, we have assessed whether the Army
    made a sound decision in revising its acquisition strategy. You also
    expressed an interest in the extent to which the Army has incorporated
    lessons learned from previous experience and from Kosovo/ Operation Allied
    Force into its Shadow 200 program. 5 This information is provided in
    appendix I.

    Results in Brief The Army has a questionable basis for revising its
    acquisition strategy to procure four additional Shadow 200 systems in
    February 2001 before

    operational testing is conducted. In contrast, the Army's original strategy,
    which would prove system capabilities before producing additional systems,
    was sound. Among its reasons to justify the revision, the Army contends that
    accelerating the program will enable it to field a much

    3 In DOD's formal acquisition process, the decision to enter full- rate
    production does not occur until a system has been operationally tested in an
    environment that realistically simulates the system's expected combat
    environment. However, before operational testing, low- rate initial
    production can take place to produce articles for testing, to prove
    manufacturing and production processes, or to build- up to planned higher
    rates of production.

    4 Developmental testing is a technical test conducted on components,
    subsystems, and system- level configurations of hardware and software to
    provide data on the achievability of critical system performance parameters.
    Operational testing refers to testing conducted in a realistic combat
    environment on production or production representative articles to support
    the decision to proceed beyond low- rate initial production. The purpose of
    this test is to provide a valid estimate of expected system operational
    effectiveness and suitability.

    5 Operation Allied Force refers to a military operation conducted from March
    to June 1999 by the U. S. and our North Atlantic Treaty Organization
    (commonly referred to as NATO) allies to bring an end to Serbian atrocities
    in Kosovo.

    needed capability sooner. Also, the Army believes that risk associated with
    additional production prior to operational testing is substantially
    mitigated by significant developmental and other testing that is planned. We
    are concerned that the Army cannot know whether the Shadow 200 system will
    be operationally effective before operational testing takes place. Our
    previous reviews of other unmanned aerial vehicle programs have shown that
    buying systems before successfully completing testing has repeatedly led to
    defective systems that were later terminated or required costly redesign and
    retrofit to achieve satisfactory performance.

    This report recommends that the Army not buy four additional systems until
    after operational testing is completed. The Department of Defense disagreed
    with us and stated that the risk associated with procuring these additional
    systems prior to operational testing is minimal. We continue to believe that
    the Army should not buy the additional systems because only operational
    testing of the system in a realistic combat environment can show whether the
    overall system will meet the Army's operational needs. If the Army does not
    implement our recommendation, we believe the Congress should consider
    directing it to do so.

    Background The Shadow 200 unmanned aerial vehicle system is expected to
    provide the Army with day or night reconnaissance, surveillance, and target
    acquisition

    capability. The Shadow 200 aircraft will allow Army commanders a view into
    heavily protected battlespace that cannot be penetrated by other
    intelligence assets or one that presents a high risk to manned aircraft. The
    Shadow 200 unmanned aerial vehicle system, formally designated the RQ- 7A,
    is shown in figure 1. The aircraft weighs approximately 325 pounds, has a
    wingspan of 13 feet, and measures 11 feet from nose to tail.

    Figure 1: Shadow 200 Unmanned Aerial Vehicle System

    Ground control stations Remote video terminal

    Personnel/ equipment and antenna

    transport and trailer X4

    Ground data terminal Air vehicles with payloads

    Portable ground Air vehicle transport

    X3

    control station and and launch

    data terminal trailer

    X1

    Source: U. S. Army

    On December 27, 1999, the U. S. Army awarded a contract to AAI Corporation
    for the engineering and manufacturing development of the Shadow 200 system.
    During the planned 16- month engineering and manufacturing development
    phase, the primary objectives are to translate the most promising design
    approach into a stable, interoperable, producible, supportable, and cost-
    effective design; validate the manufacturing and production process; and
    demonstrate system capabilities through testing. Because the Army believes
    the basic Shadow 200 system design is mature, low- rate initial production
    of four systems was started at the beginning of the engineering and
    manufacturing development phase. The Army expects to receive the first four
    systems between December 2000 and May 2001, when the engineering and
    manufacturing development phase is scheduled to be completed. These four
    systems will be used for developmental and operational testing, contractor
    and government performance testing, training, and equipping the first Army
    unit. In March 2000, the Army revised this acquisition strategy and now
    plans to exercise a second contract option in February 2001, buying four
    additional systems prior to operational testing at a cost of $31.8 million
    (see fig. 2).

    Figure 2: Revised Schedule for Shadow 200 Acquisition Strategy

    Fiscal year 2000 2001 O N D J F M A M J J A S O N D J F M A M J J A S

    Decision to enter development and produce 4 systems

    Deliveries of first 4 systems Decision to produce 4 additional systems
    Operational testing Analysis of operational test and report writing Full-
    rate production decision

    Source: Data from U. S. Army.

    Justification for Buying The Army has a questionable justification for
    revising its acquisition

    More Low- rate Initial strategy to procure the four additional Shadow 200
    systems before

    operational testing begins. Prior to this decision, the Army's acquisition
    Production Systems Is

    strategy for the Shadow 200 system was sound because it minimized risk by
    Questionable

    (1) using mature technologies, (2) completing engineering and manufacturing
    development, and (3) demonstrating system capabilities through operational
    testing before buying any additional systems.

    Original Acquisition Ensuring the maturity of components included in a
    system's design is a key

    Strategy for Shadow 200 to establishing a sound acquisition strategy. The
    Army's program office

    Was Sound considers all five of the technologies critical to the Shadow 200
    system's

    basic design to be mature- that is, at a level considered acceptable for
    programs entering the engineering and manufacturing development phase and
    ready to be integrated into a single system. 6 Our past work has shown the
    soundness of this approach; programs using more mature technology at the
    program start are more likely to succeed in meeting their objectives. In
    contrast to this lower- risk approach, the Department of Defense has often
    allowed immature technologies to be incorporated into its programs, thereby
    increasing technical risks. 7 For example, in the Hunter unmanned aerial
    vehicle program, the contractor used a motorcycle engine that was unproven
    as an airplane engine. Subsequently, in the flying environment, the engines
    overheated and valves seized, leading to a redesign of the engine to
    eliminate the problem. 8

    The original Shadow 200 acquisition strategy was also sound because it
    committed the Shadow 200 contractor to complete all its engineering and
    manufacturing development activities by May 2001, well before the next
    planned production decision scheduled for September 2001. Included in these
    activities were all the critical engineering steps necessary to ensure that
    the Shadow 200 design is cost- effective, stable, supportable, and
    producible. The original strategy also envisioned that the manufacturing

    6 The critical technologies are those incorporated into the airframe,
    engine, sensor payload, datalink, and ground control station. 7 Best
    Practices: Better Management of Technology Development Can Improve Weapon
    System Outcomes( GAO/ NSIAD- 99- 162, July 30, 1999).

    8 Unmanned Aerial Vehicles: No More Hunter Systems Should Be Bought Until
    Problems Are Fixed( GAO/ NSIAD- 95- 52, Mar. 1995).

    and production processes for the system would be validated by May 2001. In
    contrast, at the time the Department committed to acquiring the Hunter
    unmanned aerial vehicle system in January 1993, the system design was
    neither stable nor supportable. Subsequently, a number of Hunter aircraft
    crashed during testing due to design flaws, costing the U. S. government
    millions of dollars and the program time and credibility.

    Further, the original Shadow 200 acquisition strategy was sound because it
    committed to producing only four systems prior to operational testing, which
    is scheduled to begin in April 2001. Operational testing is the primary
    means of evaluating weapon system performance in a realistic combat
    environment. Although the Shadow 200 design incorporates mature
    technologies, operational testing will provide the Army with knowledge about
    whether these technologies, when integrated into a single system, will meet
    the Army's needs before it commits itself to the system's full- rate
    production in September 2001. Moreover, because operational testing was
    scheduled to take place in April 2001 and additional production was not
    planned to be approved until September 2001, the original strategy provided
    the Army with ample opportunity to fully analyze the operational test
    results.

    Army Has Questionable In December 1999, the Army's acquisition executive
    authorized the Shadow

    Basis for Revising 200 program to enter the engineering and manufacturing
    development

    Acquisition Strategy phase and also authorized building four low- rate
    initial production systems

    to be used in developmental and operational testing. At that time, the
    program manager was also directed to develop a plan to accelerate the
    fielding of the Shadow 200 system. Subsequently, in March 2000, the Army
    revised its original strategy. The revised plan will achieve accelerated
    fielding by exercising an option to buy an additional four low- rate initial
    production systems in February 2001 before engineering and manufacturing
    development is completed and operational testing is conducted (see fig. 2).
    These four additional systems would be fielded with operational Army units;
    they are not needed for testing.

    The intent behind this revision is to enable the Army to field Shadow 200
    systems to operational Army units earlier than called for in the original
    plan. We asked Army officials, including the program manager, to explain the
    basis for this decision. They told us that recent reductions in the Army's
    force structure have put a premium on surveillance and reconnaissance to
    provide greater situational awareness and knowledge, and acceleration of the
    program would allow early fielding of the much needed Shadow 200's

    capability. They also stated that risk is substantially mitigated by
    significant developmental and other testing. Further, acceleration only
    places a portion of the $31.8- million cost for the four additional systems
    at risk because most of the hardware could still be used if problems are
    later identified during operational testing.

    Although the Army might be able to deploy the Shadow 200 systems sooner if
    more systems are produced beginning in February 2001, we are concerned that
    the Army cannot guarantee their operational effectiveness at the time it
    plans to make that decision. Only operational testing can ensure that the
    components- even if mature- will work together in a realistic combat
    environment. Our previous reviews of other unmanned aerial vehicle programs
    have shown that buying systems before successfully completing operational
    testing has repeatedly led to defective systems that were later terminated
    or required costly redesign and retrofit to achieve satisfactory
    performance. For example, because predecessors to the Pioneer unmanned
    aerial vehicle system had been used successfully by Israeli forces, the Navy
    procured nine Pioneer systems in 1985 without testing and deployed the
    system to operational forces. As we reported in 1990, numerous problems
    ensued that led the Navy to redesign and modify virtually the entire system
    at a cost of about $50 million. 9 The redesign and modification costs about
    matched the Navy's cost of $56 million to initially procure its nine
    systems.

    Conclusions The Army's initial acquisition strategy for the Shadow 200
    system appropriately minimized risk by scheduling operational testing before

    committing to additional production. The Army's revised- and riskier- plan
    to procure four additional systems before operational testing has a
    questionable rationale. Although the Army designed the Shadow 200 system
    using mature technologies, it has no assurance that its components will work
    well together in a realistic combat environment until operational testing is
    completed. We believe that the Army should not risk procuring systems before
    proving that they will meet its needs and will not require costly and time-
    consuming retrofits.

    9 Unmanned Aerial Vehicles: Realistic Testing Needed Before Production of
    Short- Range System( GAO/ NSIAD- 90- 234, Sept. 28, 1990).

    Recommendations for We recommend that the Secretary of Defense direct the
    Army not to

    Executive Action exercise the option to procure four more Shadow 200
    unmanned aerial

    vehicle systems until operational testing has been successfully completed
    and shown that the systems meet the Army's needs.

    Matters for If the Army does not implement our recommendation, we believe
    the

    Congressional Congress should consider directing the Army to do so.

    Consideration Agency Comments In its written comments on a draft of this
    report, the Department stated

    that the Army should have the option to procure four more Shadow 200 systems
    before successfully completing operational testing. It stated that the risk
    associated with procuring these additional systems is minimal given the
    mature technology used in the program and the extensive developmental and
    operational tempo testing 10 planned before the February 2001 scheduled
    decision. The Department added that the Army does not need to wait for the
    results of operational testing before exercising an additional production
    option because the Army will have tested all of the system's critical
    technical performance parameters during developmental and other system
    testing. The Department also stated that this minimal risk is outweighed by
    the benefits associated with accelerating delivery of the Shadow 200 system.

    We continue to believe that the Army should wait until after completion of
    planned operational testing of the Shadow 200 system in May 2001. The
    ongoing developmental and operational tempo testing will provide the Army
    with valuable information on critical technical performance parameters such
    as range and endurance, but it will not provide the data about the overall
    performance of the system in a realistic combat environment that will be
    obtained during operational testing. According to

    10 Operational tempo testing differs from operational testing in that it
    attempts to increase the pace of system operations to increase stress on the
    system, but its main purpose is to identify problem areas in design that
    need correction rather than to determine if a system will be effective and
    suitable in a realistic combat environment when operated by Army units.

    the Department of Defense guidance for its major system acquisitions, 11
    attainment of individual critical technical performance parameters does not
    guarantee that overall system performance will meet operational needs.
    Although the Shadow 200 system has not been designated a major system, we
    believe this concept is equally applicable to the performance of the Shadow
    200 system.

    The Department of Defense's written comments are reprinted in appendix II.
    The Army also provided technical comments, which we incorporated as
    appropriate.

    Scope and To assess the Shadow 200 program's acquisition strategy and plans,
    we met

    Methodology with Department of Defense, Army, and contractor officials, and
    analyzed

    Shadow 200 system cost data, assessment reports, requirements documents, and
    program plans. To assess Shadow 200 system maturity, we asked program
    officials to identify the system's critical technologies and apply an
    analytical tool developed by the National Aeronautics and Space
    Administration to assess the technical maturity of each critical technology
    at the time the program entered the engineering and manufacturing design
    phase.

    To assess the extent to which lessons learned in Operation Allied Force were
    used to improve the performance of the tactical unmanned aerial vehicles
    (see app. I), we reviewed the Department of Defense's lessons learned
    report, 12 reviewed program documentation, and held discussions with program
    officials. We conducted our work at the Directorate for Intelligence,
    Surveillance, and Reconnaissance Systems, Office of the Secretary of
    Defense, Washington, D. C.; Tactical Unmanned Aerial Vehicle Project Office,
    Huntsville, Alabama; Training and Doctrine Command System Manager for
    Unmanned Aerial Vehicles, Fort Huachuca, Arizona; and AAI Corporation, Hunt
    Valley, Maryland.

    11 Department of Defense Regulation 5000. 2- R, Mandatory Procedures for
    Major Defense Acquisition Programs and Major Automated Information System
    Acquisition Programs (Mar. 15, 1996), appendix III, page III- 7.

    12 Report to the Congress: Kosovo/ Operation Allied Force After- Action
    Report, Department of Defense( Jan. 31, 2000).

    We conducted our work from August 1999 through September 2000 in accordance
    with generally accepted government auditing standards.

    We will send copies of this report to interested congressional committees;
    the Honorable William Cohen, Secretary of Defense; the Honorable Louis
    Caldera, Secretary of the Army; and the Honorable Jacob Lew, Director,
    Office of Management and Budget. Copies will also be made available to
    others upon request.

    If you have any questions regarding this report, please contact me at (202)
    512- 4841. Other contacts and key contributors to this report are listed in
    appendix III.

    Sincerely yours, Louis J. Rodrigues Director

    Appendi xes The Army Is Incorporating Lessons Learned From Previous
    Experience Into Its Shadow

    Appendi I x 200 Strategy In 1999, the Army, the Navy, and the Air Force
    operated RQ- 5A Hunter, RQ- 2A Pioneer, and RQ- 1A Predator unmanned aerial
    vehicle systems, respectively, in support of Operation Allied Force in
    Kosovo. 1 According to the Department of Defense, these unmanned aerial
    vehicles were used to an unprecedented degree and played an unprecedented
    role in Operation Allied Force. They were used extensively for surveillance
    and reconnaissance missions, and their ability to loiter over hostile
    territory enabled them to provide information that was otherwise unavailable
    while avoiding the risk of losing aircrews. Nevertheless, in its January
    2000 Kosovo/ Operation Allied Force report, the Department of Defense
    identified a number of technical improvements it believes unmanned aerial
    vehicles need to attain their full promise on the battlefield. These include
    the need for (1) improved tactics, techniques, and procedures; (2) more
    capable sensor payloads (e. g., advanced imagery, radar, and laser); and (3)
    air vehicles that can operate in all types of weather conditions. Based on
    its previous experience operating Hunter unmanned aerial vehicles in
    peacetime, however, the Army had already learned these lessons and has been
    incorporating them into its acquisition strategy for its new tactical
    unmanned aerial vehicle system, the Shadow 200.

    In January 1999, to improve the Army's understanding of tactics and of
    planning considerations for using unmanned aerial vehicles in future
    operations, the Army removed a Hunter system from storage and approved its
    use for joint readiness training at Fort Polk, Louisiana. Several Army units
    have rotated through the training center, and Army operational concepts are
    being validated and new lessons learned. One critical lesson learned is that
    the Army will be sending its unmanned aerial vehicles into high- risk areas
    to conduct surveillance where they are likely to be lost in battle. Thus,
    Army unmanned aerial vehicles must be inexpensive enough to be considered
    expendable. Hence, the Army's objective cost for a Shadow 200 air vehicle is
    about $452,000, which is a fraction of the cost of a manned observation
    helicopter.

    To address the need for more capable sensor payloads in its unmanned aerial
    vehicles, the Army began a yearlong payload study in March 2000. During the
    study period, the Army is exploring alternatives and benefits that synthetic
    aperture radar, chemical weapons detection, laser range finders, signals
    intelligence, and other payloads could provide

    1 See Report to the Congress: Kosovo/ Operation Allied Force After- Action
    Report, Department of Defense (Jan. 31, 2000).

    commanders. 2 Until the study is complete, the only payload that will be
    integrated with the Shadow 200 is an imagery sensor to provide television
    and infrared pictures. The study will take into account that the Shadow 200
    must remain inexpensive and expendable. Therefore, the more complex and
    expensive a particular payload is, the more benefits it must provide to the
    commander if it is to be incorporated into the Shadow air vehicle.

    The Army also recognizes the value of unmanned aerial vehicles with all-
    weather capability. Before Operation Allied Force, the Army understood that
    unmanned aerial vehicle flight and sensor performance are adversely affected
    by the elements- especially icing. However, the Army's belief that tactical
    unmanned aerial vehicles must be inexpensive enough to lose and the Shadow
    200's small size make it impractical to give the Shadow 200 aircraft all-
    weather capability. The Army plans to integrate a sensor on the Shadow 200
    aircraft to detect icing; once icing is detected, the aircraft operator can
    fly the aircraft out of the icing environment. Other than this sensor, the
    Shadow 200 aircraft will not have all- weather capability because adding
    additional weight in the form of deicing equipment to a vehicle of this size
    would substantially limit its range and sensor payload capacity.

    2 A synthetic aperture radar uses radar signals and the complex information
    processing capability of modern digital electronics to provide high
    resolution imagery that is used by the aircraft operators on the ground for
    reconnaissance and targeting.

    Appendi I x I Comments From the Department of Defense

    Appendi xI I I GAO Contacts and Staff Acknowledgments GAO Contacts Robert E.
    Levin (202) 512- 4841 Charles A. Ward (202) 512- 4343 Acknowledgments In
    addition to those named above, Thomas L. Gordon, Danny G. Owens,

    Jose A. Ramos, Jr., and Susan Woodward made key contributions to this
    report.

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    Appendix I

    Appendix I The Army Is Incorporating Lessons Learned From Previous
    Experience Into Its Shadow 200 Strategy

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    Appendix II

    Appendix II Comments From the Department of Defense

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    Appendix III

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