Unmanned Aerial Vehicles: Progress of the Global Hawk Advanced Concept
Technology Demonstration (Letter Report, 04/25/2000, GAO/NSIAD-00-78).

Pursuant to a legislative requirement, GAO reviewed the Global Hawk
Advanced Concept Technology Demonstration, focusing on: (1) whether the
average unit flyaway price for the 10 Global Hawk production aircraft
numbered 11 through 20 will be within the Department of Defense's (DOD)
price goal of $10 million each in fiscal year 1994 dollars; (2) the
status of the military user demonstration, including the extent to which
Global Hawk has demonstrated reconnaissance capabilities; and (3) DOD
and Air Force plans to transition to a formal acquisition program.

GAO noted that: (1) the Global Hawk Advanced Concept Technology
Demonstration has made progress in terms of achieving performance
objectives, but has not made progress toward the price goal; (2) neither
DOD nor the Global Hawk contractor expects to achieve the $10 million
average unit flyaway price goal for the 10 production air vehicles
numbered 11 through 20; (3) the most recent projection from the
contractor in July 1999 is an average unit flyaway price of $15.3
million in fiscal year 1994 dollars; (4) the contractor's projection is
based on data from actual costs incurred for construction of the third
prototype built, assumes there will not be significant design changes to
the prototype aircraft, and assumes higher annual production rates than
DOD is now planning; (5) moreover, the Air Force, which manages the
Global Hawk Advanced Concept Technology Demonstration, has not finalized
its design requirements for a future production version or completed an
analysis to determine the total number of Global Hawks it needs; (6)
although the Air Force expects to address these issues before the
Advanced Concept Technology Demonstration is complete in September 2000,
based on a set of draft minimum requirements the Air Force is
considering adopting, the actual average unit flyaway price paid by DOD
in the future for the production version could be significantly higher
than $15.3 million; (7) to assess whether Global Hawk has military
utility, the Air Force began demonstrating the prototype aircraft in
June 1999 for military users and their assessment is ongoing; (8) to
date, the Global Hawk prototype has demonstrated basic flying
capabilities but has not yet undergone sufficient testing to determine
whether it can successfully conduct reconnaissance missions on a regular
basis; (9) DOD plans to increase the number of flight-test hours
dedicated to demonstrating reconnaissance capability before the
flight-test phase is complete in June 2000; (10) although the Air Force
had hoped to secure an early decision to proceed with the acquisition of
Global Hawk in July 1999, DOD delayed a formal decision on whether to
acquire it until September 2000 after the Advanced Concept Technology
Demonstration is complete; (11) in the meantime, at DOD's request,
Congress has authorized the Air Force to procure the sixth and seventh
prototype air vehicles to sustain the Global Hawk industrial base; and
(12) DOD's decision to wait for the conclusion of the Advanced Concept
Technology Demonstration before committing to formally acquire Global
Hawk is prudent because by September 2000, a number of important
unknowns will be addressed.

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

 REPORTNUM:  NSIAD-00-78
     TITLE:  Unmanned Aerial Vehicles: Progress of the Global Hawk
	     Advanced Concept Technology Demonstration
      DATE:  04/25/2000
   SUBJECT:  Military aircraft
	     Defense procurement
	     Defense capabilities
	     Department of Defense contractors
	     Defense cost control
	     Cost overruns
	     Procurement planning
	     Operational testing
IDENTIFIER:  DOD High Altitude Endurance Unmanned Aerial Vehicle
	     Program
	     Global Hawk Unmanned Aerial Vehicle

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GAO/NSIAD-00-78

National Security and
International Affairs Division

B-284511

April 25, 2000

Congressional Committees

The Department of Defense (DOD) has built five prototype Global Hawk
reconnaissance aircraft for use in a High Altitude Endurance Unmanned Aerial
Vehicle Advanced Concept Technology Demonstration.1 The Advanced Concept
Technology Demonstration's purpose is to determine through design and
construction of Global Hawk prototypes, and a subsequent assessment of their
utility in military user demonstrations, if the concept is effective as an
Air Force reconnaissance aircraft before DOD decides whether to acquire a
production version of it. Reconnaissance aircraft such as Global Hawk are
used to obtain information about the activities and resources of enemy
forces.

If DOD decides to acquire Global Hawk, the production version is expected to
provide the Air Force with the ability to fly for 40 continuous hours and
conduct reconnaissance for up to 24 hours at a radius of 3,000 nautical
miles. In 1994, when the Advanced Concept Technology Demonstration was
initiated, DOD established a $10-million average unit flyaway price goal in
fiscal year 1994 dollars for air vehicles numbered 11 through 20.2 The unit
flyaway price covers the cost of the vehicle, its reconnaissance sensors,
and the contractor's fee. Unit flyaway price excludes costs for systems
engineering and program management, system test and evaluation and
non-recurring tooling, engineering and manufacturing development, and
non-flying support equipment such as the ground control station.

Because of concerns about Global Hawk's affordability, Congress directed us
to review the Global Hawk Advanced Concept Technology

Demonstration.3 Our objectives were to determine (1) whether the average
unit flyaway price for the 10 Global Hawk production aircraft numbered 11
through 20 will be within DOD's price goal of $10 million each in fiscal
year 1994 dollars; (2) the status of the military user demonstration,
including the extent to which Global Hawk has demonstrated reconnaissance
capabilities; and (3) DOD and Air Force plans to transition to a formal
acquisition program. This is our second report addressing the status of
DOD's progress toward meeting its price goal for Global Hawk.4 In our prior
report, we concluded that DOD was not making progress toward the goal.

The Global Hawk Advanced Concept Technology Demonstration has made progress
in terms of achieving performance objectives, but has not made progress
toward the price goal. Neither DOD nor the Global Hawk contractor expects to
achieve the $10 million average unit flyaway price goal for the 10
production air vehicles numbered 11 through 20. The most recent projection
from the contractor in July 1999 is an average unit flyaway price of $15.3
million in fiscal year 1994 dollars. The $15.3 million unit price represents
an increase of $0.5 million per unit from DOD's July 1998 estimate of $14.8
million per unit. The contractor's projection is based on data from actual
costs incurred for construction of the third prototype built, assumes there
will not be significant design changes to the prototype aircraft, and
assumes higher annual production rates than DOD is now planning. Moreover,
the Air Force, which manages the Global Hawk Advanced Concept Technology
Demonstration, has not finalized its design requirements for a future
production version or completed an analysis to determine the total number of
Global Hawks it needs. Although the Air Force expects to address these
issues before the Advanced Concept Technology Demonstration is complete in
September 2000, based on a set of draft minimum requirements the Air Force
is considering adopting, the actual average unit flyaway price paid by DOD
in the future for the production version could be significantly higher than
$15.3 million.

To assess whether Global Hawk has military utility, the Air Force began
demonstrating the prototype aircraft in June 1999 for military users and

their assessment is ongoing.5 To date, the Global Hawk prototype has
demonstrated basic flying capabilities but has not yet undergone sufficient
testing to determine whether it can successfully conduct reconnaissance
missions on a regular basis. According to an October 1999 test report from
the Air Force, the prototype has flown at altitudes in excess of 66,000 feet
and for lengths of more than 27 hours. However, of the 1,200 flight-test
hours planned for the user demonstrations, only about 260 were completed by
the end of January 2000. DOD plans to increase the number of flight-test
hours dedicated to demonstrating reconnaissance capability before the
flight-test phase is complete in June 2000. According to DOD, while fewer
hours have been dedicated to testing reconnaissance sensors, the sensors'
different operating modes have been tested, and over 2,700 recorded images
have been transmitted to military users to assess the aircraft's
reconnaissance capability.

Although the Air Force had hoped to secure an early decision to proceed with
the acquisition of Global Hawk in July 1999, DOD delayed a formal decision
on whether to acquire it until September 2000 after the Advanced Concept
Technology Demonstration, including the user demonstration and assessment,
is complete. In the meantime, at DOD's request, Congress has authorized the
Air Force to procure the sixth and seventh prototype air vehicles to sustain
the Global Hawk industrial base. DOD's decision to wait for the conclusion
of the Advanced Concept Technology Demonstration before committing to
formally acquire Global Hawk is prudent because by September 2000, a number
of important unknowns will be addressed. These include the Air Force's final
requirements for a production version of Global Hawk, determination of how
many Global Hawks the Air Force may need, and analyses of the user
demonstration and assessment results and cost data from the Advanced Concept
Technology Demonstration. Eliminating these unknowns before an acquisition
decision is consistent with the best practices of leading commercial firms.
These firms do not commit to produce a new product until knowledge about
technological maturity and cost-effectiveness is available.6

In 1994, DOD began the Global Hawk Advanced Concept Technology Demonstration
as one of a number of advanced concept technology demonstrations. As an
Advanced Concept Technology Demonstration, Global Hawk does not follow DOD's
formal approval process for acquisition programs. Rather, through the use of
prototypes, a mature technology is field tested by military users to
determine whether there is an effective military application. Based on the
results of the Advanced Concept Technology Demonstration, a decision is made
whether to transition the demonstration product into a formal acquisition
program. DOD's original manager for the effort, the Defense Advanced
Research Projects Agency, and Global Hawk's prime contractor,
Northrop-Grumman's Ryan Aeronautical Center, envisioned Global Hawk to be an
affordable way to augment the Air Force's manned U-2 high altitude
reconnaissance aircraft. The Air Force assumed program management
responsibility for the Advanced Concept Technology Demonstration in October
1998.

Global Hawk is a large aircraft measuring longer than 40 feet with a
wingspan of more than 100 feet. (See fig. 1.) During the Global Hawk
Advanced Concept Technology Demonstration, the contractor has built five
prototypes. The fifth prototype was delivered to DOD in November 1999. One
of the vehicles was destroyed when it crashed in March 1999. This crash
delayed the start of the Air Force's user demonstration from April until
mid-June 1999. DOD expects to make a formal acquisition decision in
September 2000.

Figure 1: Global Hawk High Altitude Endurance Unmanned Aerial Vehicle
Source: U.S. Air Force.

Neither Global Hawk's prime contractor nor DOD expects to achieve the
$10-million average unit flyaway price goal in fiscal year 1994 dollars. The
price goal was established by agreement between DOD and the contractor and
was to be applicable to the 10 production air vehicles numbered 11 through
20 should DOD proceed with a formal acquisition program after the Advanced
Concept Technology Demonstration. The contractor's most recent average unit
flyaway price projection (dated July 1999) is
$15.3 million in fiscal year 1994 dollars. The contractor's projection is
based on data from actual costs incurred for construction of the third
prototype, assumes there will not be significant design changes between the
prototype aircraft and the aircraft built in a future production phase, and
assumes higher annual production rates than DOD is now planning. The
$15.3-million unit price projection also represents an increase of
$0.5 million per unit from DOD's unit price projection of $14.8 million made
in July 1998. A comparison of these projections to the original goal is
shown in table 1.

Table 1: 1994, 1998, and 1999 Average Unit Flyaway Price Projections for
Production Air Vehicles Numbered 11 Through 20

 Fiscal year 1994 millions of dollars

 Category   Contractor            DOD projection      Contractor projection
            projection (1994)a    (July 1998)         (July 1999)
 Structure  $2.6                  $6.1                $6.1
 Avionics   0.4                   0.5                 0.6
 Sensors    4.1                   5.2                 6.7
 Propulsion 1.6                   1.6                 1.9
 Fee        1.3                   1.4                 b
 Total      $10.0                 $14.8               $15.3

aProjections assume production aircraft will not differ significantly from
prototype aircraft.

bFor its July 1999 projection, the contractor did not show its fee
separately. Rather, a 12-percent fee is included in component subtotals.

Sources: DOD and Northrop-Grumman Ryan Aeronautical Center.

According to DOD, most of the $5.3-million overall increase since 1994 in
the projected average flyaway price for Global Hawk is due to the need to
achieve the aircraft's range and endurance objectives. This required the
contractor to modify the wings and other structural parts, adding a
projected $3.5 million to the structural cost of each aircraft. The second
largest projected increase is in the price of the electro-optical, infrared,
and synthetic aperture radar reconnaissance sensors selected by the
contractor.7 The contractor's original projection of $4.1 million per
aircraft for these reconnaissance sensors was a significant underestimate
compared with its July 1999 projection of $6.7 million per aircraft.
Further, the contractor's July 1999 $15.3 million unit price projection
includes the effects of two factors that were not considered in developing
the 1994 projection. First, breaks in construction between the second and
third prototypes, and after the fifth prototype, prevented the contractor
from

reducing costs per aircraft as rapidly as anticipated.8 The second factor is
DOD's lower planned annual production rate of 2 per year versus the original
plan to acquire 10 Global Hawk production aircraft in a single year. This
reduced the contractor's plans to achieve unit cost savings through greater
economies of scale.

The Air Force and the contractor continue to collect actual cost data for
use in updating their projections of average unit flyaway price. Continuing
to collect and update this knowledge until the end of the Advanced Concept
Technology Demonstration in September 2000 is important because it will form
the basis for determining Global Hawk's cost-effectiveness. In addition, the
actual average unit flyaway price paid by DOD in the future for the
production version could differ significantly from $15.3 million because the
Air Force has not finalized its design requirements for a future production
version or completed an analysis of alternatives to determine how many
Global Hawks it will need.

Concurrent with the ongoing Advanced Concept Technology Demonstration, the
Air Force is preparing an operational requirements document for Global Hawk.
This document will formally identify all the performance capabilities that
the Air Force will require for Global Hawk to be considered ready to
operationally deploy successfully. The Air Force expects to complete this
document by September 2000.

During the requirements generation process, the Air Force expects to use
affordability as a factor in prioritizing Global Hawk performance
requirements. For example, according to a draft Air Force operational
requirements document, improvements to current Global Hawk prototype
reconnaissance sensors must be funded. Conversely, active defensive systems
to protect Global Hawk from missiles (e.g., a towed decoy capability),
though included in the contractor's design, are identified as lower priority
objectives to be included in production when funding becomes available.
Improved sensors would increase the average unit flyaway price by $700,000.
Not requiring defensive systems would lower it by $600,000. A more precise
and comprehensive estimate on the impact to the average unit flyaway price
can be made once the operational requirements document is approved in
September 2000.

Another key program document that is currently being drafted by the Air
Force is an Analysis of Alternatives evaluating other approaches to
performing the mission the Global Hawk is being designed to perform. The
primary alternative being evaluated is the purchase of additional U-2 manned
reconnaissance aircraft. The Air Force expects to publish this document in
April 2000. The outcome of this analysis could further affect Global Hawk's
average unit flyaway price by influencing the total number of Global Hawks
the Air Force concludes it may need.

The Global Hawk Advanced Concept Technology Demonstration, including ongoing
user demonstrations and the military utility assessment, is to be completed
by September 2000. During the user demonstrations, Global Hawk prototypes
are being flown in military exercises so military users can assess their
usefulness as high-altitude, endurance reconnaissance aircraft. The
prototype was originally expected to fly to altitudes greater than
65,000 feet and spend 40 hours aloft. An October 1999 report concludes that
the prototype has successfully demonstrated basic flying capabilities,
reaching altitudes in excess of 66,000 feet and flying for lengths of more
than 27 hours.9 On one assessment flight, a Global Hawk successfully flew
over a large section of the western United States, encompassing California,
Nevada, Idaho, and Utah, while being controlled from a ground station in
California.

However, while the assessment plan calls for flying 1,200 hours between June
1999 and June 2000, only about 260 hours had been flown as of January 2000.
Additionally, Air Force testers noted that of the hours flown, only a
limited number have been dedicated to demonstrating the aircraft's sensors
can successfully complete the reconnaissance mission. DOD plans to address
this by increasing the number of test hours dedicated to demonstrating
reconnaissance capability as the assessment proceeds. Furthermore, according
to DOD, though flight hours flown in support of sensor demonstrations are
lower than anticipated, all of the aircraft's sensor modes have been
successfully evaluated, and over 2,700 recorded images have been distributed
to assessment participants for analysis. Future reports should provide a
better indication of Global Hawk's military usefulness. This information,
together with the cost data, will allow DOD to make an informed tradeoff
between cost and technical performance as part of the decision whether to
transition to a formal acquisition program and proceed with production.

Technology Demonstration

Although the Air Force had hoped to secure in July 1999 an early decision to
proceed with the acquisition of Global Hawk, DOD delayed a formal decision
on whether to acquire it until after the Advanced Concept Technology
Demonstration is complete in September 2000. In the meantime, an
Intelligence Program Decision Memorandum issued in August 1999 directed the
Air Force to add funding to initiate an acquisition program with an expected
acquisition decision for engineering and manufacturing development at the
end of fiscal year 2000. DOD's decision to wait is prudent because by
September 2000, the actual costs incurred to build the first five aircraft,
the operational requirements document, the analysis of alternatives, and the
Global Hawk user demonstration and military utility assessment results
should be available for use in deciding whether to formally acquire Global
Hawk.

Concurrent with the ongoing assessment, the Air Force has been preparing for
the Global Hawk acquisition decision. To that end, in July 1999, the Air
Force developed a number of acquisition strategy alternatives and presented
them to the Under Secretary of Defense for Acquisition, Technology and
Logistics. In response, the Under Secretary approved continuing activities
to prepare for a transition to acquisition, including procuring a sixth and
seventh aircraft of the prototype design to sustain the Global Hawk
industrial base. However, he delayed a formal decision to proceed beyond the
Advanced Concept Technology Demonstration until it is complete in September
2000.

The Under Secretary's decision to wait for the conclusion of the Advanced
Concept Technology Demonstration before committing DOD to acquire Global
Hawk is prudent because there are still a number of important unknowns that
need to be addressed. These include the actual costs incurred to build the
first five aircraft, the operational requirements document, the analysis of
alternatives, and the Global Hawk user demonstrations and military utility
assessment results. Our work in the best practices area shows leading
commercial firms do not commit to produce a new product until knowledge
about technological maturity and cost-effectiveness is available. Product
development is thereafter a clearly defined undertaking to design and
manufacture an end item for delivery to a customer that the customer needs
and can afford.

If a decision to acquire Global Hawk is made in September 2000, the Air
Force's preferred acquisition strategy would begin with an engineering and
manufacturing development phase before production. According to the Air
Force, the objective of the proposed development phase would be to make
design changes to improve the prototype Global Hawk so the production
version will be operationally ready to be deployed. As directed by the
Defense Acquisition Executive, this 1-year engineering and manufacturing
development phase would begin in fiscal year 2001 and is estimated to cost
$87.4 million.

As part of the 1-year engineering and manufacturing development phase, the
Air Force would complete the two additional Advanced Concept Technology
Demonstration prototype aircraft requested by DOD and approved by Congress
while preparing to produce the improved aircraft. Following this engineering
and manufacturing development phase, the Air Force will begin initial
production of eight of the improved aircraft (and two ground control
stations) from fiscal years 2002 through 2005. The total cost of procurement
planned during this phase is $365.6 million. The total estimated cost of the
overall program implementing the Air Force's preferred acquisition strategy
for Global Hawk would be $772.9 million, as shown in table 2.

Table 2: Estimated Cost to Improve Global Hawk and Procure Improved
Production Versions (Preferred Air Force Acquisition Strategy)

 Major cost category                   Estimated cost in then-year millions
                                       of dollars, fiscal years 2001-05
 Research, Development, Test, and
 Evaluation                            $306.3a
 Procurement (includes 8 improved
 aircraft and 2 ground stations)       365.6b
 Operations and maintenance            51.0
 Military construction                 50.0
 Total                                 $772.9

aThis figure includes funding for procuring the 2 additional,
congressionally approved, prototype air vehicles in fiscal year 2001, the
1-year engineering and manufacturing development period in fiscal year 2001
to improve the prototype design, and funding for further development in
fiscal years 2002-2005 for a future Global Hawk aircraft with more
improvements.

bThis figure includes procurement of all equipment necessary to operate
Global Hawk, not just the aircraft.

Source: U.S. Air Force.

DOD provided written comments on a draft of this report (see app. I). DOD
generally concurred with the report and suggested technical changes for
clarification and accuracy that we incorporated as appropriate.

To determine DOD's progress toward meeting its price goal, the status of the
user demonstrations, and DOD and the Air Force's acquisition plans, we met
with DOD, Air Force, and contractor officials, and analyzed Global Hawk cost
data, an assessment report, draft requirements documents, and program plans.
We conducted our work at the Division of Intelligence, Surveillance, and
Reconnaissance Systems, Office of the Secretary of Defense, Washington D.C;
Air Combat Command and U.S. Atlantic Command (now Joint Forces Command),
Norfolk, Virginia; the Air Force Reconnaissance System Program Office,
Wright-Patterson Air Force Base, Ohio; and Ryan Aeronautical Center,
Northrop-Grumman Corporation.

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

We are sending copies of this report to the Secretaries of Defense and the
Air Force, and the Director of the Office of Management and Budget. We will
also provide copies to others upon request. If you or your staff have any
questions, please contact me at (202) 512-4841. Principal contributors to
this report were Charles Ward, Richard Strittmatter, and Michael McGuire.

Louis J. Rodrigues
Director, Defense Acquisitions Issues

List of Congressional Committees

The Honorable John Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Richard C. Shelby
Chairman
The Honorable Robert Kerrey
Vice Chairman
Select Committee on Intelligence
United States Senate

The Honorable Floyd D. Spence
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

The Honorable Porter J. Goss
Chairman
The Honorable Norman Dicks
Ranking Minority Member
Permanent Select Committee on Intelligence
House of Representatives

Comments From the Department of Defense

(707385)
  

1. Advanced Concept Technology Demonstrations do not follow DOD's formal
approval process for its acquisition programs. Instead, before a formal
decision to acquire a product is made, a given mature technology is
demonstrated to military commanders who determine if the technology has
military application, and is cost-effective.

2. In accordance with DOD's agreement with the Global Hawk contractor, the
first 10 production aircraft were to be Global Hawk aircraft numbered 11
through 20. Aircraft numbered 1 through 10 were to be prototypes for the
demonstration. However, to save money, only five demonstration prototypes
were built.

3. National Defense Authorization Act for Fiscal Year 1998, section 216.

4. Unmanned Aerial Vehicles: Progress Toward Meeting High Altitude Endurance
Aircraft Price Goals (GAO/NSIAD-99-29 , Dec. 15, 1998).

5. During the military utility assessment, the Air Force is operationally
demonstrating the Global Hawk prototype's capabilities during military
exercises in realistic operational environments so that military users can
assess its mission effectiveness.

6. Best Practices: Successful Application to Weapon Acquisitions Requires
Changes in DOD's Environment (GAO/NSIAD-98-56 , Feb. 24, 1998).

7. The aircraft's sensors are used by the aircraft's operators on the ground
to make images of what is below the aircraft for analysis.

8. A "break in construction" occurs when a manufacturing process comes to a
stop. In this case, DOD did not immediately authorize the contractor to
begin building the third or sixth prototypes when it was ready to do so and
work ceased. The subsequent disruption to the continuity of the work,
according to the Global Hawk contractor, caused its employees to not become
as efficient at building Global Hawks as it projected they would.

9. Global Hawk Quick Look Report, U.S. Air Force, October 1999.
*** End of document. ***