Ballistic Missile Defense: Improvements Needed in THAAD Acquisition
Planning (Letter Report, 09/12/97, GAO/NSIAD-97-188).

GAO reviewed the Theater High Altitude Area Defense (THAAD) program to
determine whether: (1) planned testing would demonstrate operational
effectiveness before a significant number of units are produced for
deployment; and (2) missile target resources are adequate to support
testing plans.

GAO noted that: (1) the current THAAD program review and evaluation
provides the Department of Defense (DOD) with the opportunity to: (a)
reduce risk and minimize the number of initial quantities of unproven
system hardware by reexamining the schedule for operational testing and
production; and (b) ensure that realistic targets will be used for
testing; (2) the last approved THAAD acquisition plan calls for
significant production of deployment hardware almost 2 years before
beginning independent operational testing to assess the system's
operational effectiveness; (3) the Army maintains that it needs to buy a
number of THAAD systems during low-rate initial production to "ramp-up"
to the full rate of production; (4) delaying production until after
completing sufficient testing that provides assurance that key
performance requirements can be met reduces the risk of buying unproven
systems and facilitates production of proven systems at more efficient
rates; (5) a suitable target for testing the THAAD system against longer
range missiles does not exist, and funds have not been requested for
target development and production; and (6) without a longer range test
target to represent the more formidable, higher velocity missiles that
THAAD could face, the system's operational effectiveness will remain in
doubt and DOD will not have reasonable assurance that it could rely on
THAAD in an actual conflict.

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

 REPORTNUM:  NSIAD-97-188
     TITLE:  Ballistic Missile Defense: Improvements Needed in THAAD 
             Acquisition Planning
      DATE:  09/12/97
   SUBJECT:  Testing
             Defense capabilities
             Concurrency
             Ballistic missiles
             Product performance evaluation
             Advanced weapons systems
IDENTIFIER:  SDI Theatre High Altitude Area Defense System
             THAADS
             
******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.  Major          **
** divisions and subdivisions of the text, such as Chapters,    **
** Sections, and Appendixes, are identified by double and       **
** single lines.  The numbers on the right end of these lines   **
** indicate the position of each of the subsections in the      **
** document outline.  These numbers do NOT correspond with the  **
** page numbers of the printed 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.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************


Cover
================================================================ COVER


Report to the Secretary of Defense

September 1997

BALLISTIC MISSILE DEFENSE -
IMPROVEMENTS NEEDED IN THAAD
ACQUISITION PLANNING

GAO/NSIAD-97-188

THAAD Testing

(707191)


Abbreviations
=============================================================== ABBREV

  BMDO - Ballistic Missile Defense Organization
  DOD - Department of Defense
  THAAD - Theater High Altitude Area Defense
  UOES - User Operational Evaluation System

Letter
=============================================================== LETTER


B-274599

September 12, 1997

The Honorable William S.  Cohen
The Secretary of Defense

Dear Mr.  Secretary: 

We reviewed the Theater High Altitude Area Defense (THAAD) program to
determine whether (1) planned testing would demonstrate operational
effectiveness\1 before a significant number of units are produced for
deployment and (2) missile target resources are adequate to support
testing plans.  We are addressing this report to you at this time
because of the ongoing Department of Defense (DOD) evaluation of the
THAAD program and schedule following a succession of test intercept
failures. 


--------------------
\1 DOD defines "operational effectiveness" as the overall degree of
mission accomplishment of a system when used by representative
personnel in the environment planned or expected for operational
employment of the system considering organization, doctrine, tactics,
survivability, vulnerability, and threat. 


   BACKGROUND
------------------------------------------------------------ Letter :1

The $17.9 billion THAAD is a ground-based weapon system being
developed by the Ballistic Missile Defense Organization (BMDO) and
the Army to defeat theater ballistic missiles.  It supports the
national objective of protecting U.S.  and allied deployed forces,
population centers, and industrial facilities from theater missile
attacks.  The THAAD system consists of four major components:  (1)
truck-mounted launchers, (2) interceptors, (3) the radar system, and
(4) the battle management/command, control, communication, computer,
and intelligence (BM/C4I) system.  The launcher is to provide rapid
reload of interceptors.  Each interceptor is to consist of a single
stage booster and a kill vehicle that is designed to autonomously
home on an enemy missile during the last phase of interceptor flight
and destroy the missile by colliding with it, called "hit-to-kill."
The radar is being designed to support the full range of
surveillance, target tracking, and fire control functions and provide
a communications link with THAAD interceptors in flight.  The BM/C4I
system is to manage and integrate all THAAD components and link the
THAAD system to other missile defense systems to support an
interoperable theater missile defense architecture.  Figure 1 shows
THAAD as the upper tier in a two-tier theater missile defense
architecture. 

   Figure 1:  THAAD System

   (See figure in printed
   edition.)

Source:  GAO. 

The THAAD program has undergone two major revisions.  One revision
delayed fielding from fiscal year 2002 until 2006 and was the result
of DOD reducing planned funding by about $2 billion during the fiscal
year 1997 budget process.  The delay increased total system cost from
$16.8 billion to $17.9 billion, or by $1.1 billion.  The other
revision accompanied DOD's fiscal year 1998 budget request and
involved accelerating fielding to fiscal year 2004 by adding a total
of $722 million for fiscal years 1998 through 2003. 

To date, the Army has conducted four THAAD intercept tests.  All four
attempts failed.  After the system failed the fourth attempt to
intercept its target in March 1997, the Director, BMDO, established
two independent teams to assess program requirements.  One team was
to determine if the system design can meet warfighter needs; and the
other team was to evaluate the interceptor design and quality
assurance.  According to a THAAD project office representative, the
teams' results are to be used to revise the THAAD acquisition plan. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The current THAAD program review and evaluation provides DOD with the
opportunity to (1) reduce risk and minimize the number of initial
quantities of unproven system hardware by reexamining the schedule
for operational testing and production and (2) ensure that realistic
targets will be used for testing.  The last approved THAAD
acquisition plan calls for significant production of deployment
hardware almost 2 years before beginning independent operational
testing to assess the system's operational effectiveness.  The Army
maintains that it needs to buy a number of THAAD systems during
low-rate initial production to "ramp-up" to the full rate of
production.  Delaying production until after completing sufficient
testing that provides assurance that key performance requirements can
be met reduces the risk of buying unproven systems and facilitates
production of proven systems at more efficient rates. 

A suitable target for testing the THAAD system against longer range
missiles does not exist, and funds have not been requested for target
development and production.  Without a longer range test target to
represent the more formidable, higher velocity missiles that THAAD
could face, the system's operational effectiveness will remain in
doubt and DOD will not have reasonable assurance that it could rely
on THAAD in an actual conflict. 


   ACQUIRING SIGNIFICANT
   QUANTITIES OF HARDWARE BEFORE
   KEY PERFORMANCE REQUIREMENTS
   ARE TESTED IN AN OPERATIONAL
   ENVIRONMENT INCREASES RISK
------------------------------------------------------------ Letter :3

BMDO's current schedule calling for award of the low-rate initial
production contract almost 2 years before the start of operational
testing and evaluation increases the risk associated with the THAAD
program.  The Director, BMDO, acknowledged that the initial THAAD
schedule was high risk and contributed to THAAD development problems. 
In May 1997, he stated that THAAD's aggressive schedule led to
problems probably traceable to "hurry up." The THAAD Project Manager
informed us that both the contractor and the project office were
overly optimistic regarding the test schedule.  In addition, he
pointed out that, in hindsight, additional component testing could
have prevented some test flight failures.  Prior to the last test
flight, the number of test flights planned as the basis for entering
the engineering and manufacturing development phase was reduced from
20 to 9 flights partly to stay on schedule.  DOD established three
successful intercepts as the criterion for THAAD entering the
engineering and manufacturing development phase.  Figure 2 shows the
most current approved THAAD schedule for operational testing and
production of units for deployment.  The figure shows that contract
award of the low-rate initial production contract will precede the
start of operational testing and evaluation by almost 2 years. 

   Figure 2:  Last Approved
   Schedule of THAAD Operational
   Testing and Production

   (See figure in printed
   edition.)

Source:  GAO. 

In light of recent test failures, the THAAD program is being revised. 
While BMDO and DOD have not yet approved a revision to the THAAD
acquisition plan and schedule, a proposed plan currently being
discussed within the Army, BMDO, and DOD would equip the first unit
in fiscal year 2006.  However, that proposed plan still calls for
significant low-rate initial production before operational testing. 

According to 10 U.S.C.  2400, low-rate initial production is the
minimum quantity needed to (1) provide weapons for operational test
and evaluation, (2) establish an initial production base for the
weapon, and (3) permit an orderly increase in production before
full-rate production begins. 

With regard to the need for weapons used in operational test and
evaluation, THAAD equipment produced during low-rate initial
production is currently intended for deployment to operational units
rather than for use in operational test and evaluation.  The low-rate
initial production contract was scheduled for award almost 2 years
before beginning operational testing to assess operational
effectiveness.  During low-rate initial production, the Army plans to
produce significantly more than the amount of THAAD system components
needed to equip the first deployed unit (battery).  For example, the
first deployed unit is to consist of 9 launchers, 72 interceptors, 1
radar, and 3 BM/C4I systems.  But the plan calls for production under
the low-rate initial production contract of 32 launchers, 253
interceptors, and 3 radars.  Of the 253 interceptors, 234 are planned
for deployment and 19 are planned for production verification and
reliability testing.  The 234 interceptors are more than three times
the number needed to equip the first fielded unit and would represent
about 20 percent of the total 1,178 interceptors planned for full
deployment. 

Concerning the other two purposes of low-rate initial
production--establishing an initial production base and permitting an
orderly increase in production before full-rate production begins--we
believe that starting production of significant quantities of an
unproven system 2 years before beginning operational testing
increases risk.  If the production line prove-out and ramp-up were
delayed until after the completion of sufficient independent testing
in an operational environment, initial quantities of unproven systems
would be reduced and additional funding would become available to buy
the proven systems at more efficient rates.  As we previously
reported, DOD often budgets available funding for unnecessary
increases in low-rate production quantities of unproven weapons whose
designs are not yet stabilized with the result that it is unable to
buy proven weapons at originally planned full rates because of
insufficient funds.\2

The Army's latest approved THAAD acquisition plan calls for initial
fielding in fiscal year 2004.  Under this schedule, a contract is to
be awarded early in the engineering and manufacturing development
phase to produce components for operational testing and later a
$1.2-billion low-rate initial production contract for production of
system components for deployment.  In prior reports, we pointed out
that an aggressive schedule is also the basis for the Army's current
plans to procure prototype interceptors well before it knows whether
the interceptors will be operationally effective.\3


--------------------
\2 Weapons Acquisition:  Better Use of Limited DOD Acquisition
Funding Would Reduce Costs (GAO/NSIAD-97-23, Feb.  13, 1997). 

\3 We have previously expressed our concerns regarding the Army's
plan to commit over $200 million for producing prototype
interceptors, called User Operational Evaluation System (UOES)
interceptors, to provide an early deployable capability before
testing that would provide some assurance of the system's
effectiveness.  DOD has indicated that it still plans to commit funds
to UOES interceptor production on very limited testing--one
successful intercept.  See Ballistic Missile Defense:  Issues
Concerning Acquisition of THAAD Prototype Systems (GAO/NSIAD-96-136,
July 9, 1996) and Ballistic Missile Defense:  Prototype THAAD System
(GAO/NSIAD-97-70R, Jan.  6, 1997). 


   LONGER RANGE TARGET REQUIREMENT
   IS NOT FUNDED
------------------------------------------------------------ Letter :4

According to a representative from the Office of the Director,
Operational Test and Evaluation, several flight tests against targets
having a range of more than 2,000 kilometers will be required during
developmental and operational testing to validate THAAD's operational
effectiveness against longer range missiles.  Because the velocity of
attacking missiles increases with range, longer range targets
represent a more formidable threat than shorter range targets.  In
addition, the longer range targets generally represent attacking
missiles having a different flight trajectory than shorter range
targets.  Seven longer range THAAD flight tests are being planned by
the Army Space and Strategic Defense Command's Targets Office with an
eighth target as a spare. 

A suitable longer range target does not exist.  The Storm and Hera
targets used in THAAD testing, to date, have only a maximum range of
about
750 and 1,100 kilometers, respectively, rather than the roughly
2,000 kilometers needed.  According to the Targets Office Product
Manager, numerous studies were conducted between 1992 and 1997 to
determine the best options for longer range theater missile defense
targets.  The options studied included land/sea-launched and
air-launched/dropped targets.  According to Army officials, however,
the use of longer range target options and target launching platforms
is limited by the 1991 Strategic Arms Reduction Talks and 1987
Intermediate Range Nuclear Forces Treaties.  This makes selection of
a longer range target more difficult.  As of June 1997, BMDO had not
selected a specific longer range target solution. 

In testimony on May 15, 1997, before the Subcommittee on Military
Research and Development, House Committee on National Security, the
Under Secretary of Defense for Acquisition and Technology
acknowledged that targets built for lower tier systems simulate the
short-range threat but do not provide the greater range targets that
are needed for upper tier theater missile defense systems such as
THAAD.  The Under Secretary noted that BMDO had recently completed a
study of long-range target alternatives to determine the best treaty
compliant, cost effective, and flexible solution.  The study
recommended an air-launched target that would support testing of both
Army and Navy upper tier theater missile defense systems.  The Under
Secretary stated that BMDO would examine the technical and
programmatic feasibility of the air-launched concept in 1997. 

The Acting Director, BMDO Test and Evaluation Directorate, has
advised us that longer range targets for THAAD are now a pressing
need.  While the specific target concept has not been defined, the
Acting Director stated that about $55 million would be required to
develop the target between fiscal years 1999 and 2001.  Production of
eight longer range THAAD targets is estimated to cost another $56
million to $72 million.  BMDO expects to develop a more precise
estimate in late fiscal year 1997.  However, funding to develop and
produce a longer range target for the system is not currently
contained in DOD's future years funding plan for fiscal years 1999
through 2003. 


   CONCLUSIONS AND RECOMMENDATIONS
------------------------------------------------------------ Letter :5

The current THAAD program review and evaluation provides DOD with an
opportunity to (1) reduce risk in the acquisition program and
minimize the number of initial quantities of unproven systems by
reexamining the schedules for operational testing and production and
(2) ensure that realistic targets will be used for testing.  We
recommend that you direct BMDO to delay low-rate initial production
of the THAAD system until after the Director, Operational Test and
Evaluation, has certified, based on sufficient independent testing in
an operational environment, that the system can meet its key
performance requirements. 

We also recommend that you include in DOD's fiscal year 1999 budget
submission, the estimated funds needed to implement a treaty
compliant, longer range missile target program consistent with
THAAD's revised test schedule. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

In commenting on a draft of this report, the Director, Strategic and
Tactical Systems, Office of the Under Secretary of Defense
(Acquisition and Technology), disagreed with our recommendation
concerning the delay of low-rate initial production until after
certification of THAAD's operational effectiveness.  He partially
concurred with our recommendation that the fiscal year 1999 budget
submission should include funding for targets that is consistent with
the THAAD revised schedule.  He cited Title 10 of the United States
Code, which describes low-rate initial production of a new system as
the minimum quantity necessary to:  (1) provide production-configured
or representative articles for operational tests, (2) establish an
initial production base for the system, and (3) permit an orderly
increase in the production rate of the system.  However, he also
stated that THAAD low-rate initial production is not planned to
provide representative articles for operational tests--although such
an option still exists. 

The Director's response does not address our main point.  We
recognize that the existing low-rate initial production legislation
does not include specific standards on when and how programs should
begin low-rate initial production, or on the type and amount of
testing to be done before low-rate initial production begins. 
Instead, the thrust of our recommendation is that delaying production
of system components intended for deployment until enough realistic
testing information is secured would reduce risk and minimize the
procurement of unproven equipment.  As discussed in the report,
current plans provide for producing about 20 percent of the THAAD
interceptors during low-rate production.  If DOD buys unproven
weapons during low-rate initial production at minimum rates--the rate
needed to complete initial operational test and evaluation and prove
the production line--more funds would be available to buy proven
weapons in full-rate production at more efficient rates and at lower
costs.  Implementing our recommendation could also reduce the number
of THAAD systems that may have to be modified based on the results of
operational testing and evaluation thus allowing full-rate production
of more THAAD systems with demonstrated performance. 

Although the Director points out that an early operational assessment
is planned prior to the commitment to low-rate initial funding, it is
our view that such an assessment will not provide sufficient
realistic and independent testing information.  The Staff Assistant
to DOD's Director, Operational Test and Evaluation--the organization
which is responsible for certifying that a new weapon system is
operationally effective--confirmed that early operational assessments
were never intended to, and do not, provide a basis for assuring
operational effectiveness.  He stated that early operational
assessments are only interim assessments of equipment that indicate a
system's progress and problems.  Thus, we continue to believe that
our recommendation to delay the low-rate initial production is valid. 
Our recommendation has been clarified to reflect the basis of DOD's
certification as being the completion of sufficient independent
testing in an operational environment. 

We agree with the Director's statement that the statute and
regulations envision that low-rate production will begin before
completion of initial operational test and evaluation.  We are not
recommending that all initial operational test and evaluation be
completed before beginning low-rate initial production.  We recommend
only that sufficient independent testing be conducted in an
operational environment to show that the system can meet its key
performance requirements.  This is an appropriate criterion for
systems being produced for deployment. 

Concerning our second recommendation, the Director stated that BMDO's
long-range target strategy is to pursue an air-launched target
platform that will demonstrate its capability in fiscal year 2001,
earlier than THAAD's planned test requirement; but that BMDO is
examining other options to meet its target needs.  He stated that
BMDO is reviewing funding shortfalls for inclusion in the fiscal year
1999 budget submission as we recommended. 

DOD's comments are reprinted in appendix I. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

We performed our work at the Office of the Secretary of Defense and
Headquarters, BMDO, in Washington, D.C.; the Office of the Director,
Operational Test and Evaluation, Alexandria, Virginia; the U.S.  Army
Air Defense Artillery School at Fort Bliss, Texas; the White Sands
Missile Range, New Mexico; and the THAAD Project Office and the U.S. 
Army Space and Strategic Defense Command in Huntsville, Alabama.  At
these locations, we interviewed responsible agency officials and
analyzed pertinent acquisition and testing documents. 

We conducted our work from July 1996 to September 1997 in accordance
with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :7.1

As you know, the head of a federal agency is required by 31 U.S.C. 
720 to submit a written statement of actions taken on our
recommendations to the Senate Committee on Governmental Affairs and
the House Committee on Government Reform and Oversight not later than
60 days after the date of this report.  A written statement also must
be submitted to the Senate and House Committees on Appropriations
with the agency's first request for appropriations made more than 60
days after the date of the report. 

We are sending copies of this report to appropriate congressional
committees; the Director of BMDO; and the Secretaries of the Army,
the Navy, and the Air Force.  We will also make copies available to
others on request. 

If you or your staff have any questions concerning this report,
please contact me on (202) 512-4841.  Major contributors to this
report are listed in appendix II. 

Sincerely yours,

Allen Li
Associate Director, Defense Acquisitions Issues




(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
============================================================== Letter 



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:1

Tom Schulz
Lee Edwards
Stan Lipscomb
Leon Gill
Tom Gordon

*** End of document. ***