oversight

Problems of the Deep Submergence Rescue Vehicle Program Show Need for Improvement in Management Control

Published by the Government Accountability Office on 1971-06-03.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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     REPORT TO THE CONGRESS



     Problems Of The Deep
     Submergence Rescue Vehicle
     Program Show Need For
     Improvement In
     Management Control                     6-767325




     Department of the Navy




     BY THE COMPTROLLER GENERAL
     OF THE UNITED STATES
                         COMPTROLLER            GENERAL        OF     THE       UNITED      STATES
                                            WASHINGTON.         D.C         20548




B-167325




To the          President         of the        Senate         and          the
Speaker           of the      House        of Representatives


               This     is our     report          entitled  “Problems                        of the    Deep Sub-
mergence               Rescue       Vehicle          Program     Show                     Need for      Improve-
ment       in Management                   Control,           Department                   of t?le Navy.”


           Our          review   was made    pursuant   to the Budget                                   and Ac-
counting              Act,   1921 (31 U.S.C.   53), and the Accounting                                     and
Auditing              Act of 1950 (31 U.S.C.      67).


               Copies   of this          report            are being    sent to the                  Director,
Office          of Management               and           Budget;   the Secretary                    of Defense;
and      the     Secretary             of the     Navy.




                                                                Comptroller                   General
                                                                of the United                 States




                               50TH        ANNIVERSARY                       1921-       1971 ----
I        COMPTROLL~ER
                    GENERAS'S                   PROBLEMSOF THE DEEP SUBMERGENCERESCUE
I
I        REPORTTO THE CONGRESS                  VEHICLE PROGRAMSHOWNEED FOR IMPRDVE-
                                                MENT IN NAVY'S MANAGEMENT
                                                                        CONTROL
                                                B-167325

I
I        DIGEST
         ------
I

         WHYTHE REVIEW PJASMADE

             The development cost and time for the Deep Submergence Rescue Vehicle
             have far exceeded original  estimates, This review was made to deter-
             mine the causes.

             An earlier  General Accounting Office (GAO) report to the Congress on
             the rescue vehicle's    development, in February 1970, indicated that the
             increased effectiveness    to be obtained from producing four more vehi-
             cles in addition to the two already on order, would be small in rela-
             tion to their cost of purchase and operation.     That report also noted
             the increases in the program's cost and development time,

             The rescue vehicle is a small submersible craft designed to rescue
             personnel from a disabled submarine.     It would be transported by air to
             a port near a submarine disaster and then be carried to the site by a
             support craft.    The vehicle would then shuttle between the disabled
             submarine and the support craft,   rescuing the submarine crew.            L
                                                                                    m

         FINDINGS AND CONCLUSIONS
             The estimated cost for the rescue vehicle program increased by more
             than 1,100 percent from 1964 to 1969--from $36.5 million     for a 12-vehicle
             system and 1 year of operation to $463 million    for a six-vehicle  system.
             The estimated development and introduction   period increased from 4 to
             10 years.    (See p. 9.)
    I
    I
    I         In addition,  changes made in the design of the vehicle necessitated a
    I         redesign of support craft and some of the supporting equipment, which
    I         increased their costs.   (See p. 17.)
    I
    I
    I         In response to GAO's earlier     report, however, the Navy    advised that it
    I
    I         had initiated a cost-effectiveness      study. In December    1970 the Navy
    I         decided to confine the program to two rescue vehicles,        at an estimated
    I
    I         cost of $199.4 million,    rather than six rescue vehicles     as had been
    I         planned before the study.      (See pp. 5 and 6.)
     I
     I
     I        GAO believes that a substantial      portion   of the cost growth and program
    I
     I
              stretch-out  occurred because




                                                                  JUHE      3,1971
   --the     original        estimates,       made by a Deep         Submergence  Systems    Review
       Group estab?ished             by the Secretary         of   the Navy after   the U+S.S.
       "Thresher"         submarine      disaster      of April      1963, were Tow and were made
       without      sufficient        design,     preliminary        deve?opment,  and testing      and

   --changes   were          made in the vehicle        design     to increase      its capabilities
      beyond those           stated     in the formal     requirement      document     for the vehi-
      cle (Specific            Operational     Requirement).

The design         changes      included

   --an increase    in the operating    depth of the vehicle    to                      almost   three
      times the depth    at which rescue    of submarine personnel                         is possible
       (see p. 16)9 and

   --an increase    in         the   vehicle's       rescue   capacity      from    14 to    24 survivors.     1
                                                                                                               I
       (See p. 20.)

Under the         Navy management     system,       the Chief   of Naval Operations        deter-
mines the         equipment    needs of the operating         forces.      According    to Navy
records,         however,   the decisions       to make changes       in the rescue     vehicle
were made         by the developing       group--the     Deep Submergence       Systems    Project
Office.          (See p. 14.)

GAO found no thorough          and well-documented       analysis      of consideration
given   in-the    decisionmaking       process    to the effects       the changes      would
have on development         cost and time-- which were considerable--or                 to the
measurement     of the benefits        obtainable    from the increased         capabilities
against     the increased      program    costs.    Moreover9     there   was little         indi-
cation    of specific      approval    by top Navy echelons         of the significant
change decisions.          (See p. 14.)

The Navy management           system     includes     many controls.         It does not,   how-
ever,    require    formal      approval      by top-level       management     of major changes
increasing       the capabilities          of a developmental          system beyond those
called     for in the Specific           Operational       Requirement.        (See p* 25.)

Since      all   funds   needed to complete        the rescue      vehicle    project were not
required       at one time and since           the Project    Office     was able to reprogram
funds      from its other       projects,      no point    was reached     at which a need for
funds      for technical      changes     forced   a formal    decision      by the Chief  of
Naval      Operations.       (See pp. 31 and 32.)

The Project       Office      said that discussions           were held with officials                 of
the Office      of the Chief          of Naval Operations.            (See pp. 14 and 15.)
GAO believes       that     discussions        do not ensure      that responsible           officials
are fully     informed        of the consequences          of major changes.            In GAO's
opinion,    a requirement           for formal     approval      by the Chief        of tiaval       Opera-
tions,    or other       designated        user representatives,          of major changes             would
provide    more effective           control     and assurance       that    benefits      are carefully
weighed    against       possible       cost increases       and development         delays.         (See
p. 27.)

                                                 7
           I
           I
           I
           I
           I
           I
           I
               RECOMMENDATIONS
                             OR SlJCGES"IONS
          I
          I
          I
                   To provide more effective  control over development projects and over
          I        significant increases in development cost and time, the Secretary of
          I
          I
                   the Navy should require that
          I
          I
          I
                      --a sufficient     body of design, experimental  development work, and
          I              subsystem testing be done before promulgation of an end-item sys-
         I               tem requirement document and thus establish     a sound factual basis
         I
         I               for authorizing    full-scale  development (see p. 33);
         I
         I
         I
                     --analyses be made of the impact on program cost and time schedules of
         I              proposed changes designed to increase the capabiljties of equipment
         I
         I
                        beyond the required level (see p. 33); and
         I
         I            --advance approval of top-level  management be obtained for all changes
         I
         I               which are desiqned to increase the caoabilities     of the equipment be-
         I               yond requirements and which significantly    affect program ‘cost and
        I
        I                time schedules (see p. 34).
        I
        I
        I
        I      AGENCYACTIONS AND UNRESOLVEDISSUES
        I
        I
      I            The Navy did not agree with all of GAO's conclusions but considered the
      I            management objectives implicit  in GAO's recommendations to be generally
      I
      I            sound. The Navy, however, did not cite any actions to be taken,
     I
     I
     I
                   The Navy pointed out that, after the rescue vehicle program had been
     I             initiated,   the Department of Defense established   new methods to improve
     I
     I
                   the management of major acquisition   programs.    The Navy believes that
     I             the new methods will correct the problems reported by GAO. (See pp.
     I              34 and 35.)
     I
     I
    I              The new methods should help to ensure more participation       by top manage-
    I
    I
                   ment in the acquisition   process.   GAO believes,   however, that it still
    I              is necessary to revise Navy regulations.      The regulations   should require
    I
    I
                   that analyses be made of the impact on development cost and time of all
    I              significant  technical  changes designed to increase the capabilities         of
 I                 equipment beyond those in a program's Specific      Operational Requirement.
 I
 I                 The analyses should provide the information      necessary for determining
I                  whether such changes are expected to increase effectiveness       sufficiently
I
I                  to justify  added costs or time.
I
I
I
                    Navy regulations  should require also that, where analyses show a signif-
I                   icant increase in development cost or time, the Chief of Naval Opera-
I
 I
                    tions, or other high-level     user representative, certify  that each major
 I                  change is necessary for the equipment to perform its mission.       The regu-
I
I
                    lations  should prohibit   project managers from committing the Government
I                   to proceed with the changes until certifications     are given.   (See p. 35.)
I
I
I
I
I
I
I
I
I
                                                       3
I
I
I
MATTERS FOR COA'SIDER.4TIOA'
                          OF THE' CONGRESS

     This report is being submitted to the Congress because of its expressed       i
     interest    in the acquisition   of major systems and to inform it of the     I
                                                                                   I
     opportunity,    through tightened management control,   to limit  increases   I
     in cost and development time in acquiring equipment and systems.              I
                                                                                   I




                                     4
                          Contents

                                                                Page

DIGEST                                                            1

CHAPTER

  1        INTRODUCTION                                           5
               Origin of project                                  6
               Project management                                 7

           COST GROWTHAND DELAYS IN DEVELOPMENTPROGRAM 9
              Low original    estimate                   12
              Changes in vehicle      design             14
                   Increased operating       depth       16
                   Increased capacity      for rescuees  20
                  Addition    of provision     for diver
                      lockout                            23

           LACK OF TOP-LEVEL APPROVALOF CHANGESIN
           DEVELOPMENTPROGRAM                                    25
               Top-level    approval not required       for
                 technical     changes increasing      equip-
                 ment's capabilities                             26
               Approval of technical         plans not a con-
                 trolling    factor                              28
                    Technical    Development Plan                28
                    Project    Master Plan                       29
               Need for additional        funds did not force
                 top-level     consideration      of changes     31

           RECOMMENDATIONSAND AGENCY COMMENTS                    33
              Recommendations                                    33

           SCOPE OF REVIEW                                       36

APPENDIX

   I       Letter  of October 20, 1970, from the Assis-
              tant Secretary  of the Navy (Financial
             Management)                                         39
                                                              Page

APPENDIX

 II        Principal    officials  of the Department of De-
              fense and the Department of the Navy re-
              sponsible    for administration of activities
              discussed in this report                        49
COMPTROLLERGEiiERdL'S                              PROBLEMS OF THE DEEP SUBMERGENCE RESCUE
REPORTTO THE COT/GRESS                             VEHICLE PROGRAM SHOW NEED FOR IMPROVE-
                                                   MENT IN NAVY'S MANAGEMENT CONTROL
                                                   B-167325


DIGEST
------


WHYTHE REVIEW WASMADE

     The development   cost and time for the                       Deep Submergence   Rescue Vehicle
     have far exceeded    original estimates.                       This review   was made to deter-
     mine the causes.

     An earlier       General     Accounting      Office     (GAO) report      to        the Congress       on
     the rescue       vehicle's      development,        in February   1970,           indicated       that   the
     increased     effectiveness         to be obtained        from producing              frur  more vehi-
     cles in addition           to the two already         on order,   would           be small      in rela-
     tion    to their     cost of purchase         and operation.         That         report    also noted
     the increases         in the program's        cost and development                time.

     The rescue      vehicle    is a small       submersible     craft  designed     to rescue
     personnel    from a disabled         submarine.         It would be transported       by air to
     a port near a submarine           disaster      and then be carried       to the site     by a
     support   craft.        The vehicle     would then shuttle        between   the disabled
     submarine    and the support         craft,     rescuing    the submarine     crew.


FINDINGS AND CONCLUSIONS
     The estimated     cost for the rescue      vehicle   program      increased     by more
     than 1,100 percent       from 1964 to 1969--from       $36.5 million        for a 12-vehicle
     system and 1 year of operation         to $463 million        for a six-vehicle       system.
     The estimated     development    and introduction      period     increased     from 4 to
     10 years.     (See p. 9.)

         In addition,         changes      made in the design    of the vehicle    necessitated       a
         redesign     of support         craft    and some of the supporting    equipment,      which
         increased      their     costs.       (See p* 17.)

         In response        to GAO's earlier         report,    however,    the Navy        advised   that  it
         had initiated        a cost-effectiveness           study.      In December        1970 the Navy
         decided     to confine       the program       to two rescue      vehicles,        at an estimated
         cost of $199.4        million,       rather    than six rescue       vehicles       as had been
         planned     before    the study.          (See ppa 5 and 6.)

         GAO believes      that    a substantial         portion     of   the   cost   growth     and   program
         stretch-out      occurred    because




                                                     I
   --the     original        estimates,       made by a Deen         Submergence  Systems    Review
       Group established             by the Secretary         of   the Navy after    the U.S.S.
       "Thresher"         submarine      disaster      of April      1963, were low and were made
       without      sufficient        design,     preliminary        development,  and testing      and

   --changes   were          made in the vehicle       design     to increase      its capabilities
      beyond those           stated    in the formal     requirement      document     for the vehi-
      cle (Specific           Operational     Requirement).

The design         changes      included

   --an increase    in the operating       depth              of the vehicle    to almost   three
      times the depth at which       rescue    of             submarine  personnel    is possible
       (see p. 16)9 and

   --an increase    in         the   vehicle's       rescue    capacity    from   14 to 24 survivors.
       (See p. 20.)

Under the         Navy management     system,       the Chief   of Naval Operations       deter-
mines the         equipment    needs of the operating         forces.      According   to Navy
records,         however9   the decisions       to make changes       in the rescue    vehicle
were made         by the developing       group--the     Deep Submergence       Systems Project
Office.          (See p. 14.)

GAO found      no thorough     and well-documented       analysis      of consideration
given   in the decisionmaking          process    to the effects       the changes would
have on development         cost and time-- which were considerable--or                 to the
measurement      of the benefits       obtainable    from the increased         capabilities
against     the increased      program    costs.    Moreover9     there   was little        indi-
cation    of specific      approval    by top Navy echelons         of the significant
change decisions.          (See p. 14.)

The Navy management          system     includes     many controls,         It does yet, how-
ever,    require     formal    approval      by top-level       management     of major changes
increasing       the capabilities         of a developmental         system    beyond those
called     for in the Specific          Operational       Requirement.        (See p. 25.)

Since      all   funds   needed to complete        the rescue      vehicle    project  were not
required       at one time and since           the Project    Office     was able to reprogram
funds      from its other       projects,      no point    was reached     at which a need for
funds      for technical      changes     forced   a formal    decision      by the Chief  of
Naval      Operations.       (See pp. 31 and 32.)

The Project       Office      said that      discussions      were held with officials                 of
the Office      of the Chief          of Naval Operations.            (See pp. 14 and 15.)
GAO believes       that     discussions        do not ensure      that    responsible        officials
are fully     informed        of the consequences          of major changes.            In GAO's
opinion,    a requirement           for formal      approval     by the Chief        of Naval Opera-
tions,    or other       designated       user representatives,           of major changes would
provide    more effective           control     and assurance       that    benefits      are carefully
weighed    against       possible      cost increases        and development         delays.         (See
p. 27.)

                                                 3
    To provide more effective  control over development projects and over
    significant increases in development cost and time, the Secretary of
    the Navy should require that

      --a sufficient     body of design ) experimental development work, and
         subsystem testing be done before promulgation of an end-item sys-
         tem requirement document and thus establish     a sound factual basis
         for authorizing    full-scale  development (see p. 33);

      --analyses be made of the impact on program cost and time schedules of
         proposed changes designed to increase the capabilities of equipment
         beyond the required level (see p. 33); and

      --advance approval of top-level    management be obtained for all changes
         which are designed tn increase the capabilities     of the equipment be-
         yond requirements anr, which significantly   affect program cost and
         time schedules (see p8 34).


AGENCYACTIONS AND UNRESOLVEDISSUES

    The Navy did not agree with all of GAO's conclusions but considered the
    management objectives implicit  in GAO's recommendations to be generally
    sound. The Navy, however, did not cite any actions to be taken,

    The Navy pointed out that, after the rescue vehicle program had been
    initiated,   the Department of Defense established   new methods to improve
    the management of major acquisition   programs.    The Navy believes that
    the new methods will correct the problems reported by GAO. (See ppm
     34 and 35.)

    The new methods should help to ensure more participation      by top manage-
    ment in the acquisition   process.   GAO believes,   however, that it still
    is necessary to revise Navy regulations.      The regulations  should require
    that analyses be made of the impact on development cost and time of all
    significant  technical  changes designed to increase the capabilities         of
    equipment beyond those in a program's Specific Operational Requirement.
    The analyses should provide the information      necessary for determining
    whether such changes are expected to increase effectiveness       sufficiently
    to justify  added costs or time.

     Navy regulations  should require also that, where analyses show a signif-
     icant increase in development cost or time, the Chief of Naval Opera-
     tionsg or other high-level     user representative, certify  that each major
     change is necessary for the equipment to perform its mission.       The regu-
     lations  should prohibit   project managers from committing the Government
     to proceed with the changes until certifications     are given.   (See p. 35.)




                                        3
IklATTERS
        FURCONSIDERATION
                       OF THECONGRESS
    This report     is being  submitted to the Congress because of its expressed
    interest     in the acquisition     of major systems and to inform it of the
    opportunity,      through tightened    management  control,  to limit    increases
    in cost and development        time in acquiring   equipment   and systems.
                                    CHAPTER 1

                              INTRODUCTION

       As a part of its review of the development of the Deep
S,ubmergence Rescue Vehicle,   t:le General Accounting Office
issued a report to the Congress entitled       "Evaluation   Needed
of Cost-Effectiveness    of Four More Deep Submergence Rescue
Vehicles Before Purchase by the Navy" (B-167325, February20,
1970).    The report noted significant    increases    in develop-
ment cost and time; however, it did not deal with the causes
of these increases,    which is the subject of this report.

       In response to our earlier          report,   the Navy advised us
that it had initiated        a cost-effectiveness       study and that
construction    of four additional         rescue vehicles   was not to
be ,undertaken unless,       and until,      it could be shown that
their 'usefulness    j,ustif  ied their      cost.

      The Navy completed its study and the Chief of Naval
Operations  approved it on December 3, 1970.   This study
concluded that:

        --In the next 20 years, one plus or minus one rescuable
            submarine disasters would occur.

        --The Deep %bmergence Rescue Vehicle would be able to
           meet effectively   the Navy's requirements for under-
           sea rescue operations.

        --If    all system components (the rescue vehicle,         support
           craft,   etc.)   performed as advertised     and if all
           scheduling     conflicts  could be satisfactorily    re-
           solved, then the most effective       mix of these compo-
           nents would be:

        1, One Rescue Unit     Home Port          Facility.

        2. No catamaran1     hull     auxiliary       submarine   rescue
           ships.


1
    A ship with two parallel  hulls.   These ships were devel-
    oped for 'use with the Deep S'ubmergence Rescue Vehicle.
      3.     Two   Deep Submergence Rescue Vehicles.

      4, Eighteen       Mother   Submarines.1

       The Navy study recommended that requirements,          program
plans, and component procurement plans for ,undersea           rescue
operations    be revised to reflect the conclusions   of       the
study,     Thus the program would be confined to only         two Deep
Submergence Rescue Vehicles at an estimated      cost of
$199.4 millione2

       In our follow-on   review, we evaluated the management
controls   that had been used by the Navy in this program.
The evaluation     was made to determine if development cost
and time might have been controlled         more effectively   through
better   implementation   of existing    procedures    or the use of
improved procedures,      In this review segment we inquired
into the causes for the increases         in development cost and
time discussed in our earlier       report.

      The Deep Submergence Rescue Vehicle is a small s,ubmers-
ible vehicle     designed to rescue personnel from a disabled
submarine.     In the event of a disaster,       the Deep Submergence
Rescue Vehicle would be transported          by aircraft    to a port
near the disaster.         It was planned that the vehicle would
then be carried     to the site by a surface auxiliary         submarine
rescue ship or a Mother Submarine, either            of which could act
as the supporting       craft,     The Deep Submergence Rescue Vehi-
cle would then shuttle         between the bottomed submarine and
the supporting     craft rescuing the submarine crew.

QRIGIN OF PROJECT

      The requirement for a rescue vehicle may be traced to
the U,S.S, "Thresher"  disaster  of April 10, 1963.  The sub-
marine, with 129 men on board, went down in 8,400 feet of,


1Specially  configured submarines         used to carry   the Deep
 Submergence Rescue Vehicle.
2The June 30, 1970, Selected Acquisition    Report estimated
 a cost of $204.3 million  for a two vehicle   system.
water, well beyond her outer 'hull-collapse      depth.    Conse-
quently,    there was no possibility  of survivors.     Two weeks
later    the Secretary of the Navy established    'the Deep Submer-
gence Systems Review Group (Review Group).         This group was
composed of Government employees and persons from outside
the Government familiar    with undersea problems.

     One of the responsibilities        assigned   to the Review
Group was to:

      "Review the Navy's plans for the development and
      procurement of components and systems related   to
      location,  identification, rescue from and recovery
      of deep submerged large objects from the ocean
      floor."

      On February 22, 1964, the Review Group s,ubmitted its
report to the Secretary      of the Navy and recommended, among
other things,   the development,     construction,    and operation
of rescue vehicles   capable of personnel rescue down to col-
lapse depths of current      submarines,    independent of weather,
surface,  or ice conditions,      and capable of quickly    respond-
ing to emergencies at any location        in the world.

     The Secretary      of the Navy accepted the proposed        program
and directed  that    the project  be undertaken.

PROJECT MANAGEMENT

       Under the Navy's management system, the Chief of Naval
Operations    has responsibility       for planning and determining
the types of equipment needed to perform Navy missions.
This responsibility       includes   determining   the characteristics
of, and priorities      for, items to be developed and/or pro-
cured.     When the Chief of Naval Operations         determines that
a system is required,        is feasible   based on preliminary      de-
velopment and experimental         work, and should be developed
for operational     use, he issues a Specific        Operational    Re-
quirement.     This document defines the required          operational
capabilities     of the system.

     The Specific   Operational  Requirement  is intended to be
the controlling   document throughout   the remainder of the
development process.     It was designed to serve as a con-
tract  between the Chief of Naval Operations        and the Chief
of Naval Material,   the latter     being responsible    for obtain-
ing equipment that will     fulfill   the operational    requirements
set forth   therein.   The Specific     Operational   Requirement
for the Deep Submergence Rescue Vehicle was issued in Octo-
ber 1964.

       In preparation    for undertaking    the project,   the Chief
of Naval Material      in June 1964 established      the Deep S,ubmer-
gence Systems Project        Office as a division    of his Special
Projects   Office.     The Project   Office   assumed responsibility
for development of a rescue vehicle         that would meet the re-
quirements    presented    in the Specific    Operational  Requirement.

        The Project    Office     functioned    as part of the Special
Projects     Office   until    February 1966, when the Chief of Naval
Material     established     it as a separate project.        The purpose
of elevating       the deep submergence system to the status of a
separate project       was to provide for the establishment          of
exceptional      management policies         and thereby give greater   at-
tention    to the development of the deep submergence systems
for which the Project          Office had responsibility,

        The Project Office was given responsibility       for several
deep submergence systems.      The major effort     at the Project
Office,    however, had been the development of the Deep Sub-
mergence Rescue Vehicle system.      Through fiscal      year 1970
about $150 million    had been expended or obligated        on the
rescue system.

      Data on the cost growth and schedule slippage in the
Deep Submergence Rescue Vehicle program was included in a
GAO report  to the Congress titled "Acquisition  of Major
Weapon Systems" (B-163058, March 18, 19711, Appendix I and
Summaries.
                                CHAPTER 2

         COST GROWTHAND DELAYS IN DEVELOPMENTPROGRAM

       During the period 1964 to 1969, the estimated          cost of
the rescue vehicle      program increased     from $36,5 million   to
$463 million,      more than 1,100 percent,      despite a 50-percent
reduction     in the number of vehicles     to be built   (from 12 to
six).     In addition,    the estimated  development and introduc-
tion period increased        from 4 to 10 years.

       We believe that a large part of the cost growth and
program stretch-out       can be attributed     to the low original
estimates    established    by the Review Group,       We believe also
that these low original        estimates    were made because the
Navy did not conduct sufficient          design, preliminary     develop-
ment, and testing      to provide a sound factual       basis for es-
timating   realistic     development cost and time.

      We believe   further    that another large part of the in-
creases in development cost and time can be attributed       to
changes in the vehicle       design which had increased the vehi-
cle's capabilities      beyond those that had been stated in the
Specific  Operational      Requirement,

       As a result      of insufficient      preliminary     development
and the changes in design, the rescue vehicle                  currently be-
ing produced bears little           resemblance to the one contem-
plated by the Review Group or described                in the Specific    Cp-
erational     Requirement,       In this respect,        the rescue vehicle,
as originally      planned, was expected to weigh about 15 tons,
to hold a maximum of 14 rescuees,             and to be able to make
rescues   down   to   the   depth   at  which   the hulls of modern sub-
marines collapse        from water pressure.

        In 1969 the vehicle,  as then designed and being built,
weighed about 35 tons, held 24 rescuees,      and could go far
deeper than the depths at which rescue could be made. A
pictorial    comparison of the two vehicles   follows.  The con-
figurations    shown were obtained from the Navy.

     The first   estimate  of development cost and time for
the resc'ue vehicle   was made by the Review Group.   In its


                                     9
                                      ETACHABLE RESCUE SKIRT




FIGURE
    2
                                     50 FEET ---




   DETACHABLE RESCUE SKIRT




         NOTE:   THE LENGTHS  INDICATED ON THE ABOVE CONFIGURATIONS
                 AS WELL AS OTHERS IN THE REPORT  ARE APPROXIMATE.




                                          10
February 1964 report,     the   Review   Group  stated   that a proto-
type vehicle   could be developed in about 2 years at a cost
of about $4.6 million.        Each additional    vehicle    was esti-
mated to cost about $1,4 million.           In addition,    the Review
Group estimated   that the complete system could be obtained
in 4 years at a cost of about $36.5 million.             This cost es-
timate included    12 rescue vehicles       and 1 year of operation.

        k program plan containing      revised project     cost and
time estimates       was prepared by the Project     Office    in Decem-
ber 1964, several months after         the Specific    Operational     Re-
quirement had been iss,ued, and that office          had assumed re-
spon,;ibility     for developing    the vehicle.    The estimated       to-
tal ,zost and development time for the system contained               in
the revised estimates        was about $100 million     for 7 years
(fiscal     years 1965 to 1971, inclusive).        The first     rescue
vehicle     was estimated    to cost about $13 million.

       This plan provided for six rescue vehicles        (as did the
Specific   Operational   Requirement)    rather  than for 12 rescue
vehicles   as mentioned in the Review Group's plan.          There
were no significant     changes in the technical     characteristics
of the vehicle     to be developed.    'This program plan was re-
viewed by the Offices     of the Chief of Naval Material,         the
Chief of Naval Operations,      and the Secretary     of the Navy.
In October 1965 the plan was accepted by the Deputy Secre-
tary of Defense,

      In 1969 the Navy estimated       that it would cost      $463   mil-
lion to obtain a rescue system consisting            of six vehicles
with the cost to be incurred       through fiscal      year 1974, a
IO-year period.    A Navy official       estimated    also that the
first   Deep Submergence Rescue Vehicle,         which was launched
on January 24, 1970, and is currently          being tested,    would
cost about $41 million.    This estimate         for the first    vehi-
cle is over nine times the estimate          of the Review Group and
over three times the estimate        contained     in the plan accepted
by the Deputy Secretary   of Defense.
LOW ORIGINAL
---            ESTIMATE
           _.-----

     We believe    that a large but u.ndetermninabl.e part of the
cost growth and program stretch-out     is attributable    to the
how original   estimates  established  by the Rcviebir Group.

        Commenting on our draft    repcrt,    the Assistant   Secretary
of the Navy (Financial      Management) in his reply of Octo-
ber 20, 1970, stated that the $36.5 million            cited in the re-
port of the Review Group was not a proper starting            point for
indicating     cost growth.    This estimate,     according to the
Navy9 had been made simply to determine whether the concept
looked sufficiently      promising   to warrant proceeding with
further    analysis.   The Navy believes      that its first   engi-
neering estimate     of $100 million     is the proper starting
point for computing cost growth.

       'Gle believe that the $36.5 million       is an appropriate
starting     point,   because Navy records indicated       that this
estimate     had been used in the Chief of Naval Operations"          de-
cision    to issue the Specific    Operational     Requirement for the
rescue system in October 1964.          According   to Navy documents
the fiscal      year 1965 reprogramming    request    (which provided
the initial      funds for the project)    and the 1966 budget re-
quest would have been based on this early estimate.

      In this report,     we    have included both this estimate
and the later   engineering       estimate   to present the full    scope
of the estimates     of the     cost of this program.     Regardless   of
which starting    figure   is    used, the cost growth of the pro-
gram is very substantial,         about 1,100 percent based on the
$36.5 written   estimate,       or 360 percent,    based on the
$100 million   estimate.

        The Navy reply noted that GAO had compared the origi-
nal cost estimate        with the estimated     cost of a six-rescue-
vehicle    program.      The Navy contends that this comparison is
inappropriate,       because on April     29, 1969, the Chief of Na-
val Operations       directed   that a study be made of the number
of rescue vehicles         needed.   The Navy stated that construc-
tion of the rescue vehicles          beyond the two then under con-
struction     ;Jould not be undertaken      unless,  and until,   their
usefulness      could be shown to justify       the additional   cost.
        We have used the six-rescue-vehicle        estimates      because
the Project     Office   had planned to buy six rescue vehicles
and because all its calculations          and estimates,     after   the
initial    estimate    of $36.5 million    for 12 rescue vehicles,
had been based upon a six-rescue-vehicle           acquisition      pro-
gram.     As previously     mentioned,  the Navy study dated Decem-
ber 3, 1970, concluded that only two rescue vehicles                were
needed at a total       program cost of $199.4 million.

       In June 1965, about 8 months after     the     Specific   Opera-
tional   Requirement was issued,   the Bureau of       Ships prepared
a report    which summarized "'the early results       of exploratory
design studies of a rescue vehicle."        Similar      studies were
also performed by the Navy after      the rescue      system specific
requirement     had been issued.

       In our opinion,      such studies,     as well as experimental
subsystem tests,       should be conducted in development work
performed prior      to, and included       as the basis for,    the Spe-
cific    Operational    Requirement.      We believe   that,  if this
had been done, the original          estimate   would have been more
valid and beneficial        to top-level     management in their    deci-
sionmaking.




                                   13
CHANGES IN VEHICLE DESIGN

       We believe     that a significant       part of the increases        in
vehicle    development cost and time is attributable                to changes
in design undertaken         to increase    the capabilities        of the ve-
hicle beyond those required          in the Specific        Operational   Re-
quirement.      (These changes in design are discussed on pp* 16
to 24.)     According     to Navy records decisions          permitting   the
design changes had been made by personnel of the Project                    Of-
fice.    These decisions       had significant      effects    upon develop-
ment cost and time.         We found no thorough and well-documented
analysis    detailing     the consideration      given to the effect        the
decisions    would have on these factors           or on the cost benefit
of the increased       capabilities.

      The Navy contends that careful   analyses have been made
of the impact of the changes on the rescue vehicle;    however,
it acknowledges that a formal cost-effectiveness    analysis  of
the impact on the whole system has not been conducted.

        We found no detailed     documented     information  in Navy
files    on the cost of these changes.          Although considerations
might have been given to many of the            changes at the project
office    level,  the considerations    had     not been reduced to
writing     and had not been communicated        to higher Navy levels.

       Moreover, we found little      indication    of specific  ap-
proval by top-level     management officials       of many important
decisions    causing substantial    increases    in development cost
and time.     Whether these officials      would have formally    ap-
proved the changes had they been presented before they had
been put into effect     is conjectural.

      Representatives      of the Project      Office    told us that ver-
bal discussions       had been held with officials          of the Office
of the Chief of Naval Operations            and the Naval Material       Com-
mand. We could not obtain written             records of such meetings
nor could we find definite         indications      that specific    approv-
als of decisions       had been given.       We believe     that, for deci-
sions of such importance,        the specific       approval of the re-
sponsible   officials     should be obtained in writing.

      The Navy informed us that         there had been constant  com-
munication  between the Project         Office and the higher levels.

                                      14
The Navy further     stated that,    during the critical    initial
phase of the rescue vehicle's        development,    a high degree of
urgency generated by the "Thresher"         disaster   had been pres-
ent and that a Steering       Task Group, to obtain rapid approval
of system parameters,       had been established     and had met regu-
larly.   The Chief of Naval Operations         and the Chief of Naval
Material  were represented,       This group reviewed and approved
all important    decisions.
                .
      In addition,   p ersonnel representing       these two offices
were kept informed of, and participated          in, the decision-
making process through day-to-day        contacts,     staff   meetings,
and regularly    scheduled briefings,       The Project      Manager re-
ported program status directly        to the Chief of Naval Mate-
rial  and met with him on a weekly basis.

       We examined records of the meetings of the Steering
Task Group.       The group was only advisory,       and we therefore
could not determine       the effect     which the group had upon de-
cisions    involving   the rescue vehicle.        We did note, however,
that it did not meet between December 1966 and May 1968 and
that during this period costs and time schedules continually
increased.      We also believe      that informal   discussions   do not
assure that responsible       persons are fully      informed of the
consequences of proposed changes.

      Details   pertaining    to major   decisions   follow,




                                    15
    Increased   operating   depth

      The Specific  Operational    Requirement stated that the
small submersible   vehicles    should be capable of personnel
rescue down to the hull-collapse       depth1 of modern, nuclear
submarines.   Despite the fact that rescue below the collapse
depth is not possible,     the rescue vehicle has been designed
to operate at three times that depth.

        In requesting    proposals      for construction     of the rescue
vehicle,    the Project     Office specified       an operating    depth
almost twice that of the rescue depth specified                 in the Spe-
cific    Operational    Requirement.        The Project  Office specified
the use of a newly developed, high-strength              steel,    to
achieve this greater operating             depth.   It was recognized
that the use of this steel,          which at the time 'had not been
used in a submersible        structure,      might cause delays and ad-
ditional    cost.     The Project     Office also asked the contrac-
tors to submit proposals for a vehicle which could go even
deeper,

       In responding,  Lockheed Missiles    and Space Company,
Sunnyvale, California,     in its proposal,   offered a choice of
two vehicles--   one capable of descending to almost twice the
collapse   depth of modern submarines and the other capable
of reaching almost three times that depth.

        The Project    Office elected to accept Lockheed's pro-
posal for a vehicle         capable of operating   at three times the
hull-collapse      depth of modern submarines.       This decision
had been made by the Project           Office and, so far as we could
ascertain,    had been made without the formal approval of the
Chief of Naval Material,          Chief of Naval Operations,   or
higher echelons.        Moreover, we found no evidence that the
difference    in development cost and time between the vehi-
cles proposed by Lockheed and one required           by the Specific
Operational     Requirement had been analyzed prior to the de-
cision to accept Lockheed"s proposal,

       Because the Navy was unable to furnish  evidence of a
detailed   analysis, we cannot assess the extent to which


1
    The exact   collapse    depth   is classified,
                                       16
this decision     contributed     to the cost increases      and sched-
ule slippages*       Available    records indicate    that this was a
significant    factor    and that    this decision    contributed   to
other problems in the vehicleIs          development.     For example,
we noted that a weight reduction          program had been initiated
during construction       of the vehicle     to meet the requirement
for air transportability.1

        In addition,   the weight of the vehicle was a factor
leading to a decision         to redesign the handling equipment
on the surface auxiliary          submarine rescue ships under con-
struction.       The decision     to obtain the greater operating-
depth capability      and the other changes discussed in the
following    sections     contributed    to the weight problem and
increased the cost of the supporting           equipment by an un-
determinable      amount,

        Representatives     of the Project     Office informed us that
it was common practice         to exceed the requirements         of the
Specific     Operational    Requirement in an attempt to ensure
that the technical       problems encountered         in development did
not reduce the equipment's          capability    below the levei spec-
 ified.    Although we agree that some margin may be desirable,
we believe that a ZOO-percent increase beyond the stated
requirement     warrants    careful   consideration       before a deci-
sion is made, in view of the additional               costs and time in-
volved.      In this case, we found no documented evidence that
the Project     Office had made such a determination             or that
higher echelons had had an opportunity              to formally     con-
sider all the effects         of the decision.

      The Navy, in its comments on our draft report,           dis-
agreed with our conclusion   that changes made to the design
of the vehicle   to increase its capability,      specifically      its
operating   depth and rescue capacity,    contributed     to in-
creases in development cost and time.        The Navy stated that
the Review Group's report recommended an operating            depth of
6,000 feet, that the initial     Specific  Operational      Require-
ment specified   a minimum requirement    of rescue at the
-
1As pointed out on p. 22, it was originally      planned to use
 one G-141 aircraft    to transport  the system.    It will now
 require   three C-141"s to do this.

                                   17
collapse  depth of submarines,  and that a Navy analysis   of
the state of the art in machining 7-l/2-foot   HYE40 steel
spheres allowed an operating   depth of 3,500 feet.

       Tlhe Navy stated also that the Circular           of the Require-
ments     specified    a 3,500-foot     depth but requested        ideas
from industry       as to how the 6,000-foot       depth could be
achieved.      The Navy stated further       that,   through advanced
machining techniques,        Lockheed had been able to exceed the
specified    3,500-foot-depth       level without    significantly       in-
creasing program costs.

        The decision to use HY140 steel did enable the Navy to
obtain the greater         depths it had stated,        If the Navy, how-
ever9 had sought to meet only the depth requirement                  in the
Specific    Operational      Requirement     (the collapse     depth of
submarines),     it   would   not   have   been  necessary   to  use HY140
steel.     This steel was difficult          to machine and had never
been used in the construction             of an ,undersea structure,
The 'use of HY140 steel,          according    to Navy records,     appears
to have been a costly          increase in requirements.         A cost-
effectiveness       analysis     of this change was never made.

       The Navy stated that it had been able to cancel plans
for construction     of a 6,000-foot-depth     prototype    search ve-
hicle as a result     of extending    the operating    depth of the
rescue vehicle.     Navy records indicated      that the Navy had
actually   wanted to acquire a search vehicle         capable of de-
scending to 20,000 feet.       Plans for the 20,000-foot-depth
vehicles   were retained    for several years, b,ut we were in-
formed that the plans recently        had been canceled.

      The Navy stated also that the change to the three-
sphere concept had been necessary to permit an injured       res-
cuee on a stretcher    to be loaded aboard the rescue craft.
Under the original   concept such loading also would have
been possible,   and this change was necessary only because
of other changes accepted as a result     of differences be-
tween the original   concept and Lockheed's design.


1
    The technical requirements      of the contract.  This         document
    is included in the request      for proposal package.

                                      lh
       In concl~usion,     the Navy stated further         that it did not
believe that the increase         in operating      depth and the addi-
tion of a third       sphere were significant        causes of increases
in cost.     The Navy attrib,uted       the cost increases        to such
causes as inability        to 'use off-the-shelf      items in the deep-
ocean environment;       unforeseeable      problems in new technology
development;     and schedule slippages          and stretch-outs       as a
result    of design problems,       late subcontractor        deliveries,
interface    definition,     1 and test program extensions,            as well
as escalation      in the cost of labor and material.

       Navy records do not indicate        what portion      of the in-
creased costs could be assigned to any of these factors,
Therefore     neither    we nor the Navy can say with certainty
precisely     what caused the substantial        cost increases        or
what portion       of these increases    can be attributed        to any
particular      factor.    Problems, such as the inability           to use
off-the-shelf       items and interface    definition,     however,
should have been recognized         and provisions     should have been
made for them in estimating         the program costs before the ve-
hicle entered full-scale         development,      We believe     that,    if
a sufficient       body of design and experimental        testing      had
existed     before the vehicle     entered full-scale       development,
many of the problems could have been avoided.

1
    This term is used to describe problems involved     in fitting
    equipment,  such as navigation   and control parts on which
    the Massachusetts   Institute  of Technology was the prime
    contractor,  into the rescue vehicle   hull on which Lockheed
    was the prime contractor.




                                       19
Increased    capacity   for   rescuees

        The technical   decision to enlarge the capacity    of the
rescue vehicle      from 14 to 24 rescuees contributed    to in-
creased development cost and time.        This decision was made
without    the formal approval of officials    outside  the Project
Office.

         The Specific Operational       Requirement     issued by the
Chief of Naval Operations          called for a capacity        of 12 to 14
rescuees.      The configuration       of the vehicle      before the is-
slance of the request for proposal            (see fig.     3, pe 21)
called for this capacity         and consisted       of two connected
spheres and a detachable         rescue skirt.        The skirt   was to
fit    over the escape hatch of the disabled            submarine to en-
able its crew members to enter the rescue vehicless                 spheres.
The skirt     was to be detachable       to facilitate      air transport-
ability.

      This design was rejected--primarily         because it was
deemed important     that the rescue skirt      be an integral    part
of the hull for structural      reasons and to minimize the
assembly effort     during rescue operations.       The configuration
in the request for proposal       (see fig.   4, p- Zl), having a
nondetachable    rescue skirt   as an integral     part of the hull,
was subsequently     prepared.    This design was used to solicit
proposals   from Lockheed and other prospective         builders.      A
comparison of the configurations,        before and in the request
for proposal as obtained from the Navy, are shown below.

       In its response Lockheed proposed that the rescue skirt
be detachable       and that the small center sphere be increased
in size to accommodate 24 resurees.           The sketch entitled
"configuration       as constructed"   shown on page 10 depicts
Lockheed's proposed design.          The proposal  stated that the
suggested design would cost about the same as the design
contained      in the request for proposal.

       Although Lockheed's proposal contained        the same objec-
tionable    feature    that had been a major factor     in the rejec-
tion of the Navy design shown as figure          3, page 21--the
detachable      rescue skirt--the  Project  Office   accepted it.
Moreover,     the proposal had been accepted without       comparing
the development cost and time with the development cost and
FIGURE
     3


I-+--                                   ~_   33 FEET .-_--   .- .- -. --.-__   _-----..   4




                             -I
             L PORTABLE BELOW                        \
                                                         DETACHABLE RESCUE SKIRT
                        THIS   I INF



               COWFIGURATIO#
                         BEFORE
                              ISSUANCE
                                     OF REQUEST
                                             FORPROPOSAL



FIGURE
     h

b   ~~--.-      ---..           -.              __   44 FEET .___ _.._ -. ___-.--         .- .-..--._ _- m-.-T




                          NONDETACHABLE RESCUE SKIiT




                                       CONFIGURATION
                                                 I# TKEREOUEST
                                                            FORPROPOSAL
time which would have been incurred had the preliminary
design, with its capacity of 12 to 14 rescuees,   been used.

        Another factor      that should have had a bearing on this
decision     was the effect       of the increased       size upon other
components of the rescue system.               Specifically,     the Navy had
designed a new surface auxiliary             submarine rescue ship to
transport     the rescue vehicle.         The change to 24 rescuees
necessitated      an increase in the length and weight of the
rescue vehicle.         These increases      resulted     in the redesign of
the auxiliary       rescue ship,     including     an  increase    in its
length.      The increased weight of the vehicle,              as previously
mentioned,      contributed     to problems in developing          the rescue
vehicle.

      The Navy stated in its reply that the redesign of sup-
port craft   and equipment and a corresponding      increase in
costs had occurred and that this had been caused by growth
in the weight of the vehicle.        The Navy, however, stated
also that the   three-sphere    concept  was not responsible   for
the growth in length of the surface ship, because it had
been included   in the contract    design for the ship.

       We agree that the increase in the length of the surface
ship occurred before the contract     award, but this increase
occurred   after  the plans had been formulated   for the support
craft   and equipment and thus substantial    changes in the
support craft    and equipment were required.

       Further,   the increased      size and weight of the vehicle
affected    its air transportability.         It was originally      planned
to use one C-141 aircraft        to transport     the system (one veh-
icle and the supporting       equipment necessary to effect          rescue).
It will    now, however,   require      three C-141's  to  transport     the
system.

        Project   Office     personnel had made the decision--despite
its importance       insofar     as time and money are concerned--to
increase the number of rescuees without             obtaining   formal
approval     from the Chief of Naval Material,          the Chief of Na-
val Operations,        or higher echelons.       Moreover, many of the
effects     of the decision were not given adequate consideration
at the Project       Office,     because essential   data on development
cost and time had not been obtained.

                                     22
Addition   of provision      for   diver    lockout

      Another decision    which affected   the development cost
and time of the rescue vehicle was the addition        of the diver-
lockout provision,     !'Diver lockout"  is a term referring   to
the process by which a diver exits from an underwater        vehi-
cle e

       The Specific  Operational       Requirement did not require
diver-lockout    capability,     and such capability       is not needed
for rescue missions according          to Project   Office    officials.
Personnel of the Project        Office   amended the contract         in
December 1966 to provide        for the inclusion       of this capability,
According to the contract,         the amendment was to VVprovide the
capability    in the pressure      capsule and fittings        for diver
lockout to 600-foot       depthGIN This modification         did not pro-
vide the vehicle with diver-lockout           capability.

        It made only basic changes so that the vehicle                could,
with further        modifications,      have such a capability.         The
Project     Office     wanted this modification        because it consid-
ered the use of the vehicle             as a diver-lockout     platform     a
likely     secondary mission for the vehicle.              We were advised
by Project       Office    personnel    that the vehicle     could not be
used for rescue while equipped for diver lockout.                    Equipping
the vehicle       for diver lockout,        performing   a diver-lockout
mission,     and returning         the vehicle    to use for rescue could
require     several weeks.

       In this case, the Project        Office    did estimate    the cost
of including      the diver-lockout     provision     before making the
decision    to proceed with modifications.            The estimated   cost
on the first      rescue vehicle was $35,000.          In July 1967,
however, the amount negotiated          for this provision      was almost
$180,000*     Part of the work included          in this modification
was the installation         of heavier internal      hatches in the
pressure    hull.     Later,   however, these heavier hatches were
replaced with lightweight         hatches at a cost of about
$48,000 as part of a weight reduction             program.

       The Project     Office    did not determine,    however, the
entire   cost of obtaining        diver-lockout   capability,   Proj-
ect officials      stated that no cost studies had been made of
the additional      modification      needed to provide the first

                                       23
rescue vehicle with diver-lockout     capability.      The officials
stated that the cost would be significant         and could be as
much as several million    dollars.   The 1959 estimate     of
$4.53 million for the program did not include an amount for
modifications   associated  with diver lockout.

      In this case, as in the others,    we could rind no       indi-
cation that this technical   decision   had been formally       con-
sidered by the Chief of Naval Material     or the Chief of        Na-
val Operations,  even though its potential    effect  upon      the
rescue vehicle program was significant.
                                CHAPTER 3

                    LACK OF TOP-LEVEL APPROVAL

                OF CHANGES IN DEVELOPMENTPROGRAM

       As explained      in the preceding       chapter,   the personnel    of
the Project    Office     were able to make technical          changes having
a significant     effect      on development cost and time without
formal approval by the Chief of Naval Operations                 who repre-
sents the operating         forces that ultimately        use the equip-
ment.     Navy regulations        and instructions      suggest that a
check-and-balance        relationship      is intended to exist between
the developer and the user.             Although the Navy management
system contains many controls,             it does not require     a pos-
itive   formal decision        from the Chief of Naval Operations
before a major change to a project              can be implemented that
would increase      capability      beyond requirements.        In this re-
spect:

      --The system provides           for review of changes in the
         technical      characteristics       of the item to be developed
         only if the technical           characteristics    contained in
         the Specific      Operational      Requirement are not met.
         Exceeding the requirements            specified  in that document
         does not require        approval even if costs are increased
         significantly.

      --The planning   documents, required   under the Navy man-
         agement system,do not call for specific     approval by
         the Chief of Naval Operations    and did not bring the
         technical  changes cited in this report   to his atten-
         tion for formal decisions,

      --Because all funds were not obtained     from the Chief of
         Naval Operations   and because they were not required
         at one time, the need for funds to finance the addi-
         tional costs that resulted    from the cited technical
         changes did not force a formal decision     by the Chief
         of Naval Operations.

Details    of our   findings   on each of these      points   are pre-
sented    below.

                                      25
TOP-LEVEL APPROVALNOT REQUIRED
FOR TECHNICAL CHANGESINCREASING
EQUIPMENT9S CAPABILITIES

       Navy policy requires       that the developing   organization
advise the Chief of Naval Operations          if it cannot attain    a
technical    characteristic     specified   in the Specific   Opera-
tional    Requirement.      The requirement   is spelled out in that
document.      In the case of the Deep Submergence Rescue Vehi-
cle,   it  was   stated as follows:

      "In an instance where the attainment          of a partic-
      ular specification     threatens    the orderly    progress,
      or early realization      of the development,      or de-
      serves a decision     based on trade-off      considerations,
      the developing     agency will    immediately   advise the
      Chief of Naval Operations        and will make appropri-
      ate alternative     remedial recommendations*"

As the above requirement     indicates,     the Chief of Naval Oper-
ations must be notified    if the developing      organization can-
not fulfill  the requirements     of certain    specifications with-
out delaying the project's      completion.

       We found, however, that no such reporting        was required
when the developing      agency planned to exceed the established
requirements.     Consequently,     formal approval by the Chief
of Naval Operations      was neither    requested nor given for the
changes which were made even though the rescue vehicle's
size) weight,    operational    capabilities,    and development cost
and time were increased      appreciably.

       In April 1969 a revised      Specific  Operational      Require-
ment, which had been prepared by the Project           Office,    was
approved by the Chief of Naval Operations.            This document
included the changes which the personnel          of the Project       Of-
fice had already contracted       for with Lockheed.        At that
point,   of course, the Government was already committed to a
larger   and more costly   vehicle.     Thus, in our opinion,        the
issuance of the revised     Specific    Operational    Requirement
merely ratified    actions already taken.




                                    26
       Project   Office officials     advised us that they main-
tained close liaison     with the appropriate         representatives
of the Office     of the Chief of Naval Operations          and that
these representatives      were fully     informed of all pertinent
matters.      We were unable to ascertain        precisely   what infor-
mation had been provided        to that office,      because of person-
nel changes and the lack of written           records of such meetings
with the appropriate     representatives.

        It is our view that informal      discussions     do not assure
that responsible     officials  are fully     informed of the conse-
quences of proposed major changes.           The possibility       exists
that proposed major changes will        not receive     sufficient       at-
tention    from these officials    if they are not called upon to
approve these changes.

         F'urthermore,     we believe that it is important     that de-
cisions       increasing,     as well as those decreasing,   the capa-
bilities       of equipment should receive the specific        approval
of the operating          forces,  in this case represented    by the
Chief of Naval Operations,             Greater capabilities  for equip-
ment mean little          unless the operating    forces have a specific
need for them.           Therefore   we believe also that such decisions
merit the formal,          written   approval,  in advance, by the Chief
of Naval Operations.




                                     27
-.'I-'"k'('Vl-11,
  ~-z---1.--- OF TECHNICAL -___
                            PLANS
 TX)T
---____  A  CONTROLLING FACTOR
                         --

       The Navy management system calls for the submission
r>f ~:KJ planning documents which are used for management
purposes.      One of these documents is the Technical               Develop-
ment Plan; the other is the Project_ Master Plan.                  These two
plans are approved by the Chief of Naval Material                  and then
:lsed by other high-echelon         officials    in reviewing      and eval-
uating the development of the system.               As explained      below,
the Project     Office     submitted one of‘these       plans late and
did not submit the other at all.              The failure     to comply with
Na;TY regulations       did not, however, stop Project          Office    per-
sonnel from continuing         with vehicle     modifi.cations,      because
approval of these plans had not been regarded as necessary
for continuing       the work.

Technical
1L--           Development   Plan

      T'he Technical    Development Plan contains     technical,    fi-
nancial,    schedule,   and management plans for development of
an item.     According to Navy instructions,     this document
"serves as a basic decisionmaking        document at all manage-
ment levels"    and "is the primary management control          and
reporting    document.Ys Navy instructions     specify    that a re-
vised Technical      Development Plan be submitted      at certain
established    milestones    or at least once a year.

        The initial      Technical    Development Plan for the Deep
Submergence Rescue Vehicle and related             systems   was submitted
in .ianuary 196s; in April 19'65 a revised and updated Tech-
nical Development Plan was submitted             and later   approved.
Project    Office    officials     stated that a revision     to the
April    1955 Technical        Development Plan was not submitted
until    August 1957, even though many significant            program
changes were made during the period,              The revised    Technical
Development Plan, submitted over a year late,              was reviewed
and returned      without      the approval of the Chief of Naval Ma-
terial.

      In his   reply to the Project  Office,    the Chief of Naval
Material   stated that the system characteristics       set forth
in the 'Technical Development Plan deviated from the opera-
tional   concepts and performance   constraints    of the
Specific  Operational    Requirement and that     it   did not prese':t
a comprehensive    development plan.

       A revised    Technical    Development Plan was submitted       to
the Chief of Naval Material         for approval on February 15,
1958; it was approved in January 1969.             Approval of the
Technical     Development Plan was delayed,        because a revision
to the Specific      Operational    Requirement proposed by the
Project    Office   was awaiting    the approval of the Chief of
Naval Operations.        The Chief of Naval Material       would not
approve the revised Technical          Development Plan until     the
proposed revision      to the Specific     Operational    Requirement
had been approved.        By the time the Technical       Development
Plan had been approved,        the decisions    on the technical
changes had long been made and its approval had been large lY
academic.

      We believe that the fact that an updated Technical    De-
velopment Plan was rejected    and was not approved for years
after  approval of the initial   plan indicates  a need for
improved coordination   among these offices.

Project        Master   Plan

        The other document which Navy instructions         specified  as
being essential     to control   and review development efforts
effectively     was the Project   Master Plan.      This plan, ac-
cording to Naval Material       Command Instruction      5200.11, dated
February 24, 1965, was:

           designed to provide the single comprehensive
      “> bk*
      plan for the control,   direction,      coordination,
      and evaluation  of project    evaluations      throughout
      the normal phases of a project      life-cycle.lV

       A Project   Master Plan for designated     projects   was re-
quired to be submitted      to the Chief of Naval Material
within    120 days after   establishment    of a project   manager or
120 days after     receipt  of the Specific    Operational   Require-
ment, whichever was later.         The plan was then to be made
available    to the Chief of Naval Operations       and other con-
cerned officials.       To ensure current    and complete data, the
Project    Master Plan was to be revised whenever significant
changes occurred and updated at least annually           by February
15.
                                 29
       We found that the Project       Office    had not submitted      a
Project   Master Plan.     A report    to the Chief of Naval Mate-
rial   on a management review of the Project          Office     in Octo-
ber 1966 stated that the Project          Office   had not prepared a
Project   Master Plan.     The report     went on to state that an
informal    and unrecorded   agreement had been made some time
ago that permitted      the Project   Office     to submit an updated
and expanded Technical      Development Plan in lieu of a Proj-
ect Master Plan until      such time as the Project         Office   could
comply with the requirement        for a Project Master Plan.

     One of the recommendations           of the report     had been that
the Project 3ffice:

      I'*~c* immediately establish        a file   into which they
      can begin to collect    data,       fragmented    though it
      may be, for the preparation           of a Project Master
      Plan."

       In reply to the report      on the project   management review,
the Project     Manager stated on May 31, 1967, that the Project
Office     had established   procedures  to gather data for the
preparation     of a Project   Master Plan.    He stated also that,
after    the submission of the Technical      Development Plan, he
intended to embark on the preparation         of the Project  Master
Plan.      In March 1968 some work was begun on a Project      Mas-
ter Plan.

        In April 1968, however, Headquarters,           Naval Material
Command Notice 5000 deferred          the requirement     for producing
a Project    Master Plan until      promulgation    of a new document,
the Acquisition      Plan, which would combine the Project          Mas-
ter Plan and Technical       Development Plan.        No further   action
was taken, however, until         March 1970 when the requirement          for
a Project    Master Plan was reinstated.          The instruction      which
reinstated     the requirement     also changed the scope and ob-
jectives    of the Project     Master Plan.      As of March 1970 the
requirement      for an Acquisition      Plan was still    being studied.

       As is obvious from the above, the requirement      for the
Project   Master Plan, like that for the Technical     Development
Plan, neither    resulted in bringing    the decisions on the tech-
rlical changes to the attention     of the Chief of Naval Opera-
tions when the decisions    were in the formulative    stage nor
kequired him to formally    approve them.
                                    30
NEED FOR ADDITIONAL F'UNDSDID NOT FORCE
TOP-LEVEL CONSIDERATION OF CHANGES

        We found that the need for additional      funds did not en-
sure    formal consideration   of the technical    changes by the
Chief     of Naval Operations  or other high-level     officials. A
major     reason for this condition   was the nature of develop-
ment    work and the manner in which it was funded.

       In the development of a system, decisions        made early in
the program may not have a significant         effect  on the immedi-
ate fund requirements.       For example, although the contract
for the first     Deep Submergence Rescue Vehicle was awarded in
June 1966, additional     funds to pay costs incurred        under this
contract    were not requested until    fiscal    year 1970.     This,
coupled with the fact that only one of the six planned vehi-
cles had been contracted      for early in the program, delayed
the full    impact of fund requirement     decisions   until   later   in
the program.

     We found also that two other factors          had prevented    the
need for additional     funds from forcing     a top-level   decision
on the technical     changes.    The first  of these factors     was
the delays encountered      in the program.     Even though large
cost increases    were occurring 9 program delays allowed for
the funds planned for the development to be sufficient            to
cover costs incurred      during the first   few years..    For exam-
ple, in the program change request approved in October 1965,
the estimated    cost of the six-vehicle     rescue system in the
Five Year Defense Plan was about $100 million,           whereas the
funds planned for fiscal       years 1965 through 1968 were less
than $77 million,

      Although the estimated    cost of the six-vehicle     rescue
system rose to $463 million,      less than $85 million    was.re-
quired in fiscal  years 1965 through 1968,        Since the funds
expended were within   the limits     of the Five Year Defense
Plan, the cost growth did not result        in a Department of De-
fense review of the program,

         The second factor  was the ability   of Project    Office of-
ficials,     under Navy policies   and procedures,   to reprogram
funds from other deep submergence systems, which allowed
some of the cost increases       on the rescue vehicle    to be met

                                    31
with funds originally planned for the other systems.    This
vas possible because all systems managed by the Project   Of-
fice were funded as a whole, rather than each system's being
funded separately.




                             32
                               CHAPTER4

               RECOJYMENDATIONS
                              AND AGENCY COlYM?ZXTS

RECONNEXDATIONS

       To help prevent problems similar      to those in the Deep
Submergence Rescue Vehicle program from occurring          in pro-
grams in the future,      we recommend that the Secretary       of the
Navy take action to ensure that a sufficient         body of design,
experimental    development work, and subsystem testing         be ac-
complished prior     to the promulgation   of an end-item system
requirement    document (Specific   Operational    Requirement)      and
thus establish    a sound factual   basis for authorizing       ful.%-
scale development,

      The Navy stated that this recommendation was consisteM
with long-standing     Navy policy    and with current      Department
of Defense policy    of "fly before buy,"         The Navy instruction
governing   the Specific    Operational     Requirement   requires    &a'k.
it be established    that there are no unacceptable          techno'Logi-
cal risks and that the necessary technology            is at hand,, The
Navy noted, however, that the decision          as to what consti-
t,uted a "sufficient     body," particularly      of subsystem testing,
must be made very carefully       in accordance with good engineer-
ing judgment and with the nature of the development in ques-
tion.

       We agree that such decisions     must be made very care-
fully.    We believe that the problems described      in this re-
port demonstrate     that the decision   to undertake the Deep
Submergence Rescue Vehicle program had been made primariby
on a conceptual     analysis without   a sufficient  body of fact,

      We recommend also      that   the Secretary   of the Navy:'

      --require   that analyses be made of the impact on pro-
         gram cost and time schedules that could result    from
         proposed changes designed to increase the capabili-
         ties of equipment beyond the level required    by the
         Specific   Operational Requirement and




                                     33
     --establish        procedures which will require     that advance
        approval       of top-level    management be obtained for all
        technical       changes which are designed to increase the
        capabilities        of the equipment beyond those required
        and which       have a significant    impact upon program cost
        and time       schedules,

      The Navy stated that it agreed that significant       changes
and their  operational   and financial   consequences should be
approved at sufficiently    senior levels,    consonant with the
magnitude of the development.       The Navy, however, did not
cite any actions to be taken,

       The Navy advised us in its reply that, after the rescue
vehicle   program had been initiated,    measures had been taken
to improve management procedures      in the areas in which GAO
considered    improvements were needed.     These were:

     --Development    Concept Papers are memoranda expressing
        the Secretary   of Defenseas decisions    on the initia-
        tion of, or changes to, major research and develop-
        ment programs.    A Development Concept Paper estab-
        lishes the limits   within which changes can occur.
        Changes beyond these limits      trigger a review of the
        program and require    a decision by the Secretary      of
        Defense on the action to be taken.

     --The Defense Systems Acquisition             Review Council was
         established,     consisting  of the Director        of Defense
        Research and Engineering       and the Assistant        Secretaries
         of Defense (Comptroller),        (Installations      and Logis-
        tics),and     (Systems Analysis).        This council reviews
        weapons programs at three major transition              points in
        the acquisition      process and when established          limits
        are breached.       Separate,  detailed       reviews of program
        management are also conducted by the Department of
        Defense early in the acquisition             process, to ensure
        that adequate management procedures have been estab-
        li.shed.

     --The Selected Acquisition     Reports       are now required  on
        all major acquisition   programs.         They serve as the



                                    34
.



        management tool by which programs are monitored  on a
        regular  basis and deal with the source and amount of
        both cost variances  and schedule changes.

     --A new organization           was created on August 3, 1970,
        within    the Naval Material         Command, This organiza-
        tion,    called the Requirements         Analysis   Office,    has
        specific     responsibility       for review of all documents
        which respond to requirements.             In addition,     the Navy
        stated that procedures          required   that program changes
        be approved through the chain of command to the Di-
        rector    of Defense Research and Engineering.

       The new management method, which the Navy advised us
the Department of Defense had established,        should help pre-
vent the recurrence      of the conditions that existed    for the
rescue vehicle.     With the advent of the Selected Acquisition
Report,   which consists    of a quarterly reporting    of current
cost estimates   and major changes to high management levels,
including   the Congress, management visibility      of what is go-
ing on in a particular      program should be improved.

      We believe that it still      is necessary to revise Navy
regulations    to require  that analyses of the impact on devel-
opment cost and time of all significant        technical   changes
designed to increase the capabilities        of equipment beyond
those in the Specific     Operational   Requirement    be conducted
and that these analyses provide the information          necessary to
determine   if such changes are cost effective.

       The regulations    should require     also that,     if these
analyses show a significant       increase     in cost or delivery
schedules,    the Chief of Naval Operations,         or other top-level
user representative,      certify   that each major change is nec-
essary for the equipment to perform the assigned mission for
which it is being acquired.         The regulations       should also
prohibit   project    managers from committing       the Government to
proceed with such changes until         these certifications       are
given.
                               CHAPTER 5

                            SCOPEOF REVIEW

       In our examination     we reviewed available       records re-
Pated to the determination        of performance     requirements       for
the Deep Submergence Rescue Vehicle and selected components
2nd reports    on reviews and studies of the rescue program.
Ye also examined Navy regulations          and written     instructions
governing project     management and the development of new sys-
terns.   We also conducted numerous discussions           with person-
nel of the Project     Office   to obtain information         not con-
tained in the files     and to supplement the documentary in-
formation.     Our examination     was performed primarily          at the
Deep Submergence Systems Project         Office,    Chevy Chase, Mary-
land.




                                   36
37
                                                                               APPENDIX I

                       DEPARTMENT                 OF   THE     NAVY
                         OFFICE        OF   THE    SECRETARY
                         WASHINGTON,               D. C.   20350

                                  20    OCT 1970



Mr. Charles M. Bailey
Director,  Defense Division
U. S. General Accounting Office
Washington, D. C. 20548

Dear Mr. Bailey:

     The Secretary of Defense has asked me to reply to your letter
of 28 July 1970 which forwarded the GAO draft report on the develop-
ment management of the deep submergence rescue vehicle program.    I
am enclosing the Navy reply to the report.

      Your letter  also requested a security classification     review of
the report, and stated your desire to issue an unclassified       report.
The very few classified    parts of the report are shown in the attached
copy of the report.     The report may be issued as unclassified,     with
those parts deleted.     The GAO is authorized to forward the present
report, classified    as indicated, to committees and members of the
Congress in accordance with the provisions     of DOD Directive    5200.1.

                                                   Sincerely          yours,




                                                              CHARLESA. BOWSHER
                                                       ASSISTANT SECRETARYOF THE NAVY
                                                            (FINANCIAL MANAGEMENT)
Encl:
(1) Navy Reply to GAO Draft Report of 28 Jul 1970 on Deep Submergence
      Rescue Vehicle Program Indicates Need for
      Control Over the Development Process (OSD
(2) Copy of GAO Draft Report (c!)




                                            39
APPENDIX I

                                  Navy Reply
                                          to
                   GAO Draft     Report        of 28 July     1970

                                          on
          Deep Submergence Rescue Vehicle                program     Indicates
           Need for    Strengthening       Management Control            Over
                          the Development           Process
                               (OSD Case #3150)




I.   GAO Findings,      -Conclusions       and Recommendations

     GAO reviewed the management of the DSRV (Deep Submergence
Rescue Vehicle)    because the actual development cost and time
substantially    exceeded the original     estimates.    The DSRV is a
3%ton submersible      vehicle   designed for rescue of personnel
from disabled    submarines.     When needed, the Deep Submergence
Rescue Vehicle would be transported        by aircraft   to a seaport
near the disaster    and carried     to the site by a supporting
surface    ship or submarine,     The vehicle   would then shuttle
between the disabled     submarine and the supporting      craft,  res-
cuing up to 24 survivors       each trip.
    GAO inquired        into the management controls  to see whether
the increases    in     development cost and time might have been
more effectively        controlled.
     A.    Findings.      The GAO found          that:

         1.   During the period 1964 to 1969, the estimated          cost
for the rescue vehicle       program increased    from $36.5 million
for a twelve-vehicle     system and one year of operation       to 3,463
million  for a six-vehicle       system.   This represents  about a
1300 percent   increase    in cost in spite of a 50 percent re-
duction  in the number of vehicles       to be built.
         2. Changes made in the design of the vehicle            during
this period necessitated    a   redesign   of  support  craft   and  some
of the supporting   equipmcn  t  with   a corresponding    increase   in
their costs.
                                                                   Enclosure     (1)
                                           40
                                                                     APPENDIX I


          3.      Although the Navy management system contains           many
controls,    it    does not require     a positive    formal decision    from
the Chief of       Naval Opera.tions prior      to increasing  the c2pa-
bilities   of     a developmental    system beyond those called       for in
the Specific       Operational    Requirement.

            4. No thorough and well-documented      analysis of the
consideration     given in the decision   making process showing
the effects    these decisions  would have on development cost
and time or the cost benefits      obtainable   from the increased
capabilities.
        5.   Little indication  of specific              approval    by the top
Navy echelons of muny important   decisions              involving    substan-
tial development cost 2nd time.

     B.   Conclusions.        The GAO concluded       that:

          1.     A substantial    portion      of the cost growth and pro-
gram stretch-out       exists   because of the low original           estimates
establish cd by tt;e Deep Subxergence system Review Grotlp.                   GAO
believes     these low estixtes       were used :;lhcn the system require-
ment was issued because the Sxvy did not conduct sufficient
design,   preliminary      development and testing         to provide 2 sound,
factuzl   basis for estimating         realistic     develop;,lent cost 2nd
tims,    Accordingly,      the decision       to establish     2 firm requii-c-
merit fcr the system y;as based on cost and time estimates                   ob-
tained from a conceptual         study instcad       of from design and
engineering      analysis,
         2.   A substantial   portion         of the increase   in develop-
ment cost a:ld time is attributable            to changes in the vehicle
'design undertaken   to increase    its       capabilities   beyond those
 stated in the reqzirexent.

           3. Although Project    Office  officials     stated   that
representatives    of the Office   of the Chief of Naval Opera-
tions were fully     informed of all pertinent      maiters    by informal
rneZms2 infor      discussions   do not assure that responsible
persons are fully      informed of the consequences of such pro-
posed ch2nges.
           Aa. Formal approval       by the Chief of          Naval Operations
of major increases       in technical     requi ';'c;~eilts    y/ould achieve
more effective     control    over the development            of major systems
and provide    greater     assurance that benefits            2re carefully
weighed against     possible     cost increases       2nd     development delays.
      APPENDIX I

       C.    Recommendations.     GAO recommends that               SECNAV take
  actions    whi?~ii     require:

            1. A sufficient  body of design,    experimental    develop-
  ment work, and subsystem testing    be provided prior      to the pro-
  mulgation   cf an end-item system requirement    document to ensure
  the basis of fact necessary to authorize      the follow-on     full
  scale development and procurement    of operational     equipment and
  systems D

             2.   All significant     technical chanses which increase
  the capabilities      of the item being developed beyond those
  specified    be presented     to the Chief of Naval Operations   for
  his concurrence     before development proceeds.

           3. In presenting     such technical  change data to the
  Chief of Naval Cperations,     the developer  also furnish     analyses
  of any additional  cost,   delays,  and increased  capabilities      to
  result from the change.

II,     --Summary of the Navy Position
      The Navy considers    the report  to be, in general,    factually
 accurate.   The Havy does not concur in all of the conclusions
 of the report,    but considers   the management ob.jectives    implicit
 in the GAO recommendations      to be generally   sound.   Comments
 concerning   specific  GAB statements    are contained   in Tab A.
             Recommendation (1) is consistent               with long standing      Navy
 poli?>~-\h                current        309 policy     of "fly    before buy," as
 exprc:;sed by the Deputy Secretary                    of Defense in his memorandum
 of 2ti bfay 1976.           ‘I’ilUS , OPNA\:INST 3910.6,        governing     the Specific
 Qcrational          Haquirencnt          (SCR), the requirement         document   which
 calls out Engineering                 Gevelopmcnt,      states,    a8 a prerequisite
 to i.s.suance of an 5(X, that it must be established                          that there
 arc7 no unacceptable               technological      risks,    and that the necessary
 iechr1cilo~;y is at hand.                It should be noted, however, that the
 docisicn         as to what constitutes            a "sufficient       bodv," particu-
 larly         of subsystem testin;:,         must be made very carefully           in
 accorciance        with good engineering            judgment and tile nature of
 tile develop:lent         ii1 question.          For example, in the case of ship-
 building,         a too-broad        requirement      for subsystem      testing   could
 result         in unacceptable         lead time    for the major system.

      Recor,lxendations --.-_-.-
      -------------.-         (2) and (3) are concomitant.      The Navy
 agrees     that sl&mcanc          chan:;es and their operational   and
 financial        consequences should be approved at sufficiently
 senior levels,         consonant with the ma,o;nitude of the develop-
 ment in quustiou.               [See GAO note on p. 48#1


                                             42
                                                                                                            APPENDIX           I


                                      [See       GAO note          on p.       48.1



       Sjnce the time Then the DSFV characteristj                                 cs were evolved,            new proce-
dures have been instituted                    in the Department                 of Defense         which     provide       more
stringent       controls.           Cf particular            importance           is the Development              Concept
Paper (DCP).            XP’s       are memoranda          by which the Sscretary                    of Defense          expresses
his decisjons           on the ini~tratj           on of or char!ces             to ma,~or RS:D pror;rams.                 The XT?
makes explicit            assumptions         concerning          the agr..ep d unon problem                 or threat,         the
developxnt          time frame 9 priority,                 force      I.e\rels      contempiated,          and measures
of merj t, or effectiveness,                    xhjch     will      be used to evaluate                 and compare alter-
native      systems.         These thresholds              establl;sh         the limits          of changes        &i.ch     can
occur before          triggerins         a revj.ew       of the ?ropan               and a decision           by the ?ecre-iar:,
of Defense         on action         to be ta.ken.           There has been eetablished                      within      T.C3 a
Defense      Systems Acq’lisition               ‘icview      Council        consistjrx;         of the Djrector            of
Defense      Research        and Engineerin?            and the Assistant                 F,ccretaries         of Defense
Comptroller,          Installations           and LogictS.cs,             and Systems Anal:ysis.                  This cocci         1
reviews      we533ns nroc;ras!s             at three      mz,jor transition                points     in the accuisitL2n
Frocess,       and when thresholds                 a.re breached.             The XID also condl:ct,s               skpara?~,
detailed       reviews       of the management               of these major yrcsrar?s                   early     In the pceess
to ensure        that     adeo_?late mnamxnt                 procedures           have been established.                   “5 ES.11 :i,
the D9D instituted               .Select,ed     A.cqz?aition          Report        serves      as the management             t.orl.
by which acquisition                 programs        are monitored             on a rei-,ular       basis.        T1: I s rt?:,a-t
 speci fj cal ly deal-s :rith             tk     source      and tkc amount              of both cost variance;                 cne
 schedule      changes.
                 . .
       In addltlon,        policies        and prcxedures          withtn       the Xavel Xaterjal               Commnni
have been established                which     provf de for high level               review.        A recent         reorca-
nization       of the Deputy Chief               of ?aval Material             (Development)           (XX(D)         ),
3 August 1970, established                   the Eequirer?ents          if,nalysis      Cffice       (?.-fi0) >;!?ich <s
responsible         for a thorough           and meaningful          review       of all documents             which
respond      to requirements             (Protxsed      Technical       Approach         (X.2))     Ii::D FlannLng
Summary (CD 1634)) Technical-                    Development        Plans      (‘YE’)).     This review          res~I.ts
in a reccmmendaticn              to C?TI$ for his decision.                 :/hen funded,         the ‘YDP or 33 If34
becomes the primary              manegement’control            and reporting             doc.aent        for the ti:e
of the development.                It is kept up to date on e contln.;ing                         basis.         I.:pdeted
TD?s/DD 1634s~must be stibmittcd                     to the director,             Defense       Research        and
Engineering          (PDRVY) through           the chain      of command whenever                a Program          Chance is
approved      V whenever          a significant         chan.Te occur-es          in the ststx             of the ~rs;;ect,
whenever       a reouest        for initiation          of Engineering            Cevelcpment          is subm’ittei
 to ED9.E, and -at leas-5 once a year by 1 Ppril                             in order       to assure         that       ?LF c.3
 has current        information         at the time of formal               pro;ram        guidance,         prosram       planning,
budSet      estimates       and appcrticnment             requests.

      The Xavy believes   that  the necessary          ccntrols    are contained      in the I?avy
management    system as it has evolved         since    1$6     and j.n changes    currently    in
yrogyess in KID, and conseq:lently         that     the action     necessary     to achieve   tY.2
objectives    o f the GAO in strenpthening
                                     .>            rr.anagement    contrcis    over t;‘ne develo,Funt
process has been taken.
t       APPENDIX I


/I

1
,!



    1
    I
    !
    !
    I

                              DETAILED CCKMVIENTS

                                      ON

                            SWCIFIC   STATEhW?IL‘S

                                      IN

                                 GAO REPORT

                     DEEP SW3ld3rlGEXCE RESCU3i VEHI CL&’
                                (OSD Case 3150)




                                                            Tab A




                                           44
                                                                                                                            APPENDIX I
        ‘

.I,    *                 --GA8 Statement      (Pa::c 1.0)         In its                                          analysis    of cau.scs of
  growth                in cost and Time estj%Zes                 in the                                          DSIZV program,    GAO con-.
  eludes                that   a substantial        portion      of this                                           growth   exists   because
  of the                low original      estimates        established                                             by the DSSRG.

            FTavy Comment,

      a.     \Yith respect    to the various      GAO statements        in this     re-
port     concerning    !XRV cost jiromth      and increases      in development
time,     it is important       to note that     GAO has again used t,Iie Febru-
ary 1964 estimates         of the Deep Sulxlel~gcncc       Systems      Rcvi2vi Group
 (DSSRG) as the basis         for comparison.       In its    reply     to the G;,O
draft     report    of 22 b:ay 1X0 J and again      in its    repllr    to the final
GAO report        to Congress     (OSD Case F2:350) of 20 February            1970,
the Navy made the following            statement    concerning       the actual
basis     for the approved        DSRV program:

                         By way of background,                        the Deep Subxerzcnce                      Sys-
             tems         Heview GJ:OIJX)               (i)aSltG) Report          rccor,!nended            as a
             long         term        ~+CSCUC        iiilprovenent,          that      iii,?   ida~y     develop,
             cor1struc-t             9 and      operate         a fleet       of 12 cl-~~11 sulmcrsi-
             ble rc?L-c:Ic vehicll2s.                          5%2 Report,          \?hiC:li      *XaFi  COIICept!i:~l.
             in mr;urt5,                 c;ti~~~;tTc'cii ihai         such a program                r:ould       cost
             $36.5i.1 over a five-fear                            pc;-iod.        It is emp2issizec-t
             that- the DSLRG 2cpOrt,                            as 3 COUC2iltUFil              stu.;y,        did not
             consti           ilite      the basis           for the approved                 progr;:m.              liom-
             c?ve1-, when such a prograr4 was su'bjectcd                                          to engii1esrin.g
             and design                  analyses,           a r2orc reali::<          ic cost of a seven-
             year program                    wzs estimated              to be :~ilS?,i,            (in reality
             v139 i:!illion                  t;hcn taking          into      account          the elimination
             of "shared                  research'           caused by the deletion                      of the
             search             vehicle          in the final             phase of the iipproval                         of
              the PCP (3ro::rn);;                    Change Proposal)              . li"~,is prc!:rar.i,
             which Yeas proposcci                         as an entire          Rescue System,                   in-
             eluding:              improved          escape development,                     8as approved                by
             Deputy              Secrec~ry           of Defense           Vance on 7 October                      1955.
             At the time of approval,                               this     PCP v;as structured                        on
              the basis               of a COlTC?irJ*Ctlt             deep search             vessel       program
             with         extensive              common rchearch               and tle;~elopment.                       The
              effect             of the decision                to defer        the search              vehicle
             was to increase                       t!ae cost of the rescue                      program           from
             $ll9h!             to $139I:I?
 As indicated       above,       the DSST:G Report         is not properly         the cost
 reference     point.        ?“nis was a study        ai,,r,cl at rec,llircr;cnts.         Cost
 estimates     were included           to help the Chief             of Naval   @eraLions
 determine     whether       Lhe concept      looked       sufficienlly       promising     to
 proceed    with    furtlier       analysis.     Follo\:iing         ihc DSSj:?,G Rzpcrt ,
 further    engineering          analysis    developea             the ccst   and sc.hzclu2.e
 ‘GAO       footnote.     The   11 19 mlltlon    Includes   supplementat        systems,       whereas    the
                          $100 millIon    used   in GAO’S     report   IS for   the   rescue     system    only

                                                                           Tab A
                                                                                       45
 APPENDIXI

iJS;til?:atCSreflected       in the Program Change Proposal approved by '
 i,iac:       Secretary
          kijuty               of Jkfensc in October 1965.    These numbers
;rre considered      realistic     for the information available   at that
t i 111
     eo
       b* 1-t should also be noted that the GAO cost comparisons
arc based on a projected                      six-vehicle     program,    The Assistant
Secretary        of the Navy (Financial                   Eanagement) letter   of 19 Au:;ust
1259 advised G.40 that the Chiel" of Naval Operations,                           on 29 April
1969 di1~CCtCt.i             that a D521Vforce          level study be lilatie and   that
construction               of additional         JX!Ws beyond the two Lhcn uncicr con-
Stl-uC~LiOi~     I;Oi.tlCi       not ‘be   uilder'taken until     and unless their     Useful-
ner:,s justificii              their     cost ant! that there was no provision          in
the Five Year lkfen:;e                    Program for additional       L)SRVs.

2,    GAO Si,ate:~Cilt (Pa?@ 17).         GAO alao concludes   that a sub-
8tEn'L-7-7-----------"~~~
         la1 poi*tion 01           ~ncrcasc in development cost and time
is attributable           to ch anges in vehicle   design undertaken   to in-
crc~se its capabilities            beyond those stated in the SO!;. Spe-
cifically        cited are increasc.s in operating       depth and rescue
cap2 c i     .     ty




              a      \':'ith     rez:arci     to  the    questioil           of       tlcnth,    the DSSj'KGReport
reco:n~~onded :tn operating                           depth of 6,OOa feet.                         The initial             bCX:
specified                    a minil,lum require;,zent                 that the vehicle               he capable of
l*e:<Cilil>~;              person2cl        at submrine                collapse           depth (collapse              depth
 is classi ficil and can be provided                                      as    r@quircd)        e    The   Navy's
an::lysis                  inc!icateJ       that the state-oi-the-al*t                         in machinin;: 'i 1~
ioo?i. iiY 140 steel spheres of the desired weight :Tor the i)L;iZV
pressure                   hull allwed           a XKV operatin!;                     depth of 2,500 feet.
'I'hc CXl (Circular                       of 3.5quil=er.:ents) specified                       3,5@0 feet but
reqciccitccl icicas fro;n inciusiLry as to ho\;l a (;,0!30 foot depth
capability                    could be achieved.                     l&SC (Locir,hecd blissile                  and
Space           Corpo3xtion)                inclicated        that it had proprietary                       iilL%cllinin;;
techniques                    which wol~i(i achieve improveil sphericity.                                   Since the
improved sphcricity                           had not been demon:;traie(1 on the selectecl
material ) the                      Idavy  elected      ItO        specify        a material          thickness            ade-
quate to achieve 3,500 feet.                                       l.E:SC did achieve its predicted
machining perfcrmance , which resulted                                            in a tiepth capability                    of
Sp,OOOfeet.                      This achievement did not involve a si;;nificant
increase                   in the cost estimaxe.                       On the other hand, it tiid pro-
vide the capability                          of performins;               interin          depth search opera-
ti01EG;,          thus enabling cancellation                             of original            plans for a
s6:garRte                 6,000 foot ;irototype                    search vehicle              (included          in ,502
46-16 of S October 196~!) and a multi-million                                                  dollar     saving to
the Government.




                                                         46
                                                                      APPENDIX I


1         b.   Both the DSSRG Report and the SOR contemplated                a
    vehicle    that would accommodate 12 to 14 people.             'f'he Request
    for Proposal was issumi with a pressure            hull design of t\;ro
    spheres joined by an access trunk.             One of these spheres was
    to house the crew and equipment and the other was to house 1%
    to 14 rescuees.         I3efore the contract    was written,      the chan:;e
    to the three sphere concep-‘-L was made to permit an injured                   res-
    cuee to be loaded on a stretcher,             This could not have bee11
    accornpl ished under the COR configuration.            Tile  contractor        also
    proposed converting          the access trunk to an additional         rencuc
    sphere,    thereby increasing        the payload to 2~: rescuees per trip.
    This conversion        reduced the mission time, reliability            rzquir:;'-
    merits, power requirements,          etc., thereby effecting        operatin;;
    cost savings.        There were also forecast      cost savings resL?lting
    from the use of the same tooling           for all three spheres instead
    of special     tooling     for a smaller   mid-sphere.

         C.     The increase    in operating      depth and the addition       of the
    third    sphere were not major factors           in the cost growth of this
    program o More significant           were such cause:; as inability         to use
    off-the-shelf      ite.ns in the deep ocean environment;            unforesec:llJie
    problems in new technology           developnznt;      anu schedule slippages
    and stretch-outs        as a result     of design problems,      late sub-
    contractor     deliveries,     interrace    definition,     and test pro:ra!;l
    extensions     as well as escalatfo:l       in the cost of labor and
    material.
    3.   GAO Statement (Page 21) 0 GAO indicates     that changes made
    in the design of the-%?iXEle    necessitated   a redesign of support
    cra2t and some 0J: the supporting    equipment with B corresponding
    increase  in their costs.

    Navy Comment.       Selection    of the three-sphere        concept \vith t!ie
    rcsult-ing   increase    in X2V length took         place early in the de-
    sign oi" the Submari:te Rescue Ship (AS;;) 3116 Fas incll!ded              in
    the contract     design for the ship.          Slibseqilent v:eig-lit growth
    of the IXRV did necessiente          redesign of handling        eciuipmcai and
    modif ications     to the ASR. However, a significaI1-L           portion    0I‘
    this weight growth did not         result    from   vehicle   design    changes
    undertaken     to iucreasc    its capabilities.,

    40   GAO Statement
         -_--               (Fx;:es 15,lG).      GAO reports     that it found no
    thorough and=1          uocuiacll tcdxaiycis     showiq; the effects      that
    decisions   to change the rescue vehicle          xould have on the cicvel-
    opment cost and tine or the cost benefits              at-cainable   from the
    increased   capabilities.
    Navy Co:xlent.   Generally, and in each of the cases                  cited,care-
    ful aGTy=      were made of the impact cf the changes                 on the DXLV

                                                                        Tab A
                                              47
 APPENDIX I


itself.            However, fCTln?ll cost-effectiveness analysis                                              of the
impact           on the whole system was net conducted.

5. GAO Stateinent     (?a:;cs     15,  16, 24).      GAO reports,     also,
that it founrl little       indication    cf specific     approval    by the
top Navy echelons of many important             decisions   involving     sub-
stantial  Levelopment cost and time.
Nzy    Coimen t e During the critical       initial    phase of the DSRV,
a high degree of urgency generated          by the Thresher disaster
was present;.     A Steering   Task Group to obtain rapid approval
of sy.ste;n paral,leters   was established     and met regularly.       The
CNO and the CX?,iwere represented.          This group reviewed and
approved all ii,lportant     decisions.     In addition,    cognizant
OPi%V and !JAVi:AT ;lersonnel     were kept informed of and partici-
pated in the decision-m aking process throuLh day-to-day              con-
tacts,    staff  meetings,   and regularly     sched:lled briefings.
The project     Kanager reported     program status directly       to the
Chief of Naval 14xteerial and met with him on a weekly basis,
GAO   note:   Deleted      comments          relate   to matters   discussed      in the draft       re-
              port   but    which     have     not    been discussed    in this    ftnal   report.




                                                                                                           Tab A
                                                        APPENDIX II


                    PRINCIPAL OFFICIALS OF

                   THE DEPARTMENTOF DEFENSE

                AND THE DEPARTMENTOF THE NAVY

       RESPONSIBLE FOR ADMINISTRATION OF ACTIVITIES

                   DISCUSSED IN THIS REPORT


                                          Tenure      of office
                                          From                    To
                                                                  -
                     DEPARTMENTOF DEFENSE

SECRETARYOF DEFENSE:
   Melvin R. Laird                     Jan.    1969      Present
   Clark M. Clifford                   Mar.    1968      Jan.    1969
   Robert S. McNamara                  Jan.    1961      Feb.    1968

DEPUTY SECRETARYOF DEFENSE:
    David M. Packard                   Jan.    1969      Present
    Paul H. Nitze                      July    1967      Jan.    1969
    Cyrus R. Vance                     Jan.    1964      June 1967
    Roswell L. Gilpatric               Jan.    1961      Jan,    1964


                    DEPARTMENTOF THE NAVY

SECRETARYOF THE NAVY:
    John H. Chafee                     Jan.    1969      Present
    Paul R. Ignatius                   Sept.   1967      Jan.    1969
   Charles F. Baird (acting)           Aug.    1967      Sept. 1967
   Robert H. B. Baldwin (acting)       July    1967      Aug.    1967
   Paul H. Nitze                       Nov.    1963      June '1967
    Fred Korth                         Jan.    1962      Nov.    1963
CHIEF OF   NAVAL OPERATIONS:
    Adm.   Elmo R. Zumwalt, Jr.        Oct.    1970      Present
    Adm.   Thomas H. Moorer            Aug.    1967      Sept. 1970
    Adm.   David L. McDonald           Aug.    1963      July    1967



                                  39
APPENDIX II


                                        Tenure     of office
                                        From                      To
                                                                  -

                   DEPARTMENTOF THE NAVY (continued)

CHIEF OF NAVAL MATERIAL:
    Adm. Jackson D. Arnold           July   1970      Present
    Adm. Ignatius J. Galantin        Mar.   1965      June 1970




                                                     U.S.   GAO   Wash.,   D.C.