oversight

Defense Acquisitions: Improvements Needed in Space Systems Acquisition Policy to Optimize Growing Investment in Space

Published by the Government Accountability Office on 2003-11-18.

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

                             United States General Accounting Office

GAO                          Testimony
                             Before the Subcommittee on Strategic
                             Forces, Committee on Armed Services,
                             U.S. Senate

For Release on Delivery
Expected at 2:00 p.m. EST
Tuesday, November 18, 2003   DEFENSE ACQUISITIONS
                             Improvements Needed in
                             Space Systems Acquisition
                             Policy to Optimize Growing
                             Investment in Space
                             Statement of Robert E. Levin, Director
                             Acquisition and Sourcing Management




GAO-04-253T
                                                 November 18, 2003


                                                 DEFENSE ACQUISITIONS

                                                 Improvements Needed in Space Systems
Highlights of GAO-04-253T, a report to           Acquisition Policy to Optimize Growing
Subcommittee on Strategic Forces,
Committee on Armed Services, U.S.                Investment in Space
Senate




The Department of Defense is                     Similar to all weapon system programs, we have found that the problems
spending nearly $18 billion                      being experienced on space programs are largely rooted in a failure to match
annually to develop, acquire, and                the customer’s needs with the developer’s resources—technical knowledge,
operate satellites and other space-              timing, and funding—when starting product development. In other words,
related systems. The majority of                 commitments were made to satellite launch dates, cost estimates, and
satellite programs that GAO has
reviewed over the past 2 decades
                                                 delivering certain capabilities without knowing whether technologies being
experienced problems that                        pursued could really work as intended. Time and costs were consistently
increased costs, delayed schedules,              underestimated. DOD has recognized this problem and recently revised its
and increased performance risk. In               acquisition policy for non-space systems to ensure that requirements can be
some cases, capabilities have not                matched to resources at the time a product development starts. The space
been delivered to the warfighter                 community, however, in its newly issued policy for space systems, has taken
after decades of development.                    another approach.

DOD has recently implemented a                   As currently written, and from our discussions with DOD officials about how
new acquisition policy, which sets               it will be implemented, the policy will not result in the most important
the stage for decision making on                 decision, to separate technology development from product development to
individual space programs. GAO
was asked to testify on its
                                                 ensure that a match is made between needs and resources. Instead, it
assessment of the new policy.                    allows major investment commitments to be made with unknowns about
                                                 technology readiness, requirements, and funding. By not changing its
                                                 current practice, DOD will likely perpetuate problems within individual
                                                 programs that require more time and money to address than anticipated.
GAO did not make                                 More important, over the long run, the extra investment required to address
recommendations in its testimony.                these problems will likely prevent DOD from pursuing more advanced
However, it reiterated a previous                capabilities and from making effective tradeoff decisions between space and
recommendation that DOD modify
                                                 other weapon system programs.
its policy to separate technology
development from product
development. DOD disagreed with                  Overview of Key Decision Points
our earlier recommendation
because it believes that the
modification would slow down
acquisitions, increase risks, and
keep DOD from taking advantage
of cutting edge technology. Our
past work, however, has
consistently shown that time and
risk are reduced and capability is
increased when programs begin
with knowledge that technologies
can work as intended.



 www.gao.gov/cgi-bin/getrpt?GAO-04-253T.

 To view the full product, including the scope
 and methodology, click on the link above.
 For more information, contact Katherine
 Schinasi or Bob Levin at (202) 512-4841 or
 schinasik@gao.gov or levinr@gao.gov.
                      Mr. Chairman and Members of the Subcommittee:

                      I am pleased to be here today to discuss the Department of Defense’s
                      (DOD) new space acquisition policy. This policy will be critical as DOD
                      strives to optimize its investment in space—which currently stands at
                      more than $18 billion1 annually, and is expected to grow considerably over
                      the next decade. DOD’s space acquisitions have experienced problems
                      over the past several decades that have driven up costs by hundreds of
                      millions, even billions of dollars, stretched schedules by years, and
                      increased performance risks. In some cases, capabilities have not been
                      delivered to the war fighter after decades of development.

                      Similar to all weapon system programs, we have found that the problems
                      being experienced on space programs are largely rooted in a failure to
                      match the customer’s needs with the developer’s resources—technical
                      knowledge, timing, and funding—when starting product development.
                      While DOD’s new policy for space acquisitions may help to illuminate gaps
                      between needs and resources, it will not help DOD to close this gap. More
                      specifically, the policy allows programs to continue to develop
                      technologies after starting product development, which not only means
                      that costs and schedule will be more difficult to estimate, but that there
                      will be more risk that DOD will encounter technical problems that could
                      disrupt design and production and require more time and money to
                      address than anticipated. More important, over the long run, the extra
                      investment required to address these problems may likely prevent DOD
                      from pursuing more advanced technologies and from making effective
                      tradeoff decisions between space and other weapon system programs.

                      By contrast, DOD is taking steps to better position its other acquisition
                      programs for success. Its revised acquisition policy for non-space systems
                      separates technology development and product development.


                      DOD’s current space network is comprised of constellations of satellites,
The Importance of     ground-based systems, and associated terminals and receivers. Among
DOD’s Space Systems   other things, these assets are used to perform intelligence, surveillance,
                      and reconnaissance functions; perform missile warning; provide
is Growing            communication services to DOD and other government users; provide



                      1
                       This includes research, development and testing; procurement; and operations and
                      maintenance accounts.



                      Page 1                                                                    GAO-04-253T
weather and environmental data; and provide positioning and precise
timing data to U.S. forces as well as national security, civil, and
commercial users.

All of these systems are playing an increasingly important role in military
operations. According to DOD officials, for example, in Operation Iraqi
Freedom, approximately 70 percent of weapons were precision-guided,
most of those using Global Positioning System (GPS) capabilities. Weather
satellites enabled war fighters to not only prepare for, but also take
advantage of blinding sandstorms. Communication and intelligence
satellites were also heavily used to plan and carry out attacks and to
assess post-strike damage. Some of DOD’s satellite systems—such as
GPS—have also grown into international use for civil and military
applications and commercial and personal uses. Moreover, the demand for
space-based capabilities is outpacing DOD’s current capacity. For
example, even though DOD has augmented its own satellite
communications capacity with commercial satellites, in each major
conflict of this past decade, senior military commanders reported
shortfalls in capacity, particularly for rapid transmission of large data files,
such as those created by imagery sensors.

DOD is looking to space to play an even more pivotal role in future
military operations. As such, it is developing several families of new,
expensive, and technically challenging satellites, which are expected to
require dramatically increased investments over the next decade. For
example, DOD is building new satellites that will use laser optics to
transport information over long distances in much larger quantities than
radio waves. The system, known as the Transformational Satellite, or
TSAT, is to be the cornerstone of DOD’s future communications
architecture. Many space, air, land, and sea-based systems will depend on
TSAT to receive and transmit large amounts of data to each other as DOD
moves toward a more “network centric” war-fighting approach. DOD is
also building a new space-based radar (SBR) system, which is to employ
synthetic aperture radar2 and other advanced technologies to enable DOD
to have 24-hour coverage over a large portion of the Earth on a continuous
basis and allow military forces a “deep-look” into denied areas of interest,


2
 Synthetic Aperture Radar (SAR) “synthesizes” an antenna — a very long antenna — by
taking radar samples looking sideways along a flight path of an aircraft or satellite, taking
advantage of the fact that the ground and objects on the ground are essentially stationary
during the fly-by time. The synthesized radar signals can be used to generate quality
resolution ground imagery.



Page 2                                                                          GAO-04-253T
on a non-intrusive basis without risk to personnel or resources. SBR itself
is expected to generate large amounts of imagery data, and it will rely on
TSAT to deliver this data to war fighters.

As figure 1 shows, the costs of these and other new efforts will increase
DOD’s annual space investment significantly. For example, based on the
2003 President’s budget, acquisition costs for new satellite programs and
launch services in the next 4 years are expected to grow by 115 percent—
from $3.5 billion to about $7.5 billion. Costs beyond that period are as yet
unknown. While DOD’s budget documents show a decrease in 2009 for
these systems to $6.4 billion—they do not include procurement costs for
some of the largest programs, including TSAT, GPS III, SBR, Space
Tracking and Surveillance System (STSS), and Space-Based Surveillance
System (SBSS), which DOD will begin fielding beginning 2011. Nor do
these numbers reflect the totality of DOD’s investment in space. For
example, ground stations and user equipment all require significant
investment and that investment will likely increase as the new programs
mature.




Page 3                                                           GAO-04-253T
Figure 1: DOD’s Investment in New Programs through 2009




Table 1 identifies specific programs factored into our analysis of upcoming
investments. It also shows that DOD will be fielding many of the new
programs within just a few years of each other.




Page 4                                                         GAO-04-253T
Table 1: Satellites and Launch Services Currently Being Developed and Planned

                                                                                                              Year DOD plans to
                                                                                                                  start launching
Program                        Description                                              Status              satellites or services
Evolved Expendable Launch      Acquisition of commercial launch services from two       Development                          2002
Vehicle (EELV)                 competitive families of launch vehicles
Wideband Gapfiller Satellite   Satellites based almost exclusively on commercial        Production                           2004
(WGS)                          parts being developed by the Air Force to provide
                               interim communications support
Space Based Infrared           Ballistic missile detection system being developed       Development                          2006
System (SBIRS)-High            by the Air Force to replace its legacy detection
                               system
Advanced Extremely High        Communications satellite system being developed          Development                          2006
Frequency (AEHF)               by the Air Force to replace legacy protected
Communications Satellite       communications satellites
Space Tracking and             Two satellites that were developed under the SBIRS-      Development                          2007
Surveillance System (STSS)     Low program that are going to be used as technology
Block 2006                     demonstrators in 2006-2007 missile defense tests to
                               assess whether missiles can be effectively tracked
                               from space
National Polar-orbiting        Weather satellites being developed by the National       Development                          2009
Operational Environmental      Oceanic and Atmospheric Administration, the
Satellite System (NPOESS)      National Aeronautics and Space Administration, and
                               DOD to replace those in use by the agencies
Mobile User Objective          Navy effort to develop a family of unprotected,          Concept                              2009
System (MUOS)                  narrow-band satellites that can support mobile and
                               fixed-site users worldwide
Space Tracking and             A new constellation of ballistic missile detection and   Pre Concept                          2011
Surveillance System (STSS)     tracking satellites being developed by the Missile
Block 2010                     Defense Agency
Transformational Satellite     Communications satellites being developed by the         Concept. Expected                    2011
(TSAT)                         Air Force to employ advanced technologies in             to enter
                               support of DOD’s future communications                   development late
                               architecture                                             2003.
Space Based Surveillance       A constellation of satellites to be developed that can   Pre Concept                          2011
System (SBSS)                  detect, track, and characterize man-made objects in
                               space
Space Based Radar System       Reconnaissance satellites being developed by the         Concept                              2012
(SBR)                          Air Force to provide 24-hour global coverage
Global Positioning System      New version of GPS being developed to add                Concept                              2012
(GPS) III                      advanced jam resistant capabilities and provide
                               higher quality and more secure navigational
                               capabilities.




                                           Page 5                                                                   GAO-04-253T
                        For the past 6 years, we have been examining ways DOD can get better
Grounding Decisions     outcomes from its investment in weapon systems, drawing on lessons
in Knowledge is Vital   learned from the best, mostly commercial, product development efforts.3
                        Our work has shown that leading commercial firms expect that their
for DOD’s Space         managers will deliver high quality products on time and within budgets.
Investment              Doing otherwise could result in losing a customer in the short term and
                        losing the company in the long term. Thus, these firms have adopted
                        practices that put their individual programs in a good position to succeed
                        in meeting these expectations on individual products. Collectively, these
                        practices ensure that a high level of knowledge exists about critical facets
                        of the product at key junctures and is used to make decisions to deliver
                        capability as promised. We have assessed DOD’s space acquisition policy
                        as well as its revised acquisition policy for other weapon systems against
                        these practices.

                        Our reviews have shown that there are three critical junctures at which
                        firms must have knowledge to make large investment decisions. First,
                        before a product development is started, a match must be made between
                        the customers’ needs and the available resources—technical and
                        engineering knowledge, time, and funding. Second, a product’s design
                        must demonstrate its ability to meet performance requirements and be
                        stable about midway through development. Third, the developer must
                        show that the product can be manufactured within cost, schedule, and
                        quality targets and is demonstrated to be reliable before production
                        begins. If the knowledge attained at each juncture does not confirm the
                        business case on which the acquisition was originally justified, the
                        program does not go forward. These precepts hold for technically
                        complex, high volume programs as well as low volume programs such as
                        satellites.

                        In applying the knowledge-based approach, the most-leveraged investment
                        point is the first: matching the customer’s needs with the developer’s
                        resources. The timing of this match sets the stage for the eventual
                        outcome—desirable or problematic. The match is ultimately achieved in
                        every development program, but in successful development programs, it



                        3
                         For example, see U.S. General Accounting Office, Best Practices: Better Matching of
                        Needs and Resources Will Lead to Better Weapon System Outcomes, GAO-01-288
                        (Washington, D.C.: March 8, 2001). Best Practices: Better Management of Technology
                        Development Can Improve Weapon System Outcomes, GAO/NSIAD-99-162 (Washington,
                        D.C.: July 30, 1999). Best Practices: Capturing Design and Manufacturing Knowledge
                        Early Improves Acquisition Outcomes, GAO-02-701 (Washington, D.C.: July 15, 2002).



                        Page 6                                                                  GAO-04-253T
                           occurs before product development begins. When the needs and resources
                           match is not made before product development, realistic cost and
                           schedule projections become extremely difficult to make. Moreover,
                           technical problems can disrupt design and production efforts. Thus,
                           leading firms make an important distinction between technology
                           development and product development. Technologies that are not ready
                           continue to be developed in the technology base—they are not included in
                           a product development.

                           With technologically achievable requirements and commitment of
                           sufficient resources to complete the development, programs are better
                           able to deliver products at cost and on schedule. When knowledge lags,
                           risks are introduced into the acquisition process that can result in cost
                           overruns, schedule delays, and inconsistent product performance. As we
                           recently testified,4 such problems, in turn, can reduce the buying power of
                           the defense dollar, delay capabilities for the war fighter, and force
                           unplanned—and possibly unnecessary—trade-offs in desired acquisition
                           quantities and an adverse ripple effort among other weapon programs or
                           defense needs. Moreover, as DOD moves more toward a system-of-
                           systems approach—where systems are being designed to be highly
                           interdependent and interoperable—it is exceedingly important that each
                           individual program stay on track.


Decisions on Space         Our past work5 has shown that space programs have not typically achieved
Programs Have Not Been     a match between needs and resources before starting product
Sufficiently Grounded in   development. Instead, product development was often started based on a
                           rigid set of requirements and a hope that technology would develop on a
Knowledge                  schedule. At times, even more requirements were added after the program
                           began. When technology did not perform as planned, adding resources in
                           terms of time and money became the primary option for solving problems,
                           since customer expectations about the products’ performance already
                           became hardened.




                           4
                            U.S. General Accounting Office. Best Practices: Better Acquisition Outcomes Are
                           Possible If DOD Can Apply Lessons from F/A-22 Program, GAO-03-645T (Washington,
                           D.C.: April 11, 2003).
                           5
                            U.S. General Accounting Office. Military Space Operations: Common Problems and
                           Their Effects on Satellite and Related Acquisitions, GAO-03-825R (Washington, D.C.: June
                           2, 2003).



                           Page 7                                                                    GAO-04-253T
For example, after starting its Advanced Extremely High Frequency
(AEHF) communications satellite program, DOD substantially and
frequently changed requirements. In addition, after the launch failure of
one of DOD’s legacy communications satellites, DOD decided to
accelerate its plans to build AEHF satellites. The contractors proposed,
and DOD accepted, a high risk schedule that turned out to be overly
optimistic and highly compressed, leaving little room for error and
depending on a precise chain of events taking place at certain times.
Moreover, at the time DOD decided to accelerate the program, it did not
have funding needed to support the activities and manpower needed to
design and build the satellites quicker. The effects of DOD’s inability to
match needs to resources were significant. Total program cost estimates
produced by the Air Force reflected an increase from $4.4 billion in
January 1999 to $5.6 billion in June 2001—a difference of 26 percent.
Although considered necessary, many changes to requirements were
substantial, leading to cost increases of hundreds of millions of dollars
because they required major design modifications. Also, schedule delays
occurred when some events did not occur on time, and additional delays
occurred when the program faced funding gaps. Scheduling delays
eventually culminated into a 2-year delay in the launch of the first satellite.
We also reported that there were still technical and production risks that
need to be overcome in the AEHF program, such as a less-than-mature
satellite antenna system and complications associated with the production
of the system’s information security system.

Another example can be found with DOD’s Space-Based Infrared System
(SBIRS)–High program, which is focused on building high-orbiting
satellites that can detect ballistic missile launches. Over time, costs have
more than doubled for this program. Originally, total development costs
for SBIRS-High were estimated at $1.8 billion. In the fall of 2001, DOD
identified potential cost growth of $2 billion or more, triggering a
mandatory review and recertification under 10 U.S.C. section 2433.6
Currently, the Air Force estimates research and development costs for
SBIRS-High to be $4.4 billion. We reported that when DOD’s SBIRS-High



6
 This unit cost reporting mechanism, which also applies to procurement unit cost for
procurement programs, originated with the Nunn-McCurdy Amendment to the Department
of Defense Authorization Act, 1982. The amendment, as revised, was made permanent law
in the following year’s authorization act. Known as Nunn-McCurdy “breaches,” program
unit cost increases of 15 percent or more trigger a requirement for detailed reporting to
Congress about the program. Increases of 25 percent or more also trigger the requirement
for Secretary of Defense certification.



Page 8                                                                     GAO-04-253T
satellite program began in 1994, none of its critical technologies were
mature. Moreover, according to a DOD-chartered independent review
team, the complexity, schedule, and resources needed to develop SBIRS-
High, in hindsight, were misunderstood when the program began. This led
to an immature understanding of how requirements translated into
detailed engineering solutions. We recently reported7 to this subcommittee
that while the SBIRS restructuring implemented a number of needed
management changes, the program continues to experience problems and
risks related to changing requirements, design instability, and software
development concerns. We concluded that if the Air Force continues to
add new requirements and program content while prolonging efforts to
resolve requirements that cannot be met, the program will remain at risk
of not achieving, within schedule, its intended purposes—to provide an
early warning and tracking system superior to that of its current ballistic
missile detection system.

DOD has also initiated several programs and spent several billion dollars
over the past 2 decades to develop low-orbiting satellites that can track
ballistic missiles throughout their flight. However, it has not launched a
single satellite to perform this capability. We have reported8 that a primary
problem affecting these particular programs was that DOD and the Air
Force did not relax rigid requirements to more closely match technical
capabilities that were achievable. Program baselines were based on
artificial time and/or money constraints. Over time, it became apparent
that the lack of knowledge of program challenges had led to overly
optimistic schedules and budgets that were funded at less than what was
needed. Attempts to stay on schedule by approving critical milestones
without meeting program criteria resulted in higher costs and more slips in
technology development efforts. For example, our 1997 and 2001 reviews
of DOD’s $1.7 billion SBIRS-Low program (which was originally a part of
the SBIRS-High program) showed that the program would enter into the
product development phase with critical technologies that were immature
and with optimistic deployment schedules. Some of these technologies
were so critical that SBIRS-Low would not be able to perform its mission if


7
 U.S. General Accounting Office. Defense Acquisitions: Despite Restructuring, SBIRS
High Program Remains at Risk of Cost and Schedule Overruns, GAO-04-48 (Washington,
D.C.: October 31, 2003).
8
 U.S. General Accounting Office, Missile Defense: Alternate Approaches to Space
Tracking and Surveillance System Need to Be Considered, GAO-03-597 (Washington, D.C.:
May 23, 2003) and Defense Acquisitions: Space-Based Infrared System-Low At Risk of
Missing Initial Deployment Date, GAO-01-6 (Washington, D.C.: February 28, 2001).



Page 9                                                                 GAO-04-253T
                      they were not available when needed. DOD eventually restructured the
                      SBIRS-Low program because of the cost and scheduling problems, and it
                      put the equipment it had partially built into storage. In view of the
                      program’s mismatch between expectations and what it could achieve, the
                      Congress directed DOD to restructure the program (now under the
                      responsibility of the Missile Defense Agency) as a research and
                      development effort.


                      DOD’s new space acquisition policy may help increase insight into gaps
New Space Policy      between needs and resources, but it does not require programs to close
Allows Programs to    this gap before starting product development. In other words, the new
                      policy does not alter DOD’s practice of committing major investments
Go Forward with Key   before knowing what resources will be required to deliver promised
Unknowns              capability.

                      There are tools being adopted under the new policy that can enable DOD
                      to better predict risks and estimate costs. Similar tools are also being
                      adopted by other weapon system programs. For example:

                      •   DOD is requiring that all space programs conduct technology maturity
                          assessments before key oversight decisions to assess the maturity level
                          of technology.
                      •   DOD is requiring space programs to more rigorously assess
                          alternatives, consider how their systems will operate in the context of
                          larger families of systems, and think through operational, technical,
                          and system requirements before programs are started.
                      •   The new policy seeks to improve the accuracy of cost estimates by
                          establishing an independent cost estimating process in partnership
                          with DOD’s Cost Analysis Improvement Group (CAIG) and by adopting
                          methodologies and tools used by the National Reconnaissance Office.
                          To ensure timely cost analyses, the CAIG will augment its own staff
                          with cost estimating personnel drawn from across the entire national
                          security space cost estimating community.

                      Moreover, to facilitate faster decision-making on programs, the policy also
                      calls for independent program assessments to be performed on space
                      programs nearing key decision points. The teams performing these
                      assessments are to be drawn from experts who are not directly affiliated
                      with the program, and they are to spend about 8 weeks studying the
                      program, particularly the acquisition strategy, contracting information,
                      cost analyses, system engineering, and requirements. After this study, the
                      team is to conclude its work with recommendations to the Under


                      Page 10                                                        GAO-04-253T
Secretary of the Air Force, as DOD’s milestone decision authority for all
DOD major defense acquisition programs for space, on whether or not to
allow the program to proceed, typically using the traditional “red,”
“yellow”, and “green” assessment colors to indicate whether the program
has satisfied key criteria in areas such as requirements setting, cost
estimates, and risk reduction.

The benefits that can be derived from tools called for by the space
acquisition policy, however, will be limited since the policy allows
programs to continue to develop technologies while they are designing the
system and undertaking other product development activities. As
illustrated below, this is a very different and important departure from
DOD’s acquisition policy for other weapon systems.




Page 11                                                        GAO-04-253T
Figure 2: Key Decision Points for DOD’s Acquisition Policies for Weapon Systems and Space Systems




                                       Note: According to DOD officials, while technology development is expected to ramp down during
                                       phase B, in some instances technology development could even continue after key decision point C
                                       or critical design review. Thus, technology development is depicted in a lighter shade after decision
                                       point C.
                                       As we reported9 last week, the revised acquisition policy for non-space
                                       systems establishes mature technologies—that is, technologies
                                       demonstrated in a relevant environment—as critical before entering
                                       product development. By encouraging programs to do so, the policy puts
                                       programs in a better position to deliver capability to the war fighter in a
                                       timely fashion and within funding estimates because program managers
                                       can focus on the design, system integration, and manufacturing tasks
                                       needed to produce a product. By contrast, the space acquisition policy


                                       9
                                        U.S. General Accounting Office. Defense Acquisitions: DOD’s Revised Policy
                                       Emphasizes Best Practices But More Controls Are Needed, GAO-04-53 (Washington, D.C.:
                                       November 10, 2003).



                                       Page 12                                                                                GAO-04-253T
increases the risk that significant problems will be discovered late in
development because programs are expected to go into development with
many unknowns about technology. In fact, DOD officials stated that
technologies may well enter product development at a stage where basic
components have only been tested in a laboratory, or an even lower level
of maturity. This means that programs will still be grappling with the
shapes and sizes of individual components while they are also trying to
design the overall system and conduct other program activities. In
essence, DOD will be concurrently building knowledge about technology
and design—an approach with a problematic history that results in a cycle
of changes, defects, and delays. Further, the consequences of problems
experienced during development will be much greater for space programs
since, under the new space acquisition policy, critical design review
occurs at the same time as the commitment to build and deliver the first
product to a customer. It is thus possible that the design review will signify
a greater commitment on a satellite program at the same time less
knowledge will be available to make that commitment.

An upcoming decision by DOD on the new TSAT program represents the
potential risks posed by the new space acquisition policy. The $12 billion
program is scheduled to start product development in December 2003,
meaning that the Air Force will formally commit to this investment and, as
required by law,10 set goals on cost, schedule and performance. However,
at present, TSAT’s critical technologies are underdeveloped, leaving the
Air Force without the knowledge needed to build an effective business
case for going forward with this massive investment. In fact, most of the
technologies for TSAT are at a stage where most of the work performed so
far has been based on analytical studies and a few laboratory tests or, at
best, some key components have been wired and integrated and have been
demonstrated to work together in a laboratory environment. The program
does not know yet whether TSAT’s key technologies can effectively work,
let alone work together in the harsh space environment for which they are
intended. Yet the space acquisition policy allows the Air Force to move the
program forward and to set cost, schedule, and performance goals in the
face of these unknowns. Moreover, the Air Force has scaled back its AEHF
program, whose technologies are more mature, to help pay for TSAT’s
development. Making tradeoff decisions between alternative investments
is difficult at best. Yet doing so without a solid knowledge basis only




10
     10 U.S.C. Sections 2220 and 2435.



Page 13                                                          GAO-04-253T
                      compounds the risk of failures. Our work on program after program has
                      demonstrated that DOD’s optimism has rarely been justified.


                      The growing importance of space systems to military and civil operations
Changes Needed to     requires DOD to achieve timely delivery of high quality capability. New
Optimize DOD’s        space systems not only need to support important missions such as missile
                      defense and reconnaissance, they need to help DOD move toward a more
Investment in Space   “network centric” warfighting approach. At the same time, given its desire
                      to transform how military operations are conducted, DOD must find ways
                      to optimize its overall investment on weapon systems since the
                      transformation will require DOD to develop new cutting edge systems
                      while concurrently maintaining and operating legacy systems—a costly
                      proposition. Recognizing the need to optimize its investment, DOD has
                      expressed a desire to move toward an “effects-based” investment
                      approach, where decisions to acquire new systems are made based on
                      needs and joint interests versus annual budgets and parochial interests.

                      Changing the new space acquisition policy to clearly separate technology
                      development from product development is an essential first step toward
                      optimizing DOD’s space investment and assuring more timely delivery of
                      capability since it enables a program to align customer expectations with
                      resources, and therefore minimize problems that could hurt a program in
                      its design and production phase. Thus, we recommended that DOD make
                      this change in our recent report on the new space acquisition policy.11
                      DOD did not agree with our recommendation because it believed that it
                      needs to keep up with the fast-paced development of advanced
                      technologies for space systems, and that its policy provides the best
                      avenue for doing so. In fact, it is DOD’s long-standing and continuous
                      inability to bring the benefits of technology to the war fighter in a timely
                      manner that underlies our concerns about the policy for space
                      acquisitions. In our reviews of numerous DOD programs, including many
                      satellite developments, it has been clear that committing to major
                      investments in design, engineering, and manufacturing capacity without
                      knowing a technology is mature and what resources are needed to ensure
                      that the technology can be incorporated into a weapon system has
                      consistently resulted in more money, time, and talent spent than either



                      11
                        U.S. General Accounting Office. Defense Acquisitions: Improvements Needed in Space
                      Systems Acquisition Management Policy, GAO-03-1073 (Washington, D.C.: September 15,
                      2003).



                      Page 14                                                                GAO-04-253T
was promised, planned for, or necessary. The impact of such high risk
decisions has also had a damaging effect on military capability as other
programs are taxed to meet unplanned cost increases and product units
are often cut because unit costs increase and funds run out. Moreover, as
it moves toward a more interdependent environment, DOD can simply no
longer afford to misestimate the cost and time to field capabilities—such
as TSAT—since they are needed to support other applications.

Further, policy changes are just a first step toward optimizing DOD’s
investment in space and other weapon systems. There are also some
changes that need to be made at a corporate level to foster a knowledge-
based acquisition approach. As we have reported in the past, DOD needs
to remove incentives that drive premature product development decisions.
This means embracing a willingness to invest in technology development
outside a program as well as alleviating pressures to get new acquisition
programs approved and funded on the basis of requirements that must
beat out all other alternatives. Other changes—some of which have been
recognized by recent DOD studies on space acquisitions—include:

•   Keeping key people in place long enough so that they can affect
    decisions and be held accountable. Part of the solution would be to
    shorten product development times.

•   Providing program offices with the capability needed to craft
    acquisition approaches that implement policy and to effectively
    oversee the execution of programs by contractors.

•   Realigning responsibilities and funding between science and
    technology organizations and acquisition organizations to enable the
    separation of technology development from product development.

•   Bringing discipline to the requirements-setting process by demanding a
    match between requirements and resources.

•   Designing and implementing test programs that deliver knowledge
    when needed, including reliability testing early in design.

Lastly, DOD leadership can use this knowledge-based approach to
effectively rebalance its investment portfolio. For programs whose original
justification was based on assumptions of cost, schedule and performance
that have not been realized, having a consistent set of standards allows
DOD and the Congress to reevaluate alternatives and make investment



Page 15                                                        GAO-04-253T
              decisions across programs that increase the likelihood that the war fighter
              will have the best possible mix of capabilities in a timely fashion.


              In conclusion, using an approach for managing weapon system
              investments based on knowledge instead of promises can help DOD fully
              leverage the value of its investment dollars. At a time when the nation is
              facing a large and growing fiscal gap, DOD’s $150 billion annual
              investment in the acquisition of new weapons is the single largest area of
              discretionary spending. While there are differing views on what weapons
              DOD should or should not invest in and how much should be invested,
              there cannot be any disagreement that within this fiscal environment, once
              a consensus has been reached on the level of investment and the specific
              weapons to be acquired, we should get those weapons for what was
              estimated in the budget. While DOD’s revised acquisition policy for non-
              space systems puts DOD on a better footing toward this end, DOD’s
              acquisition policy for space systems does not because it allows programs
              to proceed into product development before knowing what their true costs
              will be. Therefore, we continue to recommend that DOD modify its policy
              to separate technology development from product development so that
              needs can be matched with available technology, time, and money at the
              start of a new development program.

              Mr. Chairman and Members of the Subcommittee, this concludes my
              statement. I would be happy to respond to any questions that you or other
              members of the Subcommittee may have.


              In preparing for this testimony, we relied on previously issued GAO
Scope and     reports on DOD’s space acquisition policy, common problems affecting
Methodology   space acquisitions, SBIRS-High and other individual programs, as well as
              our reports on best practices for weapon systems development. We also
              analyzed DOD’s Future Years Defense Program to assess investment
              trends. In addition, we reviewed DOD reports on satellite acquisition
              problems. We conducted our review between October 29 and November
              14, 2003 in accordance with generally accepted government auditing
              standards.




              Page 16                                                        GAO-04-253T
           Contacts and Acknowledgements

           For future information, please contact Katherine Schinasi or Bob Levin at
           (202) 512-4841 or by email at schinasik@gao.gov or levinr@gao.gov
           Individuals making key contributions to this testimony include Cristina
           Chaplain, Jean Harker, and Art Gallegos.




(120308)
           Page 17                                                       GAO-04-253T
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