oversight

High-Risk Series: Defense Weapon Systems Acquisition

Published by the Government Accountability Office on 1997-02-01.

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

                United States General Accounting Office

GAO             High-Risk Series




February 1997
                Defense Weapon
                Systems Acquisition




GAO/HR-97-6
GAO   United States
      General Accounting Office
      Washington, D.C. 20548

      Comptroller General
      of the United States



      February 1997
      The President of the Senate
      The Speaker of the House of Representatives

      In 1990, the General Accounting Office began a special
      effort to review and report on the federal program areas
      its work identified as high risk because of vulnerabilities
      to waste, fraud, abuse, and mismanagement. This effort,
      which was supported by the Senate Committee on
      Governmental Affairs and the House Committee on
      Government Reform and Oversight, brought a
      much-needed focus on problems that were costing the
      government billions of dollars.

      In December 1992, GAO issued a series of reports on the
      fundamental causes of problems in high-risk areas, and in
      a second series in February 1995, it reported on the status
      of efforts to improve those areas. This, GAO’s third series
      of reports, provides the current status of designated
      high-risk areas.

      This report discusses our concerns about the Department
      of Defense’s annual expenditure of billions of dollars to
      acquire new weapon systems. It focuses on continuing
      weaknesses in the way major weapon system
      requirements are determined, planned, budgeted, and
      acquired. The underlying conditions and cultural attitudes
      that help foster these weaknesses have been addressed in
      more detail in our report Weapons Acquisition: A Rare
      Opportunity for Lasting Change (GAO/NSIAD-93-15,
Dec. 1992). This report also focuses on our ongoing
evaluations of the Department’s efforts to address these
long-standing problems.

Copies of this report series are being sent to the
President, the congressional leadership, all other
Members of the Congress, the Director of the Office of
Management and Budget, and the heads of major
departments and agencies.




James F. Hinchman
Acting Comptroller General
of the United States




            Page 2   GAO/HR-97-6 Defense Weapon Systems Acquisition
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Contents



Overview                                                                  6

Background                                                               10

Weapon Systems                                                           13
Acquisition
Problems Persist
Acquisition                                                              26
Reform Initiatives
What Needs to Be                                                         35
Done
Related GAO                                                              38
Products
1997 High-Risk                                                           40
Series




                     Page 4   GAO/HR-97-6 Defense Weapon Systems Acquisition
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Overview



              The national defense budget, measured in
              constant 1997 dollars, declined from a peak
              of $415.8 billion in fiscal year 1985 to
              $269.9 billion in fiscal year 1996—a
              reduction of about 35 percent. Even though a
              large part of the reduction was in funding for
              the development and procurement of new
              and improved weapon systems, the
              Department of Defense (DOD) still spends
              about $79 billion annually to research,
              develop, and acquire weapon systems. While
              DOD’s expenditures have produced many of
              the world’s most capable weapon systems,
              its weapon system acquisition processes
              have often proved costly and inefficient, if
              not wasteful.


The Problem   Despite DOD’s past and current efforts to
              reform the acquisition system, wasteful
              practices still add billions of dollars to
              defense acquisition costs. Many new weapon
              systems cost more and do less than
              anticipated, and schedules are often delayed.
              Moreover, the need for some of these costly
              weapons, particularly since the collapse of
              the Soviet Union, is questionable. DOD has
              perpetuated its history of establishing
              questionable requirements for weapon
              systems; projecting unrealistic cost,
              schedule, and performance estimates; and


              Page 6   GAO/HR-97-6 Defense Weapon Systems Acquisition
           Overview




           beginning production before adequate
           testing has been completed. These problems
           have been discussed in more detail in our
           cross-cutting reports entitled Weapons
           Acquisition: A Rare Opportunity for Lasting
           Change (GAO/NSIAD-93-15, Dec. 1992) and
           Weapons Acquisition: Low-Rate Initial
           Production Used to Buy Weapon Systems
           Prematurely (GAO/NSIAD-95-18, Nov. 21,
           1994) as well as in our reports on individual
           programs (see Related GAO Products at the
           end of this report).


Progress   DOD’s leadership has emphasized its
           commitment to reforming its weapon system
           acquisition processes. DOD’s goal is to
           become the world’s smartest buyer,
           continuously reinventing and improving the
           acquisition process while taking maximum
           advantage of emerging technologies that
           enable business process reengineering. In
           the area of “what to buy,” DOD is focusing its
           efforts on (1) greater reliance on commercial
           products and processes and (2) more timely
           infusion of new technology into new or
           existing systems. In the area of “how to buy,”
           DOD’s efforts have been directed at, among
           other things, increasing teamwork and
           cooperation, encouraging risk management
           rather than risk avoidance, reducing


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                  Overview




                  reporting requirements, and reducing
                  nonvalue-added layers of review and
                  oversight. In addition, the Congress has
                  passed a series of legislative reforms for the
                  system acquisition process.


Outlook for the   The ultimate effectiveness of DOD’s current
Future            initiatives to reduce the costs and improve
                  the outcomes of its acquisition processes
                  cannot yet be fully assessed because they
                  are in various stages of implementation. DOD
                  is pursuing a number of positive initiatives
                  that should, over time, improve the
                  cost-effectiveness of its acquisition
                  processes and is reporting some success in
                  terms of cost savings or avoidance and other
                  benefits. However, it may take several years
                  of continued implementation before tangible
                  results can be documented and sustained.

                  While these initiatives are commendable,
                  DOD continues to (1) generate and support
                  acquisitions of new weapon systems that will
                  not satisfy the most critical weapon
                  requirements at minimal cost and (2) commit
                  more procurement funds to programs than
                  can reasonably be expected to be available
                  in future defense budgets. The fundamental
                  reforms needed to correct these problems
                  have not yet been formulated, much less


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Overview




instituted, by DOD and the Congress.
However, the likelihood of continuing fiscal
constraints and reduced national security
threats should provide additional incentives
for real progress in changing the structure
and dominant culture of DOD’s system
acquisition processes.




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Background



                 In our previous high-risk reports, we
                 reported that, while DOD continues to
                 produce many of the world’s most
                 technologically advanced and capable
                 weapon systems, the processes through
                 which weapon requirements are determined
                 and systems are acquired have often proved
                 costly and inefficient, if not wasteful. DOD
                 frequently has experienced cost overruns,
                 schedule delays, and performance shortfalls
                 in its weapon acquisition programs. Too
                 often, we found that DOD

             •   acquired systems that were not the most
                 cost-effective solution for mission needs;
             •   developed unrealistic cost, schedule, and
                 performance estimates that led to program
                 instability and cost increases;
             •   developed and supported programs that
                 could not be executed as planned with
                 available funds;
             •   established program acquisition strategies
                 that were unreasonable or risky at best; and
             •   committed too much money before a
                 program proved to be suitable for
                 production and fielding.

                 We reported that the underlying cause of
                 these persistent and fundamental problems
                 was a prevailing culture dependent on
                 continually generating and supporting the


                 Page 10   GAO/HR-97-6 Defense Weapon Systems Acquisition
Background




acquisition of new weapons. Inherent in this
culture are powerful incentives and interests
that influence and motivate the behaviors of
participants in the process—including
components of DOD, the Congress, and
industry. It is not unusual for these interests
to override the need to satisfy the most
critical weapon requirements at minimal
cost.

We reported that cultural changes were
needed to (1) control interservice
competition and self-interest that have led to
the acquisition of unnecessary, overlapping,
or duplicative capabilities; (2) discourage the
overselling of programs through optimistic
cost, schedule, and performance estimates
and the use of high-risk acquisition
strategies; and (3) limit the incorporation of
immature technologies into new weapons to
reduce the risk of technological failures.

Our earlier high-risk reports noted that a
number of acquisition reforms either had
been or were being implemented in response
to (1) studies like those done by the Packard
Commission and other blue ribbon panels,
(2) the diminished Soviet threat, and
(3) budget reductions. Nevertheless, our
reports have noted that parochial interests
and incentives were delaying or preventing


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Background




the timely rationalization of defense weapon
system requirements and acquisitions in the
post-Soviet threat era. Many weapon systems
were being developed and produced, despite
the fact that the Soviet threat upon which
they were justified had diminished. We also
noted that defense cutbacks would require
DOD to rely more on commercial products
and practices to reduce costs and ensure an
adequate defense industrial capability.




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Weapon Systems Acquisition Problems
Persist


                   Although DOD has begun many acquisition
                   reform initiatives since our previous
                   high-risk reports (see subsequent
                   discussion), pervasive problems persist
                   regarding (1) questionable requirements and
                   solutions that are not the most cost-effective
                   available; (2) unrealistic cost, schedule, and
                   performance estimates; (3) questionable
                   program affordability; and (4) the use of
                   high-risk acquisition strategies.


Questionable       DOD  acquisition policies require analyses of
Requirements and   missions, mission needs, costs, and weapon
Solutions That     system alternatives to ensure that
Are Not the Most   cost-effective solutions are matched to valid
Cost-Effective     needs before substantial resources are
                   committed to a particular program. An
Available
                   important objective is to minimize overlap
                   and duplication among weapon systems that
                   perform the same or similar missions. This
                   objective is of particular concern when more
                   than one service participates in similar
                   mission areas. We have found that while the
                   services conduct considerable analyses in
                   justifying major acquisitions, these analyses
                   can be narrowly focused, without full
                   consideration of alternative solutions,
                   including the joint acquisition of systems
                   with the other services.



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    Weapon Systems Acquisition Problems
    Persist




    In addition, because DOD does not routinely
    develop information on joint mission needs
    and aggregate capabilities, it has little
    assurance that decisions to buy, modify, or
    retire systems are sound. Based on our
    reviews of air power mission areas, for
    example, some planned modernization
    programs will add only marginally to already
    formidable capabilities, while the need for
    others has been lessened by the changed
    security environment. For some programs,
    there are viable, less costly alternatives.

    We continue to uncover examples of
    questionable mission needs and of systems
    that are not the most cost-effective solution
    to a mission need. For example:

•   The operational deficiencies in the
    F/A-18C/D aircraft cited by DOD to justify
    buying the F/A-18E/F either have not
    materialized as projected or can be
    corrected with nonstructural changes to the
    C/D. Furthermore, the E/F’s operational
    capabilities will be only marginally improved
    over the C/D model but will cost an
    additional $17 billion. Continuing to procure
    and upgrade the F/A-18C/D in the interim
    would be more cost-effective.
•   Although the Navy plans to remanufacture
    72 of the AV-8B day attack model aircraft


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    Persist




    and convert them to aircraft with night
    attack and radar capabilities, procuring new
    AV-8B radar attack aircraft would be more
    cost-effective.
•   The Navy continues to develop and plans to
    produce a $249 million upgrade to the
    propulsion system of the MK-48 torpedo.
    However, the need for the upgrade is
    questionable because it is based on faulty
    assumptions regarding the launching
    submarine’s reduced vulnerability to enemy
    attack.
•   The Joint Tactical Unmanned Aerial Vehicle
    Projects Office continued to proceed with
    the acquisition of the $340 million Hunter
    shipboard variant, even though all Navy fleet
    commanders stated that they did not want
    the system on Navy ships. Until the program
    was terminated by DOD, the Navy was at risk
    of investing in a system that would not be
    used.
•   The Army and the Navy continue to pursue
    combat identification systems—at a cost of
    more than $4 billion—based on different
    technologies without fully considering how
    and at what cost these systems would be
    integrated.
•   After more than 4 years of advanced
    development, some Navy officials
    questioned whether the intercooled
    recuperated gas turbine engine would


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                        Weapon Systems Acquisition Problems
                        Persist




                        provide a viable and timely return on the
                        investment of over $400 million needed to
                        develop it. However, the Navy continues to
                        develop the engine as a preplanned product
                        improvement for its destroyers.
                    •   The Longbow Hellfire missile procurement
                        plan is inadequate because about 3,200
                        unrequired missiles are to be procured for
                        $540 million to $750 million. Also, a
                        significant number of missiles will be
                        procured and lose up to one-half of their
                        shelf-life before Longbow Apache aircraft
                        are available.
                    •   The Army overstated expected benefits and
                        understated technical risks associated with
                        major systems included in its helicopter
                        modernization strategy. Some users were
                        concerned that the strategy could result in
                        an inappropriate mix and quantity of
                        helicopters and therefore adversely affect
                        their operational effectiveness. Also, DOD and
                        Army studies did not fully consider
                        alternatives that could accomplish many of
                        the planned roles and missions of the
                        strategy’s centerpiece—the Comanche.


Unrealistic Cost,       In our 1992 high-risk report, we noted that
Schedule, and           the desire of program sponsors to keep cost
Performance             estimates as low as possible and to present
Estimates               attractive milestone schedules had


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    Weapon Systems Acquisition Problems
    Persist




    encouraged the use of unreasonable
    assumptions about the pace and magnitude
    of the technical effort, material costs,
    production rates, savings from competition,
    and other factors. We noted that in DOD’s
    culture, the success of participants’ careers
    is more dependent on moving programs
    through the process than on achieving better
    program outcomes. Accordingly, overselling
    a program works in the sense that programs
    are started, funded, and eventually fielded.
    The fact that a given program costs more
    than estimated, takes longer to field, and
    does not perform as promised is secondary
    to fielding a “new and improved” system.

    We continue to find examples where
    program projections appear to be overly
    optimistic and risks excessive in light of the
    current budget and security environment:

•   The Joint Air-to-Surface Standoff Missile
    Program contains significant schedule and
    cost risks. The plan is to develop and initially
    deploy the Air Force’s most capable
    precision-guided munition in 5 years for no
    more than $700,000 per missile. However,
    the plan does not appear to allow enough
    time to develop and test the complex
    technology needed and to integrate the
    missile into the appropriate aircraft.


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    Weapon Systems Acquisition Problems
    Persist




•   DOD’s recurring flyaway cost estimate of
    $44 million per unit (in fiscal year 1996
    dollars) for the F/A-18E/F is understated.
    This estimate is based on buying a total of
    1,000 aircraft and producing 72 aircraft per
    year. However, both quantities are
    overstated because the Marines no longer
    plan to buy the F/A-18E/F, and the Congress
    has questioned the affordability of producing
    72 aircraft per year. We have calculated that
    by reducing the number of aircraft to be
    procured and the annual production rate to
    more realistic goals, the E/F unit recurring
    flyaway costs would more likely be
    $53 million (in fiscal year 1996 dollars).

    Also, in our 1995 high-risk report, we stated
    that the quality and credibility of cost
    information available to decisionmakers
    remain a problem. DOD has acknowledged,
    and our financial statement audit work has
    consistently confirmed, significant problems
    in the comprehensiveness and accuracy of
    DOD’s reported cost information. Most
    recently, in March 1996, we reported that the
    Navy’s financial reports excluded billions of
    dollars invested in building aircraft and
    missiles and modernizing weapon systems.
    We also found that the Navy’s reported costs
    for ships under construction did not include



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                Weapon Systems Acquisition Problems
                Persist




                all relevant costs, such as those for outfitting
                and post delivery.


Questionable    We reported in 1992 that DOD’s Future Years
Program         Defense Program (FYDP) could not be
Affordability   executed with available funds. We concluded
                that DOD’s tendency to overestimate the
                funding that would be available in the future,
                coupled with the tendency to underestimate
                program costs, had resulted in the advent of
                more programs than could be executed as
                planned. When DOD finally faced funding
                reality, it often reduced, delayed, and/or
                stretched out programs—substantially
                increasing the cost of each system. In
                addition to the higher unit costs caused by
                program stretchouts, another downside to
                the affordability issue is DOD’s potential
                inability to address valid requirements when
                available resources are consumed on
                questionable priorities. For example, the
                Army chose to use most of its available
                resources to procure Comanche helicopters
                and upgrade Apache helicopters and
                deferred or canceled the funding of other
                Army helicopter modernization programs,
                such as medical evacuation and cargo
                helicopters, that the Army believes are
                important to the performance of its aviation
                missions.


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    Weapon Systems Acquisition Problems
    Persist




    Again, in our 1995 high-risk report, we noted
    that the imbalance between resources and
    programs in DOD’s 1995-99 FYDP could exceed
    $150 billion. The spending plan contained
    billions of dollars in understated costs and
    overstated savings and reductions, such as
    (1) less costs and more savings than
    expected from base closures, (2) less costs
    than expected for environmental
    remediation and peacekeeping operations,
    (3) more savings than expected from the
    Defense Management Report Initiatives,
    (4) understated cost growth in weapon
    system acquisitions, and (5) understated
    inflation estimates. In addition, DOD used
    undistributed future adjustments that
    amounted to unspecified overprogramming.

    We continue to find numerous problems
    with DOD’s budgeting and spending practices
    for weapon system acquisitions. For
    example:

•   In analyzing the infrastructure-related
    program elements of the FYDP, we found no
    significant net infrastructure savings to DOD
    between fiscal year 1996 and 2001.
    Nonetheless, DOD is pursuing a number of
    major system acquisition programs on the
    assumption that such savings will
    materialize.


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                  Weapon Systems Acquisition Problems
                  Persist




              •   In June 1996, we testified that DOD’s
                  ambitious aircraft modernization program
                  did not appear to be affordable, given
                  reasonable expectations of available
                  funding. We pointed out that the proposed
                  level of aircraft investments was more
                  consistent with the former Cold War era
                  than with the current security environment.


High-Risk         We reported in 1992 and 1995 that high-risk
Acquisition       acquisition strategies were being based on
Strategies        the need to meet the threat and to reduce
                  acquisition costs. We noted that one
                  common characteristic of high-risk
                  strategies is the acquisition of weapons
                  based on optimistic assumptions about the
                  maturity and availability of enabling
                  technologies. We recommended that
                  research and technology efforts be
                  disassociated from weapon programs until
                  they reach the demonstration and validation
                  phase (now called the program definition
                  and risk-reduction phase).

                  We also reported in 1992 and 1995 on the
                  high-risk practice of beginning production of
                  a weapon system before development,
                  testing, and evaluation are complete. When a
                  highly concurrent strategy is used, critical
                  decisions are made without adequate


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    Weapon Systems Acquisition Problems
    Persist




    information about a weapon’s demonstrated
    operational effectiveness, reliability, logistic
    supportability, and readiness for production.
    Also, rushing into production before critical
    tests have been successfully completed has
    resulted in the purchase of systems that do
    not perform as intended. These premature
    purchases have resulted in lower-than-
    expected availability for operations and have
    quite often led to expensive modifications. In
    late 1994, we reported that DOD’s policy to
    begin low-rate initial production of weapons
    without doing any operational testing and
    evaluation had resulted in the procurement
    of substantial quantities of unsatisfactory
    weapons. These weapons required costly
    modifications, and in some cases,
    substandard systems were deployed to
    combat forces. We noted that in today’s
    national security environment, proceeding
    with low-rate production without
    demonstrating that the system will work as
    intended should rarely be necessary.
    Nevertheless, DOD still begins production of
    many major and nonmajor weapons without
    first ensuring that the systems will meet
    critical performance requirements, as
    indicated in the following examples:

•   The F-22 aircraft program involves
    considerable technical risk because it


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    Persist




    embodies important technological advances
    that are critical to its operational success.
    Nevertheless, DOD plans to begin producing
    the F-22 well before beginning initial
    operational testing and to commit to the
    production of 80 aircraft at a cost of over
    $12 billion before initial operational testing
    is complete.
•   Under the Army’s restructured Comanche
    program, production decisions will be made
    before operational testing starts, thereby
    continuing the high degree of risk associated
    with concurrent development and
    production. However, the extension of the
    development phase and the acquisition of six
    additional aircraft under the restructured
    program provide the Army with the
    opportunity to conduct operational testing
    before committing funds to any production.
•   The Army’s strategy to accelerate production
    of the Joint Stars Ground Stations
    unnecessarily risks millions of dollars on an
    unproven system. Because earlier versions
    of the ground station have performed poorly
    in developmental tests and have not
    completed an operational test, we believe
    that buying more systems than are needed
    for operational testing significantly raises
    the risk of procuring a costly and ineffective
    system.



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    Persist




•   Despite numerous performance problems
    that surfaced in developmental tests of the
    ALR-67(V)3 radar warning receiver, the
    adverse consequences from the premature
    procurement of earlier versions of the
    ALR-67, and the production of sufficient test
    articles for all operational testing, the Navy
    plans to begin low-rate production before
    determining the system’s operational
    effectiveness and suitability through
    completion of operational testing.
•   The Army plans to commit funds for
    producing 40 early prototype interceptors of
    the Theater High Altitude Area Defense
    System well before testing provides
    assurance of the system’s capabilities, even
    though the program has already experienced
    significant cost, schedule, and technical
    performance problems. Also, the Army does
    not need these interceptors for testing but
    has plans for deploying them as needed.
•   The Joint Tactical Unmanned Aerial Vehicle
    Project Office plans to start low-rate
    production of the Maneuver System before
    its performance is demonstrated in
    operational testing. In addition, the units to
    be produced are not intended for operational
    testing, one of the key rationales for starting
    initial production.
•   The Air Force continued to buy the ALQ-135
    Band 3 jammer despite its deficient


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Persist




performance, resulting in the premature
deployment of systems with limited
capability to protect the F-15. Although
developmental tests showed the Band 3 to
have serious performance flaws, the Air
Force procured most of the total program
quantity without demonstrating acceptable
operational performance.




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Acquisition Reform Initiatives



                The reduced Soviet threat and declining
                defense budgets have created both an
                opportunity and a challenge for DOD to
                reform its weapon system acquisition
                processes. In our 1992 high-risk report, the
                need for and the nature of acquisition
                reforms centered on improving weapon
                requirements determination and acquisition
                organizations and processes. In our 1995
                report, we state that while these reforms
                remain critical, the impact of reduced
                defense procurement on the defense
                industry, together with the budget-driven
                need to reduce procurement costs, elevated
                the importance of reform efforts designed to
                broaden DOD’s industrial base by increasing
                reliance on commercial products and
                processes. The Secretary of Defense stated
                that, to meet the new national security
                challenges, DOD must

            •   maintain its technological superiority and a
                strong national industrial base by relying
                more on commercial state-of-the-art
                products and technology, assisting
                companies in the conversion from
                defense-unique to dual-use production,
                aiding in the transfer of military technology
                to the commercial sector, and preserving
                defense-unique core capabilities and



                Page 26   GAO/HR-97-6 Defense Weapon Systems Acquisition
                       Acquisition Reform Initiatives




                   •   reduce acquisition costs (including overhead
                       costs) through the adoption of business
                       processes characteristic of world-class
                       buyers.

                       DOD continues to implement a variety of
                       acquisition reform initiatives and is reporting
                       some success in terms of cost savings or
                       avoidance and other benefits. We are now
                       evaluating the status of several of these
                       initiatives. However, it is too soon to fully
                       assess the extent to which these changes are
                       reducing costs and improving outcomes of
                       current defense acquisition programs.


Ongoing            DOD’s goal is to become the world’s smartest
Acquisition        buyer, continuously reinventing and
Reform Initiatives improving its acquisition processes while
                       taking maximum advantage of emerging
                       technologies that enable business process
                       reengineering. Two of the areas that DOD is
                       emphasizing are the requirements
                       determination and resource allocation
                       processes—“what to buy”—and the
                       acquisition process—“how to buy.”

                       In terms of “what to buy,” DOD’s efforts have
                       focused on (1) greater reliance on
                       commercial products and processes and



                       Page 27   GAO/HR-97-6 Defense Weapon Systems Acquisition
    Acquisition Reform Initiatives




    (2) more timely infusion of new technology
    into new or existing systems. For example:

•   On June 29, 1994, the Secretary of Defense
    signed a directive entitled “Specifications
    and Standards—A New Way of Doing
    Business.” As a result, (1) requirements in
    solicitations are being described in
    performance terms; (2) if military or federal
    specifications or standards are necessary,
    waivers must first be obtained; and
    (3) solicitations for new acquisitions that
    cite military or federal specifications or
    standards typically also contain language
    encouraging offerors to propose alternatives.
    DOD has made significant progress in
    disposing of the huge inventory of military
    specifications and standards through
    cancellation, consolidation, conversion to a
    guidance handbook, or replacement with a
    performance specification or
    nongovernment standard.
•   The use of cooperative agreements and other
    transactions appears to provide some
    opportunities to remove barriers between
    the defense and civilian industrial bases, in
    particular by attracting firms that
    traditionally did not perform research for
    DOD.
•   The Advanced Concept Technology
    Demonstration Program emphasizes the


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    Acquisition Reform Initiatives




    ability to reduce operational risk early in the
    acquisition process, to compress the
    acquisition cycle time, and to stimulate
    innovation. This program allows
    technologists and operational users to work
    together as a team to assess the usefulness
    of mature technologies. It also gives
    experienced military commanders an
    opportunity to develop the operational
    concepts that address current and future
    military needs prior to major acquisition
    decisions and large dollar commitments.
•   To assist the Joint Requirements Oversight
    Council in advising the Chairman of the Joint
    Chiefs of Staff on joint war-fighting
    capabilities, the joint warfare capability
    assessment process was established in 1994.
    If key acquisition decisions are thoroughly
    addressed at such higher organizational
    levels, competing demands, available
    resources, and the needs of theater
    commanders could be more fairly assessed
    before a specific program is started.
    However, based on our recent review of
    DOD’s combat air power capabilities and
    programs, the joint warfare capability
    assessment process could be improved by
    conducting more comprehensive
    assessments of joint requirements and
    existing capabilities. The broader
    assessments would help the Secretary of


    Page 29   GAO/HR-97-6 Defense Weapon Systems Acquisition
    Acquisition Reform Initiatives




    Defense make the difficult tradeoff decisions
    across the services that may be required.

    In considering “how to buy,” DOD has focused
    on increasing teamwork and cooperation,
    encouraging risk management rather than
    risk avoidance, reducing reporting
    requirements, and reducing layers of review
    and oversight that add no value. For
    example:

•   DOD has designated a number of participants
    for the Defense Acquisition Pilot Program.
    The participants are given regulatory relief
    from certain statutes, regulations, and
    internal DOD acquisition directives. Savings
    are expected from, among other things, the
    reduction of intrusive government oversight
    in contractors’ plants and reduced
    documentation requirements.
•   As a result of the recommendations from an
    internal DOD team that reviewed the
    oversight and review process for major
    systems, the Secretary of Defense directed
    the use of integrated product teams. The
    purpose of the teams, which include all the
    acquisition process stakeholders, is to build
    more successful acquisition programs by
    developing executable and affordable
    program strategies and plans and to identify
    and resolve problems early. This directive


    Page 30   GAO/HR-97-6 Defense Weapon Systems Acquisition
    Acquisition Reform Initiatives




    shows a fundamental shift in practice from
    conducting after-the-fact oversight to early
    problem identification and correction by
    program stakeholders. The use of integrated
    product teams is accompanied by the
    elimination of a one-size-fits-all approach to
    decision documentation.
•   In March 1996, DOD issued an update to its
    regulations governing the acquisition of
    major weapon systems. Among other things,
    this update (1) incorporated new laws and
    policies, including the Federal Acquisition
    Streamlining Act; (2) separated mandatory
    policies and procedures from discretionary
    practices; and (3) reduced the sheer volume
    and complexity of the regulations.
•   In its December 1994 report, The DOD
    Regulatory Cost Premium: A Quantitative
    Assessment, the management consulting
    firm of Coopers and Lybrand identified over
    120 regulatory and statutory “cost drivers”
    that increase the price DOD pays for goods
    and services. In response to the study, DOD
    established a working group to track myriad
    reforms to reduce the cost of managing and
    overseeing DOD’s contracts. Although DOD
    expects substantial savings from reforming
    DOD’s management and oversight
    requirements, we found that the savings are
    likely to be significantly less than expected.



    Page 31   GAO/HR-97-6 Defense Weapon Systems Acquisition
    Acquisition Reform Initiatives




•   In the past 2 years, DOD has developed
    policies and procedures that reflect a
    broader approach to ensuring that products
    perform the way they are supposed to. The
    approach is based on teaming with the
    contractor to control processes while
    reducing reliance on inspection. We
    concluded that the results of this approach
    could be enhanced if DOD implemented some
    of the advanced quality concepts found in
    the commercial world.

    In addition to DOD’s efforts, the Congress has
    enacted reforms in the Federal Acquisition
    Streamlining Act of 1994 and the
    Clinger-Cohen Act of 1996. Some of the
    reforms involve fostering the development of
    measurable cost, schedule, and performance
    goals and incentives for acquisition
    personnel to reach those goals. Among other
    things, the legislation requires federal
    agencies to (1) establish cost, schedule, and
    performance goals for acquisition programs
    and annually report on their progress in
    meeting those goals; (2) establish personnel
    performance incentives linked to the
    achievement of the goals; and (3) submit
    recommendations for legislation to facilitate
    and enhance the management of acquisition
    programs and the acquisition workforce
    based on performance. We recently reported


    Page 32   GAO/HR-97-6 Defense Weapon Systems Acquisition
Acquisition Reform Initiatives




that DOD had complied with the majority of
the requirements in these areas. However,
DOD has not yet established a personnel
system with enhanced incentives. DOD
reports a number of barriers to establishing
such a system.

DOD is also striving to reduce costs through
an initiative known as “cost as an
independent variable.” Under this initiative,
once the system performance and target cost
are decided (on the basis of cost-
performance tradeoffs), the assumption is
that the acquisition process will make cost
more a constraint and less a variable but
that, nonetheless, the needed effectiveness
and suitability of the system will be assured.
Today, threats are not increasing in
capability at as fast a rate as in the past, and
the DOD acquisition budget is decreasing in
response to this changed national security
environment. Therefore, it is more
appropriate to make cost a stronger driver in
system design. Such an approach is also
more consistent with commercial practices
in new system developments, where market
forces drive the price at which a new system
can be offered. DOD expects this initiative to
provide quality products that fully meet the
warfighter’s needs but allow for substantial
reductions in their costs; more stability for


Page 33   GAO/HR-97-6 Defense Weapon Systems Acquisition
Acquisition Reform Initiatives




each program; shorter program cycle times;
and innovative design, manufacturing,
support, and contracting approaches.




Page 34   GAO/HR-97-6 Defense Weapon Systems Acquisition
What Needs to Be Done



            Success in achieving greater integration of
            DOD and commercial products and practices,
            as with the other acquisition reforms, will
            require DOD to overcome cultural and
            structural barriers. DOD has the ingredients
            for making lasting improvements to its
            weapon system acquisition processes—the
            need, the opportunity, and the leadership.
            Nevertheless, it is too soon to tell how
            successful DOD will be in overcoming cultural
            and structural barriers. In our opinion,
            achieving real and lasting change will require
            DOD’s continued commitment to full and
            effective implementation of acquisition
            reform strategies and initiatives, along with
            congressional support.

            While we support DOD’s reengineering of its
            weapon system acquisition processes, not all
            of the specific reforms are sufficient. For
            example, in 1994, we recommended that DOD
            establish better controls over the start and
            continuation of low-rate initial production.
            DOD agreed to consider our specific
            suggestions when it updated its acquisition
            regulations. However, in the 1996 update of
            those regulations, DOD included no controls
            over low-rate initial production. We believe
            DOD missed an opportunity to reduce the risk
            of prematurely starting production. Also, DOD
            needs to be careful in its zeal to reduce


            Page 35   GAO/HR-97-6 Defense Weapon Systems Acquisition
    What Needs to Be Done




    unnecessary documentation and oversight
    requirements so that it does not, in effect,
    eliminate the functions necessary to ensure
    that acquisition programs are meeting their
    objectives in a cost-effective manner.

    Finally, DOD and the Congress need to take
    much stronger actions to effectively control
    the influence of the acquisition culture,
    particularly as it (1) generates and supports
    the acquisition of new weapon systems that
    do not necessarily satisfy the most critical
    weapon requirements at minimal cost and
    (2) willingly commits more procurement
    funds to programs than can reasonably be
    expected to be available in future defense
    budgets. Although many recommendations
    from a variety of sources have addressed
    these long-standing issues, little or no
    effective action has yet been taken. Some of
    the suggestions that should be given serious
    consideration include

•   planning programs and resources on a joint
    mission basis;
•   examining cost and performance tradeoffs
    among alternatives more rigorously before a
    particular approach is chosen;
•   making the warfighters responsible for
    participating in the selection of weapon
    systems based on joint mission needs and


    Page 36   GAO/HR-97-6 Defense Weapon Systems Acquisition
    What Needs to Be Done




    deciding whether or not a program is
    affordable;
•   linking program decisions in a more durable
    way to DOD’s long-term budget;
•   maintaining continuous competitive
    alternatives to solve mission needs
    throughout the acquisition process;
•   aggressively pursuing high-risk
    (breakthrough) technology before weapon
    system research and development; and
•   conducting programs in an environment of
    stable funding and management.

    These reforms will be difficult to implement,
    but DOD and the Congress must take
    aggressive steps to address a culture that has
    a very strong influence on almost every facet
    of DOD’s weapon system acquisition
    processes.




    Page 37   GAO/HR-97-6 Defense Weapon Systems Acquisition
Related GAO Products



            Acquisition Reform: Implementation of Title
            V of the Federal Acquisition Streamlining Act
            of 1994 (GAO/NSIAD-97-22BR, Oct. 31, 1996).

            Combat Air Power: Joint Mission
            Assessments Needed Before Making
            Program and Budget Decisions
            (GAO/NSIAD-96-177, Sept. 20, 1996).

            Best Practices: Commercial Quality
            Assurance Practices Offer Improvements for
            DOD (GAO/NSIAD-96-162, Aug. 26, 1996).


            Navy Aviation: F/A-18E/F Will Provide
            Marginal Operational Improvement at High
            Cost (GAO/NSIAD-96-98, June 18, 1996).

            Acquisition Reform: Efforts to Reduce the
            Cost to Manage and Oversee DOD Contracts
            (GAO/NSIAD-96-106, Apr. 18, 1996).

            Defense Infrastructure: Budget Estimates for
            1996-2001 Offer Little Savings for
            Modernization (GAO/NSIAD-96-131, Apr. 4, 1996).

            Comanche Helicopter: Testing Needs to Be
            Completed Prior to Production Decisions
            (GAO/NSIAD-95-112, May 18, 1995).




            Page 38   GAO/HR-97-6 Defense Weapon Systems Acquisition
Related GAO Products




Tactical Aircraft: Concurrency in
Development and Production of F-22
Aircraft Should Be Reduced (GAO/NSIAD-95-59,
Apr. 19, 1995).

High-Risk Series: Defense Weapon Systems
Acquisition (GAO/HR-95-4, Feb. 1995).

Electronic Warfare: Most Air Force ALQ-135
Jammers Procured Without Operational
Testing (GAO/NSIAD-95-47, Nov. 22, 1994).




Page 39   GAO/HR-97-6 Defense Weapon Systems Acquisition
1997 High-Risk Series



             An Overview (GAO/HR-97-1)

             Quick Reference Guide (GAO/HR-97-2)

             Defense Financial Management (GAO/HR-97-3)

             Defense Contract Management (GAO/HR-97-4)

             Defense Inventory Management (GAO/HR-97-5)

             Defense Weapon Systems Acquisition
             (GAO/HR-97-6)

             Defense Infrastructure (GAO/HR-97-7)

             IRS Management (GAO/HR-97-8)

             Information Management and Technology
             (GAO/HR-97-9)

             Medicare (GAO/HR-97-10)

             Student Financial Aid (GAO/HR-97-11)

             Department of Housing and Urban
             Development (GAO/HR-97-12)

             Department of Energy Contract Management
             (GAO/HR-97-13)




             Page 40   GAO/HR-97-6 Defense Weapon Systems Acquisition
1997 High-Risk Series




Superfund Program Management
(GAO/HR-97-14)




The entire series of 14 high-risk reports
can be ordered using the order number
GAO/HR-97-20SET.




Page 41   GAO/HR-97-6 Defense Weapon Systems Acquisition
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