Weapons Acquisition: Better Use of Limited DOD Acquisition Funding Would Reduce Costs

Published by the Government Accountability Office on 1997-02-13.

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

                  United States General Accounting Office

GAO               Report to the Secretary of Defense

February 1997
                  Better Use of Limited
                  DOD Acquisition
                  Funding Would Reduce

             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division


             February 13, 1997

             The Honorable William S. Cohen
             The Secretary of Defense

             Dear Mr. Secretary:

             In response to congressional concerns about the way that the Department
             of Defense (DOD) buys weapons, we reviewed (1) DOD’s practice of
             reducing the annual production of weapons below planned optimum rates
             during full-rate production, (2) the reasons for this practice, and (3) the
             effect of this practice on the costs and availability of weapons. In addition,
             we looked into the benefits of changing DOD’s current practice.

             The fiscal year 1997 DOD procurement appropriation is $43.8 billion, a
Background   reduction of over 67 percent from the $134.3 billion (in constant fiscal year
             1997 dollars) appropriated in 1985. Many weapon acquisitions have been
             affected by this decline in the procurement budget. DOD’s primary response
             to the reduced budget has been to reduce annual procurement quantities
             of weapons in full-rate production and extend their production schedules.

             DOD buys new weapons in two phases: low-rate initial production (LRIP)
             and full-rate production. When in LRIP, according to 10 U.S.C. 2400, DOD is
             to buy minimum quantities of a new weapon. This legislation resulted from
             concern in the Congress about the large quantities of weapons units
             bought before adequate testing. The purpose of LRIP is to (1) provide
             weapons for operational test and evaluation, (2) establish an initial
             production base for the weapon, and (3) permit an orderly increase in
             production before full-rate production begins. Operational test and
             evaluation is key to ensuring that a weapon’s capabilities operate as
             designed before full-rate production begins. At this time, field tests are
             done to demonstrate the weapon’s effectiveness and suitability for military
             use. After the weapon’s design has stabilized and the weapon’s capabilities
             are proven, the services enter full-rate production to begin buying proven
             weapons in economic quantities. In practice, DOD views low-rate
             production as any production prior to completion of initial operational
             tests and full-rate production as the production that follows these tests,
             with the terms low rate and full rate having little or no relevance to the
             annual quantity bought.

             Page 1                                       GAO/NSIAD-97-23 Weapons Acquisition

                   We reviewed 6 weapons in LRIP and 22 weapons in full-rate production.
                   (See app. I for a list of the weapons.) The 22 weapons in full-rate
                   production represent those that in fiscal year 1996 had substantial ongoing
                   production lines. The six low-rate production weapons were ones in
                   production in fiscal year 1996 with substantial planned follow-on full-rate
                   production quantities. For the six weapons in low-rate production, we
                   looked for increases in production rates before operational tests were
                   completed and decreases in the planned future full production rates. For
                   the 22 weapons in full-rate production, we compared DOD’s planned
                   optimal production rates, costs, and schedules to that of actual full-rate
                   production through fiscal year 1996 (see app. II).

                   DOD  has inappropriately placed a high priority on buying large numbers of
Results in Brief   untested weapons during LRIP to ensure commitment to new programs and
                   thus has had to cut by more than half its planned full production rates for
                   many weapons that have already been tested. This practice is wasteful
                   because DOD must often modify, at high cost, the large numbers of
                   untested weapons it has bought before they are usable and must lower
                   annual buys of tested, proven weapons; stretching out full-rate production
                   for years due to a lack of funds. We have repeatedly reported on DOD’s
                   practice of procuring substantial inventories of unsatisfactory weapons
                   requiring costly modifications to achieve satisfactory performance and, in
                   some cases, deployment of substandard weapons to combat forces. As
                   examples, the Air Force’s C-17 airlift aircraft, the Navy’s T45A trainer
                   aircraft, and the Army’s Family of Medium Tactical Vehicles encountered
                   problems during test and evaluation that required major changes after
                   significant quantities were bought during low-rate production.

                   We found the practice of reducing planned full production rates to be
                   widespread. Primarily because of funding limitations, DOD has reduced the
                   annual full-rate production for 17 of the 22 proven weapons reviewed,
                   stretching out the completion of the weapons’ production an average of
                   8 years longer than planned. According to DOD’s records, if these weapons
                   were produced at their originally planned rates and respective cost
                   estimates, the quantities produced as of the end of fiscal year 1996 would
                   have cost nearly $10 billion less. At the same time, DOD is funding
                   increased annual quantities of weapons in low-rate production that often
                   are in excess of what is needed to perform operational tests and establish
                   the production base.

                   Page 2                                     GAO/NSIAD-97-23 Weapons Acquisition

                          If DOD bought untested weapons during LRIP at minimum rates, more funds
                          would be available to buy other proven weapons in full-rate production at
                          more efficient rates and at lower costs. Also, this would reduce costly
                          modifications to fix substandard weapons bought in low-rate production
                          and allow full-rate production of weapons with demonstrated performance
                          to be completed and deployed to combat forces earlier.

                          It is not uncommon for DOD to reduce the annual production quantities of
DOD Often Decreases       proven weapons, stretching out full-rate production schedules for years.
Production Rates of       For 17 of the 22 proven weapons we reviewed, the actual production rates
Proven Weapons            were 57 percent lower than originally planned. Decreased rates vary from
                          10 percent for the E-2C Hawkeye to 88 percent for the Standard missile
                          system. For 12 of these weapons with reduced rates during full-rate
                          production, program officials cited insufficient funding as a contributing
                          reason for lower rates, and therefore stretching out production. As a result
                          of reduced rates, production of the 17 weapons will take an average of
                          over 8 years, or 170 percent, longer to complete than originally planned.
                          The number of years the 17 weapons’ production schedules have been
                          stretched out ranges from 1 year for the Avenger to 43 years for the Black
                          Hawk helicopter based on current production rates. (See app. III for the
                          reduced production rates on each of these weapons.) Examples of proven
                          weapons with reduced annual production rates follow:

                      •   At the extreme for slowed production is the Army’s Black Hawk
                          helicopter. If the Army continues to buy the Black Hawk at the current
                          rate, full-rate production will take almost 54 years to complete, about
                          43 years longer than originally planned.
                      •   The Navy’s production of the Tomahawk missile was to be completed in
                          9 years or by 1992, but instead it will take 15 years or until 1998, a
                          67-percent schedule increase. Originally, the Navy’s planned procurement
                          rate was 600 Tomahawks annually; instead, it has averaged 276 missiles a
                          year, a decrease of over 50 percent from the planned production rate.

                          Because of their reduced annual production rates and stretched out
Extended Schedules        schedules, the acquisition of the 17 weapons we reviewed in full-rate
Result in Higher          production has cost nearly $10 billion more, through fiscal year 1996, than
Acquisition Costs         the program offices estimated based on their original planned production
                          rates. Since 14 of the 17 weapons will still be in production beyond fiscal
                          year 1996, the total increased cost at completion of these weapons could
                          be significantly more than $10 billion. When the annual production

                          Page 3                                     GAO/NSIAD-97-23 Weapons Acquisition

                         quantity of a weapon is reduced, its unit cost generally increases because
                         fixed costs are spread over a smaller quantity. This was the case for 14 of
                         the 17 weapons we reviewed that had reduced production rates (see
                         app. II).1 For example, the Navy planned to produce 48 T45 training
                         aircraft annually at a unit cost of $8.7 million. Instead, an average of 12
                         T45s has been produced annually since full-rate production began in 1994,
                         at a unit cost of $18.2 million. For the quantity produced in full-rate
                         production through fiscal year 1996, T45 costs have increased from the
                         original estimate by $345 million.

                         When weapon systems are funded at their planned full production rates or
                         higher, the unit cost of the weapon generally decreases, as illustrated in
                         the following examples:

                     •   The Army’s program office increased the quantities of its Global
                         Positioning System (with an original planned annual rate of 14,000) from
                         11,000 to 18,500 during 4 years of full-rate production. As a result, the unit
                         cost of the system decreased from $1,400 to $1,076.
                     •   If annual production were increased, the Army could save up to an
                         estimated $491 million on the remaining 109 Kiowa Warrior helicopters it
                         needs to finish full-rate production. For each of the last 3 years, the
                         program office has procured an average of 16 units a year at a unit cost of
                         $10.22 million.2 According to Kiowa program officials, the most efficient
                         annual production rate of 72 helicopters would reduce unit cost to
                         $5.72 million.

                         The practice of allocating funds during low-rate production to increase
Making Large             annual production quantities before successful completion of initial
Investments in           operational test and evaluation has frequently been wasteful. As we
Untested Weapons         reported in November 1994, the consequences of buying large quantities of
                         untested weapons are increased acquisition costs, the accumulation of
Increases Cost and       unsatisfactory weapons that require costly modifications to meet
Performance Risks        performance requirements and, in some cases, the deployment of
                         substandard weapons to combat forces.3 That report contained
                         12 illustrative examples describing the problems experienced when the

                          The three remaining weapons had lower unit costs for reasons not tied directly to the production rate.
                         If these weapons were procured at their planned rates, additional acquisition cost savings could be
                          This is the unit cost for fiscal year 1995, the last year actual cost data were available on the helicopter.
                         This figure applies only to remanufactured vehicles.
                          Weapons Acquisition: Low-Rate Initial Production Used to Buy Weapon Systems Prematurely
                         (GAO/NSIAD-95-18, Nov. 21, 1994).

                         Page 4                                                        GAO/NSIAD-97-23 Weapons Acquisition

weapons were tested, the major fixes required after significant quantities
were bought and, in many cases, the deployment of substandard weapons
to combat forces. (Those 12 examples are included in appendix IV of this
report.) In one case, before the Army did any operational test and
evaluation, a multiyear production contract was awarded for up to 10,843
trucks. Operational testing was suspended 2 months after it began because
the trucks were found to be unreliable and therefore not operationally
effective. Production continued while the contractor modified the truck
design to correct deficiencies. By the time the trucks passed operational
testing, over 2,000 trucks were produced, the majority of which required
extensive remanufacturing to correct the deficiencies.

Most program offices developed an acquisition strategy for both low-rate
and full-rate production based on optimistic projections of available
funding. As a result, the offices tended to over program the number of
weapons that can be bought with the dollars available in DOD’s spending
plan. As we have previously reported, the use of optimistic planning
assumptions has led to program instability, costly program stretch-outs,
and program terminations.4 Current DOD acquisition guidelines permit
increasingly higher quantities of weapons in low-rate production to
provide for the orderly transition to full-rate production. In addition, DOD’s
acquisition culture encourages this practice to solidify organizational
commitment to keep weapon acquisition programs moving and to protect
them from interruption.5 In this regard, within DOD’s acquisition culture, a
weapon’s acquisition manager’s success depends on getting results, and in
acquisitions, results mean getting the weapon into production and into the

The trend to reduce the full production rates from the original plans
because of limited funds and to produce more quantities than are needed
for testing during low-rate production increases procurement costs. For
example, DOD increased the annual low-rate production of the Army’s
untested Longbow Hellfire Missile in fiscal years 1995, 1996, and 1997 from
0 to 352, and 1,040, respectively; while the Navy reduced full-rate
production of the Standard missile system for those fiscal years from 202,
to 64, and 127, respectively. Between fiscal years 1995 and 1997, low-rate
production funding for the Longbow was increased from $41.2 million to
$249.5 million while the full-rate funding for the Standard missile was
reduced from $240.4 million to $197.5 million. The Navy originally planned

 Future Years Defense Program: Optimistic Estimates Lead to Billions in Overprogramming
(GAO/NSIAD-94-210, July 29, 1994).
 Weapons Acquisition: A Rare Opportunity for Lasting Change (GAO/NSIAD-93-15, Dec. 1992).

Page 5                                                  GAO/NSIAD-97-23 Weapons Acquisition

to produce 2,160 Standard missiles a year during full-rate production over
a period of 4 years. Instead, the Navy has averaged only 266 missiles a year
and at that rate it will take 21 years to complete production, 17 years
longer than planned, and at a cost of $286 million more than estimated at
the originally planned rate.

Many times, the services steadily increased the annual LRIP quantities,
exceeding the number ultimately needed to complete operational tests and
prove out the production line. The increase in annual quantities of
weapons produced during low-rate production resulted in a substantial
reduction of funds available for the production of proven weapons at
planned rates. By minimizing the quantities of weapons procured during
LRIP, DOD can reduce the risk associated with producing untested weapons
and increase the funding available to produce other proven systems in
full-rate production at planned rates, lowering their unit cost.

For eight of the weapons we reviewed, the services’ procurement rates
during LRIP were equal to or more than they were during full-rate
production. For example, the program office for the advanced medium
range air-to-air missile increased the quantities produced during low-rate
production to 900 units annually. However, since 1992, when it completed
operational tests and entered full-rate production, the missile has been
produced at an annual rate of 900 or more only twice. In fact, from fiscal
years 1997 to 2007, the program office plans to procure an average of only
338 units a year. Table 1 shows the remaining seven weapons with
low-rate production quantities equal to or higher than full-rate quantities.

Page 6                                      GAO/NSIAD-97-23 Weapons Acquisition

Table 1: Systems With Low-Rate
Production Equal to or Higher Than                                                                                                Full-rate
Full-Rate Quantities                                                                                                            production
                                                                                                                                quantity in
                                                                           Quantity in last            Quantity in first        fiscal year
                                                                           2 low-rate years            2 full-rate years           1996
                                     Black Hawk                                   92           94            80            96            60
                                     Commander’s tactical                         33           58            51            51             0a
                                     Improved recovery vehicle                    15           24            12            12             0a
                                     JSTARS ground station                        16           20            20            19             0a
                                     Multiple launch rocket                       68           72            76            44             0b
                                     system launcher
                                     Rolling airframe missile                   250           250           180           240            200
                                     T45 trainer aircraft                         12           12            12            12            12
                                      System is still currently in low-rate production. Full-rate quantities shown are current planned
                                     rates occurring beyond fiscal year 1996.
                                         Fiscal year 1995 was the last year with production quantities for this system.

                                     DOD  continues to generate optimistic full-rate production plans that are
                                     rarely achieved. One example where this situation could occur and where
                                     planned increases in low-rate production quantities may be unnecessary is
                                     the Navy’s F/A-18E/F system. The Navy plans to procure 72 F/A-18E/F
                                     aircraft over 3 years during LRIP—12 in 1997, 24 in 1998, and 36 in 1999 and
                                     then procure 72 each year during peak full-rate production years.
                                     However, the Congress has questioned the affordability of this full
                                     production rate and has directed DOD to calculate costs based on estimates
                                     of 18, 24, and 36 aircraft a year.6 In addition, the conferees on the Omnibus
                                     Consolidated Appropriations Act for Fiscal Year 1997 asked for
                                     calculations based on 48 aircraft a year.7 The increased quantities
                                     procured during low-rate production are not necessary to transition to
                                     full-rate production, especially if the number of aircraft procured during
                                     full-rate production drops significantly. Even if the Navy buys the aircraft
                                     at the rate originally planned, production rate increases to reach peak full
                                     rates could occur after the system has been operationally tested, rather
                                     than before. The same optimistic planning is reflected in the Air Force’s
                                     F-22 program. The Air Force plans to contract for F-22 aircraft under four
                                     low-rate buys of 4, 12, 24, and 36 aircraft for a total of 76 aircraft at an

                                      National Defense Authorization Act for Fiscal Year 1997, Public Law 104-201, Section 219.
                                     H.R. Report (Conference) No. 104-863, 104th Congress, 2nd Session (1996) at 897, on Making Omnibus
                                     Consolidated Appropriations for Fiscal Year 1997.

                                     Page 7                                                         GAO/NSIAD-97-23 Weapons Acquisition

                     estimated cost of nearly $11 billion prior to completing initial operational
                     test and evaluation and entering full-rate production at 48 aircraft a year.

                     During LRIP, DOD is supposed to restrict the number of weapons produced
Conclusions          to the minimum quantity necessary to conduct operational testing,
                     establish the initial production base, and allow for an orderly increase into
                     full-rate production. However, because DOD often budgets available
                     funding for unnecessary increases in low-rate production quantities of
                     unproven weapons, it rarely is able to buy proven weapons at originally
                     planned full-rates. When funding is insufficient to produce proven
                     weapons in full-rate production at optimum levels and therefore to
                     complete programs in a timely manner, it is not cost-effective to use
                     limited funds to unnecessarily increase production of untested weapons
                     whose designs are not yet stabilized. This wasteful practice could be
                     minimized by shifting increases in annual production rates from the
                     low-rate production phase to the beginning of full-rate production.

                     We recommend that the Secretary of Defense revise DOD’s weapon
Recommendations      acquisition policies to require that (1) annual quantities of weapons
                     bought during LRIP be limited to the minimum necessary to complete initial
                     operational test and evaluation and prove the production line and (2) rates
                     and quantities not be increased during low-rate production to ease the
                     transition into full-rate production unless DOD clearly establishes that the
                     increase is critical to achieving efficient, realistic, and affordable full
                     production rates and can be accomplished without affecting the efficient
                     production of proven systems.

                     We also recommend that the Secretary of Defense direct the Under
                     Secretary of Defense for Acquisition and Technology and the Under
                     Secretary of Defense (Comptroller and Chief Financial Officer) to submit
                     future budgets that place priority on funding the efficient production of
                     weapons in full-rate production.

                     In commenting on a draft of this report, DOD agreed with the principle that
Agency Comments      premature commitment to LRIP is unwise and that LRIP should not be used
and Our Evaluation   to buy equipment that is known not to work. DOD believes the existing
                     policy as set forth in the requirements of 10 U.S.C. 2400 (enacted in
                     1995) and DOD Directive 5000.2-R (issued in 1996) adequately provides an
                     acquisition structure that allows DOD to focus on minimizing LRIP

                     Page 8                                      GAO/NSIAD-97-23 Weapons Acquisition

quantities, while providing the flexibility to maintain an adequate
industrial base capability (e.g. ramp-up) to meet the interest of national
security. DOD also stated that it makes every effort to fund full-rate
production programs to the maximum extent possible within funding
availability, changing priorities, and program realities.

Concerning our recommendations, DOD commented that (1) its current
acquisition policies fully comply with the intent of the policy proposal to
minimize the quantities produced under LRIP, (2) increasing production
rates (ramping-up) during LRIP allows the contractor to hire and train his
production team and maintain a production workforce while operational
testing is being conducted, and (3) it makes every effort to fund full-rate
production programs but fiscal realities driven by a fluid environment is a
serious challenge that will continue to impact the stability of major
defense acquisition program production rates and quantities.

Although efforts have been made in the last year to reduce the quantities
bought under LRIP, our review indicates that DOD is still buying more than
the minimum quantities needed. By allowing the ramp-up of quantities
under LRIP to hire, train, and maintain a workforce to produce a still
unproven product, funding is diverted from contractors producing proven
products and their workforce by reducing their production rates and

DOD’s comments have not addressed (1) the negative effect of the current
approach on the industrial base, (2) the cost implications, and (3) the
delayed deployment of proven weapons. Cost implications include the
added funding that will be needed to correct the problems in products
produced before operational testing is completed and the increased costs
from stretching out the production run of proven products. Stretched
production schedules can also undermine national security interests by
delaying deployment of needed proven systems to field units.

If the LRIP rate “ramp-up” was delayed until after the completion of
operational test, initial quantities of unproven systems would be reduced
and additional funding would become available to buy the proven systems
at more efficient rates. Although there are many reasons why weapon
quantities and funding for full-rate production should be changed (such as
changes in threats and technology), as long as the existing requirement
remains valid, we believe priority should be given to funding the already
tested, less risky full-rate systems at the most efficient rate possible.

Page 9                                      GAO/NSIAD-97-23 Weapons Acquisition

              DOD’s   comments are presented in their entirety in appendix V.

              To quantify the number of weapons being bought below their planned full
Scope and     production rates, we screened the line items contained in the
Methodology   February 1995 Procurement Programs document. We determined that
              88 percent of the budget for fiscal year 1996 was concentrated into 300 line
              items. We then reviewed the 300 line items, primarily using budget back-up
              books’ documentation, to determine which of those items were being
              bought on an annual repetitive production basis, which is more conducive
              to increased rate production. We narrowed our universe to 83 line items,
              or 80 weapons, by excluding line items that were multiple procurement
              items such as spares, modification programs if the work was being done at
              a depot, advance procurements, commercial products, and items that did
              not have a repetitive annual production profile, such as a single one-time

              As we obtained additional program-specific data on the 80 weapons, we
              determined that an additional 52 weapons should be excluded based on
              the original criteria. Thus, our final universe was 22 weapons in full-rate
              production and 6 weapons in LRIP with a total cost of about $6.5 billion in
              fiscal year 1996 procurement funds. We collected cost and schedule data
              for all 28 weapons through interviews and documents from program
              officials for each weapon, service- and DOD-level acquisition officials, a DOD
              Comptroller office official, and a defense contractor. We did our review
              primarily at the individual program offices responsible for procuring the

              We performed our review from August 1995 through November 1996 in
              accordance with generally accepted government auditing standards.

              This report contains recommendations to you. The head of a federal
              agency is required under 31 U.S.C. 720 to submit a written statement on
              actions taken on our recommendations to the Senate Committee on
              Governmental Affairs and the House Committee on Government Reform
              and Oversight no later than 60 days after the date of the report. A written
              statement must also be submitted to the Senate and House Committees on
              Appropriations with an agency’s first request for appropriations made
              more than 60 days after the date of the report.

              Page 10                                     GAO/NSIAD-97-23 Weapons Acquisition

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

Please contact me at (202) 512-4841 if you or your staff have any questions
concerning this report. Major contributors to this report are listed in
appendix VI.

Sincerely yours,

Louis J. Rodrigues
Director, Defense Acquisitions Issues

Page 11                                    GAO/NSIAD-97-23 Weapons Acquisition

Letter                                                             1

Appendix I                                                        14

Weapon Systems
Reviewed by Location
Appendix II                                                       16

Full-Rate Production
Systems Procured
Below Original
Planned Production
Appendix III                                                      17

Full-Rate Production
Systems Procured
Slower Than
Originally Planned
Appendix IV                                                       18

Excerpt From Prior
GAO Report
Appendix V                                                        20

Comments From the
Department of
Appendix VI                                                       26

Major Contributors to
This Report

                        Page 12   GAO/NSIAD-97-23 Weapons Acquisition

Table   Table 1: Systems With Low-Rate Production Equal to or Higher              7
          Than Full-Rate Quantities


        AGM        air-to-ground missile
        AMRAAM     advanced medium range air-to-air missile
        ATACMS     Army Tactical Missile System
        DOD        Department of Defense
        DOT&E      developmental operational test and evaluation
        FAAD       Forward Area Air Defense
        GBS        Ground Based Sensor
        GPS        Global Positioning System
        GMLS       Guided Missile Launch System
        LRIP       low-rate initial production
        MLRS       Multiple Launch Rocket System
        OT&E       operational test and evaluation
        RAM        rolling airframe missile

        Page 13                                  GAO/NSIAD-97-23 Weapons Acquisition
Appendix I

Weapon Systems Reviewed by Location

Aviation and Troop           Black Hawk
Command, Mo.                 Kiowa Warrior
                             Apache Longbow

Fort Monmouth, N.J.          JSTARS ground stationa
                             Commander’s Tactical Terminala
                             Global Positioning System (GPS) user equipment
                             Single Channel Ground and Airborne Radio System
                             Frequency hopping multiplexor

Redstone Arsenal, Ala.       Avenger
                             Multiple Launch Rocket System (MLRS) launcher
                             Army Tactical Missile System (ATACMS)
                             Stinger modification program
                             Forward Area Air Defense (FAAD)/Ground Based Sensor (GBS)
                             Longbow Hellfire missilea

Eglin Air Force Base, Fla.   Advanced medium range air-to-air missile (AMRAAM)
                             Air-to-ground missile (AGM)-130a
                             Sensor fuzed weapon

Warner Robins Air Force      R-11 fuel truck
Base, Ga.
Tank and Automotive          Improved Recovery Vehiclea
Command, Mich.
Wright-Patterson Air Force   C-17a
Base, Ohio

                             Page 14                                  GAO/NSIAD-97-23 Weapons Acquisition
                    Appendix I
                    Weapon Systems Reviewed by Location

Naval Sea Systems   Standard missile
Command, Va.        Rolling airframe missile (RAM)
                    RAM Guided Missile Launch System (GMLS)

Naval Air Systems   F/A-18C/D
Command, Va.        E-2C Hawkeye
                    T45 training system

Strategic Systems   Trident II missile
Programs, Va.
                        Denotes system in low-rate initial production (LRIP). All others are in full-rate production (FRP).

                    Page 15                                                        GAO/NSIAD-97-23 Weapons Acquisition
Appendix II

Full-Rate Production Systems Procured
Below Original Planned Production Rates

Dollars in millions
                          Annual full production rate                                       Unit flyaway costa
                                           Current           Percent                       Average           Units to       Increased
Army                    Planned            average            below           Planned       to date            dateb      cost to datec
ATACMS Block 1            470.0               190.0              55.2             $0.465     $0.642            1477.0            $261.4
Avenger                   144.0               105.2              26.9              0.674       1.140            721.0              336.0
Black Hawk                165.0                 60.0             63.6              3.685       6.022           1193.0            2,788.0
FAAD GBS                   31.0                 17.5             43.5              2.634       2.300             24.0                    0
Kiowa Warrior             120.0                 36.0             70.0              3.106       5.235            366.0              779.2
MLRS launcher              76.0                 47.5             37.5              7.787       8.143            570.0              202.9
Stinger modifications    2593.0               650.0              74.9              0.006       0.013           1850.0                  13.0
Total                                                                                                                          $4,380.5
Air Force
AMRAAM                   3000.0               484.4              83.9             $0.360     $0.596            4038.0            $953.0
Sensor fuzed weapon      2150.0               500.0              76.7              0.152       0.310            500.0                  79.0
Total                                                                                                                          $1,032.0
E-2C                        4.0                  3.6             10.0            $64.318    $65.229                7.0                 $6.4
F/A-18C/D                  74.8                 55.6             25.7             18.841     24.859             612.0            3,683.0
RAM                       900.0               240.0              73.3              0.137       0.285            620.0                  91.8
RAM GMLS                   12.0                  8.0             33.3              4.900       6.021             29.0                  32.5
Standard missile         2160.0               266.0              87.7              0.486       0.556           4087.0              286.1
T45TS                      48.0                 12.0             75.0              8.652     18.233              36.0              344.9
Tomahawk                  600.0               275.5              54.1              1.808       1.624           3913.0                    0
Trident II missile         72.0                 22.8             68.3             32.426     16.283             343.0                    0
Total                                                                                                                          $4,444.7
Average                                                          56.7
Total cost                                                                                                                     $9,857.2
                                      In constant fiscal year 1996 dollars.
                                      Does not include foreign military sales.
                                    Despite being procured at rates lower than planned, unit costs for the FAAD GBS and
                                  Tomahawk systems decreased as a result of cost-reduction initiatives, which reduced the
                                  production cost. Likewise, the Trident II missile reduced its procurement rate for industrial base
                                  preservation and affordability reasons, yet it still had lower production costs. If these systems
                                  could be produced at their planned rates, unit costs could be even lower.

                                  Page 16                                                    GAO/NSIAD-97-23 Weapons Acquisition
Appendix III

Full-Rate Production Systems Procured
Slower Than Originally Planned

                                        Years to    Years to
                                       complete    complete    Years over
                                        planned      current     planned       Percent
               Army                    schedule    schedule     schedule        longer
               ATACMS Block 1                4.0         6.0          2.0         50.0
               Avenger                       7.0         8.0          1.0         14.3
               Black Hawk                   11.0        53.6         42.6        387.3
               FAAD GBS                      4.0         6.0          2.0         50.0
               Kiowa Warrior                 6.0        15.0          9.0        150.0
               MLRS launcher                 7.5        12.0          4.5         60.0
               Stinger modifications         5.0        11.0          6.0        120.0
               Air Force
               AMRAAM                        3.0        16.0         13.0        433.3
               Sensor fuzed weapon           3.0        10.0          7.0        233.3
               E-2C                          9.0        10.0          1.0         11.1
               F/A-18C/D                     8.0        11.0          3.0         37.5
               RAM                           1.0         4.0          3.0        300.0
               RAM GMLS                      5.1         8.0          2.9         56.9
               Standard missile              4.0        21.0         17.0        425.0
               T45TS                         2.4        10.0          7.6        316.7
               Tomahawk                      9.0        15.0          6.0         66.7
               Trident II missile            7.0        19.0         12.0        171.4
               Average                                                8.2        169.6

               Page 17                              GAO/NSIAD-97-23 Weapons Acquisition
Appendix IV

Excerpt From Prior GAO Report

                                          system         Percent
                              Program     deployed to   procured
System                        category    field           in LRIP   Comments
Air Force C-17 Aircraft       Major       To be               33    The C-17’s reliability is significantly less than
                                          determined                expected, and the system cannot meet current
                                                                    payload/range specifications. Also, while known
                                                                    problems with the wings, flaps, and slats are being
                                                                    fixed, other problems continue to emerge.
                                                                    (GAO/T-NSIAD-94-166, Apr. 19, 1994).
Air Force AN/ALR-56C          Nonmajor    Yes                  8a   Despite the poor operational, test, and evaluation
Radar Warning Receiver                                              (OT&E) results, the Air Force continued full-rate
                                                                    production and had acquired about 750 systems at a
                                                                    cost of over $570 million, as discussed in a classified
                                                                    GAO report.
Air Force AN/ALQ-135          Nonmajor    Yes                100    All 65 systems were produced under LRIP at a cost of
Quick Reaction Capability                                           $256 million, before any OT&E was conducted.
Jammer                                                              Because of performance problems, most of the
                                                                    jammers were placed in storage and only 24 were
                                                                    installed on aircraft. One year later, the 24 jammers
                                                                    were deactivated because of poor performance.
                                                                    (GAO/NSIAD-90-168, July 11, 1990).
Air Force AN/ALQ-135          Nonmajor    Yes                 64b   Through 1993, 331 of the 514 planned units were
Improved Jammer                                                     acquired under LRIP. However, the system has
                                                                    encountered significant software problems, which
                                                                    have delayed completion of development testing by
                                                                    about 2 years. OT&E has not yet started.
Air Force AN/ALQ-131          Nonmajor    Yes                100    After the Air Force bought most of the total quantity of
Block II Jammer                                                     units under LRIP, tests found serious performance
                                                                    problems. As a result, the system was deployed with
                                                                    the receiver/processor inoperative due to a lack of
                                                                    software. Other deficiencies were also present.
                                                                    (GAO/NSIAD-90-168, July 11, 1990).
Air Force AN/USM-464          Nonmajor    Yes                100    Before the Air Force conducted OT&E, 72 test sets
Electronic Warfare Test Set                                         were procured under LRIP at a cost of $272 million.
                                                                    Later testing showed that the equipment would not
                                                                    meet requirements, and the units were put in storage.
Air Force AN/ALQ-184          Nonmajor    Yes                  8c   Developmental, operational, test, and evaluation
Jammer                                                              (DOT&E) recommended that jammers production be
                                                                    stopped because of poor OT&E results. However, the
                                                                    system had already entered and continued full-rate
                                                                    production anyway. We later found that most of the 24
                                                                    jammers deployed to a tactical fighter wing had been
                                                                    placed in storage. (GAO/NSIAD-90-168, July 11, 1990).
Navy F-14D Aircraft           Major       Yes                100    OT&E showed that the F-14D was not sufficiently
                                                                    developed and lacked critical hardware and software
                                                                    capabilities. The program was terminated after 55 units
                                                                    were produced. (GAO/IMTEC-92-21, Apr. 2, 1992).

                                         Page 18                                     GAO/NSIAD-97-23 Weapons Acquisition
                                    Appendix IV
                                    Excerpt From Prior GAO Report

                                        system                Percent
                         Program        deployed to          procured
System                   category       field                  in LRIP       Comments
Navy T-45A Aircraft      Major          Yes                          33      One year into LRIP, OT&E found that the T-45A was
                                                                             not effective in a carrier environment and was not
                                                                             operationally suitable because of safety deficiencies.
                                                                             Subsequent major design changes have included a
                                                                             new engine, new wings, and a modified rudder.
                                                                             (GAO/NSIAD-91-46, Dec. 14, 1990).
Navy Pioneer Unmanned    Nonmajor       Yes                       Not        The Navy procured and deployed Pioneer as a
Aerial Vehicle                                             applicable d      nondevelopmental item and without testing it.
                                                                             Numerous problems ensued, including engine failures,
                                                                             landing difficulties, and a cumbersome recovery
                                                                             system. Many modifications were required to bring
                                                                             Pioneer up to a minimum essential level of
Army Family of Medium    Major          To be                         4e     Before the Army did any OT&E, a multiyear production
Tactical Vehicles                       determined                           contract was awarded for up to 10,843 trucks.
                                                                             Subsequent OT&E was suspended because the
                                                                             vehicles were found to be unreliable and not
                                                                             operationally effective. However, production continues.
                                                                             (GAO/NSIAD-93-232, Aug. 5, 1993).
Army Palletized Load     Major          Yes                          29      OT&E showed the system to be not operationally
System/Family of Heavy                                                       suitable. Despite the need for design modifications to
Tactical Vehicles                                                            correct reliability and maintainability problems, full-rate
                                                                             production was approved.

                                    Source: Weapons Acquisition: Low-Rate Initial Production Used to Buy Weapon Systems
                                    Prematurely (GAO/NSIAD-95-18, Nov. 21, 1994).
                                        Proceeded beyond LRIP before OT&E was conducted.
                                     Because of the quantity already procured in LRIP and the lack of OT&E to date, additional units
                                    are likely to be procured in LRIP.
                                        Proceeded beyond LRIP beyond OT&E was conducted.
                                        Production was not separated into LRIP and full-rate production phases.
                                     At least 3,800 trucks are expected to be produced in LRIP, or about 4 percent of the more than
                                    87,000 units planned to be procured.

                                    Page 19                                                     GAO/NSIAD-97-23 Weapons Acquisition
Appendix V

Comments From the Department of Defense

Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.

See comment 1.

                             Page 20   GAO/NSIAD-97-23 Weapons Acquisition
Appendix V
Comments From the Department of Defense

Page 21                                   GAO/NSIAD-97-23 Weapons Acquisition
            Appendix V
            Comments From the Department of Defense

See p. 8.

            Page 22                                   GAO/NSIAD-97-23 Weapons Acquisition
               Appendix V
               Comments From the Department of Defense

Now on p. 8.

               Page 23                                   GAO/NSIAD-97-23 Weapons Acquisition
Appendix V
Comments From the Department of Defense

Page 24                                   GAO/NSIAD-97-23 Weapons Acquisition
              Appendix V
              Comments From the Department of Defense

              The following is GAO’s comment on the Department of Defense’s letter
              dated December 26, 1996.

              1. Appendix IV provides examples that illustrate how buying large
GAO Comment   quantities of unproven systems during LRIP has been costly. All costs are
              reported in fiscal year 1996 constant dollars unless otherwise indicated.
              We have modified the report to recognize the fact that there may be a
              number of valid reasons for changing the quantities and funding for
              full-rate production, but if the existing requirement is still valid and
              everything else is equal, we believe priority should be given to buying the
              proven systems over the unproven.

              Page 25                                     GAO/NSIAD-97-23 Weapons Acquisition
Appendix VI

Major Contributors to This Report

                        Laura Durland
National Security and   Brenton Kidd
International Affairs   Howard Manning
Division, Washington,   Brian Mullins
                        Nancy Ragsdale
                        Tana Davis
Atlanta Field Office    John Warren

                        Arthur Cobb
Chicago Field Office    Daniel Hauser

(707126)                Page 26          GAO/NSIAD-97-23 Weapons Acquisition
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