oversight

Ballistic Missile Defense: Improvements Needed in Navy Area Acquisition Planning

Published by the Government Accountability Office on 1997-11-14.

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




November 1997
                  BALLISTIC MISSILE
                  DEFENSE
                  Improvements Needed
                  in Navy Area
                  Acquisition Planning




GAO/NSIAD-98-34
             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division

             B-274679

             November 14, 1997

             The Honorable William S. Cohen
             The Secretary of Defense

             Dear Mr. Secretary:

             We reviewed the Navy Area Theater Ballistic Missile Defense program to
             determine whether (1) the program has met its milestones to date and its
             remaining schedule appears realistic and (2) the tests being conducted or
             planned will be adequate to demonstrate the system’s capabilities before
             production begins. We are addressing this report to you at this time
             because the program is now entering the phase during which
             developmental and operational testing is conducted and low-rate initial
             production is to begin.


             The Area program is a sea-based weapon system being developed by the
Background   Ballistic Missile Defense Organization (BMDO) and the Navy to defeat
             theater ballistic missiles. The system is considered a high-priority “core”
             theater missile defense program by BMDO and the Congress. It supports the
             national objective of protecting U.S. and allied deployed forces, population
             centers, and industrial facilities from theater missile attacks.

             The mission of the Navy Area program is to provide a near-term,
             short-range tactical ballistic missile defense capability until ground forces,
             including other ballistic missile defense systems, can be set up. The Navy
             Area system is part of a “family of missile defense systems” that also
             includes the Army’s Patriot PAC-3 system to help defend against
             short-range missiles and the Navy’s Theater-wide and the Army’s Theater
             High Altitude Area Defense systems for defending against long-range
             missiles.

             According to proponents, the advantages of Navy missile defense systems
             over ground-based systems are that Navy ships (1) are likely to be
             relatively close to any areas of potential conflict and (2) do not require
             host nation agreement to be deployed to the area. As a result, the Navy
             systems can be deployed more readily than other systems.

             According to the Navy, its Area program also takes advantage of existing
             infrastructure. It is to be incorporated into existing AEGIS weapon




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systems1 and consists of a modified AEGIS combat system and modified
Navy command and control systems to enable detection, tracking, and
engagement of theater ballistic missiles. Changes needed to give the AEGIS
system ballistic missile defense capabilities primarily involve software
changes and increased computer capability. Modifications are also to be
made to the existing Standard Missile-2, Block IV, and are to include
adding an infrared seeker and a radio-frequency adjunct sensor to enable
the missile to home and fuze on attacking ballistic missiles. This modified
missile is designated as the Standard Missile-2, Block IVA. Modifications
are also to be made to the ship’s vertical launching system. These
modifications are intended to provide AEGIS ships with a theater ballistic
missile defense capability while allowing them to maintain their ability to
conduct anti-air warfare against aircraft and cruise missiles.

To equip 57 AEGIS destroyers and 22 AEGIS cruisers with theater missile
defense capability between fiscal year 1998 and 2011, the Navy plans to
buy 1,500 Standard Missile-2, Block IVAs. The Navy also plans to field a
prototype system—the User Operational Evaluation System
(UOES)—beginning in September 1999. UOES provides for an interim
ballistic missile defense capability and allows for fleet personnel to
evaluate the system. The Navy plans to equip 2 cruisers with a total of
35 UOES missiles available for testing and/or use in a national emergency.

The total cost of the Navy Area program is projected to be $8.98 billion,
including $2.05 billion for development, $4.18 billion for procurement, and
$2.76 billion for operation and support. As of the end of fiscal year 1997,
more than $900 million has been appropriated for system development.
The Department of Defense (DOD) requested about $283 million in fiscal
year 1998—$267.8 million for development and $15.4 million for
production.

Figure 1 shows the concept of the Navy Area program.




1
 The AEGIS weapon system allows the ship to perform search, track, and missile guidance functions
using (1) the SPY-1 radar, which is an advanced, automatic, detection and track, multi-function,
phased-array radar; (2) computer equipment; and (3) advanced software.



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                              B-274679




Figure 1: Navy Area Program




                              Source: U.S. Navy.



                              The Area program has experienced schedule slips totaling about
Results in Brief              14 months due to several reasons, including technical problems in the two
                              flight tests conducted prior to the engineering and manufacturing
                              development phase. Our review indicates that further schedule slips are
                              possible because of the acquisition plan’s highly optimistic schedule for
                              conducting operational tests. Slippages in completing these tests could
                              result in the system remaining in a low-rate production phase longer than
                              currently planned.

                              The Navy plans to begin production of Area program missiles before
                              conducting any operational tests of the system. According to the Navy, it
                              needs to begin low-rate initial production of the missiles in June 2000—
                              5 months before system level developmental and operational tests are



                              Page 3                                GAO/NSIAD-98-34 Navy Area TBMD Program
                            B-274679




                            scheduled to begin—because of the urgent need for the system and to
                            maintain an efficient flow in missile production. In our opinion, two
                            factors raise some questions about the Navy’s rationale for the criticality
                            of initiating low-rate initial production, namely (1) a prototype system
                            capability consisting of two cruisers equipped with UOES missiles will be in
                            service at that time and (2) an earlier version of the Standard missile will
                            still be in production, diminishing the need for low-rate production of the
                            Block IVA missile to avoid a production gap.


                            The Area program entered the engineering and manufacturing
Schedule Slips Have         development phase of the DOD weapon systems acquisition process earlier
Occurred and the            this year, but the activities that had to be accomplished before the
Planned Test Schedule       engineering and manufacturing development phase could begin took about
                            14 months longer than expected. The initial Area program schedule
Is Optimistic               projected that the engineering and manufacturing development phase
                            would begin in December 1995 and that full-rate production would begin
                            in September 1999. Engineering and manufacturing development actually
                            began in February 1997 and the current schedule shows that full-rate
                            production will begin in August 2001. According to program officials, this
                            delay was due to the following reasons:

                        •   The Standard Missile Company—a joint venture between the Raytheon
                            Company and the Hughes Missile Systems Company—took longer than
                            expected to establish, which delayed the Area program in obtaining test
                            missiles.
                        •   A congressional budget cut for fiscal year 1995 and DOD accounting
                            changes slowed the progress of the program.
                        •   Technical problems that occurred in the two flight tests prior to the
                            engineering and manufacturing development phase caused about a
                            6-month delay.2
                        •   Concurrent with the flight test delay, there was also a delay related to the
                            completion of the Standard missile preliminary design, due to additional
                            time being required to complete cost performance tradeoffs.

                            The Area program acquisition plan has an optimistic schedule for
                            conducting operational tests, which could result in the system remaining
                            in a low-rate initial production phase longer than currently planned if the

                            2
                             The delay was due to two test issues. Neither of these test issues was related to the Block IVA missile
                            design. The first was the failure of an electronic component in the booster. The booster was designed
                            as part of the Block IV program and is a nondevelopmental item for Block IVA development. The
                            second test issue resulted from a telemetry problem resulting in range control personnel not being able
                            to receive target data.



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test program experiences serious problems. Between November 2000 and
March 2001, the Navy plans to conduct developmental and operational
tests at the Pacific Missile Range Facility that will involve intercept
attempts with a total of 32 missiles, an average rate of about 8 test firings a
month.

Program officials told us that such a test schedule is not unusual in Navy
testing, which is typically conducted based upon range availability and
ship operational commitments. According to these officials, test programs
for earlier versions of the Standard missile were also compressed. For
example, they indicated that the Block IIIB program conducted
14 operational test intercepts in 3 days and the Block IV program
conducted 7 developmental/operational intercept tests in 2 days. However,
according to DOD officials, these tests were anti-air warfare tests, with
which the Navy has a great deal of experience, and not theater missile
defense tests. Navy test officials agreed that the Area system’s test
schedule is ambitious, but said that it was “doable.” They said that some of
the testing will involve multiple simultaneous engagements, which will use
several missiles in a brief period of time.

Despite the program office’s optimism, some DOD testing and program
analysis officials expressed skepticism that the Navy could complete the
planned test program on schedule. One DOD official said that it was not
realistic for the Navy to maintain this test schedule, citing delays with
other test programs such as tests of the Army’s Patriot PAC-3 system as
well as problems with the Area system’s earlier flight demonstration tests.
An internal DOD analysis noted that DOD “has yet to demonstrate the
feasibility of such an aggressive test schedule for a [theater ballistic
missile defense] program.” According to the analysis, the best
demonstrated program schedule experience to date was about 11 weeks
between successful intercepts of theater ballistic missile targets. Testing
officials agreed that if the test program experiences serious problems, it
will cause schedule delays.




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                                                   B-274679




                                                   The Navy plans to begin low-rate initial production of Area program
Navy Plans to Begin                                missiles in June 2000 before conducting any operational tests of the
Low-Rate Initial                                   system. The combined developmental and operational tests3 scheduled to
Production Before                                  begin in November 2000 are the first fully integrated shipboard system
                                                   tests planned for this program. Figure 2 displays the current testing and
Conducting Realistic                               production schedule.
Testing
Figure 2: Schedule of Navy Area System Operational Testing and Production

                              1997                     1998                          1999                           2000                         2001
  ID    Task Name          Qtr 3   Qtr 4   Qtr 1   Qtr 2   Qtr 3   Qtr 4 Qtr 1   Qtr 2   Qtr 3   Qtr 4   Qtr 1   Qtr 2   Qtr 3   Qtr 4   Qtr 1   Qtr 2   Qtr 3
   1    White Sands
        Developmental
        Test and
        Operational
        Assessment
  2     Low-rate Initial
        Production
        Decision

  3     Developmental
        and Operational
        Testing

  4     Full-Rate
        Production
        Decision




                                                   The Navy indicated that it intends to use the results of the operational
                                                   assessment in the June 2000 decision to begin low-rate production of the
                                                   missiles. However, operational assessments will be based on
                                                   developmental tests conducted by the contractor at White Sands Missile
                                                   Range rather than on the results of realistic field testing. It will not provide
                                                   a comparable quality of information for decisionmakers that can be
                                                   obtained from independent operational tests. For example, according to
                                                   the Area program’s Test and Evaluation Master Plan, “no critical
                                                   operational issues will be resolved” during the White Sands testing.
                                                   According to Navy test officials, critical operational issues can only be
                                                   resolved during tests at sea such as the operational tests to be conducted


                                                   3
                                                    Developmental tests are conducted by program officials with the help of contractors. Operational
                                                   tests are conducted by an independent Navy testing organization, without contractors present, in
                                                   conditions that simulate actual operational conditions.



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    at the Pacific Missile Range Facility between November 2000 and
    March 2001. Tests at White Sands are limited because the system is not
    subjected to conditions found at sea such as salt water and the movement
    of the ship and because they will not use the AEGIS SPY-1 radar.

    According to Navy officials, the program needs to begin low-rate
    production in June 2000—5 months before system level developmental
    and operational tests are scheduled to begin—because of the urgent need
    for the system and to maintain an efficient flow in Standard missile
    production.

    Our review indicated that the following two factors raise some question
    about the criticality that the Navy attributes to initiating low-rate initial
    production.

•   The Navy’s stated urgent need for the Area program may be met in part by
    the UOES system. The UOES prototype system is scheduled to be available in
    September 1999. If the UOES meets it objectives, it will provide some
    operational capability until the more capable system is available. The Navy
    plans to provide two cruisers with a UOES capability, and the ships are to
    be initially equipped with a total of 35 UOES missiles. Although many of
    these missiles are to be expended in tests, a small number will remain.
•   The need to maintain Standard missile production is not solely dependent
    on the initial production of missiles for the Area program. Even without
    low-rate production of the Area program’s Block IVA missile, Standard
    missile production will continue. Production of an earlier version of the
    missile—the Block IIIB—began in fiscal year 1997 and is scheduled to
    continue at least through fiscal year 2003. Navy officials acknowledge that
    even though the configurations of the Block IIIB and Block IVA missiles
    are different, a high degree of commonality exists between the missiles
    both at the section level and at lower assembly levels. The Navy and the
    Standard Missile Company have identified minimum sustaining rates for
    major sections of the Standard missile. In most of the cases we examined,
    the minimum sustaining rate is met or almost met without production of
    the Block IVA low-rate initial production missiles. For example, the
    minimum sustaining rate for the warhead in fiscal year 1999 is 96 units.
    Total production that year is expected to be 251 units, of which only 34 are
    Block IVA units. The primary exception is the Block IVA booster, which is
    not a component of the Block IIIB missile, and thus cannot meet its
    minimum sustaining rate without Block IVA units.




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                                        Figure 3 shows planned production of the various configurations of the
                                        Standard missile.



Figure 3: Standard Missile Production
                                        Number of missiles
                                        300


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                                         50



                                          0
                                                   1997      1998      1999               2000         2001          2002           2003
                                                                                             AAA
                                                                                   IIIB    IVAAA
                                                                                             AAA IVA



                                        The Navy plans to produce 185 Block IVA missiles—12 percent of its total
                                        planned production quantity—during low-rate production. The estimated
                                        cost for these 185 missiles is $568.2 million. Scheduling low-rate initial
                                        production concurrent with testing increases risk. A DOD analysis
                                        concluded that planning low-rate production concurrent with the Navy
                                        Area test program was risky, noting that if problems are uncovered during
                                        the test phase, the program may need to acquire additional hardware and
                                        incur redesign costs. Testing problems could also cause the missile to
                                        remain in low-rate production longer than currently planned.




                                        Page 8                                             GAO/NSIAD-98-34 Navy Area TBMD Program
                     B-274679




                     Slippage in the development of the Navy Area program has already
Conclusions and      occurred and the planned test schedule is optimistic. Unless the
Recommendations      acquisition plan and/or the testing schedule is revised, the Navy will not
                     have reasonable assurance that the system will adequately perform before
                     the Navy commits itself to the production of the Block IVA interceptor
                     missiles.

                     The Navy currently plans to contract for the low-rate initial production of
                     185 Block IVA missiles, at an estimated cost of about $568.2 million, prior
                     to the completion of any realistic operational testing. The Navy intends to
                     rely on assessments that do not provide the quality of data that realistic
                     field testing provides. We are concerned that the Navy will make a
                     premature commitment to the production of unproven missiles.

                     The Navy acknowledges that risks are involved but believes it must
                     maintain the existing schedule because of the urgent need for the system
                     and to maintain an efficient flow in Standard missile production. Our
                     review indicates that if the initial production decision on the Block IVA
                     was delayed, the contractor could still generally maintain minimum
                     sustaining rates of production by continuing to work on an earlier version
                     of the Standard missile that will still be in production and has a high
                     degree of commonality with the Block IVA missile. Moreover, the Navy
                     would also have UOES to provide some intercept capability until the fully
                     operational Navy Area program demonstrates its expected capability.

                     Therefore, we recommend that you direct BMDO to revise the Navy Area
                     Theater Ballistic Missile Defense program’s acquisition plan and/or its
                     operational testing schedule to ensure that the low-rate initial production
                     decision on the 185 Block IVA missiles is made contingent on the Director,
                     Operational Test and Evaluation, certifying, based on sufficient
                     independent testing in an operational environment, that the system has the
                     potential to meet its key performance requirements.


                     In commenting on a draft of this report, DOD disagreed with our
Agency Comments      recommendation. First, DOD stated that postponing acquisition is contrary
and Our Evaluation   to the purpose of low-rate initial production as codified in title 10 of the
                     U.S. Code. Second, DOD said that complying with our recommendation
                     would cause a delay in low-rate initial production missile deliveries,
                     resulting in an inventory of seven UOES missiles—too few to respond to any
                     contingency. Third, DOD said implementing our recommendation would




                     Page 9                                 GAO/NSIAD-98-34 Navy Area TBMD Program
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impact the production of key Standard missile components, resulting in
substantial restart costs and risks.

We recognize that title 10 specifies the purposes for low-rate initial
production. The statutes, however, do not include specific standards on
when programs should begin low-rate initial production, or the type and
amount of testing to be done before production begins. The thrust of our
recommendation is that conducting realistic testing prior to the
production of system components reduces risk and minimizes the
procurement of unproven equipment. Further, implementing our
recommendation could also reduce the number of Area systems that may
have to be modified based on the results of operational testing.

DOD also says that delaying low-rate initial production missile deliveries
beyond operational testing would result in an inventory of seven UOES
missiles—too few to respond to any contingency. DOD’s comments suggest
that implementing our recommendation would mean delaying low-rate
initial production until all operational testing is completed in March 2001.
We are not suggesting such a delay in the program schedule, but rather
that the schedule be adjusted so that some operational testing be
conducted prior to the low-rate initial production decision currently
planned for June 2000. While DOD says that a delay could reduce the
number of missiles available for contingency operations for a short period,
the current schedule already includes a period of reduced availability.
Under the current schedule, only seven missiles will be available for
contingency operations from the completion of operational testing in
March 2001 until the first low-rate initial production missile delivery
begins in June 2001. In addition, under the current schedule, by the time
operational testing begins in November 2000, the Navy will have already
committed to low-rate initial production at a cost of $568.2 million.
Furthermore, DOD notes that the low-rate initial production missiles are
required to respond to a national emergency. Therefore, we believe it is
important that the Navy be able to demonstrate the missile system’s
operational capability to respond in such an emergency.

DOD also notes that Block IIIB missile production will not meet minimum
sustaining rate quantities for all components. According to DOD, delaying
low-rate initial production of Block IVA missiles would shut down booster
production and cause the guidance section to fall below minimum
sustaining rates for a 2-year period. DOD’s comments indicate that restart
costs and risks associated with restarting would be substantial.




Page 10                                GAO/NSIAD-98-34 Navy Area TBMD Program
              B-274679




              We recognize that the minimum sustaining rate for the booster will not be
              met without production of boosters for the Block IVA missile. However,
              even without the Block IVA missile, expected production of the guidance
              section would equal 96 percent of the minimum sustaining rate in both
              fiscal years 1999 and 2000. We asked Navy officials for an estimate of the
              restart costs and they told us that a minimum of $9.1 million in restart
              costs would be incurred for the booster and a component of the guidance
              section. According to these officials, cost risks associated with
              requalification of unique Block IVA component sub-vendors are not
              included in this estimate. Given that each Block IVA missile is expected to
              cost an average of about $2 million, it could easily cost more to fix already
              produced missiles if problems are revealed during subsequent testing, than
              it could cost to restart production. We believe it may be more
              cost-effective to incur some restart costs, rather than enter production
              without adequate testing. Consequently, we believe our recommendation
              is still appropriate.

              DOD’scomments are reprinted in appendix I. We have incorporated DOD’s
              technical comments as appropriate.


              To determine whether the Navy Area Theater Ballistic Missile Defense
Scope and     program has met its milestones to date and its remaining schedule appears
Methodology   realistic, we interviewed agency officials and analyzed pertinent program
              cost, schedule, and requirements documentation. We analyzed the status
              of the program, the various factors that led to the 2-year slippage in the
              program schedule, and the technical risks that remain.

              To determine whether the tests being conducted or planned will be
              adequate to demonstrate the system’s capabilities before production
              begins, we interviewed agency officials and analyzed pertinent test plans
              and schedules. We examined how many flight tests will be conducted
              before deployment of the UOES system, whether planned tests would
              realistically measure the system’s performance, the risks associated with a
              compressed operational test schedule, and the risks associated with
              beginning low-rate initial production before conducting any system level
              operational tests.

              We interviewed responsible agency officials at the following locations: the
              Office of the Secretary of Defense, Headquarters, BMDO, and the Office of
              the Director, Operational Test and Evaluation, in Washington, D.C.; the
              Navy’s Program Executive Office (Theater Air Defense), Program Office



              Page 11                                GAO/NSIAD-98-34 Navy Area TBMD Program
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for Standard Missile and Vertical Launching Systems, and Program Office
for the AEGIS Weapon System, in Washington, D.C.; and the Navy’s
Operational Test and Evaluation Force in Norfolk, Virginia.

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


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

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

If you or your staff have any questions concerning this report, please
contact me on (202) 512-4841. Major contributors to this report were Tom
Schulz, Lee Edwards, David Hand, and Judy Lasley.

Sincerely yours,




Allen Li
Associate Director, Defense Acquisitions Issues




Page 12                               GAO/NSIAD-98-34 Navy Area TBMD Program
Page 13   GAO/NSIAD-98-34 Navy Area TBMD Program
Appendix I

Comments From the Department of Defense




             Page 14       GAO/NSIAD-98-34 Navy Area TBMD Program
Appendix I
Comments From the Department of Defense




Page 15                                   GAO/NSIAD-98-34 Navy Area TBMD Program
           Appendix I
           Comments From the Department of Defense




(707197)   Page 16                                   GAO/NSIAD-98-34 Navy Area TBMD Program
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