oversight

Missile Defense: THAAD Restructure Addresses Problems But Limits Early Capability

Published by the Government Accountability Office on 1999-06-30.

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

                   United States General Accounting Office

GAO                Report to the Chairman, Subcommittee
                   on Defense, Committee on
                   Appropriations, House of
                   Representatives

June 1999
                   MISSILE DEFENSE

                   THAAD Restructure
                   Addresses Problems
                   But Limits Early
                   Capability




GAO/NSIAD-99-142
United States General Accounting Office                                                                 National Security and
Washington, D.C. 20548                    Leter
                                                                                                 International Affairs Division



                                    B-280755                                                                                       Letter

                                    June 30, 1999

                                    The Honorable Jerry Lewis
                                    Chairman, Subcommittee on Defense
                                    Committee on Appropriations
                                    House of Representatives

                                    Dear Mr. Chairman:

                                    The Ballistic Missile Defense Organization and the Army are developing the
                                    $15.4 billion Theater High Altitude Area Defense (THAAD) system to defeat
                                    theater ballistic missiles. Because of the Subcommittee’s concerns about
                                    repeated test failures and the Department of Defense’s (DOD) restructuring
                                    of the program, the former Chairman of the Subcommittee requested that
                                    we review the status of the THAAD program. Specifically, we (1) identified
                                    the underlying problems in the program that led to the test failures,
                                    (2) assessed whether program restructuring efforts address these
                                    underlying problems, and (3) determined how this restructuring will affect
                                    THAAD’s User Operational Evaluation System.1



Results in Brief                    Studies conducted by both DOD and independent sources identified the
                                    following underlying problems in the THAAD program:

                                    • The program’s compressed flight-test schedule did not allow for
                                      adequate ground testing, and as a result officials could not detect
                                      problems prior to flight tests. The schedule also left insufficient time for
                                      preflight testing, postflight analysis, and corrective actions.
                                    • The requirement to be able to quickly deploy an early prototype system
                                      diverted the contractor and government project management’s attention
                                      away from the normal interceptor development process and resulted in
                                      interceptors that were not equipped with sufficient instruments to
                                      provide optimum test data.
                                    • Quality assurance received insufficient emphasis and resources during
                                      the time of component production, resulting in unreliable components.



                                    1
                                     Initially, the THAAD program included plans for an early prototype system, called the User Operational
                                    Evaluation System, that could be used in a national emergency.




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        • The contract for developing the interceptor was a cost-plus-fixed-fee
          contract, a contract type that placed all of the program’s financial risk
          on the government and did not include provisions that could be used to
          hold the contractor accountable for less than optimum performance.

        Flight-test failures have been caused primarily by manufacturing defects
        rather than problems with advanced technology. These failures have
        prevented the Army from demonstrating that it can reliably employ the
        “hit-to-kill” technology critical to THAAD’s success.2

        The restructured program addresses each of the program’s four underlying
        problems. It

        • lengthens the flight-test schedule and increases ground testing;
        • removes the requirement for the deployable, early prototype
          interceptors;
        • increases the contractor’s quality emphasis, including its commitment,
          leadership, and quality assurance staffing; and
        • modifies the cost-plus-fixed-fee contract to provide performance-based
          incentives and penalties and introduces a degree of competition into the
          program.

        Despite these changes, the reliability of the remaining flight-test
        interceptors remains a concern because most components were produced
        when the contractor’s quality assurance system was inadequate.

        The program restructuring puts into question the need to retain a fully
        staffed User Operational Evaluation System battalion. The battalion will
        have little or no capability to intercept ballistic missiles because
        interceptors will not be available for the prototype system unless
        interceptors intended for tests are diverted to the battalion. According to
        the Army Training and Doctrine Command’s system manager for THAAD,
        the THAAD radar could be used for predicting the launch and impact points
        of enemy missiles, but no requirement exists for THAAD to perform that
        mission and no independent assessment of the prototype radar’s
        capabilities is planned. The User Operational Evaluation System battalion
        provides input to system designers, but according to the THAAD project



        2“Hit-to-kill”   technology allows an interceptor to destroy an attacking missile by colliding with it.




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             manager, this input could be provided with significantly fewer soldiers than
             the 295 currently authorized.

             We provide recommendations in this report for the Secretary of Defense
             concerning (1) the need for and capabilities of the User Operational
             Evaluation System and (2) the minimum essential military personnel and
             equipment required to fulfill the defined mission.



Background   When operational, THAAD will support the national objective of protecting
             U.S. and allied deployed forces, population centers, and industrial facilities
             from theater missile attacks. The THAAD system consists of four major
             components: (1) truck-mounted launchers; (2) interceptor missiles;
             (3) a radar; and (4) the battle management/command, control,
             communications, computers, and intelligence system. The launcher is
             intended to provide rapid reloading of interceptors. Each interceptor
             consists of a single-stage booster and a kill vehicle that is designed to
             autonomously home on an enemy missile during the last phase of
             interceptor flight and destroy the missile by colliding with it, a concept
             called “hit-to-kill.” The radar is designed to support the full range of
             surveillance, target tracking, and fire control functions and to provide a
             communications link with THAAD interceptors in flight. The battle
             management/command, control, communications, computers, and
             intelligence system is designed to manage and integrate all THAAD
             components and link the THAAD system to other missile defense systems
             to support an interoperable theater missile defense architecture.

             THAAD is currently in the program definition and risk reduction phase.3
             Through March 1999, the system had failed in the first six attempts to
             intercept a target. In June 1999, THAAD successfully intercepted its target
             during the seventh intercept flight test. DOD plans to continue THAAD
             testing and make a decision in the second quarter of 2000 on whether to
             proceed into the next acquisition phase—engineering and manufacturing
             development. A low rate initial production decision for the system is
             planned for the third quarter of 2005, and initial fielding is currently
             scheduled for the third quarter of 2007. DOD’s budget submission for fiscal
             year 2000 requests $611.6 million for the program. Primarily because
             restructuring extended THAAD’s development schedule by 21 months, the


             3
              DOD’s acquisition phases are (1) concept exploration, (2) program definition and risk reduction,
             (3) engineering and manufacturing development, and (4) production.




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                          program’s estimated acquisition cost increased to $15.4 billion, an increase
                          of $1.3 billion over the December 1997 estimate. Through April 1999, DOD
                          spent about $3.3 billion on the THAAD program.

                          The Army established a THAAD User Operational Evaluation System
                          battalion at Fort Bliss, Texas, in 1995. The User Operational Evaluation
                          System—an early prototype version of the final THAAD system—was
                          intended to (1) allow military users to influence the THAAD system design,
                          (2) permit an early operational assessment of the system’s capabilities, and
                          (3) provide a system that could be deployed in a national emergency. The
                          initial plan called for the prototype system to have 40 interceptors;
                          4 launchers; 2 radars; 2 battle management/command, control,
                          communications, computers, and intelligence units; and associated support
                          equipment. Except for the interceptors, these components were acquired
                          and delivered to the THAAD battalion under the existing program
                          definition and risk reduction contract at little or no additional cost. Under
                          the initial plan, the 40 interceptors were to be produced after the first
                          successful intercept test at an estimated cost of $225 million.



Underlying Reasons for    Several quality assurance audits and other independent reviews have
                          highlighted problem areas in the THAAD program. In our review of these
Past Intercept Failures   studies, we identified four underlying reasons for the program’s difficulties.
                          First, a compressed flight-test schedule and inadequate ground testing
                          delayed the program and failed to detect problems prior to flight tests.
                          Second, the requirement for a high priority but high risk User Operational
                          Evaluation System capability using an early prototype interceptor design
                          diverted the attention of the contractor and government project
                          management and limited the ability to more fully test the interceptor. Third,
                          an inadequate quality assurance system failed to detect defective
                          components. Fourth, the cost-plus-fixed-fee contract did not include
                          provisions to hold the contractor fully accountable or provide the
                          government with the ability to directly influence the contractor’s efforts.
                          Early flight-test failures have prevented the Army from determining
                          whether it can reliably employ the “hit-to-kill” technology essential to
                          THAAD’s success.




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Compressed Flight-Test    According to Army officials, DOD accepted an ambitious flight-test
Schedule and Inadequate   schedule with a reduced emphasis on ground testing because of the urgent
                          need for improved missile defenses. Several studies identified this schedule
Ground Testing
                          as a source of the program’s problems. In September 1994, for example, an
                          independent contractor reported that the program’s initial schedule—
                          which allowed only 30 days between each of the last seven flight tests—did
                          not permit adequate time for failure analysis, corrective actions, and
                          retest.4 In July 1996, another independent panel reported that insufficient
                          time to perform ground testing between flights represented an
                          unacceptable technical risk.5 Also, according to this panel, problems
                          discovered in one flight test were not fully understood before conducting
                          the next test and the number of problems being experienced may have
                          indicated a process breakdown caused by schedule pressures. According
                          to DOD’s Director of Operational Test and Evaluation, testing through
                          March 1997 emphasized schedule over success. The aggressive flight-test
                          schedule proved to be overly ambitious; technical problems encountered
                          during testing resulted in program delays.

                          In its February 1998 report, the Panel on Reducing Risk in Ballistic Missile
                          Defense Flight Test Programs labeled THAAD’s aggressive schedule and
                          insufficient attention to flight-test failures a “rush to failure.”6 This group,
                          which had been chartered to study risk in the flight testing of Ballistic
                          Missile Defense Organization programs, pointed out that THAAD’s flight
                          tests were conducted without complete component qualification and
                          ground testing.

                          THAAD program officials agree that the initial schedule was overly
                          optimistic. The contractor’s chief engineer for the THAAD program told us
                          that if the schedule had allowed for better ground testing of the interceptor,
                          at least some of the problems that caused flight-test failures would have
                          been caught. The Army’s initial plans allowed only 1 month between flight
                          tests. In hindsight, according to the program manager, additional time to
                          test components might have prevented some flight-test failures.



                          4
                            THAAD Independent Program Assessment, Final Report, Garber International Associates, Inc.,
                          September 30, 1994.

                          5Final   Report, THAAD Independent Review Panel, July 29, 1996.

                          6
                            Report of the Panel on Reducing Risk in Ballistic Missile Defense Flight Test Programs , Institute for
                          Defense Analyses, February 27, 1998.




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User Operational Evaluation   The User Operational Evaluation System was intended, in part, to provide
System Requirement            an interim defense capability that could be used until the final system was
                              ready. However, the planning and implementation of the User Operational
Diverted Attention and
                              Evaluation System diverted THAAD program management to some extent
Limited Ability to Test       from its primary task of developing the interceptor and resulted in an
Interceptor                   interceptor designed more for deployment than for testing.

                              According to the Panel on Reducing Risk in Ballistic Missile Defense Flight
                              Test Programs, the requirement for an early prototype system capability led
                              program management to focus some of its attention on operational issues
                              (such as training soldiers) rather than concentrating solely on developing
                              and testing the interceptors. The User Operational Evaluation System
                              requirement essentially demanded an operational capability before the
                              interceptor was fully designed. This resulted in interceptors built for
                              wartime use rather than equipped with sufficient instruments to provide
                              optimum test data. According to the panel’s report, because of the
                              requirement for a User Operational Evaluation System, the program used
                              parallel testing to save time rather than best practices, such as a sequential
                              find-and-fix approach. The panel recommended eliminating the
                              requirement for deployable prototype interceptors because acquiring such
                              an early operational capability was inconsistent with the complexity of the
                              task of developing the THAAD system.

                              THAAD program management agreed that the requirement for a User
                              Operational Evaluation System was a distraction and reduced its ability to
                              test the interceptor. The contractor’s THAAD chief engineer told us that
                              because of the requirement, the developmental interceptors were designed
                              with fewer ways to test components and subsystems on the ground and the
                              ground tests were made more difficult because test points were less
                              accessible. The THAAD project manager also acknowledged that planning
                              for User Operational Evaluation System interceptors had been a distraction
                              to his team.


Inadequate Quality            Inadequate quality assurance allowed problems to go undetected, and test
Assurance                     analyses show that those problems caused most, if not all, of THAAD’s six
                              failures to intercept a target. According to DOD’s Director of Operational
                              Test and Evaluation, for example, quality control deficiencies in the
                              manufacturing of the interceptors were a major factor in all but one of the




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first five flight-test failures.7 Some of the failures were caused by debris
that was allowed to get into components during the manufacturing process.
A better quality assurance system could have prevented or caught these
problems.

Although the government identified inadequacies in the contractor’s quality
assurance system, the contractor did not make improvements in a timely
manner. As early as February 1994, the Army’s first quality assurance audit
of the THAAD contractor cited 11 areas in which the contractor did not
comply with the quality assurance provisions of the contract. These
included findings that the contractor had not performed internal audits or
followed approved procedures. In addition, the audit team reported that
the approved reliability program had not been fully implemented. The
auditors noted that these deficiencies could result in flight-test failures, test
program delays, and lower hardware reliability. Over 2 years later, in
August 1996, another quality assurance audit showed that problems had
not been resolved. That audit report cited quality system weaknesses,
including a lack of quality assurance resources, and an inadequate system
for reporting problems and related corrections. Between contract award in
September 1992 and July 1995, the contractor reduced the number of staff
performing quality assurance functions by two thirds. The audit report
recommended a rededication and commitment by contractor management
to the concept of quality.

According to some analyses, the contractor’s management was not
sufficiently committed to the program and did not provide the leadership to
correct the problems and ensure the program’s success. For example,
following the 1996 quality assurance audit, the THAAD project manager
expressed concerns about the contractor’s leadership and management. He
wrote that (1) the failure reporting and corrective action system was
neither timely nor effective, (2) acceptance test plans and procedures were
not defined, and (3) both the quality and quantity of quality assurance
personnel were insufficient. The project manager concluded that the
contractor’s approach to quality assurance was not working and that a
basic change in the contractor’s management philosophy was required. The
contractor responded with a detailed resolution plan in September 1996,
but flight-test failures caused by quality problems continued. In May 1998,
following the fifth intercept failure, the government’s contracting officer



7According  to DOD’s Director of Operational Test and Evaluation, a software processing error caused
the other test failure.




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                              notified the contractor that its failure to achieve an intercept was
                              endangering the contract. Subsequent agreements between the Army and
                              the contractor addressing project office concerns were incorporated into
                              the restructured THAAD program.


Inappropriate Contract Type   THAAD’s cost-plus-fixed-fee type contract placed all of the program’s
                              financial risk on the government and, short of terminating the contract, did
                              not include provisions that could be used to hold the contractor
                              accountable for less than optimum performance. According to the May
                              1992 THAAD acquisition strategy report, a fixed-fee contract was used
                              because of the potential for cost increases. The THAAD project manager
                              told us that, at the time of the development contract award, the risks of
                              schedule slips and cost increases were considered high, reducing the
                              likelihood that a contractor would accept an incentive fee arrangement. No
                              incentive on technical performance was believed to be necessary because
                              technical risks were considered to be low. Under the cost-plus-fixed-fee
                              arrangement, the government agreed to reimburse all of the contractor’s
                              allowable costs and pay a fixed fee. Because the contractor’s fee was fixed
                              at the beginning, it was not tied to accomplishment of cost, schedule, and
                              performance objectives.

                              In November 1993, the Army Audit Agency cited THAAD as an example of
                              an acquisition that did not use the proper contract type and did not provide
                              appropriate incentives.8 The audit pointed out that the Army structured
                              contracts for the THAAD system’s radar and interceptor differently.
                              Although both components were in the program definition and risk
                              reduction phase, the radar contract included both award and incentive
                              fees, while the interceptor contract did not make use of incentives. The
                              audit agency’s report concluded that the approach taken in regard to the
                              THAAD interceptor contract did not comply with sound contracting
                              principles because it did not tie financial incentives to cost, schedule, and
                              performance goals.

                              The THAAD project office expressed concern that the contractor was not
                              taking the lead in identifying and fixing problems. The purpose of including



                              8Research and Development Contracting, U.S. Army Audit Agency Report No. 94-700, November 20,
                              1993.




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                              incentives and/or penalty provisions is to provide a means of motivating the
                              contractor to proactively identify and fix problems. Award fee contracts,
                              for example, provide the government more control in terms of directly
                              influencing the contractor’s efforts.


Army Has Not                  To date, THAAD test failures have been caused primarily by manufacturing
Demonstrated Reliability of   defects rather than advanced technology problems. For example, a short in
                              an electrical circuit caused one failure. Other failures resulted because
THAAD Hit-to-Kill
                              debris was allowed to contaminate components such as infrared seeker
Technology                    parts during the manufacturing process. Despite the flight-test failures,
                              independent reviews have concluded that the interceptor design should be
                              capable of accomplishing its mission. However, according to the
                              independent Panel on Reducing Risk in Ballistic Missile Defense Flight Test
                              Programs, DOD initially underestimated the difficulty of performing
                              “hit-to-kill” intercepts. Only 8 of the 24 hit-to-kill intercept attempts
                              conducted since the early 1980s in various missile defense programs have
                              been successful. Although the Army demonstrated THAAD’s ability to hit
                              another missile in June 1999, it has not shown that this technology can be
                              reliably employed under all necessary conditions. For example, THAAD is
                              required to intercept targets both inside and outside the atmosphere and
                              under a variety of conditions, such as when targets employ
                              countermeasures. The June 1999 intercept was in the higher regions of the
                              atmosphere and the target did not use countermeasures. Future tests are
                              planned for intercepts lower in the atmosphere and outside the
                              atmosphere. Each region presents unique challenges; for instance, it may
                              be more difficult for THAAD to distinguish between attacking warheads
                              and debris and other objects during intercept attempts outside the
                              atmosphere.



Restructured Program          After the fifth successive test failure in May 1998, DOD restructured the
                              THAAD program. The restructured program addresses each of the four
Addresses Underlying          underlying problems. However, because most interceptor components
Problems, but                 were produced before DOD restructured the program, their reliability
                              remains a concern for future tests.
Reliability Remains a
Concern




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Restructured Program   THAAD’s compressed flight-test schedule and inadequate ground testing
Addresses Underlying   were addressed by extending the schedule for the current phase of flight
                       testing and adding ground tests. The THAAD project office allowed about
Problems
                       10 months between the fifth intercept failure in May 1998 and the sixth
                       attempt in March 1999 in order to retest and recertify components. In
                       addition, more extensive interceptor ground testing was implemented at
                       the assembly facility prior to shipment to the test range and at the test
                       range just prior to flight testing. Following these actions, THAAD failed its
                       sixth intercept attempt in March 1999, but it successfully intercepted the
                       target in its seventh attempt in June 1999. The remaining three flights of the
                       current test phase are scheduled through December 1999 using the re-
                       tested components. If two of the three intercept attempts are successful,
                       THAAD will enter the engineering and manufacturing development
                       acquisition phase; in this phase, flight tests are scheduled about 3 months
                       apart to allow sufficient time for preflight testing, postflight analysis, and
                       corrective actions.

                       Under the restructured program, the Army no longer plans to produce
                       THAAD User Operational Evaluation System interceptors. As indicated
                       previously, the requirement for these interceptors distracted contractor
                       and government program management from its primary tasks of developing
                       and testing the interceptor and resulted in a less testable design. Removing
                       the requirement should eliminate this distraction, but because the design of
                       the interceptor currently being flight-tested is little changed, limits remain
                       on the ability to test it.

                       THAAD’s restructuring also improved the quality assurance program. In
                       September 1996, prior to the restructuring, the contractor issued a detailed
                       plan to resolve concerns about its quality assurance program. That plan
                       called for improvements such as (1) implementing a system for auditing
                       and evaluating the effectiveness and performance of quality assurance
                       contractual requirements, (2) dedicating personnel to support failure
                       reporting analysis and corrective actions, and (3) performing all
                       component acceptance procedures with trained quality assurance
                       representatives. Under restructuring, the contractor reorganized and added
                       a Vice President for THAAD Flight Testing, who, according to the THAAD
                       project manager, has provided the leadership and commitment that was
                       lacking. In April 1999, this official became responsible for the contractor’s
                       entire THAAD program. In addition, as shown in figure 1, the contractor
                       has significantly increased the quality assurance staffing levels. Defense
                       Contract Management Command representatives told us that, in their view,
                       the contractor’s current quality assurance staffing is sufficient.



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Figure 1: Contractor Staffing Levels Dedicated to THAAD Quality Assurance
Staffing levels

        50
        40
        30
        20
        10
         0
               Start      July-95    July-96     July-97     Jan.-98


Source: THAAD Project Office.


The restructuring also added financial incentives to the development
contract and introduced a degree of competition into the program, which
may provide even more incentive for a successful program. As part of the
THAAD restructuring, the Army and the contractor signed a contract
modification in July 1998 that provides cost-plus-incentive-fee and award-
fee elements to the original cost-plus-fixed-fee contract. The incentive
provisions require the contractor to absorb up to $75 million of
development costs based on flight-test results. The contractor incurred the
first $15 million penalty following the failed intercept attempt on March 29,
1999. Under the remaining incentive-fee provisions, the contractor would
also absorb (1) $20 million if two intercepts have not occurred by July 16,
1999;9 (2) $20 million more if three intercepts have not occurred by October
16, 1999; and (3) yet another $20 million if three intercepts have not
occurred by January 16, 2000. However, if the contractor incurs initial
penalties followed by successful intercepts, some of the penalties could be
reimbursed. The contractor can be reimbursed up to $35 million for three
successful intercepts by January 16, 2000. In addition, the contractor could
be awarded up to an additional $20 million in reimbursement based on the
contracting officer’s subjective determination of the contractor’s cost
performance.




9
    One of the two intercepts was successfully conducted on June 10, 1999.




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                        DOD also introduced a degree of competition into the restructured
                        program. DOD has proposed that THAAD and the Navy’s Theater Wide
                        system10 compete for funding beginning in fiscal year 2002.11 In December
                        2000, the Ballistic Missile Defense Organization plans to review the two
                        programs in terms of cost, schedule, performance, and risk. It then plans to
                        select one of the systems for enhanced funding in order to field that system
                        by fiscal year 2007. The other program would continue in development, but
                        at a slower pace. Regardless of which is chosen, the Army would continue
                        development of the THAAD radar and battle management/command,
                        control, communications, computers, and intelligence system for use in the
                        overall theater air and missile defense mission.


Reliability Remains a   The reliability of the interceptors that are planned for use during the
Concern                 current phase of flight-testing is an ongoing concern because most
                        components were produced under inadequate quality assurance
                        conditions. With the exception of the seeker (the component that locates
                        and tracks the target and provides that information to the interceptor’s
                        computer), all components and subsystems were produced by 1996, before
                        quality assurance improvements were made.

                        After the fifth failed intercept attempt in May 1998, all existing interceptor
                        components were subjected to reevaluation and/or retesting. However,
                        according to DOD’s Director of Operational Test and Evaluation, retesting
                        is not a substitute for initial production under adequate quality assurance
                        processes. The Director also observed that hardware for the remaining
                        THAAD interceptors was built several years ago, and only minor changes
                        or upgrades can be made to this existing hardware. 12According to the
                        Director, until new hardware is built that incorporates improved
                        manufacturing, quality assurance, and test processes, there is no reason to
                        expect any significant improvement in the THAAD interceptor’s



                        10
                         The sea-based Navy Theater Wide system is being designed to complement THAAD and help protect
                        U.S. and allied forces against medium- to long-range theater ballistic missiles.

                        11
                           The Senate’s version of the fiscal year 2000 Defense Authorization Act (Senate bill 1059, section 221)
                        if enacted into law would effectively bar this planned competition by requiring that the Secretary of
                        Defense establish an acquisition strategy that bases funding and schedule decisions on the performance
                        of each system independent of the other system.

                        12
                             Fiscal Year 1998 Annual Report, Director, Operational Test and Evaluation, February 1999.




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                       performance. After extensive review, however, DOD decided to continue
                       the current test program. THAAD failed its sixth intercept attempt in March
                       1999 because of an unreliable component, but it successfully intercepted
                       the target during its seventh attempt in June 1999. The restructured
                       program also provides for redesigning the interceptor with a view toward
                       producing 20 interceptors for testing early in the engineering and
                       manufacturing development phase.



Restructured Program   Because the restructured THAAD program does not include prototype
                       interceptors intended for early deployment, the THAAD User Operational
Significantly Alters   Evaluation System battalion will have little or no capability for intercepting
User Operational       enemy theater ballistic missiles. The restructured program includes a plan
                       to produce 20 redesigned interceptors, called “risk reduction/contingency”
Evaluation System      interceptors, but unlike the 40 interceptors initially planned for the User
Concept and            Operational Evaluation System, all 20 of these interceptors are planned for
Capabilities           testing in THAAD’s next development phase. The risk reduction/
                       contingency interceptors will (1) be designed to incorporate lessons
                       learned from the current development phase, (2) have improved test
                       instrumentation, and (3) consist of all new hardware to improve reliability
                       and performance. Under the restructured THAAD program, the first of
                       these interceptors would be delivered in 2003.

                       In addition to an interim system that could be deployed to intercept theater
                       ballistic missiles, the User Operational Evaluation System was originally
                       intended to (1) allow military users to influence the system design and
                       (2) permit an early operational assessment of the system’s capabilities. The
                       THAAD battalion has provided feedback to influence the system’s design,
                       but according to the THAAD project manager, the battalion could
                       accomplish this objective with significantly fewer soldiers than the
                       295 currently authorized. Restructuring the THAAD program removed the
                       requirement for an early operational assessment of the User Operational
                       Evaluation System.

                       The Army Training and Doctrine Command’s system manager for THAAD
                       has identified two potential military capabilities of the User Operational
                       Evaluation System that might be of value to U. S. warfighters. First, risk
                       reduction/contingency program interceptors planned for testing could be
                       diverted to the User Operational Evaluation System battalion if military
                       operations commence. However, the first of the risk reduction/contingency
                       interceptors will not be available until 2003. Because most, if not all, risk
                       reduction/contingency interceptors will be consumed soon after delivery



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                  by ground- and flight-testing, few, if any, of them would be available for
                  contingency deployment. Up to 18 months could be needed to produce
                  additional interceptors in excess of the 20 currently planned.

                  The second use postulated for the THAAD battalion is to use the THAAD
                  radars to predict the launch and impact point of enemy missiles. However,
                  DOD has not established a formal requirement for the THAAD radars to
                  perform launch and impact point predictions. Also, DOD does not plan an
                  independent assessment of the radar’s operational capabilities for this
                  mission. Both a formal requirement and an assessment of capabilities
                  would be needed for a decision to deploy the User Operational Evaluation
                  System radars because a wartime commander would have to use five or six
                  C-5 aircraft that might be needed for other purposes.13



Conclusions       The restructured program addresses each of the THAAD program’s four
                  underlying problems. However, the reliability of current flight-test
                  interceptors remains a concern because most components were produced
                  when the contractor’s quality assurance system was inadequate. Test
                  failures caused primarily by manufacturing defects, rather than advanced
                  technology problems, have prevented the Army from demonstrating that
                  THAAD can reliably intercept targets in all required regions.

                  The restructuring of the THAAD program raises the issue of what the
                  purpose of the User Operational Evaluation System battalion at Fort Bliss
                  should now be. Whether all or only part of the battalion would warrant
                  deployment for contingency operations would depend on the capabilities it
                  could provide to warfighters and the priority of the need for one or more of
                  those capabilities. However, there would be little basis for making a
                  deployment determination because DOD does not plan to conduct an
                  operational assessment of the User Operational Evaluation System.



Recommendations   We recommend that the Secretary of Defense determine and define which,
                  if any, potential capabilities of the restructured THAAD User Operational
                  Evaluation System are needed by the warfighter community. If warranted
                  by that determination, we further recommend that the Secretary (1) direct



                  13The  Army estimates that 25 C-5, 37 C-17, or 67 C-141 fights would be needed to deploy the entire
                  battalion, including launchers and missiles.




                  Page 14                                          GAO/NSIAD-99-142 THAAD Program Restructure
                      B-280755




                      that an independent operational assessment of the needed THAAD User
                      Operational Evaluation System capabilities be conducted and (2) require
                      the Army to determine the minimum essential military personnel and
                      equipment required to fulfill the defined mission.



Agency Comments and   In commenting on a draft of this report, DOD concurred with our
                      recommendations. DOD said that the Army is currently assessing how the
Our Evaluation        User Operational Evaluation System’s capabilities can help meet near-term
                      warfighting requirements. According to DOD, this review might change the
                      battalion’s force structure because interceptor missiles for test or possible
                      deployment will not be available until fiscal year 2003. Until then, THAAD’s
                      potential contribution will be limited to enhancing surveillance and launch
                      and ground impact point predictions and to providing data to other missile
                      defense systems. The Army is working to determine the minimum number
                      of military personnel and equipment needed to support the User
                      Operational Evaluation System until interceptors are available. DOD also
                      said that it will conduct an early operational assessment of the User
                      Operational Evaluation System’s capabilities before beginning THAAD
                      engineering and manufacturing development in fiscal year 2000.

                      DOD also provided additional technical comments and suggested changes,
                      which we incorporated. DOD’s comments are included in appendix I.



Scope and             To identify underlying reasons for the program’s difficulties, we reviewed
                      pertinent government and contractor documentation, including contract
Methodology           files, audit reports, schedules, briefings, cost reports, integrated product
                      team minutes, and contractor resolution plans and training plans. We also
                      reviewed independent studies and discussed the studies’ findings with
                      knowledgeable officials. We compared the results of our review to the
                      findings of the independent studies.

                      To assess the latest plans for restructuring the program and the impact of
                      the restructuring on problems identified earlier, we reviewed revised
                      program plans, integrated product team meeting minutes, and other
                      planning documents. We also discussed elements of the restructured
                      program with THAAD program officials, contractor representatives,
                      representatives of the Army’s user element, and independent test officials.




                      Page 15                             GAO/NSIAD-99-142 THAAD Program Restructure
B-280755




To determine the impact of changes on the THAAD User Operational
Evaluation System, we interviewed appropriate government and contractor
officials (including user representatives) and reviewed pertinent contractor
documents and government planning documents. We analyzed how the
changes would affect the project office and potential users.

In Washington, D.C., we interviewed representatives from the Office of the
Secretary of Defense; Joint Staff; Office of the Director, Operational, Test,
and Evaluation, Ballistic Missile Defense Organization; and the Office of
the Army’s Deputy Chief of Staff for Operations. We also interviewed
representatives from THAAD Battalion and Air Defense Artillery School,
Fort Bliss, Texas; Raytheon Corporation and THAAD Battalion, White
Sands Missile Range, New Mexico; Lockheed Martin Missiles and Space
and Defense Contract Management Command, Sunnyvale, California; and
THAAD project office and U.S. Army Space and Missile Defense Command,
Huntsville, Alabama.

We conducted our work from August 1998 to June 1999 in accordance with
generally accepted government auditing standards. At the end of our
review, we updated our work to reflect the successful intercept test on
June 10, 1999.


As arranged with your staff, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from its
issue date. At that time, we plan to provide copies of this report to the
Honorable William Cohen, Secretary of Defense; the Honorable Lewis
Caldera, Secretary of the Army; Lieutenant General Lester Lyles, Director,
Ballistic Missile Defense Organization; the Honorable Jacob Lew, Director,
Office of Management and Budget; and key committees of the Congress.
We will make copies available to others upon request.




Page 16                             GAO/NSIAD-99-142 THAAD Program Restructure
B-280755




If you or your staff have questions concerning this report, please contact
me at (202) 512-4841. The major contributors to this report were Lee
Edwards, Stan Lipscomb, and Tom Gordon.

Sincerely yours,




Allen Li
Associate Director,
Defense Acquisitions Issues




Page 17                            GAO/NSIAD-99-142 THAAD Program Restructure
Appendix I

Comments From the Department of Defense                            AppeIx
                                                                        ndi




             Page 18      GAO/NSIAD-99-142 THAAD Program Restructure
                               Appendix I
                               Comments From the Department of Defense




Now on pp. 3 and 14.




Now on pp. 3 and 14.




(707376)               L
                       ertet   Page 19                               GAO/NSIAD-99-142 THAAD Program Restructure
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