oversight

Comparison of the Pershing II Program with the Acquisition Plan Recommended by the Commission on Government Procurement

Published by the Government Accountability Office on 1977-01-24.

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

                         DOCUMENT RESUME
00091 - [A0751048]
Comparison of the Pershing II Program with the Acquisition Flan
Recommended by the Commisrion on Government Procurement.
B-182956; PSAD-77-51. January 24, 1977. 15 pp. + appendices (9
pp.).
Report to the Congress; by Elmer B. Staats, Comptroller General.
Issue Area: Federal Procurement of Goods and Services (1900).
Contact: Procurement and Systems Acquisition Di.,
Budget Frnction: National Defense: Departrent of Defense -
    Procdrement & Contracts (057); National Defense: weapon
    systems (058).
Organization Concerned: Department of Defense.
Congressional Relevance: Congress; House Committee on Armed
    Services; Senate Committee or Armee Services.
Authority: ORB Circular A-109.
         The Commission on Government Procurement recommended a
new plan for acquiring major weapons systssms and other major
systems which has become the basis for a revised policy in
procurement for all executJ.ve agencies. The Department of
Defense suggested tsat the Pershing II program came close to the
recommended procedures. Findings/Conclusions: The Pershing II
program is not similar to the Commission's plan and is
charActeristiv of the acquisition process the Cowmission wae
trying to reform. Army efforts to find a solution to the need
the Pershing II is addressing have a'ways been directed toward a
surface-to-surface missile. Also, the Armyes effcrts to define
and explore the Pershing II concept began without the Secretary
of Defense involvement that the Commission envisioned. Under the
Commission's plan, different technological approaches would have
been solicited from industry, and industry would have explored
selected alternatives before a specific system was selected.
Recommendations: Executive agencies have to understand that
under the new acquisition process mission area deficiencies must
be determined and stated independently of any specific system
solution. Effort allowed under the technology base requires
redefinition so that solutions to mission needs result from
competition between alternative solutions. Industry must be
giveu greater flexibility to propose a wide range of alternative
solutions to mission area deficiencies in responding to
Government requests. (Author/SC)
o1




            REPORT TO THE CONGRESS

             BY THE COMPTROLLER GENERAL
     ?   'i~sOF THE UNITED STATES




           Comparison Of The Pershing II
           Program With The Acquisition
           Plan Recommended By
           The Commission On
           Government Procurement
           Department of Defense

           The Commission on Government Procure-
           ment recommended a new plan for acquiring
           major weapons systems and other major
           systems which has become the basis for a re-
           vised policy in procurement for all executive
           agencies.
           GAO has compared the Pershing II program
           with the Commission's plan and has con-
           cluded that it is not similar to the plan and is
           characteristic of the acquisition process the
           Commission was trying to reform.




           PSAD-77-51                                         JL 24i, i 17
               COMPFO LLER GENERAL OF THE UNITED   rAT=
                          WAUHINGTON. D.C. WA




B-182956


To the President of the Senate
and the Spea;ker of the House of Representatives

     This report on the Pershing II program is one of three
reports on our review to determine how closely recent Depart-
ment of Defense acquisition programs parallel the major system
acquisition plan the Commission on Government Procurement
recommended.
      We made this review at the request of Senator Lawton
Chiles, Chairman, Subcommittee on Federal Spending Practices,
Efficiency, and Open Government, Senate Committee on Gov-
ernment Operations. As agreed with the Senator's office,
we asked the Department of Defense to suggest systems for our
review, which came closest to the Commission's plan.
     The NAVSTAR Global Positioning System and the Shipboard
Intermediate Range Combat System are covered in separate
reports. Of the three programs, only the Shipboard Inter-
mediate Range Combat System had any significant similarity
to the beginning steps of the Commission's plan.
     We made our review pursuant to the Budget and Account-
ing Act, 1921 (31 U.S.C. 53), and the Accounting and Auditing
Act of 1950 (31 U.S.C. 67).
     Copies of this report are being sent to the Director,
Office of Management and Budget, and the Secretary of Defense.




                                 Comptroller General
                                 of the United States
                      Contents


DIGEST                                                   i
CHAPTER
      1    INTRODUCTION                                  1
               Scope of review                           2
      2    COMMISSION ON GOVERNMENT PROCUREMENT          3
      3    THE PERSHING !I PROGRAM                       6
      4    COMPARISON OF THE PERSHING II EVOLUTION
             WITH THE COMMISSION'S RECOMMENDATIONS       7
               Starting and coordinating nrograms        7
               Congressional review of needs and
                 goals                                   9
               Technology base                          10
               Creating new systems                     11
               Congressional review of system
                 exploration                            13
               Reinstating meaningful competition       14
APPENDIX

      I    Evolution of the Pershing II program         16
  II       Principal Department of Defense offi-
             cials responsible for administering
             activities discussed in this report        24
                         ABBREVIATIONS
ASARC      Army Systems Acquisition Review Council
DCP        development concept paper
DOD        Department of Defense
DSARC      Defense Systems Acquisition Review Council
GAO        General Accounting Office
NATO       North Atlantic Treaty Organization
OSD        Office of the Secretary of Defense
ROC        required operational capability
         COMPTROLLER GENERAL'S                 COMPARISON OF THE PERSHING II
         REPORT TO THE CONGRESS                PROGRAM WITH THE ACrQrISITON PLAN
                                               RECOMMENDED BY THE COMMISSION
                                               ON GOVERNMENT PROCUREMENT
                                               Department of Defense


                         DIGEST

                         In December 1972 the Commission on Government
                         Procurement recommended a new plan for
                         acquiring major systems.  The Commision's
                         r-commendations were the basis for an
                         April 5, 1976, Office of Management and BuLget
                         circular on major system acquisitions; it
                         prescribed policy for all executive branch
                         agencies.

                         GAO was asked to compare the beginning steps
                         in the acquisition proqess of some recent major
                         systems with the Commissicn's plan.  (See p. 1.)

                         Because Department of Defense officials had
                         indicated that the Commission's intent had
                         been accomplished either formally or informally
                         in some Defense programs, GAO asked Defense
                         to suggest programs which came closest to the
                         recommended procedures.
                         One suggested program was the Pershing II, a
                         surface-to-surface missile system with nuclear
                         warheads having a program cost estimate of
                         about $1 billion. Its selection, however, was
                         apparently based on the program's compliance
                         with revised Army acquisition regulations rather
                         than on its similarity to the Commission's
                         plan.
                         The Pershing ;' Program is not similar to the
                         Commission's plan and is characteristic of
                         the acquisition process the Commission was
                         trying to reform. (See p. 7.)
                         Army efforts to find a solution to the need the
                         Pershing II is addressing have always been
                         directed toward a surface-to-surface missile.
                         Also, the Army's efforts to define snd explore
                         the Pershing II concept began without the Secre-



                                                              PSAD-77-51
TIeht.           Upon removal, the report
cover    ade   should be noted hereon.
 tary of Defense involvement that the Commission
 envisioned. (See pp. 8 and 9.)

 Under the Commission's plan, the Secretary
 of Defense would have the Army's perception
 of the mission need reconciled with overall
 agency resources. The Army's exploration
 of alternative solutions would have begun
 orly after the Secretary's approval of a
 statement of needs and goals independent
 of a specific system solution.  (See p. 8.)
Pershing II is being developed as a modular
improvement to the Pershing Ia under a sole-
source contract with the Pershing contractor.
Under the Commission's plan, different tech-
nological approaches would have been solic-
ittd from industry, and industry would have
explored selected alternatives before a specific
system was selected.  (See p. 12.)
Single-system development would be permitted as
an exception under the Commission's plan
if the needs were sufficiently urgent or
required such a massive system that competitive
development would not be possible.  Ever in
this instance, however, specific Secretary of
Defense approval would be required.   GAO be-
lieves the program would not meet the Commis-
sion's criteria for single-system development
because the low funding levels in the
program's early years do not suggest the
urgency described by the Commission or
a sufficiently large funding requirement
to rule out competitive development. (See
p. 13.)

It should be noted that some events in the
beginning steps of the Pershing II evo-
lution occurred before the Commission's
report, and the Pershing II evolution was
generally consistent with then-existing
Army and Department of Defense reaulations.
(See p. 7.)

GAO presented the results of its review of
the three programs during August 24, 1976,
hearings before the Subcommittee on Federal
Spending Practices, Efficiency, and Open



                      ii
             Government. GAO observed that implementp-
             tion of the Commission's plan as outlined
             in the Office of Management and Budget cir-
             cular will require improvements in several
             areas:

             -- Executive agencies have to understand that
                under the new acguisition process mission
                area deficiencies must be determined and
                stated independently of ants specific sys-
                tem solution. This will enable agency
                heads and the Congress to make decisions
                based on a clear understanding of the mis-
                sion deficiency and need for new systems.

             -- Effort allowed under the technology base
                requires redefinition so that solutions
                to mission needs are not dictated by in-
                house efforts but result from competition
                between alternative solutions.

             -- Industry must be given greater flexibility
                to propose a wide range of alternative
                solutions to mission area deficiencies in
                responding to Government reguests.
             Office of the Secretary of Defense and Army
             officials agreed generally with the report.
             Comments of these officials have been in-
             corporated.




Tear Sheet                          i il
                           CHAPTER   1

                          INTRODUCTION


     Major system acquisitions account for a large part of
Federal expenditures.  We reported 1/ in February 1976 that
major Federal acquisitions 2/ in process as of June 2n, '975,
would cost about $404 billion at completion.  About $.20
billion is for Department of Defense (DOD) acquisitions,
excluding the Army Corps of Engineers.

     In December 197a, after about 2-1/2 years of study, the
Commission on Governnent Procurement issued its report con-
taining 149 recommendations for improving Federal procurement.
Twelve recommendations were on major system acquisitions.
The Office of Federal Procurement Policy, Office of Manage-
ment and Budget, issued Circular No. A-109, "Major System
Acquisiticns," on April 5, 1976.  it prescribed policy for
all executive branch agencies based on the Commission's reccm-
mendations.

     During July 1975 hearings on major system acquisition
reform, the Chairman, Subcommittee on Federal Spending Prac-
tices, Efficiency and Open Government, Senate Committee on
Government Operations, asked us to undertaKe a special study
of the "very beginning steps" in the requirements process for
some current programs.  He asked that we compare the evolu-
tion of these programs with the Commission's recommendations.

     DOD officials had indicated in congressional hearings
that the intent of the Commission's plan had been implemented
either formally or informally in some DOD acquisitions.
Therefore, with agreement from the Senator's office, we
asked the Deputy Secretary of Defense to sugqesc acquisitions
which were managed in a way that most nearly buuresponded to
the procedures the Commission recommended.

     The Office of Lhe Secretary of Defense (OSD) asked each
service to suggest systems to be reviewed.     The systems
selected were  (1) the  Army's Pershing II  missile system, (2)
the Navy's Shipboard   Intermediate Range  Combat System,  and


1/   "Firancial Status of Major Ac3uisitions,   June 30,   1975,"
     PSAD-76-72, dated February 27, 1976.

2/ For civil agencies, acquisitions over $25 million were
   considered major.  For the Department of Defense, programs
   with research, develort,ent, test, and evaluation costs
   over $50 million or production costs over $200 million
   were considered major.

                                1
(3) the NAVSTAR Global Positioning System which has a joint
service program office with the Air Force as the executive
service. The Shipboard Intermediate Range Combat System and
the NAVSTAR program are subjects of separate repoLts.

     We presented the results of our review of the three
programs during August 24, 1976, hearings before Ntte Subcom-
mittee on Federal Spending Practices, Efficiency, and Open
Government. de observed that implementation of the Commis-
sion's plan, as outlined in the Office of Management and
Budget circular, will require improvements in several areas:

     -- Executive agencies have to understaid that under the
        new acquisition process mission area deficiencies
        must be determined and stated independently of any
        specific system solution. This will enable agency
        heads and the Congress to make decisions based on a
        clear understanding of the mission deficiency and
        need for new systems.
     -- Effort allowed under the tecnnology base requires
        redefinition so that solutions to mission needs are
        not dictated by in-house efforts but result from com-
        petition between alternative solutions.

     -- Industry must be given greater flexibility to propose
        a wide range of alternative solutions to mission area
        deficiencies in responding to Government requests.
SCOPE OF REVIEW

     Our review covered only the Commission's first six recom-
mendations. To determine the evolution of the selected pro-
grams, we conferred with officials of OSD, military department
headquarters, program offices, and selected contractors. We
reviewed available correspondence; reports; briefing charts;
contracting documents; and planning, programing, and budgeting
system documents.

     We did not evaluate the conclusions reached or decisions
made in the programs' evolution. Rather, we compared the
programs with the major system acquisition plan envisioned by
the Commission and the Office of Management and Budget circu-
lar on major system acquisitions.

     Formal comments were not obtained from DOD on this re-
port. However, OD and Army officials reviewed the report
and generally agreed with its findings and conclusions.
Comments of these officials have been incorporated.

                              2
                          CHAPTER 2
            COMMISSION ON GOVERNMENT PROCUREMENT

     The Commission on Government Procurement's recommenda-
tions on major system acquisitions called for:

     -- Establishing a common plan for conducting and control-
        ling all acquisition programs. The plan should high-
        light the key decisions for all involved organizations:
        the Congress, agency heads, agency components, and the
        private sector.

     -- Defining each organization's role so it can exercise
        proper responsibility and control over acquisition pro-
        grams.

     -- Providing the Congress and agency heads with the infor-
        mation needed to make key program decisions and commit-
        ments.

     The plan forms a structure applicable to programs of all
agencies. The recommendations were not designed to be selec-
tively applied to the acquisition process but, rather, to be
used together to improve the entire acquisition process.

     Specific actions called for in the early stages of the
process were:

    -- Agency components (such as the Army, Navy, and Air
       Force) would submit their perceptions of mission
       deficiencies to their agency head (such as the
       Secretary of Defense).

    -- The agency head would reconcile a perceived need with
       overall agency mission capabilities and, if there was
       agreement that a need existed, would (1) set initial
       cost, time, and capability goals and (2) direct one or
       more agency components to respond to the need.

    -- An agency component would establish a program office
       and solicit proposals from industry for conceptual
       solutions to the stated need.

    -- Industry would respond to the solicitation with pro-
       posed syste.ms.

    -- The agency budget request and the congressional authori-
       zations for front-end research and development would
       be by mission purpose rather than by individual items.


                              3
      -- The agency head would allocate ful'ds
                                               to agency com-
         ponents for the proposed systems.
      -- The agency component would fund selected
         systems using annual fixed-level funding alternative
         ing their progress each year.            after review-

      -- Industry would explore 1/ the selected
                                                systems within
         the established funding goals.
      -- The agency components would choose
                                             systems for com-
         petitive demonstration on the basis
                                              of this explora-
         tion.
      -- The agency head would specifically
                                            approve the com-
         petitive demonstration
      As an exception, agency head approval
 if the agency component determined         would be required
                                    it should concentrate
 development resources on a single system.

     The following chart from the Commission's
the interaction of the Congress, agency        report shows
nents, and the private sector in the    heads, agency compo-
acquisition plan.                    recommended major system




1/ As used by the Commission, "exploring
   consists of the study, design, and    alternative systems"
                                      development effort
   occurring between agency head direction
                                           for a component
   to respond to a need statement and
                                      the selection of systems
   for competitive demonstration.


                              4
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                         CHAPTER 3

                  THE PERSHING II PROGRAM

     The original Pershing system is a mobile, surface-to-
surface ballistic missile system with nuclear warheads and
a selective range. The system was deployed in Europe in 1963
to provide a medium-range nuclear capability to support the
Field Army.
     A 1964 Office of the Secretary of Defense study concluded
that Pershing was better suited than another option 1/ for the
theater quick-reaction alert mission. 2/ This study resulted
in Pershing being assigned the quick-reaction alert mission
ar' the Pershing Ia being developed to make the system more
suitable for that mission. Pershing Ia was deployed in 1969.
Changes co the basic system included the modernization of
ground support equipment and more launchers per battalion.
The system has three alternate warheads and slightly better
accuracy than the original Pershing system.

     The Pershing II system, now in advanced development, is
to be a modular improvement to the Pershing Ia. The improve-
ments involve replacing the warhead and guidance and control
section with new nuclear warheads and a terminally guided
reentry vehicle. Pershing II will have the same range but
a radar area correlation terminal guidance system 3/, now
being developed, will provide greater accuracy. Several war-
heads are being considered for the system. The program cost
estimate is $1 billion. In June 1978 the Defense Systems
Acquisition Review Council (DSARC) II is scheduled to consider
whether the system should enter engineering development.
     Appendix I is a detailed presentation of the evolution
of the Pershing II program.


1/ Specific data on the second option is classified.

2/ Quick-reaction alert refers to the capability to attack
   preassigned, high-threat, -ime-sensitive, fixed targets
   immediately.

3/ Before launch, a reference scene of the target area is
   inserted into the reentry vehicle. During the powered
   portion of the missile flight and immediately after re-
   entry, an jnertial navigation system is used for guidance
   correction,   After reentry, the onboard radar begins to
   scan the target area, comparing each "picture" with the
   previously inserted reference scene, leading to appropriate
   guidance corrections.
                             6
                          CHAPTER 4

           COMPARISON OF THE PERSHING II EVOLUTION

            WITH THE COMMISSION'S RECOMMENDATIONS

     On the basis of our comparison of the evolution of the
Pershing II with the Commission's first six recommendations,
we believe that the program is not similar to the Commission's
plan and that it is characteristic of the acquisition process
the Commission was trying to reform. It should be noted,
howeverr that (1) most events in the front end of the Pershing
II evolution occurred before the Commission's December 1972
report and (2) the Pershing II evolution was generally con-
sistent with then-existing Army and Department of Defense
regulations.
     The following sections present our comparision.
STARTING AND COORDINATING PROGRAMS

     "Recommendation 1. Start new system acqui otion pro-
     grams with agency head statements of needs and goals
     that have been reconciled with overall agency capa-
     bilities and resources.

     (a)   State program needs and goals independently of
           any system product. Use long-term projections
           of mission capabilities and deficiencies prepared
           and coordinated by agcncy component(s) to set
           program goals that specify:

           (1) Total mission costs within which new systems
               should be bought and used.
           (2! The level of mission capability to be achieved
               above that of projected inventories and exist-
               ing systems.

           (3) The time period in which the new capability
               is to be achieved.

     (b)   Assign responsibility for responding to statements
           of needs and goals to agency components in such a
           way that either:

           (1) A single agency component is responsible
               for developing system alternatives when
               the mission need is clearly the responsi-
               bility of one component; or



                              7
               (2) Competition between agency components is
                   formally recognized with each offering
                   alternative system solutions when the
                   mission responsibilities overlap."

     The Commission envisioned that an agency component, such
as a military service, would submit long-term projections of
mission capabilities and deficiencies to the agency head for
review. The agency he.d would then have these projections
reconciled with overall agency resources and capabilities.
bcw major system acquisition programs could start in accor-
dance with the first recommendation if the agency head agreed
that a deficiency existed. This agreement was to include a
statement of needs and goals which did not call for a specific
solution and was to occur before identification and explora-
tion of specific system alternatives.

     In accordance with the then-existing major acquisition
development process, the Army defined the Pershing II concept
as its solution to the stated mission deficiency before Office
of the Secretary of Defense approval was formally given to the
acquisition program. North Atlantic Treaty Organization (NATO)
and OSD documents in 1970-72 dealt with the general need
Pershing II is addressing (such as improved accuracy, lower
collateral damage, and an earth penetrating warhead), but
these statements did not constitute Secretary of Defense
approval of a new system acauisition program or cortain the
specific mission capability and cost and schedule goals called
for by recommendation 1.

     Also, Army effort beginning in 1970 focused on a surface-
to-surface missile solution to the mission need rather than
considering different technological approaches.
Identi ifyin    the need

     The need the Pershing II is addressing resulted from a
1967 NATO change in tactical nuclear weapons strategy. The
development concept paper (DCP) following DSARC I (see p. 22),
states that arguments against Pershing II precluded a complete
endorsement at tnat time. Arguments for the system, however,
were considered sufficient to justify an advanced develop-
ment program as an option for future force modernizations.
These issues will be considered at DSARC II before entering
full-scale developmient.

Selecting a spcific system solution

     The Commission stated that current DOD policy delegates
the responsibility for deciding needs and goals to each mili-
tary service. The services define needs and goals in terms


                                  8
of specific hardware instead of the mission. The result
been pressure to stick to a single-system approach withouthas
adequately considering alternatives.
     This policy was reflected in the Pershing II evolution.
A 1970 unsolicited proposal from the Pershing prime contrac-
tor was to design and fabricate a radar area correlation
                                                          guid-
ance system and to flight test the system using the Pershing
                                                               Ia.
     In February 1971 the Pershing project manager confirmed
with the major U.S. commanders in Europe, where Pershing
                                                          Ia is
deployed, that Pershing needed improved accuracy and reduced
nuclear yield. The project mpnager prepared the Pershing
Alternatives Plan, which described and recommended methods
improve the Pershing system's capabilities. Subsequent Armyto
contracts with the Pershing prime contractor were for a
                                                         radar
area correlation terminal guidance system.

     The Secretary of Defense was not involved in the P
II evolution as he would be under the Commission's plan rshing
                                                         in
terms of reconciling perceived needs agairst overall ayency
resources before developinrg ahe system concept and assigning
responsibility for pursuing the new capability. A step
                                                         was
made in this direction, however, much later, when the Army's
Deputy Cnhief of Staff of Operations insisted on an Air Force
review of the Army's draft DCP. He said that he would not
support a recommendation to forward the DCP to OSD unless
                                                           it
was referred to the Air Force to resolve the need for the
system on a mission-area basis. This occurred, however,
before approval of advanced development for the Pershing just
                                                          II.
     The Commission opposed allowing agency components to
make early selection of a specific system solution because
it felt the needs and goals perceived by the agency compo-
rent would be shaped by the component's views of missions
and priorities and would not necessarily coincide with the
views of other components or the agency head. According
the Commission, results could be destructive interagency to
rivalry, overlaps in mission capabilities, and the use of
old technology weapons rather than exploring the benefits
and costs of new technologies.
CONGRESSIONAL REVIEW OF NEEDS AND GOALS

    "Recommendation 2. Begin congressional budget proceed-
    ings with an annual review by the appropriate committees
    of agency missions, capabilities, deficiencies, and the
    needs and goals for new acquisition programs as a basis
    for reviewing agency budgets."



                             9
     Past DOD budget requests, including requests for fund-
ing the effort leading to the Pershing II program, have not
been presented under a mission-area format. 1/ The 1974
Congressional Budget Act requires that starting with tie
fiscal year 1979 budget request, the President's budget
will contain descriptive information in terms of national
needs, agency missions, and basic programs.

     Funding for the initial Army effort leading to the
approved Pershing II program was Inder a radar arep corre-
lation project in the terminal homing systems program element
in the fiscal year 1972-75 budget.. The Pershing II program
element did not appear until the fiscal year 1975 budget re-
quest. Congressional review of the budget requests was on a
line-item basis rather than as part of a mission-area review.
     The Commission stated that the Congress cannot effec-
tively review expenditures and the allocation of national
resources without clearly understanding the needs and goals
for new programs. It continued that the needs and goals for a
pr)gram are presented to the Congress when a single system is
proposed, with cost, schedule, and performance estimates often
predicated on insufficient re:search and development. At this
point, the cost tc meet a mission need is largely determined
by the cost of the new system, not the worth of the new
mission capability compared to other alternatives.
     The Congress should have an early opportunity to (1)
understand and debate an agency's mission needs and goals for
new acquisitions and (2) discuss the relationship of proposed
mission capabilities to current national policy and the al-
location of resources in accordance with national priorities.

TECHNOLOGY BASE

     "Recommendation 3. Support the general fields of knowl-
     edge that are related to an agency's assigned responsi-
     bilities by funding private sector sources and Government
     in-house technical centers to do:

     (a) Basic and applied research.
     (b) Proof of concept work.



1/ We are currently :eviewing research and development budget
   formulation to compare actual budget formulation for
   selected projects in various executi-e agencies with the
   Commission's recommiendations affecting budget formulation.
   lWe hope to report 3n this review in January 1977. Persh-
   ing II is one of the programs being reviewed.
                              10
     (c) Exploratory subsystem development.

     Restrict subsystem development to less than fully
     designed hardware until identified as part of a system
     candidate to meet a specific operational need."

     The Commission sought to make an agency's technology
base better serve new programs by (1) controlling how far
projects are taken within the base and (2) giving the base
greater access in offering new system alternatives. The
recommendation is Affected to-ward the total technology base
efforts of an executive agency. It is related to the budget
reform of recommendations 2 and 5 in that the Commission felt
a separate appropriation category should be established for
technology base effort.
     We did not review the DOD technology base. We believe,
however, that under the Commission's plan, effort in the
radar area correlation contracts leading to the OSD-approved
program would have been made after an OSD decision to start
a new system acquisition effort (recommendation 1).

     A January 1972 contract with .,e Pershing prime con-
tractor was for (1) advanced development of the radar area
correlation guidance system and (2) demonstration through
captive flight tests on a helicopter that the guidance system
could achieve the required Pershing II accuracy under static
conditions. This effort was aimed at improving the accuracy
of the Pershing but was not identified as part of a major
acquisition effort even though the Army had approved the
Pershing Alternatives Plan in October 1971. The Pershing II
program did not appear as a line item until the fiscal year
1975 budget request.

CREATING NEW SYSTEMS

     "Recommendations 4.   Create alternative system candidates
     by:

     (a) Soliciting industry proposals for new systems
         with a statement of the need (mission deficiency);
         time, cost, and capability goals; and operating
         constraints cf the responsible agency and compo-
         nent(s), with each contractor free to propose system
         technical approach, subsystems, and main design
         features.

     (b) Soliciting system proposals from smaller firms that
         do not own production facilities if they have:



                             11
           (1) Personnel experienced in major development
               and production activities.
           (2) Contingent plans for later use of required
               equipment and facilities.

     (c)   Sponsoring, for agency funding, the most promis-
           ing system candidates selected by agency compo-
           nent heads from a review of those proposed, using
           a team of experts from inside and outside the
           agency component development organization."

     The Army has been expioLin- e single-system solution to
the stated mission need. This      o-ration began with fund-
ing of the Pershing prime conr  . or's 1970 unsolicited
proposal to study the use of rbaar area correlation terminal
guidance on the Pershing Ia.

     The Army did not solicit irJustry proposals to create
alternative system candidates. 1/ After the Pershing II con-
cept had been defined, the Army-Missile Command in 1971 and
the Pershing II Special Task Force in 1973 identified and
evaluated alternative system candidates. They recommended
Pershing II as the alternative with the best technical ap-
proach. The Pershing II missile system is now being developed
as a modular improvement to the Pershing la by the Pershing
development contractor. Consequently, rather than several
alternatives being explored, a single solution is being devel-
oped under sole-source contracts.

      Within the Commission's plan, on the other hand, commit-
ment to system concept, technical approach, and design would
be delayed and alternative system candidates would be explored
as relatively inexpensive insurance against the possibility
that a premature choice would later prove to be a poor and
costly one. The Commission's report states that the combined
pressures of (1) limited resources to explore alternatives
and (2) the requirement that the military services defend a
system before large-scale resources are committed induce the
services to focus prematurely on one technical approach.
Military services advocate specific methods and approaches to
meet their responsibilities on the basis of past operational
experience. For     :ample, the Air Force solution to the need
being addressed by Pershing II might be based on weapons
Dcelivered by aircraft.


1/ Alternative system candidates, an defined by the Commis-
   sion would have different design approaches, thereby pro-
   viding different performance features, effectiveness levels,
   and costs of acquisition and ownership.
                               12
      Single-system development in a major system acauis'tion
 would be permitted as an exception to the Commission's plan
 when
      --urgent needs could not be met if time were taken to
        explore alternative systems or

      -- needs and goals would require major systems so phys-
         ically and financially massive that no one contractor
         (or team of contractors) would be able to marshal,
         consolidate, and manage all the necessary talents and
         resources to compete.

     Even in these instances, however, specific Secretary of
Defense approval would be required. Considering the nature
of the Pershing II program, including the lack of agreement on
the need for the system (see p. 22), we believe it would
not meet the Commission's criteria for single-system
development. The low funding levels in the program's early
years do not suggest the urgency described by the Commission
or a sufficiently large funding requirement to rule out com-
petitive development.
CONGRESSIONAL REVIEW OF SYSTEM EXPLORATION

     "Recommendation 5.   Finance the exploration of alternative
     systems by:

     (a) Proposing agency development budgets according to
         mission need to support the exploration of alter-
         native system candidates.
     ;b) Authorizing and appropriating funds by agency mission
         area in accordance witn review of agency mission
         needs and goals for new acquisition programs.

     (c) Allocating agency development funds to components
         by mission need to support the most promising system
         candidates. Monitor components' exploration
         alternatives at the agency head level through cf
                                                        annual
         budget and approval reviews using updated mission
         needs and goals."

     The Commission stated that

     "Congress has difficulty overseeing the growina expendi-
     tures for agencies' R&D [research and development]
     budgets; its intensified demands for information and
     justification leaves Congress burdened with detailed
     reviews that obscure the overall pattern."
The Commission added that the Congress could better understand
where research and development money is spent if it reviewed,
                              13
authorized, and appropriated funds for exploring candidate
systems according to mission.
     This approach would segregate funds for (1) maintaining
the technology base, (2) exploring alternative solutions to
mission needs, and (3) developing the selected systems. Funds
to explore alternative solutions would group together all
development projects associated with the alternatives to
meet each agency mission need.

     Specific advantages listed for this approach were (1)
reduced pressure to make premature commitments to a particular
system to gain funding approval, (2) greater executive branch
flexibility to explore alternative systems and to cope with
uncertain systems, and (3) more effective congressional review
of major system acquisition programs.
     Previous comments under recommendation 2 apply to this
section also. Budget requests, authorizations, and appro-
priations have not been made by mission area.
     Efforts leading to the Pershing II programn have been
financed according to current appropriation procedures.
Funds for the program have been requested in the advanced
development section of the Army's research and development
budget for missiles and related equipment. In fiscal years
1972-75, funds were requested under radar area correlation.
For fiscal years 1975-77, funds have been requested under
Pershing II. Both program elements were submitted and
reviewed on a line-item rather than a mission-area basis.

REINSTATING MEANINGFUL COMPETITION

     "Recommendation 6. Maintain competition between contrac-
     tors exploring alternative systems by:
     (a) Limiting commitments to each contractor to annual
         fixed-level awards, subject to annual review of
         their technical progress by the sponsoring agency
         component.
     (b) Assigning agency representatives with relevant
         operational experience to advise competing contrac-
         tr-s as necessary in developing performance and
         other requirements for each candidate system as
         tests and tradeoffs are made.

     (c) Concentrating activities of agency development
         organizations, Government laboratories, and
         technical management staffs during the private
         sector competition on monitoring and evaluating

                             14
        contractor development efforts, and participating
        in those tests critical to determining whether the
        system candidate should be continued."

     As stated earlier, alternative system solutions to the
stated mission need are not being explored; the Army is pursu-
ing a single-system solution.

     Th- Commission stated that effective competition in system
acquisition is often precluded when the Government makes early
design decisions on the best approach. The Commission believed
that important benefits could result from allowing competitors
to be independently responsible for the evaluation of their
systems by:

     -- Reinstating a competitive challenge to industry to use
        a wider span of technologies for simpler, less expensive
        system solutions.
     -- Creating incentives that encourage economy and austerity
        in development because, unlike in sole-source situations,
        competitors can be motivated to achieve austerity in
        system design and system design activities.
     -- Restoring the integrity of contracts, with each contrac-
        tor fully responsible for designing the system contained
        in its proposal. Ultimately, system demonstration
        should determine the success or failure of a contrac-
        tor's approach and there should be a sound banis for
        negotiating a production contract.

     This wider latitude for contractors to propose and explore
system alternatives would, according to the Commission, be
balanced by technical competition among them.




                              15
APPENDIX I                                          APPENDIX I

             EVOLUTION OF THE PEPSHING II PROGRAM

     The Pershing II concept, including the need for the sys-
tem and the technology to be incorporated into the system,
evolved in the late 1960s and early 1970s. The need being
addressed by Pershing II resulted in 1967 from a North At-
lantic Treaty Organization change in tactical nuclear weapons
strategy to that of having the capability for a flexible re-
sponse to an attack. The nature of the change is classified
and is excluded from this report.
     The Pershing II system, directed toward resolving the
need, evolved from several studies and actions beginning
shortly after NATO approved the strategy of flexible response.

      In February 1969 the Office of the Secretary of Defense's
Ad~vl-;ed Research Projects Agency awarded a 6-month, $150,000
contract to the Pershing Ia prime contractor to study alter-
native weapon systems that could be operational during the
next decade and beyond to perform certain missions. The re-
sulting September 1969 report concluded that a tactical inter-
diction missile appeared to be more practical and cost effec-
tive than other options considered.

     The conceptual tactical interdiction :issile identified
in this study would, in its mobile concept, operate much like
the Pershing and would include a radar area correlation ter-
minal guidance system to provide accuracy comparable to
Pershing II's. The study recommended that the radar area
correlation terminal guidance system be demonstrated as soon
as possible.

     Accordingly, in February 1970 the contractor submitted
an unsolicited proposal to the Army Missile Command for a
radar area correlation terminal guidance development program.
The program was to establish the feasibility and operational
effectiveness of a terminally guided reentry vehicle system
for potential use in a Pershing Ia-type mission. The pro-
posed development program was to consist of conceptual
studies, design and fabrication of a radar area correlation
terminal guidance system, and flight testing of the guidance
system using modified Pershing Ia missiles. Generally, this
is the type of development being carried out in the Pershinc
II program.
     A February 1971i Army study stated that improved accuracy
for Pershing, coupled with a low-yield, earth-penetrating


                               16
APPENDIX I                                        APPENDIX I
nuclear warhead, would offer a major tactical advantage in
Europe. The study said that these potential characteristics
of Pershing suggest that it might be no longer used for mass
destruction and instead be considered for selective use
against operating bases for fighters and bombers.

     Also in February 1971, the Pershing project manager con-
firmed with the major U.S. commanders in Europe where Pershing
Ia is deployed that the Pershing improvements were needed.
Subsemrently, the Pershing project office, along with U.S.
Army Europe, and the U.S. Army Combat Development Command (now
part of the Training Doctrine Command), prepared the Pershing
Alternatives Plan, which described and recommended methods to
achieve the improved capabilities.
INITIATING THE PERSHING II PROGRAM

     Several actions during 1971 led to the conceptual Persh-
ing II program. These included the (1) fiscal year 1972
budget request for $5.5 million for advanced development of
radar area correlation guidance, (2) initial contract award
for radar area correlation in May 1971, (3) completion of the
Pershing Alternatives Plan in July 1971, and (4) official
Army approval of the Pershing II program conceptual phase in
October 1971 based on recommendations contained in the alter-
natives plan.

Budget request for radar
area correIatToneTFforb

     The radar area correlation effort leading to Pershing II
first appeared in the fiscal year 1972 budget reauest to the
Congress as a project entitled radar area correlation under
the terminal heming systems program element. This program
element was included in the advanced development section of
the Army's research and development budget reauest for mis-
siles and related equipment.

Initial radar area
correlation contract

     In May 1971 the Army Missile Command awarded the initial
contract for preliminary design efforts on a guidance system
which is now part of the Pershing II concept. The contract
was awarded on a sole-source basis to the Pershing prime con-
tractor for $500,000. The contractor was to establish the de-
sign requirements for and the preliminary design of the radar
area correlation guidance system to demonstrate the performance
of a terminally guided ballistic missile. The contractor was
selected on a sole-source basis because (1) it designed and

                              17
APPENDIX I                                              APPENDIX I


developed the Pershing missile system, (2) the contract
required system-oriented personnel with intimate knowledge
of the Pershing system, and (3) the Goernment had already
paid the high starting and learning costs included in this
procurement.

Comrletion of the
Pershing Alternatives Plan

     In July 1D71 the Pershing project office completed the
alternatives plan. The plan was to determine

     -- whether requirements would exist in the 1980s for such
        a system,

     -- how well other existing systems could fill the require-
        ments,

     -- how well Pershing could fill the requirements, and

     -- whether modular improvements to Pershing would be
        economical.

     The plan concluded that (1) requirements exist for a
Pershing-type system, (2) the Pershing has characteristics
similar to those needed to fill the requirements, and (3)
modular improvements to Pershing could greatly increase system
and cost effectiveness. The plan recommended that:

     -- The radar area correlation program be continued as a
        Pershing advanced development program.

     -- A terminally guided reentry vehicle (using the Pershing
        la first and second stages) be developed and procured
        after the successful demonstration of the radar area
        correlation terminal guidance.

     -- An earth-penetrating nuclear warhead and appropriate
        conventional munitions be developed for the terminally
        guided reentry vehicle.

     Improving the i;iertial guidance system components was
identified as a way to increase Pershing accuracy but was not
recommended since such   improvements   could not   provide accuracy
as great as the radar area correlation terminal guidance sys-
tem.




                                18
APPENDIX I                                       APPENDIX I

A Epoval of the Persh ing II   r_g9ra
     In October 1971 the Army approved the requirements for a
system with the capabilities of Pershing II by approving the
Pershing Alternatives Plan. The Army then requested thie
Missile Command to prepare a system development plan and a
draft development concept paper for Pershing II and to co-
ordinate the development of nuclear warheads for Pershing II
with the Atomic Energy Commission and the Army Combat Develop-
ment Command. In addition, the Combat Development Command was
requested to forward a materiel need statement for Pershing II
to Army for approval not later than December 1971. After Army
approval, the Missile Command extended the $500,000 radar area
correlation design contract through December 1971 for an addi-
tional $100,000 to initiate the hardware proqram.

     The Pershing II-type improvements approved by Army were
also included in Department of Defense guidance documents
dated December 1971 and February 1972. These documents stated
that (1) an earth-penetrating warhead was required and could
be carried on a modified Pershing system and (2) tactical
nuclear weapons should be developed to improve accuracy and
reduce collateral effects.

DEVELOPMENT EFFORT AFTER PROGRAM APPROVAL

     DOD's fiscal year 1973 budget request was presented to
the Congress in early 1972. The Army reauested $6 million for
radar area correlation effort in the terminal homing systems
program element of the advanced development section of the
Army's research and development budget for missiles and related
equipment.

     In January 1972 the Army Missile Command awarded a 2-
year, $10.5 million sole-source contract to the Pershing prime
contractor for (1) advanced development of the radar area cor-
relation guidance system and (2) a baseline definition for
advanced development of the reentry vehicle. This contract
was to demonstrate through captive flight tests on a helicopter
that the guidance system could achieve the required Pershing
II accuracy under static conditions.

     In April 1972 the Combat Development Command submitted
the Pershing II draft materiel need statement reauested by
Army, and the Missile Command submitted the Pershing II system
development plan. In May 1972 the increasing Army activity
related to Pershing II prompted a request from DOD's Deputy



                                19
APPENDIX I                                        APPENDIX I
Director of Defense Research and Engineering for the Army
to prepare a DCP. The DCP is used for DOD's Defense Systems
Acquisition Review Council review and the later Secretary of
Defense decision to begin or continue a system development
program.
     In January and February 1973 OSD documents provided addi-
tional guidance for developing tactical nuclear weapons. These
documents identified needed improvements but did not identify
the specific level of capability needed above existing systems.
The documents also identified planned Pershing improvements.

CHANGE IN THE ARMY'S ACQUISITION PROCESS

     In July 1972 the Army established new guidelines for major
systems acquisition. These guidelines called for establishing
a required operational capability (ROC) need statement as the
first step in system development. After ROC acproval, an all-
Army special task force would be created to investigate alter-
native system designs and to recommend an approach to fulfill
the _1,'em need.  The spe-ial task force would prepare:
      --. concept formulation package (consisting of a trade-
         off determination, trade-off analysis, best technical
         approach, and cost/operational effectiveness analysis).

      -- A development plan.

      -- A draft DCP for consideration by the Army Systems
         Acquisition Review Council (ASARC).

     The Army selected Pershing II as the first major program
that would be developed and procured using the new system ac-
quisition guidelines. Accordingly, the Army restructured the
Pershing II draft materiel need statement into a ROC need
statement. In October 1972 the Army approved the ROC and es-
tablished a special task force to investigate alternative sys-
tem designs.

     The Pershing II Special Task Force convened in January
1973 and prepared its final report in April. The task force
director was a former commander of the 56th Field ArtilleLy
Brigade, U.S. Army, Europe, and the deputy director was the
Pershing project manager. The task force was composed of 19
Army personnel representing (1) the Materiel Command (includ-
ing the Missile Command and the Pershing project office), (2)
the Combat Development Command, (3) the Continental Army
Command, (4) U.S. Army, Europe, and (5) Department of the Army
staff.

     The task force, as required by the new system acquisition
guidelines, made trade-off determinations and trade-off
                               20
 APPENDIX I                                        APPENDIX I

 analyses to determine the best technical approach to fill
                                                           the
 system need for Pershing II. The cost and operational effec-
 tiveness of the recommended approach was then compared with
 ether weapon systems which might satisfy the Pershing II
 ROC characteristics.
     The task force identified and investigated 20 alternative
guidance system approaches and 2 system approaches to fulfill
the system need. The system approaches were to (1) develop
new missile system or (2) modify the Pershing Ia. Modifica- a
tion of the Pershing Ia system was selec'ed because it was
much cheaper.

     Radar area correlation was selected as the guidance
proach because it was the most accurate and thus was most ap-
likely to minimize civilian collateral damage. In addition,
it was considered to have better all-weather capability
                                                         and
distinct tactical operational advantages.
     The cost and operational effectiveness of this approach
was compared with several existing and conceptual surface-to-
surface missile systems and aircraft-delivered weapon systems
for the selective-release, general-strike, and general-support
missions, envisioned for Pershing II. The task force concluded
that Pershing II was the best alternative weapon system to
meet the broad requirement; of the three missions.
 PROGRAM APPROVAL BY OSD

     During 1971 and 1972 the Army and OSD established new
system acquisition guidelines, which provided for preparing
a DCP for ASARC and DSARC members to review. The ASARC
                                                        and
DSARC meetings provide top-level reviews of a weapon system
before the Secretary of Defense decides whether to initiate
or continue development of that system.

     The initial ASARC review for Pershing II was scheduled
for May 1973--a month after the task force completed its
                                                          final
report. The ASARC was held in October 1973, however, because
of internal differences the Army encountered while coordinat-
ing the DCP. Specifically, the Deputy Chief of Staff for
ations said that he would not support a recommendation     Oper-
                                                       to for-
ward the DCP to DOD unless the DCP was referred to the
                                                       Air
Force to resolve the need for the system on a mission-area
basis and to identify trade-offs between Army and Air Force
capabilities which introducing the Pershing II would permit.
As a result, the Army Chief of Staff referred the Pershing
DCP to the Air Force for comment by October 1973.           II

     An Air Staff Ad Hoc Study Group reviewed the Pershing
                                                           II
                              21
APPENDIX I                                        APPENDIX I

DCP. It agreed with the stated ne' Pershing II is ad-
dressing but disagreed that Pershing II was the best ap-
proach to satisfy that need. The Pershing II Special Task
Force director reviewed the study group's report and pointed
out factors used in the Air Force analyses which he felt were
incorrect and would. if corrected, result in a conclusion
supporting Pershing II. He concluded that Pershing II was
needed because of its utility and the flexibility it would
provide.
     The Army DCP was then sent to OSD on November 1. 1973.
After the OSD staff review and comment on the DCP. DSARC I
was held on January 22, 1974. to consider approval of the
Pershing II system for advanced development.

     As reflected in tha DCP, the DSARC considered five basic
issues related to Pershing II:

     --Are the proposed changes and role of Pershing II con-
       sistent with DOD policy for theater nuclear forces?

     -- Should the United States continue to maintain a long-
        range surface-to-surface missile as part of the
        theater nuclear forces?

     -- What is the role of Pershing II and will it have
        significant potential value to NATO?

     -- Does Pershing II fill the need better than other
        alternatives?

     -- Is the proposed technical approach the best way to fill
        the need?

     The DCP presents arguments for and against the proposed
changes and role of Pershing II in theater nuclear forces.
The arguments precluded a complete endorsement for the de-
ployment of the Pershing TI system at that time. However.
arguments for the system were considered suificient to jus-
tify the initiation of the advanced developm,:it program as
an option for future force modernization.

     On March 7. 1974. the Deputy Secretary of Defense author-
ized the Army to proceed with the Pershing II advanced devel-
opment program, as it was presented to DSARC.  In his program
decision. he said the system's technical performance and the
requirement for Pershing II in light of emerging nuclear policy




                              22
APPENDIX I                                       APPENDIX I

were major issues to be resolved. Therefore, he said the
Army should be prepared at DSARC II, scheduled for June 1978,
to show (1) how development and deployment of Pershing IX
would implement theater nuclear policy and (2) its need
and worth relative to other alternatives.
PERSHING II ADVANCED DEVELOPMENT

     In early 1974 the fiscal year 1975 budget request was
presented to the Congress. For the first time Pershing II
appeared as a line item or program element in the Army's
budget request for advanced development of missiles and
related equipment. For fiscal year 1975 the Army reaqucted
$12 million to complete its radar area correlation efforts
and $11.2 million to begin developing Pershing II.

     In February 1974, a month after the DSARC review, the
Army awarded to the Pershing prime contractor the third
sole-source contract associated with the Pershing II
program. This contract provides for verification of
the guidance system under dynamic conditions and an option
for the advanced development of the Pershing II system.
This program is to culminate with flight tests of the
terminally guided reentry vehicle. The contract, which
is st4ll active, is scheduled for completion in January
1978 at a total cost of $68.1 million.

     The DSARC II review is scheduled for June 1978 to con-
sider whether the Pershing II system should enter engineering
development.




                             23
APPENDIX II                                           APPENDIX II


          PRINCIPAL DEPARTMENT OF DEFENSE OFFICIALS
                 RESPONSIBLE FOR ADMINISTERING

              ACTIVITIES DISCUSSED IN THIS REPORT
                                             Tenure of office
                                             Prom             0



SECRETARY OF DEFENSE:
    Donald H. Rumsfeld                Nov.     1975    Present
    William P. Clements, Jr.
      (acting)                        Nov.     1975    Nov.       1975
    James R. Schlesinger              July     1973    Nov.       1975
    William P. Clements, Jr.
      (acting)                        May      1973    July       1973
    Elliot L. Richardson              Jan.     1973    May        1973
    Melvin R..Laird                   Jan.     1969    Jan.       1973


DEPUTY SECRETARIES OF DEFENSE:
    Robert Ellsworth                  Dec.     1975    Present
    William P. Clements, Jr.          Jan.     1973    Present
    Kenneth Rush                      Feb.     1972    Jan. 1973
    Vacant                            Dec.     1971    Feb. 1972
    David Packard                     Jan.     1969    Dec. 1971


DIRECTOR, DEFENSE RESEARCH AND ENGINEERING:
    Malcolm R. Currie               June 1973          Present
    John S. Foster, Jr.              ct. 1965          June 1973


SECRETARY OF THE ARMY:
    Martin R. Hoffmann                Aug.     1975    Present
    Howard H. Callaway                May      1973    July 1975
    Robert F. Froehlke                July     1971    May   1973
    Stanley R. Resor                  July     1965    June 1971




                                 24