The Ballistic Missile Defense Organization (BMDO) has responsibility for the MEADS program. Because of its unique capabilities, warfighting commands with theater ballistic missile defense missions support MEADS. MEADS Presents Funding Dilemma

BMDO will be unable to acquire MEADS without impacting higher priority missile defense programs unless DOD or the Army provide additional funds. Over the next 6 years, for which BMDO is currently budgeting, the organization needs $1.4 billion to execute the planned MEADS program. Because it has had difficulty funding MEADS, BMDO is considering various program options to find a less costly acquisition program. Estimate Forecasts $3.6 Billion Design and Development Cost

In March 1998, BMDO developed, in cooperation with the Army, a cost estimate for a MEADS system that would meet Army requirements. The United States expects to pay about one-half of this amount, or $1.8 billion. The funds are expected to pay for the U.S. share of MEADS estimated research and development cost and the procurement of eight battalions of equipment. BMDO needs about $1.4 billion between fiscal years 2000 and 2005 to develop a system that meets all of the Army’s requirements. MEADS partners are aware that the United States is considering other options. However, BMDO did not fully address funding or technology transfer issues before initiating the international program and may not be able to achieve these benefits. Some U.S. and European officials suggest that the United States may be viewed as an unreliable partner if it is unable to fund MEADS. Conclusions

If MEADS is designed to meet established requirements, it will give warfighters capabilities that are not present in any existing or planned air and missile defense systems. MEADS should be able to engage a wide range of targets, be easily transported by small transport aircraft, be capable of moving cross country and over unimproved roads, and be sufficiently lethal to destroy both conventional warheads and weapons of mass destruction. DOD believes that jointly developing and producing MEADS with U.S. allies will reduce the U.S. investment in the weapon system and strengthen political ties, creating a more effective coalition force and increasing the allies’ ability to defend themselves. However, DOD does not know whether it is willing to share information to create a truly interoperable system, whether an international program can utilize existing U.S. missile system technology to its maximum advantage, how it will fund the U.S. share of the international program, or how it can alter the MEADS system or acquisition strategy to make the program affordable and acceptable to its partners. In addition, areas that warrant attention include the (1) technology that is likely to be released into the program, (2) effect that the technology’s release could have on U.S. national security, and (3) impact of a determination to withhold information on both the execution of the program and U.S. allies. DOD said that it would take steps to ensure that (1) the approval process for future international programs includes a careful assessment of long-term funding needs and technology transfer issues and that (2) security personnel are included in negotiations of international agreements.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) Medium Extended Air Defense System (MEADS) program, focusing on the: (1) unique capabilities that MEADS will add to U.S. air and missile defense; (2) development cost of MEADS and its affordability within the expected ballistic missile defense budget; and (3) impact that international development will have on MEADS cost and capability.

What GAO Found

GAO noted that: (1) if the Army is successful in meeting established requirements, MEADS will have capabilities that no other planned theater missile defense system will possess; (2) the system should defeat a wide range of threats arriving from any direction, be transportable within theater by small transport aircraft, be mobile enough to travel cross country or over unimproved roads with the maneuver force, and be sufficiently lethal to negate weapons of mass destruction; (3) acquiring MEADS will affect higher priority missile programs or the infrastructure that supports those programs unless DOD increases the Ballistic Missile Defense Organization's (BMDO) budget allocation; (4) BMDO forecasted in March 1998 that it needed about $1.8 billion for fiscal year (FY) 1999 though FY 2007 to pay its portion of MEADS' estimated $3.6-billion design and development cost; (5) in addition, BMDO will need another $10.1 billion for FY 2005 through FY 2016 to acquire eight battalions of equipment; (6) the European partners are expected to contribute about one-half of the design and development funds; (7) thus, for FY 1999 through FY 2005--the years for which BMDO is now budgeting--the U.S. cost could be reduced to about $1.4 billion; (8) BMDO has no funds budgeted for MEADS after FY 1999 and has been reviewing various program options to find a less expensive acquisition strategy; (9) DOD officials believe that a joint cooperative effort with U.S. allies is the best means of acquiring MEADS because it reduces cost, improves political ties, and builds a more effective coalition force; (10) however, DOD did not fully assess funding and technology transfer issues before initiating the international program and may not be able to achieve these benefits; (11) U.S. and European program participants said that the United States may be viewed as an unreliable partner if it cannot fund its portion of the program, which could threaten the U.S.' ability to participate in future collaborative efforts; (12) even if the United States remains in the program, it may have difficulty developing a truly interoperable weapon without sharing valuable technology; (13) the international structure may also prevent contractors from pursuing the most cost-effective system solution; (14) contractors are finding it difficult to use existing technology developed for other systems because the process for transferring U.S. information to foreign countries is slow and the United States is reluctant to transfer some critical technology; and (15) difficulties might have been avoided if security experts had been included in negotiations of the international agreement.