Since 2003, DOD’s portfolio of major defense acquisition programs has  grown from 77 to 96 programs and its investment in those programs has  grown from $1.2 trillion to $1.6 trillion (fiscal year 2009 dollars). The total  cost growth for DOD’s portfolio of major defense acquisition programs is  higher than it was 5 years ago, but at $296 billion, it is actually less than  the 2007 portfolio’s cost growth of $301 billion. For DOD’s 2008 portfolio  of programs, total research and development costs are 42 percent higher  than originally estimated, and the average delay in delivering initial  capabilities is 22 months. What Needs to Change? As illustrated  in figure 1 below, collectively, these processes create pressures to promise  high performance, keep cost estimates low, and proceed with calendar- driven versus knowledge-driven schedules. DOD’s processes for identifying warfighter needs, funding programs, and  developing and procuring weapon systems—which collectively define  DOD’s overall weapon system investment strategy—do not work together  to provide the best value to the warfighter and to the taxpayer. At the individual program level, a military service  typically establishes and DOD approves a business case containing  requirements that are not fully understood and cost and schedule  estimates that are based on optimistic assumptions rather than on  sufficient knowledge. However, it does not adequately prioritize  those needs from a joint, departmentwide perspective and lacks the agility  to meet changing warfighter demands. Recent and Proposed Reform Efforts Could Improve Weapon Programs

There is widespread recognition of the problems that affect the acquisition  system and DOD and the Congress have taken and proposed several steps  to remedy them. Efforts to Prioritize Needs and Manage Resources

DOD has recently implemented measures to better address the needs of  the joint warfighter and align the demand for weapon systems with  available resources. However, DOD must ensure that these changes to the acquisition  process are consistently implemented and reflected in decisions on  individual programs. Some of the key changes  being introduced by DOD and the Congress to establish knowledge-based  business cases for weapon programs include:  Increased emphasis on early systems engineering activities and the  enhancement of systems engineering capabilities within the department;    A requirement for competitive prototyping of a proposed weapon system  or key system elements during the technology development phase;    Certification that critical technologies have been demonstrated in a  relevant environment before the start of system development, employing  independent technology readiness assessments to make these  determinations;    Early milestone reviews for programs going through the pre–systems    Conducting preliminary design reviews before starting system    Requiring early cost estimates for the milestone decision to move into  technology development phase; and    Elevating the role of independent cost estimates in the acquisition process,  by establishing a director or principal advisor for cost estimating who  reports to the Secretary of Defense and the Congress. Concluding Observations on Achieving Lasting Reform

I would like to offer a few thoughts about other factors that should be  considered so that we make the most out of today’s opportunity for  meaningful change. First, I think it is useful to think of the processes that  affect weapon system outcomes (requirements, funding, and acquisition)  as being in a state of equilibrium. For reforms to work, they will have to address  these forces as well.
Why GAO Did This Study

Since 1990, GAO has designated the Department of Defense's (DOD) management of its major weapon acquisitions as a high-risk area; however DOD's problems delivering weapon systems on time, at the estimated cost, in the planned amounts, and with the promised performance go back decades. Congress and DOD have continually explored ways to improve acquisition outcomes, yet problems persist. The committee asked GAO to testify on measures needed to reform the acquisition of major weapon systems and related legislative proposals. Specifically, this statement will describe the poor outcomes on weapon system investments that make reform imperative; attributes of the requirements, funding, and acquisition processes that will need to change for reform to be effective; and positive steps that Congress and DOD have taken to improve weapon program outcomes. The statement will also examine other factors that should be considered as the committee moves forward with its reform efforts. The testimony is drawn from GAO's body of work on DOD's requirements, funding, and acquisition processes. GAO has made numerous recommendations aimed at improving DOD's management of its major weapon acquisitions, but it is not making any new recommendations in this testimony.

What GAO Found

DOD must get a better return on investment from its weapon system programs. Since fiscal year 2003, DOD has increased the number of major defense acquisition programs and its overall investment in them. The cumulative cost growth for DOD's programs is higher than it was 5 years ago, but at $296 billion (fiscal year 2009 dollars), it is less than last year when adjusted for inflation. For DOD's 2008 portfolio of programs, research and development costs are now 42 percent higher than originally estimated and the average delay in delivering initial capabilities has increased to 22 months. These problems have roots in not only the acquisition process, but also in the requirements and funding processes. Collectively, these processes create pressures to demand high performance, keep cost estimates low, and proceed with calendar-driven versus knowledge-driven schedules. These processes also do not adequately prioritize needs from a joint, departmentwide perspective, respond to changing warfighter demands, or constrain the number of programs to a level that is supportable by available resources. Programs are allowed to enter and proceed through the acquisition process with requirements that are not fully understood, cost and schedule estimates that are based on optimistic assumptions, and a lack of sufficient knowledge about technology, design, and manufacturing. Congressionally-mandated and DOD-initiated changes to the acquisition system could provide the basis for sounder programs and improved acquisition outcomes. The committee's proposed legislation dealing with requirements, systems engineering, technology and integration risk assessment, and cost estimation--also address areas in need of reform. However, past reform efforts have failed to produce lasting change. To make the most out of this opportunity, the weapons acquisition environment and the incentives inherent within it will also have to be confronted and addressed.