Since the mid-1980s, about  $107 billion has been spent, and over the next 5 years, another $49 billion  is expected to be invested. To enable MDA to field and enhance a missile defense system quickly, the  Secretary of Defense, in 2002, directed a new acquisition strategy. To carry out its mission, MDA is fielding missile defense capabilities in   2-year increments known as blocks. This block is expected to  provide protection against attacks from North Korea and the Middle East. For  example, in fiscal year 2006, funding for the nine BMDS elements  collectively accounted for 72 percent of MDA’s research and development  budget. We examined the current  status of MDA’s quality assurance program by visiting various contractor  facilities and holding discussions with MDA officials, such as officials in  the Office of Quality, Safety, and Mission Assurance. MDA Has Made Progress with Block 2006, but Scope Has Been Reduced and Costs Have Gone Up

MDA made progress during fiscal year 2006, but it will not achieve the  goals it set for itself in March 2005. One year after establishing its Block  2006 goals, the agency informed Congress that it planned to field fewer  assets, reduce performance goals, and increase the block’s cost goal. MDA is generally on  track to meet its revised quantity goals, but the performance of the BMDS  cannot yet be fully assessed because there have been too few flight tests  conducted to anchor the models and simulations that predict overall  system performance. During the first year of Block 2006, MDA continued to improve the BMDS  by enhancing its performance and fielding additional assets. For example, the  GMD element completed its first successful intercept attempt since 2002. The test was also notable because it was an end-to-end test of one  engagement scenario, the first such test that the program has conducted. With the  exception of the GMD interceptors, MDA is on track to deliver the revised  quantities. MDA also reduced the performance expected of Block 2006  commensurate with the reduction in assets. However, insufficient data are  available to determine whether MDA is on track to meet the new goal. While MDA reduced Block 2006 quantity and performance goals, it  increased the block’s cost goal from about $19.3 billion to approximately  $20.3 billion. MDA’s Flexibility Makes Oversight and Accountability More Difficult

Because the BMDS has not formally entered the system development and  demonstration phase of the acquisition cycle, it is not yet required to apply  several important oversight mechanisms contained in certain acquisition  laws that, among other things, provide transparency into program progress  and decisions. On the other  hand, MDA operates with considerable autonomy to change goals and  plans, making it difficult to reconcile outcomes with original expectations  and to determine the actual cost of each block and of individual  operational assets. Over the years, a framework of laws has been created that make major  defense acquisition programs accountable for their planned outcomes and  cost, give decision makers a means to conduct oversight, and ensure some  level of independent program review. MDA can make decisions faster than other major acquisition programs  because it does not have to wait for higher-level approvals or independent  reviews. Because MDA uses research and development funds to manufacture  assets, it is not required to fully fund those assets in the year of their  purchase. MDA considers the cost of deferred work, which  may be the delayed delivery of assets or other work activities, as a cost of  the block in which the work is performed even though the work benefits  or was planned for a prior block. MDA expanded its teaming approach in  2006 to another problem supplier and reports that many systemic solutions  are already underway. During fiscal year 2006, MDA’s audits continued to identify both quality  control weaknesses and quality control procedures that contractors are  addressing.
Why GAO Did This Study

Over the next 5 years the Missile Defense Agency (MDA) expects to invest $49 billion in the Ballistic Missile Defense (BMD) system's development and fielding. MDA's strategy is to field new capabilities in 2-year blocks. In January 2006, MDA initiated its second block--Block 2006--to protect against attacks from North Korea and the Middle East. Congress requires GAO to assess MDA's progress annually. GAO's March 2007 report addressed MDA's progress during fiscal year 2006 and followed up on program oversight issues and the current status of MDA's quality assurance program. GAO assessed the progress of each element being developed by MDA, examined acquisition laws applicable to major acquisition programs, and reviewed the impact of implemented quality initiatives.

What GAO Found

During fiscal year 2006, MDA fielded additional assets for the Ballistic Missile Defense System (BMDS), enhanced the capability of some assets, and realized several noteworthy testing achievements. For example, the Ground-based Midcourse Defense (GMD) element successfully conducted its first end-to-end test of one engagement scenario, the element's first successful intercept test since 2002. However, MDA will not meet its original Block 2006 cost, fielding, or performance goals because the agency has revised those goals. In March 2006, MDA: reduced its goal for fielded assets to provide funds for technical problems and new and increased operations and sustainment requirements; increased its cost goal by about $1 billion--from $19.3 to $20.3 billion; and reduced its performance goal commensurate with the reduction of assets. MDA may also reduce the scope of the block further by deferring other work until a future block because four elements incurred about $478 million in fiscal year 2006 budget overruns. With the possible exception of GMD interceptors, MDA is generally on track to meet its revised quantity goals. But the deferral of work, both into and out of Block 2006, and inconsistent reporting of costs by some BMDS elements, makes the actual cost of Block 2006 difficult to determine. In addition, GAO cannot assess whether the block will meet its revised performance goals until MDA's models and simulations are anchored by sufficient flight tests to have confidence that predictions of performance are reliable. Because MDA has not formally entered the Department of Defense (DOD) acquisition cycle, it is not yet required to apply certain laws intended to hold major defense acquisition programs accountable for their planned outcomes and cost, give decision makers a means to conduct oversight, and ensure some level of independent program review. MDA is more agile in its decision-making because it does not have to wait for outside reviews or obtain higher-level approvals of its goals or changes to those goals. Because MDA can revise its baseline, it has the ability to field fewer assets than planned, defer work to a future block, and increase planned cost. All of this makes it hard to reconcile cost and outcomes against original goals and to determine the value of the work accomplished. Also, using research and development funds to purchase operational assets allows costs to be spread over 2 or more years, which makes costs harder to track and commits future budgets. MDA continues to identify quality assurance weaknesses, but the agency's corrective measures are beginning to produce results. Quality deficiencies are declining as MDA implements corrective actions, such as a teaming approach designed to restore the reliability of key suppliers.