When MDA was established in 2002, it was granted exceptional flexibility  in setting requirements and managing the acquisition, in order that its  BMDS be developed as a single program, using a capabilities-based, spiral  upgrade approach to quickly deliver a set of integrated defensive  capabilities. However, the flexibility also came at the expense of transparency and  accountability. Specifically, a BMDS cost, schedule, and performance baseline does not  have to be established or approved by anyone outside MDA. In addition, while most major defense acquisition programs are required  by statute to obtain an independent verification of cost estimates, MDA  has only recently developed cost estimates for selected assets and plans to  work with the DOD Office of the Director for Cost Assessment and  Program Evaluation to develop independent cost estimates for more MDA  elements. Further, assessments of a system’s suitability and effectiveness  in combat have only been accomplished, with limitations, for the currently  deployed Aegis BMD weapon system. Numerous Strategy Changes Have Exacerbated Transparency and Accountability Challenges

MDA has employed at least three strategies to acquire and deploy missile  defense systems, which has exacerbated transparency and accountability  challenges. From its inception in 2002 through 2007, MDA developed  missile defense capability in 2-year increments, known as blocks, each  built on preceding blocks intended to enhance the development and  capability of the BMDS. Changing the acquisition strategy is problematic because each time it is  changed, the connection is obscured between the old strategies’ scope and  resources and the new strategy’s rearranged scope and resources. Implementing a knowledge-based acquisition strategy consistent with  DOD acquisition regulations, and ensure that items are not  manufactured for fielding before their performance has been validated  through testing. DOD has committed to take action on many of these recommenda While agreeing with our recommendations to enhance baseline reporting,  there are differences in MDA’s perspectives on such issues as sunk costs  and changes in unit cost. MDA Has Recently Made Significant Progress in Increasing Transparency and Accountability

In 2010, MDA made significant progress in implementing some of these  recommendations by finalizing a new baseline phase review process in  which the agency set detailed baselines for several BMDS elements, or  portions of elements, for the first time. Specifically, MDA established  resource, schedule, test, operational capacity, technical, and contract  baselines for several BMDS components. It reported these to Congress in  its June 2010 BMDS Accountability Report. MDA also identified three phases of development where baselines are  approved—technology development, product development, and initial  production phases—and specified the key knowledge that is needed at  each phase. In another key step, approval of the product development and initial  production baselines will be jointly reviewed by the Director of MDA and  the respective service acquisition executive, as a number of missile  defense systems are expected to eventually transition to the military  services for operation. We reported last year that MDA extensively revised the test plan to  address these concerns. We  concluded in this year’s report that it is a highly concurrent effor with significant cost, schedule and performance risk. In the  urgency to deploy assets to meet the Presidential directive to field  an initial capability by 2004, assets were built and deployed before  developmental testing was completed.
Why GAO Did This Study

In order to meet its mission, the Missile Defense Agency (MDA) is developing a highly complex system of systems--land-, sea-, and spacebased sensors, interceptors, and battle management. Since its initiation in 2002, MDA has been given a significant amount of flexibility in executing the development and fielding of the ballistic missile defense system. GAO was asked to testify on its annual review of MDA and on progress made to improve transparency and accountability. This statement is based on our March 2011 report.

What GAO Found

When MDA was established in 2002, it was granted exceptional flexibility in setting requirements and managing the acquisition, in order to meet a Presidential directive to deliver an initial defensive capability in 2004. However, the flexibility also came at the expense of transparency and accountability. For example, unlike certain other Department of Defense (DOD) major defense acquisition programs, a cost, schedule, and performance baseline does not have to be established or approved outside MDA. In addition, while most major defense acquisition programs are required by statute to obtain an independent verification of cost estimates, MDA has only recently developed cost estimates for selected assets and plans to work with DOD's Office of the Director for Cost Assessment and Program Evaluation to develop independent cost estimates for more MDA elements. Further, assessments of a system's suitability and effectiveness in combat have only been accomplished, with limitations, for the currently deployed Aegis Ballistic Missile Defense weapon system. Since its inception, MDA has employed at least three different strategies to acquire and deploy missile defense systems. Because these changes involved different structures for reporting cost, schedule, and performance data, they have exacerbated transparency and accountability challenges--each time a strategy changes, the connection between the old and new strategy planned scope and resources is obscured. In 2010, MDA made significant progress in addressing previously reported concerns about transparency and accountability. Specifically, MDA : (1) Established resource, schedule, test, operational capacity, technical, and contract baselines for several missile defense systems. It reported these to Congress in its June 2010 BMDS Accountability Report. (2) Identified three phases of development where baselines are approved-- technology development, product development, and initial production phases--and specified the key knowledge that is needed at each phase. (3) Established processes for reviewing baselines and approving product development and initial production jointly with the military services that will ultimately be responsible for those assets. GAO also reported last year that MDA extensively revised the test plan to increase its robustness and ability to inform models and simulations for assessing missile defense performance. While it is clear that progress has been made in terms of implementing new acquisition reviews and reporting detailed baselines, there remain critical gaps in the material reported, particularly the quality of the underlying cost estimates needed to establish baselines. Moreover, GAO still has concerns about realism in test planning and acquisition risks associated with the rapid pace of fielding assets. These risks are particularly evident in MDA's efforts to develop systems to support a new approach for missile defense in Europe as well as the Ground-based Midcourse Defense system. GAO does not make new recommendations in this testimony but emphasizes the importance of implementing past recommendations, including: (1) Establishing and reporting complete, accurate, reliable cost information. (2) Strengthening test planning and resourcing. (3) Following knowledge-based acquisition practices that ensure sufficient knowledge is attained on requirements, technology maturity, design maturity, production maturity and costs before moving programs into more complex and costly phases of development. DOD has committed to take action on many of our recommendations.