In its simplest form, this is evidence that (1) the warfighter’s  needs are valid and can best be met with the chosen concept, and (2) the  chosen concept can be developed and produced within existing  resources—that is, proven technologies, design knowledge, adequate  funding, and adequate time to deliver the product when needed. At the heart of a business case is a knowledge-based approach to product  development that demonstrates high levels of knowledge before  significant commitments are made. Objectives, Scope, and Methodology

To develop the information on the Future Combat System program’s  progress toward meeting established goals, the contribution of critical  technologies and complementary systems, and the estimates of cost and  affordability, we interviewed officials of the Office of the Under Secretary  of Defense (Acquisition, Technology, and Logistics); the Army G-8; the  Office of the Under Secretary of Defense (Comptroller); the Secretary of  Defense’s Cost Analysis Improvement Group; the Director of Operational  Test and Evaluation; the Assistant Secretary of the Army (Acquisition,  Logistics, and Technology); the Army’s Training and Doctrine Command;  Surface Deployment and Distribution Command; the Program Manager for  the Future Combat System (Brigade Combat Team); the Future Combat  System Lead Systems Integrator; and other contractors. Improved Business Case Is Needed for the FCS’s Success

An improved business case for the FCS program is essential to help ensure  that the program is successful in the long run. The FCS is unusual in that it  is developing 18 systems and a network under a single program office and  lead system integrator in the same amount of time that it would take to  develop a single system. Yet system-level  requirements are not yet stabilized and will continue to change,  postponing the needed match between requirements and resources. These difficulties underscore the gap between  requirements and available resources that must be closed if the FCS  business case is to be executable. In the 2003 technology assessment, 87 percent of FCS’s critical  technologies were projected to be mature to a TRL 6 by 2005. Furthermore, this latest estimate does not include complementary  programs that are essential for FCS to perform as intended, or all of the  necessary funding for FCS spin-outs. It accounts for the  restructure of the FCS program and its increased scope, the 4-year  extension to the product development schedule, the reintroduction of four  systems that had been previously deferred, and the addition of a spin-out  concept whereby mature FCS capabilities would be provided, as they  become available, to current Army forces. Originally, FCS annual funding was not to exceed $10  billion in any one year. The latest cost estimate does not include all the costs that will be needed  to field FCS capabilities. These  and other unfunded programs would have to compete for already tight  funding. Adding these items brings the  total required FCS investment to the $200 billion range. Through fiscal year 2006, the Army will have budgeted over $8 billion for  FCS development. First, the program must proceed without exceeding its currently projected  costs. FCS Business Arrangements

Given the risks facing the FCS program, the business arrangements made  for carrying out the program will be critical to protecting the government’s  interests. The government has used the LSI approach on other  programs that require system-of-systems integration. These decisions, including  procurement decisions for major weapons systems, are now being made  by the LSI with Army involvement. The Army plans to change the fee structure for the FCS program in the  new contract. As the details are  worked out, it is important that the new contract encourage meaningful  demonstrations of knowledge and to preserve the government’s ability to  act on knowledge should the program progress differently than planned.
Why GAO Did This Study

The Future Combat System (FCS) is a networked family of weapons and other systems in the forefront of efforts by the Army to become a lighter, more agile, and more capable combat force. When considering complementary programs, projected investment costs for FCS are estimated to be on the order of $200 billion. FCS's cost is of concern given that developing and producing new weapon systems is among the largest investments the government makes, and FCS adds significantly to that total. Over the last five years, the Department of Defense (DOD) doubled its planned investments in such systems from $700 billion in 2001 to $1.4 trillion in 2006. At the same time, research and development costs on new weapons continue to grow on the order of 30 to 40 percent. FCS will be competing for significant funds at a time when Federal fiscal imbalances are exerting great pressures on discretionary spending. In the absence of more money being available, FCS and other programs must be executable within projected resources. Today, I would like to discuss (1) the business case needed for FCS to be successful and (2) related business arrangements that support that case.

What GAO Found

There are a number of compelling aspects of the FCS program, and it is hard to argue with the program's goals. However, the elements of a sound business case for such an acquisition program--firm requirements, mature technologies, a knowledge-based acquisition strategy, a realistic cost estimate and sufficient funding--are not yet present. FCS began product development prematurely in 2003. Since then, the Army has made several changes to improve its approach for acquiring FCS. Yet, today, the program remains a long way from having the level of knowledge it should have had before starting product development. FCS has all the markers for risks that would be difficult to accept for any single system, much less a complex, multi-system effort. These challenges are even more daunting in the case of FCS not only because there are so many of them but because FCS represents a new concept of operations that is predicated on technological breakthroughs. Thus, technical problems, which accompany immaturity, not only pose traditional risks to cost, schedule, and performance; they pose risks to the new fighting concepts envisioned by the Army. Many decisions can be anticipated that will involve trade-offs the Government will make in the program. Facts of life, like technologies not working out, reductions in available funds, and changes in performance parameters, must be anticipated. It is important, therefore, that the business arrangements for carrying out the FCS program--primarily in the nature of the development contract and in the lead system integrator (LSI) approach-- preserve the government's ability to adjust course as dictated by these facts of life. At this point, the $8 billion to be spent on the program through fiscal year 2006 is a small portion of the $200 billion total. DOD needs to guard against letting the buildup in investment limit its decision making flexibility as essential knowledge regarding FCS becomes available. As the details of the Army's new FCS contract are worked out and its relationship with the LSI evolves, it will be important to ensure that the basis for making additional funding commitments is transparent. Accordingly, markers for gauging knowledge must be clear, incentives must be aligned with demonstrating such knowledge, and provisions must be made for the Army to change course if the program progresses differently than planned.