Figure 1 aligns the  knowledge points with key decision points in DOD’s acquisition process. The Navy’s UCLASS Acquisition Strategy Defers Key Oversight Mechanisms

In fiscal year 2014, the Navy plans to commit to investing an estimated  $3.7 billion to develop, produce, and field from 6 to 24 aircraft and modify  1 to 4 aircraft carriers as an initial increment of UCLASS capability— referred to as an early operational capability. Accordingly, it is not planning to hold a  Milestone B review to formally initiate a system development program— which would trigger key oversight mechanisms—until after the initial  capability is fielded in fiscal year 2020. This strategy will likely limit Congress’s ability to oversee this 6- year multibillion dollar program. Navy officials believe that their approach  effectively utilizes the flexibility in DOD’s acquisition policy to ensure that  UCLASS requirements and concept of operations are well understood  and achievable before formally beginning a system development  program. The following year, the  Navy plans to review those preliminary designs, conduct a full and open  competition, and award a contract to develop and deliver the UCLASS air  vehicles, effectively ending competition within the air vehicle segment. DOD policy and best practices indicate that around this review point a  program would typically be expected to hold a Milestone B review and  transition from technology development to system development. UCLASS Faces Cost, Schedule, and Program Management Risks

The UCLASS system faces several risks related to cost, schedule, and  program management that, if not addressed, could lead to additional cost  and significant schedule delays for the system. The Navy recognizes that  many of these risks exist and has mitigation plans in place to address  them. UCLASS cost estimates are uncertain and could exceed available  funding: Preliminary cost estimates completed by the Navy indicate  that the development and fielding of the initial UCLASS system  through fiscal year 2020 could cost between $3.7 and $5.9 billion, all  of which is expected to be development funding. However, the Navy  has only projected funding of $3.2 billion for the system through fiscal  year 2020. The Navy’s strategy allows  for about 8 months between the time that it issues its request for air  vehicle proposals and the time it awards the contract. UCLASS is dependent on development and delivery of other  systems: The Navy identifies the delivery of the Common Control  System software as a risk and notes that if it is delayed, alternative  control system software would be needed to achieve the established  deployment timeline. The Navy  will have three separate but interrelated segments to manage, the  timing and alignment of which are crucial to success of the overall  system. The system is reliant on 22 existing government systems,  such as JPALS. UCLASS Acquisition Strategy Contains Aspects of a Knowledge-Based Approach

While the Navy has not yet established a business case or acquisition  program baseline, the UCLASS strategy reflects aspects of a knowledge- based approach. Conclusions

The Navy plans to manage UCLASS as a technology development  program, although its strategy encompasses activities commensurate  with system development and early production. Without a program baseline  and regular reporting on progress, it will be difficult for Congress to hold  the Navy accountable for achieving UCLASS cost, schedule, and  performance goals. For example,  the Navy is leveraging knowledge gained from prior technology  development programs, incorporating an open systems design, matching  resources with requirements, and utilizing competition. Matters for Congressional Consideration

To enhance program oversight and accountability given that the Navy  does not plan to modify its acquisition strategy and hold a Milestone B  decision review for the UCLASS system following the system level  preliminary design review in fiscal year 2015, Congress should consider  directing the Navy to hold a Milestone B review for the system after the  system level preliminary design review is complete. If the Navy does not comply, Congress should consider limiting the  amount of funding available for the UCLASS system until the Navy  provides the basic elements of an acquisition program baseline, such as  development and production cost estimates, unit costs, quantities,  schedules, annual funding profiles, and key performance parameters  needed for such a large investment. Recommendation for Executive Action

In order to provide for increased congressional oversight and program  accountability, we recommend that the Secretary of Defense direct the  Secretary of the Navy to hold a Milestone B decision review for the  UCLASS system following the system level preliminary design review— which is currently scheduled in fiscal year 2015. The Navy  pointed out that DOD’s policy defines the technology development phase  as an “iterative process designed to assess the viability of technologies  while simultaneously refining user requirements.” The Navy went on to  state that the UCLASS user requirements and Concept of Operations will  be refined during the early operational capability fleet exercises currently  scheduled to begin in fiscal year 2020 and that, at that time, the Navy  plans to request approval to hold a Milestone B review to continue  development of the UCLASS capability. Appendix I: Objectives, Scope, and Methodology

The National Defense Authorization Act for Fiscal Year 2012 mandated  that GAO evaluate the Unmanned Carrier-Launched Airborne  Surveillance and Strike (UCLASS) system acquisition strategy. This  report (1) assesses the Navy’s UCLASS acquisition strategy, (2) identifies  key areas of risk facing the UCLASS system, and (3) notes areas where  the Navy’s strategy contains good practices. Additionally we compared the Navy’s strategy  against DOD acquisition policy.
Why GAO Did This Study

The Navy estimates that it will need $3.7 billion from fiscal year 2014 through fiscal year 2020 to develop and field an initial UCLASS system. The National Defense Authorization Act for Fiscal Year 2012 mandated that GAO evaluate the UCLASS system acquisition strategy. This report (1) assesses the UCLASS acquisition strategy, (2) identifies key areas of risk facing the system, and (3) notes areas where the Navy's strategy contains good practices. To do this work, GAO reviewed the Navy's acquisition strategy and compared it to DOD's acquisition policy, among other criteria; and reviewed Navy acquisition documents and spoke with Navy and Office of the Secretary of Defense officials.

What GAO Found

In fiscal year 2014, the Navy plans to commit to investing an estimated $3.7 billion to develop, build, and field from 6 to 24 aircraft as an initial increment of Unmanned Carrier-Launched Airborne Surveillance and Strike (UCLASS) capability. However, it is not planning to hold a Milestone B review--a key decision that formally initiates a system development program and triggers key oversight mechanisms--until after the initial UCLASS capability has been developed and fielded in fiscal year 2020. The Navy views UCLASS as a technology development program, although it encompasses activities commensurate with system development, including system integration and demonstration. Because the initial UCLASS system is to be developed, produced, and fielded before a Milestone B decision, Congress's ability to oversee the program and hold it accountable for meeting cost, schedule, and performance goals will likely be limited. Specifically, the program will operate outside the basic oversight framework provided by mechanisms like a formal cost and schedule baseline, statutory unit cost tracking, and regular reports to Congress on cost, schedule, and performance progress. The Navy believes its approach effectively utilizes the flexibility in the Department of Defense's (DOD) acquisition policy to gain knowledge needed to ensure a successful UCLASS system development program starting in fiscal year 2020. Yet the Navy expects to review preliminary designs, conduct a full and open competition, and award a contract for UCLASS development in fiscal year 2014, a point at which DOD policy and best practices indicate that a program would be expected to hold a Milestone B review to initiate a system development program. Apart from deferring Milestone B, the Navy's plan would be consistent with the knowledge-based acquisition process reflected in DOD policy.
UCLASS faces several programmatic risks going forward. First, the UCLASS cost estimate of $3.7 billion exceeds the level of funding that the Navy expects to budget for the system through fiscal year 2020. Second, the Navy has scheduled 8 months between the time it issues its request for air vehicle design proposals and the time it awards the air vehicle contract, a process that DOD officials note typically takes 12 months to complete. Third, the UCLASS system is heavily reliant on the successful development and delivery of other systems and software, which creates additional schedule risk. Fourth, the Navy will be challenged to effectively manage and act as the lead integrator for three separate but interrelated segments--air vehicle, carrier, and control system--and 22 other government systems, such as the aircraft landing system, the timing and alignment of which are crucial to achieving the desired UCLASS capability. While the Navy recognizes many of these risks and has mitigation plans in place, they could lead to cost increases and schedule delays if not effectively addressed.
The Navy's UCLASS acquisition strategy includes some good acquisition practices that reflect aspects of a knowledge-based approach. For example, the Navy is leveraging significant knowledge gained from prior technology development efforts, incorporating an open systems design approach, working to match the system's requirements with available resources, and reviewing preliminary designs for the air vehicle before conducting a competition to select a single contractor to develop and deliver the air vehicle segment.

What GAO Recommends

Congress should consider directing the Navy to hold a Milestone B review for the UCLASS system after the system level preliminary design review is complete.If the Navy does not comply, Congress should consider limiting the amount of funding available for the UCLASS system until an acquisition program baseline is provided. GAO included these matters for consideration because the Navy does not plan to make changes as a result of GAOs recommendation to hold a Milestone B review following the system level preliminary design reviewwhich is currently scheduled in fiscal year 2015. The Navy did not concur with the recommendation, and believes that its approved strategy is compliant with acquisition regulations and laws. GAO continues to believe that its recommendation is valid as discussed in this report.