	DOD Has Too Many Acquisition Programs Competing for Limited Resources, while Program Costs and Schedules Continue To Increase

DOD’s portfolio of major acquisition programs has grown at a pace that far  exceeds available resources. From 1992 to 2007, the estimated acquisition  costs needed to complete the major acquisition programs in DOD’s  portfolio increased almost 120 percent, while the funding provided for  these programs only increased 57 percent, creating a fiscal bow wave that  may be unsustainable (see fig. On average, the current  portfolio of programs has experienced a 21-month delay in delivering  initial operational capability to the warfighter, and 14 percent are more  than 4 years late. At the strategic level, DOD’s processes for identifying  warfighter needs, allocating resources, and developing and procuring  weapon systems—which together define DOD’s overall weapon system  investment strategy—are fragmented and broken. Such lengthy cycle times  promote program funding instability—especially when considering DOD’s  tendency to change requirements and funding as well as frequent changes  in leadership. The government’s control over and accountability for decisions is  complicated by DOD’s growing reliance on technical, business, and  procurement expertise supplied by contractors. Recent Congressional Initiatives and DOD Actions Aim to Promote a More Disciplined, Knowledge-Based Acquisition Approach

Recognizing the need for more discipline and accountability in the  acquisition process, Congress recently enacted legislation that, if followed,  could result in a better chance to spend resources wisely. Likewise, DOD  has recently begun to develop several initiatives, based in part on  congressional direction and GAO recommendations that, if implemented  properly, could also provide a foundation for establishing a well balanced  investment strategy and sound, knowledge-based business cases for  individual acquisition programs. For example, 2006 and 2008  legislation require decision-makers to certify that specific levels of  knowledge have been demonstrated at key decision points early in the  acquisition process before programs can enter the technology  development phase or the system development phase. Recent DOD Actions Provide Opportunities for Improvement

DOD has initiated actions aimed at improving investment decisions and  weapon system acquisition outcomes, based in part on congressional  direction and GAO recommendations. Concluding Observations on Achieving Successful and Lasting Reform

DOD understands what it needs to do at the strategic and at the program  level to improve acquisition outcomes. Past efforts have had similar goals, yet we continue to find all  too often that DOD’s investment decisions are service- and program- centric and that the military services overpromise capabilities and  underestimate costs to capture the funding needed to start and sustain  development programs. More legislation can be enacted and policies can be written, but until DOD  begins making better choices that reflect joint capability needs and  matches requirements with resources, the acquisition environment will  continue to produce poor outcomes. Finally, no real reform can be  achieved without a true partnership among all these players and the  Congress. § 2433 (as amended) - Unit Cost Reports   Amended reporting and certification requirements for major defense programs that exceed baseline  costs, by:    creating two types of growth thresholds--“significant cost growth” and “critical cost growth”;    basing new thresholds on the percentage increases in both the original and current baseline estimate  incorporating these thresholds into existing unit cost reporting requirements; and    requiring that in the event of a breach of the critical cost growth threshold, the Secretary of Defense,  in coordination with the Joint Requirements Oversight Council, to (1) assess the reasons for the cost  growth, the projected cost to either complete the program with current or reasonably modified  requirements, and the rough order of magnitude costs for a reasonable alternative system or  capability and (2) certify that the program is essential to national security; no less costly, equally  capable alternatives exist; new cost estimates are reasonable; and an adequate management  structure is in place to control costs. Defense Acquisitions: Assessments of Selected Weapon Programs. Best Practices: Better Support of Weapon System Program Managers  Needed to Improve Outcomes. Defense Acquisitions: Major Weapon Systems Continue to Experience  Cost and Schedule Problems under DOD’s Revised Policy.
Why GAO Did This Study

Since 1990, GAO has designated the Department of Defense's (DOD) management of major weapon system acquisitions a high risk area. DOD has taken some action to improve acquisition outcomes, but its weapon programs continue to take longer, cost more, and deliver fewer capabilities than originally planned. These persistent problems--coupled with current operational demands--have impelled DOD to work outside of its traditional acquisition process to acquire equipment that meet urgent warfighter needs. Poor outcomes in DOD's weapon system programs reverberate across the entire federal government. Over the next 5 years, DOD plans to invest about $900 billion to develop and procure weapon systems--the highest level of investment in two decades. Every dollar wasted on acquiring weapon systems is less money available for other priorities. This testimony describes DOD's current weapon system investment portfolio, the problems that contribute to cost and schedule increases, and the potential impacts of recent legislative initiatives and DOD actions aimed at improving outcomes. It also provides some observations about what is needed for DOD to achieve lasting reform. The testimony is drawn from GAO's body of work on DOD's acquisition, requirements, and funding processes, as well as its most recent annual assessment of selected DOD weapon programs.

What GAO Found

DOD's portfolio of weapon system programs has grown at a pace that far exceeds available resources. From 1992 to 2007, the estimated acquisition costs remaining for major weapons programs increased almost 120 percent, while the annual funding provided for these programs only increased 57 percent. Current programs are experiencing, on average, a 21-month delay in delivering initial capabilities to the warfighter--often forcing DOD to spend additional funds on maintaining legacy systems. Systemic problems both at the strategic and at the program level underlie cost growth and schedule delays. At the strategic level, DOD's processes for identifying warfighter needs, allocating resources, and developing and procuring weapon systems--which together define DOD's overall weapon system investment strategy--are fragmented and broken. At the program level, weapon system programs are initiated without sufficient knowledge about system requirements, technology, and design maturity. Lacking such knowledge, managers rely on assumptions that are consistently too optimistic, exposing programs to significant and unnecessary risks and ultimately cost growth and schedule delays. At the same time, frequent turnover of program managers and an increased reliance on contractors increases the government's risk of losing accountability. Recognizing the need for more discipline and accountability in the acquisition process, Congress recently enacted legislation part of which requires decision-makers to certify that programs meet specific criteria at key decision points early in the acquisition process. Likewise, DOD has recently begun to develop several initiatives that are based in part on congressional direction and GAO recommendations. If adopted and implemented properly, these measures could provide a foundation for establishing a well balanced investment strategy, sound business cases for major weapon system acquisition programs, and a better chance to spend resources wisely. While legislation and policy revisions can help guide change, DOD must begin making better choices that reflect joint capability needs and match requirements with resources or the department will continue to experience poor acquisition outcomes. DOD investment decisions continue to be dictated by the services who propose programs that overpromise capabilities and underestimate costs to capture the funding needed to start and sustain development programs. The transitory nature of leadership further undermines successful reform. To better ensure warfighter capabilities are delivered when needed and as promised, incentives must encourage a disciplined, knowledge-based approach, and a true partnership with shared goals must be developed among the department, the military services, the Congress, and the defense industry.