	Trends in DOD’s Portfolio of Major Acquisitions

There can be little doubt that we can—and must—get better outcomes  from our weapon system investments. As seen in table 1, the value of  these investments in recent years has been on the order of $1.5 trillion or  more, making them a significant part of the federal discretionary budget. Yet, as indicated in table 1, 39 percent of programs  have had unit cost growth of 25 percent or more. For example, cost growth has declined  between 2011 and 2012.programs have improved their buying power by finding efficiencies in   We have also observed that a number of  development or production, and requirements changes. On the other  hand, cost and schedule growth remain significant when measured  against programs’ first full estimates. The body of work we have done on benchmarking best practices   Recent, significant changes  has also been reflected in acquisition policy.to the policy include those introduced by the Weapon Systems Acquisition  Reform Act of 2009 and the department’s own “Better Buying Power”  initiatives which, when fully implemented, should further strengthen  practices that can lead to successful acquisitions. The policy provides a  framework for developers of new weapons to gather knowledge that  confirms that their technologies are mature, their designs are stable, and  their production processes are in control. These improvements do not yet signify a trend or suggest that a corner  has been turned. The reforms themselves still face implementation  challenges such as staffing and clarity of guidance and will doubtless  need refining as experience is gained. In other words, the reforms have not yet been institutionalized  within the services. Other programs are significantly at odds with the  acquisition process. The question is why aren’t we  doing it?” To that point, reforms have been aimed mainly at the “what”  versus the “why.” They have championed sound management practices,  such as realistic estimating, thorough testing, and accurate reporting. Seen this way,  the practices prescribed in policy are only partial remedies. I will now discuss several factors that illustrate the pressures that create  incentives to deviate from sound acquisition management practices. Several Factors Create Incentives to Deviate from Sound Acquisition Practices

			Conflicting Demands

The process of acquiring new weapons is (1) shaped by its different  participants and (2) far more complex than the seemingly straightforward  purchase of equipment to defeat an enemy threat. Collectively, as  participants’ needs are translated into actions on weapon programs, the  purpose of such programs transcends efficiently filling voids in military  capability. Take, for example, a decision to start a  new program scheduled for August 2016. It is the funding approvals that ultimately define  acquisition policy. Fox, Defense Acquisition Reform. Where Do We Go from Here? Drawing on our extensive body of work in weapon systems acquisition, I  have four areas of focus regarding where to go from here. These are not  intended to be all-encompassing, but rather, practical places to start the  hard work of realigning incentives with desired results. Identify significant program risks upfront and resource them: Weapon  acquisition programs by their nature involve risks, some much more than  others. More closely align budget decisions and program decisions: Because  budget decisions are often made years ahead of program decisions, they  depend on the promises and projections of program sponsors. Attract, train, and retain acquisition staff and management: Dr. Fox’s book  does an excellent job of laying out the flaws in the current ways DOD  selects, trains, and provides a career path for program managers.
Why GAO Did This Study

DOD's acquisition of major weapon systems has been on GAO's high risk list since 1990. Over the past 50 years, Congress and DOD have continually explored ways to improve acquisition outcomes, including reforms that have championed sound management practices, such as realistic cost estimating, prototyping, and systems engineering. Too often, GAO reports on the same kinds of problems today that it did over 20 years ago.
The topic of today's hearing is: "25 Years of Acquisition Reform: Where Do We Go From Here?" To that end, this testimony discusses (1) the performance of DOD's major defense acquisition program portfolio; (2) the management policies and processes currently in place to guide those acquisitions; (3) the incentives to deviate from otherwise sound acquisition practices; and (4) suggestions to temper these incentives. This statement draws from GAO's extensive body of work on DOD's acquisition of weapon systems.

What GAO Found

The Department of Defense (DOD) must get better outcomes from its weapon system investments, which in recent years have totaled around $1.5 trillion or more. Recently, there have been some improvements, owing in part to reforms. For example, cost growth declined between 2011 and 2012 and a number of programs also improved their buying power by finding efficiencies in development or production and requirements changes. Still, cost and schedule growth remain significant; 39 percent of fiscal 2012 programs have had unit cost growth of 25 percent or more.
DOD's acquisition policy provides a methodological framework for developers to gather knowledge that confirms that their technologies are mature, their designs stable, and their production processes are in control. The Weapon Systems Acquisition Reform Act of 2009 and DOD's recent "Better Buying Power" initiatives introduced significant changes that, when fully implemented, should further strengthen practices that can lead to successful acquisitions. GAO has also made numerous recommendations to improve the acquisition process, based on its extensive work in the area. While recent reforms have benefited individual programs, it is premature to say there is a trend or a corner has been turned. The reforms still face implementation challenges and have not yet been institutionalized within the services.
Reforms that focus on the methodological procedures of the acquisition process are only partial remedies because they do not address incentives to deviate from sound practices. Weapons acquisition is a complicated enterprise, complete with unintended incentives that encourage moving programs forward by delaying testing and employing other problematic practices. These incentives stem from several factors. For example, the different participants in the acquisition process impose conflicting demands on weapon programs so that their purpose transcends just filling voids in military capability. Also, the budget process forces funding decisions to be made well in advance of program decisions, which encourages undue optimism about program risks and costs. Finally, DOD program managers' short tenures and limitations in experience and training can foster a short-term focus and put them at a disadvantage with their industry counterparts.
Drawing on its extensive body of work in weapon systems acquisition, GAO sees several areas of focus regarding where to go from here:
at the start of new programs, using funding decisions to reinforce desirable principles such as well-informed acquisition strategies;
identifying significant risks up front and resourcing them;
exploring ways to align budget decisions and program decisions more closely; and
attracting, training, and retaining acquisition staff and managers so that they are both empowered and accountable for program outcomes.
These areas are not intended to be all-encompassing, but rather, practical places to start the hard work of realigning incentives with desired results.