Cost Tracking Deficiencies Hinder Assessment of Cost Performance

MDA has not yet established baselines for total costs or unit costs, both  fundamental markers that most programs use to measure progress. Similarly, MDA has not established unit costs for  selected assets, such as GBIs. Consequently, for the sixth year, we have  been unable to assess MDA’s overall progress on total or unit cost. While  MDA plans to establish some total cost baselines in 2009, most efforts will  not be captured in a baseline. However, the budgeted costs at  completion, in some cases, have grown significantly over time. As a consequence of testing problems, none  of the six MDA Director’s test knowledge points for 2008 were achieved. Shortfalls in testing have delayed  validating the models and simulations that are used to assess the overall  performance of the BMDS as a whole. MDA embarked on this major development without  estimating the cost to develop the family of target missiles. Overall Performance of BMDS Can Not Yet Be Assessed

MDA’s modeling and simulation program enables MDA to assess the  capabilities and limitations of how BMDS performs under a wider variety  of conditions than can be accomplished through the limited number of  flight tests conducted. Production and Fielding of BMDS Systems Getting Ahead of Testing

Despite developmental problems, test delays and MDA’s inability to  complete all fiscal year 2008 Director’s test knowledge points,  manufacturing, production, and fielding have proceeded close to schedule. Limited Progress Made in Improving Transparency and Accountability

In March 2008, we reported that efforts were underway to improve BMDS  management, transparency, accountability, and oversight including a new  executive board outside of MDA and a new block structure along with  other improvements within MDA. Missile Defense Executive Board’s Oversight Role More Active in 2008

During 2008, the MDEB appeared to act with an increased level of  authority in providing oversight of MDA and the BMDS. This review covered production  and the element’s contract schedule. This change allows the  agency to continue the practice of moving work from one block to  another, which thereby reduces the transparency of the new block  structure and undermines any baselines that are established. Most of  the annual revisions to the test baseline occur either because MDA has  changed the substance of test, changed the timing of tests, or added tests  to the baseline. At this point, a better balance  must still be struck between the information Congress and DOD need to  conduct oversight of the BMDS and the flexibility MDA needs to manage  across the portfolio of elements that collectively constitute the system’s  capability. At this point, the balance does not provide sufficient information for  effective oversight. Less testing is conducted than planned, thus delaying the validation of  the models and simulations needed to assess the overall performance  of the BMDS. Consequently, fielding decisions and  capability declarations are being made with limited understanding of  system effectiveness. 2. In the area of testing and performance:  4. For  example, in one case the budgeted cost at completion increased by  approximately five times its original value. Since our assessment does not  reveal, as cost growth, the difference between the original and current  budgeted costs at completion it would be inappropriate to compare the  underruns or overruns for MDA programs with cost growth on major  defense acquisition programs since those major defense acquisition  programs have established their full scope of work as well as developed  total cost baselines, while these have not been developed for MDA  programs. This task  will culminate in a demonstration planned for fiscal year 2010. 3. Despite test reductions and effects  on assessing system-level performance, production and fielding of assets  continues as planned.
Why GAO Did This Study

The Missile Defense Agency (MDA) has spent about $56 billion and will spend about $50 billion more through 2013 to develop a Ballistic Missile Defense System (BMDS). GAO was directed to assess the annual progress MDA made in developing the BMDS as well as improvements in accountability and transparency in agency operations, management processes, and the new block strategy. To accomplish this, GAO reviewed contractor cost, schedule, and performance; tests completed; and the assets fielded during 2008. GAO also reviewed pertinent sections of the U.S. Code, acquisition policy, and the activities of the new Missile Defense Executive Board (MDEB). An appendix on the effect the cancellation of a Ground-based Midcourse Defense flight test had on BMDS development is also included.

What GAO Found

Cost: MDA has not yet established baselines for total costs or unit costs, both fundamental markers most programs use to measure progress. Consequently, for the sixth year, GAO has not been able to assess MDA's actual costs against a baseline of either total costs or unit costs. MDA planned to establish such baselines in 2008 in response to past GAO recommendations, but has delayed this until 2009. GAO was able to assess the cost performance on individual contracts, and project an overrun at completion of between $2 billion and $3 billion. However, because in some cases the budgeted costs at completion--the basis for our projection--has changed significantly over time as adjustments were made, this projection does not capture as cost growth the difference between the original and current budgeted costs at completion. In one case, these costs increased by approximately five times its original value. Performance and Testing: While MDA completed several key tests that demonstrated enhanced performance of the BMDS, all elements of the system had test delays and shortfalls. Overall, testing achieved less than planned. For example, none of the six Director's test knowledge points established by MDA for 2008 were achieved. Poor performing target missiles have been a persistent problem. Testing shortfalls have slowed the validation of models and simulations, which are needed to assess the system's overall performance. Consequently, the performance of the BMDS as a whole can not yet be determined. Schedule: Although fewer tests have been conducted than planned, the production and fielding of assets has proceeded closer to schedule. Except for no ground-based interceptors being delivered, all other radars, standard missiles, and software were delivered as planned. However, some deliveries, such as enhanced Exoatmospheric Kill Vehicles, will now precede test results. In most cases, MDA has also reduced the bases it planned to use to declare when capabilities are operational in the field. Thus, fielding decisions are being made with a reduced understanding of system effectiveness. Transparency, Accountability, and Oversight: Improvement in this area has been limited. The Missile Defense Executive Board (MDEB) has acted with increased authority in providing oversight of MDA and the BMDS. However, transparency and accountability into MDA's work is limited by the management fluidity afforded through the lack of cost baselines, an unstable test baseline, continued use of development funds to produce assets for fielding, and renewed potential for transferring work from one predefined block to another. A better balance must still be struck between the information Congress and the Department of Defense need to conduct oversight of the BMDS and the flexibility MDA needs to manage across the portfolio of assets that collectively constitute the system's capability. At this point, the balance does not provide sufficient information for effective oversight.