Figure 1  depicts the program’s entry into DOD’s acquisition process as currently  anticipated. Program Makes Progress Toward Establishing a Sound Business Case

The Navy has made progress in the past year toward establishing a  sound business case for development that reflects a rational balance  between requirements, costs and schedule. The Navy completed the  AOA, which was deemed sufficient by CAPE to inform future acquisition  decisions, and OSD has approved the program to proceed to a Milestone  B decision. Navy Completes AOA

The Navy, building on its initial 2010 study, completed its AOA on April 4,  2012, and concluded that the currently proposed acquisition approach of  using mature technologies from outside the program on an in-production  commercial or military helicopter was acceptable. Specifically, the 2012 study estimates suggest that using the proposed  approach of having the program enter the acquisition process in the  engineering and manufacturing development phase rather than the  technology development phase, as was anticipated in the 2010 study,  would reduce investment cost by approximately $1.5 billion (19.7 percent)  and shorten the development schedule by about 18 percent. The 2012 VXX AOA study team made a number of recommendations  including:
To mitigate aircraft certification risk, the airworthiness certifying  authority actively participate in all government development activities  for the cockpit, communications, and mission systems and be  involved in the source selection process for the aircraft;
To reduce the risk of having to resort to a Min Mod approach, an  active and aggressive life cycle weight management effort should be  put in place if the selected platform does not provide a large enough  margin to accommodate future weight growth; and
The release of a request for proposals be contingent upon achieving  acceptable technical maturity of critical government developments,  such as communications and mission systems. The Under Secretary decided that:
Milestone B, scheduled for 3rd quarter of fiscal year 2014, will be the  first formal acquisition system milestone for VXX; however, a Pre- EMD Review will occur prior to release of the Request for Proposals  for development, integration, and production;
Prior to the pre-EMD review, the Navy and the JROC are to approve  the CDD and the Director, Cost Assessment and Program Evaluation  is to develop an Independent Cost Estimate based on the approved  CDD; and
The Under Secretary will establish affordability targets for the VXX  program concurrent with CDD approval by the JROC. Based on our review of the AOA report, supporting material,  and interviews of program and other defense officials, we found the AOA  to be sufficient for this stage of the acquisition. It included elements that  GAO has reported should be part of a robust AOA. Cost estimating and analysis are significant components of an  AOA. The  initial 2010 analysis was based on performance requirements that were  lower in a number of areas than for the VH-71 program. The 2012 AOA  study reflected additional trade-offs made with regard to cost, schedule,  risk and performance. This is to occur in the second quarter of fiscal year 2013. Efforts Intended to Leverage Technologies into VXX Aircraft Progress

The Navy’s currently proposed acquisition approach relies on the  government’s providing, as government furnished equipment, mature  technologies for integration into aircraft. Those technologies either  already exist or are in development, some as legacy fleet aircraft  upgrades. Their provision will be an important factor in the Navy’s  achieving the reduced cost and schedule it seeks through its proposed  acquisition approach. While the program reports the key technologies to be provided by the  government for integration are on track, there are risks that they will not  work out as planned. To mitigate integration  risk, though, the VXX program is making use of a systems integration  laboratory and also plans to install the communications and mission  systems into a test aircraft and do demonstration testing before  integration efforts begin on the VXX platform. Ensuring the technologies being developed for integration into the  selected VXX platform develop as needed and integration mitigation  efforts are adequately planned, resourced, and executed. In commenting on a draft of this report, DOD stated that it would ensure  that mitigations are in place to address potential risk areas. It believes its  efforts are aligned with GAO’s best practices and the recommendations in  GAO’s 2011 report on the program and plans to continue to monitor  program progress in view of these standards. We are sending copies of this report to interested congressional  committees; the Secretary of Defense; the Under Secretary of Defense  for Acquisition, Technology and Logistics; and the Secretary of the Navy.
Why GAO Did This Study

The VXX is a Navy program to develop a replacement for the current fleet of presidential helicopters. The Ike Skelton National Defense Authorization Act for Fiscal Year 2011 directed GAO to review and report annually to the congressional defense committees on the program. GAO has reported on the program twice previously. The first report identified major lessons learned from a prior terminated program that should be applied in the follow-on program. The second covered the program's progress, upgrades to the existing helicopters, and plans for moving the program forward. This is the last of the required reports. It discusses (1) the program's progress over the past year, particularly regarding evaluation of alternatives, and (2) DOD's efforts to develop key technologies for the VXX aircraft. GAO examined program documents; interviewed officials; and compared the AOA with elements GAO previously reported are needed for a robust AOA, and cost estimating and analysis standards. GAO also assessed the Navy's approach to developing key technologies and progress made.

What GAO Found

The Navy made progress in the past year in establishing a sound VXX business case that reflects a rational balance between requirements, costs and schedule. In 2012, the Navy completed an updated Analysis of Alternatives (AOA) based on refined requirements and an acquisition approach that would leverage mature technologies from outside the program onto an in-production commercial or military airframe--allowing the program to begin in the engineering and manufacturing development phase of the Department of Defense's (DOD) acquisition process. The 2012 AOA reflected additional trade-offs made among cost, schedule, risk, and performance. Some key performance requirements changed from the terminated VH-71 program to the VXX.
Per the AOA, using this approach would reduce investment cost by approximately $1.5 billion (19.7 percent) and shorten the schedule by about 18 percent from the approach anticipated in 2010, which included more time and cost to develop technology within the program.
DOD's Director of Cost Assessment and Program Evaluation deemed the AOA sufficient to inform future acquisition decisions and the Under Secretary of Defense for Acquisition, Technology and Logistics approved the program to move forward toward a decision to begin engineering and manufacturing development. GAO's review of the AOA found it to be sufficient for this phase of the acquisition.
DOD's efforts to ensure key technologies are ready for integration into VXX aircraft are also making progress. The Navy's acquisition approach relies on the government providing mature technologies for integration into an in-production aircraft selected for the VXX program. These technologies either exist or are in development. Their use will be an important factor in achieving the reduced cost and schedule the Navy seeks. While the program reports that these efforts are on track and assesses the risks of integration as low, it is possible that key technologies may not be realized as planned or be as easy to integrate as anticipated. To mitigate integration risk, the Navy is making use of an integration laboratory and plans to demonstrate key technologies in a test aircraft.
Building on these decisions, the program will have to manage challenges in a number of areas, including holding the line on VXX requirements, controlling helicopter weight growth, and ensuring that efforts to mitigate integration risks are adequately planned, resourced, and executed.

What GAO Recommends

GAO is not making recommendations in this report. DOD stated that it would ensure that mitigations are in place to address potential risk areas. It believes its efforts are aligned with GAO's best practices and the recommendations in GAO's 2011 report on the program and plans to continue to monitor program progress in view of these standards.