Finally, we noted  when a program or contract ends, DOD can make choices that would  allow the government to retain value from the work completed. However, the  impact of a weapon program cancellation can extend beyond the  immediate program and its contractors and ultimately affect a broader  industrial base and local economies, as well as other programs and  agencies. However, current plans for notifying program managers of this resource  may not be sufficient. In  particular, its database is designed to allow officials who have  experienced program cancellation to share lessons learned. Without continued contribution of lessons learned from  program officials with experience shutting down canceled programs, DOD  will be missing opportunities to build and share knowledge on program  shutdown. Information about Whether Assets Are Being Leveraged Is Limited

We could not determine the extent to which DOD leveraged the assets in  our case studies because DOD does not have a way to track all types of  assets. However, both the process and the system are designed to track specific  pieces of equipment, materials, and tools and are not designed to track  intellectual property, such as rights to technical data and software,  partially developed technologies, or even other types of assets such as  real property and hazardous materials. Because there is no department- wide process or requirement for disseminating information about all  assets available for reuse, DOD cannot help ensure that technologies,  hardware, and other potentially useful assets can be delivered to parties  who can best develop them further. Contract Termination Cost Estimates Have Limitations

Estimates of contract termination costs are sometimes perceived by  program officials as a useful tool in managing a portfolio of investments  and informing contract termination planning and budgeting decisions. However, there are some uncertainties about costs that cannot be  addressed until a program is actually terminated, making estimates less  useful for the purpose of informing the decision to terminate a contract. DAU has developed guidance that addresses the  spectrum of issues faced in a cancellation, though current efforts may be  insufficient to ensure that program managers who are faced with a  program cancellation will be aware of this guidance. Without this  awareness, program officials may lack the knowledge necessary to  manage the shutdown process and leverage related investments as  effectively as possible. Recommendations for Executive Action

To improve DOD’s ability to ensure it is fully leveraging investments made  in canceled programs, we recommend that the Secretary of Defense  direct the Office of Acquisition, Technology, and Logistics to take the  following three actions:  (1) Direct program officials to refer to DAU’s Smart Shutdown guidance  throughout the process of shutting down the program. (3) Develop department-wide processes to improve tracking of assets,  including technical data and software, and dissemination of information  about assets available for reuse after programs are canceled. DOD also partially concurred with our recommendation to direct program  officials to submit lessons learned after cancellation, again stating that it  would highly encourage, rather than direct, this action. Appendix I: Scope and Methodology

The Senate report accompanying the National Defense Authorization Act  for Fiscal Year 2013 mandated GAO to review and report on issues  associated with contract terminations and program cancellations of major  defense acquisition programs (MDAP). This report examines (1) the  effects of program cancellation, (2) the adequacy of current Department  of Defense (DOD) guidance on program cancellations, (3) the extent to  which DOD leveraged—by transferring for further development or use on  other programs—various types of assets from canceled programs, and  (4) the usefulness of contract termination cost estimates.
Why GAO Did This Study

In the face of increasing budgetary pressures, it is important that DOD continue to find ways to manage its portfolio of major defense acquisition programs (MDAP) more efficiently. In 2008, GAO concluded that program cancellations can be a valuable portfolio management tool, and found that DOD can take various steps to retain value from the work completed. The Senate report accompanying the National Defense Authorization Act for 2013 mandated GAO to review issues associated with cancellations of MDAPs. This report assesses (1) the effects of program cancellation, (2) the adequacy of DOD guidance on program cancellations, (3) the extent to which DOD leveraged or transferred to other programs various types of assets from canceled programs, and (4) the usefulness of contract termination cost estimates. To do this work, GAO reviewed the cancellation of five major DOD programs from across the military services; interviewed officials at the Office of the Secretary of Defense, the military services, and others; and reviewed current guidance related to program cancellation.

What GAO Found

Cancellation of a major Department of Defense (DOD) weapon program can have broad effects. Cancellation of one program can affect the schedules or budgets for related programs as well as the industrial base and local economies. For example, the cancellation of one program has impacted the schedule for the Army's network modernization efforts. DOD stakeholders can provide input to program officials on the potential effects of a cancellation.
DOD has developed an online resource, Smart Shutdown, to offer tools for program managers related to program cancellations. In 2013, a guidebook was added that addresses the spectrum of cancellation effects. However, current efforts to publicize this online resource may not be sufficient and program officials may lack the knowledge necessary to leverage investments as effectively as possible. Furthermore, while this resource is designed to allow officials to share lessons learned about program cancellation, there have been few contributions to date. Without increased sharing of lessons learned, DOD will miss opportunities to build and share knowledge on program shutdown.
GAO could not determine the extent to which DOD leveraged the assets in its case studies because DOD does not have a way to track all types of assets from canceled programs.
DOD relies on a government-wide process for tracking disposal of government property, such as computer hardware and equipment, but this process is not tailored to weapon systems and was not designed to track other types of assets such as rights to technical data and software, or partially-developed technologies. Because there is no department-wide process for disseminating information about all assets available for reuse, DOD cannot ensure that technologies go to parties who can best use or develop them further.
Estimates of contract termination costs are sometimes perceived as a useful tool in managing a portfolio of investments and informing contract termination and budgeting decisions. However, the usefulness of these estimates is limited by, among other factors, inherent uncertainties about costs that cannot be addressed until a program is actually terminated.

What GAO Recommends

GAO recommends that DOD direct program officials to refer to Smart Shutdown guidance and to provide lessons learned, and that DOD develop department-wide processes to improve tracking and dissemination of information about assets available. DOD partially concurred with these recommendations, but stated use of and contribution to Smart Shutdown should be encouraged rather than directed. GAO maintains direction would be more effective.