	Observations on DOD’s 2009 Major Defense Acquisition Program Portfolio

In our 2010 assessment of weapon programs, we made several  observations concerning DOD’s management of its major defense  acquisition portfolio. First, in DOD’s fiscal year 2010 budget, the Secretary  of Defense proposed canceling or significantly curtailing programs with  projected total costs of at least $126 billion that he characterized as too  costly or no longer relevant for current operations, while increasing  funding for others that he assessed as higher priorities. Congress  supported several of the recommended terminations (see table 1). Second, DOD plans to replace several of the canceled programs in fiscal  years 2010 and 2011, hopefully with new, knowledge-based acquisition  strategies, because the warfighter need remains. The most significant of  these new programs will be the effort to restructure the Army’s Future  Combat System program into several smaller, integrated programs. Third,  DOD’s portfolio of major defense acquisition programs grew to 102  programs in 2009—a net increase of 6 since December 2007. Observations from Our Assessment of Knowledge Attained by Key Junctures in the Acquisition Process

At the program level, our recent observations present a mixed picture of  DOD’s adherence to a knowledge-based acquisition approach, which is  key for improving acquisition outcomes. While program knowledge is increasing, as in the past,  none of the 42 programs we assessed have attained or are on track to  attain all of the requisite amounts of technology, design, and production  knowledge by each of the key junctures in the acquisition process. However, if DOD consistently implements its December 2008 policy  revisions on new and ongoing programs, then DOD’s performance in these  areas, as well as its cost and schedule outcomes, should improve. Since 2006, there has been a significant increase in the  percentage of technologies demonstrated in a relevant or realistic  environment by the start of system development. This increase  coincided with a change in statute. However, most designs are still not stable at this point. The Weapon Systems  Acquisition Reform Act of 2009 requires that DOD policy ensure that  the acquisition strategy for each major defense acquisition program  provides for competitive prototypes before milestone B approval,  unless a waiver is properly granted. Observations on Other Factors That Can Affect Program Execution

Our 2010 assessment of weapon programs also included three  observations on other areas related to DOD’s management of its weapons  programs, including requirements, software management, and program  office staffing. We have also reported  that workforce challenges can hinder program execution and negatively  affect program management and oversight. Many programs are at risk for cost growth and schedule delays  because of software development issues. Observations about DOD’s Implementation of Acquisition Reforms

DOD has begun to incorporate acquisition reforms into the acquisition  strategies for new programs. Both DOD’s December 2008 acquisition  policy revisions and the Weapon Systems Acquisition Reform Act of 2009  require programs to invest more time and resources in the front end of the  acquisition process—refining concepts through early systems engineering,  developing technologies, and building prototypes before starting system  development. These steps could provide a foundation for  establishing sound, knowledge-based business cases for individual  weapon programs and are consistent with many of our past  recommendations; however, if reform is to succeed and weapon program  outcomes are to improve, they must continue to be reinforced in practice  through decisions on individual programs. Our analysis of the programs in our 2010 assessment allowed us to make  two observations about the extent to which DOD is implementing recent  acquisition reforms:    Most of the ten programs in our 2010 assessment that had not  yet entered system development reported having acquisitions  strategies consistent with both DOD’s revised acquisition policy  and the provisions of the Weapon Systems Acquisition Reform  Act of 2009. Seen in this light, it will take considerable and  sustained effort to change the incentives and inertia that reinforce the  status quo.
Why GAO Did This Study

The past two years have seen the Congress and DOD take meaningful steps towards addressing long-standing weapon acquisition issues--an area that has been on GAO's high risk list since 1990. This testimony focuses on the progress DOD has made in improving the planning and execution of its weapon acquisition programs and the potential for recent acquisition reforms to improve program outcomes. The testimony includes observations about (1) DOD's efforts to manage its portfolio of major defense acquisition programs, (2) the knowledge attained at key junctures of a subset of 42 weapon programs from the 2009 portfolio, (3) other factors that can affect program execution, and (4) DOD's implementation of recent acquisition reforms. The testimony is based on the results of our annual assessment of weapon programs. To conduct the assessment, GAO analyzed data on the composition of DOD's portfolio of major defense acquisition programs. GAO also collected data from program offices on technology, design, and manufacturing knowledge, as well as on other factors that can affect program execution. GAO has made numerous recommendations on weapon system acquisition in prior work but is not making any new recommendations in this testimony.

What GAO Found

While DOD still faces significant challenges in managing its weapon system programs, the current acquisition reform environment provides an opportunity to leverage the lessons of the past and manage risks differently. This environment is shaped by significant acquisition reform legislation, constructive changes in DOD's acquisition policy, and initiatives by the administration, including making difficult decisions to terminate or trim numerous weapon systems. To sustain momentum and make the most of this opportunity, it will be essential that decisions to approve and fund acquisitions be consistent with the reforms and policies aimed at getting better outcomes. DOD has started to reprioritize and rebalance its weapon system investments. In 2009, the Secretary of Defense proposed canceling or significantly curtailing weapon programs with a projected cost of at least $126 billion that he characterized as too costly or no longer relevant for current operations, while increasing funding for others that he assessed as higher priorities. Congress supported several of the recommended terminations. DOD plans to replace several of the canceled programs in fiscal years 2010 and 2011, hopefully with new, knowledge-based acquisition strategies, because the warfighter need remains. The most significant of these will be the effort to restructure the Army's terminated Future Combat System program. At the same time, however, DOD's portfolio of major defense acquisition programs continues to grow. Between December 2007 and July 2009, the number of major defense acquisition programs grew from 96 to 102 programs. GAO has previously reported that DOD should continue to work to balance its weapon system portfolio with available funding, which includes reducing the number or size of weapon system programs, or both, and assessing the affordability of new programs and capabilities in the context of overall defense spending. At the program level, our recent observations present a mixed picture of DOD's adherence to a knowledge-based acquisition approach, which is a key for improving acquisition outcomes. For 42 programs GAO assessed in depth in 2010, there has been continued improvement in the technology, design, and manufacturing knowledge programs had at key points in the acquisition process. However, most programs are still proceeding with less knowledge than best practices suggest, putting them at higher risk for cost growth and schedule delays. A majority of programs have also experienced requirements changes, software development challenges, or workforce issues, or a combination, which can affect program stability and execution. DOD has begun to implement a revised acquisition policy and congressional reforms that address many of these areas. For example, eight programs we examined in the technology development phase plan to test competitive prototypes before starting system development and seven programs plan to hold early systems engineering reviews. If DOD consistently applies this policy, the number of programs adhering to a knowledge-based acquisition should increase and the outcomes for DOD programs should improve.