As part of MDA’s planning process, MDA defines overarching program  goals for the development and fielding of BMDS block configurations. For example, MDA estimates it will need about  $12.0 billion to fund Block 2008 activities over the next 7 years through  2011. Policy. To address its negative cost variance for  GMD, MDA deferred some work planned for completion in fiscal year 2004  into fiscal year 2005, and, to cover these increased costs, requested and  received additional money in its fiscal year 2005 budget. Based on DOD’s  Future Years Defense Plan for fiscal years 2006-2011, MDA plans to  request, on average, Research, Development, Test, and Evaluation  (RDT&E) funding of about $10 billion annually. This funding supports  continued development, procurement, and sustainment of hardware and  software that MDA is fielding. One factor for the increasing pressure is that DOD’s acquisition programs  such as ballistic missile defense are likely to be competing for a decreasing  share of the federal budget. MDA Is Not Consistently Matching Cost and Fielding Goals

In assessing the extent MDA achieved its stated goals in fiscal year 2004,  we observed that MDA’s cost goal for a given block is not consistently  aligned with that block’s fielding goals. Of these missiles, 11 will be  delivered in 2004-2005, and the remaining missiles will be delivered  during 2006-2007. Similarly, funds accounted for in the Block 2006 cost  goal are being used to procure 40 missiles. In addition, counter to the definition of a block as an integrated set of  capabilities fielded during the 2-year block window, the Airborne Laser  program will not field any capabilities during Block 2004 although Block  2004 funds are used in the program’s development. Despite this success, the  performance of the system remains uncertain and unverified because of  recurrent test delays and failures. To provide these  capabilities, the Missile Defense  Agency (MDA) is upgrading  existing Aegis Navy ships for the  BMD mission. It will also be used as a forward-deployed Ballistic Missile Defense System  (BMDS) sensor, employing its shipboard SPY-1 radar, to perform  surveillance and tracking of long-range ballistic missiles in support of the  Ground-based Midcourse Defense (GMD) mission. Battle management/command and control (BMC2). The near-term focus of the program was shifted toward two  events: (1) the achievement of a key laser demonstration known as “First  Light”—the first demonstration of the integration of six individual laser  modules to produce a single beam of laser energy—and (2) the initial flight  test of the prototype aircraft with the BC/FC installed, which is referred to  as “First Flight.” Key provisions of the restructure call for the program  office to complete the following activities during the next few years:    Ground test and flight test the BC/FC segment independent of high- energy laser testing activities. BMDS integration and communications. By the end of fiscal year 2004, GMD carried out planned activities needed to  field an initial missile defense capability, including, as summarized below,  the emplacement of interceptors at Fort Greely, Alaska. History

The Department of Defense (DOD) established the National Missile  Defense program in 1996 to develop a missile defense system capable of  protecting the United States from ICBM attacks. DOD will use this initial capability  to provide the United States with protection against a limited ballistic  missile attack launched from Northeast Asia. Ground tests were conducted to ensure interoperability of  element components and to verify operation and performance of  component software. Cost:  Our analysis of prime contractor cost performance reports shows that  the contractor’s favorable cost and schedule performance eroded somewhat  during fiscal year 2004.
Why GAO Did This Study

Since 1985, the Department of Defense (DOD) has invested $85 billion in ballistic missile defense programs, with $66.5 billion more anticipated over the next 7 years through 2011. As a major result of this investment, the Department is on the verge of activating our nation's first missile defense system for protecting the United States from intercontinental ballistic missile attacks out of Northeast Asia. This initial capability--referred to as Limited Defensive Operations (LDO)--is the first step of a national priority to develop, field, and evolve over time an overarching ballistic missile defense system (BMDS). To fulfill a congressional mandate, GAO assessed how well the Missile Defense Agency (MDA) met its cost, schedule, testing, and performance goals during fiscal year 2004. GAO assessed the program last year and will continue to provide assessments of MDA progress through 2006.

What GAO Found

By the end of fiscal year 2004, MDA carried out activities needed to field an initial missile defense capability, as planned. These included delivery and emplacement of Ground-based Midcourse Defense interceptors; upgrades of ground-based radars; enhancements to Aegis Navy ships for improved surveillance and tracking; development of command and control software for system operation; and tests to verify that components of this initial capability can communicate as part of an integrated whole. However, the performance of the system remains uncertain and unverified, because a number of flight tests slipped into fiscal year 2005 and MDA has not successfully conducted an end-to-end flight test using operationally-representative hardware and software. Additionally, based on our analysis of prime contractor cost and schedule performance, the development of BMDS elements cost approximately $370 million more than planned during fiscal year 2004. To cover much of this cost overrun, MDA deferred work planned for fiscal year 2004, redirected funds earmarked for other programs, and requested additional funds in its fiscal year 2005 budget to cover the cost of deferred work. In the future, MDA will likely face increased funding risks. MDA plans to request about $10 billion annually from DOD for BMDS development, procurement, and sustainment. However, DOD's acquisition programs are likely to be competing for a decreasing share of the total federal budget and MDA's programs are competing against hundreds of other DOD programs. Also, MDA continues to budget for unanticipated cost growth. For example, the Airborne Laser program plans to spend an additional $1.5 billion to develop and demonstrate a prototype aircraft. Furthermore, procurement and sustainment will demand increased funding as more missile defense components are fielded over time. MDA policy defines a block as an integrated set of capabilities fielded during the 2-year block cycle, but we observed that MDA's fielding goals do not consistently match its cost goals. For example, Block 2004 funds are used to procure 32 Aegis Ballistic Missile Defense missiles, but of these missiles, 11 will be delivered in 2004-2005 and the remaining missiles will be delivered during 2006-2007. MDA officials intend to clarify the block policy in the near future to better align the cost and fielding goals.