	Background

DON is a major component of the Department of Defense (DOD),  consisting of the Navy and the Marine Corps. It is to be developed incrementally, with the  first increment to provide comparable NMCI capabilities, additional  information assurance, and increased government control of the network. The program’s preliminary life  cycle cost estimate (through fiscal year 2025) for the first increment is  about $50 billion. The NGEN AOA contained key weaknesses in its cost  estimates and operational effectiveness analysis that impaired its ability to  inform investment decision making. Further, none of the alternatives in  this analysis match the current acquisition approach, and these differences  have not been analyzed to determine the breadth of risk that exists. While the AOA identified limitations in the cost analysis, such as the use of  NMCI data that did not reflect prices of other service providers, and  evaluated the impact on costs of using different transition timeline  scenarios, it did not include a sensitivity analysis of the key cost driver  (i.e., the number of personnel needed to manage NGEN), despite concerns  that the Navy’s estimates of these numbers were not stabilized at the time  of the AOA. Rather, it simply states that it  was a qualitative assessment. However, these measures alone do not provide insight into how they  would influence the operational effectiveness of each alternative because  they were not linked to NGEN capabilities and goals, and they did not  provide sufficient insight for selecting a preferred alternative. However, the segmented approach currently  being pursued by DON was not one of the alternatives assessed in the  AOA. Without a reliable schedule, it is likely that established  program milestones will slip. Our work has identified nine best practices associated with developing  and maintaining a reliable schedule. However, the most  current version of this schedule (May 2010) that was available at the time  we began our review was not reliable because only two of the four  subschedules that we analyzed substantially met any of the nine  practices. Notwithstanding these weaknesses, the program was approved  to proceed. Nevertheless,  the program was approved to proceed. Further, according to the assessment, the Test and Evaluation  Master Plan was not complete because the requirements were not defined. According to DON officials, the decisions to pass the gates  and proceed were based on their view that they had sufficiently mitigated  known risks and issues. Most notably, while  DON produced substantially well-documented cost estimates, the NGEN  acquisition approach currently being followed is not grounded in a reliable  analysis of alternative approaches, and the selected approach was not  even assessed and is about $4.7 billion costlier and introduces more risk  than the alternatives that were assessed. Exacerbating this  is an equally troubling pattern of missed milestones and delays in key  program documentation, as well as gate review decisions that have  allowed the program to proceed in the face of significant performance  shortfalls and risks. It is thus imperative, given the scope and nature of the program’s  problems, that swift and immediate action be taken to ensure that the  most cost-effective acquisition approach is pursued and that a reliable  schedule and performance- and risk-based decision making are employed. Recommendations for Executive Action

To ensure that NGEN capabilities are acquired in the most cost-effective  manner, we recommend that the Secretary of Defense take the following  two actions:    direct the Under Secretary of Defense for Acquisition, Technology, and  Logistics to conduct an interim NGEN milestone review, and    direct the Secretary of the Navy to immediately limit further investment in  NGEN until this review has been conducted and a decision on how best to  proceed has been reported to the Secretary of Defense and congressional  defense committees. To facilitate implementation of the acquisition approach resulting from the  above review, we further recommend that the Secretary of Defense direct  the Secretary of the Navy to take the following two actions:    ensure that the NGEN integrated master schedule substantially reflects the  key schedule estimating practices discussed in this report, and    ensure that future NGEN gate reviews and decisions fully reflect the state  of the program’s performance and its exposure to risks. By not evaluating all viable acquisition  approaches before proceeding with further investment in NGEN, the  department cannot be assured that it is pursuing the most cost-effective  approach. Appendix I: Objectives, Scope, and Methodology

Our objectives were to determine whether (1) the Department of the Navy  (DON) sufficiently analyzed alternative approaches for acquiring its Next  Generation Enterprise Network (NGEN), (2) DON has a reliable program  schedule for executing NGEN, and (3) acquisition decisions have been  performance- and risk-based.
Why GAO Did This Study

The Department of the Navy (DON), a major component of the Department of Defense (DOD), has launched its Next Generation Enterprise Network (NGEN) program to replace the Navy Marine Corps Intranet (NMCI) program. NGEN capabilities, such as secure transport of voice and data, data storage, and e-mail, are to be incrementally acquired through multiple providers. As planned, the first increment is expected to provide comparable NMCI capabilities, additional information assurance, and greater DON network control, at a cost of about $50 billion through fiscal year 2025. Given the size, importance, and complexity of NGEN, GAO was asked to determine whether DON has sufficiently analyzed alternative acquisition approaches and has a reliable schedule for executing the program, and whether program acquisition decisions have been performance- and risk-based. To do this, GAO reviewed the NGEN analysis of alternatives, integrated master schedule, and key milestone decisions.

What GAO Found

DON did not sufficiently analyze alternative acquisition approaches for NGEN because the alternatives analysis contained key weaknesses, and none of the alternatives assessed match the current acquisition approach. Specifically, the cost estimates for the respective alternatives were not reliable because they were not substantially accurate, and they were neither comprehensive nor credible. Further, the operational effectiveness analysis, the other key aspect of an analysis of alternatives, did not establish and analyze sufficient measures for assessing each alternative's ability to achieve program goals and deliver program capabilities. Moreover, the acquisition approach that DON is actually pursuing was not one of the alternatives assessed in the analysis, and it is riskier and potentially costlier than the alternatives analyzed because it includes a higher number of contractual relationships. According to program officials, the analysis reflects the most that could be done in the time that was available to complete it, and they do not view the alternative selected as materially different from the assessed alternatives, even though it is about $4.7 billion more costly. DON does not have a reliable schedule for executing NGEN. Only two of the four subschedules that GAO reviewed, each of which help form the master schedule, adequately satisfied any of the nine practices that are associated with developing and maintaining a reliable schedule. These weaknesses have contributed to delays in key program milestones. During the course of GAO's review, DON stated that action was taken to address some, but not all, of these weaknesses. According to program officials, schedule estimating was constrained by staffing limitations. NGEN acquisition decisions were not always performance- and risk-based. In particular, the program was approved in the face of known performance shortfalls and risks. For example, the program was approved at a key acquisition review despite the lack of defined requirements, which was recognized as a risk that would impact the completion of other key documents, such as the test plan. This risk was later realized as a critical issue. According to program officials, the decisions to proceed were based on their view that they had sufficiently mitigated known risks and issues. Collectively, these weaknesses mean that DON does not have a sufficient basis for knowing that it is pursuing the best approach for acquiring NGEN capabilities and the program's cost and schedule performance is unlikely to track to estimates.

What GAO Recommends

GAO is recommending that DOD limit further investment in NGEN until it conducts an interim review to reconsider the selected acquisition approach and addresses issues discussed in this report. In its comments, DOD stated that it did not concur with the recommendation to reconsider its acquisition approach; GAO maintains that without doing so, DOD cannot be sure it is pursuing the most cost-effective approach.