For example, the requirements for acquisition program  baselines and independent cost estimates, generally applicable by statute  to major defense acquisition programs and implemented by the DOD  regulations, will not be applied until a BMDS element or component is  transferred to a military service concurrent with Milestone C. Milestone C,  the point at which a decision is made to begin initial production, is the  point at which the service is to assume management and funding  responsibility for an element or component of the BMDS. These officials told us that when the Under Secretary established transfer  criteria in 2002, DOD did not fully understand the complexity of the BMDS  and how it could affect transfer decisions. MDA Contemplates a Revised Acquisition Model

There is currently uncertainty as to when and under what conditions DOD  will transfer management and funding responsibility for elements and  major components from MDA to the military services. Management responsibility for some elements and components might  never be transferred to a military service because these assets are not  integrated on service platforms or do not perform core service missions. MDA officials suggested that  these components could be operated by either contractors or military  personnel, and MDA might fund their operation and sustainment. Additionally, DOD has not yet determined  the full cost of procuring, operating, and sustaining the BMDS from 2006  through 2011, and it has not included all known costs in its budget. Until  DOD decides which organization will fund these costs, the services will  likely continue to provide only the funding that they are directed to make  available, and some needs, which neither MDA nor the services have  planned for, will probably go unfunded. Additionally, if the funds budgeted  for some purposes, such as logistical support for the BMDS, turn out to be  insufficient, DOD will either have to take funds from other programs or  spend less on missile defense. DOD reports that it will spend $68.5 billion between fiscal years 2005 and  2011 to develop, acquire, and support missile defense capabilities,  including an initial capability emplaced in 2004-2005 that can be used in  the event of an emergency. MDA Is Using RDT&E Funds to Acquire BMDS Components

In fiscal year 2005, MDA budgeted $1.5 billion of its research and  development funds to acquire interceptors and radars and to upgrade  various BMDS elements or components. It expects to continue to acquire  and upgrade BMDS assets through 2011. Conclusions

The military services are uncertain as to which missile defense assets may  eventually be transferred to them and under what conditions those  transfers may occur. This uncertainty makes it difficult for the services to  plan the activities that are necessary to apply the requirements of DOD  acquisition system regulations and to consider how to best realign their  budgets to support the missile defense mission. DOD also needs to clarify whether MDA or the services will be responsible  for sustaining missile defense capabilities that have not been transferred  to the services. On the other  hand, the military services will not want to fund the operation and  sustainment of a missile defense capability if its cost cannot be accurately  estimated. While the team established by MDA to develop transition plans  includes working-level representatives from MDA, the military services,  and the combatant commands, it will be difficult to reach full agreement  as to who should pay sustainment costs for these assets because the  representatives do not have the authority to make binding financial  decisions for their organizations. Recommendations

We recommend that the Under Secretary of Defense for Acquisition,  Technology and Logistics revise the criteria for deciding when  management and funding responsibility for missile defense assets should  be transferred from MDA to a military service so that those criteria are  clear and complete.
Why GAO Did This Study

In 2002, the Department of Defense (DOD) implemented a new acquisition model to develop a Ballistic Missile Defense System (BMDS) that included all major missile defense acquisitions, some of which were being developed by the military services. The model called for the management and funding responsibility for production, operation, and sustainment of a capability to be transferred to a military service when a BMDS element or major component is technically mature and plans for production are well developed. The Missile Defense Agency (MDA) was given responsibility for developing the BMDS and recommending the transfer of management and funding responsibilities to the services. In 2004, MDA emplaced an initial missile defense capability, but DOD did not transfer management and funding responsibility for that capability. Because a formal transfer did not occur, GAO was asked to (1) identify DOD's criteria for deciding when a missile defense capability should be transferred to a service and (2) determine how DOD is managing the costs of fielding a BMDS capability.

What GAO Found

There is currently uncertainty as to which assets may eventually be transferred to each military service and under what conditions those transfers should occur. This uncertainty makes it difficult for the services to plan to address the requirements of DOD acquisition regulations and realign their budgets to support the missile defense mission. According to MDA and other DOD officials, when transfer criteria were established in 2002, the Department did not fully understand the complexity of the BMDS and how it could affect transfer decisions. For example, it has been difficult to determine whether MDA or a military service will be responsible for managing and funding some assets, such as stand-alone missile defense radars, because these assets are not integrated on service platforms or do not perform core service missions. MDA officials suggested that these components could be operated by either contractors or military personnel and MDA might fund their operation and sustainment. A team that includes representatives from the military services, the combatant commands, MDA, and other DOD offices was established early this year to address transfer issues. However, because MDA and the services have been unable to reach agreement on the transfer of some missile defense assets, a unit under the Joint Chiefs of Staff was tasked in July 2005 with recommending revisions to the existing transfer criteria. MDA budgeted $1.5 billion of its fiscal year 2005 research and development funds to acquire interceptors and radars and upgrade various BMDS components. It expects to continue to acquire and upgrade BMDS assets through 2011 and beyond. However, MDA and the services disagree as to who should pay for operating and sustaining the initial defensive capability after fiscal year 2005. Additionally, although DOD has budgeted $68.5 billion to develop, procure, operate, and sustain a missile defense capability between 2005 and 2011, it has not completely determined whether additional operation and sustainment funds will be needed, and it has not included all known operation and sustainment costs in its budget. Until DOD decides who will fund these costs, the services will likely continue to provide only the funding that they have been directed to provide. As a result, some needs--for which neither MDA nor the services have planned--will go unfunded. Additionally, if the funds budgeted for some purposes, such as logistical support for the BMDS, turn out to be insufficient, DOD will either have to take funds from other programs or spend less on missile defense.