	Fragmented Investment Decision Making, Unexecutable Programs, and Lack of Accountability Underlie Poor Acquisition Outcomes

Over the past several years our work has highlighted a number of  underlying systemic causes for cost growth and schedule delays at both  the strategic and program levels. At the strategic level, DOD’s processes  for identifying warfighter needs, allocating resources, and developing and  procuring weapon systems—which together define DOD’s overall weapon  system investment strategy—are fragmented. As a result, DOD fails to  effectively address joint warfighting needs and commits to more programs  than it has resources for, thus creating unhealthy competition for funding. Furthermore, DOD officials are rarely held  accountable for poor decisions or poor program outcomes. We recently reviewed the impact of the PPBE process on major defense  acquisition programs and found that the process does not produce an  accurate picture of the department’s resource needs for weapon system  programs, in large part because it allows too many programs to go forward  with unreliable cost estimates and without a commitment to fully fund  them. Recent DOD Policy Changes Could Improve Future Performance of Weapon System Programs

The department understands many of the problems that affect acquisition  programs and has recently taken steps to remedy them. It has revised its  acquisition policy and introduced several initiatives based in part on  direction from Congress and recommendations from GAO that could  provide a foundation for establishing sound, knowledge-based business  cases for individual acquisition programs. Some key elements of the department’s new acquisition  policy include    a new materiel development decision as a starting point for all programs  regardless of where they are intended to enter the acquisition process,    a more robust Analysis of Alternatives (AOA) to assess potential materiel  solutions that address a capability need validated through JCIDS,    a cost estimate for the proposed solution identified by the AOA,    early program support reviews by systems engineering teams,    competitive prototyping of the proposed system or key system elements as  part of the technology development phase,    certifications for entry into the technology development and system  development phases (as required by congressional legislation),    preliminary design review that may be conducted before the start of    configuration steering boards to review all requirements and technical  changes that have potential to affect cost and schedule. Observations on Proposed Acquisition Reform Legislation

Overall, we believe that the legislative initiatives being proposed by the  committee have the potential, if implemented, to lead to significant  improvements in DOD’s management of weapon system programs. Several  of the initiatives—including the increased emphasis on systems  engineering and developmental testing, the requirement for earlier  preliminary design reviews, and the strengthening of independent cost  estimates and technology readiness assessments—could instill more  discipline into the front end of the acquisition process when it is critical  for programs to gain knowledge. Establishing a termination criterion for  Nunn-McCurdy cost breaches could help prevent the acceptance of  unrealistic cost estimates as a foundation for starting programs. Having  greater involvement by the combatant commands in determining  requirements and requiring greater consultation between the  requirements, budget, and acquisition processes could help improve the  department’s efforts to balance its portfolio of weapon system programs. Concluding Observations on What Remains to Be Done

A broad consensus exists that weapon system problems are serious and  that their resolution is overdue. The new policy  will not work effectively, however, without changes to the overall  acquisition environment. Resisting the urge to achieve the revolutionary  but unachievable capability, allowing technologies to mature in the  science and technology base before bringing them onto programs,  ensuring that requirements are well-defined and doable, and instituting  shorter development cycles would all make it easier to estimate costs  accurately, and then predict funding needs and allocate resources  effectively. But these measures will succeed only if the department uses an  incremental approach. Defense Management: Actions Needed to Overcome Long-standing  Challenges with Weapon Systems Acquisition and Service Contract  Management. Best Practices: Increased Focus on Requirements and Oversight Needed  to Improve DOD’s Acquisition Environment and Weapon System  Quality. Defense Acquisitions: Major Weapon Systems Continue to Experience  Cost and Schedule Problems under DOD’s Revised Policy.
Why GAO Did This Study

Since 1990, GAO has consistently designated the Department of Defense's (DOD) management of its major weapon acquisitions as a high-risk area. A broad consensus exists that weapon system problems are serious, but efforts at reform have had limited impact. Last year, GAO reported that DOD's portfolio of weapon programs experienced cost growth of $295 billion from first estimates, were delayed by an average of 21 months, and delivered fewer quantities and capabilities to the warfighter than originally planned. At a time when DOD faces increased fiscal pressures from ongoing operations in Iraq and Afghanistan, and the federal budget is strained by a growing number of priorities, it is critical that the department effectively manage its substantial investment in weapon system programs. Every dollar wasted or used inefficiently on acquiring weapon systems means that less money is available for the government's other important budgetary demands. This testimony describes the systemic problems that contribute to the cost, schedule, and performance problems in weapon system programs, recent actions that DOD has taken to address these problems, proposed reform legislation that the committee recently introduced, and additional steps needed to improve future performance of acquisition programs. The testimony is drawn from GAO's body of work on DOD's acquisition, requirements, and funding processes.

What GAO Found

For several years, GAO's work has highlighted a number of strategic- and program-level causes for cost, schedule, and performance problems in DOD's weapon system programs. At the strategic level, DOD's processes for identifying warfighter needs, allocating resources, and developing and procuring weapon systems, which together define the department's overall weapon system investment strategy, are fragmented. As a result, DOD fails to balance the competing needs of the services with those of the joint warfighter and commits to more programs than resources can support. At the program level, DOD allows programs to begin development without a full understanding of requirements and the resources needed to execute them. The lack of early systems engineering, acceptance of unreliable cost estimates based on overly optimistic assumptions, failure to commit full funding, and the addition of new requirements well into the acquisition cycle all contribute to poor outcomes. Moreover, DOD officials are rarely held accountable for poor decisions or poor program outcomes. Recognizing the need for more discipline in weapon systems acquisition and to implement Congressional direction, DOD recently revised its policy and introduced several initiatives. The revised policy, if implemented properly, could provide a foundation for developing individual acquisition programs with sound, knowledge-based business cases. The policy recommends the completion of key systems engineering activities, establishes early milestone reviews, requires competitive prototyping, and establishes review boards to manage potential requirements changes to ongoing programs. The committee's proposed reform legislation should lead to further improvements in outcomes. Improved systems engineering, early preliminary design reviews, and strengthened independent cost estimates and technology readiness assessments should make the critical front end of the acquisition process more disciplined. Establishing a termination criterion for critical cost breaches could help prevent the acceptance of unrealistic cost estimates at program initiation. Having greater combatant command involvement in determining requirements and greater consultation between the requirements, budget, and acquisition processes could help improve the department's efforts to balance its portfolio of weapon system programs. Legislation and policy revisions may lead to improvements but cannot work effectively without changes to the overall acquisition environment and the incentives that drive it. Resisting the urge to achieve revolutionary but unachievable capabilities, allowing technologies to mature in the technology base before bringing them onto programs, ensuring requirements are well-defined and doable, and instituting shorter development cycles would all make it easier to estimate costs accurately, and then predict funding needs and allocate resources effectively. These measures will only succeed if the department balances its portfolio and adopts an incremental approach to developing and procuring weapon systems.