Defense Acquisitions
Sound Business Case Needed to Implement Missile Defense Agency's Targets Program
GAO-08-1113, Sep 26, 2008
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The Missile Defense Agency (MDA) is likely to spend $460 million annually on missiles used as targets for flight tests. Executing these tests depends on the quality and availability of targets. Congress asked GAO to assess (1) if MDA is providing reliable targets; (2) the causes of any deficiencies; and (3) if resolutions exist for any problems identified. To do this, GAO analyzed acquisition policies and procedures; flight test data; and budget, program execution, and acquisition materials; and interviewed MDA and DOD officials.
MDA has difficulty in both supplying targets for missile defense testing as well as in developing a new family of short, medium and long-range targets. The number of target failures and anomalies (failing to achieve one or more non-critical mission objective or partially achieving a critical mission objective) during flight tests has increased since 2006, contributing to delays in flight tests and modification of flight test objectives. In addition, the average unit cost of targets has grown significantly, from $4.5 million to $8.5 million from 2002 to 2006 to current estimates of $32 million to $65 million for the targets planned from 2008 to 2010. Many factors contribute to this cost growth, including increased complexity of targets to better reflect an evolving threat and late changes to target requirements on contract. MDA's difficulty in supplying existing targets is driven by diminishing sources for components, unanticipated costs, and problems incorporating requirements into contracts and establishing program baselines. MDA has also encountered problems developing the new family of targets, an effort currently estimated to cost at least $1 billion. The problems are due, at least in part, to the fact that a sound business case was not established before proceeding with the program and the attendant contracting strategy. The decision to pursue this new family of targets was made without a formal cost analysis and it is unclear whether MDA evaluated all alternatives before making this commitment. GAO also could not identify an original approved acquisition strategy for the new family of targets. Consequently, developmental problems have arisen in the new family of targets, leading to cost growth, delayed flight tests, and deferral of several key capabilities. MDA is taking a series of actions to address these problems, such as: (1) establishing technical, cost, and schedule baselines for all missions in the 2-year integrated master test plan; (2) drafting long-term target capability requirements; (3) developing a new cost model for targets; (4) making plans to improve risk management by considering program-wide issues, and including programmatic risks, cost and schedule in risk assessments. However, the prospects for resolution of the target acquisition problems are unclear and the overall success of the Ballistic Missile Defense System flight test program depends on the success of a new family of targets under development.
Status Legend:
Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
- In Process
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: The Secretary of Defense should require the Director, MDA to establish a revised business case for providing reliable and timely targets for a robust flight test program. Such a business case should, among other things, (1) determine the best approach for providing an ample supply of quality targets to support the missile defense flight test program, including consideration of approaches other than the FTF; (2) demonstrate that the chosen approach--including the attendant acquisition and contracting strategy-can be executed with available technologies, funding, time, and management capacity; (3) establish separate cost, schedule, and performance baselines for each class of target under development against which progress can be measured; and (4) reflect input from key organizations, such as the Missile Defense Executive Board, independent cost estimators, and the Director, Operational Test and Evaluation.
Agency Affected: Department of Defense
Status: Open
Comments: The Missile Defense Agency conducted a business case analysis, and released a Targets and Countermeasures acquisition strategy in July 2009, but the agency subsequently, in 2010, made decisions that were not consistent with this new acquisition strategy. 1) The business case analysis which was approved on July 23, 2009 did not include an assessment of quality and schedule measures of effectiveness, which are part of the evaluation criteria in the source selection process. Revisions to the business case analysis are expected but have not yet been provided for GAO review. In addition, the strategy called for as many as five new contract types which was later reduced to three (Medium, Intermediate and Intercontinental range targets). 2) It is not clear whether the chosen approach will require new technologies, funding, time and management because the solicitation for the medium range ballistic missile target, and the draft solicitation for the intercontinental ballistic missile target were issued but then cancelled prior to award. The contract for the intermediate range ballistic missile was competed and awarded in the second quarter of fiscal year 2011. 3) The Agency established a Ballistic Missile Defense (BMD) Accountability Report (BAR) in July 2010, but it is not yet clear whether they will use these baselines to manage the program's progress. 4) Neither the Director, Operational Test and Evaluation nor independent cost estimators were identified as participants in preparation of the acquisition plan. In addition, only integration costs were considered in the estimate. We will continue to follow the program's fiscal year 2011 plans and further evaluate all of the criteria in this recommendation.
Recommendation: The Secretary of Defense should align MDA's plans and resources with the targets program approach resulting from the above business case.
Agency Affected: Department of Defense
Status: Open
Comments: MDA released a new business case and acquisition plan for the Targets and Countermeasures program in July 2009 but failed to fully implement the new acquisition plan when 2 target solicitations were cancelled in 2010 and an undefinitized contract action was awarded instead. We will review 2011 target acquisition decisions to evaluate whether the program is acting consistent with the revised 2009 acquisition plan. In addition, we will evaluate MDA's fiscal year 2012 budget and the June 2010 and February 2011 BMDS Accountability Reports to determine whether or not the Secretary of Defense aligns MDA's plans and resources with the new business case.
Recommendations for Congressional Consideration
Recommendation: The Congress has repeatedly stressed the need for robust testing of the Ballistic Missile Defense System and has become concerned with the health of the MDA targets program. The Congress has also expressed concern that the FTF program is proceeding at a slower pace and greater cost than expected. Therefore, Congress may wish to consider whether to require the Secretary of Defense to report the departmentally approved missile defense target development and procurement strategy, business case, and baselines to the Congressional Defense Committees.
Agency Affected: Congress
Status: Open
Comments: MDA conducted a business case analysis in order to identify a new acquisition plan to address problems with cost, schedule and performance problems, and initiated a new acquisition plan in 2009. This acquisition plan called for separate contract awards for different classes of targets. However, in 2010, MDA cancelled both of the solicitations for medium-range targets and intercontinental-range targets, and instead issued a new undefinitized contract action for medium-range air-launched targets in the second quarter of fiscal year 2010. As of August 2011, this contract action remained undefinitized. All of these actions are inconsistent with the new acquisition plan. GAO plans to review several key acquisition decisions in fiscal year 2011 that the Targets and Countermeasures program will make in order to see if they are more consistent with the new acquisition plan. We will also review legislation to determine whether or not Congress requires the Secretary of Defense to report the new strategy, business case, and baseline to the Congressional Defense Committees. We already know that baselines are reported to the Committees in MDA's annual BMDS Accountability Report.