Sam Black & Victoria Samson / The Center for Defense Information – 2007-05-04 08:25:05

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WASHINGTON (April 27, 2007) — The Government Accountability Office (GAO) is not known for suffering fools gladly. With the recent release of two reports on Missile Defense Agency (MDA) acquisition and development practices, GAO’s reputation is fully warranted. The first report’s title succinctly and eloquently demonstrated the problem: Missile Defense Acquisition Strategy Generates Results but Delivers Less at Higher Cost.”

The second report reveals MDA’s plans for its proposed boost- and ascent-phase intercept programs to be woefully incomplete. Given the high political priority given to MDA programs and their tremendous cost – GAO estimated that $107 billion has been spent on missile defense since the mid-1980s – this lackadaisical attitude by MDA is foolish and deserves more attention.

MDA Acquisition Process
On March 15, 2007, GAO released a report titled “Missile Defense Acquisition Strategy Generates Results but Delivers Less at Higher Cost.” The report was prepared at the behest of Congress, which mandated annual assessments of the Missile Defense Agency’s cost, schedule, and performance in developing the ballistic missile defense system (BMDS).

The main reason Congress had for requesting these annual reports is that the Missile Defense Agency (MDA) is not subject to the normal budgeting and reporting requirements used to hold major programs accountable for their planned outcomes and costs.

The normal acquisition process is fairly straightforward. Program goals are set based on estimates of cost, schedule and performance requirements and then submitted to senior Department of Defense officials and Congress for approval and funding. A clear baseline is established for the assets to be delivered, including their cost per unit, average cost, delivery date and performance parameters. If approved, the program is required to measure progress against this baseline and obtain approval before making significant changes. GAO also noted the following:

Title 10, United States Code (U.S.C.), section 2434 prohibits the Secretary of Defense from approving system development and demonstration, or production and deployment, of a major defense acquisition program unless an independent estimate of the program’s full life-cycle cost has been considered by the Secretary.

So, the process assures that decision-makers have objective, transparent data with which to evaluate the program in question.

MDA is exempt from many of these requirements. Its director has the authority to establish a baseline and change it midstream without first submitting the original or the changes for approval outside the agency. This flexibility “comes at the cost of transparency and accountability.” MDA develops the elements of the system in two-year blocks, each of which is designed to build upon the capabilities acquired previously.

This flexibility has not been used responsibly. One of the report’s main conclusions was that “…costs have increased and the scope of the block – in terms of assets to be fielded and tests to be conducted – have been reduced.” The delivery goals for Block 2004 (assets to be delivered between 2004 and 2005) were reduced three times; the goals for Block 2006 have likewise been curtailed.

MDA Director Lt. Gen. Trey Obering is only required to report these changes to Congress if he considers them “significant.” Obering likewise gets to choose whether or not to report the cost of the work being deferred to later blocks; so far he has not done so.

One would hope that if the scope of a project were reduced, the limited requirements might be able to be accomplished within the bounds of the original budgets. This is not the case. As GAO reports, despite the reduced scope, “most of the elements’ prime contractors reported that work completed during fiscal year 2006 cost more than planned.”

For Block 2006, this overrun amounts to about $1 billion. Additionally, the work that was not completed in Block 2006 has been added to Block 2008, increasing the likelihood that it too will fall behind schedule and rise above projected costs. When work is deferred, its costs are shifted with it, but its capabilities are not. This makes it impossible to track the total cost associated with each asset.

The result of this flexibility? The full cost of Block 2006 is unknown. Some of the Block 2006 expenses may not yield any actual capability until much later on, and were only included in Block 2006 because they may be able to provide some “emergency capability.”

Among the programs in the latter category was the Airborne Laser (ABL), which is not scheduled to even attempt a lethal target shoot-down until 2009. What the ABL would provide in an emergency situation is unclear, as the plane has never been flown or tested with a fully functioning laser. Exacerbating these issues is the fact that the nine separate elements of the BMDS are inconsistently reporting costs.

MDA’s special privileges do not end there. The agency can also initiate new capability blocks and move toward fielding them without an independent cost estimate or an independent test of its effectiveness. The while the acquisition system is designed to deploy assets more quickly, MDA “has fielded some assets whose capability is uncertain.”

The report does provide some relief to frustrated readers. The BMDS has been plagued by quality control issues that have resulted in a number of test failures – another consequence of the unsupervised acquisition process and accelerated development schedule. In response to these issues, MDA has implemented procedures designed to enhance quality.

Among them were a “teaming approach designed to restore the reliability of MDA’s suppliers,” more frequent quality control inspections, and “award fees with an increased emphasis on quality assurance.” The results were encouraging: a 43 percent decline in test failures between March 2004 and September 2005 and a 64 percent decrease in open quality control issues between September 2005 and August 2006.

GAO provides a succinct summary of the situation: “Actual costs cannot be reconciled with original goals because the goals have changed, work travels to and from other blocks, and individual program elements do not account for costs consistently.”

While quality control is very important, and the improvements MDA has made in that area should not be overlooked, similar progress in the financial realm doesn’t appear to be on the horizon. MDA disagreed with GAO’s recommendation that costs should be reported for each element as a whole. The agency’s rationale for this was that it would “detract from managing the BMDS as a single integrated system.”

As GAO retorts, the Department of Defense already requests funding and awards contracts for individual elements; reporting costs in blocks only serves to obscure the true costs of the system. The fact this is the standard for the Department of Defense’s largest single procurement program should not be acceptable.

Missile Defense Decision-making Questioned
On April 17, 2007, the GAO released a second document examining the distinct peculiarities of MDA. In “Missile defense: Actions needed to improve information for supporting future key decisions for boost- and ascent-phase elements,” issues raised on said program elements could in fact be applied to any of the MDA programs.

This study was done as a follow-up to a report that MDA released in March 2006 to explain how its boost- and ascent-phase intercept programs were faring. GAO was asked by the House Appropriations Committee to examine this report, specifically with regard to how MDA presented the technical and operational issues, and whether MDA included a thorough assessment of how much these capabilities would cost to develop and maintain.

The program elements studied were the Airborne Laser (ABL) and Kinetic Energy Interceptor (KEI), both of which are possible boost-phase interceptor programs, and the Aegis Ballistic Missile Defense (BMD) system, which is supposed to develop an ascent intercept capability. Because MDA has strongly pushed for the flexibility to develop a multitude of programs and make decisions as they develop as to whether efforts will continue, ABL and KEI are rapidly approaching key decision points: an attempted shoot-down of a live ballistic missile in 2009 for ABL, and booster flight test in 2008 for KEI.

GAO discovered that while the report did detail some of the boost- and ascent-phase intercept information, “the information in the report has several limitations.” GAO pointed out that DOD acquisition officials can best make decisions on their programs when stakeholders are involved from the get-go, as that allows them to shape the weapon systems to their needs; and that when assumptions are fully explained, the officials can be in the best place to make important development decisions.

Alas, GAO says of MDA: “the March 2006 report presents an incomplete picture of technical capabilities, such as development challenges to be overcome in order to achieve desired performance, and it does not clearly explain the effects of operational assumptions, such as basing locations, asset quantities, and base support requirements.”

GAO determined that “MDA may not have had all potential inputs that could have affected how the type, capability, and likelihood of countermeasures to the boost- and ascent-phase elements were presented in its report.”

These boost- and ascent-phase interceptor systems would need to be based abroad in order to be near their intended targets. MDA did include some information about basing but did not fully study how much it would cost and what sort of effort would be entailed in actually doing so. This omission is crucial, since if the weapon systems cannot be placed overseas where MDA intends to deploy them, the cost of their operation and protection could skyrocket.

While much of the boost- and ascent-phase intercept technology is very early in its development process, MDA made the assumption that the technology would develop as planned, and did not go into how the elements’ capabilities might change if the needed technology did not work as proposed. Given the lackluster performance of missile defense programs to date, this assumption seems quite inappropriate.

Perhaps most striking was MDA’s decision to use modeling information that rested on the systems working as MDA wishes, not as the systems have demonstrated thus far in testing. Besides, the systems at hand are so early in their development that much can change. One criticism by the GAO of the 2006 MDA report is that it “does not explain that some of the technologies for the Airborne Laser have to improve between 60 percent and 80 percent and the report does not discuss any of the challenges MDA faces in doing so.”

MDA did not include the services in determining the numbers of weapon systems required to provide boost- or ascent-phase intercept capability, yet GAO stated that “the Navy had done a preliminary analysis in July 2005 and that the Joint Staff has begun a capabilities mix study and both include, in part, an analysis of quantities.”

Since the programs presumably will follow the Patriot Advanced Capability (PAC)-3’s example, which was developed by MDA but sent over for the Army to deploy and operate, allowing the services to have some say in what their missile defense force structures would look like would be a useful step.

As for cost predictions, GAO found that MDA did not cover all the cost categories which normally are part of any DOD cost assessment. For example, MDA assumed that the missile defense elements would be sent to U.S. bases abroad which would fully and completely cover the new operational costs without further financial support – a situation completely foreign to past experience.

Furthermore, MDA did not “calculate costs based on realistic quantities of each element the combatant commanders or services would need to conduct the mission.” For example, MDA officials said 96 Standard Missile-3 block 2A missiles (which would be part of the Aegis BMD system) should be acquired, simply because they had planned to buy 96 of the block 1A variant. Yet, the Navy was not a part of this decision-making process.

Sensitivity analysis, or “a way to identify risk by demonstrating how the cost estimates would change in response to different values for specific cost drivers,” was not included in MDA’s cost estimates, nor were costs shown over time. The absence of these normal parameters of DOD cost assessments means that decision-makers will not know all the various options and their consequences, a fact that could have a major impact for later deployment efforts.

Risk assessments were not conducted for MDA’s cost estimates, nor were they independently verified by DOD’s Cost Analysis Improvement Group (the latter was excluded because of time constraints to complete the report). MDA did admit that cost verification was important, so perhaps this will be included in future cost estimates. In any case, the cost estimates as they currently stand are incomplete, something that should be remembered by Congress when it attempts to make budget decisions.

Conclusion
An unpleasant image of MDA emerges from both these reports: an agency that is exempt from most of the reporting restrictions on and planning documents required from every other Pentagon acquisition program.

These oversight mechanisms exist to prevent the sort of bloated budgets and missed deadlines that we see in the BMDS system today. Moreover, we see an agency that is betting on the unrealistic assumption that all its very rudimentary technologies will develop perfectly, a head-in-the-sand mentality that should be discouraged.

Exacerbating the problem is the fact that these estimates are used to justify MDA’s already massive budget, obscuring the fact that its projected costs are, in all likelihood, far lower than what will come to pass. Finally, we see an institution which is so focused on getting something, anything developed, that it has forgotten to include basic cost estimates for deployment and operations of those systems developed.

The GAO reports have only further highlighted the need for more robust congressional oversight of MDA and its developmental programs.

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