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Testimony: 

Before the Subcommittee on Airland, Committee on Armed Services, U.S. 
Senate: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 2:30 p.m. EDT:
Tuesday, June 16, 2009: 

Defense Acquisitions: 

Issues to be Considered for Army's Modernization of Combat Systems: 

Statement of Paul L. Francis, Managing Director: 
Acquisition and Sourcing Management: 

GAO-09-793T: 

GAO Highlights: 

Highlights of GAO-09-793T, a report to Subcommittee on Airland, 
Committee on Armed Services, U.S. Senate. 

Why GAO Did This Study: 

Future Combat System (FCS) has been at the center of the Army’s efforts 
to become a lighter, more agile, and more capable combat force by 
replacing existing combat systems with a family of manned and unmanned 
vehicles and systems, linked by an advanced information network. To 
meet the challenges of FCS’s scope and schedule, the Army contracted 
with Boeing to be lead systems integrator (LSI), to help define, 
develop, and integrate FCS systems. 

Earlier this year, the Secretary of Defense proposed restructuring FCS 
to lower risk and address more near-term needs, shortly before FCS was 
to undergo a congressionally-mandated review to determine its future. 
The Department of Defense (DOD) and the Army have already begun to make 
programmatic and budgetary adjustments to FCS. This statement reviews 
aspects of FCS that should be considered for inclusion in future 
efforts, aspects that were problematic and need re-examination, and 
considerations for shaping future Army ground force modernization. 

The testimony is drawn from GAO’s body of work on FCS management and 
acquisition strategy, including knowledge gaps, cost, affordability, 
oversight, and the Army/LSI relationship. GAO has made numerous 
recommendations aimed at managing FCS risks, but it is not making any 
new recommendations in this testimony. 

What GAO Found: 

FCS has many good features that should be considered in future efforts, 
including a holistic vision of the future force, government insight 
into subcontractor selection and management, a focus on leveraging 
capabilities through an information network, and establishment of 
organizations to train with and evaluate technologies to be spun out to 
current forces. 

Other more difficult lessons from FCS must also be used to put future 
modernization efforts on the soundest footing possible. FCS was not 
executable within reasonable bounds of technical, engineering, time, or 
financial resources. From the start, the program was immature and 
unable to meet DOD’s own standards for technology and design. Although 
adjustments were made, including adding time and trading off 
requirements, vehicle weights and software code grew, key network 
systems were delayed, and technologies took longer to mature. By 2009, 
it was still not known that the FCS concept would work. Oversight has 
been extremely challenging, given the program’s vast scope and the 
innovative, but close, partner-like relationship between the Army and 
the LSI. Oversight by the Office of the Secretary of Defense did not 
compensate for these risks early in the program. Oversight was further 
challenged by the fact that the planned schedule for making decisions 
outpaced demonstrated knowledge—major production commitments were to be 
made before basic designs were demonstrated. 

As the Army proceeds with a different approach to modernization, there 
will be a number of important factors to consider. Rather than a single 
FCS program going forward, several programs with more targeted 
objectives may emerge. These programs need to be based on principles 
such as knowledge-based acquisition, sound cost estimating, and 
transparency and accountability for oversight. Beyond these principles, 
the Army will have to tailor its approaches to the needs of the 
individual programs. For example, the acquisition approach for spinning 
out mature technologies to current forces would differ from the 
approach needed to develop an information network. Several issues with 
transitioning from FCS will have to be addressed, including: closing 
out or restructuring current contractual arrangements; transferring FCS 
knowledge to emergent programs; transitioning the FCS information 
network to current Army forces; placing early emphasis on key design 
considerations such as sustainability; and balancing investments 
between future capabilities and keeping fielded systems capable. 

The Army’s experience with FCS has been productive. The key in going 
forward will be to take the best from both positive and negative 
lessons learned and apply them to the ground force modernization 
efforts that will succeed FCS. The Army and DOD should continue to be 
innovative as to concepts and approaches, but anchored in knowledge-
based strategies when it comes to proposing a specific system 
development effort. 

View [hyperlink, http://www.gao.gov/products/GAO-09-793T] or key 
components. For more information, contact Paul Francis at (202) 512-
4841 or francisp@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the Department of the Army's 
modernization efforts to transform into a lighter, more agile, and more 
capable combat force using a new concept of operations, technologies, 
and information network. For the past 6 years, the Future Combat System 
(FCS), a revolutionary and expansive program, formed the core of Army 
modernization. Earlier this year, the Secretary of Defense recommended 
restructuring the FCS program to lower risk and to address more near 
term needs. His recommendation came a few months before the FCS program 
was scheduled to undergo a congressionally-mandated go/no-go review to 
determine the program's future. Although the Army has not yet 
officially implemented the Secretary's recommendation, the Department 
of Defense (DOD) and the Army have begun to make conforming 
programmatic and budgetary adjustments to FCS. 

My statement today is based on the work we conducted over the last 
several years in response to the National Defense Authorization Act for 
Fiscal Year 2006, which requires GAO to report annually on the FCS 
program.[Footnote 1] As Congress will be asked to make significant 
funding commitments for Army ground force modernization over the next 
several years, this statement will review: (1) aspects of FCS that 
should be preserved in future efforts, (2) aspects of FCS that were 
problematic and need re-examination, and (3) considerations for shaping 
future Army ground force modernization. 

Background: 

With FCS, the Army embraced a new warfighting concept designed to 
replace most of its existing combat systems with a family of manned and 
unmanned vehicles and systems linked by an advanced information 
network. According to the Army, FCS represented the greatest technology 
and integration challenge it had ever undertaken--an FCS-equipped force 
was to be as lethal and survivable as today's force, but significantly 
lighter and thus easier to both move and sustain. The Army determined 
it could not meet the challenges of the FCS scope and schedule with its 
workforce alone and with traditional management approaches. In 2003, 
the Army contracted with the Boeing Company as the lead systems 
integrator (LSI) to assist in defining, developing, and integrating FCS 
systems. Boeing subcontracted with Science Applications International 
Corporation (SAIC) to assist in performing the LSI functions. Over the 
past several years, Congress, GAO, and other organizations have 
expressed numerous concerns about the management and acquisition 
strategy for the FCS program, including significant knowledge gaps, 
questionable costs and affordability, the relationship between the Army 
and the LSI, and the lack of oversight by the Office of the Secretary 
of Defense (OSD). 

This committee has been influential in overseeing the FCS program and 
protecting the government's interests therein. In particular, the 
committee advocated changes to the original contract structure and type 
to incorporate more Federal Acquisition Regulation provisions, 
including those related to the Truth-in-Negotiations Act and the 
Procurement Integrity Act. 

This statement is based on work we conducted over the last several 
years in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Aspects of FCS that Should Be Considered for Inclusion in Future 
Efforts: 

There is no question the Army needs to ensure its forces are well- 
equipped. The Army has vigorously pursued FCS as the solution, a 
concept and an approach that is unconventional, yet with many good 
features that should be considered in future efforts. These features 
include a holistic, system-of-systems architectural vision, government 
insight into subcontractor selection and management, a focus on 
leveraging capabilities through an information network, and 
establishing organizations to train with and evaluate FCS-related spin- 
out technologies being provided to current forces. 

FCS resulted from Army leadership's vision of how land forces should be 
organized, equipped, and trained to fight in the future. The decisions 
to pursue FCS, along with modular combat units, became the centerpiece 
for realizing this vision. To the Army's credit, these decisions were 
harder than just replacing current combat systems, like the Abrams tank 
and Bradley fighting vehicle, with new versions. Rather, Army 
leadership saw FCS as breaking with tradition. It was to be a system of 
systems--an overall architecture through which the collective 
capabilities of individual systems, both manned and unmanned, would be 
multiplied because of the synergistic effect of being linked by an 
advanced information network. Individual systems were to be designed to 
work within the architecture and the network--an improvement over a 
traditional, system-centric design approach that would integrate the 
systems after the fact. Army leadership also chose to cross its own 
stove-piped combat lines, such as infantry, armor, and fire support. 
The resultant scope of the FCS program was overly broad for a single 
acquisition program. Nonetheless, such a holistic view, anchored in a 
vision of how the land force of the future needs to fight, should 
continue to guide the modernization investments the Army makes. A 
context, it should be noted, does not necessarily equate to a program 
or programs. 

While we have reported a number of risks associated with the LSI 
arrangement on FCS (which are discussed later), the insights the Army 
gained into subcontractors was beneficial. Army leadership set up the 
FCS program and LSI contract in such a way that it would create more 
competition and have more influence over the selection of 
subcontractors below the LSI. Traditionally, once the Army contracted 
with a prime contractor, that contractor would bring its own supplier 
chains, and the Army was not very involved in the choice of the 
subcontractors. In FCS, the Army called for the LSI to hold a 
competition for the next tier of contractors. The Army had veto power 
over these selections. The Army also directed that the LSI contract 
with integrators at lower levels in the program, and the Army was 
involved with these selections. These integrators held competitions to 
select suppliers for those systems. This strategy kept the first tier 
of subcontractors from bringing their own supplier chains, and the 
approach promoted competition and pushed Army visibility down lower 
into the supplier chain. It was also a means for the Army to ensure 
commonality of key subsystems across FCS platforms. Enhanced visibility 
into the selection and design decisions of subcontractors appears to 
have benefited the FCS program and warrants consideration in future 
efforts. 

The Army envisioned an unprecedented information network as the 
backbone of FCS. Inventing such a network while concurrently designing 
vehicles and other systems dependent on it was too grand an approach. 
However, the recognition that an integrated combat network should be 
deliberately designed versus derived or cobbled together from other 
systems was discerning. Since FCS began, the Army has achieved an 
understanding of what the information network needs to be, what may be 
technically feasible, how to build it, and how to demonstrate it. It 
has also consciously endeavored to develop the FCS network and software 
over time in a series of pre-planned blocks. Although work on such a 
network needs to be properly situated within the acquisition process 
and guided by requirements that are technically realistic, the 
deliberate development of an integrated network seems a sound approach. 

The Army initiated spin-out development in 2004, when it embarked on an 
effort to bring selected FCS capabilities, such as the unattended 
ground sensors and the non-line-of-sight launch system, to current 
forces while core FCS development continued. In 2006, the Army 
established the Army Evaluation Task Force to use, evaluate, and train 
with the spin-out capabilities, and the Task Force began its testing of 
the first FCS equipment in early 2008. As noted by both Army and DOD 
officials, the Task Force has proven quite useful in identifying system 
issues and suggesting design changes. Accordingly, the Army should 
continue utilizing the Task Force to better understand and improve its 
systems, spin out and otherwise. 

Aspects of FCS that were Problematic and Need Re-Examination: 

In our work, we found the greatest obstacle to the Army's realizing its 
vision for FCS to be that the program was not executable within 
reasonable bounds of technical, engineering, time, or financial 
resources. The program was very immature when it began, never measuring 
up to DOD's own standards for technology and design. Over time, 
adjustments were made such as adding development time and trading off 
requirements, but nonetheless, vehicle weights and software code grew 
substantially, key network systems were delayed, and technologies took 
longer to mature than planned. By 2009, whether FCS would work as 
planned remained undemonstrated. As we have reported, these 
difficulties do not necessarily represent problems that could have been 
avoided; rather, they reflect the actual immaturity of the program. 
Yet, to a large extent, these difficulties are foreseeable at the start 
of programs that do not apply the standards embodied in DOD's own 
acquisition policies. 

Oversight of FCS was extremely challenging given the program's vast 
scope and the innovative, but close, partner-like relationship between 
the Army and the LSI. OSD did not play an active oversight role, such 
as stringently applying its own acquisition policies, until about the 
past 2 years of the program. Congress intervened by mandating a go/no- 
go milestone decision to occur in late 2009. Oversight was further 
challenged by the pace of the program; the schedule for making 
decisions outpaced demonstrated knowledge to the extent that major 
production commitments were to be made before basic designs were to be 
demonstrated. Lessons from this experience should be applied to put 
future modernization efforts on the soundest footing possible for 
execution. 

Strategy to Acquire FCS Was Not Executable Within Projected Resources: 

Originally, the Army intended to define thousands of requirements; 
mature critical technologies; and develop the network, manned and 
unmanned vehicles, and other systems within about 5 1/2 years from 
development start--much faster than a single system typically takes. 
When FCS entered development in 2003, the Army had not yet established 
firm requirements that were matched with mature technologies and 
preliminary designs. Although the Army lengthened the development 
schedule to 10 years, it did not plan to demonstrate the level of 
knowledge needed at development start until 2009. 

In 2003, only 40 percent of the FCS critical technologies were nearing 
maturity, although DOD's acquisition policy called for all critical 
technologies to be mature at development start. Originally, the Army 
officials believed it could mature the remaining technologies in just 3 
years. While the Army has made significant progress, today it is still 
conducting evaluations to demonstrate minimum maturity levels for 
several critical technologies. Also, the Army needed capabilities being 
developed by programs outside of FCS to meet network and other 
requirements. However, these programs were immature as well, and 
synchronizing them with FCS proved elusive. In particular, the Joint 
Tactical Radio System and Warfighter Information Network-Tactical 
programs, the primary enablers of the network, experienced 
developmental delays that adversely affected the FCS schedule. As 
technologies, designs, and requirements evolved, key tradeoffs became 
necessary. For example, the weight of the manned ground vehicles grew 
from 19 tons to 29 tons, and the use of the C-130 as the main transport 
aircraft had to be abandoned. 

The Army set forth an ambitious schedule for software development and 
the program as a whole. Originally, the Army anticipated 33 million 
lines of software code for FCS--which at the time made the program the 
largest software-intensive acquisition program in DOD history. That 
estimate has now grown to over 114 million lines of software code. The 
Army approach to managing the software effort has employed disciplined 
management practices, but these have been impaired by late and changing 
requirements. With such a schedule in mind, the Army allowed the 
program to proceed through developmental and test events without 
sufficient knowledge. Similarly, the Army was poised to begin early 
production without having adequately tested production-representative 
articles. 

In light of these and other risks, the John Warner National Defense 
Authorization Act for Fiscal Year 2007 mandated that the Secretary of 
Defense carry out a Defense Acquisition Board milestone review of FCS 
not later than 120 days after the system-of-systems preliminary design 
review, which occurred in May 2009.[Footnote 2] According to the law, 
the milestone review should include an assessment of: 

1. whether the warfighter's needs are valid and can be best met with 
the concept of the program; 

2. whether the concept of the program can be developed and produced 
within existing resources; and: 

3. whether the program should: 

a. continue as currently structured; 

b. continue in restructured form; or: 

c. be terminated. 

In our March 2009 report on FCS, we concluded that the Army would be 
challenged to convincingly demonstrate the level of knowledge needed to 
warrant an unqualified commitment to the FCS program at the milestone 
review.[Footnote 3] We identified a number of knowledge gaps that have 
persisted throughout the development program. Specifically, the FCS 
program has yet to show that critical technologies are mature, design 
issues have been resolved, requirements and resources are matched, 
performance has been demonstrated versus simulated, and costs are 
affordable. Also, network performance is largely unproven. In summary, 
we determined that the FCS program was not executable within Army cost 
and schedule projections. 

The pace of the program called for key commitments in advance of needed 
information. For example, the Army had scheduled only 2 years between 
the critical design review and the production decision in 2013, leaving 
little time to gain knowledge between the two events. As a result, FCS 
was planning to rely on immature prototypes for making the decision to 
proceed into production. Also, by 2009, the Army had already spent 
about 60 percent of its planned development funds and schedule but had 
only proceeded to the preliminary design stage. That would have left 
only 40 percent of its financial and schedule resources left to 
complete what is typically the most challenging and expensive 
development work ahead. The timing of planned commitments to production 
funding put decision makers in the difficult position of making 
production commitments without knowing if FCS would work as intended. 
Facilitization costs were planned to begin in fiscal year 2011, the 
budget for which would have been presented to Congress in February 
2010, several months prior to the planned FCS critical design review. 
Further, in February 2011, when Congress would have been asked to 
approve funding for initial low-rate production of core FCS systems, 
the Army would not yet have proven that the FCS network and the program 
concept worked. 

Oversight Challenges Were Too Great: 

The relationship between the Army and the LSI was shaped by the 
ambitious scope of the FCS program and limitations in the Army's 
ability to manage it. The relationship is complex; on one hand, the LSI 
has played the traditional contractor role of developing a product for 
the Army. On the other hand, the LSI has also acted like a partner to 
the Army, ensuring the design, development, and prototype 
implementation of the FCS network and systems. The Army believed this 
relationship would offer more real-time, better informed decisions; 
reduce rework; and provide increased flexibility to adjust to new 
demands. While a close partner-like relationship offers benefits, such 
as the government and the contractor working together on a continual 
basis to decide what work is to be done, the partner-like relationship 
between the Army and the LSI broke new ground. As such, it posed 
oversight risks such as the government becoming increasingly vested in 
the results of shared decisions and being less able to provide 
oversight, especially when the government is disadvantaged in terms of 
workforce and skills. The Institute for Defense Analysis has also 
reported on the risks of the Army and LSI relationship, noting that the 
government cannot expect contractors to act in the best interest of the 
government as that could potentially conflict with their corporate 
financial interests. The Institute recommended that the Army take steps 
to ensure that it has, and continually uses, a competent internal 
capability to develop a corporate Army position on key FCS issues such 
as measuring program status and trends as well as independent 
operational testing. 

Part of the Army's original rationale for using an LSI was to keep the 
contractor's efforts focused on development, rather than on production. 
Early on in the FCS program, steps were taken to reinforce this focus, 
such as strengthening organizational conflict of interest provisions. 
While the original Other Transactions Agreement for FCS development and 
demonstration contained an organizational conflict of interest clause 
that required certain safeguards be put into place if and when Boeing 
and SAIC competed for FCS subcontracts, the 2006 Federal Acquisition 
Regulation-based contract precluded the Boeing/SAIC team from competing 
for any FCS subcontract awards. By this time, Boeing already had prime 
responsibility for two critical software efforts. As the program 
evolved however, the LSI's role in production grew. In 2007, the Army 
decided that the LSI should be the prime contractor for the first spin 
outs as well as low-rate production of FCS core systems. This was a 
significant change from the early steps taken to keep the LSI's focus 
on development. 

The Army structured the FCS contract consistent with its desire to 
incentivize development efforts and make it financially rewarding for 
the LSI to make such efforts. In general, contracts are limited in that 
they cannot guarantee a successful outcome. As with many cost- 
reimbursable research and development contracts, the LSI was 
responsible to put forth its best effort on the development of the FCS 
capability. If, given that effort, the FCS capability falls short of 
needs, the LSI would not be responsible, would still be entitled to 
have its costs reimbursed, and may earn its full fee. Specific aspects 
of the contract could make it even more difficult to tie the LSI's 
performance to the actual outcomes of the development effort. Under the 
terms of the FCS contract, the LSI could earn over 80 percent of its 
$2.3 billion fee by the time the program's critical design review is 
completed in 2011, and the Army would have paid out roughly 80 percent 
of contract costs by that point. Yet the actual demonstration of 
individual FCS prototypes and the system-of-systems would have taken 
place after the design review. Our work on past weapon system programs 
shows that most cost growth--symptomatic of problems--occurs after the 
critical design review. The Army shared responsibility with the LSI for 
making some key FCS decisions and to some extent the Army's performance 
could thus affect the performance of the LSI. 

OSD's oversight did not compensate for these risks early in the 
program. OSD has largely accepted the program and its changes as 
defined by the Army, even though it is at wide variance from the best 
practices embodied in OSD's own acquisition policies. Until recently, 
OSD had passed on opportunities to hold the FCS program accountable to 
more knowledge-based acquisition principles. Despite the fact that the 
program did not meet the requisite criteria for starting an acquisition 
program, OSD approved the program's entrance into system development 
and demonstration in 2003. OSD later reevaluated the decision and 
decided to hold a follow-on review with a list of action items the 
program had to complete in order to continue. However, this review 
never occurred and the FCS program continued as originally planned. 
Furthermore, OSD did not plan to conduct another review and decision 
point until the 2013 production decision, when it would be too late to 
have a material effect on the course of the program. In addition, OSD 
has allowed the Army to use its own cost estimates rather than 
independent--and often higher--cost estimates when submitting annual 
budget requests. 

Over the last couple years, the Under Secretary of Defense for 
Acquisition, Technology, and Logistics has taken steps to improve 
oversight on the FCS program. For instance, in 2007, the Under 
Secretary deemed the Non-Line-of-Sight Cannon program as being in need 
of special attention, so he designated the program as special interest 
and declared that his office would be the decision authority on 
production. Also, in 2008, the Under Secretary issued a directive to 
pursue alternate arrangements for any future FCS contracts. The Under 
Secretary found that the fixed fee was too high and the fee structure 
allows industry to receive most of the incentive fee dollars prior to 
demonstrating integrated FCS system-of-systems capability. The Under 
Secretary also directed that the Army conduct a risk-based assessment 
to examine contracting alternatives for FCS capability. This assessment 
is to evaluate opportunities for procurement breakout of the individual 
platforms and systems that comprise FCS and how the government's 
interests are served by contracting with the LSI as compared to 
contracting directly with the manufacturers of the items. 

Considerations for Shaping Future Army Ground Force Modernization 
Efforts: 

In April, the Secretary of Defense announced plans to cancel the FCS 
manned ground vehicle and non-line-of-sight cannon development and 
initiate a new ground combat vehicle program that leverages successful 
outcomes from FCS investments and incorporates lessons learned from 
current combat operations. Explaining the rationale for his decision, 
the Secretary noted that FCS vehicle designs did not reflect lessons 
learned from combat in Iraq and Afghanistan and that the contract fee 
structure provided little leverage to promote cost efficiency. 

As the Army proceeds to modernize and ensure its ground forces are well 
equipped for current and future operations, there are several important 
factors to consider, and some questions to answer. While the Army and 
DOD are in the early stages of deciding how to proceed with 
modernization, it appears likely that rather than a single program like 
FCS going forward, several programs with more targeted objectives will 
emerge. For example, the spin-out program may continue in an 
accelerated form and a program to develop a new family of manned ground 
vehicles will likely be pursued per the Secretary of Defense's 
direction. It is also conceivable that a program focused on developing 
an information network would also be considered. 

Regardless of how the Army's ground force modernization program is 
structured or managed, some key principles will have to be embodied. 
These include: 

* Knowledge-based acquisition: any emergent modernization programs 
should be put on the soundest footing possible for success, by 
following DOD's latest acquisition policy that spans the initial 
decision to pursue a material solution, analysis of alternatives, 
concept formulation, technology maturation, requirements definition, 
incremental system design and development, production, and fielding. 
Sound systems engineering practices should be the guide throughout 
these phases. 

* Sound cost estimating: Any emergent program following a knowledge- 
based approach should be well understood and defined sufficiently to 
facilitate realistic cost estimates with reasonable levels of 
confidence. In order to ensure the accuracy, completeness, and 
reliability of these estimates, independent cost estimates should be 
completed and assessed before approval into the product development 
phases. 

* Transparency and accountability for oversight: The emerging programs 
need to include sufficiently detailed and transparent reporting 
approaches to facilitate oversight. Those should include an acquisition 
strategy that features demonstrations of knowledge before planned 
commitments to future phases and additional funding; a contracting 
strategy that features as much competition as possible and protections 
for the government's interests; complete justification materials to 
support budget requests; and a clear and understandable framework for 
selected acquisition and earned value management reporting. 

Beyond these principles, the Army will have to tailor its approaches to 
the needs of the individual programs that emerge, allowing for the 
different challenges they represent. For example, the current spin-out 
program is in the late stages of development, approaching production. 
The Army now plans to field at least some FCS equipment and some 
portion of the FCS network to its current 73 Brigade Combat Teams. We 
have reported that the pace of the spin-out program has been hurried, 
not allowing enough time to test and evaluate production-representative 
prototypes before beginning production. Specifically, it is unclear 
whether the Army will be testing with the specific equipment it plans 
to produce and use. To date, that has not been the case. Testing thus 
far has employed spin-out systems that are surrogate and non-production 
representative, and are thus not in the form that will be fielded. 
Using such systems is problematic because it does not conclusively show 
how well the actual systems perform. Additionally, we do not know how 
the Army plans to determine the content and schedule of future FCS spin-
out phases. 

Notional plans for the new ground combat vehicle program include a goal 
of fielding the new vehicles within 5-7 years, with concept development 
efforts underway. This program will likely revert back to a pre- 
acquisition phase. This effort will involve different organizations, 
such as those involved with science and technology, different 
strategies, and different contracting approaches than the spin-out 
program. The risks for the ground combat vehicle program will be 
different and will have to be addressed differently. For example, under 
FCS, vehicles were being designed as network-dependent, a risky 
approach as the network has not yet been developed. In addition to the 
Secretary of Defense's direction that the new program incorporate 
lessons learned from current operations, the Army may have to consider 
whether the vehicle designs should be network-enhanced versus network- 
dependent. An incremental approach would allow the vehicle designs to 
incorporate increasing network capabilities as they became available. 

While we do not know at this point how the Army plans to approach the 
development of an information network, its acquisition approach may 
also have to retrench to a pre-acquisition phase to reconsider how best 
to proceed to manage risks in line with DOD acquisition policy and to 
meet the direction of the Secretary of Defense. While some elements of 
the network may be further advanced than some of the vehicle work, the 
concept itself and how to test and evaluate its performance in large 
scale may present greater challenges than the vehicle program. Again, 
the network may need a different acquisition and contracting approach, 
as well as involvement from different organizations, than either the 
spin out or manned ground vehicle program. 

In proceeding forward with a different modernization approach, there 
are several questions or issues that will have to be addressed. These 
include: 

* Closing out or restructuring current contractual arrangements: 
Depending on what the Army decides to do with the new ground vehicle 
program, it will have to restructure or possibly terminate the existing 
FCS contract. To help in that process, it would be useful for the Army 
to have a more detailed understanding about the factors that influenced 
the Secretary of Defense's recommendation to cancel the current FCS 
vehicle development effort. Whereas the Secretary's decision could be 
interpreted as a determination that the FCS concept would not meet 
current needs, it is not clear at this point what is required to 
satisfy current military needs. 

* Transferring knowledge from current FCS efforts to emergent programs: 
The Army should carry forward knowledge already gained from the 
significant investments in FCS systems development. While the Army 
plans to capture and use what has been learned, doing so depends in 
large part on whether that knowledge can be transferred to a follow-on 
program. For example, the Army and LSI have been jointly managing the 
development of FCS software centrally. That effort included software 
for the information network, manned ground vehicles, and other 
individual FCS systems. As the Army proceeds to structure the multiple 
programs, it will need to coordinate what may be multiple separate 
software development and demonstration efforts. 

* Transition of FCS information network to current Army forces: 
Depending on how the Army proceeds with an information network, there 
are questions as to how it can be transferred to the current forces. 
None of the existing equipment in the current forces has been developed 
with such a network in mind. As part of the spin-out evaluation 
process, the Army encountered difficulties last year in trying to 
integrate even a small portion of the FCS network. Furthermore, the 
Abrams and Bradley vehicles have space, weight, and power constraints 
that may limit their ability to be integrated with an FCS-like network. 
Additionally, it is not clear whether the Army will be developing and 
fielding vehicles like the proposed FCS command and control vehicle and 
reconnaissance and surveillance vehicle, which were to be key 
components of the FCS network. 

* Early emphasis on key development and design considerations: 
Previously, we have commended the Army's efforts to break from 
traditional thinking with its early emphasis on key development and 
design considerations. Specifically, the Army defined the larger 
context within which it wanted its new assets and capabilities to work, 
emphasizing open system designs and interoperability early in 
development, rather than as an afterthought. Further, we have noted the 
productive nature of the Army's early consideration and focus on 
challenging issues like sustainability. As the Army ground force 
modernization effort goes forward, the Army will need to find ways to 
retain this broader focus across multiple programs. 

* Moving from a single program structure to multiple programs: The 
Army's preliminary plans for the FCS restructuring call for several 
separate programs, including those for the new ground combat vehicles, 
the information network, and the FCS spin-out effort. As it shaped the 
original FCS program, the Army made a concerted effort to reduce the 
influence of the various "stovepipes" within its user organization and 
set up a unitary management structure. Separate programs may differ 
greatly from the centralized structure of the FCS program to date and 
would have consequences that need to be considered. On the one hand, 
separate structures might lend themselves more readily to better 
oversight within each area. On the other hand, multiple programs may 
require more staffing and might introduce various and competing 
objectives rather than maintain singular focus on interoperability and 
other key objectives. 

* Balancing investments between future capabilities and keeping fielded 
systems as capable as possible: The Army will have to strike a balance 
between near-term and long-term needs, realistic funding expectations, 
and a sound execution plan as it moves on the new FCS path forward. The 
Army's FCS budget material for Fiscal Year 2010, which includes the new 
ground combat vehicle program, provides little detail and no long-term 
perspective. DOD, Army, and Congress will eventually have to agree on 
the magnitude of funds that can be devoted to ground force 
modernization and how that money should be allocated among near-, mid-, 
and long-term needs. 

Concluding Remarks: 

The Army's experience with FCS has been productive. Its vision, 
holistic context, recognition of network potential, and penchant for 
innovative managerial and experimentation techniques, are worthy of 
emulation. On the other hand, the difficulties in executing and 
overseeing the program were apparent at the outset of the program--they 
were not unexpected discoveries made along the way. The key in going 
forward is to take the best from both kinds of lessons and applying 
them, in a tailored way, to the different modernization efforts that 
will succeed FCS. The Army and DOD should continue to be innovative as 
to concepts and approaches, but anchored in knowledge-based strategies 
when it comes to proposing a specific system development effort. 
Differences in the task at hand should warrant different approaches. At 
one end of the spectrum, spin outs are in late development, where the 
focus should be on testing and production preparations. At the other 
end of the spectrum are efforts to develop a new family of manned 
ground vehicles and an information network. These would be in early 
stages of development, in which informed decisions on technologies and 
requirements will be key. Even within these two developmental efforts, 
different technical and managerial approaches may be necessary, for 
more is known about developing and projecting the performance of 
vehicles than is known about a network. 

Mr. Chairman, that concludes my prepared statement. I will be happy to 
answer any of your questions. 

Contacts and Staff Acknowledgements: 

For future questions about this statement, please contact me on (202) 
512-4841 or francisp@gao.gov. Individuals making key contributions to 
this statement include William R. Graveline, Assistant Director; Marcus 
C. Ferguson; William C. Allbritton; Noah B. Bleicher; Helena Brink; and 
Tana M. Davis. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 109-163, §211. 

[2] Pub. L. No. 109-364, § 214 (2006). 

[3] GAO, Defense Acquisitions: Decisions Needed to Shape Army's Combat 
Systems for the Future, [hyperlink, 
http://www.gao.gov/products/GAO-09-288] (Washington, D.C.: Mar. 12, 
2009). 

[End of section] 

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