Department of Defense's Waiver of Competitive Prototyping Requirement for the Army's Indirect Fire Protection Capability Increment 2, Block 1 Program

What GAO Found

The Department of Defense's (DOD) rationale for waiving the competitive prototyping requirement in the Weapon Systems Acquisition Reform Act (WSARA) of 2009, as amended, for the Army’s Indirect Fire Protection Capability (IFPC) – Increment 2, Block 1 program addresses one of the two bases provided in the statute; namely that the cost of producing competitive prototypes exceeds the expected life-cycle benefits (in constant dollars) of producing the prototypes. IFPC Increment 2, Block 1 is the first of three blocks of capability to detect, assess, and defend against threats from rockets, artillery, mortars, cruise missiles, and unmanned aircraft. According to the DOD waiver, the Army’s acquisition strategy leverages mature, fielded components and subsystems, and as a result the potential benefits ofcompetitive prototyping are limited. In addition, the Army plans to build two of its own prototypes and conduct a formal review of the system’s preliminary design during the technology development phase to further reduce technical, cost, and schedule risks. The Army estimates that this strategy will cost $219.6 million (in base year 2013 dollars). In comparison, the Army estimates that competitive prototyping would cost around $428.1 million (in base year 2013 dollars) and add 24 months to the technology development schedule with potential benefits of only $9.8 million (in base year 2013 dollars). DOD and the Army concluded that neither the life-cycle benefits, nor the benefits of improved performance and increased technical and design maturity, justified the cost of producing such prototypes.

DOD found that the Army’s cost-benefit analysis was reasonable. The Army’s analysis consideredtwo strategies. The first strategy reflects the Army’s current plan to build two of its own prototypes. The second strategy reflects a competitive prototyping scenario in which two competing contractors each build two prototypes for a combined total of four. The Army’s analysis indicates that nearly all of the cost difference between the two strategies is associated with having contractors build a combined total of four prototypes, test ranges, and facilities to support the additional prototypes, and costs associated with retaining systems engineering and program management personnel longer than currently planned. The Army assumed that if a competitive prototyping strategy was used, one of the competing developers would be carried forward into engineering and manufacturing development which would provide the benefit of continuous learning. Using guidance from DOD’s Manufacturing Management Guide and Defense Acquisition University the Army determined that a 9 percent increase in software productivity and a 15 percent increase in production and fielding efficiency could be realized, which would result in a total life-cycle benefit of around $9.8 million (in base year 2013 dollars).

WSARA required the Secretary of Defense to modify guidance to ensure that the acquisition strategy for each major defense acquisition program provides for competitive prototypes before Milestone B approval--which authorizes entry into system development--unless the Milestone Decision Authority waives the requirement. Competitive prototyping, which involves commercial, government, or academic sources producing early prototypes of weapon systems or critical subsystems, can help DOD programs reduce technical risk, refine requirements, validate designs and cost estimates, and evaluate manufacturing processes prior to making major commitments of resources. It can also help reduce the time it takes to field a system, and as a result, reduce its acquisition cost. WSARA also provides that whenever a Milestone Decision Authority authorizes a waiver of the competitive prototyping requirement on the basis of what WSARA describes as "excessive cost," the Milestone Decision Authority is required to submit notification of the waiver, together with the rationale, to the Comptroller General of the United States. WSARA further provides that no later than 60 days after receipt of a notification of a waiver, GAO is to review the rationale for the waiver and submit a written assessment of that rationale to the congressional defense committees.

On March 31, 2014, we received notice from DOD that it had waived the competitive prototyping requirement for the IFPC Increment 2, Block 1 program. In this report, we assess DOD’s rationale for granting the waiver and the analysis used to support it.

For more information, contact Michael J. Sullivan at 202-512-4841 or sullivanm@gao.gov.