GAO-10-311, Defense Acquisitions: Missile Defense Transition Provides Opportunity to Strengthen Acquisition Approach


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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

February 2010: 

Defense Acquisitions: 

Missile Defense Transition Provides Opportunity to Strengthen 
Acquisition Approach: 

GAO-10-311: 

GAO Highlights: 

Highlights of GAO-10-311, a report to congressional committees. 

Why GAO Did This Study: 

By law, GAO is directed to assess the annual progress the Missile 
Defense Agency (MDA) made in developing and fielding the Ballistic 
Missile Defense System (BMDS). GAO also assessed MDA’s progress toward 
improving accountability and transparency in agency operations, 
management processes, and its acquisition strategy. To accomplish 
this, GAO reviewed asset fielding schedules, test plans and reports, 
as well as pertinent sections of Department of Defense (DOD) policy to 
compare MDA’s current level of accountability with that of other DOD 
programs. GAO’s fiscal year 2009 assessment of MDA’s cost, schedule, 
and performance progress is more limited than previous assessments 
because MDA removed key components of schedule and performance goals 
from its annual report of goals. In addition, though it had committed 
to, MDA did not report total cost estimates in 2009. 

What GAO Found: 

Fiscal year 2009 was an unprecedented year of transition for MDA as it 
experienced its first change of administration, its third MDA 
Director, shifts in plans for missile defense in Europe as well as a 
shift in focus for technology development from intercepting missiles 
during the boost phase to the early intercept phase. Such changes 
present new challenges for MDA but also opportunities to strengthen 
acquisition approaches. 

Progress: 

MDA achieved several accomplishments. For example, MDA revised its 
testing approach to better align tests with modeling and simulation 
needs and undertook a new targets development effort to resolve 
longstanding problems supplying sufficient and reliable targets. The 
agency also demonstrated increased levels of performance for some 
elements through flight and ground testing. Fiscal year 2009 testing 
indicates an increased level of interoperability among multiple 
elements, improving both system-level performance and advancing the 
BMDS models and simulations needed to predict performance. In 
addition, the agency delivered 83 percent of the assets it planned to 
deliver by the end of fiscal year 2009. 

Challenges: 

While there was progress, all BMDS elements had delays in conducting 
tests, were unable to accomplish all planned objectives, and 
experienced performance challenges. Poor target performance continued 
to be a problem, causing several test delays and leaving several test 
objectives unfulfilled. The test problems also precluded MDA from 
gathering key knowledge and affected development of advanced 
algorithms and homeland defense. These test problems continued to 
affect the models and simulations used to assess the overall 
performance of the BMDS. Consequently, comprehensive assessments of 
its capabilities and limitations are still not possible. MDA also 
redefined its schedule baseline, eliminating goals for delivering 
integrated capabilities so we were not able to assess progress in this 
area. Despite these problems, MDA proceeded with production and 
fielding of assets. 

Transparency, Accountability, and Oversight: 

In 2009, the significant adjustments MDA made to its acquisition 
approach—terminating the block structure; reducing, eliminating, or 
not reporting key baselines; and terminating its capability 
declaration process—and adjustments to the material reported to 
Congress reduced the transparency and accountability MDA had begun to 
build. However, MDA is beginning to implement several initiatives—
including the adoption of key principles of DOD acquisition 
regulations—that could improve transparency and accountability and lay 
the foundation needed for oversight. If these initiatives are 
implemented in accordance with knowledge-based acquisition principles, 
an opportunity exits to improve the BMDS acquisition by ensuring MDA 
programs begin with realistic, transparent plans and baselines. While 
these initial steps hold promise, they will take time to fully 
implement and once implemented they will need to be sustained over 
time and consistently applied. 

What GAO Recommends: 

GAO makes a number of recommendations for MDA to increase transparency 
and accountability through more thorough and consistent reporting of 
baselines and variances to those baselines. In addition, GAO 
recommended that MDA apply more knowledge-based approaches to its new 
acquisition initiatives and report these initiatives and their 
associated commitments to Congress. In response, DOD fully concurred 
with 9 of the 10 recommendations and partially concurred with 1. 

View [hyperlink, http://www.gao.gov/products/GAO-10-311] or key 
components. For more information, contact Cristina Chaplain at (202) 
512-4841 or chaplainc@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Significant Adjustments Made to Missile Defense in Fiscal Year 2009: 

Progress Made in Fiscal Year 2009: 

Significant Challenges Remain in Developing the BMDS: 

MDA Lacks Controls and Mechanisms Needed to Establish Transparency, 
Accountability, and Oversight: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Comments from the Department of Defense: 

Appendix II: Scope and Methodology: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: MDA's BMDS Elements: 

Table 2: Fiscal Year 2009 BMDS Test Achievements: 

Table 3: BMDS Deliveries and Total Fielded Assets as of September 30, 
2009: 

Table 4: BMDS Test and Target Issues: 

Table 5: Status of Fiscal Year 2008 Director's Knowledge Points to Be 
Achieved through Tests: 

Table 6: MDA Commitments to Improve Transparency, Accountability, and 
Oversight: 

Abbreviations: 

ABL: Airborne Laser: 

Aegis BMD: Aegis Ballistic Missile Defense: 

AN/TPY-2: Army Navy/Transportable Radar Surveillance - Model 2: 

BMDS: Ballistic Missile Defense System: 

C2BMC: Command, Control, Battle Management, and Communications: 

DOD: Department of Defense: 

GBI: Ground-based Interceptor: 

GMD: Ground-based Midcourse Defense: 

MDA: Missile Defense Agency: 

MDEB: Missile Defense Executive Board: 

SM-3: Standard Missile-3: 

STSS: Space Tracking and Surveillance System: 

THAAD: Terminal High Altitude Area Defense: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

February 25, 2010: 

Congressional Committees: 

Fiscal year 2009 was an unprecedented year of transition for the 
Missile Defense Agency (MDA) as it experienced its first change of 
administration, its third MDA Director, its third Ballistic Missile 
Defense System (BMDS) acquisition strategy, and a reduction of 
approximately $1 billion from its annual budget request. Established 
in 2002 and directed by the President to "deploy a set of initial 
missile defense capabilities beginning in 2004," MDA has developed and 
deployed missile defense capabilities while struggling to provide the 
transparency and accountability necessary for the Department of 
Defense's (DOD) largest single acquisition program--spending between 
approximately $7 billion and $9.5 billion per year. 

Since 2002, Congress has directed GAO to assess MDA's annual fiscal 
year cost, schedule, testing, and performance progress in developing 
the BMDS.[Footnote 1] We have delivered assessments of MDA's progress 
covering fiscal years 2003 through 2008 and are currently mandated to 
continue delivering assessments through fiscal year 2013.[Footnote 2] 
According to this mandate we are required to assess MDA's fiscal year 
progress against the annual goals it is required to report to Congress 
each February. However, as agreed with your staff, this year we are 
providing a more limited assessment of MDA's progress than we have in 
the past because MDA removed key components of the schedule and 
performance goals it had previously reported from its annual report of 
goals. MDA also did not report the total acquisition cost goals that 
it had committed to include in this year's report, nor did it report 
top-level test goals. In addition, the agency did not report its 
annual goals until August 2009--only a month and a half before the end 
of fiscal year 2009. 

This report provides an assessment of MDA's cost, schedule, testing, 
and performance progress in fiscal year 2009 as well as problems and 
challenges in these areas. We also report on the progress MDA made in 
improving accountability and transparency over the past year. Although 
prior reports have included an assessment of MDA's cost progress on 
its prime contracts, we will report on this analysis in more detail in 
a separate report. In addition, given the number, scope and breadth of 
changes made to missile defense this year, we discuss those changes as 
well as their implications on acquisitions. 

In order to provide some measure of MDA's progress, given the late and 
limited goals established by MDA, we had to determine alternative 
comparison points and we discussed these with MDA and our 
congressional clients. We assessed MDA's progress in testing by 
comparing the tests conducted against the goals as presented in its 
October 2008 Integrated Master Test Plan and the annually submitted 
budget justification documents. In terms of performance, we assessed 
the capabilities demonstrated through the tests. For schedule, we 
compared progress against fiscal year 2008 goals, budget justification 
material, and the September 2008 execution master fielding schedule. 

To assess progress during fiscal year 2009, we examined the 
accomplishments of eight BMDS elements that MDA is currently 
developing and fielding: the Aegis Ballistic Missile Defense (Aegis 
BMD); Airborne Laser (ABL); BMDS Sensors; Command, Control, Battle 
Management, and Communications (C2BMC); Ground-based Midcourse Defense 
(GMD); Space Tracking and Surveillance System (STSS); Targets and 
Countermeasures; and Terminal High Altitude Area Defense (THAAD). 
[Footnote 3] These elements collectively account for about 76 percent 
of MDA's research and development budget.[Footnote 4] We also examined 
MDA's Fiscal Year 2009 BMDS Accountability Report, Program Execution 
Reviews, test plans and reports, and production plans. We interviewed 
officials within program offices and within MDA functional 
directorates, such as the Directorate for Advanced Technology. In 
addition, we discussed the elements' test programs and results with 
the BMDS Operational Test Agency and DOD's Office of the Director, 
Operational Test and Evaluation. 

To follow up on the progress MDA made to improve transparency and 
accountability, we held discussions with officials in MDA's 
Directorate of Business Operations to discuss MDA's block structure 
termination. In addition, we reviewed pertinent DOD policies to 
compare MDA's current level of accountability with that of other DOD 
programs. We interviewed officials from the Office of the Under 
Secretary of Defense for Acquisition, Technology and Logistics to 
discuss its role in conducting quarterly execution reviews as well as 
the oversight role of the Missile Defense Executive Board. Lastly, we 
met with officials involved in MDA's Integration Synchronization Group 
to discuss how the agency is managing and reporting against its 
internal baselines. Our scope and methodology is discussed in more 
detail in appendix II. 

We conducted this performance audit from April 2009 to February 2010 
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 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

MDA's BMDS is being designed to counter ballistic missiles of all 
ranges--short, medium, intermediate, and long. Since ballistic 
missiles have different ranges, speeds, sizes, and performance 
characteristics, MDA is employing an integrated and layered 
architecture to provide multiple opportunities to destroy ballistic 
missiles before they can reach their targets. The system's 
architecture includes networked space-based sensors as well as ground-
and sea-based radars, ground-and sea-based interceptor missiles, and a 
command and control, battle management, and communications network 
providing the warfighter with the necessary communication links to the 
sensors and interceptor missiles. 

A possible engagement scenario to defend against an intercontinental 
ballistic missile would occur as follows: 

* Infrared sensors aboard early-warning satellites detect the hot 
plume of a missile launch and alert the command authority of a 
possible attack. 

* Upon receiving the alert, land-or sea-based radars are directed to 
track the various objects released from the missile and, if so 
designed, to identify the warhead from among spent rocket motors, 
countermeasures, and debris. 

* When the trajectory of the missile's warhead has been adequately 
established, an interceptor--consisting of a kill vehicle mounted atop 
a booster--is launched to engage the threat. The interceptor boosts 
itself toward a predicted intercept point and releases the kill 
vehicle. 

* The kill vehicle uses its onboard sensors and divert thrusters to 
detect, identify, and steer itself into the warhead. With a combined 
closing speed of approximately 10 kilometers per second (22,000 miles 
per hour), the warhead is destroyed above the atmosphere through a 
"hit to kill" collision with the kill vehicle. 

Some interceptors use sensors to steer themselves into the inbound 
ballistic missile. Inside the atmosphere, weapon systems kill the 
ballistic missile using a range of mechanisms, such as direct 
collision between the interceptor missile and the inbound ballistic 
missile, or using the combined effects of a blast fragmentation 
warhead (heat, pressure, and shrapnel) in cases where a direct hit 
does not occur. 

In the August 2009 BMDS Accountability Report, MDA presents the BMDS 
performance from the perspectives of homeland defense and regional/ 
theater capabilities. Homeland defense uses the capabilities of Ground-
based Interceptors (GBI), Aegis BMD assets, and BMDS radars against 
the threat from intercontinental and intermediate-range ballistic 
missiles, while regional and theater defense use Aegis BMD Standard 
Missile-3 (SM-3) and THAAD interceptors with mobile radars against 
threats from medium-range missiles and short-range ballistic missiles. 

Table 1 provides a brief description of eight BMDS elements that are 
currently under development by MDA. 

Table 1: MDA's BMDS Elements: 

BMDS element: Aegis Ballistic Missile Defense; 
Missile defense role: Aegis BMD is a ship-based missile defense system 
designed to destroy short-to intermediate-range ballistic missiles 
during the midcourse phase of their flight; its capability has been 
expanded to include the terminal phase of flight using the Standard 
Missile-2 Block IV missile. Aegis BMD's mission is twofold: to provide 
an engagement capability against regional ballistic missile threats 
that is mobile, global, and deployable and can destroy ballistic 
missiles both above and within the atmosphere, as well as a forward 
deployed combatant to search, detect and track ballistic missiles of 
all ranges and transmit track data to the BMDS, performing a strategic 
role in homeland defense. To date, 19 ships have been upgraded for the 
Aegis BMD mission. MDA is planning to procure 329 Aegis BMD SM-3 
missiles from fiscal years 2004 through 2018. 

BMDS element: Airborne Laser; 
Missile defense role: ABL is an air-based missile defense system 
designed to destroy all classes of ballistic missiles during the boost 
phase of their flight. ABL employs a high-energy chemical laser to 
rupture a missile's motor casing, causing the missile to lose thrust 
or flight control. MDA plans to demonstrate proof of concept in a 
series of system demonstrations in 2010 where the ABL will attempt to 
shoot down a ballistic missile. The current program is not expected to 
result in an operational system. 

BMDS element: BMDS Sensors; 
Missile defense role: MDA is developing various stand-alone radars for 
fielding. These include forward-based sensors; mobile, sea-based 
sensors; and upgrades to existing early-warning radars. The BMDS uses 
these sensors to identify and continuously track ballistic missiles in 
all phases of flight. 

BMDS element: Command, Control, Battle Management and Communications; 
Missile defense role: C2BMC is the integrating element of the BMDS. 
Its role is to provide deliberate planning, situational awareness, 
sensor management, and battle management for the integrated BMDS. 

BMDS element: Ground-based Midcourse Defense; 
Missile defense role: GMD is a ground-based missile defense system 
designed to destroy intercontinental ballistic missiles during the 
midcourse phase of their flight. Its mission is to protect the U.S. 
homeland against ballistic missile attacks from North Korea and the 
Middle East. MDA is planning on emplacing 30 operational interceptors 
at Fort Greely, Alaska, and Vandenberg Air Force Base, California, by 
the end of fiscal year 2010. 

BMDS element: Space Tracking and Surveillance System; 
Missile defense role: In fiscal year 2009, MDA successfully launched 
two low-orbit demonstration satellites. The program will pursue a 
testing schedule to demonstrate STSS's capabilities, including missile 
detection and tracking throughout all phases of flight and intercept 
assessment in the context of the BMDS. Lessons learned from the STSS 
satellites will inform the design of a Precision Tracking Space Sensor 
experimental prototype and associated command and control battle 
management, communication and fire control networks. 

BMDS element: Targets and Countermeasures; 
Missile defense role: MDA maintains a series of targets used in BMDS 
flight tests to present authentic threat scenarios. The targets are 
designed to encompass the full spectrum of threat missile ranges and 
capabilities. Under its Flexible Target Family, MDA is currently 
developing one long-range 72-inch target, the LV-2, which can be 
modified in various ways to represent evolving threats. The first 
launch of the LV-2 target is scheduled for 2010. 

BMDS element: Terminal High Altitude Area Defense; 
Missile defense role: THAAD is a ground-based missile defense system 
designed to destroy short-and medium-range ballistic missiles during 
the late-midcourse and terminal phases of flight. Its mission is to 
defend deployed U.S. forces and population centers. MDA plans to field 
a THAAD Battery, which includes 24 missiles, in 2010 and a second 
battery in 2011. 

Source: MDA data. 

[End of table] 

Significant Adjustments Made to Missile Defense in Fiscal Year 2009: 

The new administration proposed significant changes to the BMDS 
program in 2009 including program terminations and changes to some of 
the BMDS elements we reported on in the past, as well as changes to 
plans for missile defense in Europe. Administration proposals 
culminated in reductions of approximately $1 billion from MDA's budget 
request for fiscal year 2010. In the spring of 2009, the Secretary of 
Defense recommended termination of the Multiple Kill Vehicle element. 
Originally designed as an optional warhead for all midcourse 
interceptors, MDA terminated the Multiple Kill Vehicle element because 
of feasibility issues raised about this technology, which was still in 
its early stages of development, as well as a decision to refocus 
MDA's resources on new technologies aimed at early intercept of 
ballistic missiles.[Footnote 5] MDA also terminated its Kinetic Energy 
Interceptor element because of technical issues, its incompatibility 
with operational infrastructures, and delays during development. It 
was originally designed as a mobile land-based missile defense system 
to destroy medium, intermediate, and intercontinental ballistic 
missiles during the boost and midcourse phases of their flight. The 
ABL program was also significantly affected by the Secretary of 
Defense's proposal to designate it as a technology program and cancel 
the plans for the purchase of a second aircraft that would have 
provided an operational capability. In addition, MDA requested 
increased funding for the Aegis BMD and THAAD programs for fiscal year 
2010 following administration recommendations. MDA plans to use these 
funds to move both elements toward meeting full funding policies, to 
increase production for Aegis BMD and THAAD interceptors, to increase 
the interceptor production rate and number of THAAD batteries, and to 
increase the number of Aegis BMD ships. 

MDA is also responding to the new administration's shift in its 
approach to European missile defense. In September 2009, DOD altered 
its approach to European defense, which originally focused on GBIs 
from the GMD element and a large fixed radar as well as transportable 
X-Band radars, and is now focusing on providing defenses against long-
range threats to the United States and short-, medium-, and 
intermediate-range Iranian threats to Europe. This new "Phased, 
Adaptive Approach" consists primarily of Aegis BMD sea-based and land-
based systems and interceptors, as well as various sensors to be 
deployed over time as the various capabilities are matured. According 
to DOD, this new approach offers a number of improvements over the 
previous architecture, such as providing missile defenses sooner with 
greater flexibility to meet evolving threats, providing more 
opportunities to involve close allies, and delivering greater 
capability to defend against a large number of threat missiles. 

In addition, during fiscal year 2009, MDA transitioned to a new 
Director and the agency's development effort was rebalanced to focus 
more on regional/theater missile defense. This rebalancing included 
shifting technology development efforts from boost-phase intercept 
technologies to early intercept technologies (or ascent phase). MDA 
officials state that because early intercept technology initiates 
intercept as early as possible to execute a shoot-look-shoot tactic 
and defeat a threat before countermeasures are deployed, it will 
ultimately reduce the number of interceptors required to defeat a raid 
of threat missiles and save on the costs of maintaining a significant 
number of expensive interceptors to destroy advanced countermeasures 
in a later phase of a threat missile's flight. According to the MDA 
Director, this technology will force the deployment of countermeasures 
early in flight where they are less effective. 

In June 2009, MDA also began to change its acquisition management 
strategy. From its inception in 2002 to December 2007, MDA managed the 
acquisition of missile defense capabilities by organizing the 
development effort into 2-year increments known as blocks. Each block 
was intended to provide the BMDS with capabilities that enhanced the 
development and overall performance of the system. The first 2-year 
block--Block 2004--fielded a limited initial capability that included 
early versions of the GMD, Aegis BMD, Patriot Advanced Capability-3, 
and C2BMC elements as well as various sensors. The agency's second 2- 
year block--Block 2006--culminated on December 31, 2007, and fielded 
additional BMDS assets. On December 7, 2007, according to MDA in 
response to recommendations from GAO, MDA's Director announced a new 
acquisition management strategy to better communicate its plans and 
goals to Congress. The agency's new approach was based on fielding 
capabilities that address particular threats as opposed to a biennial 
time period. This approach divided fielding capabilities into five 
blocks.[Footnote 6] 

The capabilities-based five-block approach included several positive 
changes, including the commitment by DOD to establish total 
acquisition costs and unit cost for selected block assets, including 
in a block only those elements or components that will be fielded 
during the block, and abandoning the practice of deferring work from 
one block to another. MDA was still transitioning to this new 
capabilities-based block approach when the MDA Director terminated it 
in June 2009--a year and a half after it was created. According to 
MDA, the agency terminated the capability-based block structure to 
address the explanatory statement accompanying the Department of 
Defense Appropriations Act, 2009, which stated that MDA's 
"justification materials should no longer be presented in the Block 
format, but rather by fiscal year for each activity within the program 
element." The agency has decided that it will manage the BMDS as a 
single integrated program and is in the process of determining how it 
will implement changes to its acquisition management strategy. 

Progress Made in Fiscal Year 2009: 

In fiscal year 2009, MDA achieved several noteworthy accomplishments. 
For example, MDA revised its testing approach to better align tests 
with modeling and simulation needs and is undertaking a new targets 
development effort to resolve long-standing problems supplying 
sufficient and reliable targets. The agency also demonstrated 
increased levels of performance for some of its BMDS elements through 
flight and ground testing. MDA testing achievements during the year 
indicate an increased level of interoperability among multiple 
elements, improving both system-level performance and advancing the 
validation of BMDS models and simulations needed to predict 
performance. In addition, the agency delivered most of the assets as 
planned by the end of fiscal year 2009. 

MDA Revised Its Testing Approach: 

In fiscal year 2009, MDA revised its testing approach in response to 
GAO and DOD concerns. In March 2009 we reported that MDA's Integrated 
Master Test Plan--its test baseline--was not effective for management 
and oversight because it was revised frequently, only extended through 
the following fiscal year and was not well integrated with other key 
aspects of testing such as target acquisitions.[Footnote 7] Most of 
the annual revisions to the test baseline were occurring either 
because MDA changed the substance of tests, changed the timing of 
tests, or added tests to the baseline. In other instances, MDA 
canceled planned tests which also affected the test baseline. In 
addition, the BMDS Operational Test Agency identified several 
limitations in the previous BMDS test program, including unaccredited 
models and simulations, flight test artificialities, and inadequate 
modeling of some environmental conditions.[Footnote 8] 

Members of Congress also expressed concern with MDA's test approach. 
For example, in the fiscal year 2008 National Defense Authorization 
Act conference report, conferees noted that MDA failed to ensure an 
adequate testing program and that its test and targets program needed 
to be managed in a way that fully supported high-priority near-term 
programs. 

MDA extensively revised its test plan in fiscal year 2009 to address 
many of these concerns. For example, the new Integrated Master Test 
Plan bases test scenarios on modeling and simulation needs and extends 
the test baseline through 2015, which allows for better estimation of 
target needs, range requirements, and test assets. As part of the 
revised test plan, MDA scheduled dedicated periods of developmental 
and operational testing, during which the system configuration will 
remain fixed to allow the warfighter to carry out training, tactics, 
techniques, and procedures for developmental and operational 
evaluation. Additionally, the new test plan will provide sufficient 
time after test events to conduct a full post-test analysis. These 
improvements are important because BMDS performance cannot be fully 
assessed until models and simulations are accredited and validated and 
the test program cannot be executed without meeting its targets needs. 

MDA Began New Target Development Effort: 

In July 2009, MDA also initiated a new target acquisition strategy to 
address recurring target performance issues and increases in target 
costs. According to the Director of MDA, this new target approach is 
based on streamlining a set of classes of targets to increase quality 
control of an inventory of identical targets that represent general 
threat characteristics to account for intelligence uncertainties. He 
further stated that a goal of the new target acquisition strategy is 
to minimize the number of targets needed to emulate specific threats 
and establish backup targets, which will be available in 2012. 

Targets have been a recurring cause of flight test delays, 
cancellations, and failures since 2006. In the past, we reported that 
the THAAD program was unable to achieve its first intercept attempt in 
2006 because the target malfunctioned.[Footnote 9] The program also 
experienced target anomalies in 2007 that precluded the completion of 
two radar characterization tests. During the same year, the GMD 
program experienced long-term effects on its flight test schedule when 
it was unable to achieve all primary test objectives because of a 
target failure. We also reported in March 2009 that the Aegis BMD 
program was unable to conduct an intercept because the target was not 
available.[Footnote 10] In addition, in its January 2009 report to the 
defense committees, MDA acknowledged target availability and 
reliability problems and reported its plan for a new target 
acquisition strategy to address these issues and improve costs, 
quality, and reliability. 

In revising its target acquisition strategy, MDA solicited input from 
industry in an effort to better understand possible new target 
solutions that might be available to improve cost, quality, and 
performance. To leverage industry capability and promote a more 
competitive contract environment, MDA decided to use multiple 
contractors with multiple contracts instead of a single prime 
contract, increasing its flexibility to respond to changing program 
requirements. The agency plans to award a new contract for each class 
of target needed to execute the BMDS test plan. MDA will begin making 
decisions on contract awards and new target designs over the next 
year. According to program officials, MDA originally planned to issue 
five requests for proposals for new contracts in fiscal year 2010 and 
one additional request in fiscal year 2011. However, to reflect 
changes in the test plan and subsequent changes to the acquisition 
strategy, the program now plans to issue two requests for proposals in 
fiscal year 2010 and one in fiscal year 2011. The Targets and 
Countermeasures program anticipates that the first targets will be 
delivered under the new strategy in fiscal year 2012, and the first 
intercontinental ballistic missile target is expected to be delivered 
in fiscal year 2013. 

MDA also made progress in several ongoing target development efforts 
that could enhance the ability to test the BMDS. During fiscal year 
2009, the Targets and Countermeasures program made progress in 
developing four new targets--the LV-2 target, Aegis Readiness 
Assessment Vehicle-C target, a new medium range target, and the 
Extended-Long Range Air Launched Target. Each target adds a new 
capability to MDA's target portfolio. For example, the LV-2 target 
provides the potential for significantly expanding the intermediate 
range payload and range performance over current inventory 
capabilities. The Aegis Readiness Assessment Vehicle-C target provides 
a new, low-cost capability as it is designed to contribute additional 
separating and maneuvering capabilities in short-and medium-range 
targets. MDA's new Medium Range Target provides improved kill 
assessment capability at this range.[Footnote 11] In addition, the new 
Extended-Long Range Air Launched Target is a medium-range target that 
provides a greater range capability than previous air-launched targets 
and adds the ability to deploy associated objects--a capability not 
currently available in other similar target types. MDA expects each of 
these targets to be ready for use in flight tests in fiscal year 2010. 
[Footnote 12] 

MDA Demonstrated Some Improved Performance through Testing: 

In fiscal year 2009, MDA conducted several ground tests and flight 
tests demonstrating improved performance in several areas of the BMDS 
including element-level functionality, theater and regional 
performance, and interoperability. Table 2 identifies key test events 
achieved in fiscal year 2009 for each element. 

Table 2: Fiscal Year 2009 BMDS Test Achievements: 

Element: ABL; 
Significant test achievements: 
* Achieved first live tracking tests against boosting targets; 
* Achieved first firing of high energy laser in flight. 

Element: Aegis BMD; 
Significant test achievements: 
* Verified capability to destroy multiple targets during an engagement. 

Element: C2BMC; 
Significant test achievements: 
* Demonstrated capability to display information from both strategic 
and theater scenarios on one common operational picture; 
* Displayed situational awareness data for Patriot units. 

Element: GMD; 
Significant test achievements: 
* Utilized correlated sensor data from four sensors to intercept a 
target. 

Element: Sensors; 
Significant test achievements: 
* Demonstrated that the upgraded early warning radar could conduct 
missile warning, space surveillance, and missile defense during a live 
intercept of a target missile. 

Element: STSS; 
Significant test achievements: 
* Completed ground testing, integration of components, and launch of 
two demonstration satellites. 

Element: THAAD; 
Significant test achievements: 
* Conducted a salvo launch of two interceptors against single target. 

Sources: GAO (presentation); MDA (data). 

[End of table] 

In June 2009, the ABL program successfully completed its first two 
tracking tests against boosting missile targets. These tests marked 
the first time ABL demonstrated a complete low-power engagement 
sequence against a boosting target. In addition, the ABL was able to 
demonstrate its ability to fire its high energy laser in an airborne 
environment during a flight test in August 2009. During this test, the 
laser was fired into a calorimeter on board the aircraft to capture 
the laser's energy and measure performance characteristics of the 
laser's beam. 

The Aegis BMD program also demonstrated increased levels of element 
performance through Navy fleet exercises and developmental tests. For 
example, Aegis BMD demonstrated, for the first time, its capability to 
destroy a ballistic missile in the terminal phase of flight using 
Standard Missile-2 Block IV missiles while simultaneously conducting a 
mission using the Standard Missile-2 Block IIIA missile against a 
cruise missile target. The program also conducted successful 
developmental component tests for the next generation of the Aegis BMD 
interceptor--the SM-3 Block IB. Developmental testing will continue 
into 2010. In addition, the program successfully demonstrated that the 
latest software release of the Aegis BMD system had the capability to 
support the program's next generation interceptor during simulated SM- 
3 Block IB engagements. 

The C2BMC program also satisfied multiple test objectives and 
increased its capability in fiscal year 2009. The program participated 
in many system-level tests during the year that enabled it to 
demonstrate multiple capabilities, including improved situational 
awareness and sensor management.[Footnote 13] During testing, C2BMC 
used multi-sensor correlation and provided integrated situational 
awareness for weapons release decisions. 

GMD, for the first time, used information from multiple sensors to 
develop and successfully conduct an intercept of a live target during 
a flight test. In December 2008, target information from four 
different sensors and satellite data were input into the GMD fire 
control system to develop an intercept plan. The involvement of 
multiple sensors provides better information to develop an engagement. 
In addition, GMD made progress in addressing BMDS Operational Test 
Agency concerns regarding the formatting, tracking, and accounting of 
messages from GMD sensors. For example, MDA added test instrumentation 
to collect data for regional/theater tests communications. However, 
the agency still faces ongoing challenges assessing timeliness with 
the exchange of messages at the strategic level. According to BMDS 
Operational Test Agency officials, they continue to work with MDA to 
resolve this issue. Key to the integration and functionality of the 
BMDS is communications and message traffic. The timely reception of 
messages from sensors to weapon systems is key to support decisions 
and achieve effective intercepts. In March 2009, we reported that 
these data management problems prevented the analysis of the 
timeliness of message data, according to BMDS Operational Test Agency 
officials.[Footnote 14] 

The STSS program successfully completed the ground testing and 
integration of components to support the launch of its two 
demonstration satellites in September 2009. These satellites will use 
onboard infrared sensors to detect, track, and discriminate ballistic 
missiles throughout their trajectories. 

THAAD also demonstrated improved element-level functionality when it 
successfully launched a salvo of two THAAD interceptors to intercept a 
separating target inside the earth's atmosphere. The primary 
interceptor hit the target and the second interceptor hit the largest 
remaining piece of target debris seconds later. 

BMDS Demonstrated Improved Theater and Regional Performance and an 
Increased Level of Interoperability: 

Regional and theater BMDS assets--Aegis BMD and THAAD--succeeded in 
demonstrating improved interoperability in fiscal year 2009. For 
example, during a THAAD intercept test, Aegis BMD tracked a target and 
provided the information to THAAD's fire control. As a result, the 
missile was successfully engaged by THAAD. Additionally, during this 
test, the forward-based radar supporting THAAD was also able to 
discriminate the threat reentry vehicle from other objects and provide 
the information to support the engagement. According to program 
officials, the THAAD element reported that C2BMC provided accurate and 
timely status information for the BMDS as well as situational 
awareness of the test to the warfighter. 

MDA also demonstrated interoperability for BMDS elements during 
several ground tests in fiscal year 2009.[Footnote 15] For example, 
during one ground test--GTD-03--MDA successfully demonstrated 
simultaneous theater and regional capabilities using operational BMDS 
hardware and actual communications between them. In addition, MDA 
demonstrated simultaneous BMDS capabilities to conduct training while 
the BMDS network remained operational during this test. This 
capability allows MDA to conduct development activities while 
maintaining readiness to engage in missile defense operations. This 
ground test also allowed several BMDS elements to demonstrate that 
they could successfully exchange data with other elements. 
Additionally, in December 2008 numerous elements worked together to 
support system-level post-flight reconstruction needed to validate 
BMDS models and simulations.[Footnote 16] This system-level post-
flight reconstruction for flight test FTX-03 was the first ever and 
was highly successful because different MDA groups achieved the same 
results, according to MDA officials. 

MDA Made Progress Developing and Integrating Models and Simulations: 

MDA took significant steps forward in fiscal year 2009 in developing 
the modeling and simulation tools necessary to understand BMDS 
performance against strategic and theater/regional threats. Because 
the potential combinations of BMDS configurations, intercept 
scenarios, and missile threats are too numerous for ground and flight 
testing, assessing overall BMDS performance depends upon the use of 
models and simulations to understand the capabilities and limitations 
of the system. Such an end-to-end system-level simulation brings 
together the capabilities of various element models in order to 
analyze how the BMDS integrated and fielded radars, communication 
networks, and interceptors perform during scenarios.[Footnote 17] 
However, to work effectively these models and simulations need to be 
anchored to data from ground and flight tests and validated by 
independent evaluators--the BMDS Operational Test Agency--in order to 
have confidence in their results.[Footnote 18] Moreover, the system-
level simulation itself is expected to change over time as additional 
models become available to represent the evolving BMDS configuration. 

In March 2009 we reported that MDA experienced several problems in its 
overall modeling and simulation program, which negatively affected the 
2007 performance assessment and led to the cancellation of the 2008 
performance assessment.[Footnote 19] Performance Assessment 2007 was 
unsuccessful primarily because of inadequate flight and ground test 
data for verification and validation to support accreditation and a 
lack of common threat and environment input data among element models. 
MDA officials canceled their 2008 performance assessment efforts in 
April 2008 because of developmental risks associated with modeling and 
simulations, focusing instead on testing and models for Performance 
Assessment 2009. 

In fiscal year 2009, MDA made some progress integrating the individual 
element models and simulations for Performance Assessment 2009. A 
leading accomplishment was the development of a system-level 
simulation for regional and theater scenarios in addition to existing 
strategic scenarios for a more complete analysis of BMDS performance. 
Performance Assessment 2007 only included homeland defense scenarios 
against strategic threats. One of MDA's goals for the performance 
assessment is the integration of models that communicate like the 
networked BMDS. As of October 2009, Performance Assessment 2009 
achieved interactive communications among the element models and 
simulations. In addition, MDA achieved consistency in representing the 
threat missile and post-intercept data among all models and scenarios, 
which was also a weakness of Performance Assessment 2007. Finally, the 
BMDS Operational Test Agency observed that conducting Performance 
Assessment 2009 is helping to build confidence in BMDS-level 
simulation capability for the subsequent Performance Assessment 2010. 

MDA Delivered Many Assets as Planned in Fiscal Year 2009: 

In fiscal year 2009, MDA met many of its delivery goals. Four MDA 
elements--Aegis BMD, GMD, Sensors, and C2BMC--were scheduled to 
deliver a total of 41 assets and capabilities in fiscal year 2009. MDA 
delivered 34 of these assets or 83 percent. Table 3 outlines BMDS 
asset deliveries in fiscal year 2009. 

Table 3: BMDS Deliveries and Total Fielded Assets as of September 30, 
2009: 

BMDS element: Aegis BMD; 
Fiscal year 2009 delivery goals: 10 SM-3 missiles; 
Assets delivered in fiscal year 2009: 19 SM-3 missiles; 
Total assets available (cumulative total of assets since 2005): 
47 SM-3 missiles. 

BMDS element: Aegis BMD;
Fiscal year 2009 delivery goals: 20 Aegis BMD Weapon System 3.6.1 
installations; 
Assets delivered in fiscal year 2009: 18 Aegis BMD Weapon System 3.6.1 
installations; 
Total assets available (cumulative total of assets since 2005): 
18 Aegis BMD Weapon System 3.6.1 installations; 
1 Aegis BMD Weapon System 4.0.1 installation. 

BMDS element: GMD; 
Fiscal year 2009 delivery goals: GBIs number 28-30; 
Assets delivered in fiscal year 2009: GBI 28; 
Total assets available (cumulative total of assets since 2005): 
28 GBIs[A]. 

BMDS element: GMD; 
Fiscal year 2009 delivery goals: 1 additional silo; 
Assets delivered in fiscal year 2009: 1 silo; 
Total assets available (cumulative total of assets since 2005): 
31 silos[B]. 

BMDS element: C2BMC; 
Fiscal year 2009 delivery goals: 1 fielding and activation site; 
Assets delivered in fiscal year 2009: None[C]; 
Total assets available (cumulative total of assets since 2005): 
7 combatant command suites; 
64 Web browsers; 
54 enterprise workstations; 
4 Global Engagement Manager workstations; 
1 Global Engagement Manager suite. 

BMDS element: Sensors; 
Fiscal year 2009 delivery goals: 1 additional AN/TPY-2 radar; 
Site construction, deployment, activation, and fielding for 1AN/TPY-2 
radar; 
Near-term discrimination software; 
Thule radar upgrades; 
Thule radar site construction; 
Thule radar communication upgrade; 
Assets delivered in fiscal year 2009: 1 AN/TPY-2 radar; 
Site construction, deployment, activation, and fielding for 1AN/TPY-2 
radar; 
Near-term discrimination software; 
Thule radar site construction; 
Total assets available (cumulative total of assets since 2005): 
6 AN/TPY-2 radars; 
2 operational sites; 
1 Near-term discrimination software; 
1 Thule radar site construction. 

Sources: GAO (presentation); MDA (data). 

Note: Goals for GMD, Sensors and C2BMC asset deliveries came from the 
Fiscal Year 2008 BMDS Block Baselines and Goals, while Aegis BMD 
delivery goals were informed by Aegis BMD budget justification 
documents. 

[A] The total includes GBIs numbered 25, 26, and 27 which were 
delivered in fiscal year 2009, 1 year after their initially scheduled 
delivery date in fiscal year 2008. 

[B] The total includes 26 silos at Fort Greely and 5 silos (one for 
test use only) at Vandenberg Air Force Base. 

[C] Program officials told us that C2BMC's delays were not driven by 
technical issues but by programmatic changes needed by other elements, 
the warfighter, and the new administration. 

[End of table] 

Aegis BMD planned to install the Aegis Weapons System 3.6.1 software 
on 20 ships and deliver 10 SM-3 missiles in fiscal year 2009. The 
program met its goal to deliver the 10 missiles and began to deliver 
additional rounds, initially designated for 2010, ahead of schedule. 
However, the program fell behind on its goal of installing the 3.6.1 
software on 20 ships, delivering 18 by the end of the fiscal year 
2009. Aegis BMD officials pointed out that all ship sets were 
available but because of real-world national security situations, 
these ships were not available for installations in fiscal year 2009. 
Nonetheless, one of the remaining ships was completed in December 2009 
and another will be completed by March 2010. In fiscal year 2009, 
Aegis BMD also delivered an additional ship set with the next 
generation Aegis BMD Weapon System, 4.0.1, for a total of 19 ship 
deliveries. 

The GMD program also partially met its delivery goals in fiscal year 
2009. The program delivered an additional silo at Vandenberg Air Force 
Base as planned, but lagged in its GBI deliveries. For example, in 
fiscal year 2009, GMD emplaced three interceptors that were initially 
planned for fiscal year 2008 and only one of the three interceptors 
planned for fiscal year 2009. 

The Sensors program met most of its delivery goals, successfully 
fielding a new near-term discrimination algorithm, activating an 
additional AN/TPY-2 radar site, and delivering an additional AN/TPY-2 
radar. However, it fell short of meeting all of its delivery goals for 
the fiscal year. Although the program completed the construction for 
the Thule radar site ahead of schedule in fiscal year 2008, it was 
unable to deliver Thule radar communications and upgrades as planned 
in fiscal year 2009. These activities have been delayed until fiscal 
year 2010. 

Finally, C2BMC delivered four additional C2BMC Web browsers, five work 
stations, and an additional combatant command suite. Additionally, the 
program office rolled out the Global Engagement Manager suite and 
added four work stations that support it. However, it was unable to 
meet its schedule baseline goal of an additional fielding and site 
activation to declare its next spiral operational. This was due to 
major program restructures needed to accelerate C2BMC capabilities for 
other BMDS elements as well as programmatic changes to fulfill 
warfighter requests and meet new administration direction. 

Significant Challenges Remain in Developing the BMDS: 

While there was progress in addressing concerns about test planning 
and target development as well as in delivering assets, all BMDS 
elements experienced delays in conducting tests, were unable to 
accomplish all planned objectives, and experienced performance 
challenges. Poor target performance continued to be a problem causing 
several test delays and leaving several test objectives unfulfilled. 
The test problems also precluded the agency from gathering key 
knowledge through tests specified by the MDA Director that were 
originally planned to be completed in fiscal year 2008.[Footnote 20] 
MDA's efforts to develop advanced algorithms and its efforts to 
demonstrate homeland defense were also affected by target issues. 
These shortfalls in testing continued to delay validation of the 
models and simulations used to assess the overall performance of the 
BMDS. Consequently, comprehensive assessments of the capabilities and 
limitations of the BMDS are still not possible. MDA also redefined its 
schedule baseline, eliminating goals for delivering integrated 
capabilities so we were not able to assess MDA's progress in this key 
area. 

MDA Experienced Testing Delays and Shortfalls Across the Board in 
Fiscal Year 2009: 

During fiscal year 2009, although several tests showed progress in 
individual elements and some system-level capabilities, all BMDS 
elements experienced test delays and shortfalls in part because of 
problems with the availability and performance of target missiles. 
None of the elements conducted all planned tests as scheduled and none 
achieved all planned objectives. Table 4 outlines BMDS test and target 
issues in fiscal year 2009. 

Table 4: BMDS Test and Target Issues: 

Element: ABL; 
Issues: Optics failure experienced during test. Delayed first full 
demonstration test from fiscal year 2009 until fiscal year 2010. 

Element: Aegis BMD; 
Issues: Target availability, test range requirements, and programmatic 
changes delayed key test from fiscal year 2008 until at least 2013.[A] 

Element: C2BMC; 
Issues: Changes in the scope of C2BMC's ongoing development effort as 
well as issues with BMDS-level models and simulation tools have 
delayed C2BMC's spiral capability development testing.[B] 

Element: GMD; 
Issues: Target failed to release countermeasures during December 2008 
flight test--FTG-05; 
target modeling delayed subsequent test--FTG-06--until January 2010.[C] 

Element: Sensors; 
Issues: Target failures prevented Sensors element from developing 
discrimination capability as planned. 

Element: STSS; 
Issues: Integration difficulties delayed launch of demonstration 
satellites. 

Element: Targets and Countermeasures; 
Issues: Flexible Target Family delivery delayed and experienced cost 
growth. 

Element: THAAD; 
Issues: Target availability reduced planned fiscal year 2009 
objectives. 

Source: GAO (presentation); MDA (data). 

[A] According to Aegis BMD officials, this test has been canceled, 
however several objectives will be included in FTM-23 scheduled for 
2013. 

[B] Program officials told us that C2BMC's scope changes were not 
driven by technical issues but by programmatic changes needed by other 
elements, the warfighter, and the new administration. 

[C] FTG-06 was conducted on January 31, 2010, but did not achieve all 
of its objectives. The GBI failed to intercept the target as planned. 
According to an MDA official, the agency has convened a Failure Review 
Board and expects results from its investigation to take months. 

[End of table] 

Two BMDS elements--ABL and C2BMC--experienced delays in achieving 
fiscal year 2009 test events. For example, ABL experienced delays in 
development and ground testing that resulted in the delay of its first 
full flight test demonstration until fiscal year 2010. Additionally, 
C2BMC was unable to conduct testing needed to further develop its next 
spiral capability because of BMDS-level delays in developing the 
models and simulations needed to conduct this testing. Major program 
restructures needed to accelerate C2BMC capabilities for other BMDS 
elements and programmatic changes to fulfill warfighter requests and 
meet new administration direction also contributed to C2BMC's 
inability to conduct planned fiscal year 2009 testing. 

As noted in table 4, targets affected the BMDS test program for four 
elements in fiscal year 2009. The Aegis BMD, GMD, Sensors, and THAAD 
test program were affected by either target availability or target 
reliability and performance issues. In fiscal year 2009, targets 
contributed to a test cancellation and test delays and prevented 
elements from completing tests or achieving all test objectives. One 
test for Aegis BMD--FTM-15--was originally projected to use the new 
Flexible Target Family's LV-2 target in fiscal year 2008, but because 
of qualification difficulties, the target was unavailable and the test 
was not conducted. This test was planned as the first Aegis BMD SM-3 
engagement against an intermediate-range target. It was also expected 
to verify interoperability of Aegis BMD, a Sensors radar, and C2BMC. 
As of December 2009, MDA had canceled the test and planned to combine 
several of the FTM-15 objectives with those in a future flight test in 
2013--FTM-23. However, as of February 2010, the Director of MDA stated 
that the test is being rescheduled for 2011. Test documentation was 
not provided for our review so it remains unclear whether the test 
will include the original test objectives, target, and BMDS hardware 
and software configurations. 

The GMD and Sensors programs were also unable to complete all planned 
objectives because of a target failure during an intercept test. 
During a December 2008 flight test--FTG-05--the target failed to 
release planned countermeasures. A similar target failure was 
experienced in a prior 2008 test--FTX-03--and MDA's risk assessments 
leading up to the FTG-05 test could not determine the root cause of 
the failure. These risk assessments determined that a similar failure 
would be "likely" and the consequences "severe" if MDA proceeded with 
the test in December 2008, even after taking mitigation steps. 
[Footnote 21] According to the Defense Contract Management Agency, the 
cost to execute FTG-05 exceeded $210 million. This was the last 
planned flight test using this type of target. As a result of the 
target failure, GMD was unable to assess the Capability Enhancement-I 
kill vehicle against countermeasures. According to the July 2009 
Integrated Master Test Plan, this test is now planned to be conducted 
in the third quarter of fiscal year 2011--nearly 4 years after this 
configuration completed fielding. 

The GMD program had to delay its second planned fiscal year 2009 
intercept test--FTG-06--to fiscal year 2010 because pretest analysis 
raised concerns that the target may not perform as required. This test 
was important because it was planned as the first test of GMD's 
enhanced version of the kill vehicle called the Capability Enhancement 
II exoatmospheric kill vehicle. This test was also designed to 
demonstrate a long-flight time for the GBI and GMD's capability 
against countermeasures. In early 2009, MDA altered the target to 
present a more representative threat. Since MDA did not have modeling 
data to represent the new characteristics of the target, MDA officials 
were concerned about the target's expected performance and decided to 
delay the test. In January 2010, MDA conducted FTG-06. However, all 
test objectives were not met as the GBI failed to intercept the target 
as planned. According to an MDA official, a Failure Review Board was 
convened to investigate the test results, but its investigation is 
expected to take months to complete. 

As we reported in March 2009, THAAD program officials had to 
reschedule the planned fiscal year 2008 BMDS-level event, FTT-10, into 
fiscal year 2009 because of a target malfunction.[Footnote 22] THAAD 
successfully completed this test event in fiscal year 2009. In 
addition, a Short Range Air Launch Target planned for use in a third 
quarter fiscal year 2009 THAAD flight test, FTT-11, had a component 
failure and subsequently needed to be requalified. This failure caused 
the THAAD program to modify its planned flight test objectives and 
move the test into fiscal year 2010, also resulting in delays to a 
subsequent test--FTT-12. FTT-11 was conducted in December 2009 but 
could not be completed due to failure of the target missile. The air-
launched target was successfully deployed from a transport aircraft, 
but the target's rocket motor did not ignite. The THAAD interceptor 
was not launched and test objectives were not achieved. According to 
the Director of MDA, the Failure Review Board was concluding its 
investigation of the root cause of this failure. The board's report 
was not available during our audit. 

Target reliability and failures in fiscal year 2009 also prevented 
several elements from achieving all planned objectives. In March 2009, 
Aegis BMD experienced target difficulties when two refurbished lower- 
cost Army targets for a short-range mission fell short of their 
expected trajectory. One target was outside the intercept control area 
and Aegis BMD was not able to fire the interceptor because of safety 
limitations. In the second test, the target, while short of its 
expected trajectory, fell in the intercept control area and was 
successfully intercepted. 

It Will Be Several Years Before New Target Acquisition Approach 
Addresses Problems: 

It will be several years before MDA's new approach to target 
development and acquisitions will be fully implemented because most 
targets needed through fiscal year 2011 are already under contract and 
will not be affected by the new strategy. The activities under 
existing contracts will not be complete until 2013. Moreover, MDA's 
implementation of a new acquisition management strategy does not 
necessarily mean that any particular target currently being used, such 
as the LV-2, will be phased out of the test program. MDA could decide 
to continue to use an existing target under the new strategy, and as a 
result, some existing target missiles could continue to be procured 
under new contracts. 

MDA has not presented a complete business case for proceeding with a 
new target acquisition management strategy. A complete business case 
includes establishing top-level cost, schedule, and performance 
baselines available internally and externally for oversight.[Footnote 
23] It is the essential first step in any acquisition program because 
it sets the stage for acquisition and execution. Program officials 
told us that they would have cost, schedule, and performance baselines 
finalized and documented as part of the decision to proceed with new 
contract awards. These baselines, however, will be very detailed and 
spread across multiple documents and therefore are unsuitable for 
internal and external oversight. The officials further stated that 
they do not intend to establish top-level cost, schedule, and 
performance baseline measures similar to approved program baselines 
that are established for DOD's major defense acquisitions to provide 
accountability.[Footnote 24] In September 2008, we reported that MDA 
had difficulty in developing and supplying new targets in part because 
a sound business case was not developed before significant decisions 
were made. In that report we recommended that MDA develop cost, 
schedule and performance baselines as part of an effort to establish a 
sound business case for each new class of target under development. 
[Footnote 25] 

As part of the new target development efforts, MDA also developed a 
new cost model. However, because the cost model and test baseline are 
continually updated, the Targets and Countermeasure program continues 
to lack solid cost baselines against which progress can be measured. 
According to the Director of MDA, the agency will continue to update 
its cost model as the Integrated Master Test Plan changes, noting that 
where the technical content of the test plan remains constant, cost, 
schedule, and performance baselines can be measured from year to year. 
However, as we reported in March 2009, the Integrated Master Test Plan 
changes frequently. In fact, the latest approved version is dated July 
2009, and according to MDA's Director, a revised version of the 
Integrated Master Test Plan is expected in March 2010, which limits 
the baseline's stability to approximately 8 months and limits our 
ability to measure MDA's progress against a cost baseline. 

MDA's ability to develop an accurate cost baseline is also affected by 
the lack of historical data available for targets or for other similar 
missiles. Program officials said that they are now collecting more 
useful cost data for new contracts by requiring more detailed cost 
reporting from their contractors. This approach will allow program 
officials to gather more complete and accurate data over time to make 
the new cost model a more powerful cost estimating tool. 

Testing and Targets Problems Affected Planned Progress of Overall BMDS 
Development: 

The inability of MDA to successfully conduct its test plan precluded 
the agency from collecting critical information needed for key 
decisions and significantly affected development of advanced 
algorithms and homeland defense capabilities. 

Key Director's Knowledge Points Delayed Again: 

In fiscal year 2009, MDA was unable to accomplish any of the 
Director's knowledge points that were to be achieved through tests. 
Several of these tests were originally planned for fiscal year 2008, 
but were delayed into 2009 and then again delayed into fiscal years 
2010 and 2011. Table 5 shows the original test date and MDA's current 
estimate for obtaining the necessary knowledge. 

Table 5: Status of Fiscal Year 2008 Director's Knowledge Points to Be 
Achieved through Tests: 

Knowledge point: Assess capability to deliver real time engagement 
tracks; 
Knowledge gained: Verification of initial Global Engagement Manager 
capability to support ballistic missile defense level sensor/weapon 
system pairing; 
Flight and ground test: GTD-03; 
Original test date: Fourth quarter fiscal year 2008; 
Current projection: To be determined[A]. 

Knowledge point: Verify 72 inch Flexible Target Family; 
Knowledge gained: Confirmation of 72 inch performance. Viability of 
Flexible Target Family concept to efficiently configure and transport 
target to launch facility. Confidence to discontinue use of the 
Strategic Target System; 
Flight and ground test: FTM-15[B]; 
Original test date: Fourth quarter fiscal year 2008; 
Current projection: Second Quarter Fiscal Year 2010. 

Knowledge point: Demonstrate high acceleration booster; 
Knowledge gained: Confirmation of Boost Phase Capability alternative 
to ABL and High Acceleration Booster for Midcourse Defense (mobile and 
fixed sites); 
Flight and ground test: FTK-01; 
Original test date: Fourth quarter fiscal year 2008; 
Current projection: Deleted[C]. 

Knowledge point: Confirm Constellation affordability; 
Knowledge gained: Space sensor performance against operationally 
realistic targets confirmed with existing Block 2006 technology 
(anchors performance-cost baseline for future STSS); 
Flight and ground test: FTS-01; 
Original test date: Fourth quarter fiscal year 2008; 
Current projection: Deleted. 

Knowledge point: Verify capability to conduct launch on the tactical 
digital information link ballistic missile engagement; 
Knowledge gained: Assessment of Aegis BMD 3.6 and SM-3 Block IA 
performance and ability to successfully engage and intercept a long 
range ballistic missile target and to use an off-board sensor's track 
data via Link-16 to initiate that engagement; 
Flight and ground test: FTM-15; 
Original test date: Fourth quarter fiscal year 2008; 
Current projection: To be determined[D]. 

Knowledge point: Confirm Constellation performance; 
Knowledge gained: Space sensor performance against operationally 
realistic targets confirmed with existing Block 2006 technology 
(anchors performance-cost baseline for future STSS); 
Flight and ground test: FTS-03[E]; 
Original test date: Fourth quarter fiscal year 2008; 
Current projection: Third quarter fiscal year 2011. 

Sources: GAO (presentation); MDA (data). 

[A] After the knowledge point had been established in 2007, MDA split 
it into two parts. Although GTD-03 was completed in the second quarter 
of fiscal year 2009 and was the test that was originally set to meet 
this knowledge point, MDA altered its plan. The first part of the 
knowledge point, Verification of initial Global Engagement Manager 
capability to support ballistic missile defense level sensor/weapon 
system pairing, will meet its objectives during the GTX-04 series, 
which will not be completed until the second quarter of fiscal year 
2011 while the second part, Verification of Aegis Launch on C2BMC, was 
originally set to meet its objectives during FTM-15. However, FTM-15 
has been canceled, and program officials told us that several 
objectives would be rolled into future tests, such as FTM-23. 

[B] MDA changed the test to verify the 72 inch Flexible Target Family 
target from FTM-15 to FTG-06. FTG-06 was conducted on January 31, 
2010, but did not achieve all of its objectives. Therefore, it is 
unclear whether the knowledge point was fulfilled. 

[C] MDA's cancellation of the Kinetic Energy Interceptor program 
during fiscal year 2009 caused its subsequent test events, including 
FTK-01, to be canceled. 

[D] As of December 2009, MDA had canceled the test and planned to 
combine several of the FTM-15 objectives with those in a future flight 
test in 2013--FTM-23. However, as of February 2010, the Director, MDA 
states that the test is being rescheduled for 2011. Test documentation 
was not provided for our review so it remains unclear whether the test 
will include the original test objectives, target, and BMDS hardware 
and software configurations. 

[E] FTS-03 is now designated FTS-02. 

[End of table] 

Advanced Algorithm and Homeland Defense Affected: 

Target issues continued to affect MDA's ability to fully develop 
algorithms needed for discrimination capability. In March 2009, we 
reported that multiple elements experienced test failures which caused 
delays in collecting data needed to develop discrimination capability. 
[Footnote 26] For example, in 2007, two THAAD radar characterization 
tests were unsuccessful because of target anomalies. These tests were 
designed with characteristics needed for radar observation in support 
of advanced discrimination algorithm development. However, target 
problems prevented an opportunity for the radar to exercise all of the 
planned algorithms, causing a loss of expected data. Similarly, in a 
2008 sensor characterization test, the target failed to release its 
countermeasures, which prevented the sensors from collecting expected 
data. Consequently, MDA was unable to fully develop discrimination 
algorithms as planned. 

In fiscal year 2009, MDA continued to be unable to develop its 
advanced algorithms as planned as key tests that were designed to 
reduce the maturation risk were affected by targets. For example, the 
Sensors and GMD elements were unable to collect data to develop their 
advanced algorithms when the target failed to release countermeasures 
and present the expected scene complexity during FTG-05. The 
subsequent delay to the next intercept test--FTG-06--until January 
2010 has also reduced the data MDA had expected in fiscal year 2009 
for the development of discrimination capability. Additionally, target 
unavailability caused MDA to delay a THAAD test--FTT-11--from fiscal 
year 2009. This test was designed to provide data for the development 
of advanced algorithms for the THAAD radars. The test was conducted in 
fiscal year 2010 but could not be completed because the target 
malfunctioned during deployment. According to the Director of MDA, the 
Failure Review Board was concluding its investigation of the root 
cause of this failure. The board's report was not available during our 
audit. 

Likewise, GMD continues to experience delays demonstrating increased 
interceptor performance for homeland defense as the two aforementioned 
tests--FTG-05 and FTG-06--were not conducted as planned. As we 
testified in February 2009, MDA had expected to conduct seven GMD 
interceptor flight tests from the start of fiscal year 2007 through 
the first quarter of fiscal year 2009. However, MDA was able to 
conduct only two, which, according to the Director of Operational Test 
and Evaluation, has limited the complete sets of information necessary 
for validating ground-based interceptor models. MDA also delayed the 
other planned flight test, FTG-06, beyond fiscal year 2009 because of 
target issues and an anomaly with a component of the Sea-Based X-band 
radar. As of June 2009, MDA estimated this test to cost over $236 
million while the Defense Contract Management Agency estimated the 
cost to exceed $310 million. These costs are likely understated 
because they do not include all of the cost increases of delaying the 
test first to September 2009, nor do they include any cost increases 
of further delaying the test until the second quarter of fiscal year 
2010. 

Although the Aegis BMD missile--SM-3 Block IA--capability against an 
intermediate range ballistic missile is not a requirement, MDA has 
planned for years and invested millions of dollars in a plan to test 
the Aegis BMD system and SM-3 Block IA interceptor against this type 
of threat. At the start of fiscal year 2009, Aegis BMD officials 
intended to conduct this test in the third quarter of fiscal year 
2009. However, as of December 2009, MDA had canceled the test and 
planned to combine several objectives with those in a future flight 
test in 2013. As of February 2010, the Director of MDA stated that the 
test is being rescheduled for 2011. Test documentation was not 
provided for our review, so it remains unclear whether the test will 
include the original test objectives, target, and BMDS hardware and 
software configurations. 

New Test Plan Not Yet Complete, Not Fully Tied to Resources, and Not 
Synchronized with Other Management Baselines: 

MDA's new July 2009 test plan was intended to provide stability; 
however, program officials already anticipate major revisions and 
alterations. According to MDA officials, budget decisions and the 
presidential decision to implement a European phased, adaptive 
approach, drove changes to the test and targets program. For example, 
the new strategy for European missile defense will primarily utilize 
Aegis BMD interceptors as opposed to GMD interceptors. Tests in 
support of developing this capability have not yet been added to the 
test plan. The Director of MDA stated that his agency is coordinating 
with the Office of the Director, Operational Test and Evaluation and 
with the BMDS Operational Test Agency to address these changes. 
According to the Director of MDA, flight and ground testing to support 
phases one through four of the Phased Adaptive Approach will be 
baselined in the March 2010 Integrated Master Test Plan, but the test 
plan was not available for our review during our audit. 

One way MDA's new testing approach was intended to provide stability 
is that it was structured to slow the spiral development fielding 
process, allowing the warfighter to gain confidence in the BMDS before 
fielding decisions are made. However, BMDS Operational Test Agency 
officials told us that changes to hardware and software configurations 
need to follow the process jointly agreed to with MDA, noting that 
changes to the operational baseline should not occur until the 
appropriate developmental tests and operational tests have been 
completed. After the adoption of the new test plan through October 
2009, MDA continued to incorporate software changes as updates to the 
operational baseline. According to Operational Test Agency officials, 
most of the proposed and approved software changes had not been 
through system-level testing and immediately made future test 
configurations in the Integrated Master Test Plan invalid. Changes 
made without full system-level testing, could result in possible 
adverse effects to the BMDS and the warfighter's ability to use the 
system effectively. The BMDS Operational test Agency continues to work 
with MDA on these issues. BMDS Operational Test Officials told us that 
they have seen improvements since October 2009, noting that there has 
been an increase in early coordination and presentation of data to 
support interim releases of software and hardware. According to these 
officials, these improvements coupled with the new warfighter and MDA-
accepted approach for testing--allowing developmental testing to occur 
before operational testing and before new capabilities are delivered 
to the Warfighter--will likely resolve issues encountered with 
frequent changes to software and hardware. 

We testified in February 2009 that the success of MDA's new approach 
to testing hinges on providing sufficient resources, among other 
factors.[Footnote 27] However, these resource challenges continue to 
affect the test plan because MDA's new test plan was not fully 
resourced when it was approved in July 2009. In addition, BMDS 
Operational Test Agency officials also raised concerns that the 
Integrated Master Test Plan is not currently resourced to support the 
necessary personnel to analyze the tests or the performance assessment. 

Until the new development efforts are fully reflected in the test 
plan, MDA will also not be able to fully integrate that plan with 
other key aspects of testing and development, such as the acquisition 
of targets. The test plan is one of six management baselines MDA uses 
to track program progress. However, MDA determined that these 
baselines consist of a disparate set of non-integrated business 
processes.[Footnote 28] More importantly, MDA acknowledged that there 
is inconsistent management, configuration control, integration, and 
synchronization of existing manual processes. MDA is developing new 
business tools to automate the integration of these baselines and 
projects. While it will take several years for the agency to integrate 
these baselines using those tools and synchronize them with other key 
testing and development efforts, the initial capability to 
automatically integrate cost, schedule, and performance baselines will 
be available in early fiscal year 2011. 

Overall BMDS Performance Cannot Be Assessed Because MDA Models Are Not 
Sufficiently Mature: 

MDA models and simulations have not matured sufficiently to assess 
overall BMDS performance and may not fully mature until 2016, instead 
of 2011as we reported last year. According to the BMDS Operational 
Test Agency, it could not project which models and simulations could 
be accredited for Performance Assessment 2009.[Footnote 29] It expects 
to make its determination in July 2010 at the earliest. Further, 
functionality shortfalls diminished the usable scope and integration 
issues have delayed the execution of Performance Assessment 2009 by at 
least 6 months. As a result, the BMDS Operational Test Agency did not 
use the Performance Assessment 2009 data in its 2009 annual 
operational assessment as it had once intended. According to these 
officials, because of the known limitations and the changes to the 
BMDS operational configuration that will occur in 2010, the BMDS 
Operational Test Agency also will not be able to use the results as 
part of its 2010 annual operational assessment. 

MDA officials acknowledged that their primary challenge for the next 
several years will be obtaining enough flight test data to anchor and 
accredit the models. Moreover, the BMDS Operational Test Agency is 
still concerned about the effect on the validation of models due to 
artificialities in flight tests, particularly for GMD.[Footnote 30] 
The BMDS Operational Test Agency believes that the validation of 
models will improve as artificialities in flight tests are reduced. 
Another unresolved modeling and simulation weakness in the testing 
program has been addressing different weather conditions.[Footnote 31] 
MDA, in concert with the BMDS Operational Test Agency, is addressing 
modeling deficiencies with respect to weather conditions, but specific 
plans to resolve this weakness were not available during our audit. 
Finally, the BMDS Operational Test Agency anticipates that 
deficiencies in modeling the BMDS communications system at the 
regional and theater levels that exist in Performance Assessment 2009 
will improve in the subsequent Performance Assessment 2010. 

Progress in Delivering Integrated Capabilities Could Not Be Assessed: 

In 2008, we assessed MDA's capability delivery progress against its 
integrated capability schedule goals and found that many slipped to 
2009.[Footnote 32] We are no longer able to assess MDA's progress in 
delivering integrated capabilities because, in fiscal year 2009, the 
agency eliminated integrated capability delivery goals from its 
schedule baseline. In its most recent BMDS Accountability Report, MDA 
redefined its schedule baseline to consist solely of hardware and 
software deliveries spread across fiscal years. MDA assigned schedule 
metrics to asset deliveries on an element level only and removed key 
schedule measures--engagement sequence groups--from its August 2009 
BMDS Accountability Report that tracked integrated block capability 
deliveries and provided a means for assessing the readiness of BMDS 
capabilities, integration, and functionality. Thus, MDA provided no 
information about its progress and plans to deliver integrated BMDS 
capabilities. 

MDA previously identified its capability delivery schedule goals and 
baselines within the block structure, in terms of assets and 
engagement sequence groups made available for fielding in a particular 
timeframe. Under this capabilities-based five-block acquisition 
management strategy, some blocks contained schedule baselines for 
deliveries of significant increments of capabilities against 
particular threats, culminating in the full capability declaration at 
a projected date. According to MDA, engagement sequence groups created 
manageable combinations of system configurations and provided a 
structure to assess BMDS performance. Because MDA presented early, 
partial and full capability delivery dates for individual engagement 
sequence groups, engagement sequence groups served as baseline to 
measure the schedule of integrated capability deliveries.[Footnote 33] 

MDA officials told us that the agency eliminated engagement sequence 
groups as measures of integrated capability deliveries to address 
warfighter concerns. According to MDA officials, the warfighter did 
not assess engagement sequence groups since they were organized in a 
way that did not align with warfighter operations, tactics, and 
procedures. During our audit, MDA had not replaced these previously 
reported integrated capability delivery baselines with new metrics. 
However, according to the Director of MDA, the agency is working to 
develop new baselines and schedules from which progress can be 
measured. In addition, agency officials told us that MDA is 
transitioning to an incremental BMDS capability delivery concept. 
However, MDA did not provide a definition of incremental BMDS 
capability deliveries or define them as schedule goals in the August 
2009 BMDS Accountability Report. MDA also did not identify anticipated 
delivery dates for its performance metrics; however, the Director of 
MDA stated that developmental baselines are anticipated to be 
developed, reviewed and approved by the third quarter of fiscal year 
2010. Furthermore, major MDA documents designed to communicate MDA's 
BMDS schedule are not synchronized. Although MDA officials told us 
that they have recently synchronized the Integrated Master Schedule 
with the Integrated Master Test Plan, the two documents' schedule 
still does not correspond to the BMDS Master Plan. The Integrated 
Master Test Plan will be revised in February 2010, rendering all three 
documents again unsynchronized with MDA's acquisition strategy and 
programmatic decisions. 

While it has eliminated its externally reported integrated capability 
declaration goals, MDA continues to internally track capability 
declarations for at least two of its assets--the Sea-based X-band 
radar and the Shariki AN/TPY-2 radar--whose capability declarations 
slipped again in fiscal year 2009. The Sea-based X-band radar partial 
capability declaration appears to have slipped from fiscal year 2009 
to fiscal year 2010, while full capability will be declared with less 
knowledge than initially planned. According to MDA officials, the 
agency was planning for a partial capability declaration in June 2009, 
following successful execution of four test events--GTI-03, FTX-03, 
FTG-05, and GTD-03--and analysis. However, these events slipped over 
the course of the year, and according to MDA, the partial capability 
declaration was delayed to fiscal year 2010. According to the Director 
of MDA, the capability declaration is currently planned to occur after 
analysis can include both FTG-06 and a test--CD-03--planned for 
September 2010. It remains unclear what effect the problems 
encountered in FTG-06 will have on the declaration decision. 

The Shariki radar was designated by MDA to reach a full capability 
declaration by December 2008, but that was subsequently delayed to 
July 2009. The radar was to undergo the military mission capability 
assessment, in which the warfighter verifies the radar's readiness for 
full operational use by the services in the context of the present 
BMDS architecture. To date, the full capability declaration has not 
been made. Consequently, the date for the full mission capability has 
not been determined. Furthermore, as with the Sea-based X-band radar, 
the decision has not been made as to whether the Shariki radar 
capability declaration process will continue under the original plan 
or migrate to the new approach. 

BMDS Assets Still Being Delivered Despite Developmental Problems and 
Test Delays: 

Despite testing delays, developmental problems, and the continued 
inability to complete the Director's test-related knowledge points, 
MDA proceeded with manufacturing, production, and fielding of BMDS 
assets prior to operational testing and evaluation.[Footnote 34] 

The Aegis BMD program intends to execute a contract modification in 
the second quarter of 2010 to acquire 18 operationally configured SM-3 
Block IB missiles, used for testing and fielding. These 18 SM-3 Block 
IB missiles were originally justified in the fiscal year 2010 budget 
request as needed for flight testing and for delivery to the fleet as 
operational assets. According to MDA's September 2009 SM-3 Block IB 
utilization plan, 2 missiles are to be used for flight tests, 10 are 
to be used for fleet deployment, and 6 are to be used for either fleet 
proficiency training or fleet deployment. However, MDA is proceeding 
with the contract modification even though flight testing of a fully 
integrated prototype for this missile type in an operational 
environment will not have occurred. The first flight test--FTM-16--
that could demonstrate some performance of the missile is currently 
scheduled for the third quarter of fiscal year 2011. In addition, the 
program is still maturing several critical technologies, such as the 
throttleable divert and attitude control system, and developmental 
testing of these technologies will not be complete until after the 
manufacturing decision for these 18 missiles. The manufacturing 
decision is also scheduled to occur almost a year before the 
manufacturing readiness review--currently scheduled for the second 
quarter of fiscal year 2011. Consequently, approval for production of 
this missile is scheduled before the results of developmental testing 
to demonstrate that the technologies and design are fully mature, 
before the first flight test demonstrates the system functions as 
intended, and before the readiness to begin manufacturing has been 
assessed--all of which increases the risk of costly design changes 
while production is underway. The Director of MDA and the Assistant 
Secretary of the Navy for Research, Development and Acquisition 
approved a developmental baseline in January 2010 that set production 
criteria and projected an initial production decision for 74 SM-3 
Block IB missiles in the third quarter of fiscal year 2011. 

GMD continues to manufacture and field the Capability Enhancement II 
exoatmospheric kill vehicle prior to having it verified through 
operationally realistic flight testing. In March 2009, we reported 
that MDA had planned to conduct an intercept test to assess Capability 
Enhancement II exoatmospheric kill vehicle in the first quarter of 
fiscal year 2008--months before emplacing any interceptors with this 
configuration.[Footnote 35] However, developmental problems with the 
new configuration's inertial measurement unit and problems with the 
target delayed the first flight test with the Capability Enhancement 
II configuration--FTG-06--until the fourth quarter of fiscal year 
2009. This test was again delayed because of modeling uncertainties 
with the target and failures experienced with the Sea-Based X-Band 
radar during testing. GMD officials stated that they do not plan to 
adjust deliveries of the Capability Enhancement II exoatmospheric kill 
vehicle because of the test delay. However, MDA officials told us that 
they will not add Capability Enhancement II to the operational 
baseline until after FTG-06 has been conducted. As previously noted, 
FTG-06 was conducted in January 2010 but was unsuccessful. According 
to the July 2009 revised Integrated Master Test Plan, the next planned 
intercept test with a similar configuration as FTG-06--a three-stage 
booster and a Capability Enhancement II exoatmospheric kill vehicle--
is not scheduled to take place until at least fourth quarter fiscal 
year 2012. If MDA delivers Capability Enhancement II exoatmospheric 
kill vehicle units as currently scheduled, it will have delivered all 
of the Capability Enhancement II exoatmospheric kill vehicles that are 
currently under contract before the test is conducted. 

MDA's concurrent approach to developing and fielding assets has led to 
concerns about the performance of some fielded assets. In March 2009, 
we reported that MDA had initiated a refurbishment program in 2007 to 
replace questionable parts and that some improvements had already been 
introduced into the manufacturing flow.[Footnote 36] However, 
according to program officials, they discovered additional problems 
during early refurbishments causing the program to expand its effort. 
Additionally, as MDA continues to manufacture ground based 
interceptors, it is discovering additional process and design issues, 
and the corrective actions are being incorporated into the 
refurbishment program. The program has three categories for 
refurbishments--minimal, moderate, and extensive--with the cost of 
each vehicle going through refurbishment varying from vehicle to 
vehicle. MDA originally estimated that the cost for extensive 
refurbishment of an individual interceptor could reach as high as $24 
million. 

MDA Lacks Controls and Mechanisms Needed to Establish Transparency, 
Accountability, and Oversight: 

MDA continues to face challenges with transparency, accountability, 
and oversight controls and mechanisms. In establishing MDA in 2002, 
the Secretary of Defense directed the agency to develop the BMDS as a 
single program using a capabilities-based, spiral upgrade approach to 
quickly deliver a set of integrated defensive capabilities. To 
accomplish this mission, MDA was granted exceptional flexibility in 
setting requirements and managing the acquisition. This flexibility 
allowed MDA to begin delivering an initial defensive capability in 
2004, but at the expense of transparency and accountability. 

Since our first MDA report in 2004, we have repeatedly found that 
MDA's approach for building its cost, schedule, and performance goals 
hindered transparency and limited accountability of the BMDS 
development effort. Specifically in April 2004, we reported that MDA's 
goals did not provide a reliable and complete baseline for 
accountability purposes and decision making because these goals varied 
year to year, did not include all associated costs, and were based on 
assumptions about performance that were not explicitly stated. These 
conclusions still hold true for several aspects of the BMDS 
acquisition strategy. For example, MDA's goals change continuously, 
cost baselines have yet to be established, and some details regarding 
performance goals are still not explicitly stated. Since 2004, we have 
also made recommendations to develop baselines and report variances to 
those baselines to promote a higher level of transparency and 
accountability for the agency; to adjust its block strategy to ensure 
that it was knowledge-based and aligned with agency goals; and to 
strengthen oversight by, for example, having the Missile Defense 
Executive Board (MDEB) consider the extent to which MDA could adapt 
and adopt aspects of DOD's standard acquisition policies to enhance 
oversight. 

Members of Congress have also expressed concerns regarding the block 
strategy, acquisition management strategy, accountability, and 
oversight of MDA. For example, in 2007, the House Appropriations 
Committee directed MDA to "develop a system-wide plan to report 
according to the spirit of existing acquisition laws to improve 
accountability and transparency of its program."[Footnote 37] More 
recently, in the National Defense Authorization Act for Fiscal Year 
2008, Congress required MDA to establish acquisition cost, schedule, 
and performance baselines for each system element that has entered the 
equivalent of the systems development and demonstration phase of 
acquisition or is being produced or acquired for operational fielding. 
[Footnote 38] MDA is not yet fully compliant with this requirement. 
However, officials indicated that they are working toward fulfilling 
this requirement, but the expected date for full compliance was 
unknown at the time of our audit. 

While MDA has committed to take actions to address concerns about 
accountability and transparency, it has made limited progress in 
implementation, as shown in table 6. 

Table 6: MDA Commitments to Improve Transparency, Accountability, and 
Oversight: 

MDA commitment: Implement a capabilities-based block structure [A]; 
Status: Partially fulfilled. 

MDA commitment: Establish schedule, budget, and performance baselines 
for certain blocks [B] where a firm commitment could be made to 
Congress; 
Status: Not fulfilled. 

MDA commitment: Report these baselines in its annual publication of 
goals; 
Status: Not fulfilled. 

MDA commitment: Identify significant variances from expected outcomes. 
Schedule delays, budget increases, and performance shortfalls will be 
explained as variances; 
Status: Partially fulfilled. 

MDA commitment: Obtain independent cost estimates before establishing 
unit costs or cost baselines for blocks; 
Status: Not fulfilled. 

MDA commitment: Present MDA's plans, progress, and problems in 
bimonthly quarterly execution reviews beginning in 2008 [C]; 
Status: Not fulfilled. 

MDA commitment: Establish cost baselines at block level [A]; 
Status: Not fulfilled. 

MDA commitment: Establish unit cost estimates for BMDS assets being 
acquired and delivered to the warfighter; 
Status: Partially fulfilled. 

Source: GAO analysis and presentation of MDA data. 

[A] According to MDA, on December 7, 2007, in response to 
recommendations from GAO, MDA's Director instituted a new capabilities-
based block approach to better communicate its plans and goals to 
Congress. However, in June 2009, while MDA was still transitioning to 
the capabilities-based block approach, it was terminated by the 
Director. 

[B] MDA provided some budget, schedule, and performance baselines for 
some blocks in its January 2008 Statement of Goals. However, in 2009, 
it eliminated the block structure and its ability to maintain these 
baselines and measure progress against them. In its 2009 goals, the 
agency only provided portions of the previous schedule baselines and 
did not include any schedule metrics for its performance baseline as 
it had in its 2008 goals. Additionally, the agency did not report any 
budget baselines or data in its 2009 goals. 

[C] Quarterly execution reviews were terminated in June 2008, with 
only one meeting held after MDA's commitment. 

[End of table] 

Block Structure: 

MDA's termination of its capabilities-based block approach in June 
2009 marked the third acquisition management strategy for the BMDS in 
the last 3 years and effectively reduced transparency and 
accountability for the agency. As previously noted, MDA has organized 
the development of the BMDS using two different block approaches in 
the past--(1) sequential 2-year blocks of BMDS-wide integrated 
capabilities and (2) five capabilities-based blocks of different MDA 
elements against particular threats. Changing the block structure is 
problematic because each time the block structure is changed, the 
connection is obscured between the old block structure's scope and 
resources and the new block structure's rearranged scope and 
resources. This makes it difficult for decision makers to hold MDA 
accountable for expected outcomes and clouds transparency of the 
agency's efforts. 

In March 2008, we reported that the agency's capabilities-based block 
approach had begun to provide improvements to transparency and 
accountability, but as we recommended, transparency and accountability 
could have been further improved with MDA's development and reporting 
of full acquisition cost estimates as well as independent verification 
of those costs.[Footnote 39] 

Cost: 

For the seventh year, we are unable to assess MDA's actual costs 
against a baseline for total acquisition costs because the agency did 
not fulfill its commitment to baseline such costs. In its response to 
recommendations we made in March 2008, the agency committed to develop 
cost estimates, to obtain independent verification of those estimates, 
and to develop total acquisition cost baselines based on those 
estimates by blocks when a firm commitment could be made to Congress. 
Cost estimates were to be independently reviewed by DOD's Cost 
Analysis Improvement Group.[Footnote 40] However, the Cost Analysis 
Improvement Group did not complete its review of any cost estimates 
because MDA was unable to provide all of the information and data it 
needed. MDA officials stated that they plan to develop capability 
increments at the program level, from which MDA will establish cost 
estimates at some point in the future. MDA officials also stated that 
they do not yet know when those estimates would be established or 
reported, although the Director of MDA informed us that his agency has 
recently reached agreement with DOD's Cost Analysis Improvement Group 
to independently estimate THAAD's cost and that other independent cost 
estimates of other BMDS elements will follow. Therefore, the timeframe 
for developing and reporting total acquisition cost baselines was also 
undetermined at the time of our audit. 

For the first time, MDA--in its August 2009 BMDS Accountability 
Report--provided unit costs for key Aegis BMD, THAAD, Sensors, and GMD 
assets. Normally, unit costs are reported in two ways: (1) program 
acquisition unit cost, which is the total cost for the development and 
procurement of the acquisition program divided by the total quantity, 
or (2) average procurement unit cost, which is the total procurement 
funds divided by the fielded quantity. MDA reported the latter for its 
BMDS assets noting that the elimination of the capabilities-based 
block structure made calculation of program acquisition unit cost more 
difficult and time consuming. Reporting the average procurement unit 
cost, while providing valuable insight into unit costs, excludes MDA's 
historical and ongoing large investment in development of the assets. 
Considering this, MDA's current approach to reporting unit costs 
provides a limited and incomplete view of those costs. According to 
the August 2009 BMDS Accountability Report, MDA plans to present both 
average procurement unit cost and program acquisition unit cost in the 
2010 BMDS Accountability Report. However, according to MDA officials, 
they are in the process of baselining the different elements and they 
may not complete their estimates in time for this year's BMDS 
Accountability Report. 

Reporting Variances: 

MDA met its commitment to identify and report significant performance 
variances in 2009. The agency describes a performance variance as any 
predicted or confirmed shortfall in BMDS performance metrics. In 
August 2009, MDA reported that there were no variances in its 
performance metrics. However, MDA did not fulfill commitments to 
identify and report significant budget variances against established 
budget baselines. When MDA reported its annual goals in August 2009, 
budget variances were not reported. In addition, MDA did not include 
any budget information in its 2009 annual goals. In its prior annual 
submission of goals, budget data were reported for each block, 
element, and capability associated with the BMDS. 

DOD Internal Oversight: 

The extent of MDA's efforts to improve DOD internal oversight was also 
less than planned in 2009. When it was established in 2002, MDA was 
given unprecedented flexibility to defer application of DOD 
acquisition policies and therefore given autonomy from the standard 
internal DOD management framework. According to MDA's February 2008 
report to Congress, the agency planned to enhance senior-level DOD 
oversight through both the MDEB which was established in 2007 and 
through quarterly reviews with the Under Secretary of Defense for 
Acquisition, Technology, and Logistics. MDA noted that these senior-
level reviews were to substitute for the traditional accountability 
and oversight mechanisms conducted within DOD's standard requirements, 
acquisition, and budget processes. However, after reviewing one MDA 
element early in fiscal year 2009, MDEB reviews of individual MDA 
programs were put on hold during the remainder of the fiscal year. An 
MDEB official told us that the board will resume program reviews once 
MDA makes a determination of each BMDS element's acquisition status 
and determines their next major acquisition decision points. 

The MDEB was also established to provide oversight of significant 
issues facing the BMDS. However, the MDEB appeared to be less involved 
with certain decisions for the BMDS in 2009. For example, according to 
an MDEB official, the MDEB was heavily involved in the agency's plan 
to implement a new block approach in 2007. However, the MDEB was not 
consulted prior to the Director of MDA's decision to terminate the 
capabilities-based block approach. According to MDA, the MDEB was 
notified of the termination during a briefing on MDA's proposed fiscal 
year 2011 budget--2 months after the decision was made. The MDEB 
accepted the MDA budget proposals without reference to blocks. In 
addition, MDA did not brief the MDEB on the decision itself either, 
but rather notification was made via the restructuring of the budget 
proposal around programs rather than blocks. 

Beginning in 2008, MDA also committed to present its plans, progress, 
and problems to the Under Secretary of Defense for Acquisition, 
Technology and Logistics in a quarterly execution review every other 
month, alternating with the MDEB meetings. According to MDA's February 
2008 Plan to Enhance the Accountability and Transparency of the 
Ballistic Missile Defense Program, quarterly execution reviews were 
expected to focus on actual results against schedule, budget, and 
performance goals and baselines as well as on earned value cost 
variances. However, these reviews were terminated in June 2008, with 
only one meeting held after the February report to congressional 
defense committees. According to MDA officials, the MDA Director and 
officials in the Office of the Under Secretary of Defense for 
Acquisition, Technology and Logistics decided that MDEB meetings were 
sufficient to fulfill the intent of quarterly execution reviews. The 
Director of MDA informed us that as the MDA Acquisition Executive, he 
is executing performance evaluation reviews and the agency is also 
reviewed by the Office of the Under Secretary of Defense for 
Acquisition, Technology and Logistics. According to the Director of 
MDA, the first performance evaluation review will be of the Aegis BMD 
system in the second quarter fiscal year 2010. 

New MDA Initiatives Provide Opportunity to Increase Transparency and 
Accountability: 

Although key controls and mechanisms needed to establish a sound 
acquisition process for MDA are still lacking, MDA has initiatives 
underway that could improve the transparency, accountability, and 
oversight of the acquisition of the BMDS. In June 2009, the MDA 
Director testified before the Senate Armed Services Committee that MDA 
is responding to the Weapon System Acquisition Reform Act of 
2009[Footnote 41] through the establishment of acquisition milestone 
decisions.[Footnote 42] These decisions are designed to ensure 
appropriate competitive acquisition strategies. He further noted that 
as the Acquisition Executive for the initial phases of missile 
defense, he is implementing milestone review and baseline reporting 
processes that are closely aligned with the principles of DOD's 
acquisition policies, commonly referred to as the DOD 5000 series. He 
further noted that he recognized the need to incorporate the tenets of 
the DOD 5000 series to ensure that programs are affordable, are 
justified by the warfighter, and demonstrate acceptable risk through a 
milestone review process overseen by the MDEB. He also stated that MDA 
intends to separate the management of its technology and development 
programs. The Director testified that under his authority, potential 
programs that may provide technological or material solutions for MDA 
will undergo a Milestone "A" decision to determine if they should 
become programs.[Footnote 43] These technology-based programs will be 
managed by knowledge points and incubated until maturity, at which 
time MDA along with the service acquisition executive will be able to 
make a Milestone "B" decision as to whether the program should be 
converted to a development program. He explained that the Under 
Secretary of Defense for Acquisition, Technology and Logistics will 
make Milestone "C" production decisions regarding the programs. 

We were only able to obtain limited insight into these initiatives 
because the agency only determined how they will be implemented at the 
end of our audit and was just beginning to implement them. In regards 
to the milestone decisions, the Director of MDA indicated that the 
agency is undertaking a baseline phase review process. The agency is 
transitioning to managing the six developmental baselines at the 
project element level. These baselines will be approved in 
developmental baseline reviews and managed through quarterly 
performance element reviews. MDA has identified three phases of 
development where baselines are approved--technology development, 
product development, and initial production phases--which may ensure 
that the appropriate level of knowledge is obtained before 
acquisitions move from one phase to the next. Approval of the product 
development and initial production baselines will be jointly reviewed 
by the Director of MDA and the respective service acquisition 
executive. In addition, while our draft was being reviewed by MDA, the 
Director of MDA provided us with initial information regarding the 
definition of these new phases and the process for establishing cost, 
schedule, or performance baselines. Based on our initial briefing on 
MDA's new process, it may include many of the necessary elements of a 
sound business case--such as establishing top-level cost, schedule, 
and performance measures that are available internally and externally 
for oversight. 

Although we were unable to fully evaluate MDA's new initiatives, these 
initiatives do offer an opportunity for the agency to increase 
transparency and accountability if they are implemented in accordance 
with knowledge-based acquisition principles, leading to the 
establishment of sound business cases and realistic baselines. 

Over the past 10 years, we have conducted extensive research on 
successful programs and have found that successful defense programs 
ensure that their acquisitions begin with realistic plans and 
baselines prior to the start of development. We have previously 
reported that the key cause of poor weapon system outcomes, at the 
program level, is the consistent lack of disciplined analysis that 
would provide an understanding of what it would take to field a weapon 
system before system development begins. We have reported that there 
is a clear set of prerequisites that must be met by each program's 
acquisition strategy to realize successful outcomes.[Footnote 44] 
These prerequisites include the following: 

* Establishing a clear, knowledge-based, executable business case for 
the product. An executable business case is one that provides 
demonstrated evidence that (1) the identified needs are real and 
necessary and can best be met with the chosen concept and (2) the 
chosen concept can be developed and produced within existing 
resources--including technologies, funding, time, and management 
capacity. Knowledge-based acquisition principles and business cases 
combined are necessary to establish realistic cost, schedule and 
performance baselines. Without documented realistic baselines there is 
no foundation to accurately measure program progress. 

* Separating technology development activities from product 
development activities. As noted earlier, the Director of MDA plans to 
separate technology development and product development for the BMDS. 
The process of developing technology culminates in discovery--the 
gathering of knowledge--and must, by its nature, allow room for 
unexpected results and delays. When immature technologies are brought 
onto the critical path of product development programs too early, they 
often cause long delays in an environment where large workforces must 
be employed; complex tools, plants, and facilities must be operated; 
long and expensive supplier networks must be paid; and the product 
itself must sometimes be redesigned once the final form of the 
technologies is known. Ensuring that only mature technologies are 
brought into product development is a key step for successful programs. 

* Employing early systems engineering discipline in order to develop 
realistic cost and schedule estimates prior to development start. 
Early systems engineering provides the knowledge a product developer 
needs to identify and resolve performance and resource gaps before 
product development begins, either by reducing requirements, deferring 
them to the future, or increasing the estimated cost for the weapon 
system's development. Requirements that are too risky given the state 
of technology and design should not be allowed into this expensive 
environment. MDA's Director noted that he has taken steps to enhance 
systems engineering by designating a senior executive position to 
establish engineering policy, ensure the disciplined practice of 
systems engineering fundamentals, and develop the systems engineering 
competencies of the missile defense workforce; creating knowledge 
centers; and increasing the number of recent engineering school 
graduates. While these initiatives hold promise for the future, they 
could provide further enhancements if they are used as the foundation 
to develop realistic cost and schedule estimates for the BMDS. 

These practices could address MDA's past problems of initiating 
programs and beginning system development based on limited systems 
engineering knowledge. These programs depended on critical 
technologies that were immature and not ready for product development 
or production. The Director of MDA acknowledged the importance of 
changing MDA's acquisition approach to adopt knowledge-based 
acquisition processes. 

Conclusions: 

In order to respond to a presidential directive to deliver a missile 
defense capability in a rapid manner, MDA has been given unprecedented 
funding and decision-making flexibility. This flexibility has allowed 
concurrent development, testing, manufacturing and fielding and 
enabled MDA to quickly develop and field the first increment of 
capability in 2005. However, while this approach has expedited the 
fielding of assets, it also resulted in less transparency and 
accountability than is normally present in a major weapon program. 
Since the program's inception, MDA's lack of baselines and its 
management of the BMDS with high levels of uncertainty about 
requirements and program cost estimates effectively set the missile 
defense program on a path to an undefined destination at an unknown 
cost. Across the agency, these practices left programs with limited 
knowledge and few opportunities for crucial management oversight and 
decision making concerning the agency's investment and the 
warfighter's continuing needs. At the program level, these practices 
contributed to quality problems affecting targets acquisitions, which 
in turn, hampered MDA's ability to conduct tests as planned. 

As MDA transitions to new leadership, a new acquisition strategy, a 
new test strategy, and a shift in emphasis toward early intercept 
capabilities, the agency has an opportunity to chart a course that 
enables transparency and accountability as well as flexibility, and it 
appears committed to doing so. Importantly, the Director of MDA has 
begun new initiatives in accordance with guiding principles of DOD's 
acquisition policies, which already embrace knowledge-based practices 
and sound management controls. The Director of MDA intends to apply 
these new policies to each element or appropriate portions of the 
elements, as is currently done across DOD, in order to provide a 
foundation for the Congress and others to assess progress and hold 
senior leadership accountable for outcomes. 

These initial steps are promising, but it will take time to fully 
implement them and once implemented they will need to be sustained and 
the tools consistently used in order to establish accountability. If 
this is done effectively, with baselines set at a program level, MDA 
can respond to strategic changes affecting the overall configuration 
of the system without losing basic knowledge about cost, schedule, and 
performance. Such actions do not have to result in a slower or more 
burdensome acquisition process. In the past, weapon programs often 
rushed into systems development before they were ready, in part 
because DOD's acquisition process did not require early formal 
milestone reviews and programs would rarely be terminated once 
underway. Over time, in fact, these changes could help programs 
replace risk with knowledge, thereby increasing the chances of 
developing weapon systems within cost and schedule targets while 
meeting user needs. 

Recommendations for Executive Action: 

As MDA implements its initiatives to improve transparency, 
accountability, and oversight, and begins efforts to manage and 
oversee MDA at the element level, we recommend that the Secretary of 
Defense direct MDA to take the following eight actions: 

* Establish cost, schedule, and performance baselines for the 
acquisition of each new class of target when it is approved by the 
Director prior to proceeding with acquisition and report those 
baselines to Congress. 

* Obtain independent Cost Assessment and Program Evaluation cost 
estimates in support of these cost baselines. 

* Ensure that program acquisition unit costs for BMDS assets are 
reported in the BMDS Accountability Report, to provide Congress with 
more complete and comprehensive information by including development 
costs. 

* Update DOD's Plan to Enhance the Accountability and Transparency of 
the Ballistic Missile Defense Program to reflect MDA's current 
initiatives and include dates for fulfilling each commitment. 

* Report top-level test goals for each element, or appropriate 
portions thereof, to Congress in the next BMDS Accountability Report. 

* Develop and report to Congress in the annual BMDS Accountability 
Report a measure for schedule baseline goals that incorporates 
delivering integrated capabilities to the warfighter. 

* Develop and report to Congress in the annual BMDS Accountability 
Report the dates at which performance baselines will be achieved. 

* Report to Congress variances against all established baselines. 

Several of these actions, such as establishing cost, schedule, and 
performance baselines, have been recommended in prior GAO reports or 
addressed in legislation. This report, however, restates these 
recommendations in the context of changes made to the missile defense 
program, for example, the deletion of the block structure and 
increased focus on elements. 

We further recommend that the Secretary of Defense direct MDA to take 
the following two actions: 

* Delay the manufacturing decision for SM-3 Block IB missiles intended 
for delivery to the fleet as operational assets until after (1) the 
critical technologies have completed developmental testing, (2) a 
successful first flight test demonstrates that the system functions as 
intended, and (3) the successful conclusion of the manufacturing 
readiness review. 

* Ensure that developmental hardware and software changes are not made 
to the operational baseline that disrupt the assessments needed to 
understand the capabilities and limitations of new BMDS developments. 

Agency Comments and Our Evaluation: 

DOD provided written comments on a draft of this report. These 
comments are reprinted in appendix I. DOD also provided technical 
comments, which were incorporated as appropriate. 

DOD fully concurred with 9 of our 10 recommendations, including our 
recommendation to establish cost, schedule, and performance baselines 
for the acquisition of each new class of target when it is approved by 
the MDA Director prior to proceeding with acquisition and report those 
baselines to Congress. In response to our recommendation, DOD 
commented that MDA has already established and the Director has 
approved cost, schedule, and performance baselines for the acquisition 
of each new class of target. The department noted that these baselines 
are contained in multiple documents and will be brought together in a 
Target Program Baseline prior to contract award. However, MDA should 
ensure that the Target Program Baseline establishes top-level cost, 
schedule, and performance baseline measures similar to approved 
program baselines that are established for DOD's major defense 
acquisitions and available for internal and external oversight. It is 
unclear whether MDA will make its Target Program Baseline available 
internally for oversight and report it to Congress as we recommended. 

DOD partially concurred with our recommendation that the Secretary of 
Defense direct MDA to delay the manufacturing decision for SM-3 Block 
IB missiles intended for delivery to the fleet as operational assets 
until after (1) the critical technologies have completed developmental 
testing, (2) a successful first flight test demonstrates that the 
system functions as intended, and (3) the successful conclusion of the 
manufacturing readiness review. In response to this recommendation, 
DOD stated that manufacturing of SM-3 Block IB missiles to support 
testing is under way, but the production decision for SM-3 Block IB 
missiles used for fleet operation is planned to occur after criteria 
listed in our recommendation have been met. However, during our 
review, we found that the 18 SM-3 Block IB missiles in question were 
originally justified in the fiscal year 2010 budget request as needed 
for "flight testing and for delivery to the fleet as operational 
assets." In addition, Aegis BMD Program Office responses related to 
this matter indicate that these missiles will be used operationally if 
a security situation requires it. Furthermore, according to MDA's 
September 2009 SM-3 Block IB utilization plan briefed and approved by 
the MDA Acquisition Strategy Board, only 2 of these missiles are 
specifically designated for flight tests, while 10 are to be used for 
fleet deployment and 6 are to be used for either fleet proficiency 
training or fleet deployment. Based on this information, the contract 
modification to acquire these 18 SM-3 Block IB missiles will take 
place before the critical technologies are fully matured at the 
conclusion of FTM-16--the first SM-3 Block IB end-to-end flight test 
of a fully integrated, production-representative prototype. Thus, we 
maintain that approval for manufacturing of these 18 SM-3 Block IB 
missiles--the majority of which will be deployed to the fleet--is 
scheduled to occur before the results of developmental testing to 
demonstrate that the technologies and design are fully mature, before 
the first flight test demonstrates the system functions as intended, 
and before the readiness to begin manufacturing has been assessed--all 
of which increase the risk of costly design changes and retrofit. 

We are sending copies of this report to the Secretary of Defense and 
to the Director of MDA. The report also is available at no charge on 
the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-4841 or chaplainc@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made major 
contributions to this report are listed in appendix III. 

Signed by: 

Cristina Chaplain: 
Director Acquisition and Sourcing Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable John McCain: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Daniel K. Inouye: 
Chairman: 
The Honorable Thad Cochran: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Ike Skelton: 
Chairman: 
The Honorable Howard P. McKeon: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable John P. Murtha: 
Chairman: 
The Honorable C.W. Bill Young: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Comments from the Department of Defense: 

Office Of The Under Secretary Of Defense: 
Acquisition, Technology	And Logistics: 
3000 Defense Pentagon: 
Washington, DC 20301-3000: 

February 16, 2010: 

Ms. Christina Chaplain: 
Director, Acquisition and Sourcing Management: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Ms. Chaplain: 

This is the Department of Defense (DOD) response to the GAO draft 
report, GA0-10-311, 'Defense Acquisitions: Missile Defense Transition 
Provides Opportunity to Strengthen Acquisition Approach," dated 
December 22, 2009 (GAO Code 120826). 

The DOD concurs with nine of the draft report's recommendations and 
partially concurs with one. The rationale for our position is included 
in the enclosure. I submitted separately a list of technical comments 
for your consideration. I would appreciate an opportunity to discuss 
disposition of those comments. 

We appreciate the opportunity to comment on the draft report. My point 
of contact for this effort is Mr. David Crim, (703) 697-5385, 
david.crim@osd.mil. 

Sincerely, 

Signed by: 

David G. Ahern: 
Director: 
Portfolio Systems Acquisition: 

Enclosure: As stated: 

[End of letter] 

GAO Draft Report — Dated December 22, 2009: 
GAO Code 120826/GA0-10-311: 
"Defense Acquisitions: Missile Defense Transition Provides Opportunity 
To Strengthen Acquisition Approach" 

Department Of Defense Comments To The GAO Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct the Missile Defense Agency (MDA) to establish cost, schedule, 
and performance baselines for the acquisition of each new class of 
target when it is approved by the Director prior to proceeding with 
acquisition and report those baselines to Congress. 

DOD Response: Concur. MDA has already established and the Director has 
approved cost, schedule, and performance baselines for the acquisition 
of each new class of target. These baselines are contained in multiple 
documents and will be brought together in a Target Program Baseline 
(TPB) prior to contract award. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct the MDA to obtain independent Cost Assessment and Program 
Evaluation cost estimates in support of these cost baselines. 

DOD Response: Concur. Independent cost estimates will be developed to 
support the Under Secretary of Defense (Acquisition, Technology and 
Logistics) (USD (AT&L)) initial production decisions. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct the MDA ensure that program acquisition unit costs for BMDS 
assets are in the Ballistic Missile Defense System (BMDS) 
Accountability Report, to provide Congress with more complete and 
comprehensive information by including development costs. 

DOD Response: Concur. MDA will report Program Acquisition Unit Cost 
(PAUC) for appropriate Element and Components in the BMDS 
Accountability Report. 

Recommendation 4: The GAO recommends that the Secretary of Defense 
direct the MDA to update DoD's Plan to Enhance the Accountability and 
Transparency of the Ballistic Missile Defense Program to reflect MDA's 
current initiatives and include dates for fulfilling each commitment. 

DOD Response: Concur. MDA will update the Plan to Enhance the 
Accountability and Transparency of the Ballistic Missile Defense 
Program dated February 4, 2008 (Report to Congress) during FY 2010. 

Recommendation 5: The GAO recommends that the Secretary of Defense 
direct the MDA to report top-level test goals for each element, or 
appropriate portions thereof, to Congress in the next BMDS 
Accountability Report. 

DOD Response: Concur. MDA will describe test events planned for the 
fiscal year and the associated description of each event from the 
Integrated Master Test Plan in the BMDS Accountability Report. 

Recommendation 6: The GAO recommends that the Secretary of Defense 
direct the MDA to develop and report to Congress in the annual BMDS 
Accountability Report a measure for schedule baseline goals that 
incorporates delivering integrated capabilities to the Warfighter. 

DOD Response: Concur. MDA will develop and report to Congress in the 
annual BMDS Accountability Report a measure for schedule baseline 
goals that incorporates delivering integrated capabilities to the 
Warfighter. MDA has established integrated capability increment goals 
for the Ballistic Missile Defense System. MDA will base the delivery 
of integrated capability increments on ground tests, flight tests, 
performance assessments, and validated Warfighter needs. The Agency's 
plan and schedule for tests and performance assessments are in its 
Integrated Master Test Plan and Integrated Master Schedule. 

Recommendation 7: The GAO recommends that the Secretary of Defense 
direct the MDA to develop and report to Congress in the annual BMDS 
Accountability Report the dates at which performance baselines will be 
achieved. 

DOD Response: Concur. MDA will report the dates at which the 
performance stated in the annual BMDS Accountability Report are 
scheduled to be achieved, beginning with the Fiscal Year 2010 BMDS 
Accountability Report. 

Recommendation 8: The GAO recommends that the Secretary of Defense 
direct the MDA to report to Congress variances against all established 
baselines. 

DOD Response: Concur. Variances will be reported, as appropriate, 
against all established baselines, in the BMDS Accountability Report. 

Recommendation 9: The GAO recommends that the Secretary of Defense 
direct the MDA delay manufacturing decision for SM-3 block IB missiles 
intended for delivery to the fleet as operational assets until after 
(1) the critical technologies have completed developmental testing, 
(2) a successful first flight test demonstrates that the system 
functions as intended, and (3) the successful conclusion of the 
manufacturing readiness review. 

DOD Response: Partially concur. The production decision for SM-3 Block 
IB missiles used for Fleet operation is planned to occur after the 
GAO's criteria listed in the recommendation has been met. Note 
however, that manufacturing of SM-3 Block IB missiles to support 
testing is underway. 

Recommendation 10: The GAO recommends that the Secretary of Defense 
direct the MDA ensure that the developmental hardware and software 
changes are not made to the operational baseline that disrupt the 
assessments needed to understand the capabilities and limitations of 
new BMDS developments. 

DOD Response: Concur. MDA is implementing a more rigorous fielding 
strategy that involves maintaining a BMDS configuration for an 
extended period of time to allow for the appropriate level of testing, 
performance assessment and training before fielding new capability. At 
the same time, DOD remains committed to responding to Warfighter 
requirements for contingency fielding when it is deemed necessary. A 
lower level of confidence may be associated with such fielding, but 
the more rigorous testing, training and assessment activity will 
continue in parallel. 

[End of section] 

Appendix II: Scope and Methodology: 

To examine the progress that eight Missile Defense Agency (MDA) 
elements have made during fiscal year 2009 toward schedule, testing, 
and performance baselines, we developed data collection instruments 
that were completed by each element's program office. These 
instruments collected detailed information on prime contracts, design 
reviews, test schedules and results, element performance, noteworthy 
progress, lessons learned, and challenges facing the elements during 
the fiscal year. In addition, we reviewed individual element Program 
Execution Reviews, test plans and reports, production plans, staffer 
day briefings, and other requirements documents. We held interviews 
with officials in each element's program office and followed up on the 
information we received with MDA's Agency Operations Office; the 
Department of Defense's (DOD) Office of the Director, Operational Test 
and Evaluation; and MDA's Ballistic Missile Defense System (BMDS) 
Operational Test Agency. 

To further review individual element and BMDS-level performance 
progress during the fiscal year, we met with officials in MDA's 
Modeling and Simulation Directorate at the Missile Defense Integration 
and Operations Center, individual element program offices, and MDA's 
BMDS Operational Test Agency to discuss modeling and simulations plans 
and procedures as well as other performance metrics. We also reviewed 
DOD and MDA policies, memos, and flight test plans related to modeling 
and simulations. In addition, we reviewed various elements' 
verification, validation, and accreditation plans, MDA performance 
briefings, and validation, verification, and accreditation plans for 
MDA's BMDS Performance Assessment 2009. 

We assessed MDA's testing and target development progress by reviewing 
MDA's Integrated Master Test Plans, Integrated Master Schedule, target 
acquisition plan, and target business case analysis. In addition, we 
met with officials in the Targets and Countermeasures Program Office 
to obtain information on MDA's acquisition management strategy 
including plans for cost, schedule, and testing. We also met with 
MDA's testing directorate, MDA's BMDS Operational Test Agency, and 
DOD's Office of the Director of Test and Evaluation to discuss the 
progress, challenges, and lessons learned during fiscal year 2009 
testing. 

To analyze MDA's changing acquisition approach and the agency's 
progress in addressing issues related to transparency, accountability, 
and oversight, we interviewed officials from the Office of the Under 
Secretary of Defense for Acquisition, Technology and Logistics; MDA's 
Agency Operations Directorate; MDA's Advanced Technology Directorate; 
and MDA's Office of Quality, Safety, and Mission Assurance 
Directorate. We also reviewed various MDA statements and documents 
related to MDA's block structure. We reviewed DOD acquisition system 
policy and various DOD directives to gain insight into other DOD 
systems' accountability and oversight mechanisms. We also analyzed 
MDA's acquisition directives and Missile Defense Executive Board 
briefings to examine MDA's current level of oversight. In addition, we 
reviewed MDA budget estimate submission justifications, Integrated 
Master Test Plans, the Ballistic Missile Defense Master Plan, the BMDS 
Accountability Report, and prior reports that outlined the agency's 
baselines and goals. 

Our work was performed both at MDA headquarters in Arlington, Virginia 
and at various program offices located in Huntsville, Alabama. In 
Arlington we met with officials from the Aegis Ballistic Missile 
Defense Program Office; Airborne Laser Program Office; Command, 
Control, Battle Management, and Communications (C2BMC) Program Office; 
MDA's Agency Operations Office; DOD's Office of the Director, 
Operational Test and Evaluation; and the Office of the Under Secretary 
of Defense for Acquisition, Technology and Logistics. In Huntsville, 
Alabama we interviewed officials from the Ground-based Midcourse 
Defense (GMD) Program Office, the Sensors Program Office, the Terminal 
High Altitude Area Defense Project Office, the Targets and 
Countermeasures Program Office, the Advanced Technology Directorate, 
and the Office of the Director for BMDS Tests. We met with officials 
from the Missile Defense Integration and Operations Center at 
Schriever Air Force Base in Colorado Springs, Colorado, to discuss the 
C2BMC and Space Tracking and Surveillance System elements as well as 
to receive further information on MDA's models and simulations. 
Additionally, we interviewed Raytheon officials in Tucson, Arizona, to 
discuss the Kinetic Energy Interceptor, GMD, and Aegis BMD elements' 
status. 

In December 2007, the conference report accompanying the National 
Defense Authorization Act for Fiscal Year 2008 noted the importance of 
DOD and MDA providing information to GAO in a timely and responsive 
manner to facilitate the review of ballistic missile defense programs. 
During the course this audit, we experienced significant delays in 
obtaining information from MDA. During the audit, MDA did not always 
provide GAO staff with expeditious access to requested documents and 
articles of information, which delayed some audit analysis and 
contributed to extra staff hours. Of the documents and information we 
requested, we received approximately 24 percent within the 10 to15 
business day protocols that were agreed upon with MDA.[Footnote 45] 
Pre-existing documentation took MDA on average about 28 business days 
to provide and many pre-existing documents took 40 business days or 
more to be provided to GAO. Notwithstanding these delays, we were able 
to obtain the information needed to satisfy our objectives in 
accordance with generally accepted government auditing standards. 

We conducted this performance audit from April 2009 to February 2010 
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 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Cristina Chaplain (202) 512-4841 or chaplainc@gao.gov: 

Acknowledgments: 

In addition to the contact named above, David Best, Assistant 
Director; LaTonya Miller; Ivy Hübler; Tom Mahalek; Steven Stern; 
Meredith Allen Kimmett; Wiktor Niewiadomski; Kenneth E. Patton; Karen 
Richey; Robert Swierczek; and Alyssa Weir made key contributions to 
this report. 

[End of section] 

Footnotes: 

[1] National Defense Authorization Act for Fiscal Year 2002, Pub. L. 
No. 107-107, § 232(g) (2001); Ronald W. Reagan National Defense 
Authorization Act for Fiscal Year 2005, Pub. L. No. 108-375, § 233 
(2004); National Defense Authorization Act for Fiscal Year 2006, Pub. 
L. No. 109-163, § 232 (2006); John Warner National Defense 
Authorization Act for Fiscal Year 2007, Pub. L. No. 109-364, § 224 
(2006); and National Defense Authorization Act for Fiscal Year 2008, 
Pub. L. No. 110-181, § 225 (2008). 

[2] We did not assess MDA's progress in fiscal year 2002 as the agency 
did not establish goals for that fiscal year. We delivered the 
following reports for fiscal years 2003 through 2007: GAO, Missile 
Defense: Actions Are Needed to Enhance Testing and Accountability, 
[hyperlink, http://www.gao.gov/products/GAO-04-409] (Washington, D.C.: 
Apr. 23, 2004); Defense Acquisitions: Status of Ballistic Missile 
Defense Program in 2004, [hyperlink, 
http://www.gao.gov/products/GAO-05-243] (Washington, D.C.: Mar. 31, 
2005); Defense Acquisitions: Missile Defense Agency Fields Initial 
Capability but Falls Short of Original Goals, [hyperlink, 
http://www.gao.gov/products/GAO-06-327] (Washington, D.C.: Mar. 15, 
2006); Defense Acquisitions: Missile Defense Acquisition Strategy 
Generates Results but Delivers Less at a Higher Cost, [hyperlink, 
http://www.gao.gov/products/GAO-07-387] (Washington, D.C.: Mar. 15, 
2007); Defense Acquisitions: Progress Made in Fielding Missile 
Defense, but Program Is Short of Meeting Goals, [hyperlink, 
http://www.gao.gov/products/GAO-08-448] (Washington, D.C.: Mar. 14, 
2008); and Defense Acquisitions: Production and Fielding of Missile 
Defense Components Continue with Less Testing and Validation Than 
Planned,[hyperlink, http://www.gao.gov/products/GAO-09-338] 
(Washington, D.C.: Mar. 13, 2009). 

[3] In [hyperlink, http://www.gao.gov/products/GAO-09-338], we 
reported on two more elements, the Kinetic Energy Interceptor and the 
Multiple Kill Vehicle, which were canceled by the agency during fiscal 
year 2009. This report does not contain an assessment of these two 
elements. The BMDS also includes a ninth element and tenth element, 
the Patriot Advanced Capability-3 and the European Component. The 
Patriot Advanced Capability-3 has been transferred to the Army for 
production, operation, and sustainment. The European Component is 
being developed to defend the homeland, allies, and deployed forces in 
Europe. This report does not evaluate the Patriot Advanced Capability-
3 because its initial development is complete and is now being managed 
by the Army. 

[4] The total research, development, test and evaluation amount used 
in the computation does not include the Multiple Kill Vehicle or 
Kinetic Energy Interceptor elements' budgeted funds. These elements 
requested funding in fiscal year 2009, but were also canceled during 
the fiscal year and are not elements we are reviewing in this report. 

[5] The term early intercept refers to an engagement early in the 
battlespace that could optimize the ability to execute a shoot-look- 
shoot tactic, may force less effective deployment of countermeasures, 
could minimize the potential impact of debris, and could potentially 
reduce the number of interceptors required to defeat a raid of threat 
missiles. 

[6] The five blocks were as follows: Block 1.0: Defend U.S. from 
Limited North Korean Long-Range Threats; Block 2.0: Defend Allies and 
Deployed Forces from Short-to Medium-Range Threats in One Region/ 
Theater; Block 3.0: Expand Defense of the U.S. to Include Limited 
Iranian Long-Range Threats; Block 4.0: Defend Allies and Deployed 
Forces in Europe from Limited Iranian Long-Range Threats; and Block 
5.0: Expand Defense of Allies and Deployed Forces from Short-to 
Intermediate-Range Threats in Two Regions/Theaters. 

[7] [hyperlink, http://www.gao.gov/products/GAO-09-338]. 

[8] The BMDS Operational Test Agency conducts independent operational 
assessments of BMDS capability to defend the United States, its 
deployed forces, friends, and allies against ballistic missiles of all 
ranges and in all phases of flight. MDA funds all BMDS Operational 
Test Agency activities. 

[9] GAO, Defense Acquisitions: Sound Business Case Needed to Implement 
Missile Defense Agency's Targets Program, [hyperlink, 
http://www.gao.gov/products/GAO-08-1113] (Washington, D.C.: Sept. 26, 
2008). 

[10] [hyperlink, http://www.gao.gov/products/GAO-09-338]. 

[11] The new Medium Range Target was successfully launched in October 
2009. 

[12] The Aegis Readiness Assessment Vehicle-C target was successfully 
flown in November 2009. 

[13] Situational awareness is defined as the degree to which the 
perception of the current environment mirrors reality. 

[14] [hyperlink, http://www.gao.gov/products/GAO-09-338]. 

[15] Ground tests play a vital role in the development of technologies 
for missile defense by providing officials detailed information about 
hardware and software system functionality. 

[16] A key step in the process of anchoring models is post-flight 
reconstruction, when data from a past flight test scenario are run in 
a simulated environment to check and adjust the accuracy of the models. 

[17] An end-to-end simulation represents a complete BMDS engagement-- 
from enemy missile launch to attempted intercept by BMDS kill vehicle. 

[18] The BMDS Operational Test Agency provides an independent 
accreditation of MDA models and simulations. 

[19] [hyperlink, http://www.gao.gov/products/GAO-09-338]. 

[20] In May 2007, the Director of MDA established test knowledge 
points to provide critical information for making key decisions 
regarding the BMDS. According to MDA, these knowledge points were 
unique management approaches chosen to manage MDA's critical program 
risks and to demonstrate the performance of the BMDS. 

[21] MDA assesses risk into five categories of likelihood--(1) remote, 
(2) unlikely, (3) possible, (4) likely and (5) highly likely; and five 
categories of consequence--(1) minimal, (2) moderate, (3) significant, 
(4) extensive, and (5) severe. 

[22] [hyperlink, http://www.gao.gov/products/GAO-09-338]. 

[23] We previously reported in GAO-07-387 that to provide 
accountability, major defense acquisition programs are required by 
statute to document program goals in an approved baseline description 
(10 U.S.C. § 2435) that, as implemented by DOD, has been approved by a 
higher-level DOD official prior to the program's initiation. The 
acquisition program baseline, derived from the users' best estimates 
of cost, schedule, and performance requirements, provides decision 
makers with the program's total cost for an increment of work, average 
unit costs for assets to be delivered, the date that an initial 
operational capability will be fielded, and the weapon's intended 
performance parameters. The baseline is considered the program's 
initial business case--evidence that the concept of the program can be 
developed and produced within existing resources. Once approved, major 
acquisition programs are required to measure their program against the 
baseline or to obtain approval from a higher-level acquisition 
executive before making significant changes. When MDA was established 
in 2002, it was given the flexibility to delay entry of BMDS into the 
DOD acquisition cycle. Because the baseline requirement is typically 
triggered by a program's entry into the engineering and manufacturing 
development (formerly the system development and demonstration) phase 
of the DOD acquisition cycle during which the weapon system is 
designed and then demonstrated in tests, and the BMDS has not formally 
entered into the DOD acquisition cycle, this requirement does not yet 
apply. 

[24] Though MDA is not yet required to establish an acquisition 
program baseline because of the acquisition flexibilities it has been 
granted, Congress has enacted legislation requiring MDA to establish 
some baselines. The Fiscal Year 2005 National Defense Authorization 
Act, Pub. L. No. 108-375, § 234(e), required the Director, MDA, to 
establish and report annually to Congress a cost, schedule, and 
performance baseline for each block configuration being fielded. MDA 
has since terminated its block approach. In addition, the National 
Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110-181, § 
223(g) required that no later than the submittal of the budget for 
fiscal year 2009, MDA shall "establish acquisition cost, schedule and 
performance baselines" for BMDS elements that have entered the 
equivalent of system development and demonstration or are being 
produced and acquired for operational fielding. 

[25] [hyperlink, http://www.gao.gov/products/GAO-08-1113]. 

[26] [hyperlink, http://www.gao.gov/products/GAO-09-338]. 

[27] GAO, Defense Acquisitions: Charting a Course for Improved Missile 
Defense Testing, [hyperlink, http://www.gao.gov/products/GAO-09-403T] 
(Washington, D.C.: Feb. 25, 2009). 

[28] MDA's six baselines are technical, schedule, resource, contract, 
test, and operational. These baselines give the MDA Director 
management information for the BMDS that he uses to make decisions 
that affect multiple weapon system programs over multiple fiscal years. 

[29] The BMDS Operational Test Agency provides an independent 
accreditation of MDA models and simulations. 

[30] The BMDS Operational Test Agency defines artificialities as BMDS 
architecture, targets, procedures, and conditions that exist in flight 
tests but would not exist in the real world. Flight test 
artificialities are introduced for a number of reasons, such as 
increased chances of success, range safety, data collection, and asset 
availability. According to BMDS Operational Test Agency officials, the 
complexity associated with the strategic mission of the GMD system 
makes challenges associated with artificialities greater. 

[31] Weather conditions include rain, clouds, and snow. Severe sea 
states, ice loads, or winds could render tests unsafe to execute. 

[32] [hyperlink, http://www.gao.gov/products/GAO-09-338]. 

[33] MDA used the incremental declaration process to designate BMDS 
capability for its blocks. Three capability designations--early, 
partial, and full capability declarations--were applied to all BMDS 
elements, their hardware and software components, and engagement 
sequence groups. Each capability designation in the delivery schedule 
represented upgraded capacity to support the overall function of BMDS 
in its mission as well as the level of MDA confidence in the system's 
performance. 

[34] We also recently reported in GAO, Missile Defense: DOD Needs to 
More Fully Assess Requirements and Establish Operational Units before 
Fielding New Capabilities, GAO-09-856 (Washington, D.C.: Sept. 16, 
2009), that DOD fielded missile defense equipment to units before 
those units were fully organized, manned, and trained to execute all 
of their ballistic missile defense responsibilities. 

[35] [hyperlink, http://www.gao.gov/products/GAO-09-338]. 

[36] [hyperlink, http://www.gao.gov/products/GAO-09-338]. 

[37] H.R. Rep. No. 110-279, at 382 (2007). 

[38] Pub. L. No. 110-181 § 223(g). 

[39] [hyperlink, http://www.gao.gov/products/GAO-08-448]. 

[40] The Weapon Systems Acquisition Reform Act of 2009, Pub. L. No. 
111-23, transferred the functions of the Cost Analysis Improvement 
Group to the Office of the Director of Cost Assessment and Program 
Evaluation. 

[41] The Weapon Systems Acquisition Reform Act of 2009, Pub. L. No. 
111-23, included provisions aimed at improving the organization and 
procedures of the Department of Defense for the acquisition of major 
weapon systems and addressed areas such as cost assessment and program 
evaluation, developmental test and evaluation and systems engineering, 
and performance assessments and root cause analyses for major defense 
acquisition programs. 

[42] The milestone decision authority, is the designated individual 
with overall responsibility for a program. The milestone decision 
authority has the authority to approve entry of an acquisition program 
into the next phase of the acquisition process and is accountable for 
cost, schedule, and performance reporting to higher authority, 
including congressional reporting. The milestone decision authority 
for MDA is the Director of MDA. 

[43] The defense acquisition management framework defines the stages 
through which typical programs proceed. As each stage concludes, a 
decision must be made by the milestone decision authority to initiate, 
continue, advance, adjust, or terminate a project or program work 
effort or phase. The review associated with each of these decision 
points typically addresses program progress and risk, affordability, 
program trade-offs, acquisition strategy updates, and the development 
of exit criteria for the next phase or effort. Milestone decision 
points are Milestone A, for entry into the technology development 
phase; Milestone B, for entry into the engineering and manufacturing 
development stage (formerly known as system development and 
demonstration phase); and Milestone C, for entry into the production 
and deployment phase. 

[44] GAO, Defense Acquisitions: Measuring the Value of DOD's Weapon 
Programs Requires Starting with Realistic Baselines, [hyperlink, 
http://www.gao.gov/products/GAO-09-543T] (Washington, D.C.: Apr. 1, 
2009). 

[45] These data are current as of December 18, 2009. 

[End of section] 

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