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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

March 2011: 

Missile Defense: 

Actions Needed to Improve Transparency and Accountability: 

GAO-11-372: 

GAO Highlights: 

Highlights of GAO-11-372, a report to congressional committees. 

Why GAO Did This Study: 

Since 2002, Congress has directed GAO to assess the Missile Defense 
Agency’s (MDA) annual fiscal year cost, schedule, testing, and 
performance progress in developing the Ballistic Missile Defense 
System (BMDS). This year's report specifically assesses MDA’s progress 
in (1) delivering missile defense assets as scheduled (2) improving 
accountability and transparency over the past year (3) implementing 
the European Phased Adaptive Approach (4) implementing changes to the 
Ground-based Midcourse Defense program (5) implementing the targets 
revised acquisition strategy identified in 2009, and (6) testing the 
BMDS and developing its modeling and simulations to assess 
performance. To accomplish this, GAO reviewed MDA’s progress reports 
to the Congress, pertinent Department of Defense (DOD) policies and 
reports including a DOD assessment and plan related to the Ground-
based Midcourse Defense system. 

What GAO Found: 

In 2010, MDA made progress in delivering assets as well as increasing 
transparency and accountability. While many significant, positive 
steps were taken, GAO also found issues limiting the extent to which 
cost, schedule, and system performance can be tracked. Stabilizing the 
new acquisition approach, improving execution and increasing 
transparency are key steps for DOD. 

Asset Delivery: 
In 2010, MDA was able to meet or exceed its delivery goals for several 
MDA activities, such as missile defense upgrades to Aegis ships. 
However, the agency was unable to meet all of its goals for Terminal 
High Altitude Area Defense, a system used to defend against targets in 
their last phases of flight. 

Transparency and Accountability: 
MDA finalized a new process in which detailed baselines were set for 
several missile defense systems. As a result of the new process, its 
2010 progress report to the Congress is more comprehensive than it was 
in 2009. Although the information in MDA’s progress reports to the 
Congress increased, GAO found its unit and life-cycle cost baselines 
had unexplained inconsistencies and documentation for six baselines 
had insufficient evidence to be a high-quality cost estimate. As a 
result, GAO could not evaluate cost progress. 

European Phased Adaptive Approach for Missile Defense: The September 
2009 shift in focus for European missile defense represents a 
significant change in U.S. policy and a substantial investment for 
DOD. However, DOD has not fully implemented a management process that 
synchronizes European missile defense acquisition activities and 
ensures transparency and accountability. Without key management and 
oversight processes, there is a limited basis for oversight, and there 
is a risk that key components will start production before 
demonstrating system performance. In the past, similar deficiencies in 
missile defense acquisition oversight have led to rework, cost 
increases, delays, and doubts about delivered capabilities. 

Ground-based Midcourse Defense (GMD):
While the GMD system—-which is primarily designed to engage longer-
range targets in the midcourse range of flight—has demonstrated a 
limited capability, DOD has not yet determined the system’s full 
capabilities and limitations. In January and December 2010, GMD 
experienced two flight test failures. In addition, GMD is just 
beginning to take actions necessary to sustain the capability through 
2032. 

Targets Acquisition, Testing, and Performance: 
MDA made a targets acquisition decision in 2010 in response to a 
target failure. This decision was not consistent with its 2009 
acquisition plan which envisioned competitive contract awards that 
would reduce reliance on its prime contractor. The cost of this action 
remains unknown. Also, as in previous years, failures and delays in 
testing have continued to delay validation of models and simulations 
used to assess BMDS performance. 

What GAO Recommends: 

GAO makes 10 recommendations for MDA to strengthen its resource, 
schedule and test baselines, facilitate baseline reviews, and further 
improve transparency and accountability. GAO is also making a 
recommendation to improve MDA’s ability to carry out its test plan. In 
response, DOD fully concurred with 7 recommendations. It partially 
concurred with 3, contending that its current actions are sufficient 
and that the test recommendation is also not affordable. GAO continues 
to believe that additional action is needed. 

View [hyperlink, http://www.gao.gov/products/GAO-11-372] or key 
components. For more information, contact Cristina Chaplain at (202) 
512-4841. 

[End of section] 

Contents: 

Letter: 

Background: 

MDA Met Most of Its Fiscal Year 2010 Asset Delivery Goals: 

MDA Undertook Steps to Improve Transparency and Accountability: 

Acquisitions Supporting European PAA Face Synchronization, 
Transparency, and Accountability Challenges: 

New GMD Strategy Curtails Planned Operational Quantities, and It May 
Take Years to Understand Capabilities, Limitations, and Sustainability: 

Decisions on Acquisition of Targets in Fiscal Year 2010: 

Overall Performance of the BMDS Still Cannot Be Assessed Due to Models 
and Simulations Challenges and Shortfalls in Testing: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Comments from the Department of Defense: 

Appendix II: Assessment of MDA Resource Baselines: 

Appendix III: Aegis Ballistic Missile Defense (Aegis BMD) with 
Standard Missile-3 Interceptor: 

Appendix IV: Aegis Ashore with Standard Missile-3 Block IB (European 
PAA Phase II): 

Appendix V: Airborne Infrared (ABIR): 

Appendix VI: Airborne Laser Test Bed (ALTB): 

Appendix VII: BMDS Sensors: 

Appendix VIII: Command and Control, Battle Management and 
Communications (C2BMC): 

Appendix IX: Ground-based Midcourse Defense (GMD): 

Appendix X: Precision Tracking Space System (PTSS): 

Appendix XI: Space Tracking and Surveillance System (STSS): 

Appendix XII: Targets and Countermeasures: 

Appendix XIII: Terminal High Altitude Area Defense (THAAD): 

Appendix XIV: Scope and Methodology: 

Appendix XV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Description of MDA's BMDS Elements and Supporting Efforts: 

Table 2: September 2009 Presidential Policy for European Phased 
Adaptive Approach: 

Table 3: BMDS Fiscal Year 2010 Asset Deliveries: 

Table 4: Some System Development Risks Exacerbated by European PAA 
Schedule Compression: 

Table 5: Status of Activities Needed to Inform GMD Sustainment Efforts: 

Table 6: Operation and Sustainment Costs as a Percentage of Total 
Costs Reported in the 2010 BAR: 

Table 7: Unreported APUC Variances from MDA's 2009 BAR: 

Table 8: Current Delivery Plans for AN/TPY-2: 

Table 9: The Number of Ground-Based Interceptors Needed through 2032 
Lacks Analysis: 

Table 10: Key MDA Target Acquisition Decisions in Fiscal Year 2011: 

Table 11: THAAD's Knowledge Point Objectives by Test Before and After 
the FTT-11 Failure in December 2009: 

Figures: 

Figure 1: GAO Analysis of MDA Cost Estimates against the Four 
Characteristics of High-Quality and Reliable Cost Estimates: 

Figure 2: GAO Analysis of MDA Cost Estimates against the Four 
Characteristics of High-Quality and Reliable Cost Estimates: 

Figure 3: February 2010 and February 2011 Plans for Aegis Ashore 
Flight Test Events: 

Abbreviations: 

ABIR: Airborne Infrared: 

Aegis BMD: Aegis Ballistic Missile Defense: 

AIRS: Airborne Infrared Surveillance: 

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

ALTB: Airborne Laser Test Bed: 

APUC: Average Procurement Unit Cost: 

AT&L: Acquisition, Technology and Logistics: 

BAR: BMDS Accountability Report: 

BMDR: Ballistic Missile Defense Review: 

BMDS: Ballistic Missile Defense System: 

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

CAPE: Cost Assessment and Program Evaluation: 

CE-I: Capability Enhancement-I: 

CE-II: Capability Enhancement-II: 

DOD: Department of Defense: 

DOT&E: Director, Operational Test and Evaluation: 

EKV: Exoatmospheric Kill Vehicle: 

EVM: Earned Value Management: 

FTF: Flexible Target Family: 

GBI: Ground-based Interceptor: 

GMD: Ground-based Midcourse Defense: 

ICBM: Intercontinental Ballistic Missile: 

IMTP: Integrated Master Test Plan: 

MBIT: Maintenance Built-In Test: 

MDA: Missile Defense Agency: 

MDEB: Missile Defense Executive Board: 

OTA: Operational Test Agency: 

PAA: Phase Adaptive Approach: 

PAUC: Program Acquisition Unit Cost: 

PTSS: Precision Tracking Space System: 

RAM: Reliability, Availability and Maintainability: 

SBIRS: Space-Based Infrared System: 

SBX: Sea-Based X-Band: 

SM-3: Standard Missile-3: 

STSS: Space Tracking and Surveillance System: 

TDACS: Throttleable Divert and Attitude Control System: 

THAAD: Terminal High Altitude Area Defense: 

TIVS: Thermally Initiated Venting System: 

UAS: Unmanned Aircraft System: 

UEWR: Upgraded Early Warning Radar: 

VLS: Vertical Launch System: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

March 24, 2011: 

Congressional Committees: 

The Missile Defense Agency's (MDA) mission is to develop an integrated 
and layered Ballistic Missile Defense System (BMDS) to defend the 
United States, its deployed forces, allies, and friends. In order to 
meet this mission, MDA is developing a highly complex system of 
systems--land, sea-, and space-based sensors, interceptors and battle 
management. Since its initiation in 2002, MDA has been given a 
significant amount of flexibility in executing the development and 
fielding of the BMDS. To enable MDA to field and enhance a missile 
defense system quickly, the Secretary of Defense in 2002 delayed the 
entry of the BMDS program into the Department of Defense's (DOD) 
traditional acquisition process until a mature capability was ready to 
be handed over to a military service for production and operation. To 
meet a presidential directive to deliver an initial capability by 
2004, the program has concurrently developed and fielded assets. While 
this approach helped MDA rapidly deploy an initial capability, it has 
also meant that MDA has fielded some assets whose capability is 
uncertain. Moreover, we have reported that MDA's approach has limited 
transparency and accountability for DOD's largest single acquisition 
program--spending from approximately $7 billion to $9.5 billion per 
year.[Footnote 1] More specifically, there has been limited 
understanding about baseline costs, schedules, requirements, and 
system effectiveness. 

Last year, we reported that MDA was in the process of transitioning to 
new leadership, a new acquisition strategy, a new test strategy, and a 
shift in emphasis toward early intercept capabilities. Given the 
breadth and scope of these changes, we concluded that the agency had 
an opportunity to chart a course that enables transparency and 
accountability while retaining its desired flexibility, and it 
appeared that MDA was committed to doing so. Importantly, the Director 
of MDA had begun new initiatives in accordance with guiding principles 
of DOD's acquisition policies, which already embrace knowledge-based 
practices and sound management controls.[Footnote 2] The Director of 
MDA intended 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 better foundation for Congress and others to 
assess progress and hold senior leadership accountable for outcomes. 
[Footnote 3] 

Since 2002, Congress has directed GAO to assess MDA's annual fiscal 
year cost, schedule, testing, and performance progress in developing 
the BMDS.[Footnote 4] We have delivered assessments of MDA's progress 
covering fiscal years 2003 through 2009 and are currently mandated to 
continue our assessments through fiscal year 2013.[Footnote 5] 
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 in the BMDS Accountability Report (BAR).[Footnote 6] 
This year's report specifically assesses MDA's progress in (1) 
delivering missile defense assets as scheduled (2) improving 
accountability and transparency over the past year (3) implementing 
the European Phased Adaptive Approach (PAA) (4) implementing changes 
to the Ground-based Midcourse Defense (GMD) program (5) implementing 
the targets revised acquisition strategy identified in 2009, and (6) 
testing the BMDS and developing its modeling and simulations to assess 
performance. 

To assess all six areas of MDA's progress, we examined the 
accomplishments of nine BMDS elements and supporting efforts that MDA 
is currently developing and fielding: the Aegis Ballistic Missile 
Defense (Aegis BMD); Aegis Ashore; BMDS Sensors; Command, Control, 
Battle Management, and Communications (C2BMC); GMD; Precision Tracking 
and Surveillance System (PTSS); Space Tracking and Surveillance System 
(STSS); Targets and Countermeasures; and Terminal High Altitude Area 
Defense (THAAD). We reviewed individual element responses to GAO data 
collection instruments, which detailed key accomplishments for fiscal 
year 2010. The results of these reviews are presented in detail in 
appendixes to this report and are also integrated as appropriate in 
our findings related to progress in delivering assets and implementing 
new initiatives. We also sought to examine MDA's Baseline Execution 
Reviews of each element's progress, but were unable to assess the 
supporting backup materials as they were not made available to us 
until February 2011--the very end of the audit. 

To assess whether MDA elements delivered assets as scheduled, we 
examined the 2009 BAR and compared it to the 2010 version, looking for 
similarities and differences between the two. We also reviewed 
responses to GAO data collection instruments, which detailed key 
accomplishments for fiscal year 2010, including some asset deliveries, 
as well as any delayed asset deliveries: 

To follow up on the progress MDA made to improve transparency and 
accountability, we reviewed pertinent DOD policies to compare MDA's 
current level of accountability with that of other DOD programs. We 
also assessed the cost, schedule, and test baselines included in the 
2010 BAR.[Footnote 7] In addition, we held discussions with officials 
in MDA's Operations Directorate to discuss the new phased adaptive 
approach. Lastly, we met with officials in MDA's Acquisition 
Directorate to discuss how the agency is establishing and managing 
against its internal baselines. 

For our assessment regarding the implementation of the management 
process to synchronize acquisitions for the European PAA, we 
synthesized management and oversight principles from the Office of 
Management and Budget, DOD, MDA, and GAO best acquisition practices 
for large acquisition efforts similar to European PAA.[Footnote 8] We 
then compared European PAA acquisition efforts to these principles. We 
also reviewed DOD and MDA documentation related to European PAA. We 
also requested the European PAA cost estimate that was completed in 
fall of 2009.[Footnote 9] However, we did not receive the cost 
estimate until February 2011--the very end of our audit--and therefore 
we could not assess it for this report. We met with MDA and Office of 
the Secretary of Defense officials. We visited the U.S. European 
Command and U.S. Strategic Command. We met with officials from MDA 
directorates and element program offices as well as the Offices of the 
Under Secretary of Defense for Policy and the Under Secretary of 
Defense for Acquisition, Technology and Logistics and visited 
contractor facilities. 

In addition, we are including the acquisition-related parts of our 
final analysis performed in response to a congressional mandate that 
we review a DOD assessment and plan related to the GMD system, that 
included issues related to acquisition, sustainment and 
refurbishment.[Footnote 10] For DOD's Assessment and Plan for the GMD 
program, we reviewed the reports provided by DOD; analyzed 
sustainment, refurbishment and test plans and program schedules; and 
assessed budget documents and program reviews. We interviewed 
officials from MDA, U.S. Strategic Command, U.S. Northern Command, and 
the Army. 

To assess BMDS testing and target development progress, we reviewed 
technical baselines in the BAR, MDA's Integrated Master Test Plans, 
the target business case analysis, target contracts, and other 
documents related to target planning and acquisitions. We also 
interviewed officials within program offices and within MDA functional 
directorates, such as the Directorates for Engineering and Testing. In 
addition, we discussed the elements' test programs and test results 
with the BMDS Operational Test Agency and DOD's Office of the 
Director, Operational Test and Evaluation. We held discussions with 
the BMDS Operational Test Agency to follow up on BMDS models and 
simulations. Our scope and methodology for each of the six objectives 
is discussed further in appendix XIV. 

As we agreed to with your staff, we do not include an analysis of 
MDA's earned value management (EVM) reporting this year. In prior 
years, in the absence of full cost baselines for elements, we assessed 
the EVM progress of individual contracts. We issued our findings on 
MDA's EVM progress during fiscal year 2009 in July 2010 and found data 
reliability issues with 2 of the 14 contracts.[Footnote 11] Because of 
these issues with the GMD and Targets and Countermeasures programs' 
EVM data, we were unable to report cost progress for these two 
contracts which amounted to half of the total budgeted contract costs 
for MDA prime contracts we reviewed. We plan to assess EVM data on MDA 
prime contracts in the future once MDA has had time to address our 
recommendations to improve data reliability. In our July report, MDA 
stated that it intended to take a key step in addressing our 
recommendations by conducting a major review of the GMD program's EVM 
data by the end of September 2010. Because MDA provided documentation 
of its actions at the end of our audit--in February 2011--leaving no 
time for review, we will assess whether the steps MDA has taken 
sufficiently address GMD's data reliability issues in next year's 
report. 

We conducted this performance audit from March 2010 to March 2011 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 space-based and airborne sensors as well as 
ground-and sea-based radars; ground-and sea-based interceptor 
missiles; and a command and control, battle management, and 
communications system to provide the warfighter with the necessary 
communication links to the sensors and interceptor missiles. 

A typical 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, 
decoys, 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 up to 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, these systems kill the 
ballistic missile using a range of mechanisms such as direct collision 
between the missile and the inbound ballistic missile or killing it 
with the combined effects of a blast fragmentation warhead (heat, 
pressure, and grains/shrapnel) in cases where a direct hit does not 
occur. 

* Table 1 provides a brief description of nine BMDS elements and 
supporting efforts currently under development by MDA. 

Table 1: Description of MDA's BMDS Elements and Supporting Efforts: 

BMDS element/supporting effort[A]: Aegis Ballistic Missile Defense 
(Aegis BMD); 
Description: Aegis BMD is a sea-based missile defense system being 
developed in incremental, capability-based blocks to defend against 
ballistic missiles of all ranges. Key components include the shipboard 
SPY-1 radar, Standard Missile-3 (SM-3) missiles, and command and 
control systems. It will also be used as a forward-deployed sensor for 
surveillance and tracking of ballistic missiles. The SM-3 missile has 
multiple versions in development or production: Blocks IA, IB, and IIA. 

BMDS element/supporting effort[A]: Aegis Ashore; 
Description: Aegis Ashore is a future land-based variant of the ship-
based Aegis BMD. It is expected to track and intercept ballistic 
missiles in their midcourse phase of flight using SM-3 interceptor 
variants as they come available. Key components include the Aegis SPY-
1 radar, command and control system, and vertical launching system; 
and removable enclosures for the systems to facilitate worldwide 
deployment. DOD plans to deploy the first Aegis Ashore with SM-3 Block 
IB in 2015 as part of the European Phased Adaptive Approach. 

BMDS element/supporting effort[A]: BMDS Sensors; 
Description: MDA is developing various sensors for fielding. These 
include forward-based sensors; mobile, sea-based, space-based and 
airborne sensors; as well as 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/supporting effort[A]: Command, Control, Battle 
Management, and Communications (C2BMC); 
Description: 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/supporting effort[A]: Ground-based Midcourse Defense 
(GMD); 
Description: GMD is a ground-based missile defense system designed to 
destroy intermediate and 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. 

BMDS element/supporting effort[A]: Precision Tracking and Space System 
(PTSS); 
Description: PTSS is being developed as an operational component of 
the BMDS designed to support early intercept of regional medium-and 
intermediate-range ballistic missile threats to the United States and 
its allies in Europe. PTSS will track large missile raid sizes early 
after launch, which could enable earlier intercepts. 

BMDS element/supporting effort[A]: Space Tracking and Surveillance 
System (STSS); 
Description: STSS is a space-based infrared sensor program with two 
demonstration satellites that launched on September 25, 2009. The 
purpose of the program is to provide risk reduction for the future 
PTSS. 

BMDS element/supporting effort[A]: Targets and Countermeasures; 
Description: MDA maintains a series of targets used in BMDS flight 
tests to present realistic threat scenarios. The targets are designed 
to encompass the full spectrum of threat missile ranges and 
capabilities. 

BMDS element/supporting effort[A]: Terminal High Altitude Area Defense 
(THAAD); 
Description: 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 friendly foreign population centers. 

Source: MDA data. 

[A] The Airborne Laser Test Bed (ALTB), formerly the Airborne Laser 
program, is being developed as an advanced platform for DOD's directed 
energy research program. As a test bed, the ALTB is currently not 
under development as a BMDS element. 

[End of table] 

Acquisition Strategy for Missile Defense: 

MDA has employed varied strategies to acquire and deploy missile 
defense systems. From its inception in 2002 through 2007, MDA 
developed missile defense capability in biennial increments, known as 
blocks. These 2-year blocks were each built on preceding blocks and 
enhanced the development and capability of the BMDS. However, there 
was little visibility into baseline costs and schedules associated 
with systems that comprised the blocks or how the blocks addressed 
particular threats. In response to recommendations from GAO, in 
December 2007, MDA announced a new block structure that was intended 
to improve the program's transparency, accountability, and oversight. 
The new blocks were not based on biennial time periods, but instead 
focused on fielding capabilities that address particular threats. 
Because the new block structure was not aligned to regular time 
periods, multiple blocks were under way concurrently. The capabilities-
based five-block approach included several positive changes, including 
the commitment by DOD to establish total acquisition costs and unit 
costs for selected block assets, including in a block only those 
elements or components of elements that would 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 congressional 
concerns. The agency then began to manage the BMDS as a single 
integrated program but planned to report on cost, schedule, and 
performance issues by each element within the program. At the time of 
our 2010 report, MDA was in the process of determining how it would 
implement changes to its acquisition management strategy. 

Shift in Approach to European Missile Defense: 

Another significant change that took place in 2009 was the new 
administration's shift in its approach to European missile defense. 
DOD altered its approach to European defense, which originally focused 
on ground-based interceptors (GBI) from the GMD element and a large 
fixed radar as well as transportable X-Band radars, in order to 
provide defenses against long-range threats to the United States and 
short-, medium-, and intermediate-range Iranian threats to Europe. The 
new European PAA 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 
essence, the new policy marks a fundamental change from an emphasis on 
a global integrated system to a policy that bundles capability and 
tailors it for different regions--the PAA--with the European PAA being 
the first of these regional approaches. According to DOD, it intends 
to use the department's existing processes for managing missile 
defense acquisitions and the existing BMDS element-based acquisition 
approach for missile defense system elements--not one specific to each 
PAA--to approve system acquisitions for each PAA. 

The European PAA policy announced by the President articulates a 
schedule for delivering four phases of capability to defend Europe and 
augment current protection of the U.S. homeland in the following 
timeframes: Phase 1 in 2011, Phase 2 in 2015, Phase 3 in 2018, and 
Phase 4 in 2020. DOD's phased schedule for the European PAA comprises 
multiple elements and interceptors to provide increasingly integrated 
ballistic missile defense capability. The policy is structured around 
the phased deployment of increasingly capable variants of the SM-3 
interceptor, together with sensors, command and control, and other 
capabilities. It is projected that each successive phase will deliver 
additional capability with respect to both threat missile range and 
raid size. 

Table 2 outlines the plans and estimated delivery timeframes 
associated with each European PAA phase. 

Table 2: September 2009 Presidential Policy for European Phased 
Adaptive Approach: 

European PAA phase: Phase I; 
Plans: Deploy current and proven missile defense systems available in 
the next 2 years, including the sea-based Aegis Weapon System, the SM-
3 interceptor (Block IA) and sensors such as the Army/Navy 
Transportable Radar Surveillance system to address regional ballistic 
missile threats to Europe and deployed U.S. personnel and their 
families; 
Estimated delivery time frame: 2011. 

European PAA phase: Phase II; 
Plans: After appropriate testing, deploy a more capable version of the 
SM-3 interceptor (Block IB) in both sea- and land-based configurations 
and more advanced sensors, to expand the defended area against short-
and medium-range missile threats; 
Estimated delivery time frame: 2015. 

European PAA phase: Phase III; 
Plans: After development and testing are complete, deploy the more 
advanced SM-3 Block IIA variant currently under development to counter 
short-, medium-, and intermediate-range threats; 
Estimated delivery time frame: 2018. 

European PAA phase: Phase IV; 
Plans: After development and testing are complete, deploy the SM-3 
Block IIB to help better cope with medium-and intermediate-range 
missiles and the potential future intercontinental range ballistic 
missile threat to the United States; 
Estimated delivery time frame: 2020. 

Source: President's September 17, 2009 policy announcement. 

[End of table] 

However, many aspects of the European PAA have not yet been 
determined. DOD has thus far committed to using two land-based Aegis 
Ashore facilities and at least one Army Navy/Transportable Radar 
Surveillance--Model 2 (AN/TPY-2) radar. Additionally, each European 
PAA phase could have as many as three Aegis BMD ship patrol areas, but 
DOD has not yet committed to a specific number of ships or SM-3 
interceptors for each phase. DOD also has not yet committed to the 
specific type or number of the other elements and interceptors that 
will be part of the European PAA phases. 

MDA Met Most of Its Fiscal Year 2010 Asset Delivery Goals: 

MDA increased inventories for Aegis, GMD, Sensors, and THAAD in fiscal 
year 2010. The Aegis, GMD, and Sensors elements all either met or 
exceeded their delivery goals, but THAAD was unable to meet all of its 
2010 delivery goals. Table 3 shows the asset deliveries that we were 
able to track and record based on the agency's 2009 BAR and other 
information we obtained directly from each program element. 

Table 3: BMDS Fiscal Year 2010 Asset Deliveries: 

BMDS element: Aegis; 
Fiscal year 2010 delivery goals: 2 Aegis BMD cruisers (ships); 
17 SM-3 missiles; 
Assets delivered in fiscal year 2010: 2 Aegis BMD cruisers (ships); 
26 SM-3 missiles. 

BMDS element: GMD; 
Fiscal year 2010 delivery goals: 3 ground-based interceptors; 
Assets delivered in fiscal year 2010: 6 ground-based interceptors[A]. 

BMDS element: BMDS Sensors; 
Fiscal year 2010 delivery goals: 1 AN/TPY-2 radar; 
Assets delivered in fiscal year 2010: 1 AN/TPY-2 radar. 

BMDS element: THAAD; 
Fiscal year 2010 delivery goals: 1 THAAD battery[B]; 
Assets delivered in fiscal year 2010: 1 partial THAAD battery[C]. 

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

[A] Although the GMD program delivered six GBIs in fiscal year 2010, 
two of the interceptors were delayed from fiscal year 2009 and another 
one was a test asset. 

[B] A THAAD battery includes interceptor missiles, launchers, an X- 
band radar, and a fire control and communications system. 

[C] THAAD delivered all of the first battery except for the 
interceptor missiles and launchers. 

[End of table] 

In fiscal year 2010, Aegis BMD planned to deliver two additional ships 
to the fleet with the Aegis Weapons System software as well as 17 SM-3 
missiles. The program reported that it met its goal of delivering two 
additional ships with the Aegis Weapon System software as planned, 
which completed the 20-ship fleet. In addition, the program delivered 
26 SM-3 Block IA missiles in fiscal year 2010--9 more than originally 
planned. Furthermore, MDA redelivered 2 missiles that resolved quality 
problems discovered in 2009.[Footnote 12] 

Meanwhile, GMD met its delivery goals, delivering three interceptors 
as planned. The program also delivered two additional interceptors in 
fiscal year 2010 that were originally scheduled to be delivered in 
fiscal year 2009. The program also delivered an interceptor that was 
used during a fiscal year 2010 flight test.[Footnote 13] Lastly, the 
BMDS Sensors program successfully delivered one AN/TPY-2 radar to 
THAAD as planned. 

The THAAD program partially met its goal to deliver its first battery 
in fiscal year 2010. While some assets of its first battery were 
delivered, which included an X-band radar, a fire control and 
communications system, and some ground support equipment, none of the 
battery's 24 interceptors or 3 launchers were delivered as planned. 
The interceptors are experiencing delays because of production issues 
stemming from design and qualification issues related to a safety 
system in the interceptor. The launchers are experiencing delays to 
completing the government acceptance process because of issues during 
production associated with manufacturing challenges, parts 
obsolescence, design changes, and manufacturing defects. Late 
qualification and design changes have also delayed the acceptance 
process further. THAAD plans to complete the interceptors by the end 
of the fourth quarter of fiscal year 2011. The government acceptance 
process for the launchers should be complete by the third quarter of 
fiscal year 2011. 

MDA Undertook Steps to Improve Transparency and Accountability: 

Throughout 2010, MDA continued to make significant changes to its key 
acquisition processes in order to increase transparency and 
accountability and reflect acquisition best practices. Specifically, 
MDA assessed each program to determine its acquisition phase 
(technology development, product development, or production), and for 
the first time, developed and reported detailed baselines for each 
element, including resource baselines outlining key costs for several 
BMDS components. While the steps taken are significant and positive, 
our analysis identified shortcomings in cost, schedule, and testing 
baselines that limit the extent to which cost and schedule growth as 
well as system performance can be tracked. 

New Review Process Results in More Detailed Baselines, but Gaps Remain: 

In our last report, we recommended that in addition to procurement 
unit costs, the unit costs for BMDS assets reported in the 2010 BAR be 
broadened to include development costs so that all costs were included 
in its unit costs.[Footnote 14] We also recommended that MDA develop 
and report to Congress a measure for schedule baseline goals that 
incorporates delivering integrated capabilities to the warfighter and 
the dates at which performance baselines will be achieved. In 
addition, we recommended that top-level test goals for each element, 
or appropriate portions thereof, be reported to Congress in the 2010 
BAR. A final recommendation called for MDA to report variances against 
all established baselines. DOD concurred with all of these 
recommendations. 

In 2010, MDA made progress in implementing these recommendations by 
finalizing a new baseline phase review process in which the agency set 
detailed baselines for several BMDS elements, or portions of elements, 
for the first time. Specifically, MDA established resource, schedule, 
test, operational capacity,[Footnote 15] technical,[Footnote 16] and 
contract[Footnote 17] baselines for several BMDS components. It 
reported these to Congress in its June 2010 BAR. MDA identified three 
phases of development where baselines are approved--technology 
development, product development, and initial production phases--and 
specified the key knowledge that is needed at each phase. MDA 
officials stated that they expect that aligning the development 
efforts with the phases will help to ensure that the appropriate level 
of knowledge is obtained before the acquisitions move from one phase 
to the next. In another key step, approval of the product development 
and initial production baselines will be jointly reviewed by the 
Director of MDA and the respective service acquisition executive, as a 
number of missile defense systems are expected to eventually 
transition to the military services for operation. In addition, in 
regard to these new phases, the agency established a process for 
approving baselines. As a result of MDA's new baseline phase review 
process, its 2010 BAR is more comprehensive than its 2009 BAR. 

This year, we specifically assessed the new resource, schedule, and 
test baselines set by MDA. While the material reported was more 
comprehensive and provided more transparency into resources, schedule, 
and testing than in previous years, we identified shortcomings that 
limit the ability to track cost and schedule growth and performance. 

Resource Baseline: 

The resource baseline is the expected investment needed that leads to 
the delivery of a BMDS product. MDA presented unit cost baselines for 
specific assets of each element as well as baselines for cost 
components of the element including development costs, production and 
deployment costs, and military construction costs. As a result, there 
can be multiple baselines for each element. This was the first time 
that MDA reported program acquisition unit costs (which include 
development costs in its calculation) and baselines for portions of, 
and in some cases all, life-cycle costs derived from life cycle cost 
estimates. 

* Unit cost is the cost divided by the quantity. It is usually 
reported in two ways: (1) average procurement unit cost--procurement 
cost divided by procurement quantity--and (2) program acquisition unit 
cost--acquisition cost (which includes both development and 
procurement) divided by total quantity.[Footnote 18] 

* MDA's baselines for life cycle costs are based on life cycle cost 
estimates. A life cycle cost estimate should encompass all past (or 
sunk), present, and future costs for every aspect of the program, 
regardless of funding source, and can be used to support budgetary 
decisions, key acquisition decision points, milestone reviews, and 
investment decisions. The elements of a program's life cycle cost 
include the costs of research, development, test, and evaluation; 
production and deployment; military construction; operation and 
sustainment; and disposal. MDA's life cycle cost baselines in many 
cases included sunk costs and costs from the future years defense plan 
through completion. In addition, MDA included a time-phased estimate 
of the costs including sunk costs, costs through the future years 
defense plan, and "to complete" costs. 

MDA provided 12 cost baselines for elements' efforts under our review, 
including Aegis Ashore; Aegis BMD SM-3 Block IB missiles and 
associated software upgrades for ship sets; future Aegis BMD ship 
software upgrades; two capability deliveries for AN/TPY-2; C2BMC 
Spiral 6.4; GMD; two capability deliveries for the Sea Based X-band 
(SBX) radar; the current THAAD capability configuration; and the 
Targets and Countermeasures program short-range, medium-range, 
intermediate-range, and intercontinental ballistic missile target 
efforts.[Footnote 19] 

While the amount of information presented has increased, we found that 
the unit cost baselines and the baselines for portions of, and 
sometimes all, life cycle costs in the BAR did not provide clear, 
consistent, and complete information, which affected its usefulness 
for oversight. 

* Parts of the 2010 resource baselines were unclear and inconsistent 
because MDA used particular terms that did not always appear to 
accurately describe the costs and baselines it was reporting. For 
example, MDA presented "life cycle costs" in several resource 
baselines but the use of this term is misleading because in some cases 
the reported totals appeared to only partially reflect all the main 
life cycle cost categories. Specifically, it is unclear if disposal 
costs and, in some cases, operation and sustainment costs were 
accounted for in all of the life cycle costs. No explanation is 
provided in the BAR to explain why some of the cost categories appear 
to be missing or to describe how the use of the term life cycle cost 
is appropriate for what was reported. 

* The resource baselines for three of the four Targets and 
Countermeasures resource baselines were incomplete because a large 
percentage of sunk costs were excluded. The BAR, however, does not 
disclose that the sunk costs were excluded nor does it explain why MDA 
decided to exclude them. 

* MDA officials told us that they mistakenly baselined operation and 
sustainment costs in the 2010 BAR and intend to remove those baselines 
in the 2011 BAR. Choosing not to baseline these costs, in some cases, 
excludes a large portion of costs from the total cost baseline MDA is 
reporting. Further, officials also told us that they do not plan to 
report variances in future BARs for any of the remaining development, 
production and deployment, or military construction costs that are 
baselined. Reporting variances is important because deviations from 
the baseline plan provide valuable insight into program risk and its 
causes to decision makers. It is unclear why the agency will not 
report variances against these baselines. 

* MDA was also unclear and incomplete in its reporting of operation 
and sustainment costs. In four of five cases, the operation and 
sustainment costs reported in the BAR are only those costs for which 
MDA is responsible and do not include the costs borne by the services. 
[Footnote 20] MDA's BAR does not explain that the operation and 
sustainment costs represented are only a portion of those costs that 
will be required for the program.[Footnote 21] 

* Although MDA presented average procurement unit costs for 10 BMDS 
assets in its 2009 BAR, it only reported on 6 of the 10 in its 2010 
BAR. MDA also did not identify variances for any of these unit costs 
or explain why these variances were not provided, although it could 
have reported variances in 3 of the 6 cases. 

* MDA was also unclear and inconsistent in how it reported target unit 
costs--by choosing not to report average procurement or program 
acquisition unit costs. Instead the program reported average unit 
costs and, separately, recurring costs without defining these costs or 
explaining their purpose the BAR. By reporting only the average unit 
costs for targets, MDA is not reporting the full unit costs to develop 
and procure targets that would normally be captured in program 
acquisition unit costs as it reported for other baselines. 

Details on these inconsistencies, exclusions, and issues with clarity 
are outlined in appendix II. 

Finally, we sought to determine whether the cost baselines reported in 
the BAR were supported by high-quality--that is, reliable--cost 
estimates. According to the GAO Cost Estimating and Assessment Guide, 
the cost estimate is part of a total systems analysis and is a 
critical element in any acquisition process to help decision makers 
evaluate resource requirements at milestones and other important 
decision points.[Footnote 22] Cost estimates establish and defend 
budgets and drive affordability analysis. The guide identifies the 12 
steps necessary for developing a high-quality cost estimate, which we 
used to assess MDA's life cycle cost estimates to determine whether 
they were (1) comprehensive, (2) well documented, (3) accurate, and 
(4) credible. According to MDA cost officials, they developed their 
cost estimates based on the methodology in our guide. Our methodology 
and the full details of our assessment are reported in appendix II. 

While MDA was able to provide life cycle cost estimates for all 12 of 
the BAR life cycle cost baselines reported, we found that 6 of the 
estimates did not match the costs that were reported in the BAR-- 
specifically those for Aegis Ashore, Aegis BMD SM-3 Block IB missile 
and associated software upgrades for ship sets, C2BMC Spiral 6.4, GMD, 
SBX capability deliveries, and current THAAD capability configuration 
estimates.[Footnote 23] We did not assess those estimates further 
because they did not support the BAR baselines. For the remaining 6, 
we found that the documentation that MDA provided contained 
insufficient evidence to meet the characteristics of a high-quality 
cost estimate. Specifically, the estimates were not comprehensive, 
lacked documentation, were not completely accurate, or were not 
sufficiently credible. See figure 1 for the results of our review of 
the 6 estimates. 

Figure 1: GAO Analysis of MDA Cost Estimates against the Four 
Characteristics of High-Quality and Reliable Cost Estimates: 

[Refer to PDF for image: illustrated table] 

Future Aegis BMD ship software upgrades[A]: 
Comprehensive: Partially Met; 
Well documented: Partially Met; 
Accurate: Partially Met; 
Credible: Minimally Met. 

AN/TPY-2[B]: 
Comprehensive: Partially Met; 
Well documented: Partially Met; 
Accurate: Partially Met; 
Credible: Minimally Met. 

Short range ballistic missile target[C]: 
Comprehensive: Partially Met; 
Well documented: Minimally Met; 
Accurate: Minimally Met; 
Credible: Minimally Met. 

Medium range ballistic missile target[C]: 
Comprehensive: Partially Met; 
Well documented: Minimally Met; 
Accurate: Minimally Met; 
Credible: Minimally Met. 

Intermediate range ballistic missile target[C]: 
Comprehensive: Partially Met; 
Well documented: Minimally Met; 
Accurate: Minimally Met; 
Credible: Minimally Met. 

Intercontinental range ballistic missile target[C]: 
Comprehensive: Minimally Met; 
Well documented: Minimally Met; 
Accurate: Minimally Met; 
Credible: Not Met. 

Source: MDA data; GAO analysis. 

Note: The ratings we used in this analysis are as follows: "met" means 
that the program provided documentation that satisfied the criterion; 
"substantially met" means that the program provided the majority of 
the documentation to satisfy the criterion; "partially met" means that 
the program provided documentation satisfying part of the criterion; 
"minimally met" means that the program provided documentation 
satisfying a minor part of the criterion; and "not met" means that the 
program did not provide documentation that satisfied the criterion. 

[A] Future Aegis BMD ship software upgrades refer to software version 
5.0. See appendix III for details on this software version. 

[B] The cost estimate was for a portion of the AN/TPY-2 element's 
costs related to two capability deliveries. 

[C] The Targets and Countermeasures program manages the short-range, 
medium-range, intermediate-range, and intercontinental ballistic 
missile efforts. 

[End of figure] 

The 6 estimates were not fully comprehensive because in some cases 
they did not provide enough detail to enable us to determine if all 
government and contractor costs had been included, or, in other cases, 
did not include the historical data necessary to back up given 
assumptions. The estimates were not well documented in some cases 
because the estimates lacked documentation necessary to recreate the 
estimate, or, in some instances, did not provide enough information on 
how cost factors were derived. None of the estimates met the standards 
for accuracy because, in some cases the estimates did not provide a 
confidence level making it impossible to determine if the estimate was 
unbiased and based on most likely costs, did not provide access to the 
detailed calculations used in the estimate, or discrepancies existed 
on costs among several of the documents provided. Finally, costs 
associated with the estimates lacked credibility because none of the 6 
estimates performed a cost sensitivity analysis, provided evidence 
that cost driver cross checks were performed, or completed independent 
cost estimates. 

As discussed above, one of the criteria for a credible cost estimate 
is having an independent cost assessment. Other DOD major defense 
acquisition programs are required to perform an independent cost 
estimate before advancing through major milestones.[Footnote 24] 
Because of the flexibilities granted in 2002, MDA is not required to 
obtain independent cost estimates for its programs, and has not 
otherwise required their programs to do so.[Footnote 25] The Office of 
the Director for Cost Assessment and Program Evaluation (CAPE) has 
performed independent cost estimates for the Aegis BMD program as well 
as portions of other MDA programs in the past including the STSS and 
GMD programs. More recently, the CAPE performed an independent cost 
estimate of THAAD procurement costs. MDA has committed to work with 
the CAPE to develop cost estimates for other MDA elements in the 
future. MDA's plans to work with the CAPE to develop cost estimates 
for more MDA elements will contribute to the credibility of its 
estimates. 

Although MDA established life cycle cost baselines as part of its 
resource baseline for the first time in fiscal year 2010, cost 
progress cannot be independently evaluated until MDA reports baselines 
that are supported by reliable, high-quality cost estimates and 
addresses the issues noted in appendix II. 

Schedule Baseline: 

The schedule baseline, as presented in the 2010 BAR, is a timeline for 
key product development milestones and tasks, such as key decision 
points and product deliveries. For the first time, MDA reported 
detailed schedule baselines, including information about the program 
phase decision points and capability deliveries, element knowledge 
points, models and simulations, and product and capability development 
efforts. In addition, some schedule baselines also include scheduled 
flight and ground test information, as well as fielding and field 
support events. For example, the GMD schedule baseline shows fielding 
and field support deliveries, such as hardware deliveries, which 
includes new and refurbished GBI deliveries; facilities, such as silo 
construction; and software upgrades. However, the amount and type of 
information presented varies from element to element. 

While the amount of information presented is a significant improvement 
over that in the 2009 BAR, we found that the asset delivery schedule 
reported in the 2010 BAR was not comparable to the asset delivery 
schedule in the 2009 BAR. The 2009 BAR included a comprehensive list 
of planned asset deliveries, as well as schedule delays and 
accelerations. However, the 2010 BAR did not include a comprehensive 
list of planned asset deliveries nor did it report variances against 
the delivery plans it set in 2009. As a result, we could not track and 
analyze the timing and number of asset deliveries using the BAR. 
Instead, we had to request detailed information from each program 
element. The lack of variance reporting on asset deliveries from 2009 
to 2010, coupled with the absence of planned asset deliveries limits 
the usefulness of the BAR for oversight. 

Test Baseline: 

MDA's 2010 BAR includes a schedule of major flight tests, ground 
tests, key modeling and simulation events and the primary goals 
associated with those tests and events. The test events found in the 
BAR are further detailed and explained in MDA's test baseline known as 
the Integrated Master Test Plan (IMTP). The IMTP is the management 
tool that MDA uses to establish and document test requirements for the 
BMDS test program. We reported last year that MDA extensively revised 
the IMTP to address concerns that the plan 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 26] While the new IMTP still represents a significant 
improvement in test planning and transparency for MDA, frequent 
revisions to the test baseline due to test failures and/or target 
availability, hinders external oversight of MDA's test baseline and 
the funding allocated for testing. 

More specifically, the revised IMTP extended the test baseline through 
2015 and better laid out MDA's test plan by establishing and 
documenting the test requirements for the BMDS with specific focus on 
collecting the data needed for verification, validation, and 
accreditation of the BMDS models and simulations. Also, under the new 
plan, each test was designed to test certain criteria, so that, 
according to MDA test officials, a failed test did not necessarily 
require alteration to the IMTP. 

Despite the agency's effort to revamp its test plans, MDA's test plan 
remains success-oriented. For example, MDA officials told us that they 
do not plan for test failures when developing the test schedule and 
that there is no flexibility to absorb test failures. Despite 
experiencing several failures in recent years and conducting several 
retests, the agency does not build in contingencies for retests in its 
test plans. Moreover, according to program officials, there are no 
risk reduction flights planned for newly developed targets and MDA 
does not budget for extra flight test interceptors. Accordingly, 
having a sufficient schedule and funding margin to account for actual 
recent experience remains key to a more successful and stable test 
program. 

Because the IMTP is success-oriented, any problems encountered with 
the plan necessitates a change in the plan and frequent changes to 
those plans make it difficult to maintain effective oversight of MDA's 
test program using the test baselines reported in the BAR. For example 
two intercept tests that were planned for the THAAD program in fiscal 
year 2010 did not take place because of a target failure in a previous 
flight test.[Footnote 27] Additionally, MDA had to alter GMD's planned 
flight test schedule for fiscal years 2010 and 2011 in order to 
conduct a retest of a prior test--FTG-06--that failed January 2010. 
According to the Director, Operational Test and Evaluation, this 
retest will likely delay the previous flight test program by at least 
6 months. Also, MDA canceled an additional future flight test in order 
to conduct the retest, thereby reducing the amount of intercept data 
that will be collected. 

These frequent changes make it more difficult to track testing 
progress and system performance. Moreover, it is unclear what happens 
to funding planned for tests within a certain fiscal year when the 
test is canceled or moved to a subsequent fiscal year. Each year, as 
part of its budget request, MDA justifies its flight test funding 
request based on a planned set of specific tests. However, because MDA 
is unable to execute its test plan as presented in the BAR and the 
budget and does not identify test cost variances in the BAR or the 
budget, the connection between the justification for funds and the 
actual execution is broken. For example, MDA requested funding for a 
GMD flight test--FTG-09. According to the fiscal year 2010 budget 
request, this test was scheduled to be conducted in fiscal year 2011 
as a salvo test.[Footnote 28] However, because of the noted failure in 
FTG-06, this test was canceled. Consequently, reviewing budget 
documents and the BAR does not enable us to determine how much was 
spent on the FTG-09 test prior to its deletion. Until MDA establishes 
or reports a test baseline that is both relatively stable and 
synchronized with other key BMDS management documents, such as the 
budget, as well as identifies test cost variances, decision-makers 
will continue to make decisions based on unstable data that are not 
effective for oversight or useful for timely decisions. 

Lastly, as in prior years, target availability also continued to 
affect MDA's test plans in fiscal year 2010. Since 2006, we have 
reported that target availability has delayed and prompted 
modifications to planned test objectives. This trend continued in 
2010. For example, because of target availability, five tests 
scheduled for fiscal year 2010 were canceled because of a moratorium 
on air launches of targets. Additionally, target shortfalls have 
contributed to delays in flight tests, reduced the number of flight 
tests, and altered test objectives. According to MDA officials, 
targets were the main driver of the revisions of the test schedule in 
the latest IMTP. For additional information regarding target issues 
and their effect on BMDS testing, see appendix XII. 

Congress established new requirements for Missile Defense baselines, 
in December 2010, in the National Defense Authorization Act for Fiscal 
Year 2011.[Footnote 29] Several of the shortcomings in the 2010 BAR we 
discuss above are addressed in the law as MDA is now required to 
submit annual reports on acquisition baselines--to include schedules, 
cost estimates, and test baselines--starting February 15, 2011. MDA's 
2010 BAR was approved prior to this law. However, we plan to assess 
the agency's 2011 BAR against the law's criteria in our 2012 report. 

Acquisitions Supporting European PAA Face Synchronization, 
Transparency, and Accountability Challenges: 

The shift in focus for European missile defense represents the most 
comprehensive shift in U.S. Ballistic Missile Defense policy since 
2002 when the Secretary of Defense created MDA and the President 
directed the fielding of an initial set of missile defense 
capabilities by 2004. To assist Congress in its review of this policy 
shift and its implications, we were asked to assess DOD's efforts to 
implement the phased adaptive approach for Ballistic Missile Defense 
in Europe. In December 2010, we issued a correspondence on acquisition 
management and near-term development risks related to the European 
PAA.[Footnote 30] In January 2011, we reported on (1) the extent to 
which DOD has developed guidance and addressed management of cost and 
schedule in the planning and implementation of the European PAA and 
(2) the extent to which DOD planning for the European PAA is informed 
by operational performance data. 

In our January report on the European PAA, we recommended actions to 
enable effective oversight of the European PAA, including 
establishment of a life cycle cost estimate to help assess 
affordability and an integrated schedule to help identify European PAA 
implementation risks.[Footnote 31] With respect to acquisition 
management for the European PAA, our December 2010 report found that 
DOD has not fully implemented a management process that synchronizes 
European PAA acquisition activities and ensures transparency and 
accountability. At the time of our review, DOD had made progress in 
acquisition planning for technology development and systems 
engineering and testing and partial progress in defining requirements 
and identifying stakeholders but had not yet developed a European PAA 
acquisition decision schedule or an overall European PAA investment 
cost. We found that the limited visibility into the costs and schedule 
for the European PAA and the lack of some key acquisition management 
processes reflect the oversight challenges with the acquisition of 
missile defense capabilities that we have previously reported. The 
consequences of these issues have included limited means of 
independently assessing progress and a limited basis for oversight and 
the department entering into production before fully demonstrating 
system performance, leading to rework, cost increases, delays, and 
uncertainties about delivered capabilities. We concluded that for the 
European PAA, the flexibility desired by DOD is not incompatible with 
appropriate visibility into key aspects of acquisition management. As 
DOD proceeds with the European PAA acquisition activities, it is 
important for Congress and the President to have assurance that the 
European PAA policy is working as intended and that acquisition 
activities are cost-effective. 

In response to our December 2010 report, DOD stated that it disagreed 
with GAO's approach to assess the European PAA as what it termed a 
"near-distinct" element of the BMDS, rather than DOD's decision to 
employ the department's existing processes. As we have consistently 
reported, the department's existing processes for developing and 
acquiring missile defense have transparency and accountability issues 
that limit oversight and preclude assessing overall progress and limit 
opportunities for constructive action to put programs in a better 
position to succeed. The principles we used to assess the European PAA 
are embedded in the department's acquisition guidance as well as the 
Office of Management and Budget's guidance for capital programming 
across federal agencies, particularly as it relates to bringing 
together and synchronizing multiple development efforts. Although we 
understand that the European PAA is a policy approach, not an 
acquisition program, it nonetheless represents an arrangement of 
significant investments, it requires a high degree of coordination and 
technical integration, and the progress implementing the European PAA 
continues to be of congressional interest. Thus, we reported that we 
continue to believe these acquisition management principles serve as a 
useful, appropriate and beneficial standard by which to assess the 
department's approach to managing European PAA acquisitions. 

European PAA Acquisition Schedules Are Highly Optimistic: 

We have consistently reported that a sound, executable acquisition has 
firm requirements, mature technologies, and a strategy that provides 
sufficient time and money for design activities before making the 
decision to start system development and demonstration or to 
transition to production. The administration's European PAA policy 
committed DOD to a schedule before the scope of system development 
effort was fully understood. DOD is working to develop plans for 
implementation within the constraints of policy time frames; however, 
system schedules are highly optimistic in technology development, 
testing, production, and integration, leaving little room for 
potential delays. As efforts to meet near-term commitments unfold, the 
schedule for delivering capabilities may be difficult to achieve and 
resources needed may grow. (See table 4.) 

Table 4: Some System Development Risks Exacerbated by European PAA 
Schedule Compression: 

BMDS element/area: Command, Control, Battle Management, and 
Communication (C2BMC); 
Issues/risks: The C2BMC element, which is designed to integrate the 
BMDS capabilities and provide planning, situational awareness, sensor 
management, and battle management, may present an incorrect picture of 
the battle space because it may not accurately group threat missile 
tracks to reduce multiple cues from sensors about the tracks. 

BMDS element/area: Aegis Ashore; 
Issues/risks: The Aegis BMD weapon system currently in service on 
ships will require modifications for use on land as Aegis Ashore. The 
contract for Aegis Ashore's new deckhouse was awarded prior to key 
design reviews for Aegis Ashore and we have reported that such 
sequencing can lead to costly modifications later in the process. 
Aegis Ashore developmental flight test intercept events have been 
reduced from five to two, the first intercept test is delayed more 
than a year, and testing is not timed to inform production commitments. 

BMDS element/area: Aegis Ballistic Missile Defense (Aegis BMD) SM-3 IB; 
Issues/risks: Target availability delayed a key flight test expected 
to demonstrate performance of Aegis BMD 3.6.1 with Standard Missile-3 
Block IA for European PAA Phase I. Progress of Aegis 4.0.1 with SM-3 
Block IB is limited by delay in development of Throttleable Divert 
Attitude Control System (TDACS), an interceptor component. Aegis BMD 
5.0 features highly integrated hardware and software and is a key 
dependency of the new Aegis Ashore program. 

BMDS element/area: Terminal High Altitude Area Defense (THAAD); 
Issues/risks: Some production risks for THAAD batteries including an 
incomplete system and some component qualification, potential design 
changes, and demonstrated production rates for interceptor components 
not supporting production needs, have caused a more than a 6-month 
delay in production. 

BMDS element/area: Interoperability and Assessment of Integrated 
System Performance; 
Issues/risks: As a system of systems, the BMDS is expected to perform 
as a whole, not just the sum of its individual parts; 
thus technical interoperability and integration among individual 
systems is key to whole system performance. Ability of testing and 
assessment plans to fully demonstrate BMDS capabilities in regional 
context is constrained by existing limitations in models and 
simulations. These limitations include incorrect representations of 
how BMDS elements are linked in the real world and can result in 
overstating integrated system performance. Interoperability with 
friends and allies is uncertain. Who will contribute, how, and the 
degree of technical feasibility and investment to interoperate with 
other nations has yet to be determined. 

Source: GAO analysis of DOD data. 

[End of table] 

New GMD Strategy Curtails Planned Operational Quantities, and It May 
Take Years to Understand Capabilities, Limitations, and Sustainability: 

Another significant change made for 2010 included a reduction in the 
number of planned emplaced GBIs from 44 to 30. In making this 
reduction, the Secretary of Defense stated that 30 GBIs provide an 
adequate near-term defensive capability for the United States, while 
allowing for testing and resolution of problems with interceptor 
technology.[Footnote 32] According to the Ballistic Missile Defense 
Review, over the past few years, MDA accelerated development of the 
homeland defense by simultaneously developing and fielding assets. 
This step was taken largely in order to facilitate the deployment of 
GBIs in time to coincide with the expected deployment of 
intercontinental ballistic missiles by North Korea. That projected 
intercontinental ballistic missile deployment has not yet occurred and 
consequently, DOD concluded that it is unnecessary to continue to 
accept the same level of programmatic risk in the GMD program going 
forward. Rather, the department plans to focus homeland defense on 
maintaining the current level of capability and developing future, 
proven capabilities to enhance homeland defense should a new threat 
emerge while still maintaining current GMD capabilities. 

We were mandated by the Congress in 2009 to examine a DOD assessment 
and plan related to the GMD system, that included issues related to 
acquisition, sustainment and refurbishment. We found that while the 
GMD system has demonstrated a limited capability, DOD has not yet 
determined the system's full capabilities and limitations. According 
to the Director of Operational Test and Evaluation's fiscal year 2010 
assessment, ground tests support characterization of GMD performance 
and test results suggest that GMD provides a capability to defend the 
United States against limited, uncomplicated, long-range ballistic 
missile threats. However, lack of sufficient data for comprehensive 
model and simulation validation and accreditation continues to 
preclude a full performance evaluation of GMD. Even though GMD 
continued to further develop its capability in fiscal year 2010, the 
GMD program has been unable to successfully achieve all of its testing 
objectives since 2005. Testing shortfalls continued in fiscal year 
2010 when GMD failed to achieve an intercept during Flight Test Ground-
based Interceptor (FTG)-06. As we previously reported, FTG-06 was 
planned as the first test of GMD's enhanced version of the kill 
vehicle called the Capability Enhancement II (CE-II). Additionally, we 
noted that MDA stated that the CE-II interceptors would not be 
declared operational until the satisfactory completion of FTG-06. As a 
result of the failure in FTG-06, MDA inserted[Footnote 33] FTG-06a, 
which also failed to achieve an intercept in December 2010.[Footnote 
34] 

Despite testing delays, shortfalls, and failures, MDA has continued to 
deliver assets. For example, neither the Capability Enhancement I (CE- 
I) or CE-II Exoatmospheric Kill Vehicle (EKV) has verified its 
capability against countermeasures--a capability it expected to 
demonstrate for the CE-I in 2008. Failures in both the target and the 
interceptors over several years have prevented collecting this 
information. Moreover, the CE-II EKV has not successfully intercepted 
a target. Despite these shortfalls all CE-I EKVs have been delivered 
and the manufacturing and emplacements of the CE-II EKV continued in 
2010. According to the Director, MDA, based on the issues that arose 
in FTG-06a, he directed the agency to stop taking deliveries of any 
more completed CE-II EKVs. MDA officials stated that the agency is 
allowing the contractor to continue to work on those components of the 
EKV that would not be factors in the FTG-06a flight test anomaly in 
order to keep the production line moving and to allow a rapid recovery 
of deliveries once the failure investigation team determines likely 
cause or causes and develops either design changes or mitigations. 
However, based on our assessment of the GMD developmental flight test 
plan that was scheduled to continue until 2021, even with this delay, 
most CE-II EKVs will be manufactured and delivered prior to completing 
the developmental flight tests and validating their capability. 

Delays in collecting data to fully understand capabilities and 
limitations also hinder GMD's efforts to adequately plan sustainment 
efforts.[Footnote 35] In fiscal year 2010, the Director of MDA stated 
that the GMD program is expected to be in service until 2032. However, 
in certain cases, the agency is just beginning to collect necessary 
sustainment data that would support the service life. In addition, the 
collection of this data is incomplete and, in many cases, will not be 
completed for many years. Table 5 lists several activities that are 
necessary to inform sustainment efforts and their status. Appendix IX 
provides additional details regarding GMD sustainment efforts. 

Table 5: Status of Activities Needed to Inform GMD Sustainment Efforts: 

Activity necessary to inform sustainment effort: Stockpile Reliability 
Plan; 
Status of activity: 
* Finalized September 30, 2010. 

Activity necessary to inform sustainment effort: Aging and 
Surveillance Test Program; 
Status of activity: 
* Began data collection in 2008 on certain components; 
* Lack of spare parts hinders collection of key data; 
* No specific CE-II EKV components are undergoing aging and 
surveillance testing; 
* Planned completion: To be determined based on the quality of data 
gathered. 

Activity necessary to inform sustainment effort: Developmental Flight 
Test Program; 
Status of activity: 
* Expected completion: 2021. 

Activity necessary to inform sustainment effort: Reliability, 
Availability, Maintainability, and Testability; 
Status of activity: 
* Reliability, availability, and maintainability was not designed into 
certain GMD components; 
* Started gathering limited data in 2007; 
* Planned completion: To be determined. 

Source: MDA data. 

[End of table] 

Decisions on Acquisition of Targets in Fiscal Year 2010: 

MDA initiated a new targets acquisition plan in 2009 which called for 
separate contract awards for different classes of targets, including 
medium-range, intermediate-range, and intercontinental targets. This 
plan was undertaken in response to GAO findings regarding cost, 
schedule and performance problems with the previous targets 
acquisition approach.[Footnote 36] MDA conducted a business case 
analysis in order to identify a new acquisition plan that could 
address these problems. This new approach was to seek separate, 
competitive contract awards for different classes of targets, allowing 
MDA to benefit from greater opportunities for competition and reducing 
the role of the prime contractor. In fiscal year 2010, as part of this 
strategy, MDA issued two solicitations: one for medium-range targets, 
and another for intermediate-range targets. However, the agency 
canceled the solicitation for medium-range targets after receiving 
proposals. According to MDA officials, the proposals received were 
more expensive than anticipated. MDA officials cited higher-than-
expected costs for the proposals received on the medium-range 
solicitation as the primary reason it was canceled, but the 
information they provided did not show detailed analysis of the effect 
of the cancellation on the cost and schedule assumptions of the 
business case. The cost effects of this change remain unknown. 
According to targets program officials, they may issue a new 
competitive solicitation for medium-range targets, but they have not 
yet done so. MDA also issued a draft solicitation for intercontinental-
range targets in September 2010, but canceled the solicitation in 
February 2011 before it was finalized.[Footnote 37] 

Separately, MDA also issued a new undefinitized contract action in the 
second quarter of fiscal year 2010, which asked the incumbent prime 
contractor to build five new medium-range air-launched targets. 
[Footnote 38] MDA officials stated that this action was in response to 
the target failure in the FTT-11 flight test, and was not related to 
the cancellation of the medium-range solicitation. Undefinitized 
contract actions authorize contractors to begin work before reaching a 
final agreement on contract terms. The current "not-to-exceed" level 
for the contract action is $496 million. MDA has allowed this 
undefinitized contract action to continue for an extended period--over 
290 days as of January 2011.[Footnote 39] According to MDA officials, 
the delay in definitization is due to changes in its requirements for 
the targets, and they anticipate definitization in July 2011, by which 
time the contract action will have remained undefinitized for about 
450 days. The extended use of undefinitized contract actions has 
previously been identified by GAO and others as risky for the 
government. Because contracting officers normally reimburse 
contractors for all allowable costs they incur before definitization, 
contractors bear less risk and have little incentive to control costs 
during this period. The government also risks incurring unnecessary 
costs as requirements may change before the contract is definitized. 
According to MDA officials, acquiring these new medium-range air-
launched targets through an undefinitized action was necessary in 
order to meet the testing schedule. Documentation provided by the 
agency showed only limited analysis prior to the decision to award the 
undefinitized contract action. Officials recognized that this approach 
would add to the cost of targets compared to the Air Force contract 
vehicle they had previously used, but because the action remains 
undefinitized, the agency does not yet know the final price of these 
targets. For more detailed information regarding targets during fiscal 
year 2010, see appendix XII. 

Overall Performance of the BMDS Still Cannot Be Assessed Due to Models 
and Simulations Challenges and Shortfalls in Testing: 

For the eighth year, we are unable to report on the overall 
performance of the BMDS because MDA models and simulations have not 
matured sufficiently and may not be fully mature until 2017. 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 
systems, and interceptors perform during scenarios. 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 (OTA)--in order to have confidence in 
their results. Moreover, the system-level simulation itself is 
expected to change over time as additional models become available to 
represent the evolving BMDS configuration. Until models and 
simulations are accredited and validated, BMDS performance cannot be 
fully assessed. 

In fiscal year 2010, MDA began execution of its revamped IMTP to 
collect the data needed to accredit the models and simulations used 
for assessing BMDS performance. The agency was able to conduct several 
BMDS element tests that generated data needed to accredit models and 
simulations as well as assess performance for individual BMDS 
elements. For example, in June 2010 during a GMD booster verification 
test, C2BMC was able to collect data for accreditation of its models 
and simulations while demonstrating command and control of a key BMDS 
radar. In addition, in August 2010, MDA and the BMDS OTA conducted a 
ground test referred to as Ground Test Integrated-04b (GTI-04b), to 
demonstrate functionality, interoperability, and performance of the 
BMDS and to characterize BMDS element capabilities. According to the 
Director of Operational Test and Evaluation, this test provided the 
most accurate representation to date of the BMDS including GMD for 
characterization of performance as well as insight into GMD 
functionality, interoperability, and performance within the BMDS. Test 
results suggested that GMD provides a capability to defend the United 
States against limited long-range ballistic missiles with 
uncomplicated, emerging threat reentry vehicles. 

While some individual BMDS elements' models and simulations provided 
insight into their interoperability and performance within the BMDS, 
BMDS OTA officials told us that current BMDS system-level modeling and 
infrastructure are inadequate to assess the overall performance of the 
BMDS. BMDS OTA officials told us that the current IMTP focuses on data 
needed to accredit element-level models, but it does not address 
system-level integrated performance. In an August 2009 memorandum to 
MDA, the BMDS OTA and the Joint Functional Component Command for 
Integrated Missile Defense, referred to as the Warfighter, identified 
testing requirements that are needed to assess BMDS performance. More 
importantly, in this memorandum both the BMDS OTA and the Warfighter 
alerted MDA that there were a number of system-level model, 
infrastructure, and stimuli limitations that adversely affected the 
OTA's ability to assess BMDS performance. The Warfighter and the BMDS 
OTA require testing to reflect realistic representations of strategic 
and regional/theater defense designs with the full complement of 
fielded BMDS assets. The BMDS OTA and the Warfighter noted that as the 
BMDS matures and fielded assets increase, modeling and simulation 
capabilities and laboratory representations of BMDS assets must keep 
pace to maintain operational realism. However, they stated that 
current laboratory and model and simulation limitations prevent full 
asset representation and fail to test the loading that would occur on 
the communication links as well as the complexity of a full regional/ 
theater conflict on command and control nodes. This limitation 
severely affects event execution and the ability of the Warfighter to 
make informed decisions relative to the operational readiness and 
capability of BMDS elements. 

In addition, as with previous years, failures and delays in testing 
have continued to delay the validation of the models and simulations 
used to assess the overall performance of the BMDS. GMD, Sensors and 
THAAD were able to conduct several key flight tests demonstrating 
element performance; however, each also failed to achieve all planned 
fiscal year objectives. Additionally, the C2BMC element successfully 
participated in multiple element tests and completed some ground tests 
needed to declare a new software configuration operational. Aegis BMD 
and STSS were unable to conduct either of their planned developmental 
flight tests for fiscal year 2010. For specific details regarding each 
element's annual testing accomplishments, delays, and failures, see 
the individual element appendixes. 

Conclusions: 

Last year we noted that as MDA transitioned to new leadership, a new 
acquisition strategy, a new test strategy, and a shift in emphasis 
toward early intercept capabilities, the agency had an opportunity to 
chart a course that enables transparency and accountability as well as 
flexibility. We also noted that the Director of MDA had begun new 
initiatives in accordance with guiding principles of DOD's acquisition 
policies, which already embrace knowledge-based practices and sound 
management controls. This year we began to see the fruit of those 
efforts as MDA applied these new policies and began to provide a 
better foundation for Congress and others to assess progress and hold 
senior leadership accountable for outcomes. However, while it is 
undoubtable that some progress has been made in terms of implementing 
new acquisition reviews and reporting detailed baselines, there remain 
critical gaps in both the material reported and particularly the 
quality of the underlying cost estimates needed to establish baselines. 

In addition, the department has undertaken another series of 
significant changes to the acquisition focus of MDA. The decision in 
2010 to shift the focus of acquisitions from strategic to regional 
missile defense brings with it a host of significant challenges for 
MDA and the department. Ensuring that these changes are properly 
analyzed, efforts are properly synchronized and the resulting 
decisions are communicated and justified will require significant 
attention from top departmental leaders. 

Lastly, fundamental to accountability and oversight is being able to 
establish a sound plan and to track actual performance against that 
plan. For a variety of reasons, including a lack of baselines and 
changing goals and methods for tracking progress, we have not been 
able to report with any confidence or consistency on how the missile 
defense program has performed against its plans or expectations these 
past 8 years. Thus, it is imperative that the latest policy 
initiatives be sustained in a way that provides consistent, complete 
and reliable reporting of progress and variances against those 
baselines from year to year. The baseline structure MDA established in 
2010 is a good start and represents a reasonable basis for reporting 
progress and variances in the future, and thus should be safeguarded 
for several years. 

Recommendations for Executive Action: 

We recommend that the Secretary of Defense direct MDA to undertake the 
following 10 actions to strengthen its baselines, facilitate external 
and independent reviews of those baselines, ensure effective oversight 
of the BMDS, and further improve transparency and accountability of 
its efforts. Several of these recommendations relate to how DOD may 
meet the new statutory requirements to establish and report baselines 
under the Ike Skelton National Defense Authorization Act for Fiscal 
Year 2011. 

To improve clarity, consistency, and completeness of the baselines 
reported to Congress, the Secretary of Defense should ensure that MDA 
takes the following actions: 

1.	For resource baselines: 

a)	Provide more detailed explanations and definitions of information 
included in resource baselines; particularly operations and support 
costs and unit cost calculations. 

b)	Label cost estimates to appropriately reflect the content reported 
and explain any exclusions. 

c) Include all sunk costs in all of its cost estimates and baselines. 

d) Obtain independent cost estimates for each baseline. 

In meeting new statutory requirements to include a cost estimate in 
each acquisition baseline for a program element, take steps to ensure 
these cost estimates are high quality, reliable cost estimates that 
are documented to facilitate external review. 

2.	For schedule baselines: 

a) In meeting new statutory requirements to report on an acquisition 
baseline including a comprehensive schedule, include a comprehensive 
list of actual versus planned quantities of assets that are or were to 
be delivered each fiscal year. 

b)	In meeting new requirements to report variances on acquisition 
baselines, report on variances of these quantities by fiscal year and 
the reasons for these differences. 

3. For test baselines: 

a) In meeting new statutory requirements to report variances between 
reported acquisition baselines, also report variances between the test 
plan as presented in the previous acquisition baseline and the test 
plan as executed that explain the reason for any changes. 

b) Report the cost effects of those test changes in either the BAR or 
the budget justification documentation. 

In order to stabilize the test plan and ensure the test baseline can 
absorb test failures and test delays and remains executable, the 
Secretary of Defense should ensure that the Missile Defense Agency: 

4. Includes sufficient schedule and resource margin, including spare 
test assets and targets, based on recent test experience and 
forecasted testing demands. 

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 7 of our 10 recommendations, including our 
recommendations to take steps to ensure its cost estimates are high- 
quality, reliable cost estimates that are documented to facilitate 
external review. In response to this recommendation, DOD stated that 
MDA will follow the GAO Cost Estimating and Assessment Guide for each 
program reported in the BAR. In doing so, MDA Cost Estimating and 
Analysis Directorate plans to form a cost assessment group to formally 
assess each cost estimate to ensure they are well documented, 
comprehensive, accurate, and credible. DOD also fully concurred with 
our recommendation to report the cost effects of its test changes in 
either the BAR or budget justification documentation, stating that MDA 
will provide the cost effects as part of the individual program 
resource baselines starting in the 2012 BAR. 

DOD partially concurred with our recommendation that the Secretary of 
Defense direct MDA to include all sunk costs in all of its cost 
estimates and baselines. DOD stated that MDA will continue to report 
sunk costs in most of its acquisition programs except targets, where 
it will continue to report unit costs in the same manner as the 2010 
and 2011 BARs. According to DOD, because each target is inherently a 
test article and no two are identical, there are always variable non- 
recurring costs associated with each article. Also, due to the 
extensive reuse of previous strategic missile components in the 
targets program, including all sunk costs does not reflect MDA program 
costs accurately. Accordingly, MDA will use the costs incurred/planned 
during the future years defense plan to calculate unit costs. These 
unit costs will not include any sunk costs. We continue to believe 
that all costs, including all sunk costs incurred for individual 
target efforts, should be reported to the maximum extent possible, 
regardless of the agency or service that originally incurred those 
costs. To the extent that a sunk cost, such as the original cost of 
previous strategic missile components, can not be calculated, that 
fact should be explained when the costs are reported. Moreover, DOD's 
method of reporting and baselining target unit costs will not reflect 
even MDA program costs accurately because it excludes MDA-incurred 
sunk costs. Excluding these costs, which can run into the hundreds of 
millions of dollars, precludes understanding of the full investment 
required to develop and procure targets, as well as limiting insight 
into developmental progress. In addition, the incomplete costs 
reported will be changed every two years because, as DOD noted, MDA 
uses only the costs for the future years defense plan to calculate the 
target unit cost baselines. The future years defense plan covers a six 
year period of time, but changes every two years to a new six year 
period of time. Calculating unit costs this way provides neither the 
full cost nor the full quantities of targets as it removes any costs 
or quantities prior to fiscal year 2010. We therefore continue to 
believe that including these costs will aid departmental and 
congressional decision makers as they make difficult choices of where 
to invest limited resources. 

DOD also partially concurred with our recommendation that the 
Secretary of Defense direct MDA to report, in its annual reports on 
acquisition baselines, variances in quantities of assets by fiscal 
year that are or were to be delivered each fiscal year and the reasons 
for these differences. DOD stated that a change in an asset quantity 
in a fiscal year may drive a reportable BMDS schedule variance and 
noted that any changes in asset quantities would also be reflected in 
unit costs and in the technical baseline. In a separate response, DOD 
stated that in meeting new statutory requirements, MDA will report a 
comprehensive list of actual versus planned assets that are or will be 
delivered each fiscal year. MDA, in its 2009 BAR, included a 
comprehensive list of actual versus planned quantities of assets that 
were to be delivered each fiscal year as its schedule baseline, 
identified the criteria for reporting schedule variances, and also 
planned to provide the rationale for any variances. MDA is now 
statutorily required to establish an acquisition baseline for each 
element that includes a comprehensive schedule, including delivery and 
fielding schedules. In addition, because DOD has stated that they will 
include actual versus planned quantities when meeting annual baseline 
reporting requirements, we continue to believe that additionally 
reporting the rationale for these variances, as MDA had previously 
committed to, would benefit departmental and congressional decision 
makers as they meet their obligations to manage and oversee this 
effort. 

DOD also partially concurred with our recommendation that the 
Secretary of Defense direct MDA to include sufficient schedule and 
resource margin, including spare test assets and targets, based on 
recent test experience and forecasted testing demands. DOD responded 
that maintaining cost/schedule margins and additional targets is not 
cost effective. Instead, DOD stated that MDA will conduct an event-
oriented test and acquisition decision-based program and update the 
test plan frequently to reflect the status of test execution. In 
addition, DOD noted that MDA will use a "rolling spare" approach to 
targets. We remain concerned about MDA's inability to successfully 
execute those plans. MDA changed its approach to testing 2 years ago, 
after struggling for years to successfully execute the test plan, 
instituting a more rigorous planning effort. However, despite 
increased attention to defining and resourcing its test plan, it has 
been unable to stabilize and execute the plan successfully. Without a 
change in its approach, MDA is almost certain to continue to set and 
reset test plans that are immediately unexecutable soon after they are 
reset. This approach incurs significant hidden or unplanned costs as 
testing is delayed and test plans are restructured. As we testified 
February 25, 2009, the success of MDA's test planning hinges on 
properly resourcing the tests with sufficient time, funding and 
reliable targets.[Footnote 40] Our current recommendation, based on 
the experience of the last 2 years, is designed to help stabilize the 
test plan and reduce the frequency and effort required to reset the 
test plan while gathering the knowledge MDA has decided it needs as 
efficiently as possible. Until MDA adds sufficient cost and schedule 
margin, including additional interceptors and targets, it will 
continue to achieve less testing, at a greater cost than planned. We 
therefore continue to believe that the department and Congress would 
benefit if test plans incorporate reasonable cost and schedule margins. 

Lastly, DOD identified 35 "factual errors" in its technical comments. 
However, upon review we found that 7 of the 35 were not errors of 
fact, but rather different conclusions; 6 we determined were errors in 
DOD's official comments, 12 required additional substantiation that 
was not provided or were material previously requested but could not 
be assessed during this review because the extensive delay left no 
time for analysis; and lastly 10 we determined were actual errors of 
facts and we therefore made the appropriate changes in those cases. 

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 about 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. Major contributors to this report are 
listed in appendix XV. 

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

The Honorable C.W. Bill Young:
Chairman:
The Honorable Norman D. Dicks:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives: 

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: 

March 15, 2011: 

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

Dear Ms. Chaplain: 

This is the Department of Defense (DoD) response to the GAO Draft 
Report, GA0-11-372, "Missile Defense: Actions Needed to Improve 
Transparency and Accountability," dated February 25, 2011 (GAO Code 
120904). 

The DoD concurs with seven of the draft report's recommendations and 
partially-concurs with three. The rationale for our position is 
included in the enclosure. I submitted separately a list of technical 
and factual errors for your consideration. 

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

Sincerely, 

Signed by: 

David G. Ahern: 
Deputy Assistant Secretary of Defense: 
Portfolio Systems Acquisition: 

Enclosure: As stated: 

[End of letter] 

GAO Draft Report Dated February 25, 2011: 
Gao-11-372 (Gao Code 120904): 

"Missile Defense: Actions Needed To Improve Transparency And
Accountability" 

Department Of Defense Comments To The GAO Recommendations: 

Recommendation 1: The GAO recommends that the Secretary of Defense 
direct Missile Defense Agency (MDA) to: 

a)	Provide more detailed explanations and definitions of information 
included in resource baselines; particularly operations and support 
costs and unit cost calculations. 

b) Label cost estimates to appropriately reflect the content reported 
and explain any exclusions. 

c)	Include all sunk costs in all of its cost estimates and baselines.
d) Obtain independent cost estimates for each baseline. 

e)	In meeting new statutory requirements to include a cost estimate in 
each acquisition baseline for a program element, take steps to ensure 
these cost estimates are high quality, reliable cost estimates that 
are documented to facilitate external review. 

DOD Response: 

la) DoD concurs with the recommendation. 

lb) DoD concurs with the recommendation. 

lc) Partially Concur. MDA will continue to report sunk costs in most 
of its acquisition programs except targets. Specifically, MDA will 
continue to report unit costs for their targets in the same manner as 
the 2010 and 2011 Ballistic Missile Defense System (BMDS) Accountability
Reports (BARS). Because each target is inherently a test article and 
no two are identical, there are always variable non-recurring costs 
associated with each article. Due to the extensive reuse of previous 
strategic missile components in our targets program, including all 
sunk costs does not reflect MDA program costs accurately. Accordingly, 
MDA will use the costs incurred/planned during the FYDP to calculate 
unit costs. These unit costs will not include any sunk costs. 

1d) DoD concurs with the recommendation. The Department is using Cost 
Assessment and Program Evaluation Independent Cost Estimates (10Es) 
for MDA programs. 

le) DoD concurs with the recommendation. MDA will ensure it has a high 
quality, reliable cost estimate, completed and documented in 
accordance with the GAO Cost Estimating and Analysis Guide for each 
program reported in the BAR. To help ensure this, MDA Cost Estimating 
and Analysis Directorate plans to form a cost assessment group to 
formally assess each cost estimate to ensure they are well documented, 
comprehensive, accurate, and credible. 

Recommendation 2: The GAO recommends that the Secretary of Defense 
direct Missile Defense Agency to: 

a) In meeting new statutory requirements to report on an acquisition 
baseline including a comprehensive schedule, include a comprehensive 
list of actual versus planned quantities of assets that are or were to 
be delivered each fiscal year. 

b) In meeting new requirements to report variances on acquisition 
baselines, report variance of these quantities by fiscal year and the 
reasons for these differences. 

DOD Response: 

2a) Concur. MDA will meet statutory requirements on acquisition 
baseline reporting, including comprehensive schedules, and will 
include a comprehensive list of actual versus planned quantities of 
assets that are or will be delivered each fiscal year. 

2b) Partially Concur. A change in an asset quantity in a fiscal year 
may or may not drive a BMDS schedule variance. Changes in asset 
quantities are likely to affect Unit Cost (resource baseline). Changes 
in asset delivery schedule may affect BMDS performance (technical 
baseline). Changes to each baseline are reported. Each baseline has 
thresholds defining when changes become variances. 

Recommendation 3: The GAO recommends that the Secretary of Defense 
direct Missile Defense Agency to: 

a) In meeting new statutory requirements to report variances between 
reported acquisition baselines, also report variances between the test 
plan as presented in the previous acquisition baseline and the test 
plan as executed that explain the reason for any change. 

b) Report the cost effects of those test changes in either the BMDS 
Accountability Report (BAR) or budget justification documentation. 

DOD Response: 

3a) DoD concurs with the recommendation. 

3b) DoD concurs with the recommendation. MDA will provide the cost 
effects of test changes as part of the individual program resource 
baselines starting in the 2012 BAR. 

Recommendation 4: The GAO recommends that the Secretary of Defense 
direct Missile Defense Agency to include sufficient schedule and 
resource margin, including spare test assets and targets, based on 
recent test experience and forecasted testing demand. 

DOD Response: Partially Concur. Maintaining cost/schedule margins and 
additional targets is not cost effective. Instead, MDA will conduct an 
event-oriented test and acquisition decision based program and update 
the Integrated Master Test Plan frequently to reflect status of test 
execution. MDA will use a "rolling spare" approach to targets. 

[End of section] 

Appendix II: Assessment of MDA Resource Baselines: 

We reviewed 12 resource baselines for Ballistic Missile Defense System 
(BMDS) elements' efforts as presented in the June 2010 BMDS 
Accountability Report (BAR) including: 

* Aegis Ashore; 

* Aegis Ballistic Missile Defense (BMD) Standard Missile 3 (SM-3) 
Block IB missiles and associated software upgrades for ship sets; 

* future Aegis BMD ship software upgrades; 

* two capability deliveries for Army Navy/Transportable Radar 
Surveillance (AN/TPY-2); 

* Command and Control, Battle Management, and Communications (C2BMC) 
Spiral 6.4; 

* Ground-based Midcourse Defense (GMD); 

* two capability deliveries for the Sea Based X-Band (SBX) Radar; 

* current Terminal High Altitude Area Defense (THAAD) capability 
configuration; and: 

* Targets and Countermeasures program short-range ballistic missile; 

* Targets and Countermeasures program medium-range ballistic missile; 

* Targets and Countermeasures program intermediate-range ballistic 
missile; and: 

* Targets and Countermeasures program intercontinental ballistic 
missile target efforts.[Footnote 41] 

The Missile Defense Agency (MDA) presented baselines for both unit 
costs and portions of, and in some cases all, life cycle costs in the 
2010 BAR. MDA presented unit cost baselines for specific assets of 
each element as well as baselines for cost components of the element 
including development, production and deployment, and military 
construction costs. As a result, there can be multiple baselines for 
each element. MDA expressed the majority of its unit costs as program 
acquisition unit cost (PAUC) or average procurement unit cost (APUC). 
The APUC is the total procurement funds divided by the fielded 
quantity, and was included as part of MDA's unit cost baselines for 
the first time in the 2009 BAR.[Footnote 42] The PAUC is the total 
cost for the development and procurement of the acquisition program 
divided by the total quantity, and was included for most of the 
elements for the first time in the 2010 BAR in response to GAO 
recommendations.[Footnote 43] MDA's 2010 BAR also presented, for the 
first time, a baseline for portions of, and in some cases all, life 
cycle costs based on life cycle cost estimates for several BMDS 
components. 

Other major defense acquisition programs[Footnote 44] are required by 
statute to describe program goals in an acquisition program baseline 
that, as implemented by the Department of Defense (DOD), has been 
approved by a higher-level DOD official prior to the program's 
initiation.[Footnote 45] The baseline, derived from the best estimates 
of cost, schedule, and performance requirements, provides decision 
makers with the program's total cost for an increment of work, 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, according to DOD acquisition guidance, 
includes cost parameters that should reflect realistic cost estimates 
of the total program and/or increment, and should contain cost 
parameters for major elements of program life-cycle cost.[Footnote 46] 
The elements of a program's life-cycle cost include research, 
development, test, and evaluation; production and deployment; military 
construction; operation and sustainment; and disposal costs. Once 
approved, major defense acquisition programs are required to measure 
their program against the baseline. The threshold application of these 
laws and policies related to baselines are typically triggered by a 
program's entry into engineering and manufacturing development 
(formerly system development and demonstration)--a phase in the DOD 
acquisition cycle during which the weapon system is designed and then 
demonstrated in tests. The BMDS has not formally entered into the DOD 
acquisition cycle, therefore this requirement does not yet apply. 
[Footnote 47] 

The Resource Baselines Reported in the BAR Do Not Provide Clear, 
Consistent and Complete Information: 

Parts of the 2010 resource baselines were unclear because MDA used 
particular terms that did not always appear to accurately describe the 
costs and baselines it was reporting. For example, MDA presented "life 
cycle costs" in several resource baselines but it was unclear in the 
BAR whether these costs cover the full range of cost categories or 
cost components normally included in a life cycle cost estimate. In 
addition, although MDA presented baselines for some of the costs, and, 
in other cases, all of the costs included in its life cycle costs, 
program officials told us that they mistakenly baselined operation and 
sustainment costs in the 2010 BAR and intend to remove those baselines 
in the 2011 BAR. Officials also told us that they do not plan to 
report variances in future BARs for any of the remaining development 
and production costs that are baselined. The operation and sustainment 
costs that MDA did report in the BAR were incomplete and unclear 
because, except in one case, they did not include the costs borne by 
the services and there was no explanation in the BAR for these 
exclusions. The resource baselines also included many inconsistencies 
that were unexplained in the BAR. For example, MDA did not report unit 
cost variances that could have been reported and MDA presented 
alternate versions of unit costs without explaining how these unit 
costs were constructed. There also appeared to be instances of 
underestimating life cycle costs when we compared the time-phased 
estimate to the life cycle cost baseline. It was unclear why these 
inconsistencies existed for the life cycle cost baselines because MDA 
did not explain in the BAR how any portions of the life cycle costs 
were baselined. 

Although MDA termed one section of its resource baseline "life cycle 
costs," the use of the term is misleading because in some cases the 
reported totals appeared to only partially reflect all the main life 
cycle cost categories. These categories normally include research and 
development, production and deployment, operation and sustainment, and 
disposal costs. Life cycle should be thought of as a "cradle to grave" 
approach to managing a program throughout its useful life. This 
usually entails identifying all cost elements that pertain to the 
program from initial concept all the way through operations, support, 
and disposal. For some of the elements, not all of these cost 
categories were identifiable in the figures reported and as a result 
it appears that the totals reported were mislabeled as life cycle 
costs. Specifically, it appeared that the Aegis Ashore and future 
Aegis BMD ship software upgrades elements may not have included 
operation and sustainment costs. It also appeared that none of the 12 
baselines reported disposal costs. No explanation was given in the BAR 
for the exclusion of either of these cost categories or why the term 
life cycle cost is appropriate for what was reported. 

In another instance, the information reported in three of the four 
Targets and Countermeasures resource baselines was not complete 
because sunk costs were excluded from the life cycle cost baselines. 
[Footnote 48] The short-range ballistic missile effort excluded more 
than $400 million in sunk costs from its baseline, to leave less than 
43 percent of its total estimated costs baselined. The intermediate-
range ballistic missile effort also removed more than $900 million in 
sunk costs from its baselined development costs, choosing to baseline 
less than half of the total estimated costs. MDA did note in the BAR 
that costs beyond fiscal year 2015 were excluded from the Targets and 
Countermeasures baselines because the quantities of targets were 
uncertain in the years beyond 2015. The BAR, however, does not inform 
the reader that the sunk costs were excluded nor does it explain why 
MDA decided to exclude them. Agency officials told us that sunk costs 
were excluded from the development baseline because sunk costs did not 
fit the definition of average unit cost for the targets. However, this 
response still does not explain why these costs were excluded from the 
life cycle cost baselines. Excluding these costs in the baseline means 
that the full costs through 2015 for these efforts are underestimated 
and, therefore, are not transparent to decision makers external to the 
agency. 

MDA officials told us that they mistakenly reported operation and 
sustainment costs as baselined for several elements and stated that 
they do not intend to report variances for the remaining baselined 
portions of life cycle costs, despite indications in the 2010 resource 
baselines that variances would be reported in the future. For the 
current THAAD capability configuration and the Aegis BMD SM-3 Block IB 
missiles and associated software upgrades for shipsets, agency 
officials said that reporting the operation and sustainment costs 
associated with these elements as a baseline was an error. Although 
the agency intends to continue to report operation and sustainment 
costs, they do not consider those costs baselined and will not report 
them as part of the baseline in the future. Choosing not to baseline 
these costs, in some cases, removes a large portion of costs from the 
total cost baseline MDA is reporting. See table 6 for details on the 
operation and sustainment costs as a percentage of total costs MDA 
will not baseline in the future. 

Table 6: Operation and Sustainment Costs as a Percentage of Total 
Costs Reported in the 2010 BAR: 

Aegis BMD SM-3 Block IB missiles and associated software upgrades for 
shipsets[A]; 
Operation and sustainment costs: $591 million; 
Operation and sustainment as a percentage of total reported costs: 9.0 
percent. 

Two capability deliveries for AN/TPY-2; 
Operation and sustainment costs: $5.586 billion; 
Operation and sustainment as a percentage of total reported costs: 
64.7 percent. 

C2BMC Spiral 6.4; 
Operation and sustainment costs: $387 billion; 
Operation and sustainment as a percentage of total reported costs: 
31.1 percent. 

GMD[ B]; 
Operation and sustainment costs: $12.871 billion; 
Operation and sustainment as a percentage of total reported costs: 
38.6 percent. 

Two capability deliveries for SBX; 
Operation and sustainment costs: $2.550 billion; 
Operation and sustainment as a percentage of total reported costs: 
63.4 percent. 

Current THAAD capability configuration; 
Operation and sustainment costs: $4.162 billion; 
Operation and sustainment as a percentage of total reported costs: 
23.9 percent. 

Source: MDA (date); GAO (analysis): 

Note: The operation and sustainment costs reported above only include 
those costs for which MDA is responsible and excludes those costs 
borne by the services except for the two capability deliveries for SBX 
which include both the costs borne by MDA and the service. MDA did not 
clarify if the operation and sustainment costs shown for C2BMC's 
Spiral 6.4 were the total operation and sustainment costs necessary 
for the effort. 

[A] The Aegis BMD SM-3 Block IB missiles and associated software 
upgrades for shipsets effort provided a corrected version of the 
resource baseline after the June 2010 BAR was released. The updated 
version, dated September 2010, shows operation and sustainment costs 
of $591 million as 7.4 percent of the total reported costs. 

[B] In technical comments to our draft report, we learned that 
according to MDA, the GMD operation and sustainment costs are only for 
one capability delivery and are not representative of the entire 
program. The BAR did not explain that these costs only reflected a 
portion of the program. 

[End of table] 

Further, the operation and sustainment costs that MDA reported in the 
BAR were incomplete and unclear because, except in one case, they did 
not include the costs borne by the services and there was no 
explanation in the BAR for these exclusions. By excluding the 
services' portion of these costs, the operation and sustainment costs 
reported in the BAR for four out of five of the elements' efforts are 
underestimated since they only include those costs that MDA will be 
responsible for paying.[Footnote 49] Only the operation and 
sustainment costs reported for the two capability deliveries for the 
SBX Radar included both the costs borne by MDA and the service. The 
BAR does not explain these differences or exclusions in reporting its 
operation and sustainment costs. 

In addition, MDA officials stated that although MDA will continue to 
report development, production and deployment, and military 
construction costs as baselined, none of these baselines will report 
variances. They stated that the resource baselines are represented 
solely by unit cost baselines--not by any baselines for life cycle 
costs. Officials told us that there is no technical reason that 
prevents MDA from reporting variances for development, production and 
deployment, or military construction costs. It is also unclear why the 
agency will not report baselines and variances for operation and 
sustainment costs. Reporting variances is important because deviations 
from the baseline plan give management at all levels information about 
where corrective actions are needed to bring the program back on 
track. While variances are often perceived as something bad, they 
provide valuable insight into program risk and its causes and can 
empower management to make decisions about how to best handle risks. 

Although MDA presented APUC unit costs in its 2009 BAR, it only 
reported on six of the ten APUCs presented in last year's BAR. In 
addition, it did not present variances for any of these unit costs or 
explain why these variances were not provided. Of these six, MDA could 
have reported variances on three according to the agency's own 
definition of a variance--a cost increase of 10 percent or more when 
compared to the original resource baseline for a BMDS product. In the 
case of the THAAD fire control, the unit cost increased by more than 
20 percent. According to MDA, the agency did not report on APUC unit 
costs for four of the assets presenting APUCs in the 2009 BAR because 
it considered these programs to be complete and the 2009 BAR to be a 
final report. However, one of the four assets not reporting an APUC in 
the 2010 BAR is the Aegis BMD SM-3 Block IA missile for which, during 
fiscal year 2010, the agency delivered an additional 26 missiles. It 
is unclear why the agency did not provide an updated APUC for this 
asset in the 2010 BAR since it was not complete before fiscal year 
2010. In addition, the 2010 BAR did not explain MDA's decision to stop 
reporting these four assets. MDA officials also stated that no 
variances were reported because the agency considers the 2010 BAR 
resource baselines to be the first established unit cost baselines. 
However, the agency first reported APUC costs in 2009, and the 2009 
BAR explicitly refers to these as "unit cost baselines." Further, the 
2009 BAR states that the agency would report any variances to these 
APUC baselines in the 2010 BAR. See table 7 for a comparison of the 
2009 BAR APUC unit costs to the 2010 BAR APUC unit costs and 
associated unreported variances. 

Table 7: Unreported APUC Variances from MDA's 2009 BAR: 

Aegis BMD Block I missiles: 
2009 BAR APUC: $18 million; 
2010 BAR APUC: Not reported; 
Percentage change: [Empty]; 
Unreported variance: [Empty]. 

Aegis BMD Block IA missiles: 
2009 BAR APUC: $11 million; 
2010 BAR APUC: Not reported; 
Percentage change: [Empty]; 
Unreported variance: [Empty]. 

Aegis BMD shipset software upgrades[A]: 
2009 BAR APUC: $45 million; 
2010 BAR APUC: $36 million; 
Percentage change: -20.0%; 
Unreported variance: Not applicable. 

AN/TPY-2[B]: 
2009 BAR APUC: $208 million; 
2010 BAR APUC: $177 million; 
Percentage change: -14.9%; 
Unreported variance: Not applicable. 

Fylingdales upgraded early warning radar[B]: 
2009 BAR APUC: $197 million; 
2010 BAR APUC: Not reported; 
Percentage change: [Empty]; 
Unreported variance: [Empty]. 

GMD ground based interceptors: 
2009 BAR APUC: $62 million; 
2010 BAR APUC: $71 million; 
Percentage change: 14.5%; 
Unreported variance: [Empty]. 

THAAD interceptors: 
2009 BAR APUC: $11 million; 
2010 BAR APUC: $11 million; 
Percentage change: 0.0%; 
Unreported variance: Not applicable. 

THAAD fire control system: 
2009 BAR APUC: $13 million; 
2010 BAR APUC: $16 million; 
Percentage change: 23.1%; 
Unreported variance: [Empty]. 

THAAD launchers: 
2009 BAR APUC: $9 million; 
2010 BAR APUC: $10 million; 
Percentage change: 11.1%; 
Unreported variance: [Empty]. 

Thule upgraded early warning radar[B]: 
2009 BAR APUC: $216 million; 
2010 BAR APUC: Not reported; 
Percentage change: [Empty]; 
Unreported variance: [Empty]. 

Source: August 2009 BAR and June 2010 BAR. GAO analysis. 

Note: MDA's definition of a variance is a cost increase of 10 percent 
or more when compared to the original resource baseline for a BMDS 
product. MDA does not consider cost decreases of 10 percent or more as 
variances for reporting purposes. 

[A] Aegis BMD shipset software upgrades refers to software version 
4.0.1. See appendix III for further details on this software version. 

[B] The AN/TPY-2, Thule upgraded early warning radar, and Fylingdales 
upgraded early warning radar are all managed by the Sensors program 
office. For more details on these radars, see appendix VII. 

[End of table] 

MDA was also unclear and inconsistent in how it reported target unit 
costs and did not define or explain these inconsistencies in the BAR. 
While MDA reported APUC and PAUC for most of its unit cost baselines, 
it chose to instead report average unit costs for its 4 Targets and 
Countermeasures program efforts presented in the BAR--short-range, 
medium-range, intermediate-range, and intercontinental ballistic 
missile targets. It also separately reported the non-recurring costs 
to develop these targets. There was no explanation in the BAR as to 
how the targets' average unit costs were constructed or why the 
targets required a different reporting method from the rest of the 
BMDS element assets. MDA officials told us that since Targets and 
Countermeasures is procuring targets and is not a developmental 
acquisition program, that reporting APUC and PAUC was not the best 
method for reporting unit costs for targets. However, MDA is investing 
significant amounts to develop the targets it needs. MDA reported in 
the 2010 BAR that it is planning to invest $2.4 billion to develop and 
procure targets between fiscal years 2010 and 2015. 

By reporting only the average unit costs for targets, which officials 
told us was the same as the average recurring costs, MDA is not 
reporting the full unit costs to develop and procure targets. In 
analyzing the information in the 2010 BAR, we determined that in only 
4 of the 12 separate target unit costs reported did the BAR provide 
enough information to calculate PAUC costs. For example, while MDA 
reported that the new extended medium range ballistic missile average 
unit cost was $29 million, if it had included all reported development 
costs, it could have reported a PAUC of $60 million for these targets. 
In addition, the planned new intermediate range ballistic missile 
reported an average unit cost of $40 million, but had it included all 
reported development costs, it could have reported a PAUC of $109 
million. For 8 of the 12 targets presenting average unit costs, 
including the LV-2 intermediate range target, insufficient information 
was presented in the BAR to calculate a PAUC. 

The 2010 BAR's life cycle cost baselines also lacked clarity and 
consistency in how some costs were accounted for, giving the 
appearance that some of the baselines were underestimated. MDA 
presented both a time-phased estimate in then-year dollars and a life 
cycle cost baseline in base year dollars, without providing any 
details in the BAR on how these costs were converted.[Footnote 50] For 
example, sunk costs presented in the time-phased estimates were 
sometimes converted to base year dollars in the life cycle cost 
baseline and other times not converted. Four of the life cycle costs 
baselines contained sunk costs that were not converted. Not converting 
these costs to base year dollars means these costs were underestimated 
in the life cycle cost baseline. However, it is not possible to assess 
by how much these costs are underestimated since, in some cases, life 
cycle cost estimates did not include details on the span of years 
included in sunk costs. Without knowing which years are covered or 
being able to account for the costs per year, we were unable to verify 
the estimates for sunk costs. 

Life Cycle Cost Baselines Are Not Based on High-Quality Cost Estimates: 

We assessed MDA's life cycle cost estimates using the GAO Cost 
Estimating and Assessment Guide that is based on best practices in 
cost estimating and which identifies key criteria for establishing 
high quality cost estimates.[Footnote 51] Our analysis of the 12 life 
cycle cost estimates that formed the basis of the 12 life cycle cost 
baselines in the 2010 BAR found that only 6 of these estimates matched 
the costs that were reported in the BAR. The 6 estimates that did not 
match the BAR baselines--Aegis Ashore, Aegis BMD SM-3 Block IB missile 
and associated software upgrades for shipsets, C2BMC Spiral 6.4, GMD, 
SBX capability deliveries, and current THAAD capability configuration-
-were therefore excluded from further analysis.[Footnote 52] Of the 
remaining 6 life cycle cost estimates, none fully met the 4 
characteristics of high-quality cost estimates as established by the 
GAO Cost Estimating and Assessment Guide. 

According to the GAO Cost Estimating and Assessment Guide, the cost 
estimate is part of a total systems analysis and is a critical element 
in any acquisition process to help decision makers evaluate resource 
requirements at milestones and other important decision points. Cost 
estimates establish and defend budgets and drive affordability 
analysis. The guide identifies 12 steps necessary for developing a 
high-quality cost estimate.[Footnote 53] According to the guide, 
documentation is a pervasive requirement throughout the 12 steps 
needed to establish a reliable cost estimate. The detailed 
documentation called for in the guide addresses the purpose of the 
estimate, the program background and system description, its schedule, 
the scope of the estimate (in terms of time and what is and is not 
included), the ground rules and assumptions, all data sources, 
estimating methodology and rationale, the results of the risk 
analysis, and a conclusion about whether the cost estimate is 
reasonable. A cost estimate is much more than just a single number. It 
is a compilation of many lower-level cost element estimates that span 
several years, based on the program schedule. Therefore, a good cost 
estimate--while taking the form of a single number--is supported by 
detailed documentation that describes how it was derived and how the 
expected funding will be spent in order to achieve a given objective. 
This documentation should include enough detail that a cost analyst 
unfamiliar with the program could recreate it quickly with the same 
result. 

Our research has identified a number of best practices that are the 
basis of effective program cost estimating and should result in 
reliable and valid cost estimates that management and key decision 
makers can use for making informed decisions. These four 
characteristics of a high-quality and reliable cost estimate are 
comprehensive, well documented, accurate, and credible. A cost 
estimate is considered: 

* Comprehensive: when it accounts for all possible costs associated 
with a project, details all cost-influencing ground rules and 
assumptions, is technically reasonable, is structured in sufficient 
detail to ensure that costs are neither omitted nor double-counted, 
and the estimating teams' composition is commensurate with the 
assignment; 

* Well-documented: when supporting documentation for the estimate is 
accompanied by a narrative explaining the process, sources, and 
methods used to create the estimate and contains the underlying data 
used to develop the estimate; 

* Accurate: when the estimate is not overly conservative or too 
optimistic and is based on an assessment of the costs most likely to 
be incurred; and: 

* Credible: when the estimate has been cross-checked with independent 
cost estimates, the level of confidence associated with the point 
estimate has been identified, and a sensitivity analysis has been 
conducted--that is, the project has examined the effect of changing 
one assumption related to each project activity while holding all 
other variables constant in order to identify which variable most 
affects the cost estimate.[Footnote 54] 

Although MDA cost officials stated that MDA followed the GAO Cost 
Estimating and Assessment Guide for building cost estimates and 
baselines, the documentation that MDA provided for the 6 life cycle 
cost estimates contained insufficient evidence to meet the 
characteristics of a high-quality cost estimate. In our analysis, we 
used ratings to describe how much of the criteria the documentation 
met toward being comprehensive, well-documented, accurate, and 
credible. The ratings we used were as follows: "Met" means that the 
program provided documentation that satisfied the criterion; 
"Substantially met" means that the program provided the majority of 
the documentation to satisfy the criterion; "Partially met" means that 
the program provided documentation satisfying part of the criterion; 
"Minimally met" means that the program provided documentation 
satisfying a minor part of the criterion; and "Not met" means that the 
program did not provide documentation that satisfied the criterion. 
See figure 2 for the results of our review of the 6 estimates. 

Figure 2: GAO Analysis of MDA Cost Estimates against the Four 
Characteristics of High-Quality and Reliable Cost Estimates: 

[Refer to PDF for image: illustrated table] 

Future Aegis BMD ship software upgrades[A]: 
Comprehensive: Partially Met; 
Well documented: Partially Met; 
Accurate: Partially Met; 
Credible: Minimally Met. 

AN/TPY-2[B]: 
Comprehensive: Partially Met; 
Well documented: Partially Met; 
Accurate: Partially Met; 
Credible: Minimally Met. 

Short range ballistic missile target[C]: 
Comprehensive: Partially Met; 
Well documented: Minimally Met; 
Accurate: Minimally Met; 
Credible: Minimally Met. 

Medium range ballistic missile target[C]: 
Comprehensive: Partially Met; 
Well documented: Minimally Met; 
Accurate: Minimally Met; 
Credible: Minimally Met. 

Intermediate range ballistic missile target[C]: 
Comprehensive: Partially Met; 
Well documented: Minimally Met; 
Accurate: Minimally Met; 
Credible: Minimally Met. 

Intercontinental range ballistic missile target[C]: 
Comprehensive: Minimally Met; 
Well documented: Minimally Met; 
Accurate: Minimally Met; 
Credible: Not Met. 

Source: MDA data; GAO analysis. 

[A] Future Aegis BMD ship software upgrades refer to software version 
5.0. See appendix III for details on this software version. 

[B] The cost estimate was for a portion of the AN/TPY-2 element's 
costs related to two capability deliveries. 

[C] The Targets and Countermeasures program manages the short-range, 
medium-range, intermediate-range, and intercontinental ballistic 
missile efforts. 

[End of figure] 

The 6 estimates were not fully comprehensive because they did not 
provide enough detail to enable us to determine if all government and 
contractor costs had been included, and it was unclear if the cost 
estimate was derived from a detailed work breakdown structure allowing 
us to check if all of the life cycle costs were fully accounted for. 
In addition, 4 of the estimates did not include the historical data 
necessary to back up given assumptions. The estimates were not well 
documented in 5 cases because the estimates lacked documentation 
necessary to be able to recreate the estimates, and further did not 
include an electronic cost model to provide the information necessary 
to understand how each estimate was created. The remaining estimate 
was not considered well documented because, in some instances, it did 
not provide enough information on how cost factors were derived, and 
cited methodology but did not include the backup analysis to support 
it. None of the estimates met the standards for accuracy. For example, 
four of the estimates did not provide a confidence level in the 
estimate making it impossible to determine if the estimate was 
unbiased and based on most likely costs, did not provide access to the 
detailed calculations used in the estimate, or did not provide the 
historical data to allow us to check the reliability of the sources or 
how data is verified for accuracy. The other two cost estimates lacked 
accuracy because discrepancies existed on costs among several of the 
documents provided or the costs did not match the summary estimates 
reported in the BAR. Finally, costs associated with the estimates 
lacked credibility because none of the six estimates performed a cost 
sensitivity analysis, provided evidence that cost driver cross checks 
were performed, or completed independent cost estimates. In addition, 
MDA performed a cost and risk uncertainty analysis on only one of the 
six estimates, without which the estimate lacks the level of 
confidence associated with achieving the cost estimate. 

As discussed above, one of the criteria for a credible cost estimate 
is having an independent cost assessment. Other DOD major defense 
acquisition programs are required to perform an independent cost 
estimate before advancing through major milestones.[Footnote 55] 
Because of the flexibilities granted in 2002, MDA is not required to 
obtain independent cost estimates for its programs, and has not 
otherwise required their programs to do so.[Footnote 56] The Office of 
the Director for Cost Assessment and Program Evaluation (CAPE) has 
performed independent cost estimates for the Aegis BMD program as well 
as portions of other MDA programs in the past including the STSS and 
GMD programs. More recently, the CAPE performed an independent cost 
estimate of THAAD procurement costs. MDA has committed to work with 
the CAPE to develop cost estimates for other MDA elements in the 
future. MDA's plans to work with the CAPE to develop cost estimates 
for more MDA elements will contribute to the credibility of its 
estimates. 

[End of section] 

Appendix III: Aegis Ballistic Missile Defense (Aegis BMD) with 
Standard Missile-3 Interceptor: 

Fiscal Year 2010 Events: 
* Activities in fiscal year 2010--including the new European PAA--
brought new challenges to the Aegis BMD portfolio; 
* MDA restructured Aegis BMD into a program executive office with four 
programs, including Aegis BMD 4.0.1/SM-3 IB, Aegis Ashore, and Aegis 
BMD 5.1/SM-3 IIA; 
* MDA requested $2.16 billion for fiscal year 2011, an 18 percent 
increase from last year's request; 
* MDA added BMD 3.6.1 capability to two ships. DOD established Aegis 
Ashore, which will be based on Aegis 5.0 and the SM-3 IB interceptor; 
* MDA held several program reviews for Aegis BMD 4.0.1, Aegis Ashore, 
and Aegis 5.0. 

What You Need To Know: 
* Comprising about 26 percent of MDA's total fiscal year 2011 budget 
request, Aegis BMD is poised to be MDA's largest single investment in 
a BMDS element; 
* Target availability delayed a key flight test expected to 
demonstrate performance of Aegis BMD 3.6.1 with SM-3 Block IA for 
European PAA Phase I; 
* Progress of Aegis 4.0.1 with SM-3 Block IB is limited by delay in 
development of the Throttleable Divert Attitude Control System 
(TDACS), an interceptor component; 
* Aegis BMD 5.0 features highly integrated hardware and software and 
is a key dependency of the new Aegis Ashore program. 

Background and Overview: 

Aegis BMD is a sea-based missile defense system being developed in 
incremental, capability-based blocks to defend against enemy ballistic 
missiles of all ranges. Components include the shipboard SPY-1 radar, 
command and control systems, and Standard Missile 3 (SM-3). MDA 
continues to develop Aegis BMD in spirals for the weapon system and 
variants of the SM-3 interceptor. Following the shift in DOD's 
strategy for the defense of Europe from one that relied on the Ground-
based Midcourse Defense interceptors in Poland and the Czech Republic, 
Aegis BMD became the centerpiece of DOD's new European PAA. Successive 
variants of Aegis with the SM-3 interceptor are designed to improve 
performance against increased threat missile range, type, and raid 
size. The currently deployed system is Aegis BMD 3.6.1 with SM-3 IA, 
which is designed to hit short-to medium-range threat missiles. The 
next generation version is Aegis BMD 4.0.1 with SM-3 IB which features 
an improved (two-color) target seeker, an advanced signal processor, 
and an improved divert/attitude control system for adjusting its 
course. Aegis BMD 5.0, scheduled for certification in 2014, does not 
add new functionality, but is designed to integrate Aegis BMD 4.0.1 
with the Navy's open architecture system, which would enable any Aegis 
ship to perform the BMD mission. A new land-based version--Aegis 
Ashore--will have its first configuration as Aegis BMD 5.0 with SM-3 
IB, scheduled to become operational in fiscal year 2015 (see appendix 
IV). 

Aegis BMD did not conduct any developmental intercept flight tests in 
fiscal year 2010, although it did participate in several other BMDS 
flight and ground tests to assess BMD functionality and 
interoperability with the BMDS.[Footnote 57] During fiscal year 2010, 
MDA expected to conduct FTM-15 to demonstrate Aegis 3.6's ability to 
launch the SM-3 IA interceptor using data from a remote sensor against 
an intermediate-range ballistic missile target. However, the flight 
test has been delayed due to target availability. This had a ripple 
effect on other scheduled events, resulting in a delay in 
demonstrating key capabilities of Aegis 3.6.1 with SM-3 IA and Aegis 
4.0.1 with SM-3 IB. The FTM-15 is key to demonstrating capability of 
the IA interceptor to engage threat missiles in the range expected for 
European PAA Phase I, planned for deployment by December 2011. In 
other testing, a Japanese Aegis BMD destroyer conducted a successful 
intercept of a separating target using an SM-3 IA interceptor. 

Progress of Aegis 4.0.1 with SM-3 Block IB Limited by Delay in 
Development of TDACS, an Interceptor Component: 

Aegis 4.0.1 with SM-3 IB has executed more slowly than expected in 
fiscal year 2010. At the last execution review of the fiscal year, 
progress toward verifying the SM-3 IB engagement capability required 
action, and 6 of the 14 development phase exit criteria tracking 
program execution were assessed as not on track, including those 
related to requirements, affordability, design, manufacturing, and 
weapon system safety. The slower pace primarily reflects delays in SM- 
3 IB interceptor development. 

Aegis 4.0.1, with the SM-3 IB interceptor, is expected to have 
increased discrimination, engagement coordination, threat missile 
range capability and raid capacity. Technology development of the 
interceptor's Throttleable Divert Attitude Control System (TDACS) is 
following a high-risk path due to continuing resolution of issues 
discovered during sub-assembly hazard testing. The TDACS issues relate 
to the operational suitability and expected lifetime of the 
interceptor. The first intercept flight test, FTM-16, was moved into 
the third quarter fiscal year 2011 to allow time to investigate and 
resolve the issues. FTM-16 is critical to demonstrating the 
interceptor performance, as well as being required to certify the 
Aegis combat system. According to the Director, MDA, the flight test 
was rescheduled to allow time to complete qualification tests. Design 
verification and qualification tests validate component performance, 
reliability and producibility. MDA has since determined the root cause 
of the TDACS problem and identified two design improvements. However, 
due to continuing delays redesigned TDACS components will not be 
included in the interceptor manufactured for FTM-16; instead, it will 
be manufactured using a new process control to partially mitigate the 
issue. Further, MDA has since decided to conduct the flight test in 
the fourth quarter of fiscal year 2011 without completing the 
qualification tests as originally planned. The TDACS qualifications 
and verifications leading up to the FTM-16 intercept test will be 
limited to the environmental conditions expected during the FTM-16 
event. Following FTM-16, the design changes to the TDACS will require 
the full set of design and qualification testing. 

We reported in February 2010 that planned interceptor production would 
precede knowledge of interceptor performance, and recommended that MDA 
delay a decision to produce interceptors to follow successful 
completion of developmental testing, a flight test, and manufacturing 
readiness review. We reported again in December that the SM-3 IB test 
schedule was not synchronized with planned production and financial 
commitments. This schedule had become even more compressed as a result 
of TDACS redesign, and planned requalification. As a result, MDA 
recently deferred planned interceptor production decisions to follow 
redesign efforts, the manufacturing readiness review, and an 
additional flight test; steps that could better inform those 
production decisions. 

While MDA characterized the first 30 interceptors as being test 
rounds, half remain unassigned to a specific test. Furthermore, of 
those interceptors assigned to a test, some may be produced earlier 
than necessary since they deliver 1 to 2 years prior to the scheduled 
test. Program officials note the unassigned "test" rounds will provide 
information on reliability, maintainability, and supportability, and 
verify cost estimates and production processes. 

Aegis BMD 5.0 Features Highly Integrated Hardware and Software and Is 
a Key Dependency of the New Aegis Ashore Program: 

Aegis BMD 5.0 will not provide new mission capability; instead it will 
leverage the Navy's Aegis modernization effort, which transitions the 
cruisers' and destroyers' computers and displays from military 
standard to commercial-off-the-shelf components. The modernization 
effort will increase the number of cruisers and destroyers that have 
the potential to be BMD capable from 27 to 84, and the installation of 
Aegis 5.0 in conjunction with the modernization will add the BMD 
capability. Once Aegis 5.0 is available, Aegis ships with version 
3.6.1 may be upgraded directly to 5.0, instead of undergoing an 
interim installation of 4.0.1 (estimated at $52 million per ship). 
Although it does not add new mission capability, the migration into an 
open architecture environment requires significant modification and 
testing of 8 of 10 major components of the Aegis weapons system. 
Execution reviews already show signs of schedule compression and 
interdependencies of multiple efforts increase schedule risk. As the 
European PAA's new Aegis Ashore program is highly dependent on the 
scheduled delivery of Aegis 5.0, delays could have significant 
consequences for providing European BMD capability as planned (see 
appendix IV). 

[End of section] 

Appendix IV: Aegis Ashore with Standard Missile-3 Block IB (European 
PAA Phase II): 

Fiscal Year 2010 Events: 
* MDA established the Aegis Ashore program office in early fiscal year 
2010; 
* MDA held developmental baseline and baseline execution reviews for 
Aegis Ashore; 
* MDA prepared two program cost estimates; although the planned, 
independent cost estimate was not completed; 
* DOD selected the first two land-based sites for fielding the 
European Phased Adaptive Approach (Romania in 2015 and Poland in 2018); 
* MDA awarded the contract to design new Aegis Ashore system 
components, including deckhouse and enclosures for component systems; 
* DOD began expansion of the Pacific Missile Range Facility to support 
testing and development for the European PAA. 

What You Need To Know: 
* Aegis Ashore was announced in September 2009 as part of the European 
PAA; 
* Technical analysis supporting the selection of Aegis Ashore for the 
European PAA is unclear; 
* Highly concurrent acquisition activity results in significant cost, 
schedule, and performance risk; 
* Development uncertainties remain and various Aegis components 
require modification for a land-based configuration; 
* Deckhouse and vertical launching system (VLS) enclosures design are 
not complete; 
* Flight tests reduced from previous plan, not timed to inform 
production commitments. 

Background and Overview: 

Aegis Ashore is MDA's future land-based variant of the ship-based 
Aegis BMD. It is expected to track and intercept ballistic missiles in 
their midcourse phase of flight using Standard Missile-3 (SM-3) 
interceptor variants as they come available. Key components include 
the Aegis SPY-1 radar, command and control system, vertical launching 
system (VLS), SM-3 missiles and removable enclosures for the systems 
to facilitate worldwide deployment. DOD expects to deploy the first 
Aegis Ashore with the SM-3 block IB in fiscal year 2015 as part of the 
European Phased Adaptive Approach (PAA). 

Technical Analysis Supporting Selection of Aegis Ashore for European 
PAA Is Unclear: 

According to the Director of MDA, the idea of Aegis Ashore preceded 
the new European PAA policy. Earlier in 2008 and 2009 MDA had been 
studying alternatives to the Arrow 3 program--a joint US-Israeli 
program designed for Israeli self-defense against short-range 
ballistic missiles. MDA's analysis had considered several land-based 
SM-3 options, and had concluded that an Aegis with SM-3 was the 
preferred option. It is unclear how assumptions and analysis related 
to Arrow-3 supported--and what if any additional technical analysis 
was conducted to support--the selection of Aegis Ashore for the 
European PAA. 

While MDA does not yet follow DOD's standard acquisition processes, a 
robust consideration of alternatives is a key first step in that 
process and is intended to assess the operational effectiveness, 
costs, and risks of alternative weapon system solutions for addressing 
a validated warfighting need. We reported in September 2009 that DOD 
often did not effectively consider a broad range of alternatives for 
addressing a warfighting need or assess technical and other risks 
associated with each alternative.[Footnote 58] Without a sufficient 
comparison of alternatives and focus on technical and other risks, 
reviews of alternatives may identify solutions that are not feasible 
and decision makers may approve programs based on limited knowledge. 
While many factors can affect cost and schedule outcomes, we found 
that programs that had a limited assessment of alternatives tended to 
have poorer outcomes than those that had more robust assessments. The 
Office of Cost Assessment and Program Evaluation is studying 
alternatives to Aegis Ashore.[Footnote 59] 

Highly Concurrent Acquisition Activity and Development Uncertainties 
Result in Significant Cost, Schedule and Performance Risk: 

A knowledge-based acquisition approach is a cumulative process in 
which certain knowledge is acquired by key decision points before 
proceeding. In other words, demonstrating technology maturity is a 
prerequisite for moving forward into system development, during which 
the focus should be on design and integration. The President's 
announcement of the European PAA on September 17, 2009 officially 
began Aegis Ashore, and MDA placed Aegis Ashore directly into the 
third acquisition development phase--product development. MDA 
officials note that this decision was due to the understanding that 
Aegis Ashore would be a modification of proven Aegis BMD capabilities. 
Yet Aegis Ashore has not yet completed some of the activities MDA 
outlines for its first two development phases (materiel solutions 
analysis and technology development), and is executing others 
concurrently with activities in the third development phase (product 
development). For example, although MDA's acquisition oversight 
process identifies the following top-level tenets for phase review 
entry/entrance criteria prior to entering the Product Development 
phase, Aegis Ashore had not: obtained an independent cost estimate, 
prepared a life cycle cost estimate, demonstrated critical 
technologies in the operational environment (land), or ensured 
interoperability and integration with the larger BMDS. MDA's knowledge 
points--typically identified during the first MDA acquisition phase-- 
identify information required to make key decisions (e.g. program 
funding decisions, technology selections, capability declarations, 
program continuation, or the selection of an alternative course of 
action) and manage program risk. MDA's knowledge points for Aegis 
Ashore were completely redefined less than 3 months after being 
established. 

DOD's commitment to field Aegis Ashore by 2015 has resulted in 
significant schedule compression for the program, even as MDA 
discovered issues that broadened the scope of development and design, 
placing the program at increased risk of cost growth and schedule 
delay. According to the Director, MDA, Aegis Ashore development is not 
a high risk because it is based on the existing Aegis BMD system. 
However, while Aegis BMD has demonstrated performance at sea, these 
demonstrations used the currently fielded 3.6.1 version of Aegis BMD 
with the SM-3 IA interceptor, not the newer variant of the Aegis 
operating system and new interceptor that Aegis Ashore will use. Aegis 
Ashore is dependent on next-generation versions of Aegis systems--
Aegis 4.0.1 and Aegis 5.0--as well as the new SM-3 IB interceptor, all 
of which are currently under development (see appendix III). Moreover, 
a series of changes are required to further modify these new variants 
of Aegis BMD for use on land with Aegis Ashore. These modifications 
include changes to the VLS; suppression or disabling of certain 
features used at sea; design, integration, and fabrication of a new 
deckhouse enclosure for the radar, and potential changes to the SM-3 
IB interceptor. Changes to those existing Aegis BMD components that 
will be reused for Aegis Ashore may reduce their maturity in the 
context of the new Aegis Ashore program, and new features will require 
testing and assessment to demonstrate their performance. MDA plans to 
conduct both ground and flight tests prior to deployment, however 
these tests will not occur prior to making production decisions. 

Various Aegis Components Require Modification for a Land-Based 
Configuration: 

Aegis Ashore expects to leverage the existing shipboard Aegis Combat 
System--comprised of 32 sensors, communications, weapons, and 
countermeasures. However only 11 of these will be reused for Aegis 
Ashore; the remaining 21 will need to be suppressed or otherwise 
disabled, including the software that accounts for a ship's pitch and 
yaw. While officials note that current land-based testing processes 
for portions of the Aegis Combat System involve similar suppression, 
the Aegis Ashore land-based configuration is unique and must still be 
demonstrated through operational testing. 

The program office assessed both the SPY-1 radar and the VLS as flight 
proven through successful mission conditions, reflecting the 
assessment of the radar and VLS currently at sea. However, these 
systems will operate on land, and it is unclear whether the radar's 
spectrum supportability is fully understood or accounted for. Also, 
the VLS will be modified to address the differing protection, safety, 
and environmental requirements of its new land-based environment. 
Finally, MDA may modify the SM-3 Block IB for Aegis Ashore; the extent 
of these changes remains unknown. 

Deckhouse and VLS Enclosures Design Not Complete: 

Both the radar and the VLS will be configured in removable enclosures 
that have not yet been designed or tested. Also, Aegis Ashore's new 
deckhouse--instead of being integrated on a ship deck with the VLS and 
the ship's hull, mechanical, and electrical systems--will be 
configured apart from the VLS and these will require standalone power 
generation. The deckhouse design also requires that it be removable in 
order to facilitate shipment. However not all requirements are fully 
known, and although neither the deckhouse requirements or design are 
stable, the contract for Aegis Ashore deckhouse fabrication and 
integration was awarded prior to preliminary or critical design 
reviews for the overall Aegis Ashore system. The potential for rework 
because design starts before requirements are complete was noted as a 
continuing risk in the last program review of the fiscal year, and we 
have previously reported that starting fabrication prior to achieving 
design stability can lead to costly modifications later in the process 
due to rework. 

Aegis Ashore Flight Tests Reduced from Previous Plan, Not Timed to 
Inform Production Commitments: 

The number of planned developmental flight test events has been 
reduced since the Aegis Ashore program began and they are not timed to 
inform production decisions. In MDA's February 2010 test plan Aegis 
Ashore was scheduled to participate in 7 developmental flight test 
events, 5 of which were intercept events. The current plan is for 4 
test events, 2 of which are intercepts. The first intercept is now 
scheduled more than a year later than previously planned (see figure 
3). 

Figure 3: February 2010 and February 2011 Plans for Aegis Ashore 
Flight Test Events: 

[Refer to PDF for image: illustrated time line] 

Fiscal year: 2013; 
Test plan: Ver. 10.1 Feb. 2010; 
AA CTV-01 (quarter 1); 
AA FTM-01 (quarter 2); 
Test plan: Ver. 11.1 Feb. 2011; 
AA CTV-01 E1 (quarter 4); 
AA CTV-01 E2 (quarter 4). 

Fiscal year: 2014; 
Test plan: Ver. 10.1 Feb. 2010; 
AA FTM-02 (quarter 2); 
AA FTM-03 (quarter 4); 
Test plan: Ver. 11.1 Feb. 2011; 
AA FTM-01 E1 (quarter 3); 
AA FTM-01 E2 (quarter 3). 

Fiscal year: 2015; 
Test plan: Ver. 10.1 Feb. 2010; 
AA FTM-04 (2 intercepts) (quarter 2); 
AA FTX-01 (quarter 4). 

Test plan: Ver. 10.1 Feb. 2010; 
Total: 7; 
AA non-intercept events: 2; 
AA intercept events: 5. 

Test plan: Ver. 11.1 Feb. 2011; 
Total: 4; 
AA non-intercept events: 2; 
AA intercept events: 2. 

AA = Aegis Ashore. 
AA CTV = Aegis Ashore Controlled Test Vehicle. 
AA FTM = Aegis Ashore Flight Test Missile (interceptor). 
AA FTX = Aegis Ashore Flight Test Other (simulated intercept). 

Source: GAO analysis of MDA data. 

[End of figure] 

MDA officials indicate that the current plan is sufficient to collect 
data on critical variables and to evaluate weapon system performance 
in the Aegis Ashore configuration. We have previously reported that 
repetition of intercept-related objectives is important to build 
confidence in intercept capability. MDA plans to make production 
commitments for the first operational Aegis Ashore and its 
interceptors by early fiscal year 2012. The first intercept flight 
test with a target is planned for the second half of fiscal year 2014, 
at which point the design will have been finalized, the Aegis Ashore 
deckhouse and components built, and Aegis Ashore construction and 
interceptor production will be well under way. 

[End of section] 

Appendix V: Airborne Infrared (ABIR): 

Fiscal Year 2010 Events: 
* The ABIR program demonstrated the ability of infrared sensors aboard 
Unmanned Aerial System (UAS) to observe ballistic missiles in flight 
at long distances and improved sensor performance; 
* The ABIR program completed alternatives analysis and selected Multi-
Spectral Target System-class infrared sensor and MQ-9 Reaper ABIR 
experiments and demonstration efforts; 
* The ABIR program partnered with Air Force, Navy, and combatant 
commanders to develop risk reduction tests and preliminary operational 
concept; 
* The program participated in five ABIR tests demonstrating missile-
tracking accuracy. 

What You Need To Know: 
* The ABIR acquisition approach focuses on exploring the use of 
currently available technology; 
* MDA delayed fielding ABIR from fiscal year 2015 to fiscal year 2019; 
* MDA faces significant challenges in developing an operational system; 
* Delays in fielding ABIR prolong sensor coverage gaps in early 
intercept capabilities; 
* MDA's plan to field ABIR in fiscal year 2019 is inconsistent with 
justification for developing the program. 

Background and Overview: 

ABIR is being designed to track enemy ballistic missile raids soon 
after launch with airborne sensors forward in the theater in order to 
enable early intercept attempts. MDA began exploring a similar concept 
of an operational unmanned aerial system (UAS) infrared missile 
detection system with the Airborne Infrared System (AIRS) in fiscal 
year 2002. In fiscal year 2009, MDA began assessing new platform and 
sensor alternatives and decided to conduct ABIR experiments and 
demonstration efforts to determine the usefulness of UASs to perform 
missile defense missions. In addition, MDA plans to have an 
operational ABIR program fielded by fiscal year 2019 as part of Phase 
III of the Phased Adaptive Approach (PAA) for the defense of Europe 
and the United States. 

The ABIR Acquisition Approach Focuses on Exploring the Use of 
Currently Available Technology: 

MDA is following a different acquisition approach for ABIR than it has 
with some of its other acquisition development programs, according to 
program officials. Rather than developing a system from the ground up, 
MDA is using existing technology to demonstrate the usefulness of UAS 
infrared sensors to perform early missile tracking. ABIR experiments 
and demonstrations will inform the requirements for an operational 
system. To facilitate this process, MDA will utilize experiments and 
demonstrations to meet dedicated knowledge points, such as verifying 
the infrared sensor's performance, assessing missile raid size 
handling, and launching an interceptor on ABIR sensor tracks. For the 
experiments and demonstration efforts, MDA and the Air Force jointly 
conducted an analysis of alternatives to select the infrared sensor 
and decided on the Multi-Spectral Target System-class sensor, an 
infrared sensor with built-in integration to UASs that was used in 
earlier risk-reduction activities for ABIR. Program officials stated 
that MDA collaborated with the Air Force and determined that the MQ-9 
Reaper, a medium-to-high altitude, long endurance UAS, best fit both 
MDA's and the Air Force's needs. While ABIR will use the Multi-
Spectral Target System-class sensor and the MQ-9 Reaper, according to 
program officials, the operational system will be selected through 
industry competition. To that end, program officials stated they are 
developing the prototypes so that they are not necessarily tied to a 
specific UAS or sensor platform to enhance future competition. 

MDA Delayed Planned Fielding of ABIR from Fiscal Year 2015 to Fiscal 
Year 2019: 

MDA decided to delay fielding ABIR to fiscal year 2019 in order to 
further explore the usefulness of forward based airborne sensors to 
the BMDS, follow a more knowledge-based acquisition approach, and 
alleviate funding constraints. MDA initially planned to deliver six 
ABIR platforms by fiscal year 2015 and participate in Phase II of the 
PAA. However, MDA decided to delay fielding to fiscal year 2019 and 
participate in Phase III of the PAA to allow MDA more time to 
experiment and demonstrate the usefulness of forward-based UASs for 
early intercept missile tracking. Technical development challenges 
exist, such as achieving a three dimensional track of boosting 
missiles within a tactically significant timeframe and operationally 
realistic setting as well as tracking mass raid sizes. Officials from 
the Office of the Under Secretary of Acquisition, Technology and 
Logistics have stated concerns about the Precision Tracking Space 
System's (PTSS) planned capability to accomplish similar objectives. 
MDA plans to conduct experiments and progressively demonstrate key 
knowledge points in order to determine the usefulness of ABIR to the 
BMDS. 

In addition, although DOD has defined an initial operational concept 
for ABIR, DOD has identified challenges in determining a concept of 
operations for ABIR. DOD's initial operational concept is based on 
persistent coverage of a threat area by ABIR platforms for a limited 
duration, also referred to as a surge role. The intent is to maintain 
non-stop pre-determined orbits during periods of heightened tension, 
and thereby provide missile launch coverage. According to MDA 
officials, MDA does not plan to acquire UASs specifically for ABIR. 
Instead, MDA plans on adding missile-tracking capabilities to pre- 
existing UASs. The UASs that serve the ABIR role will be able to 
perform normal assignments and tasks when not being used for the BMDS 
mission. Program officials also stated that they are exploring the 
potential of using a detachable sensor pod or sensor processing "kit" 
to enhance the flexibility of the ABIR operational system. However, 
DOD officials have identified operational challenges, such as 
operating UASs in controlled airspaces, developing a sensor that can 
interface with multiple UASs, and matching availability of UASs to 
meet operational needs of an effective ABIR system. 

By allowing more time for ABIR experiments and demonstrations, MDA is 
following a more knowledge-based acquisition approach. Program 
officials stated that in order to meet timelines in the initial fiscal 
year 2015 schedule, the program schedule included a lot of concurrency 
where production decisions would occur before adequate testing had 
been conducted. As a result, MDA decided, in part, to delay fielding 
ABIR until fiscal year 2019 to ensure operationally realistic testing 
occurs before new capabilities are deployed--a key tenet of the 2010 
Ballistic Missile Defense Review. For years, we have reported that MDA 
has allowed concurrent development, testing and fielding of BMDS 
elements at the expense of cost and performance. By delaying ABIR 
fielding to allow time to experiment and demonstrate planned 
capabilities, MDA is following a more knowledge-based acquisition 
approach. 

In addition, MDA recognized budgetary constraints as a challenge to 
fielding an operational ABIR system by fiscal year 2015. According to 
MDA, accelerating ABIR and integrating the capability into Phase II of 
the PAA in fiscal year 2015 would have required significant funding 
and put the program on a high-risk path. MDA stated that the current 
2018 capability delivery allows more time for sensor technology 
development, integration and testing of sensor capabilities on an 
unmanned aircraft, and integrating ABIR into the PAA Phase III 
architecture. 

Delays in Fielding ABIR Prolong Sensor Coverage Gaps for Additional 
Early Intercept Capabilities: 

Delays in fielding ABIR prolong sensor coverage gaps to track missiles 
early after launch and delay plans for additional early intercept 
capabilities. MDA discovered there were sensor coverage gaps in its 
ability to acquire and track large ballistic missile raid sizes, 
intercept ballistic missiles earlier in its trajectory, assess 
intercept attempts in real-time, and launch additional interceptors if 
necessary. Currently, the sensor systems of the BMDS consist of radar 
sensors, such as Sea Based X-band Radar (SBX) and Army-Navy/ 
Transportable Radar Surveillance (AN/TPY-2). ABIR is being designed to 
fill these sensor coverage gaps by tracking large missile raid sizes 
soon after launch to enable earlier intercepts. 

Although MDA plans to deploy a forward-based AN/TPY-2 radar that can 
perform early missile tracking in southern Europe by fiscal year 2011, 
the radar has limitations in providing early intercept capabilities. 
The radar has limitations in its ability to search for missile 
launches while simultaneously tracking missiles already in flight. 
According to program officials, one of the primary benefits of ABIR is 
its ability to free the AN/TPY-2 radar from its search roles, which 
substantially increases AN/TPY-2's tracking capabilities. Utilizing 
additional sensors, such as ABIR and PTSS, will increase capabilities 
for sensor coverage for early missile intercepts. 

MDA's Plan to Field ABIR by Fiscal Year 2019 Is Inconsistent with 
Justification for Developing the Program: 

ABIR will not be fielded sooner than PTSS, which is inconsistent with 
a major justification for developing the program. MDA has stated that 
a major reason for the ABIR program is that it could provide infrared 
tracking sooner than fielding a space-based infrared system. Infrared 
tracking is a necessary capability, according to MDA, because it can 
fill gaps in sensor coverage that currently exist in the BMDS. In 
2002, the Senate Armed Services Committee recognized that MDA had no 
near-term plans to provide infrared tracking to missile defense 
systems. Plans to develop a space-based infrared system had been 
delayed so the committee urged MDA to aggressively pursue an airborne 
infrared program, the AIRS program, to fill sensor coverage gaps. 
According to program officials, MDA conducted some airborne data 
collection activities under the AIRS program but did not test infrared 
sensors with UASs until fiscal year 2010 under the ABIR program. MDA 
currently plans to field an operational ABIR system by fiscal year 
2019, near the same time PTSS will be fielded. Since developing ABIR 
to fill the sensor coverage gaps until an operational space-based 
sensor could be fielded is a major justification for the program, 
MDA's current plan to field both systems at the same time is 
inconsistent with that justification. MDA officials noted that while 
both ABIR and PTSS are infrared systems, they are not duplicative 
systems because they provide different capabilities. For example, ABIR 
is capable of acquiring and tracking ballistic missiles earlier than 
PTSS and has the flexibility to deploy to multiple combat theaters to 
help meet combatant commander needs. 

[End of section] 

Appendix VI: Airborne Laser Test Bed (ALTB): 

Fiscal Year 2010 Events: 
* After nearly 14 years of development and more than $5 billion, the 
airborne laser successfully conducted its first lethal destruction of 
a target in February 2010; 
* A subsequent attempt at lethal demonstration was conducted in 
September 2010, but was unsuccessful due to corrupted beam control 
software. 

What You Need To Know: 
* Continuing cost, schedule, and technology challenges led to changing 
the program to a test bed; 
* Technical issues continued to affect the test bed's experiments 
throughout fiscal year 2010 and into early fiscal year 2011; 
* MDA is working with the Director of Defense Research and Engineering 
and High Energy Laser Joint Technology Office to shape the future of 
the ALTB. 

Background and Overview: 

The Airborne Laser program has faced many challenges to demonstrating 
that all of its leading technologies work. Since its inception in 
1996, the program has also faced many schedule delays and cost 
increases, totaling approximately 7-½ years and approximately $4 
billion dollars. Consequently, affordability and technical problems as 
well as concerns about the Airborne Laser's long-term operational role 
prompted DOD to designate the program as a test bed. As a test bed, 
the ALTB does not have an operational mission and is not equipped to 
be an operational asset. The primary goal of the ALTB is to 
demonstrate the potential of using directed energy as a viable 
technology against ballistic missiles. The decision to change the role 
of airborne laser came after spending more than $5 billion on its 
development. 

Test Bed's First Lethal Demonstration Was Successful: 

In February 2010, MDA demonstrated that the ALTB could successfully 
destroy a short-range threat-representative ballistic missile during 
the boost phase. This test marked the first directed energy intercept 
demonstration against a liquid-fueled boosting missile target from an 
airborne platform. The entire engagement occurred within 2 minutes of 
the target missile launch, while the target's rocket motors were still 
thrusting. 

Less than 1 hour later, a solid-fuel missile was launched, but the 
system did not destroy the target because the laser shut down 
prematurely. During this engagement, the system detected increased 
laser light levels, which prompted the system to abort the test. 
Historically, these types of aborts are due to scattering of laser 
light which could prevent the system from successfully destroying the 
target missile. 

Subsequent Flight Tests Were Unsuccessful: 

In September 2010, after overcoming a number of technical problems 
during ground and flight test preparations, MDA attempted to destroy 
another target using the ALTB, but failed to destroy the target. The 
ALTB successfully detected and tracked the target, but corrupted beam 
control software steered the high energy laser slightly off center. 
The ALTB safety system detected this shift and shut down the high 
energy laser. 

MDA conducted another flight test in October 2010 against a solid-fuel 
missile. However, while the system seems to have successfully acquired 
and tracked the plume or rocket exhaust of the target, it never 
transitioned to active tracking. As a result, the laser was not fired. 
The laser incorrectly reported that it was not ready and the safety 
default aborted the engagement. The program's failure review board 
determined that the cause of the failure was a single micro-switch on 
a valve that incorrectly reported that the valve was closed. Neither 
the program's failure review board nor the contractor working with the 
valve and micro-switch component vendors was able to determine the 
root cause of the part failure. The board noted that it would take an 
extensive test program to attempt to determine the root cause and/or 
design a replacement micro-switch to determine or eliminate the root 
cause. However, it recommended corrective actions which were 
implemented by the program. According to program officials, the valves 
were replaced and new software procedures were implemented to ensure 
that this type of problem would not cause a system abort in the future. 

The Future of the ALTB: 

MDA is working with the Director of Defense Research and Engineering 
and High Energy Laser Joint Technology Office to shape the future of 
the ALTB. The Secretary of Defense directed a joint study of the ALTB 
that was to be completed in June 2010. However, as of February 2011, 
the report was not available. Agency officials also told us that MDA 
has commissioned a Scientific Review Committee and an Executive 
Steering Group to develop a science and technology plan for the ALTB. 
The committee and steering group, consist of subject matter experts 
from the Air Force Research Laboratory, the High Energy Laser Joint 
Technology Office, and the Director of Defense Research and 
Engineering. 

The Director of Defense Research and Engineering has also been tasked 
with annually assessing the ALTB for high power laser research and 
development. MDA will maintain the airborne laser aircraft as a 
potential test bed for ground and flight tests to characterize high 
energy laser research pending the results of the Director of Defense 
Research and Engineering study. 

[End of section] 

Appendix VII: BMDS Sensors: 

Fiscal Year 2010 Events: 
* MDA completed first version of common software development 
qualification which increases the flexibility and interchangeability 
of the AN/TPY-2 radar for forward-based and terminal-based modes; 
* BMDS Sensors participated in ground and flight tests with other 
elements, including GMD and THAAD; 
* Joint Chiefs of Staff made the decision to deploy an AN/TPY-2 radar 
to U.S. Central Command in fiscal year 2011; 
* Transition of Thule Upgraded Early Warning Radar (UEWR) sustainment 
to the Air Force was completed in fiscal year 2011. 

What You Need To Know: 
* AN/TPY-2 is a major component of Phases I and II of the Phased, 
Adaptive Approach; 
* Although AN/TPY-2 will provide early intercept capabilities, 
additional sensors may be needed to enhance early intercept 
capabilities; 
* MDA is on track to deliver 13 operational AN/TPY-2 radars by fiscal 
year 2017; 
* MDA plans to hand over operational control of Sea-based X-band Radar 
(SBX) to the Navy in fiscal year 2012; 
* The SBX program experienced a significant failure during FTG-06 and 
attempted to demonstrate a correction in FTG-06a; 
* DOD has not yet made a decision to upgrade Cobra Dane, an important 
part of the BMDS sensor suite. 

Background and Overview: 

The current generation of Ballistic Missile Defense System (BMDS) 
sensors includes the following: 

* AN/TPY-2 is a transportable X-band high resolution radar that is 
capable of tracking all classes of ballistic missiles. AN/TPY-2 in the 
forward-based mode (FBM) is capable of detecting missiles early after 
launch to support Aegis Ballistic Missile Defense (BMD) and GMD 
engagements. AN/TPY-2 in the terminal mode (TM) can track missiles in 
the later stages of flight to support THAAD. 

* SBX is a radar capable of tracking, discriminating, and assessing 
the flight characteristics of ballistic missiles. SBX primarily 
supports GMD for homeland defense and can guide interceptor missiles 
while in flight. 

* Upgraded Early Warning Radars (UEWR) are U.S. Air Force early 
warning radars that are upgraded and, when integrated into the BMDS, 
provide sensor coverage for critical early warning, tracking, object 
classification, and cueing data. UEWRs are located in Beale, 
California; Fylingdales, United Kingdom; and Thule, Greenland. MDA 
also plans to upgrade the early warning radar in Clear, Alaska. 

* Cobra Dane radar is a U.S. Air Force radar located in Shemya, Alaska 
that has been upgraded and integrated into the BMDS to provide missile 
acquisition, tracking, object classification, and cueing data. 

AN/TPY-2 Is a Major Component in Phases I and II of the Phased 
Adaptive Approach: 

MDA currently plans to deploy an AN/TPY-2 (forward-based mode) radar 
in southern Europe in 2011 as part of Phase I of the Phased, Adaptive 
Approach (PAA). The addition of the radar will significantly increase 
the size of the area that can be defended with Aegis BMD. Radar tracks 
from AN/TPY-2 will be used to provide early tracking information to 
enhance homeland defense assets. MDA will deploy AN/TPY-2 to southern 
Europe as part of the PAA to give the BMDS a continuous tracking and 
discrimination capability with more opportunities to engage the 
target, when coupled with other sensors, resulting in a greater 
probability for a successful intercept. 

Although AN/TPY-2 Will Provide Early Intercept Capabilities, 
Additional Sensors May Be Needed to Enhance Early Intercept 
Capabilities: 

Although AN/TPY-2 will provide missile coverage that will provide 
early intercept capabilities, the radar also has limitations in its 
capabilities. The AN/TPY-2 radar, like most other radars, is 
susceptible to adverse weather conditions. In addition, X-band radars 
can become overwhelmed due to their high detection sensitivity as 
exhibited by AN/TPY-2 during a 2009 event. In addition, forward-basing 
AN/TPY-2 radars come with diplomatic challenges to develop host nation 
agreements, have significant operation and sustainment costs, and need 
multi-layered force protection. Lastly, the radar has inherent 
capability limitations that necessitate the need for additional 
sensors. 

AN/TPY-2 capability limitations can be mitigated, according to MDA 
officials, by utilizing additional infrared sensor systems, such as 
the future PTSS and ABIR programs. MDA is developing PTSS, a space-
based infrared sensor satellite constellation, and ABIR, infrared 
sensors used aboard unmanned aircraft systems, to detect and track 
missile launches. Infrared sensors can help provide early missile 
launch acquisition and tracking while avoiding many of the limitations 
of radars. For example, according to MDA budget documentation, a small 
constellation of PTSS satellites can provide coverage equivalent to 50 
AN/TPY-2 radars or 20 SBX radars. MDA plans to field a PTSS 
constellation by fiscal year 2018 and ABIR system by fiscal year 2019. 
Any delays in fielding additional infrared sensors to augment the AN/ 
TPY-2 in southern Europe could significantly affect the planned 
capability to defend the United States and Europe from ballistic 
missile attack. 

MDA Is on Track to Deliver 13 Operational AN/TPY-2 Radars by Fiscal 
Year 2017 for European Missile Defense, Forward-Based Missions, and 
THAAD Deployment: 

MDA plans to produce 14 radars by fiscal year 2017, the first of which 
is developmental, and the other 13 of which will be operational. MDA 
has currently delivered 4 AN/TPY-2 radars, all of which were delivered 
on schedule. Table 8 describes MDA's current plans to deliver AN/TPY-2 
radars. 

Table 8: Current Delivery Plans for AN/TPY-2: 

AN/TPY-2 ID: #1; 
Planned assignment: Development; 
Date of delivery to user: N/A. 

AN/TPY-2 ID: #2; 
Planned assignment: Japan; 
Date of delivery to user: 2006. 

AN/TPY-2 ID: #3; 
Planned assignment: Israel; 
Date of delivery to user: 2007. 

AN/TPY-2 ID: #4; 
Planned assignment: Southern Europe (location TBD); 
Date of delivery to user: 2012. 

AN/TPY-2 ID: #5; 
Planned assignment: THAAD Battery #1 (location TBD); 
Date of delivery to user: 2009. 

AN/TPY-2 ID: #6; 
Planned assignment: Central Command; 
Date of delivery to user: 2011. 

AN/TPY-2 ID: #7; 
Planned assignment: THAAD Battery #2 (location TBD); 
Date of delivery to user: 2010. 

AN/TPY-2 ID: #8; 
Planned assignment: THAAD Battery #3 (location TBD); 
Date of delivery to user: 2013. 

AN/TPY-2 ID: #9; 
Planned assignment: THAAD Battery #4 (location TBD); 
Date of delivery to user: 2014. 

AN/TPY-2 ID: #10; 
Planned assignment: THAAD Battery #5 (location TBD); 
Date of delivery to user: 2015. 

AN/TPY-2 ID: #11; 
Planned assignment: THAAD Battery #6 (location TBD); 
Date of delivery to user: 2016. 

AN/TPY-2 ID: #12; 
Planned assignment: THAAD Battery #7 (location TBD); 
Date of delivery to user: 2016. 

AN/TPY-2 ID: #13; 
Planned assignment: THAAD Battery #8 (location TBD); 
Date of delivery to user: 2017. 

AN/TPY-2 ID: #14; 
Planned assignment: THAAD Battery #9 (location TBD); 
Date of delivery to user: 2017. 

Source: MDA data. 

Legend: TBD = to be determined. 

Notes: Years are stated in fiscal years. Data is current as of October 
21, 2010. 

[End of table] 

MDA recently decided to speed up production of radar #8 to be fielded 
with THAAD Battery #3 to help meet warfighter demands. Although DOD 
has not determined where THAAD batteries will be deployed, MDA has 
stated that future THAAD batteries may be deployed to Europe to defend 
critical assets against ballistic missile threats on a contingency 
basis. In addition, although the remaining radars to be produced 
(radars #8-14) are designated for THAAD batteries, MDA officials 
stated that if the need for an additional forward-based AN/TPY-2 
arose, these radars may be redesignated for forward-based use. 

MDA Plans to Hand over Operational Control of SBX to the Navy in 
Fiscal Year 2012: 

MDA made progress toward fielding SBX and plans to hand over 
operational control of SBX to the Navy in fiscal year 2012. During 
fiscal year 2010, MDA completed a critical Navy inspection and 
certification necessary to hand over operational control of SBX. 
Planned operational areas include positions in the northern, western, 
and middle Pacific Ocean. According to MDA, the Missile Defense 
Executive Board approved a recommendation from the Navy to utilize a 
more flexible approach allowing SBX to port at multiple locations 
rather than establishing a dedicated port for SBX. U.S. Strategic 
Command will exercise combatant commander authority of SBX and 
delegate operational control to the Navy via Pacific Command. Although 
the Navy will operate SBX, MDA will maintain the development 
responsibility for improving radar capabilities. 

The SBX Program Experienced a Significant Failure during FTG-06 and 
Attempted to Demonstrate a Correction in FTG-06a: 

During the GMD flight test FTG-06 in January 2010, SBX experienced a 
significant failure. According to program officials, as the primary 
sensor for the flight test, SBX's task was to track the missile 
target, an intermediate-range missile, and provide a qualified track 
on the target to GMD. During the flight test, SBX initially performed 
as expected but then experienced a failure which prevented it from 
establishing a reportable track on the target. According to MDA, high 
sensitivity coupled with a large number of presented objects could 
cause the SBX processor to become overwhelmed as exhibited in FTG-06. 
MDA also states that software changes were incorporated into SBX to 
mitigate this problem. Currently, computer models cannot replicate the 
situation SBX experienced during FTG-06 but can replicate the effect 
SBX experienced. 

To address the failure in FTG-06, program officials developed 
iterative software corrections. The first software correction, Spiral 
1, has already been developed by the program office and was tested 
during four targets of opportunity. During three of the tests, 
computer simulators mimicked the effects experienced during FTG-06 to 
test the software corrections. According to program officials, these 
tests, in addition to other ground tests, served as risk reduction 
leading up to a re-test of SBX objectives in FTG-06a. 

MDA tested those software corrections in FTG-06a, which was conducted 
in December 2010. This test was deemed a failure by MDA because GMD 
was unable to intercept the target. However, the performance of SBX 
during the flight test is unknown at this time because the test report 
for this event was unavailable during our audit. SBX served as an 
inline sensor for the test and was tasked to track the target over the 
horizon, discriminate the warhead, and send a missile track of the 
target to GMD. 

Transition of Thule UEWR Sustainment to the Air Force Was Completed in 
Fiscal Year 2011: 

In fiscal year 2011, MDA transitioned Thule to the Air Force after 
successfully transitioning sustainment of both Beale and Fylingdales 
to the Air Force in 2009. According to program officials, 
transitioning the UEWRs is a process during which MDA gradually hands 
over control of the UEWRs to the Air Force. The official transfer of 
the UEWRs will occur in fiscal year 2012 when all software upgrades 
are completed. The most recent software build to add information 
assurance upgrades that is currently under development will be 
deployed in fiscal year 2011. According to MDA officials, once 
certified for missile defense, the addition of Thule UEWR to the BMDS 
reduces sensor coverage gaps and provides larger defended areas for 
homeland defense. 

DOD Has Not Yet Made a Decision to Upgrade Cobra Dane, an Important 
Part of the BMDS Sensor Suite: 

MDA and the Director, Operational Test and Evaluation believe that 
both Clear and Cobra Dane are vital sensors for GMD. Both radars 
provide data to GMD to enable ballistic missile intercepts. However, 
Cobra Dane will soon be in need of large-scale hardware upgrades to 
continue to operate, according to program officials. Although MDA has 
upgraded UEWRs in the past for BMDS functions, those upgrades involved 
small hardware and software processing additions to the radars. MDA 
currently plans to upgrade Clear to bring it up to the current 
configuration of the other UEWRs in order to efficiently manage all 
the UEWRs. According to an official in the Office of the Under 
Secretary of Defense for Acquisition, Technology and Logistics, a 
decision to upgrade Cobra Dane will be a departmental decision, which 
will be made after consultation with interagency partners. 

DOT&E officials have emphasized the importance of keeping Cobra Dane a 
part of the BMDS sensor suite. According to DOT&E officials, Clear 
will not provide all necessary sensor coverage to take the place of 
Cobra Dane. For GMD to have the necessary sensor coverage, it must 
rely on both Clear and SBX to be available. However, since SBX may be 
unavailable for missile tracking at times, GMD would also need Cobra 
Dane in order to have robust sensor coverage. DOT&E officials stated 
Cobra Dane is also an advantageous sensor for GMD because of its 
unique geographic location to detect a launch from North Korea. 

[End of section] 

Appendix VIII: Command and Control, Battle Management and 
Communications (C2BMC): 

Fiscal Year 2010 Events: 
* The C2BMC program demonstrates control of multiple AN/TPY-2 radars 
during ground tests; 
* C2BMC participates in several elements' flight tests including 
THAAD, GMD, and BMDS Sensors. 

What You Need To Know: 
* Spiral 6.4 adds the capability to control more than one radar in one 
region and better communicate and manage BMDS capabilities; 
* Spiral 6.4 has experienced multiple delays and adjustments to 
content since fiscal year 2008; 
* C2BMC completed all ground testing in fiscal year 2010 to make 
progress toward declaring Spiral 6.4 operational; 
* C2BMC plans for new server at U.S. Central Command in fiscal year 
2011. 

Background and Overview: 

C2BMC is a global network that links and integrates individual missile 
defense elements. C2BMC also enables the U.S. President, Secretary of 
Defense and combatant commanders at the strategic, regional, and 
operational levels to systematically plan ballistic missile defense 
operations, to collectively see the battle develop, and to dynamically 
manage designated networked sensors and weapons systems to achieve 
global and regional mission objectives. The network includes software, 
as well as some hardware including high-end workstations, servers and 
network equipment. The program delivers the software capabilities in 
spirals--the current operational spiral is Spiral 6.2, which became 
operational in December 2007. These software spiral deliveries are 
first tested and then declared operational at servers located at 
combatant commands, which are connected to each other as well as to 
other strategic locations. 

Spiral 6.4 Adds Capability to Control More Than One Radar in One 
Region and Better Communicate and Manage BMDS Capabilities: 

The next upgrade is Spiral 6.4, which is planned for operational use 
in the third quarter of fiscal year 2011. Spiral 6.4 is the first 
release of upgraded software since Spiral 6.2 became operational in 
December 2007. Spiral 6.4 offers several upgrades to Spiral 6.2 
including the Global Engagement Management, which will add the 
capability to manage multiple AN/TPY-2 radars in a region to acquire 
and discriminate threat tracks, then forward the best track to BMDS 
weapon system fire controls. Spiral 6.4 will also improve C2BMC's 
capability to send situational awareness data to European Command in 
addition to the tri-node server which includes U.S. Strategic Command, 
Northern Command, and Pacific Command. The program intends to declare 
Spiral 6.4 operational for the tri-node in the third quarter of fiscal 
year 2011. Concurrent with Spiral 6.4 fielding, the program is 
preparing for the release of its next planned spiral capability 
release, Spiral 8.2, in fiscal year 2015. 

Spiral 6.4 Has Experienced Multiple Delays and Adjustments to Content 
since Fiscal Year 2008: 

The plan for Spiral 6.4 has changed significantly from when MDA 
expected to release a single configuration for the tri-node in fiscal 
year 2008. Since then, MDA has modified its releases to break-up 
Spiral 6.4 into smaller increments of capabilities and for other 
combatant commands. During fiscal year 2009, the program was replanned 
to accelerate capabilities from Spiral 8.2 to Spiral 6.4 adding the 
capability for C2BMC to manage multiple radars and to enhance the 
BMDS' ability to perform early intercept.[Footnote 60] The following 
year, in February 2010, the program decided to release its Spiral 6.4 
multi-radar configuration in two separate releases--one for the tri-
node and then later for European Command. MDA added European Command 
to address requirements for the European phased adaptive approach. In 
addition, the program intended to later deliver a separate upgrade to 
enhance the BMDS' ability to perform early intercept to both the tri-
node and European Command as well. Just 4 months later, MDA decided to 
delay this early intercept capability until Spiral 8.2. 

The C2BMC has experienced multiple delays in declaring Spiral 6.4 
operational. It was originally planned to go operational in fiscal 
year 2008. However, in 2008, the program delayed it to the first 
quarter of fiscal year 2010 due to technical issues in both the 
current operational capability, Spiral 6.2, and the developing 
capability, Spiral 6.4. These delays were necessary because throughout 
fiscal year 2008, Spiral 6.2 required more fixes than anticipated for 
warfighter-identified deficiencies. In order to fix the deficiencies 
the contractor delayed Spiral 6.4 work so that it could apply those 
resources to the Spiral 6.2 problems. Specifically, experience with 
testing the AN/TPY-2 with Spiral 6.2 identified the need to improve 
radar track processing in Spiral 6.4. This, along with changes that 
needed to be incorporated to meet new information assurance 
requirements pushed Spiral 6.4 operational fielding to the first 
quarter of fiscal year 2010. Then during fiscal year 2009, the program 
added another year of development, delaying Spiral 6.4 to the first 
quarter of fiscal year 2011 when it accelerated Spiral 8.2's 
capabilities to control multiple radars, support early intercept, and 
support deployment of Spiral 6.2 capability to European Command. In 
June 2010, the program again delayed the tri-node server release of 
Spiral 6.4 another 6 months to the third quarter of fiscal year 2011 
because changes to the BMDS-level testing plan delayed the ground 
testing necessary to declare the spiral operational. 

C2BMC Completed All Ground Testing in Fiscal Year 2010 to Make 
Progress toward Declaring Spiral 6.4 Operational: 

During fiscal year 2010, the C2BMC program was able to successfully 
complete ground testing as part of the series needed to declare Spiral 
6.4 operational. MDA completed its first test of the initial C2BMC 
Global Engagement Management capabilities during the second quarter of 
fiscal year 2010. It was the first in a series of ground tests 
necessary to declare Spiral 6.4 operational. This test successfully 
demonstrated the capability of Global Engagement Manager to manage 
operations of multiple AN/TPY-2 radars. This was the first major 
system-level event using Spiral 6.4. 

In addition, MDA completed a second ground test in the series during 
the fourth quarter of fiscal year 2010. This integrated ground test 
demonstrated system track forwarding between C2BMC and Aegis BMD as 
well as supported C2BMC element-level verification. It also tested 
mission functionality with GMD, AN/TPY-2, THAAD, Aegis, and Patriot. 
Full analysis results of this testing are expected in fiscal year 2011. 

C2BMC Plans for New Server at Central Command in Fiscal Year 2011: 

During fiscal year 2010, MDA made the decision to install an 
operational Spiral 6.2 server at Central Command during the second 
quarter of fiscal year 2011. Program officials told us that this 
capability was urgently needed in Central Command, so the agency made 
Spiral 6.2 operational immediately rather than waiting until Spiral 
6.4 was available. 

[End of section] 

Appendix IX: Ground-based Midcourse Defense (GMD): 

Fiscal Year 2010 Events: 
* The program completed the planned fielding of 30 GBIs; 
* The GMD element continued the manufacturing and delivery of the 
enhanced version of the kill vehicle known as the Capability 
Enhancement II (CE-II) EKVs; 
* The program failed to successfully intercept a target during its 
only intercept test in fiscal year 2010. This was the first test 
designed to assess the capability of the enhanced CE-II variant; 
* The GMD element conducted a non-intercept flight test of its two-
stage GBI, which was originally designed for a European site. 

What You Need To Know: 
* GMD's expected service life is until 2032; 
* To date, DOD has spent over $35 billion on this system and is 
planning on spending approximately another $6 billion over the future 
years defense plan; 
* In response to the President's 2002 directive to deploy an initial 
set of missile defense capabilities by 2004, MDA accelerated GMD 
developmental activities and emplaced five Ground-based interceptors 
(GBIs) by 2004; 
* To date, GMD has fielded 30 GBIs: 20 with the original kill vehicle 
known as the Capability Enhancement I (CE-I) and 10 with the enhanced 
kill vehicle known as the Capability Enhancement II (CE-II); 
* GMD has only successfully conducted 3 intercepts with the 
operationally configured GBI; 
* The CE-II EKV has failed in both flight test attempts to intercept a 
target; 
* GMD is expected to award a new development and sustainment contract 
in fiscal year 2011, expected value of $600 million per year, not to 
exceed 10 years. 

Background and Overview: 

The GMD element is a ground-based defense system designed to provide 
combatant commanders the capability to defend the homeland against a 
limited attack from intermediate-, and intercontinental-range 
ballistic missiles from regional actors like North Korea and Middle 
Eastern countries during the midcourse phased of flight. According to 
the Director, MDA, the GMD program is expected to be in service until 
2032: 

The GMD element consists of a ground-based interceptor (GBI)--a 
booster with an Exoatmospheric Kill Vehicle (EKV) on top--and a fire 
control system that receives target information from BMDS sensors in 
order to formulate a battle plan. GMD's planned acquisition cycle was 
streamlined in response to the President's 2002 directive to deploy an 
initial set of missile defense capabilities by 2004. To do so, the GMD 
element concurrently matured technology, designed the element, tested 
the design and produced and fielded a system. Additionally, 
reliability and sustainability efforts normally addressed early in 
development were deferred. Testing delays and cancellations have also 
resulted in less knowledge than planned about the capabilities and 
limitations of the system under development. For example, according to 
MDA, with the focus on rapid development, there was not always 
adequate opportunity to fully ground test the system prior to each 
flight test attempt. Corrective actions focused, instead, on fixing 
the problem at hand. According to officials from DOD, however, with 
this approach, GMD was rapidly fielded for the limited defense of the 
United States and its allies while development continued. 

2010 Congressionally Mandated Reports: 

The National Defense Authorization Act for Fiscal Year 2010[Footnote 
61] mandated the Secretary of Defense to (1) conduct an assessment of 
the Ground-based Midcourse Defense element and future options for GMD 
and (2) establish a plan for the GMD element to cover the period of 
the future years defense program. Additionally, the act mandated the 
Comptroller General to review the assessment and plan and provide the 
results to Congress. We briefed the Congress in October 2010 and 
agreed to include the acquisition-related findings in this report. 
Those findings are included below. 

The two DOD reports were issued in May 2010 and covered numerous 
topics including, but not limited to the following key areas: 

* The capabilities as of the date of the assessment and any planned 
capabilities. 

* The plan to maintain the operational effectiveness of the GMD 
element over the course of its service live, including sustainment 
efforts. 

* The plan for flight testing the GMD element, including aging and 
surveillance tests to demonstrate the continuing effectiveness for the 
system over its service life. 

* The number of GBI missiles necessary for operational assets, test 
assets, and spare missiles. 

The following sections reflect GAO's findings on each of these topics. 

GMD Fielded a Limited Defensive Capability in 2004: 

The integrated capabilities of the GMD element are expressed as 
performance baselines with associated performance metrics reported in 
the BAR; however, DOD lacks the information needed to validate them. 
DOD established performance metrics such as the Probability of 
Engagement Success, Launch Area Denied, and Defended Area.[Footnote 
62] To be credible, these metrics must to be informed by models that 
are anchored by flight and ground test data, but test delays and 
failures have provided less data than is needed for evaluation. For 
example, at the end of fiscal year 2009, the data necessary for 
validation, verification, and accreditation of GMD models was only 8 
percent complete. Moreover, U. S. Northern Command officials stated 
that they do not have confidence in the values provided by MDA for the 
official metric of effectiveness (Probability of Engagement Success) 
due to the low number of tests and the use of specification data 
rather than test data. 

Although uncertainties remain about the performance of GMD's 
capabilities, a 2010 annual review of BMDS capability conducted by 
U.S. Strategic Command highlighted an increasing confidence in GMD. 
Additionally, the Director, Operational Test and Evaluation recently 
concluded in its annual assessment that test results suggested GMD 
provides a capability against limited, emerging, uncomplicated 
threats. However, the lack of sufficient data for comprehensive model 
and simulation validation and accreditation continues to preclude a 
full evaluation of GMD performance. 

DOD's Sustainment Program Critical to Ensure Effectiveness of the GMD 
System through 2032: 

GMD's sustainment program is expected to maintain and support an 
effective defensive system over the expected 20-year lifecycle, 
through 2032; however the decision to defer reliability and 
sustainment efforts coupled with delays in collecting data has 
hindered GMD's efforts to adequately plan sustainment efforts. 
Although the program has been fielding interceptors since 2004, the 
Director, MDA stated that the decision to maintain the GMD system 
until 2032 is based on the fact that the expected lifespan for the 
interceptors is 20 years and the last GBI is planned to be fielded in 
2012 resulting in the 2032 timeframe. 

The GMD sustainment program is comprised of multiple efforts. Key 
among them is the Stockpile Reliability Program Plan, which is 
intended to monitor the health of fielded interceptors, identify 
reliability degraders, and mitigate obsolescence issues.[Footnote 63] 
The Stockpile Reliability Program Plan was not finalized by GMD until 
September 30, 2010[Footnote 64] and still requires additional data in 
order for it to be fully implemented. For example, the reports states 
that the "overall approach to accomplishing the GBI surveillance and 
stockpile reliability program is to analyze data from GBI development, 
sustainment, and flight testing activities throughout the lifecycle of 
the deployed interceptor fleet." However, developmental testing to get 
that data will not be completed until at least 2021.[Footnote 65] GMD 
intercept tests conducted to date have already led to major hardware 
or software changes to the GBIs--not all of which have been verified 
through flight testing. 

Formal Aging and Surveillance Testing[Footnote 66] Beginning; Data 
Incomplete: 

Aging and surveillance data, a key part of the Stockpile Reliability 
Program Plan, for a certain limited set of GBI components are being 
gathered by GMD contractors and other government organizations 
including the Crane Division of the Naval Surface Warfare Center and 
the U.S. Army Aviation & Missile Research, Development & Engineering 
Center. However, testing will not be completed for many years. 
Although Crane has been testing since 2008, a completion date has not 
been determined because it is based on the sufficiency of data 
received from ongoing component testing and funding. In addition, 
according to Crane officials, the Aging and Surveillance Test Program 
does not cover all Capability Enhancement-I (CE-I) component parts and 
there are no current efforts to test any Capability Enhancement-II (CE-
II) specific components. 

Comprehensive aging and surveillance testing is hampered by limited 
availability of spare components for the booster and the EKV. For 
example, according to Crane officials, they have had to obtain 
components for testing from engineering units or returns. In addition, 
artificially aged testing has not been conducted on the Inertial 
Measurement Unit because there are insufficient numbers of components 
available for testing.[Footnote 67] However, according to the DOD, 
natural aging of the inertial measurement unit is being assessed. 

Valuable, but Limited Data Provided by Current Maintenance Built-in 
Test: 

Maintenance Built-in Test (MBIT)[Footnote 68] testing provides trend 
data for the status of the interceptor and determines the 
interceptor's health, although the assessment is primarily pass/fail. 
According to program officials, MBIT testing is conducted quarterly on 
emplaced interceptors in the silos. However, an April 2007 report, 
[Footnote 69] developed by a team that included the prime contractor, 
warned that a lack of improvements to the MBIT may compromise GMD's 
ability to make refurbishment decisions over the service life of 
fielded GBIs. 

GMD has developed enhanced MBIT testing to provide a better insight 
into the health of the GBIs. For example, enhanced MBIT enables 
program officials to gather more extensive and higher fidelity 
telemetry data for components of the interceptor and develop detailed 
graphical trends in the health and status for GBIs. According to 
contractor officials, enhanced MBIT would add value to monitoring the 
GBI fleet. However, currently only one silo is equipped with the 
enhanced MBIT capability and according to MDA officials, there are no 
plans to upgrade existing silos or to incorporate enhanced MBIT 
capability in new silos being constructed. 

Lack of Spare Component Parts Makes Planning for Refurbishments, 
Repairs, and Unexpected Failures Difficult: 

MDA lacks sufficient spare parts for EKV refurbishments and repairs. 
According to MDA officials, besides the initial refurbishment kits 
that were on contract, there were no other spare component parts 
ordered for CE-I and CE-II EKVs. Consequently, there are no spare 
components for CE-I refurbishments and only minimal spares for the CE-
II EKVs. Certain EKV components are specifically fitted for either the 
CE-I or CE-II configuration, therefore these components are not 
interchangeable. The lack of spare components could lead to difficult 
choices if components that are no longer available fail. For example, 
contractor officials stated that EKVs might need to be used as a 
source for parts resulting in a reduction in available inventory. 

MDA plans to purchase a specific amount of kits for scheduled 
refurbishments, but GMD officials stated that the amount of additional 
spare parts needed for unexpected failures and repairs has not been 
determined. It is planned that as part of the development and 
sustainment contract, which MDA expects to award in fiscal year 2011, 
the contractor will define repair and spare hardware requirements for 
each GBI. However, it is unclear when that will occur and at what cost. 

Lower-tier GBI suppliers began completing delivery followed by a break 
in production starting in 2007. All remaining third-and fourth-tier 
GBI suppliers are expected to complete their deliveries in fiscal year 
2010 with two exceptions--Aerojet and Rockwell Collins. Future GBI 
procurements--five additional GBIs plus additional hardware to support 
GBI scheduled maintenance activities--will require funding to restart 
manufacturing lines. However, the full cost to restart and requalify 
vendors is unknown. Although estimates for fiscal year 2010 and 2011 
funding were provided, MDA has not yet developed a comprehensive cost 
estimate for restart and requalification activities for all vendors 
involved in GBI production beyond fiscal year 2011. Under the current 
plan, any additional GBI purchases beyond that year will likely incur 
redesign and development costs due to parts obsolescence and GBI 
purchases after fiscal year 2013 will incur manufacturing line restart 
costs for third-and fourth-tier GBI suppliers. 

Reliability, Availability, and Maintainability Is Key for Developing 
and Fielding Weapon Systems: 

Reliability, Availability, and Maintainability (RAM) analysis provides 
the probability that an item will perform its required function under 
stated conditions for a specified period of time, measures failure 
rates, sets corrective and preventative maintenance requirements, and 
determines maintenance conditions and procedures. According to DOD's 
Guide for Achieving Reliability, Availability, and Maintainability, 
during system development, the most important RAM activity is to 
identify potential failure mechanisms and to make design changes to 
remove them. Achieving specified levels of RAM for a system is 
important for many reasons; specifically because of the effect RAM has 
on readiness, system safety, and mission success. Additionally, RAM 
problems slow the development and fielding of systems, drive up total 
cost, and degrade operational readiness and mission accomplishment. 
However, according to a June 2010 MDA briefing on GMD's RAM program, 
RAM was not designed into components nor were complete data collected 
to inform RAM prior to 2007. Additionally, a comprehensive RAM program 
was not developed until 2008. 

Difficulty in Conducting GMD Flight Testing Delays Planned Knowledge: 

Although MDA altered the GMD flight test tempo to one intercept per 
year, it is unclear if it can still be executed successfully. Since 
2004, we have continually reported that GMD has experienced difficulty 
in conducting its annual flight test plan, a difficulty that continued 
in 2010 as well. According to MDA's fiscal year 2010 budget request, 
the GMD program expected to conduct two tests utilizing its two-stage 
booster in fiscal year 2010. However, the program modified this plan 
to include one intercept test (FTG-06) that utilized the enhanced kill 
vehicle known as the CE-II EKV and one booster verification test for 
the two-stage design.[Footnote 70] As we previously reported, FTG-06 
was important because it was planned as the first intercept test of 
this version of the EKV,[Footnote 71] and because it was designed to 
demonstrate a long-flight time for the GBI and GMD's capability 
against countermeasures. MDA officials told us that they will not add 
the CE-II EKV to the operational baseline until after the successful 
completion of an intercept test. One such test, FTG-06, was conducted 
in January 2010, but was unsuccessful: the CE-II EKV failed to achieve 
an intercept of the target. MDA chartered a failure investigation team 
to investigate and determine the root cause of the failure.[Footnote 
72] In light of the failure, the GMD program attempted to conduct a 
similar test in December 2010--FTG-06a--but that test was also 
unsuccessful due to a failure with the CE-II EKV.[Footnote 73] 

The costs to conduct each GMD flight test are in the hundreds of 
millions. For example, as we previously reported, MDA projected, prior 
to FTG-06, that the test would cost over $236 million while the 
Defense Contract Management Agency estimated that the cost was likely 
to exceed $310 million. These costs were likely understated because 
they did not include all of the cost increases of delaying the test 
first to September 2009, nor did they include any cost increases of 
further delaying the test to fiscal year 2010 or for investigating the 
failure. Additionally, as noted above because FTG-06 failed MDA 
inserted FTG-06a which was structured to capture the same objectives. 
It is therefore likely that the cost to conduct the FTG-06a test was 
similarly expensive. 

It should be noted that although the program failed to successfully 
complete its intercept tests in fiscal year 2010, MDA was able to 
conduct a non-intercept flight test of its two-stage GBI (designated 
BVT-01) in June 2010. Although all flight test objectives were 
achieved, an EKV anomaly was experienced that might affect system 
performance. 

GMD testing delays and shortfalls have had three major consequences 
for the program. First, delays in validating capability results in a 
reduce level of knowledge needed to inform GMD models. Second the 
production and fielding of the CE-II EKVs has gotten ahead of testing. 
Currently, even though the CE-II has failed both intercept attempts, 
12 of the 23 CE-II GBIs have already been delivered. Additionally, 
according to the March 2010 plan, all CE-IIs under contract are 
expected to be delivered prior to fully validating its capability. 
[Footnote 74] Third, GMD's current flight test plan assumes success 
and any flight test failures could require difficult decisions, such 
as a reduction in planned developmental flight tests or the use of an 
interceptor designated as an operational spares or for stockpile 
reliability testing. For example, FTG-09, a salvo test planned for 
fiscal year 2011, was canceled in order to re-conduct FTG-06. Although 
the flight test objectives were moved to FTG-06a and FTG-08, this 
removes an opportunity to collect performance data needed to develop 
GMD models and to assess the capability of the EKV. Additionally, as 
we previously reported, the repetition of intercept-related objectives 
is important to build confidence in the intercept capability.[Footnote 
75] Consequently, the delays in validating capability results in a 
reduced level of knowledge needed to inform the GMD program leaving a 
significant amount of data still needing to be gathered to fully 
assess GMD capability. For example, the CE-I and CE-II capability 
against countermeasures still is not validated, although MDA has been 
attempting to obtain it since 2008 and EKV performance against its 
main threat class--an intercontinental ballistic missile--will not 
occur until at least 2014. 

Planned Inventory of 52 GBIs Needed through 2032 Lacks Analysis: 

In 2009, the Secretary of Defense reduced the number of planned 
emplaced GBIs from 44 to 30, reducing the number of operational GBIs 
needed. The reduced inventory includes 30 operational interceptors and 
an additional 22 for testing and spares. Although officials from U.S. 
Northern Command agree that 30 operational GBIs is currently 
sufficient, as table 9 shows, the planned inventory lacks analysis: 

Table 9: The Number of Ground-Based Interceptors Needed through 2032 
Lacks Analysis: 

GBIs: 30 Operational GBIs; 
GMD analysis/justification for GBIs: 
* The number of operational GBIs was a policy decision based on the 
calculation of threat missiles; 
Limitations: 
* Sufficiency of operational GBI numbers is based on various 
assumptions including the reliability of the interceptor. However, the 
reliability of the interceptor is not fully known; 
* MDA has not completed analysis to determine whether the 2032 
timeframe for GBI lifespan is achievable. 

GBIs: 16 flight test GBIs; 
GMD analysis/justification for GBIs: 
* According to DOD's Assessment, the number of necessary flight test 
GBIs was dictated by the Integrated Master Test Plan; 
Limitations: 
* MDA's analysis for the number of GBIs necessary to conduct flight 
testing assumes success: flight test failures could require an 
adjustment to the remaining GBI inventory that supports operational 
spares, stockpile reliability testing and flight testing. 

GBIs: 6 Operational Spares and Stockpile Reliability Program Testing 
GBIs; 
GMD analysis/justification for GBIs: 
* According to DOD's Assessment, the number of spare missiles needed 
for spare requirements and Stockpile Reliability Program testing was 
determined through reliability, availability, maintainability, and 
testability analysis; 
Limitations: 
* We could not determine based on the RAM-T analytical materials 
provided by MDA how it determined the number of GBIs needed for 
operational spares and Stockpile Reliability Program testing; 
* RAM was not designed into the components; 
* Only limited RAM data are available; RAM quality data were not 
collected prior to 2007; 
* No GBIs are dedicated to aging and surveillance testing. 

Source: GAO analysis of MDA data. 

[End of table] 

Appendix X: Precision Tracking Space System (PTSS): 

Fiscal Year 2010 Events: 
* MDA conducted architecture studies and system engineering, including 
developing system concepts and determining capability needs. 

What You Need To Know: 
* Many aspects of the PTSS acquisition approach are consistent with 
GAO-recommended best practices; 
* However, MDA has developed an optimistic schedule to field an 
operational constellation by fiscal year 2018; 
* MDA faces significant design challenges in developing PTSS but has 
mitigation plans in place to address them; 
* Delays in fielding PTSS would significantly affect U.S. and European 
missile defense. 

Background and Overview: 

PTSS is being designed to detect and track large ballistic missile 
raid sizes beginning shortly after launch and throughout their 
trajectories. Tracking ballistic missiles earlier in flight enables 
earlier interceptor launches and the potential to shoot another 
interceptor if necessary. Earlier intercept attempts improve ballistic 
missile defensive capabilities and reduce the need for terrestrial 
sensors and the size of deployable missile defense systems. 

Many Aspects of PTSS's Acquisition Approach Are Consistent with GAO 
Best Practices: 

In alignment with GAO best practices, MDA plans to build two prototype 
satellites to define the system performance and focus on cost-
effective production in an industrial environment. The prototype 
design and operation will be heavily informed by the on-orbit STSS 
demonstration satellites. Past GAO work identified Department of 
Defense (DOD) programs that did not regularly test production-
representative prototypes before committing to production which led to 
cost growth and schedule delays. We have recommended that DOD develop 
fully-capable prototypes to demonstrate that the system can be built 
efficiently and production and postproduction costs are minimized. 

Also consistent with GAO best practices, MDA plans to separate 
technology discovery from technology development by ensuring critical 
technologies are matured before large-scale acquisition begins. In the 
past, we have reported that some programs have attempted to satisfy 
all requirements in a single step, regardless of the design challenge 
or the maturity of technologies necessary to achieve the full 
capability. We have recommended that DOD separate technology discovery 
from acquisition and follow an incremental path toward meeting user 
needs. MDA plans to utilize systems and components for the PTSS design 
that are currently used in commercial satellite sensors without 
significantly altering form, fit or function. In addition, the 
Director, MDA stated that a key hallmark of the PTSS satellites will 
be their relatively small size and simplistic design. For example, 
rather than including a dedicated acquisition sensor to identify 
ballistic missile launches, PTSS will rely on other existing DOD 
infrared sensors to establish a ballistic missile launch, thus 
removing the need for an acquisition sensor and simplifying the 
overall design of the satellite. 

MDA also plans to follow an incremental path toward meeting user needs 
by using currently available technology to deliver near-term 
capabilities while maintaining the flexibility to add capabilities 
later. For example, combatant commanders identified a need for global 
coverage of missile threats to the homeland. To address the need, PTSS 
will initially be able to track regional medium-and intermediate-range 
ballistic missile threats, with the potential to handle future 
intercontinental ballistic missile threats to the United States. MDA 
officials stated that they also have the flexibility to increase the 
total constellation size by building and emplacing additional 
satellites to further add to system capabilities, such as increasing 
raid handling size. MDA plans to confine PTSS's program objectives to 
track missile launches for the BMDS and exclude additional program 
objectives to ensure that the design remains relatively simple. For 
example, the program currently plans to exclude observation of space 
objects, also known as space situational awareness, as a program 
objective as it could complicate the design and scope of the program. 
MDA officials stated that PTSS could potentially serve other 
functions, such as space situational awareness, during times when the 
satellite is not actively being used to serve the BMDS. 

MDA Has Developed an Optimistic PTSS Schedule: 

MDA has developed an optimistic PTSS acquisition approach to field an 
operational constellation by fiscal year 2018. MDA plans to conduct 
prototyping efforts beginning in fiscal year 2011 and launch two 
prototype satellites in fiscal year 2015. MDA also plans to launch a 
minimum of seven additional satellites by fiscal year 2018. According 
to program officials, the two prototype satellites will become part of 
the operational system forming a minimum nine-satellite constellation 
in fiscal year 2018. Other DOD space programs have experienced long 
development times to launch initial satellites. For example, Space 
Based Infrared System (SBIRS) High, a program that will potentially 
supply ballistic missile launch cues to PTSS, began development in 
fiscal year 1997 and plans to deliver the first of six satellites in 
fiscal year 2011, totaling approximately 15 years. Another example is 
the MDA-developed Space Tracking and Surveillance System (STSS), a 
program that will heavily inform PTSS. After years of research and 
development efforts by the Air Force, MDA began refurbishing and 
developing two demonstration STSS satellites in 2002 and launched the 
satellites in fiscal year 2009, totaling about 8 years. PTSS intends 
to develop and launch two prototype satellites in approximately 5 
years. MDA stated that it has conducted three studies in recent years 
and concluded that using current technologies for the payload design 
may enable a rapid PTSS acquisition approach. However, it should be 
noted that the program is not yet far enough along in development to 
determine whether MDA's current acquisition plans will enable it to 
develop and deploy the operational constellation faster than other DOD 
space programs. 

MDA Faces Significant PTSS Design Challenges but Has Mitigation Plans 
in Place to Address Them: 

Although MDA plans to follow many GAO-recommended best practices to 
use mature technologies, MDA faces significant design challenges. 
Officials in the Office of the Under Secretary of Defense for 
Acquisition, Technology and Logistics (AT&L) have identified key 
technical design challenges to PTSS that will benefit from long lead 
analysis and prototyping activities, including payload design and 
characterization. Key design risks include developing sufficient 
sensitivity to detect and track post boost ballistic missiles, 
tracking large raids of ballistic missiles, and mass-producing 
payloads. According to AT&L officials, the program plans to address 
these design challenges through the use of computer modeling and 
simulations and refining payload design models. Modeling and 
simulation is verified and validated by on-orbit test and activities 
of STSS. Although the STSS program has experienced delays in obtaining 
this data, MDA officials stated that they are confident that STSS will 
collect the data in time to sufficiently inform PTSS. 

MDA also faces significant design challenges integrating missile 
launch cues from other DOD infrared sensors into the BMDS in order to 
cue PTSS to track the detected missile launch. Since missile defense 
applications run on a timescale of seconds to minutes, the overriding 
challenges for receiving launch cues are obtaining on-demand tasking 
priority for DOD infrared sensors and processing the cues on highly 
compressed early intercept timelines. For example, to address 
challenges with integrating launch cues, MDA is pursuing a 
developmental initiative dedicated to incorporating DOD infrared 
sensor cues within the BMDS. To obtain priority for DOD infrared 
sensors, AT&L officials state that the main risk reduction effort is 
to develop a joint concept of operations for their use. 

MDA also faces challenges integrating C2BMC with PTSS, including 
processing multiple PTSS missile tracks with other sensor tracks 
simultaneously and filtering out false alarms without significant 
processing delays. MDA plans to mitigate challenges by measuring and 
planning for processing delays and simulating PTSS and C2BMC 
interactions. 

In addition, STSS, a program that heavily informs PTSS, has 
encountered significant problems operating in a high radiation 
environment in space. This environment is similar to the environment 
PTSS will operate in. During fiscal year 2010, a radiation particle 
collided with the STSS spacecraft processor while program officials 
were conducting efforts to fully calibrate the STSS satellites. 
Although program officials fully restored the affected processor, the 
event delayed the STSS satellites reaching full operating capability. 
MDA plans to mitigate environmental radiation issues by incorporating 
lessons learned from STSS radiation issues into the PTSS program. For 
example, PTSS program officials participated in STSS review meetings 
to determine root causes and solutions for radiation issues that arose 
during satellite calibration. In addition, MDA officials stated that 
the radiation environment will be considered as a key factor during 
the selection of PTSS satellite parts. PTSS also plans to use newer 
satellite processors than STSS that have improved capabilities to 
shield against radiation. 

Delays in Fielding PTSS Would Significantly Affect U.S. and European 
Missile Defense: 

Delays in fielding a PTSS constellation in fiscal year 2018 would 
significantly affect the implementation of the Phased Adaptive 
Approach (PAA) to defend Europe and the United States against regional 
ballistic missile attacks. MDA discovered that there were sensor 
coverage gaps in its ability to acquire and track large ballistic 
missile raid sizes, intercept ballistic missiles earlier in their 
trajectories, assess intercept attempts in real time, and launch 
additional interceptors if necessary. Currently, the sensor systems of 
the BMDS consist of radar sensors, such as SBX and AN/TPY-2. According 
to MDA, infrared satellites such as PTSS would have advantages over 
terrestrial radars because they can limit the affect of weather 
conditions, eliminate the need for host nation agreements, and observe 
ballistic missile launches occurring in remote locations. In addition 
PTSS is being designed to track large missile raid sizes soon after 
launch to enable earlier intercepts. Such capabilities would alleviate 
sensor coverage gaps and reduce the need for terrestrial sensors. For 
example, according to MDA budget documentation, a small constellation 
of PTSS satellites can provide coverage equivalent to approximately 50 
AN/TPY-2 radars or 20 SBX radars. MDA plans to deploy a forward-based 
AN/TPY-2 radar to southern Europe for Phase I of the PAA for the 
defense of Europe and the United States. Although the AN/TPY-2 radar 
can perform early missile tracking, the radar has inherent capability 
limitations. It is therefore necessary to have additional sensors in 
order to enhance early launch missile tracking capabilities. Delays in 
the PTSS programs would prolong robust early intercept capabilities, 
resulting in increased vulnerability to ballistic missile attacks. 

[End of section] 

Appendix XI: Space Tracking and Surveillance System (STSS): 

Fiscal Year 2010 Events: 
* Demonstration satellites progressed towards full capability 
performance; 
* STSS successfully tracked six missile targets; 
* STSS performed two-dimensional and three-dimensional acquisition 
sensor missile tracks; 
* STSS performed a track of an intercontinental ballistic missile. 

What You Need To Know: 
* STSS has experienced several on-orbit issues following launch; 
* MDA's decision to develop PTSS extended STSS's on-orbit activities 
three years beyond its planned mission life; 
* On-orbit issues and aggressive scheduling have led to significant 
schedule delays; 
* The program is at risk of not completing all data collections to 
inform PTSS; 
* Despite on-orbit issues, STSS has overcome significant challenges 
and has reached full capability performance. 

Background and Overview: 

MDA is pursuing the STSS program as a space-based sensor component of 
the BMDS. Over the past two decades, DOD has initiated several 
programs and spent several billion dollars trying to develop a system 
to track missiles from space. In 2002, MDA began refurbishing two 
demonstration satellites from the Air Force SBIRS Low program that was 
halted in 1999. MDA launched the demonstration satellites in September 
2009 and fully calibrated the satellites in November 2010. Prior to 
launch of the satellites, MDA officials stated the program experienced 
2 years of delays because of development challenges which resulted in 
over $400 million in cost growth. In addition, following launch of the 
satellites, MDA encountered several on-orbit issues resulting in an 11-
month delay in fully calibrating the satellites. MDA initially planned 
to begin fielding a follow-on operational STSS system in fiscal year 
2011, however, MDA later decided against fielding an operational STSS 
system, according to the Director, MDA, in favor of developing a 
different satellite system, the PTSS. STSS will support the future 
PTSS program by collecting critical risk reduction data during flight 
tests to help inform PTSS design. MDA plans to launch two PTSS 
prototypes in fiscal year 2015 and have a nine-satellite PTSS 
constellation in place by fiscal year 2018. 

MDA's Decision to Develop PTSS Extended STSS's On-Orbit Activities 3 
Years beyond Its Planned Mission Life: 

MDA's decision to develop PTSS significantly affected planned STSS on- 
orbit activities. MDA developed on-orbit activities for the 
demonstration satellites to help support and inform an operational 
STSS system. Because of the decision to develop PTSS, MDA 
significantly altered STSS's planned on-orbit activities almost 4 
months after launch of the satellites. MDA decided to cancel the 
dedicated flight tests for STSS because of language in the explanatory 
statement related to the Defense Appropriations Act, 2010, that 
suggested a reduction in funding. A report by the Senate Committee on 
Appropriations related to a 2010 Defense Appropriation bill stated 
that the demonstration satellites were built with payloads that would 
demonstrate capabilities required under the former SBIRS-Low program 
and that the PTSS constellation MDA is pursuing is very different from 
the original SBIRS-Low concept and the STSS demonstration satellites. 
The committee stated that while dedicated flight tests for STSS could 
provide useful data to MDA, there was sufficient funding in the budget 
request to demonstrate the STSS capability for which they were built. 

STSS's revised on-orbit activities are planned to continue 3 years 
past the satellites' planned mission life. As a result of MDA's 
decision to cancel dedicated flight tests, program officials altered 
their planned on-orbit activities for STSS to support PTSS by 
collecting risk reduction data during BMDS test flights and targets of 
opportunity. In fiscal year 2010, STSS successfully tracked six 
missile targets over the last year producing very significant risk 
reduction data for PTSS, according to program officials. Although MDA 
has developed a plan to collect a majority of risk reduction data by 
fiscal year 2013, the satellites will not complete the PTSS risk 
reduction data collections until fiscal year 2016--3 years after the 
satellites' planned mission life ends. 

STSS has Experienced Several On-Orbit Issues Following Launch: 

Since launch of the demonstration satellites in September 2009, STSS 
has experienced over twenty-two on-orbit issues.[Footnote 76] For 
example, shortly after launch, one of the satellites was unable to 
autonomously stabilize itself during launch deployment. The operations 
team had to manually rotate the satellite to a safe sun pointing 
configuration. An anomaly review indicated that one of the satellite 
alignment numerical matrices was missing a "comma," causing the 
satellite to fire its stabilization thrusters inaccurately--a 
potentially catastrophic failure. According to program officials, good 
launch preparation enabled the team to successfully mitigate the 
situation. Program officials stated that prior to launch, they had 
practiced several contingency circumstances including the exact 
scenario which occurred. According to program officials, whereas most 
satellite programs only set up a few, if any, mobile command sites, 
the STSS program set up multiple mobile command sites to monitor and 
control the satellites throughout post-launch operations. Had the team 
been unable to control the satellite, program officials said it was 
possible that they could have lost the satellite entirely. 

The most significant on-orbit issue STSS experienced delayed the 
program by over 3 months. Less than 2 weeks after launch, program 
officials discovered problems with the Attitude Determination and 
Control System when one of the satellites lost lock on its alignment 
stars. The satellite was conducting a system bake-out, a 3-week 
process in which the satellite heats up so any remaining moisture in 
the satellite evaporates, when the error occurred, forcing the 
satellite to exit the system bake-out and rotate to a safe-sun 
pointing position. Program officials uploaded corrective software 
updates to the demonstration satellites about 5 months after the 
problem was identified. Since the corrective software was uploaded, 
program officials stated they have not experienced any additional 
problems with the Attitude Determination and Control System. 

The satellites have also experienced challenges operating in a high 
radiation environment. About 11 months after launch, one of the 
demonstration satellite's processors was struck by an atomic particle 
resulting in a temporary memory issue. According to program officials, 
they have fully restored the affected processor but anticipate that 
such radiation events will happen approximately 4 times per year. 
Although the program took measures to protect the satellites from 
radiation damage, inherent risks remain while the satellites continue 
to operate in a high radiation environment. 

Program officials are also investigating the root cause of telemetry 
problems with one of the demonstration satellites. While conducting a 
payload software upgrade, the satellite experienced an anomaly that 
prevented telemetry reporting of the cryocoolers, a system that 
ensures the sensors are kept at an appropriately cool temperature 
range. The lack of telemetry reporting prevented the sensor from 
operating, resulting in over a 2-week delay. Program officials made 
the decision to use backup hardware while they investigated the root 
cause and now believe they have a better understanding of the problem. 

On-Orbit Issues and Aggressive Scheduling Led to Significant Schedule 
Delays: 

Program officials stated that at launch, the program had an 
aggressive, no schedule margin plan that was ultimately delayed by 
approximately 11 months. Following launch of the demonstration 
satellites, program officials planned to conduct initial satellite 
check-out and sensors calibration to achieve full capability 
performance of the satellites within 4 months. At that point, the 
satellites would then begin collecting critical risk reduction data to 
inform PTSS. However, due to on-orbit issues and aggressive 
scheduling, the satellites did not reach full capability performance 
until December 2010, approximately 15 months after launch. 

STSS on-orbit issues resulted in significant delays in the program's 
schedule. Half of the 22 on-orbit issues the program has experienced 
to date resulted in schedule delays, ultimately delaying the 
satellites from reaching full capability performance.[Footnote 77] 
Because of on-orbit issues, MDA revised their test program and test 
schedule to focus on achieving fully calibrated performance and 
participating in interim BMDS-level flight tests. 

The Program Is at Risk of Not Completing All Data Collections to 
Inform PTSS: 

The program is at risk of not completing all data collections before 
the satellites' mission life is over, although the majority of data 
collection will occur by fiscal year 2013. The STSS program expects to 
fulfill all risk reduction data collection with the conclusion of 
flight test FTG-17 in fiscal year 2016, resulting in a 7-year mission 
life for the demonstration satellites. The STSS demonstration 
satellites were designed to have a 4-year mission life and are 
therefore at risk of not completing all data collections before the 
satellites go inoperable. Program officials anticipate collecting a 
large majority of risk reduction data by fiscal year 2013, within the 
satellites' planned mission life. 

STSS faces challenges coordinating flight tests to be able to collect 
data when targets will be able to fly within the satellites' viewing 
window. According to program officials, in order for STSS to view a 
target during a flight test, the test has to be coordinated among STSS 
program officials and testing officials when the STSS satellites will 
be in a position to view the target. However, competing requirements 
of other participating elements may require some tests to be conducted 
without STSS's participation. For example, STSS was unable to collect 
data in flight tests FTG-06, FTL-01, and FTG-06a because the target 
did not fly within the satellite's view. Delays in collecting full 
risk reduction data necessary for PTSS could result if STSS is unable 
to collect data during planned flight tests. 

In addition, program officials have identified insufficient funding as 
a major risk to the program completing all data collections to inform 
PTSS, a critical mission for the program. The STSS will support the 
future PTSS program by collecting risk reduction data during flight 
tests. As such, STSS is currently a mandatory asset for all BMDS-level 
flight tests. Although the program has experienced almost 3 years in 
schedule delays and over $400 million in cost overruns, program 
officials assert that insufficient funding due to several years of 
budget cuts may prevent the STSS program from collecting all the data 
required for PTSS risk reduction. 

Despite On-Orbit Issues, STSS Has Overcome Significant Challenges and 
Reached Full Capability Performance: 

Although the STSS demonstration satellites have encountered several on-
orbit issues, the STSS program has minimized the affect of these 
issues and reached full capability performance in November 2010. 
Program officials stated that both demonstration satellites have 
healthy hardware and the remaining issues are understood by the 
program office. Program officials stated that the satellites are 
incrementally improving through testing and operations and are 
currently exceeding sensor measurement requirements as well. Although 
the satellites were delayed in reaching full capability performance in 
fiscal year 2010, that capability has now been achieved and both 
satellites routinely participate in BMDS flight tests and PTSS data 
collection events. The satellites have been successfully participating 
in flight tests and achieved several important accomplishments 
including establishing a three-dimensional track of a ballistic 
missile, tracking an intercontinental ballistic missile, and tracking 
a medium-range missile early after launch through the midcourse phase. 
Program officials are confident that on-orbit issues have not 
disrupted risk reduction data collection to inform PTSS and that, the 
majority of necessary data for PTSS will be collected by fiscal year 
2013 according to the program's current schedule. 

[End of section] 

Appendix XII: Targets and Countermeasures: 

Fiscal Year 2010 Events: 
* Thirteen targets delivered and launched; 
* There was one failure of a target, on the FTT-11 flight test; 
* There were successful first launches of three new target types: LV-
2, JUNO, and ARAV-C; 
* Solicitations for medium-and intermediate-range targets were issued; 
* Medium-range solicitation was canceled after bids were received; no 
contract was awarded; 
* An undefinitized contract action with the prime contractor for 
medium-range targets was issued. 

What You Need To Know: 
* Targets remain a source of delays in BMDS testing; 
* Target failure in the FTT-11 flight test resulted in additional 
costs and delays; 
* A key MDA decision was not consistent with a targets acquisition 
goal set in 2009; 
* Reliance on the prime contractor may increase costs, and use of an 
undefinitized contract action may increase the risk of further cost 
growth; 
* MDA will make more key acquisition decisions in fiscal year 2011, 
which will have an impact on the extent of competition and the targets 
industrial base. 

Background and Overview: 

The Targets and Countermeasures program provides ballistic missiles to 
serve as targets in the MDA flight test program. The targets program 
involves multiple acquisitions--including a variety of existing and 
new missiles and countermeasures. 

In response to cost and schedule problems, MDA initiated a new targets 
acquisition strategy in 2009. Previously, MDA had relied on its prime 
contractor, Lockheed Martin, for much of its target needs. However, we 
found that this contracting approach had contributed to increased 
costs because of higher labor costs and management fees imposed by the 
prime contractor. In addition, the prime contractor's development of 
new targets experienced recurring cost and schedule overruns, 
contributing to delays in MDA's testing program. This Flexible Target 
Family (FTF) approach, followed at the time, sought to design a group 
of new targets with closely-related designs that could meet a range of 
MDA needs for short, medium, and long-range targets. However, because 
of the continuing cost and schedule problems, MDA suspended 
development of the 52-inch FTF target in 2008, leaving only the 72-
inch FTF target, which experienced cost and schedule overruns of its 
own. 

In response to congressional concern about these problems and our 
recommendations, MDA conducted a business case analysis that led in 
2009 to a new approach to target acquisitions. This new approach was 
to seek separate, competitive contract awards for different classes of 
targets, allowing MDA to benefit from greater opportunities for 
competition and reducing the role of the prime contractor. 

MDA Had a Number of Successful Target Flights in Fiscal Year 2010, 
Including New Targets: 

In fiscal year 2010, MDA delivered 13 targets. The targets launched 
during the year supported tests of several different BMDS elements, 
including the THAAD, GMD, and Patriot systems. Three of the targets 
launched were new developments. 

MDA made important progress in target development during fiscal year 
2010, launching three new targets. After a series of delays and cost 
increases, the long-range 72-inch FTF target, referred to as the LV-2, 
was launched for the first time in January 2010. According to MDA 
officials, the target performed properly, although the interception by 
the GMD system was unsuccessful. Two short-range targets, the JUNO and 
the ARAV-C, were also successfully flown for the first time, in tests 
of the Patriot system and Aegis BMD radar, respectively. 

FTT-11 Failure Caused Delays and Cost Increases: 

A target failure in the THAAD FTT-11 test resulted in additional 
costs, delayed some other launches, and led to changes in MDA's 
acquisition approach for air-launched targets. That short-range air-
launched target was the only unsuccessful launch in fiscal year 2010. 
The target failed to initiate after it was dropped from the aircraft, 
falling into the ocean, and as a result, FTT-11 was aborted. A 
subsequent failure review board investigation identified the rigging 
of cables to the missile in the aircraft as the immediate cause of the 
failure. These cables are attached to the target while it remains 
inside the aircraft, and are detached as the target is dropped from 
the aircraft. However, the investigation identified shortcomings in 
internal processes at the contractor as the underlying cause. 

The agency took several actions in response to the failure and the 
review board's findings. Through the Air Force Space and Missile 
Systems Center, the holder of the underlying contract, it issued a 
cure notice requiring the contractor to complete specific steps by 
certain dates. If the contractor fails to do so, MDA may terminate or 
descope the delivery orders. In addition, the government told the 
contractor that it would halt further obligations of funding until the 
first step called for in the cure notice--personnel and organizational 
changes--was taken. MDA is in the process of a joint review and 
"return to flight" process with the Space and Missile Systems Center. 
According to MDA, the agency also incurred a total of $96.4 million in 
costs because of the failure, including the loss of the target itself 
and associated logistics ($38.5 million), the "return to flight" test 
and related activities ($29 million), delays to other flight tests 
($19.8 million), and increased mission assurance work ($9.1 million). 

Targets Remained a Source of Delays for BMDS Testing: 

Targets continued to be a source of delays for MDA's BMDS testing 
program. We have previously reported that problems with the 
availability and reliability of targets have caused delays in MDA's 
testing of BMDS elements, and they continued to cause delays in fiscal 
year 2010.[Footnote 78] According to MDA, 8 additional tests that had 
been planned during fiscal year 2010 were delayed past the end of the 
year or canceled. Five of these delayed tests were a result of the air 
launch moratorium put in place after the failure of FTT-11. The 
remaining 3 delays and cancellations were caused by factors outside 
the targets program, such as congressional action modifying BMDS 
elements. 

In addition, MDA has changed its planned schedule of BMDS tests in 
response to target availability. According to MDA officials, target 
availability was a driving factor in determining the testing schedule 
for the new version 10.2 of its Integrated Master Test Plan (IMTP). In 
this revision, the agency delayed 11 tests compared to IMTP 10.1; 5 of 
those tests were delayed for more than a year. MDA also accelerated 10 
tests, 6 of which were accelerated by one fiscal year quarter. 
[Footnote 79] In addition, MDA stated that the test program has been 
restructured and the IMTP revised in support of the PAA. 

Decisions on Acquisition of Targets Made in Fiscal Year 2010: 

MDA issued a new competitive solicitation for medium-range targets in 
the first quarter of 2010, as part of the new acquisition plan it 
initiated in 2009. However, it canceled this solicitation in June 
2010, after receiving proposals. According to MDA officials, the bids 
received were more expensive than anticipated. The agency is presently 
considering options for procuring medium-range targets. Officials said 
that this includes the possibility of issuing a second medium-range 
solicitation, but they have not yet done so. MDA additionally released 
a draft solicitation for intercontinental-range targets in September 
2010, also as part of its 2009 acquisition plan, but it was later 
canceled as well.[Footnote 80] 

Separately, MDA awarded a new undefinitized contract action to its 
incumbent prime targets contractor.[Footnote 81] This action, signed 
in April 2010, asked the prime contractor to build a new type of 
medium-range air-launched target. The contract action initially 
included three targets; the quantity was then increased to five 
targets in September 2010. MDA officials stated that this new 
acquisition was to obtain a second procurement source for air-launched 
targets following the FTT-11 failure and was not in response to the 
cancellation of the medium-range solicitation. 

According to MDA officials, pursuing new air-launched targets through 
an undefinitized action was necessary to meet the test schedule. The 
extended use of undefinitized contract actions has previously been 
identified by GAO and others as risky for the government. Because 
contracting officers normally reimburse contractors for all allowable 
costs they incur before definitization, contractors bear less risk and 
have little incentive to control costs during this period. The 
government also risks incurring unnecessary costs as requirements may 
change before the contract is definitized. 

The purchase of air-launched targets through this undefinitized 
contract action is not consistent with the acquisition plan that MDA 
established in 2009, which envisioned competitive contract awards that 
would reduce the agency's reliance on its prime contractor.[Footnote 
82] This purchase of air-launched targets increased MDA's reliance on 
the prime contractor. We previously reported that conducting work 
through the prime contractor had increased target costs. Likewise, in 
comparing the prime contractor to other options prior to awarding the 
contract action, MDA estimated that the prime contractor's management 
and fees would add about $9 million per target compared to the Air 
Force contract vehicle they had previously used. MDA still does not 
know what the total cost will be for these targets--as of January 
2010, the contract action had remained undefinitized for over 290 
days, despite regulations that require such contract actions to 
provide for definitization within 180 days.[Footnote 83] The current 
not-to-exceed amount for this contract action is $496 million. 
According to MDA officials, the delay in definitization is due to 
changes in its requirements for the targets, and they anticipate 
definitization in July 2011, by which time the contract action will 
have remained undefinitized for about 450 days. 

Key Targets Acquisition Decisions in Fiscal Year 2011 Will Shape 
Program Outcomes: 

The Targets and Countermeasures program will make several key 
acquisition decisions in fiscal year 2011 that will shape outcomes 
several years into the future, as well as decisions related to 
contractor return to flight activities in the wake of the FTT-11 
failure. (See table 10.) 

Table 10: Key MDA Target Acquisition Decisions in Fiscal Year 2011: 

Target class: Intercontinental; 
Key fiscal year 2011 decisions: Release solicitation; 
Anticipated date in fiscal year 2011: Canceled February 16. 

Target class: Intermediate-range; 
Key fiscal year 2011 decisions: Award contract; 
Anticipated date in fiscal year 2011: Second quarter. 

Target class: Medium-range; 
Key fiscal year 2011 decisions: Definitize contract action; 
Identify acquisition approach for additional targets; 
Anticipated date in fiscal year 2011: July; No set timetable. 

Source: GAO analysis of MDA information. 

[End of table] 

Officials stated that now that proposals have been received for the 
intermediate-range target, they are in the process of evaluating the 
proposals, and anticipate a contract award in the second quarter of 
fiscal year 2011. A goal of this contract is to build an inventory of 
targets that can be used to meet testing needs as they arise. 

Likewise, MDA may also make a decision on its strategy for procuring 
medium-range targets. Following the cancellation of the solicitation 
in 2010, MDA officials reported that they are considering options for 
procurement of future medium-range targets. The agency cited both a 
new solicitation and the use of existing contracts as options they are 
considering. Use of existing contracts--as MDA has already done for 
five targets under the undefinitized contract action with its prime 
contractor--would reduce planned opportunities for competition and not 
be consistent with the acquisition approach the targets program 
initiated in 2009. 

Finally, the return to flight process for MDA's air-launch contractor 
will also take place during fiscal year 2011. Following the December 
2009 failure of FTT-11 and the subsequent failure review board report, 
MDA halted flight tests that use the contractor's systems or 
components, and has been working with the firm to address problems. 
The results of the "return to flight" test, a target launch that is 
presently scheduled for the third quarter of fiscal year 2011, will 
inform MDA decisions regarding targets currently on contract with the 
firm, as well as potential future contract awards. 

[End of section] 

Appendix XIII: Terminal High Altitude Area Defense (THAAD): 

Fiscal Year 2010 Events: 
* FTT-11 was declared a no-test due to a target failure; 
* The program successfully conducted FTT-14 to prove out objective 
software for THAAD batteries; 
* The program completed ground component deliveries for THAAD Battery 
1 and 2; 
* The program successfully completed qualification on interceptor 
ignition safety system. 

What You Need To Know: 
* THAAD interceptor design and qualification issues delay delivery of 
the first two batteries; 
* The THAAD program is currently mitigating production issues; 
* Conditional release of THAAD Batteries to the Army is delayed 6 
months; 
* Successful THAAD flight test proves out objective software for 
batteries during fiscal year 2010; 
* Targets issues continued to delay test schedule and achievement of 
knowledge points. 

Background and Overview: 

The THAAD element is a rapidly-deployable ground-based system able to 
defend against short-and medium-range ballistic missile attacks during 
their late midcourse and terminal stages. A THAAD battery consists of 
interceptor missiles, three to six launchers, an X-band radar, and a 
fire control and communications system. The THAAD program is producing 
assets for initial operational use, but it is still qualifying 
components, conducting flight tests, and having issues with targets. 

THAAD Interceptor Design and Qualification Issues Have Delayed 
Delivery of the First Two Batteries: 

Delivery of the first two THAAD batteries has been delayed by 
interceptor design and qualification issues. MDA's first THAAD battery 
was originally to be delivered in the fourth quarter of fiscal year 
2010 but due to design and qualification issues with an ignition 
safety system on the interceptors, the 24 interceptors for the first 
battery won't be completed until the fourth quarter of fiscal year 
2011. The full 48 interceptors necessary for both batteries won't be 
delivered until the second quarter of fiscal year 2012, three quarters 
later than originally intended. All of the remaining radars, fire 
controls, and other ground support equipment have been delivered for 
the first two batteries except for the launchers for Battery 1 and 
Battery 2 which are experiencing a 2-year delay in completing the 
government acceptance process. The launchers were originally planned 
to complete this process by the third quarter of fiscal year 2009, but 
now the program does not expect this process to be completed until the 
third quarter of fiscal year 2011. These delays stem from production 
issues associated with manufacturing challenges, parts obsolescence, 
design changes, and manufacturing defects. The government acceptance 
process was also contingent upon launcher qualification which, due to 
an ongoing development effort and changing designs, did not occur 
until February 2011. In addition, discoveries during a recent ground 
test have led to further design changes which are not expected to be 
completed until the second or third quarter of fiscal year 2011. 

MDA's delays in incorporating the requirement for the optical block, 
an ignition safety system to prevent inadvertent launches, led to the 
design and qualification issues. In 2003, an Army safety review board 
identified the requirement to install an optical block on the THAAD 
interceptor's initiation system. However, MDA did not modify the 
development contract to include this requirement until 2006. In 
addition, MDA awarded a production contract in December 2006 before a 
design for the optical block was selected. To date, 7 years after the 
optical block requirement was identified, program and contractor 
officials told us that full recurring costs have not been determined 
and the requirement has not been defined on the production contract. 
Although the safety switch itself had been qualified, the program's 
first qualification of the integrated design in early fiscal year 2010 
failed due to contamination. After making changes to the manufacturing 
process, the part was able to pass qualification in September 2010. 

Although the program recently completed efforts to requalify the 
optical block component, failures during recent in-processing testing 
on the integrated design have again led the program to make minor 
design changes and delayed production of the first interceptor for a 
THAAD battery another quarter. The program was on-track to produce the 
first interceptor for THAAD Battery #1 in the first quarter of fiscal 
year 2011, but due to corrective actions to a circuit in the 
integrated design, the program won't be able to produce its first 
interceptor for a THAAD battery until the second quarter of fiscal 
year 2011. This extra quarter is in addition to the more than a year 
delay from the original planned date. According to program officials, 
the program plans to develop another design of the optical block that 
is more producible for use on THAAD battery interceptors in the future. 

The THAAD Program Is Currently Mitigating Production Issues: 

In addition to completing its optical block design qualification, the 
THAAD program office is pursuing mitigation plans on other production 
risks including production rates and production gaps. 

The THAAD program has a plan in place to ensure the interceptors can 
be produced at the necessary rate of four per month to meet planned 
delivery dates. One of the parts that has yet to demonstrate the 
required rate is the flight sequencing assembly, which houses the 
optical block. Currently, the program has only demonstrated producing 
one flight sequencing assembly every 2 months. A variety of issues 
have prevented the subcontractor from demonstrating the necessary 
production rate including design changes and producibility issues 
associated with the optical block as well as availability of optical 
block parts from the contractor that produces it. However, according 
to the program office, the main issue that led to such a low level of 
production was a time-consuming testing procedure during the 
production process of the flight sequencing assembly. A new process 
has been devised to significantly speed up this testing and program 
officials are projecting that, with this process in place, production 
rates will increase to one per week--meeting the four per month 
required rates. The program hopes to demonstrate this new production 
rate as production resumes. 

The THAAD program also faces a production gap that poses cost and 
schedule risks to retrain workers and recertify and requalify 
production processes. The contract award for Battery 3 interceptors 
was delayed by approximately 6 months to the end of fiscal year 2010 
which contributed to a 1-year production gap for some interceptor 
components. Program officials told us that the cost to restart 
production for the subcontractors would be rolled up into the contract 
during the negotiation process. In addition, the contract for THAAD 
Battery 3 and 4 ground components and Battery 4 interceptors was not 
awarded as planned in the first quarter of fiscal year 2011, adding to 
the production gap of up to 3 years for some ground components. 
Program officials told us that delays to the contract award are 
because of ongoing contract negotiations. MDA is negotiating a 
contract which will include sections priced on a fixed-price incentive 
(firm target) basis for ground equipment and interceptors.[Footnote 
84] The contract is expected to be awarded in the second quarter of 
fiscal year 2011. Because there are fewer ground components than 
interceptors to produce, the program anticipated these gaps but could 
do nothing to prevent them. The program plans to negotiate these costs 
with the future contract but the effect of these gaps on cost is not 
yet known. 

Conditional Release of THAAD Batteries to the Army Is Delayed 6 Months: 

The THAAD program has delayed its conditional release of batteries to 
the Army from September 2010 until April 2011 because of ongoing 
safety issues with interceptor components. For the release to occur, 
the Army must certify that the batteries are safe, suitable, and 
logistically supported. According to program officials, the Army 
Safety Review Board will perform safety testing on the integrated 
design of the optical block to be completed in February 2011. These 
results are needed before the release board can make its decision. 
However, the review board would need to perform repeat testing on 21 
integrated designs of the optical block in order to achieve full 
materiel release, so THAAD will continue with conditional materiel 
release after passing Army safety testing on 3 units of the integrated 
designs. 

In addition, program officials told us that THAAD is also accepting 
conditional materiel release because of its inability to incorporate 
another safety feature into the initial production units. This safety 
feature, called a thermally initiated venting system (TIVS) prevents 
explosion of the boost motor in the event that the canister holding 
the interceptor heats up to a certain temperature. The THAAD program 
provided an authorization to proceed on the requirement for TIVS in 
June 2007--more than 6 months after the production contract was 
signed. The scope of the work for TIVS on the production contract has 
yet to be authorized by the THAAD program. A developmental test of the 
early TIVS design resulted in a test failure. The program has planned 
corrective actions which will be tested during an upcoming 
verification test in the second quarter of fiscal year 2011. The THAAD 
program will not be able to start producing interceptors with this 
safety feature until it has produced more than half of its production 
quantity for the first two batteries. Because it cannot deliver 
interceptors with this safety feature to meet the requirement for full 
materiel release up front, according to program officials, the Army 
will accept conditional material release of THAAD and the THAAD 
program will cut-in the TIVS design in the production process during 
the fourth quarter of fiscal year 2011. 

Successful THAAD Flight Test Proves Out Objective Software for 
Batteries during Fiscal Year 2010: 

Despite test delays over the past 2 years due to targets issues, the 
THAAD program was able to conduct a flight test in June 2010 that 
successfully demonstrated the complete objective software for the 
THAAD battery. After reorganizing its testing schedule due to address 
issues with air-launched targets, the program was able to accelerate 
the next test that did not use the air-launched targets, FTT-14, from 
the second quarter of fiscal year 2012 to the third quarter of fiscal 
year 2010. The program changed FTT-14's objectives to demonstrate 
component objective software for the THAAD battery in order to meet an 
important knowledge point for the program. Also during the test, the 
program was able to successfully demonstrate THAAD's performance 
against a simulated mass raid scenario. 

Targets Issues Continued to Delay Test Schedule and Achievement of 
Knowledge Points: 

Since 2009, the THAAD program has experienced multiple delays and test 
restructures that have affected the program's ability to achieve 
knowledge points. The THAAD program was unable to conduct planned 
tests FTT-11 and FTT-12 in fiscal year 2009 due to target availability 
issues and an agency-wide restructuring of its testing schedule. Both 
of these tests were slated to meet key knowledge points to demonstrate 
the AN/TPY-2 (THAAD mode) radar's advanced discrimination capabilities 
and to demonstrate the component objective software for the THAAD 
battery, respectively. These tests were delayed into fiscal year 2010. 
However, in December 2009, FTT-11 resulted in a "no test" due to a 
target failure related to air-launched targets. This target failure 
led MDA to suspend all tests involving air-launched targets (see 
appendix XII for a detailed discussion of target issues). The THAAD 
program then had to reorganize its testing plans delaying FTT-12 and 
FTT-13, accelerating FTT-14, and changing its test objectives to meet 
the knowledge point originally planned for FTT-12 to prove out THAAD 
battery objective software. Although the program was able to 
successfully demonstrate this knowledge point, it won't be able to 
demonstrate the AN/TPY-2 (THAAD mode) radar's advanced discrimination 
capability until the fourth quarter of fiscal year 2011, nearly 2 
years after it was originally planned. The third knowledge point to 
demonstrate a flight test intercept against a medium-range ballistic 
missile target to be met during FTT-13, has been delayed from the 
second quarter of fiscal year 2011 until the third quarter of fiscal 
year 2012 because of the lack of availability of a medium range air-
launched target. See table 11 for how THAAD's flight test objectives 
have changed. 

Table 11: THAAD's Knowledge Point Objectives by Test Before and After 
the FTT-11 Failure in December 2009: 

Knowledge points to achieve intercept versus medium-range target: 
Demonstrate AN/TPY-2 (terminal mode) radar advanced discrimination; 
Before FTT-11 failure: Flight test: FTT-11; 
Before FTT-11 failure: Date: First quarter fiscal year 2010; 
After FTT-11 failure: Flight test: FTT-12; 
After FTT-11 failure: Date: Fourth quarter fiscal year 2011. 

Knowledge points to achieve intercept versus medium-range target: 
Demonstrate complete component objective software for THAAD batteries; 
Before FTT-11 failure: Flight test: FTT-12; 
Before FTT-11 failure: Date: Second quarter fiscal year 2010; 
After FTT-11 failure: Flight test: FTT-14; 
After FTT-11 failure: Date: Third quarter fiscal year 2010. 

Knowledge points to achieve intercept versus medium-range target: 
Demonstrate flight test intercept against a medium range ballistic 
missile target; 
Before FTT-11 failure: Flight test: FTT-13; 
Before FTT-11 failure: Date: Second quarter fiscal year 2011; 
After FTT-11 failure: Flight test: FTT-13; 
After FTT-11 failure: Date: Third quarter fiscal year 2012. 

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

[End of table] 

[End of section] 

Appendix XIV: Scope and Methodology: 

To assess all six areas of MDA's progress, we examined the 
accomplishments of nine BMDS elements that MDA is currently developing 
and fielding: the Aegis Ballistic Missile Defense (Aegis BMD); Aegis 
Ashore; BMDS Sensors; Command, Control, Battle Management, and 
Communications (C2BMC); Ground-based Midcourse Defense (GMD); 
Precision Tracking and Surveillance System (PTSS); Space Tracking and 
Surveillance System (STSS); Targets and Countermeasures; and Terminal 
High Altitude Area Defense (THAAD). We developed data collection 
instruments that were completed by most elements' program offices 
[Footnote 85] and reviewed the individual element responses. These 
instruments collected detailed information on prime contracts, test 
schedules and results, element performance, noteworthy progress, 
lessons learned, and challenges facing the elements during the fiscal 
year. We also performed detailed reviews of the progress made within 
selected Missile Defense systems, or elements. The results of these 
reviews are presented in detail in appendixes to this report and are 
also integrated as appropriate in our findings related to progress in 
delivering assets and implementing new initiatives. We also examined 
the cost/resource, schedule and test baselines as presented in the 
BMDS Accountability Report (BAR), test plans and reports, and 
production plans. We sought to examine MDA's Baseline Execution 
Reviews of each element's progress, but were unable to asses the 
supporting backup materials as they were not made available to us 
until February 2011--the very end of the audit. 

To assess whether MDA elements delivered assets as scheduled, we 
examined the 2009 BMDS Accountability Report, and compared it to the 
2010 version, looking for similarities and differences between the 
two. We also reviewed responses to GAO data collection instruments, 
which detailed key accomplishments for fiscal year 2010, to include 
some asset deliveries, as well as any delayed asset deliveries. 

To follow up on the progress MDA made to improve transparency and 
accountability, we held discussions with officials in MDA's Operations 
Directorate to discuss the new phased adaptive approach as well as the 
status of transparency and accountability issues the agency initiated 
in early 2010. 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 the oversight role of the Missile Defense Executive Board. We 
also met with officials in MDA's Acquisition Directorate to discuss 
how the agency is establishing and managing its internal baselines. We 
also reviewed various MDA statements and documents related to MDA's 
new phased adaptive approach. 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's Fiscal Year 2010 BMDS Accountability Report, Integrated 
Master Test Plans, MDA budget estimate submission justifications, the 
Ballistic Missile Defense Master Plan, and prior reports that outlined 
the agency's baselines and goals. 

To assess the management process to synchronize acquisitions for the 
European Phased Adaptive Approach, we synthesized management and 
oversight principles from the Office of Management and Budget, DOD, 
the Missile Defense Agency (MDA), and GAO best acquisition practices 
for large acquisition efforts similar to EPAA. We then compared EPAA 
acquisition efforts to these principles. To determine the status of 
those efforts, we reviewed DOD and MDA documentation related to EPAA, 
including the Ballistic Missile Defense Review (BMDR) Report and MDA's 
BMDS Accountability Report (BAR). We also requested the European PAA 
cost estimate that was completed in fall of 2009. However, we did not 
receive the cost estimate until near the end of our review and 
therefore we could not perform and include the related analysis in our 
review. We met with MDA and Office of the Secretary of Defense 
officials. We also visited the U.S. European Command and U.S. 
Strategic Command. In addition, to identify near-term development 
risks, we reviewed MDA's BMDS acquisition documentation, including the 
integrated master test plan and budget documents. We met with 
officials from MDA directorates and element program offices as well as 
the Offices of the Under Secretary of Defense for Policy and the Under 
Secretary of Defense for Acquisition, Technology, and Logistics and 
visited contractor facilities. We also used prior GAO work regarding 
best acquisition practices to assess those risks. 

We included the acquisition parts of our final analysis performed in 
response to a congressional mandate that we review a DOD assessment 
and plan related to the GMD system that included issues related to 
acquisition, sustainment and refurbishment. To assess DOD's Assessment 
and Plan for the GMD program, we reviewed the reports provided by DOD. 
We sought the analysis and assumptions behind the statements in the 
reports; however, in certain cases MDA was unable to provide 
supporting documentation or the documentation provided was determined 
to be insufficient to assess. Specifically, we analyzed sustainment, 
refurbishment and test plans and program schedules. We also assessed 
budget documents, and program reviews. We interviewed officials from 
MDA, U.S. Strategic Command, U.S. Northern Command, and the Army. We 
also interviewed officials from DOD's Office of the Director, Test and 
Evaluation, and the Space and Missile Defense Command. We met with GMD 
contractors, Boeing and Raytheon, and met with officials from the 
Naval Warfare Center, Crane Division to discuss aging and surveillance 
testing. Our analysis covered data ranging from January 2002 through 
September 2010. 

We assessed MDA's testing and target development progress by reviewing 
the technical baselines in the BAR, MDA's Integrated Master Test 
Plans, the target business case analysis, target contracts, and other 
documents related to target planning and acquisitions. In addition, we 
met with officials in the Targets and Countermeasures Program Office 
to obtain information on the target acquisition strategy including 
plans for cost, schedule, and testing as well as to discuss the 
progress, challenges, and lessons learned during fiscal year 2010 
testing. We also interviewed officials within program offices and 
within MDA functional directorates, such as the Directorates for 
Engineering and Testing. In addition, we discussed the elements' test 
programs and test results with the BMDS Operational Test Agency and 
DOD's Office of the Director, Operational Test and Evaluation. We held 
discussions with the BMDS Operational Test Agency to follow up on BMDS 
models and simulations. 

As we agreed to with your staff, we do not include an analysis of 
MDA's earned value management reporting this year. In prior years, in 
the absence of full cost baselines for elements, we assessed the 
earned value management progress of individual contracts. We issued 
our findings on MDA's earned value progress during fiscal year 2009 in 
July 2010 and found data reliability issues with two of the 14 
contracts.[Footnote 86] Because of these issues with the GMD and 
Targets and Countermeasures programs' earned value management data, we 
were unable to report cost progress for these two contracts which 
amounted to more than half of the total budgeted contract costs for 
MDA prime contracts we reviewed. We plan to re-assess earned value 
management data on MDA prime contracts in the future once MDA has had 
time to address our recommendations to improve data reliability. In 
our July report, MDA stated that it intended to take a key step in 
addressing our recommendations by conducting a major review of the GMD 
program's EVM data by the end of September 2010. Because MDA provided 
documentation of its actions at the end of our audit--in February 
2011--leaving no time for review, we will assess whether the steps MDA 
has taken sufficiently address GMD's data reliability issues in next 
year's report. 

As noted above, 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. Notwithstanding 
these delays, we were able to obtain the information needed to satisfy 
our objectives in accordance with generally accepted government 
auditing standards. However, we were not given access until Late 
February 2011 to the September 2009 European Phased Adaptive Approach 
cost estimate, the backup material for the Baseline Execution Reviews, 
or the actions MDA took to respond to our previous recommendations on 
Earned Value Management. As a result, we were unable to assess this 
material as part of this year's annual review. We intend to review 
this material as part of our next mandated annual assessment. 

Our work was performed at MDA headquarters in Arlington, Virginia, in 
Dahlgren, Virginia, at various program offices and contractor 
facilities located in Huntsville, Courtland, and Troy, Alabama, and at 
contractor facilities in Orlando, Florida. In Arlington we met with 
officials from the Airborne Laser Testbed Program Office; Command, 
Control, Battle Management, and Communications (C2BMC) Program Office; 
MDA's Operations Directorate; 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 Dahlgren we 
met with officials from the Aegis Ballistic Missile Defense Program 
Office. In Huntsville, Alabama we interviewed officials from the 
Ground-based Midcourse Defense (GMD) Program Office, the Sensors 
Program Office, the Space Tracking and Surveillance System Office, the 
Terminal High Altitude Area Defense Project Office, the Targets and 
Countermeasures Program Office, the Advanced Technology Directorate, 
and Test Directorate. We also met with Lockheed Martin officials in 
Huntsville and Courtland, Alabama to discuss their role on the MDA 
Targets and Countermeasures prime contract, and production of 
intermediate-range targets. In addition, we met with Orbital Sciences 
officials to discuss their role as a contractor and subcontractor 
providing medium-range targets. We also met with Coleman Aerospace 
officials in Orlando, Florida to discuss their work on short-range 
targets and the actions they are taking in response to a December 2009 
target failure. We met with Lockheed Martin official in Troy, Alabama 
to discuss their role in developing THAAD interceptors. 

We conducted this performance audit from March 2010 to March 2011 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 XV: 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; Teague Lyons; Steven Stern; 
Gwyneth Woolwine; Meredith Allen Kimmett; Brian Tittle; Letisha 
Antone; Kenneth E. Patton; Karen Richey; Hai Tran; Robert Swierczek; 
Nicolaas Cornelisse; Matthew S. Spiers; Rebecca Guerrero; and Alyssa 
Weir made key contributions to this report. 

[End of section] 

Footnotes: 

[1] GAO, Defense Acquisitions: Missile Defense Transition Provides 
Opportunity to Strengthen Acquisition Approach, [hyperlink, 
http://www.gao.gov/products/GAO-10-311] (Washington, D.C. Feb.25, 
2010). 

[2] Knowledge-based acquisition practices are used by successful 
developers to get quality products to customers as quickly and cost 
effectively as possible. As a part of meeting this goal, developers 
focus their technology programs on maturing technologies that have the 
realistic potential for being incorporated into the product under 
consideration. Accordingly, successful developers spend time to mature 
technology in a technology setting, where costs are typically not as 
great, and they do not move forward with product development until 
essential technologies are sufficiently mature. 

[3] An element of the BMDS is essentially a program that, together 
with other BMDS elements or programs, comprises a complex system of 
defense. MDA intends for each element to play an important role in a 
system intended to defend against hostile missiles in any phase of 
flight. An element may consist of several components. 

[4] 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; 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. 

[5] 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); 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); and [hyperlink, 
http://www.gao.gov/products/GAO-10-311]. 

[6] MDA reports its goals in the annual BAR. The agency did not issue 
its 2010 goals report until June 2010--4 months later than required. 
The National Defense Authorization Act for Fiscal Year 2002, Pub. L. 
No. 107-107 § 232(c) required DOD to establish cost, schedule, testing 
and performance goals for the BMDS and to submit a statement of these 
goals to the congressional defense committees by February 1, each 
year. The BAR currently is used to meet this requirement. 

[7] 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. The 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, key dates 
associated with a capability, and the weapon's intended performance 
parameters 

[8] GAO, Missile Defense: European Phased Adaptive Approach 
Acquisitions Face Synchronization, Transparency, and Accountability 
Challenges, [hyperlink, http://www.gao.gov/products/GAO-11-179R] 
(Washington, D.C.: Dec. 21, 2010). 

[9] According to MDA, the European PAA cost estimate was not a formal 
cost estimate, but an interim work product to provide a sense of 
budget requirements for European PAA considerations. The agency also 
noted that the Office of the Secretary of Defense's Cost Analysis and 
Program Evaluation does not endorse the estimate because of the 
insufficient definition of mission requirements and technical 
requirements, as well as a lack of validated, projected technical 
capabilities that MDA states will be accomplished through its test 
program. 

[10] DOD was mandated in the National Defense Authorization Act for 
Fiscal Year 2010 Pub. L. No. 111-84, § 232 (2009) to conduct an 
assessment of the GMD element and establish a plan for GMD to cover 
period of the future years defense program. Additionally, the 
Comptroller General was mandated to review the plan and assessment and 
provide our assessment, which we did in a briefing on October 15, 2010 
to all four defense committees. We have included the key acquisition 
related material in appendix IX. 

[11] GAO, Defense Acquisitions: Missile Defense Program Instability 
Affects Reliability of Earned Value Management Data, [hyperlink, 
http://www.gao.gov/products/GAO-10-676] (Washington, D.C.: July 14, 
2010). 

[12] 7 of these missiles were redelivered in 2009, and the remaining 6 
were redelivered in 2011. 

[13] The GBI used during the fiscal year 2010 flight test was a two-
stage variant. The remaining 2010 GBI deliveries were the three-stage 
variant, which are designed for operational use. 

[14] [hyperlink, http://www.gao.gov/products/GAO-10-311]. 

[15] The operational capacity baseline, as defined in the 2010 BAR, is 
a detailed timeline and set of steps required to certify that BMDS 
capabilities are ready for operational use, including steps needed for 
obtaining compliance with information assurance requirements, 
documenting capabilities and limitations, and completing warfighter 
training requirements. However, in commenting on a draft of this 
report, DOD stated that an operational capacity baseline identifies 
elements and approved hardware and software configuration available 
for operational use by the combatant commanders. 

[16] The technical baseline is a detailed technical description of the 
capability being developed and planned improvements over time. The 
description reflects system requirements and describes how particular 
capabilities satisfy the combatant commanders' prioritized 
capabilities and the key knowledge points that must be achieved for 
continued program development. 

[17] The contract baseline is a timeline for a set of MDA contracts 
designed to deliver integrated BMDS capabilities. The timeline 
highlights the steps in the contracting process from request for 
proposals through proposal receipt, negotiations, and contract award. 

[18] 10 U.S.C. § 2432 defines, with respect to a major defense 
acquisition program, procurement unit cost as the amount equal to (1) 
the total of all funds programmed to be available for obligation for 
procurement for the program divided by (2) the number of fully 
configured end items to be procured. In addition, program acquisition 
unit cost is defined as the amount equal to (1) the total cost for 
development and procurement of, and system-specific military 
construction for, the acquisition program divided by (2) the number of 
fully configured end items to be produced for the acquisition program. 

[19] The AN/TPY-2 and SBX radars are both managed by the Sensors 
program. See appendix VII for further details on these radars. In 
addition, there are multiple shipset software upgrades planned for 
Aegis BMD ships. Aegis BMD SM-3 Block IB missiles and associated 
software upgrades for shipsets refers to software version 4.0.1. 
Future Aegis BMD ship software upgrades refer to software version 5.0. 
See appendix IV for details on these software versions. 

[20] MDA also reported operation and sustainment costs for a sixth 
element's effort, the C2BMC's Spiral 6.4, but the agency did not 
clarify if the costs represented were the total operation and 
sustainment costs necessary for the effort. 

[21] We previously reported in GAO, Missile Defense: Actions Needed to 
Improve Planning and Cost Estimates for Long-Term Support of Ballistic 
Missile Defense, [hyperlink, http://www.gao.gov/products/GAO-08-1068] 
(Washington, D.C. Sept. 25, 2008) that DOD had not clearly identified 
BMDS operation and sustainment costs because the department has not 
required that these costs are to be developed, validated, and 
reviewed, and it has not specified when this should be done or who is 
responsible for doing this. 

[22] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009). 

[23] The Aegis BMD program office provided the life cycle cost 
estimate that was the basis for the Aegis BMD SM-3 Block IB missile 
and associated software upgrades for ship sets resource baseline 
presented in the June 2010 BAR. The estimate did not directly match 
information presented in the BAR. The program office provided an 
updated resource baseline in September 2010, but did not provide the 
life cycle cost estimate that supported the updated baseline in time 
for us to include in our analysis. We therefore limited our analysis 
of resource baselines to only those presented in the June 2010 BAR. 

[24] 10 U.S.C. § 2434 requires an independent cost estimate of the 
full life-cycle cost of the program before a major defense acquisition 
program can advance into system development and demonstration (now 
known as engineering and manufacturing development) or production and 
deployment. The full life-cycle cost must be provided to the decision 
maker for consideration. 

[25] Because MDA has not yet formally entered the DOD acquisition 
cycle, the requirement at 10 U.S.C. § 2434, which is triggered by the 
phases of the cycle, does not yet apply. 

[26] [hyperlink, http://www.gao.gov/products/GAO-10-311]. 

[27] THAAD did accelerate and conduct FTT-14 in fiscal year 2010. For 
specifics regarding THAAD's fiscal year 2010 activity, see appendix 
XIII. 

[28] A salvo launch includes the firing of two interceptors at one 
target. 

[29] The Ike Skelton National Defense Authorization Act for Fiscal 
Year 2011, Pub. L. No. 111-383, § 225 (2010) required the Secretary of 
Defense to ensure that MDA establishes and maintains an acquisition 
baseline for each program element of the BMDS. This law detailed 
specific requirements for the contents of the acquisition baseline, 
including a comprehensive schedule, a detailed technical description, 
a cost estimate (including life cycle cost estimate), and a test 
baseline. Annually, MDA is to submit a report on the baselines to the 
congressional defense committees. After the first such report, each 
subsequent report shall identify the significant changes or variances, 
if any, in any baseline from any earlier report. 

[30] [hyperlink, http://www.gao.gov/products/GAO-11-179R]. 

[31] GAO, Ballistic Missile Defense: DOD Needs to Address Planning and 
Implementation Challenges for Future Capabilities in Europe, 
[hyperlink, http://www.gao.gov/products/GAO-11-220] (Washington, D.C.: 
Jan. 26, 2011). 

[32] Although the number of planned emplacements was reduced, funding 
continued to achieve a total inventory of 52 GBIs; 30 are planned for 
operational interceptors with an additional 22 for testing and spares. 

[33] GMD canceled GMD flight test FTG-07 in order to conduct FTG-06a. 

[34] At the time of our review, MDA had initiated a failure review 
team to investigate the cause(s) of the failure. 

[35] GMD's sustainment program is comprised of multiple activities to 
maintain and support an effective defensive system, to meet warfighter 
requirements over the expected 20-year lifecycle, and to support a 
service life extension decision in 2027. 

[36] 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). 

[37] According to the notice posted by MDA on the FedBizOpps Web site, 
the solicitation was canceled due to reprioritization of planned 
tests, and the agency plans to compete intercontinental-range target 
requirements in the future at a time to be determined. 

[38] To meet urgent needs, DOD can issue undefinitized contract 
actions, which authorize contractors to begin work before reaching a 
final agreement on contract terms. Undefinitized contract action means 
any contract action for which the contract terms, specifications, or 
price are not agreed upon before performance is begun under the 
action. Defense Federal Acquisition Regulation Supplement (DFARS) 
217.7401(d). 

[39] Under DFARS, undefinitized contract actions are to contain 
definitization schedules that provide for definitization by the 
earlier of 180 days after issuance of the action or the date on which 
the amount of funds obligated under the action is equal to more than 
50 percent of the not to exceed price. The 180 days threshold may be 
extended, but may not exceed the date that is 180 days after the 
contractor submits a qualifying proposal. DFARS 217.7404-3(a) (1) and 
(2) and 216.603-2(c)(5). 

[40] 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). 

[41] The AN/TPY-2 and SBX radars are both managed by the Sensors 
program. See appendix VII for further details on these radars. In 
addition, there are multiple ship set software upgrades planned for 
Aegis BMD ships. Aegis BMD SM-3 Block IB missiles and associated 
software upgrades for ship sets refers to software version 4.0.1. 
Future Aegis BMD ship software upgrades refer to software version 5.0. 
See appendix IV for details on these software versions. 

[42] 10 U.S.C. § 2432, with respect to major defense acquisition 
programs, defines the procurement unit cost as the amount equal to (1) 
the total of all funds programmed to be available for obligation for 
procurement for the program, divided by (2) the number of fully- 
configured end items to be procured. 

[43] 10 U.S.C. § 2432, with respect of major defense acquisition 
programs, defines the program acquisition unit cost as the amount 
equal to (1) the total cost for development and procurement of, and 
system-specific military construction for, the acquisition program, 
divided by (2) the number of fully-configured end items to be produced 
for the acquisition program. 

[44] The BMDS program meets the definition of a major defense 
acquisition program, which is defined in 10 U.S.C. § 2430 and 
implemented by DOD in instruction and guidance commonly referred to as 
its 5000 series. A major defense acquisition program is an acquisition 
program that is not a highly sensitive classified program and is 
designated as a major defense acquisition program or is estimated to 
require an eventual total expenditure for research, development, test, 
and evaluation of more that $365 million in fiscal year 2000 constant 
dollars or, for procurement, of more than $2.190 billion in fiscal 
year 2000 constant dollars. 

[45] 10 U.S.C. § 2435 requires a baseline description for major 
defense acquisition programs. 

[46] Department of Defense, Chapter 2.1.1, "The Acquisition Program 
Baseline," of Defense Acquisition Guidebook (2009). 

[47] Though MDA is not yet required to establish an acquisition 
program baseline pursuant to 10 U.S.C. § 2435 and related DOD policy 
because of the acquisition flexibilities it has been granted, Congress 
has enacted legislation requiring MDA to establish some baselines. The 
Ronald W. Reagan National Defense Authorization Act for Fiscal Year 
2005, Pub. L. No. 108-375, § 234(e) (2004), 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. Most recently, the Ike 
Skelton National Defense Authorization Act for Fiscal Year 2011, Pub. 
L. No. 111-383, § 225 (2010) required the Secretary of Defense to 
ensure that MDA establishes and maintains an acquisition baseline for 
each program element of the BMDS. This law detailed specific 
requirements for the contents of the acquisition baseline, including a 
comprehensive schedule, a detailed technical description, a cost 
estimate, and a test baseline. The cost estimate is to include a life 
cycle cost estimate, PAUC, APUC, and identify when the program joint 
cost analysis requirements description document is scheduled to be 
approved. Annually, MDA is to submit a report on the baselines to the 
congressional defense committees. After the first such report, each 
subsequent report shall identify the significant changes or variances, 
if any, in any baseline from any earlier report. As this law was 
passed in December 2010, we do not yet know its impact on the problems 
discussed here. 

[48] Sunk costs are costs incurred prior to the time at which the life 
cycle cost analysis occurs. 

[49] MDA also reported operation and sustainment costs for a sixth 
element's effort, the C2BMC's Spiral 6.4, but the agency did not 
clarify if the costs represented were the total operation and 
sustainment costs necessary for the effort. 

[50] Base year dollars are created by converting projected future 
annual budgets into a single base year by removing the projected 
effects of inflation. In addition, one can convert prior years budgets 
(sunk costs) into a single base year by adding inflation. 

[51] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009). 

[52] The Aegis BMD program office provided the life cycle cost 
estimate that was the basis for the Aegis BMD SM-3 Block IB missile 
and associated software upgrades for shipsets resource baseline 
presented in the June 2010 BAR. The estimate did not directly match 
information presented in the BAR. The program office provided an 
updated resource baseline in September 2010, but did not provide the 
life cycle cost estimate that supported the updated baseline in time 
for us to include in our analysis. We therefore limited our analysis 
of resource baselines to only those presented in the June 2010 BAR. 

[53] The 12 steps for developing credible cost estimates are (1) 
defining the project's purpose, (2) developing the estimating plan, 
(3) defining the project's characteristics, (4) determining the 
estimating approach, (5) identifying ground rules and assumptions, (6) 
obtaining data, (7) developing the point estimate, (8) conducting 
sensitivity analysis, (9) performing a risk or uncertainty analysis, 
(10) documenting the estimate, (11) presenting the estimate to 
management for approval, and (12) updating the estimate to reflect 
actual costs and changes. 

[54] A point estimate is the best guess or most likely value for the 
cost estimate, given the underlying data. The level of confidence for 
the point estimate is the probability that the point estimate will 
actually be met. For example, if the confidence level for a point 
estimate is 80 percent, there is an 80 percent chance that the final 
cost will be at or below the point estimate and a 20 percent chance 
that costs will exceed the point estimate. 

[55] 10 U.S.C. § 2434 requires an independent cost estimate of the 
full life-cycle cost of the program before a major defense acquisition 
program can advance into system development and demonstration (now 
known as engineering and manufacturing development) or production and 
deployment. The full life-cycle cost must be provided to the decision 
maker for consideration. 

[56] Because MDA has not yet formally entered the DOD acquisition 
cycle, the requirement at 10 U.S.C. § 2434, which is triggered by the 
phases of the cycle, does not yet apply. 

[57] Japanese flight tests help understand performance but because 
they are not US assets, they are not considered developmental flight 
tests from a programmatic perspective. 

[58] GAO, Defense Acquisitions: Many Analyses of Alternatives Have Not 
Provided a Robust Assessment of Weapon System Options, [hyperlink, 
http://www.gao.gov/products/GAO-09-665] (Washington, D.C.: Sep. 24, 
2009). 

[59] The Office of the Secretary of Defense, Office of Cost Assessment 
and Program Evaluation provides independent analytic advice to the 
Secretary of Defense on all aspects of the Defense program, including 
alternative weapon systems and force structures, the development and 
evaluation of defense program alternatives, and the cost-effectiveness 
of defense systems. 

[60] Early intercept is the interception of threat missiles early 
enough in their flight to allow for a shoot-look-shoot tactic. 

[61] The National Defense Authorization Act for Fiscal Year 2010, Pub. 
L. No. 111-84 § 232 (2009). 

[62] The Probability of Engagement Success is the probability that the 
BMDS will prevent an adversary warhead from carrying out its mission. 
Launch Area Denied is the geographic area that is defended by the 
BMDS. Defended area is the geographic area that the BMDS is capable of 
defending against adversary ballistic missiles. 

[63] The Stockpile Reliability Program Plan includes, but is not 
limited to the following activities: Aging and Surveillance Test 
Program, Maintenance Built-in Test, GBI Refurbishment Strategy, Flight 
Test Rotation Strategy, GBI Sustainment Program, and the Service Life 
Extension Plan. 

[64] According to GMD program officials, the GMD program expected it 
to be finalized in June 2010. However, the original plan was directed 
to undergo significant revisions. This delayed the release of the 
Stock Reliability Program Plan until September 2010. 

[65] According to MDA, however, results from developmental testing are 
being incorporated incrementally as test results are analyzed and 
sufficient conclusions can be drawn from all test data. 

[66] The Aging and Surveillance test program is a subcomponent to the 
Stockpile Reliability Program Plan and is designed to examine aged 
hardware to determine natural degradation characteristics and to 
understand performance changes. 

[67] The inertial measurement unit is designed to aid the kill vehicle 
in its flight location and has undergone several significant design 
changes and alterations. 

[68] The MBIT is the primary method for determining and monitoring the 
health and status of the fielded interceptor. In addition, the MBIT 
verifies the readiness of stored interceptors. 

[69] Task Assignment-23 Interceptor Refurbishment Plan (April 2007). 

[70] According to MDA, the two-stage design is an alternative for the 
PAA and the test was utilized as a risk reduction for future tests. 
However, there are no current plans to produce two-stage GBIs for 
operational use. 

[71] GAO, Defense Acquisitions: Missile Defense Transition Provides 
Opportunity to Strengthen Acquisition Approach, [hyperlink, 
http://www.gao.gov/products/GAO-10-311] (Washington, D.C.: Feb. 25, 
2010). 

[72] The failure investigation team concluded that the failure was 
caused by a quality control event. Corrective actions include design 
enhancements to improve vehicle processing, which according to MDA, 
mitigates the risk of reoccurrence. 

[73] At the time of our review, MDA had initiated a Failure Review 
Team to investigate the cause(s) of failure. 

[74] According to the Director, MDA, based on the issues that arose in 
FTG-06a, he directed the agency to stop taking deliveries of any more 
completed CE-II EKVs. 

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

[76] Data is current as of October 20, 2010. 

[77] Data is current as of October 20, 2010. 

[78] GAO, Defense Acquisitions: Missile Defense Transition Provides 
Opportunity to Strengthen Acquisition Approach, [hyperlink, 
http://www.gao.gov/products/GAO-10-311] (Washington, D.C.: Feb. 25, 
2010); 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); and 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). 

[79] In addition, 9 tests were added in IMTP 10.2 and 14 were removed. 

[80] The draft intercontinental solicitation was canceled in February 
2011, prior to being finalized. According to the notice posted by MDA 
on the FedBizOpps Web site, the solicitation was canceled due to 
reprioritization of planned tests, and the agency plans to compete 
intercontinental-range target requirements in the future at a time to 
be determined. 

[81] To meet urgent needs, DOD can issue undefinitized contract 
actions, which authorize contractors to begin work before reaching a 
final agreement on contract terms. Undefinitized contract action means 
any contract action for which the contract terms, specifications, or 
price are not agreed upon before performance is begun under the 
action. DFARS 217.7401(d). 

[82] To the extent MDA has experienced circumstances that warrant a 
departure from its 2009 acquisition plan, section 7.104 of the FAR 
requires planners to review at key dates specified in the plan or 
whenever significant changes occur, and no less often than annually, 
acquisition plans and, if appropriate, revise them. 

[83] DFARS 217.7404-3 states that UCAs shall provide for 
definitization by the earlier of either, 180 days after issuance of 
the action or the date on which more than 50% of the not-to-exceed 
price has been obligated. The 180 day threshold may be extended but 
may not exceed the date that is 180 days after the contractor submits 
a qualifying proposal.If a contractor submits a qualifying proposal 
before the 50 percent threshold has been reached, then the limitation 
on obligations may be increased to no more than 75 percent. 

[84] According to FAR 16.403-1, a fixed-price incentive (firm target) 
contract specifies a target cost, a target profit, a price ceiling 
(but not a profit ceiling or floor), and a profit adjustment formula. 
These elements are all negotiated at the outset. The price ceiling is 
the maximum that may be paid to the contractor, except for any 
adjustment under other contract clauses. When the contractor completes 
performance, the parties negotiate the final cost, and the final price 
is established by applying the formula. When the final cost is less 
than the target cost, application of the formula results in a final 
profit greater than the target profit. When final cost is more than 
target cost, application of the formula results in a final profit less 
than the target profit, or even a net loss. If the final negotiated 
cost exceeds the price ceiling, the contractor absorbs the difference 
as a loss. 

[85] Instead of requesting data collection instrument information from 
the GMD element, we relied on the information that had already been 
collected for the GMD briefing to Congress, "DOD's Assessment and Plan 
for the GMD Program." 

[86] [hyperlink, http://www.gao.gov/products/GAO-10-676]. 

[End of section] 

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