High Risk Series: Defense Weapons Systems Acquisition: GAO/HR-95-4
High Risk Series: Defense Weapons Systems Acquisition (Letter Report,
02/95, GAO/HR-95-4).

In 1990, GAO began a special effort to identify federal programs at high
risk of waste, fraud, abuse, and mismanagement.  GAO issued a series of
reports in December 1992 on the fundamental causes of the problems in
the high-risk areas.  This report on defense weapons systems acquisition
is part of the second series that updates the status of this high-risk
area. Readers have the following three options in ordering the high-risk
series: (1) request any of the individual reports in the series,
including the Overview (HR-95-1), the Guide (HR-95-2), or any of the 10
issue area reports; (2) request the Overview and the Guide as a package
(HR-95-21SET); or (3) request the entire series as a package

--------------------------- Indexing Terms -----------------------------

     TITLE:  High Risk Series: Defense Weapons Systems Acquisition
      DATE:  02/01/95
   SUBJECT:  Military procurement
             Requirements definition
             Advanced weapons systems
             Procurement evaluation
             Defense cost control
             Oversight by Congress
             Weapons research
             Budget cuts
             Deficit reduction
             Future budget projections
IDENTIFIER:  Tri-Service Standoff Attack Missile
             Comanche Helicopter
             F-22 Aircraft
             DDG-51 Destroyer
             NSSN Attack Submarine
             SSN-21 Submarine
             DOD Future Years Defense Program
             Advanced Medium Range Air-to-Air Missile
             C-17 Aircraft
             Short Range Unmanned Aerial Vehicle
             High Risk Series 1995
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================================================================ COVER

High-Risk Series

February 1995



Defense Weapons Systems Acquisition

=============================================================== ABBREV

  DOD -
  DDG -
  SSN -

=============================================================== LETTER

February 1995

The President of the Senate
The Speaker of the House of Representatives

In 1990, the General Accounting Office began a special effort to
review and report on the federal program areas we considered high
risk because they were especially vulnerable to waste, fraud, abuse,
and mismanagement.  This effort, which has been strongly supported by
the Senate Committee on Governmental Affairs and the House Committee
on Government Reform and Oversight, brought much needed focus to
problems that were costing the government billions of dollars. 

In December 1992, we issued a series of reports on the fundamental
causes of problems in designated high-risk areas.  We are updating
the status of our high-risk program in this second series.  Our
Overview report (GAO/HR-95-1) discusses progress made in many areas,
stresses the need for further action to address remaining critical
problems, and introduces newly designated high-risk areas.  This
second series also includes a Quick Reference Guide (GAO/HR-95-2)
that covers all 18 high-risk areas we have tracked over the past few
years, and separate reports that detail continuing significant
problems and resolution actions needed in 10 areas. 

This report discusses our concerns over the Department of Defense's
annual expenditure of billions of dollars to acquire new weapons
systems.  It focuses on continuing weaknesses in the way major
weapons requirements are determined, planned, budgeted, and acquired. 
The underlying conditions and cultural attitudes that help foster
these weaknesses are addressed in more detail in our report Weapons
Acquisition:  A Rare Opportunity For Lasting Change
(GAO/NSIAD-93-15).  This report also focuses on current efforts by
the Department of Defense and by the Congress to address these
long-standing problems. 

Copies of this report series are being sent to the President, the
Republican and Democratic leadership of the Congress, congressional
committee chairs and ranking minority members, all other members of
the Congress, the Director of the Office of Management and Budget,
and the Secretary of Defense. 

Charles A.  Bowsher
Comptroller General
of the United States

============================================================ Chapter 0

The defense budget, measured in constant 1995 dollars, has declined
from a peak of $390 billion in 1985 to $252 billion in 1995--a
reduction of about 35 percent.  A large part of the cuts is being
achieved by reducing the development and procurement of new systems
and reducing the quantities of those procured.  Despite these
reductions, the Department of Defense (DOD) spends about $80 billion
annually researching, developing, and procuring weapon systems. 

---------------------------------------------------------- Chapter 0:1

Despite past and current efforts to reform the acquisition system,
wasteful practices still add billions of dollars to defense
acquisition costs.  Many new weapons cost more and do less than
anticipated and experience schedule delays.  Moreover, the need for
some of these costly weapons, particularly since the collapse of the
Soviet Union, is questionable.  These problems repeat DOD's history
of establishing questionable requirements for weapon systems;
projecting unrealistic cost, schedule, and performance estimates;
developing and producing weapons concurrently; and committing to
production before adequate testing has been completed.  These
problems are discussed in more detail in our report entitled Weapons
Acquisition:  A Rare Opportunity for Lasting Change (GAO/NSIAD-93-15,
December 1992). 

---------------------------------------------------------- Chapter 0:2

DOD is committed to reforming its major weapons acquisition process. 
Top DOD management officials recognize that budget reductions
necessitate cultural and structural changes in the way DOD acquires
new weapons.  Accordingly, DOD has supported efforts to (1) eliminate
overlapping and redundant weapon requirements among the services; (2)
realistically estimate the costs and schedules of new weapon systems,
given available funds; and (3) reduce high-risk acquisition
strategies.  The Secretary of Defense, in his fiscal year 1993
Federal Managers' Financial Integrity Act report to the Congress,
identified the acquisition system as a problem area. 

Since our initial high-risk report, Defense Weapons Systems
Acquisition (GAO/HR-93-7, Dec.  1992), DOD has begun to reassess many
of its most expensive weapon programs to determine which systems can
be terminated, reduced, and/or delayed to meet anticipated shortfalls
in funding.  In December 1994, the Secretary announced reductions of
several billion dollars in weapons programs.  The Secretary's actions
included terminating the Tri-Service Standoff Attack Missile program,
deferring procurement plans for the Army's new Comanche helicopter,
reducing research and development funding for--and thereby
delaying--the Air Force's F-22 fighter aircraft program, reducing the
Navy's DDG-51 destroyer program, and scaling back the Navy's New
Attack Submarine program. 

In addition to DOD's initiatives, the Congress mandated changes in
the acquisition process through the Federal Acquisition Streamlining
Act of 1994.  And, in the National Defense Authorization Act for
Fiscal Year 1994, the Congress established the independent Commission
on Roles and Missions of the Armed Forces to reevaluate the military
services' roles and missions.  As a part of its review, the
Commission is examining whether DOD's acquisition structure is too
complex and duplicative. 

---------------------------------------------------------- Chapter 0:3

The effectiveness of DOD's current initiatives to improve the
acquisition process, which are in various stages of implementation,
cannot yet be assessed.  However, shrinking budgets, dwindling
forces, and expanding missions should make the services more
receptive to change than they have been in the past.  We believe that
current fiscal constraints, reduced threats, congressional support,
and DOD's commitment to reform its acquisition process offer more
promise than heretofore for real progress in changing the structure
and culture of the acquisition process. 

============================================================ Chapter 1

In our December 1992 high risk-report, we noted that DOD has produced
many of the world's most technologically advanced and capable weapons
systems.  However, the process through which weapon requirements were
determined and systems acquired often proved costly and inefficient,
if not wasteful.  DOD frequently experienced cost overruns, schedule
delays, and performance shortfalls in its weapon acquisitions
programs.  Too often we found

the acquisition of systems that were not the most cost-effective
solution to the mission need,

overly optimistic cost and schedule estimates that led to program
instability and cost increases,

programs that could not be executed as planned with available funds,

program acquisition strategies that were unreasonable or risky at
best, and

the expenditure of too much money before a program was shown to be
suitable for production and fielding. 

We reported that the underlying cause of these persistent and
fundamental problems was a prevailing culture dependent on generating
and supporting the acquisition of new weapons. 

Inherent in the culture are powerful incentives and interests that
influence and motivate the behaviors of participants in the process,
including components of DOD, the Congress, and industry.  Sometimes,
these interests override the need to satisfy the most critical weapon
requirements at minimal cost. 

We reported that cultural changes were needed to (1) control
interservice competition and self-interest that have led to the
acquisition of unnecessary, overlapping, or duplicative capabilities;
(2) discourage the overselling of programs through optimistic cost
and schedule estimates and accelerated--and, therefore,
high-risk--acquisition strategies; and (3) limit the incorporation of
immature technologies into new weapons to reduce risks of
technological failures. 

Our high-risk report noted that a number of acquisition reforms
either had been or were being implemented in response to the Packard
Commission's recommendations, the diminished Soviet threat, and
budget reductions.  Nevertheless, our high-risk report update, GAO
High-Risk Program (GAO/AIMD-94-72R, Jan.  27, 1994), noted that
parochial interests and incentives were delaying or preventing the
timely rationalization of defense weapons requirements and
acquisitions in the post-Soviet threat era.  Many weapon systems were
being developed and produced despite the diminished Soviet threat. 
We also noted that defense cutbacks would require DOD to rely more on
commercial products and practices to reduce costs and ensure an
adequate defense industrial capability. 

============================================================ Chapter 2

Although DOD has begun many acquisition reform initiatives since our
December 1992 high risk-report, pervasive problems persist with
respect to (1) cost and schedule estimates, (2) program
affordability, and (3) high-risk acquisition strategies. 

---------------------------------------------------------- Chapter 2:1

Our 1992 report stated that a combination of internal controls and
other forms of incentives and disincentives were needed to reduce the
tendency to promote the acquisition of weapons through optimistic
cost and schedule estimates and accelerated--and, therefore, high
risk--acquisition strategies.  We noted that in DOD's culture, the
success of participants' careers is more dependent on moving programs
through the process than on achieving better program outcomes. 
Accordingly, overselling a program works in the sense that programs
are started, funded, and eventually fielded.  The fact that a given
program costs more than estimated, takes longer to field, and does
not perform as promised is secondary to fielding a "new and improved"

The quality and credibility of cost information available to
decisionmakers remains a problem.  In October 1993, we reported on
the information systems the Army uses to identify, record, and report
weapon systems costs.  We concluded that cost information provided to
the Congress and DOD to support critical weapons decisions was highly
questionable.  We noted that the Army's cost information, which came
from 18 disparate financial and logistics systems, (1) was incomplete
and inconsistent among systems, (2) did not include all cost required
by Army guidelines, (3) reflected unsupported adjustments, and (4)
could not be independently verified. 

Despite initiatives to improve cost and schedule estimates, the unit
cost of weapons, such as the Army's $5.1 billion Javelin antitank
weapon program, continues to increase.  The costs of Navy systems,
such as the $12.9 billion SSN-21 class attack submarine program, the
$6.6 billion V-22 tilt-rotor aircraft program, and the $56.8 billion
DDG-51 destroyer program, continue to increase and unit costs have
roughly doubled original estimates.  Weapons such as the Air Force's
advanced cruise missile still encounter costly production and support

---------------------------------------------------------- Chapter 2:2

We reported in 1992 that DOD's Future Years Defense Program could not
be executed with available funds.  DOD's tendency to overestimate the
amount of future funding available for defense, coupled with the
tendency to underestimate program costs, had resulted in the advent
of more programs than could be executed as planned.  We noted that
DOD's 5-year spending plan for 1986-90 was about $553 billion more
than was ultimately funded.  When DOD finally faced funding reality,
it often reduced, delayed, and/or stretched out
programs--substantially increasing the cost of each system purchased. 

DOD is now required by law to ensure that its spending plans and the
President's budget are consistent.  Although DOD has made significant
progress in reducing this gap, spending plans have still not kept
pace with the rapid changes in the national security environment.  We
recently reported that DOD's 1995-99 Future Years Defense Program's
overprogramming could exceed $150 billion.  The spending plan
contained billions of dollars in understated costs and overstated
savings and reductions.  These include (1) less costs and more
savings than expected from base closures, (2) less costs for
environmental remediation and peacekeeping operations, (3) more
savings than expected from the Defense Management Report initiatives,
(4) understated cost growth in weapon system acquisitions, (5)
understated inflation estimates, and (6) DOD's use of undistributed
future adjustments that amount to unspecified overprogramming. 

---------------------------------------------------------- Chapter 2:3

We reported in 1992 that accelerated high risk acquisition strategies
were being based on the need to meet the threat and to reduce
acquisition costs.  We noted that one common characteristic of
high-risk strategies is the acquisition of weapons based on
optimistic assumptions about the maturity and availability of
enabling technologies.  Research and technology efforts should be
disassociated from weapon programs until they reach the demonstration
and validation phase. 

We also reported on the high-risk practice of beginning production of
a weapon system before development, testing, and evaluation are
complete.  A highly concurrent strategy forces decisionmakers to act
without adequate information about a weapon's demonstrated
operational effectiveness, reliability, logistic supportability, and
readiness for production.  Also, rushing into production before
critical tests have been successfully completed has resulted in the
purchase of systems that do not perform as intended.  These premature
purchases have resulted in lower-than-expected availability for
operations and have quite often led to expensive modifications. 

Despite an increased emphasis on the sound development and testing of
weapons, DOD still commits to production of many major and nonmajor
weapons without first proving that the systems will meet critical
performance requirements.  In March 1994, we testified that DOD is
continuing to produce systems with inadequate knowledge of their
technical and operational capability.  We have reported that the
Advanced Medium Range Air-to-Air Missile, the C-17, the Short-Range
Unmanned Aerial Vehicle, and other systems have started production
prematurely with little, if any, indication of the systems'
operational effectiveness and suitability and that the $71.6 billion
F-22 fighter aircraft program continues to feature a concurrent and
risky development, test, and production strategy. 

We recently evaluated DOD's policy to begin low-rate initial
production of weapons without doing any operational testing and
evaluation.  We reported that this policy has resulted in the
procurement of substantial quantities of unsatisfactory weapons
requiring costly modifications and, in some cases, the deployment of
substandard systems to combat forces.  We noted that in today's
national security environment, low-rate production without
demonstrating that the system will work as intended should rarely be

============================================================ Chapter 3

The reduced Soviet threat, declining defense budgets, and a strong
commitment by the administration and the Congress to reform are
providing the ingredients for both structural and cultural changes in
the way major weapons requirements are determined and the systems are
acquired.  Since our last report, DOD has continued to implement
several ongoing acquisition reform initiatives and has also initiated
new reform efforts.  The Congress has also passed additional
acquisition reform legislation.  However, it is too soon to fully
assess the extent to which these changes are improving outcomes in
current defense acquisition programs. 

---------------------------------------------------------- Chapter 3:1

Top DOD management has demonstrated a strong commitment to
acquisition reform initiatives.  The Packard Commission's acquisition
organization and management recommendations have been largely
implemented and are becoming institutionalized.  For example, the
role and authority of the Under Secretary of Defense for Acquisition
and Technology are more firmly established.  This position was
established, as recommended by the Packard Commission in its report A
Quest for Excellence (June 1986), to provide more centralized control
and supervision of the weapons acquisition process by the Office of
the Secretary of Defense.  DOD has established a new acquisition
strategy that embodies the idea that the feasibility and
producibility of advanced technologies must be proven before they are
incorporated into new or ongoing acquisition programs. 

Increasingly, the Deputy Under Secretary of Defense for Advanced
Technology is using advanced concept technology demonstrations to
prove out technologies prior to entering the acquisition cycle. 
Although none have entered the acquisition cycle, these
demonstrations more directly involve warfighters/users in
demonstrating the operational feasibility of new technologies and
concepts before commitments are made to acquisition.  Furthermore, a
Deputy Under Secretary of Defense for Acquisition Reform position has
been established to initiate, promote, and support key acquisition
reform efforts. 

DOD continues to make progress in implementing the provisions of the
Defense Acquisition Workforce Improvement Act.  The act establishes
benchmarks for a more professional acquisition workforce with defined
training and education requirements and an acquisition career path. 
It is designed to produce an acquisition workforce that is more
responsible and accountable for meeting program costs and schedule

In the Secretary of Defense's February 1994 white paper entitled
Acquisition Reform--A Mandate for Change, the need for change is
stated and a vision and strategy for change are presented.  A key
element of the strategy is greater reliance on commercial products
and processes.  Also in 1994, the Secretary of Defense launched an
effort to reengineer the systems acquisition review process.  This
effort is intended to reduce non value-added layers of review and
oversight.  We have one cautionary note:  in streamlining and
simplifying the acquisition process, DOD must carefully balance the
cost of oversight and controls against the risk of making
inadequately informed program decisions. 

---------------------------------------------------------- Chapter 3:2

Since our 1992 report, the Vice Chairman of the Joint Chiefs of
Staff, as Chairman of the Joint Requirements Oversight Council, has
begun a Joint Warfare Capability Assessment initiative that could
significantly increase the Council's role and influence in reviewing
and approving the services' weapon acquisitions requirements.  If key
acquisition decisions are made at such higher organizational levels,
competing demands, available resources, and the needs of theater
commanders can be more fairly assessed before a specific program is

In addition to DOD's efforts, the Congress has enacted reforms in the
Federal Acquisition Streamlining Act of 1994.  Some reforms in this
act involve (1) raising the dollar threshold for using more
simplified small purchase procedures, (2) requiring a statement to
the Congress by the Secretary of Defense if a low-rate initial
production quantity exceeds 10 percent of the total number of
articles to be produced, (3) requiring a performance-based,
incentivized approach to managing acquisition programs, and (4)
emphasizing the streamlining of the acquisition process and greater
reliance on commercial products and processes. 

The act requires the Secretary of Defense to define or approve cost,
schedule, and performance goals for each major defense acquisition
program by phase of the acquisition cycle and to relate the pay and
promotions of personnel involved in each program to the achievement
of the goals.  Further, the Secretary must annually assess and report
to the Congress whether DOD is achieving on average 90 percent of the
cost, schedule, and performance goals.  These provisions of the act
have not been implemented. 

Other reforms were enacted in the Defense Authorization Act for
Fiscal Year 1994.  For example, the Congress established the
Commission on Roles and Missions of the Armed Forces to examine the
division of labor and responsibility among and within the military
services.  The seven member independent Commission is examining key
missions to determine the most cost-effective mix of weapons to
accomplish those missions and the services' responsibilities.  The
Commission is seeking to identify unnecessary overlap and duplication
in weapons and responsibilities and the impacts of changing
technology on the traditional mix of weapons and service roles. 
Roles and missions being examined include (1) close air and fire
support, (2) deep battle and conventional strike, (3) overseas
presence, and (4) joint warfare. 

The Commission is also examining a number of organizations and
processes to identify where and how improvements can be made.  For
example, it is examining whether DOD's weapons acquisition structure
is too complex and duplicative.  The Commission notes that despite a
40- percent reduction in acquisition activity, no acquisition
organizations have been eliminated.  The Commission is to report to
the Congress in May 1995.  The results of the Commission's work
should contribute to identifying the most cost-effective weapons to
meet mission needs, a problem we reported on in our 1992 high-risk

============================================================ Chapter 4

In our 1992 high-risk report, the need for and nature of procurement
reforms centered on improving weapon requirements determination and
acquisition organizations and processes.  While these reforms remain
critical, the impact of reduced defense procurements on the defense
industry, together with the budget-driven need to reduce procurement
costs, has elevated the importance of reform efforts designed to
broaden DOD's industrial base by increasing reliance on commercial
products and processes.  In his February 1994 white paper, the
Secretary of Defense states that to meet the new national security
challenges, DOD must

maintain its technological superiority and a strong national
industrial base by relying more on commercial state-of-the-art
products and technology, assisting companies in the conversion from
defense-unique to dual-use production, aiding in the transfer of
military technology to the commercial sector, and preserving
defense-unique core capabilities and

reduce acquisition costs (including overhead costs) through the
adoption of business processes characteristic of world-class buyers. 

The paper includes an acquisition reform strategy, or "vision for the
future," for accomplishing these objectives.  Key elements of the
strategy include (1) reducing the use of defense-unique
specifications and relying more on commercial performance-based
specifications in defense procurements; (2) eliminating non
value-added oversight, controls, and requirements that discourage
commercial companies from doing business with DOD or substantially
increase the cost of doing business compared to the commercial
sector; and (3) adopting acquisition processes and practices similar
to those of commercial companies. 

Success in achieving greater integration of DOD and commercial
products and practices, as with the other acquisition reforms, will
require overcoming cultural and structural barriers.  The ingredients
for making lasting improvements to the weapons acquisition
process--the need, the opportunity, and the leadership--currently
exist.  The combination of a budget-driven incentive to improve the
effectiveness and efficiency of weapons acquisitions, congressionally
enacted procurement reform measures, and DOD's commitment to
acquisition reform offers a promising environment for real change. 
Nevertheless, it is too soon to tell how successful DOD will be in
overcoming cultural and structural barriers.  The procurement
bureaucracy will not be dismantled overnight.  Regulations are needed
to implement the provisions of the recently enacted acquisition
reform law.  Achieving real and lasting change, in our opinion, will
require DOD's continued commitment to full and effective
implementation of procurement reform strategies and initiatives,
along with congressional support. 

============================================================ Chapter 5

Weapons Acquisition:  Low-Rate Initial Production Used to Buy Systems
Prematurely (GAO/NSIAD-95-18, Nov.  21, 1994). 

Future Years Defense Program:  Optimistic Estimates Lead to Billions
in Overprogramming (GAO/NSIAD-94-210, July 29, 1994). 

Navy Ships:  Seawolf Cost Increases and Schedule Delays Continue
(GAO/NSIAD-94-201BR, June 30, 1994). 

Strategic Missiles:  Issues Regarding Advanced Cruise Missile Program
Restructuring (GAO/NSIAD-94-145, May 31, 1994). 

Tactical Aircraft:  F-15 Replacement Issues (GAO/T-NSIAD-94-176, May
5, 1994). 

Navy Modernization:  Alternatives for Achieving a More Affordable
Force (GAO/T-NSIAD-94-171, Apr.  26, 1994). 

Tactical Aircraft:  F-15 Replacement is Premature as Currently
Planned (GAO/NSIAD-94-118, Mar.  25, 1994). 

Acquisition Reform:  Role of Test and Evaluation in System
Acquisition Should Not Be Weakened (GAO/T-NSIAD-94-124, Mar.  22,

Procurement Reform:  Comments on Proposed Federal Acquisition
Streamlining Act (GAO/T-OGC-94-1, Mar.  10, 1994). 

Army Acquisition:  Information on the Status and Performance of the
Javelin Antitank Weapon (GAO/NSIAD-94-122BR, Mar.  9, 1994). 

U.S.  Special Operations Forces:  Helicopter Cost is Understated and
Reliability Measures Are Inadequate (GAO/NSIAD-94-46, Jan.  25,

Electronic Warfare:  Costly Radar Warning Receiver Duplication
Continues (GAO/NSIAD-94-4, Nov.  29, 1993). 

Army Acquisition:  Problems With the Sense and Destroy Armor Munition
(GAO/NSIAD-94-59, Nov.  23, 1993). 

Financial Management:  Reliability of Weapon System Cost Reports Is

Missile Development:  TSSAM Production Should Not Be Started as
Planned (GAO/NSIAD-94-52, Oct.  8, 1993). 

Antiarmor Weapons Acquisition:  Assessments Needed to Support
Continued Need and Long-Term Affordability (GAO/NSIAD-93-49, Mar.  4,

============================================================ Chapter 6

An Overview (GAO/HR-95-1)

Quick Reference Guide (GAO/HR-95-2)

Defense Contract Management (GAO/HR-95-3)

Defense Weapons Systems Acquisition (GAO/HR-95-4)

Defense Inventory Management (GAO/HR-95-5)

Internal Revenue Service Receivables (GAO/HR-95-6)

Asset Forfeiture Programs (GAO/HR-95-7)

Medicare Claims (GAO/HR-95-8)

Farm Loan Programs (GAO/HR-95-9)

Student Financial Aid (GAO/HR-95-10)

Department of Housing and Urban Development (GAO/HR-95-11)

Superfund Program Management (GAO/HR-95-12)

The entire series of 12 high-risk reports can be ordered by using the
order number GAO/HR-95-20SET.