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entitled 'Defense Acquisitions: Status of Ballistic Missile Defense 
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Report to Congressional Committees:

United States Government Accountability Office:

GAO:

March 2005:

Defense Acquisitions:

Status of Ballistic Missile Defense Program in 2004:

GAO-05-243:

GAO Highlights:

Highlights of GAO-05-243, a report to Congressional Committees

Why GAO Did This Study:

Since 1985, the Department of Defense (DOD) has invested $85 billion in 
ballistic missile defense programs, with $66.5 billion more anticipated 
over the next 7 years through 2011. As a major result of this 
investment, the Department is on the verge of activating our nation’s 
first missile defense system for protecting the United States from 
intercontinental ballistic missile attacks out of Northeast Asia. This 
initial capability—referred to as Limited Defensive Operations (LDO)—is 
the first step of a national priority to develop, field, and evolve 
over time an overarching ballistic missile defense system (BMDS). 

To fulfill a congressional mandate, GAO assessed how well the Missile 
Defense Agency (MDA) met its cost, schedule, testing, and performance 
goals during fiscal year 2004. GAO assessed the program last year and 
will continue to provide assessments of MDA progress through 2006. 

What GAO Found:

By the end of fiscal year 2004, MDA carried out activities needed to 
field an initial missile defense capability, as planned. These included 
delivery and emplacement of Ground-based Midcourse Defense 
interceptors; upgrades of ground-based radars; enhancements to Aegis 
Navy ships for improved surveillance and tracking; development of 
command and control software for system operation; and tests to verify 
that components of this initial capability can communicate as part of 
an integrated whole. However, the performance of the system remains 
uncertain and unverified, because a number of flight tests slipped into 
fiscal year 2005 and MDA has not successfully conducted an end-to-end 
flight test using operationally-representative hardware and software. 
Additionally, based on our analysis of prime contractor cost and 
schedule performance, the development of BMDS elements cost 
approximately $370 million more than planned during fiscal year 2004. 
To cover much of this cost overrun, MDA deferred work planned for 
fiscal year 2004, redirected funds earmarked for other programs, and 
requested additional funds in its fiscal year 2005 budget to cover the 
cost of deferred work. 

In the future, MDA will likely face increased funding risks. MDA plans 
to request about $10 billion annually from DOD for BMDS development, 
procurement, and sustainment. However, DOD’s acquisition programs are 
likely to be competing for a decreasing share of the total federal 
budget and MDA’s programs are competing against hundreds of other DOD 
programs. Also, MDA continues to budget for unanticipated cost growth. 
For example, the Airborne Laser program plans to spend an additional 
$1.5 billion to develop and demonstrate a prototype aircraft. 
Furthermore, procurement and sustainment will demand increased funding 
as more missile defense components are fielded over time. 

MDA policy defines a block as an integrated set of capabilities fielded 
during the 2-year block cycle, but we observed that MDA’s fielding 
goals do not consistently match its cost goals. For example, Block 2004 
funds are used to procure 32 Aegis Ballistic Missile Defense missiles, 
but of these missiles, 11 will be delivered in 2004-2005 and the 
remaining missiles will be delivered during 2006-2007. MDA officials 
intend to clarify the block policy in the near future to better align 
the cost and fielding goals. 

Elements of Ballistic Missile Defense System

First fielded block: 
Aegis Ballistic Missile Defense;
Command, Control, Battle Management, and Communications;
Ground-based Midcourse Defense;
Patriot. 

Future blocks: 
Airborne Laser; 
Kinetic Energy Interceptors; 
Space Tracking and Surveillance System; 
Terminal High Altitude Area Defense. 

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

What GAO Recommends:

To help decision makers in Congress and DOD better understand the 
relationship between requested funding and delivered capabilities, GAO 
recommends that MDA clarify and modify, as needed, its block policy to 
ensure its cost and fielding goals are consistently aligned. DOD 
concurred with our recommendation. 

www.gao.gov/cgi-bin/getrpt?GAO-05-243. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Robert E. Levin at (202) 
512-4841 or levinr@gao.gov. 

[End of section]

Contents:

Letter:

Results in Brief:

Background:

Assessment of Scheduled Activities in Fiscal Year 2004:

Assessment of Testing in Fiscal Year 2004:

Assessment of System Performance in Fiscal Year 2004:

Assessment of System Cost in Fiscal Year 2004:

Funding Risks Expected to Increase for Ballistic Missile Defense 
Program:

MDA Is Not Consistently Matching Cost and Fielding Goals:

Conclusion:

Recommendation for Executive Action:

Agency Comments and Our Evaluation:

Appendix I: Comments from the Department of Defense:

Appendix II: Summary:

Appendix II: Aegis Ballistic Missile Defense:

Element Description:

History:

Developmental Phases:

Planned Accomplishments for Fiscal Year 2004:

Assessment of Scheduled Activities:

Assessment of Element Performance:

Assessment of Element Cost:

Appendix III: Summary:

Appendix III: Airborne Laser:

Element Description:

History:

Developmental Phases:

Fiscal Year 2004 Planned Accomplishments:

Assessment of Scheduled Activities:

Assessment of Element Performance:

Assessment of Element Cost:

Appendix IV: Summary:

Appendix IV: Command, Control, Battle Management, and Communications:

Element Description:

History:

Developmental Phases:

Planned Accomplishments for Fiscal Year 2004:

Assessment of Scheduled Activities:

Assessment of Element Performance:

Assessment of Element Cost:

Appendix V: Summary:

Appendix V: Ground-Based Midcourse Defense:

Element Description:

History:

Developmental Phases:

Planned Accomplishments for Fiscal Year 2004:

Assessment of Scheduled Activities:

Assessment of Element Performance:

Assessment of Element Cost:

Appendix VI: Summary:

Appendix VI: Kinetic Energy Interceptors:

Element Description:

History:

Developmental Phases:

Planned Accomplishments for Fiscal Year 2004:

Assessment of Scheduled Activities:

Assessment of Element Performance:

Assessment of Element Cost:

Appendix VII: Summary:

Appendix VII: Space Tracking and Surveillance System:

Element Description:

History:

Developmental Phases:

Planned Accomplishments for Fiscal Year 2004:

Assessment of Scheduled Activities:

Assessment of Element Performance:

Assessment of Element Cost:

Appendix VIII: Summary:

Appendix VIII: Terminal High Altitude Area Defense:

Element Description:

History:

Developmental Phases:

Planned Accomplishments for Fiscal Year 2004:

Assessment of Scheduled Activities:

Assessment of Element Performance:

Assessment of Element Cost:

Appendix IX: Information on the Army's Missile Defense Programs:

Background:

Combined Aggregate Program:

Patriot/MEADS CAP Funding:

Appendix X: Scope and Methodology:

Appendix XI: GAO Contact and Staff Acknowledgments:

Tables:

Table 1: BMDS Elements:

Table 2: MDA Block 2004 Fielded Configuration Goals:

Table 3: Progress toward Achieving LDO:

Table 4: Progress toward Achieving Block 2004 Fielded Configuration 
Goals:

Table 5: Status of Element Testing--Planned and Achieved:

Table 6: Prime Contractor Cost and Schedule Performance in Fiscal Year 
2004:

Table 7: Status of Aegis BMD Fiscal Year 2004 Planned Accomplishments-
-Fielding Activities:

Table 8: Aegis Ship Availability for the BMD Mission (Block 2004):

Table 9: SM-3 Missile Deliveries:

Table 10: Aegis BMD Fiscal Year 2004 Planned Accomplishments--Flight 
Test and LRS&T Activities:

Table 11: Planned Aegis BMD Fiscal Year 2005 Accomplishments--Remaining 
Block 2004 Flight Tests:

Table 12: Aegis BMD Fiscal Year 2004 Planned Accomplishments--Design 
Reviews:

Table 13: Aegis BMD Cost:

Table 14: Status of ABL Fiscal Year 2004 Planned Accomplishments--BC/FC 
Segment:

Table 15: Status of ABL Fiscal Year 2004 Planned Accomplishments--Laser 
Segment:

Table 16: ABL Cost:

Table 17: C2BMC Fiscal Year 2004 Accomplishments--Software Development 
and Testing:

Table 18: C2BMC Fiscal Year 2004 Planned Accomplishments--Making System 
Operational:

Table 19: C2BMC Cost:

Table 20: Status of GMD Fiscal Year 2004 Component Development:

Table 21: Status of Major GMD Flight Tests (Fiscal Year 2004):

Table 22: Status of GMD Fiscal Year 2004 Planned Accomplishments--
Fielding Initial Capability:

Table 23: GMD Cost:

Table 24: Status of KEI Fiscal Year 2004 Planned Accomplishments--
Contract Award and Planning:

Table 25: Status of KEI Fiscal Year 2004 Planned Accomplishments--
Design Activities:

Table 26: Status of KEI Fiscal Year 2004 Planned Accomplishments--Key 
Test Activities:

Table 27: Status of KEI Fiscal Year 2004 Planned Accomplishments--Risk 
Reduction Activities:

Table 28: KEI High-Risk Areas:

Table 29: KEI Cost:

Table 30: Status of STSS Fiscal Year 2004 Planned Accomplishments--
Space Segment:

Table 31: Status of STSS Fiscal Year 2004 Planned Accomplishments--
Ground Segment:

Table 32: STSS Cost:

Table 33: Status of THAAD Fiscal Year 2004 Planned Accomplishments--
Design Activities:

Table 34: Status of THAAD Fiscal Year 2004 Planned Accomplishments--
Build Activities:

Table 35: Status of THAAD Fiscal Year 2004 Planned Accomplishments--
Integration and Test Activities:

Table 36: Planned THAAD Flight Testing:

Table 37: THAAD Cost:

Table 38: Patriot/MEADS CAP Planned Costs:

Figures:

Figure 1: Phases of a Ballistic Missile's Trajectory:

Figure 2: Breakout of MDA Budget:

Figure 3: Aegis BMD Fiscal Year 2004 Cost and Schedule Performance:

Figure 4: ABL Block 2004 Prime Contract:

Figure 5: ABL Fiscal Year 2004 Cost and Schedule Performance:

Figure 6: C2BMC Fiscal Year 2004 Cost and Schedule Performance:

Figure 7: Components of the GMD Element:

Figure 8: GMD Fiscal Year 2004 Cost and Schedule Performance:

Figure 9: STSS Fiscal Year 2004 Cost and Schedule Performance:

Figure 10: THAAD Fiscal Year 2004 Cost and Schedule Performance:

Abbreviations:

ABL: Airborne Laser Aegis: 
BMD: Aegis Ballistic Missile Defense: 
AI&T: Assembly, Integration, and Testing: 
BC/FC: Beam Control/Fire Control: 
BILL: Beacon Illuminator Laser: 
BMC2: Battle Management, Command and Control: 
BMC4I: Battle Management, Command, Control, Communications, Computer, 
and Intelligence: 
BMDS: Ballistic Missile Defense System: 
BV: Booster Validation: 
C2BMC: Command, Control, Battle Management, and Communications: 
CAP: Combined Aggregate Program: 
COIL: Chemical Oxygen-Iodine Laser: 
CONOPS: Concept of Operations: 
CONUS: Continental United States: 
CTF: Control Test Flight: 
DOD: Department of Defense: 
DOT&E: Director, Operational Test and Evaluation: 
EVM: Earned Value Management: 
FM: Flight Mission: 
FT: Flight Test: 
FY: fiscal year: 
GMD: Ground-based Midcourse Defense: 
IBR: Integrated Baseline Review: 
ICBM: Intercontinental Ballistic Missile: 
IFICS: In-Flight Interceptor Communications System: 
IFT: Integrated Flight Test: 
IGT: Integrated Ground Test: 
IT: Integrated Test: 
KEI: Kinetic Energy Interceptors: 
LDO: Limited Defensive Operations: 
LRS&T: Long-Range Surveillance and Tracking: 
MEADS: Medium Extended Air Defense System: 
MDA: Missile Defense Agency: 
MRBM: Medium Range Ballistic Missile: 
MSE: Missile Segment Enhancement: 
NFIRE: Near Field Infrared Experiment: 
O&S: Operations and Support: 
OSC: Orbital Sciences Corporation: 
OTA: Other Transaction Agreement: 
PAC-3: Patriot Advanced Capability-3: 
PMRF: Pacific Missile Range Facility: 
RDT&E: Research, Development, Test, and Evaluation: 
SBIRS: Space-Based Infrared System: 
SBX: Sea-Based X-band Radar: 
SCF: Seeker Characterization Flight: 
SDACS: Solid Divert and Attitude Control System: 
SICO: System Integration and Checkout: 
SIL: System Integration Laboratory: 
SM: Standard Missile: 
SRBM: Short Range Ballistic Missile: 
SRR: System Requirements Review: 
STSS: Space Tracking and Surveillance System: 
TILL: Target Illuminator Laser: 
THAAD: Terminal High Altitude Area Defense: 
UEWR: Upgraded Early Warning Radar: 
USNORTHCOM: U.S. Northern Command: 
USPACOM: U.S. Pacific Command: 
USSTRATCOM: U.S. Strategic Command: 
VAFB: Vandenberg Air Force Base: 
WSMR: White Sands Missile Range:

United States Government Accountability Office:

Washington, DC 20548:

March 31, 2005:

Congressional Committees:

Our nation's first missile defense system for protecting the United 
States from intercontinental ballistic missile (ICBM) attacks is 
expected to be activated for defensive operations in the coming months. 
This initial capability is the culmination of efforts on the part of 
the Missile Defense Agency (MDA) and other Department of Defense (DOD) 
components in response to the President's December 2002 directive to 
begin fielding an initial set of missile defense capabilities to meet 
the near-term ballistic missile threat to our nation. It also 
represents a major result of the $85 billion invested in ballistic 
missile defense programs since fiscal year 1985. DOD's investment in 
missile defense continues, as indicated by proposed budgets for the 
next few years. The Department estimates MDA will need $66.5 billion 
between fiscal years 2005 and 2011 to continue work in this area, with 
fiscal year 2005 appropriations of $8.8 billion accounting for 13 
percent of DOD's total research and development budget.[Footnote 1]

The initial capability, which DOD refers to as Limited Defensive 
Operations (LDO), is the first step of a national priority to develop, 
field, and evolve over time an overarching Ballistic Missile Defense 
System (BMDS). While DOD envisions a BMDS capable of protecting the 
United States, deployed forces, friends, and allies from ballistic 
missile attacks of all ranges, the LDO capability is primarily designed 
to provide some protection of the United States against long-range 
ballistic missile attacks out of Northeast Asia. 

In developing the BMDS, MDA is attempting to follow an evolutionary 
acquisition strategy in which the development and fielding of 
capabilities is pursued in 2-year blocks. The configuration of a given 
block builds on the work completed in previous blocks. Block 2004, 
being deployed during the calendar years 2004-2005, is the first 
biennial increment of the BMDS to provide an integrated set of 
capabilities. LDO represents an interim capability on the path to full 
Block 2004 fielding. 

The National Defense Authorization Act for Fiscal Year 2002 directed 
DOD to establish schedule, testing, performance, and cost goals for its 
ballistic missile defense programs.[Footnote 2] As established by DOD, 
the goals highlight, by block, overall cost, schedule, and performance 
objectives for BMDS development and specify the quantities and 
locations of specific BMDS components[Footnote 3] planned for 
operational use. The act also directed us to assess, at the conclusion 
of each of fiscal years 2002 and 2003, the extent to which MDA achieved 
the goals it established. We delivered an assessment covering fiscal 
year 2003 to Congress in April 2004.[Footnote 4]

Congress has since continued to require our assessment through fiscal 
year 2006.[Footnote 5] To fulfill this mandate, we examined the 
progress that MDA made in fiscal year 2004 toward its stated goals. For 
example, many activities completed in fiscal year 2004 by the various 
element programs pertain to the completion of the LDO capability, which 
is an integral part of the Block 2004 goals. While conducting this 
review, we identified issues associated with MDA's ability to fund 
future development and fielding of its missile defense capabilities and 
with MDA's application of the block approach. Our report includes these 
observations. 

The accomplishment of MDA program goals is ultimately achieved through 
the efforts of individual BMDS elements, such as Ground-based Midcourse 
Defense and Airborne Laser. Therefore, we based our assessment on the 
progress made in fiscal year 2004 by those elements that are under the 
management of MDA and that are being developed as part of a block 
capability. The elements we reviewed accounted for 72 percent of MDA's 
fiscal year 2004 research and development budget. Details of our scope 
and methodology can be found in appendix X. 

Results in Brief:

By the end of fiscal year 2004, MDA carried out activities needed to 
field an initial missile defense capability, as planned. This included 
delivery and emplacement of Ground-based Midcourse Defense 
interceptors; upgrades of ground-based radars; enhancements to Aegis 
Navy ships for improved surveillance and tracking; development of 
command and control software for system operation; and tests to verify 
that components of this initial capability can communicate as part of 
an integrated whole. However, the performance of the system remains 
uncertain and unverified, because MDA has not successfully completed a 
flight test using operationally-representative hardware and software. 
Additionally, the development of system elements cost approximately 
$370 million more than planned during fiscal year 2004. To cover much 
of this cost overrun, MDA deferred work planned for fiscal year 2004, 
redirected funds earmarked for other programs, and requested additional 
funds in its fiscal year 2005 budget to cover the cost of deferred 
work. 

Two issues have relevance for decision makers in Congress and DOD when 
considering future budget decisions for the missile defense program. 
First, although MDA has received nearly all funding requested in the 
past few years, the agency is expected to face increased funding risks-
-arising from sources both outside and within DOD--in the years ahead. 
MDA plans to request, on average, about $10 billion in research and 
development funding per year over the 2006-2011 time period to support 
continued development, procurement, and sustainment of hardware and 
software that MDA is fielding.[Footnote 6] However, DOD's acquisition 
programs are likely to be competing for a decreasing share of the total 
federal budget that is allocated to discretionary (non-mandatory) 
spending. Also, within DOD, MDA's programs are competing against 
hundreds of technology development and acquisition programs for DOD's 
research and development budget--$70 billion in fiscal year 2005--and 
cost growth of existing weapon programs[Footnote 7] puts even more 
pressure on MDA's share of research and development dollars. 
Additionally, funding risks can be expected from cost growth of ongoing 
MDA programs. For example, as part of the restructuring of MDA's 
Airborne Laser program, the cost to accomplish the objective of 
developing and demonstrating a prototype aircraft increased by $1.5 
billion. Finally, procurement and sustainment will demand increasing 
levels of MDA's funding as more components are fielded over time. 

Second, we observed that MDA's cost goal for a given block--which, by 
definition, is MDA's budget for all developmental and fielding 
activities associated with the block--is not aligned with the block's 
fielding goals. According to MDA policy, for example, interceptors 
identified with the Block 2004 fielding goals and fielded during 
calendar years 2004-2005 should be funded as part of the Block 2004 
cost goal. However, we found that MDA has not been consistently 
matching a block's cost and fielding goals. For example, Block 2004 
funds are used to procure 32 Aegis Ballistic Missile Defense missiles, 
but of these missiles, 11 will be delivered in 2004-2005 and the 
remaining missiles will be delivered during 2006-2007. Also, counter to 
the definition of a block as an integrated set of capabilities fielded 
during the 2-year block window, the Airborne Laser program will not 
field any capabilities during Block 2004 although Block 2004 funds are 
used in the program's development. 

We are recommending that MDA clarify its block policy to ensure that a 
block's cost and fielding goals are consistently aligned. DOD concurred 
with our recommendation. 

Background:

Ballistic missile defense is a challenging mission for DOD, requiring a 
unique combination of defensive components--space-based sensors, 
surveillance and tracking radars, advanced interceptors, command and 
control, and reliable communications--working together as an integrated 
system. A typical scenario to engage an ICBM is expected to unfold as 
follows:

* Overhead satellites detect a missile launch and alert the command 
authority of a possible attack. 

* Upon receiving the alert, the BMDS directs its land-and sea-based 
radars to track the missile complex and (if so designed) to identify 
the warhead from decoys and associated objects. 

* Based on accurate track data, an interceptor--consisting of a "kill 
vehicle" mounted atop a booster--is launched. The interceptor boosts 
itself toward the predicted intercept point and releases its kill 
vehicle to engage the threat. 

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

To meet this challenge, DOD intends to develop and field a ballistic 
missile defense system capable of defeating ballistic missiles during 
all phases of flight (see fig. 1). 

Figure 1: Phases of a Ballistic Missile's Trajectory:

[See PDF for image]

[End of figure]

Under the evolutionary, capabilities-based acquisition strategy being 
pursued by DOD, the BMDS has no fixed design or final architecture, and 
there are no firm requirements. According to DOD, this approach gives 
MDA increased flexibility to develop a system that can more readily 
respond to a changing threat and more easily insert new technologies 
for enhancing system performance. 

The missile defense capability of Block 2004 is primarily one for 
defending the United States against ICBM attacks from Northeast Asia 
and the Middle East. It is built around the Ground-based Midcourse 
Defense (GMD) element, augmented by shipboard Aegis Ballistic Missile 
Defense (Aegis BMD) radars, and integrated by the Command, Control, 
Battle Management, and Communications (C2BMC) element. The Block 2004 
BMDS also includes the Army's Patriot element for point defense of 
deployed U.S. forces against short-and medium-range ballistic missiles. 
The Block 2006 program builds directly upon Block 2004. It continues 
element development and funds the next increment of fielding that adds 
interceptors, new radars, and enhanced battle management capabilities. 

MDA is also carrying out an extensive research and development effort 
to expand its current operational capability into future blocks. During 
fiscal year 2004, MDA funded the development of four other major BMDS 
elements--Airborne Laser (ABL), Kinetic Energy Interceptors (KEI), 
Space Tracking and Surveillance System (STSS), and Terminal High 
Altitude Area Defense (THAAD)--in addition to those elements comprising 
the Block 2004 defensive capability. MDA intends to integrate these 
elements, when ready, into future BMDS blocks. Table 1 provides a brief 
description of these elements, and more information about them is 
provided in appendixes II through VIII of this report.[Footnote 8]

Table 1: BMDS Elements:

Element: Aegis Ballistic Missile Defense; 
Missile defense role: Aegis BMD is a ship-based system designed to 
destroy short-and medium-range ballistic missiles during the midcourse 
phase of flight. Its mission is two-fold: to protect deployed U.S. 
forces, allies, and friends against ballistic missile attacks, and to 
serve as a forward-deployed BMDS sensor, especially in support of the 
GMD mission. MDA has plans to deliver up to 66 Aegis BMD missiles--the 
Standard Missile 3--and 18 ships by the end of fiscal year 2009. 

Element: Airborne Laser; 
Missile defense role: ABL is an air-based system designed to destroy 
all classes of ballistic missiles during the boost phase of flight. ABL 
employs a high-energy chemical laser to rupture a missile's motor 
casing, causing the missile to lose thrust or flight control. MDA plans 
to demonstrate proof of concept in a system demonstration no earlier 
than 2008. The availability of a militarily useful capability is 
contingent on the success of the demonstration. 

Element: Command, Control, Battle Management, and Communications; 
Missile defense role: C2BMC is the integrating and controlling element 
of the BMDS. Although it is part of the Block 2004 defensive 
capability, its role during this period is limited to mission planning 
and situational awareness--monitoring system status and missile 
trajectories. 

Element: Ground-based Midcourse Defense; 
Missile defense role: GMD is a ground-based system designed to destroy 
ICBMs during the midcourse phase of flight. Its mission is to protect 
the U.S. homeland against ballistic missile attacks from Northeast Asia 
and the Middle East. GMD is part of the Block 2004 defensive capability 
and has plans to field 18 interceptors by 2005. MDA plans to field 20 
additional interceptors in Alaska by 2010. 

Element: Kinetic Energy Interceptors; 
Missile defense role: KEI is a land-based element designed to destroy 
ICBMs during the boost and ascent phases of flight. MDA expects to 
demonstrate a defensive capability through flight testing during Block 
2012 and expand this capability to sea basing in subsequent blocks. 

Element: Space Tracking and Surveillance System; 
Missile defense role: The Block 2006 STSS element consists of a 
constellation of two demonstration satellites. MDA intends to use these 
satellites for testing missile warning and tracking capabilities. Any 
real operational capability of next-generation satellites, however, 
will not be available until the next decade. 

Element: Terminal High Altitude Area Defense; 
Missile defense role: THAAD is a ground-based element designed to 
destroy short-and medium-range ballistic missiles during the late-
midcourse and terminal phases of flight. Its mission is to defend 
deployed U.S. forces and population centers. MDA plans to field a Block 
2006/2008 unit consisting of 24 missiles in 2009. 

[End of table]

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

As part of MDA's planning process, MDA defines overarching program 
goals for the development and fielding of BMDS block configurations. 
The goals describe the composition of a block (components and elements 
under development and planned for fielding), provide the costs and 
schedules associated with element development and fielding, and 
summarize performance capabilities at the component and system 
levels.[Footnote 9] A block's cost goal is the portion of MDA's budget 
dedicated to development and fielding activities associated with the 
block. 

MDA has established Block 2004 and 2006 "Development Goals" for the 
continued development and testing of six BMDS elements--ABL, Aegis BMD, 
C2BMC, GMD, STSS, and THAAD--and stand-alone components such as forward-
deployed radars.[Footnote 10] These goals identify the developmental 
areas MDA is funding as part of the Block 2004 and 2006 programs. The 
associated cost goals, which are the planned budgets for these 
activities, are approximately $5.7 billion and $12.2 billion for Block 
2004 and 2006, respectively. 

MDA also established a complementary set of goals--referred to as 
"Fielded Configuration" Goals[Footnote 11]--in response to the 
President's December 2002 direction to begin fielding a limited 
ballistic missile defense capability. The fielding goals build directly 
upon the Development Goals but aim to deliver an operational missile 
defense capability during a given block's time frame. For example, 
Block 2004 goals identify the components of the BMDS available for 
defensive operations by the end of December 2005. MDA states that the 
cost goals associated with the Block 2004 and 2006 fieldings are $1.7 
billion and $3.8 billion, respectively. Therefore, the total cost goals 
for Block 2004 and 2006 are $7.4 billion and $16.0 billion, 
respectively. 

Figure 2 depicts MDA's total budget between fiscal years 2005 and 2011 
broken out by block.[Footnote 12] As illustrated, funding for a given 
block spans more than the 2-year period. For example, MDA estimates it 
will need about $12.0 billion to fund Block 2008 activities over the 
next 7 years through 2011. 

Figure 2: Breakout of MDA Budget:

[See PDF for image]

Note: MDA's total budget for a given fiscal year is represented by the 
expenditures for all block activities plus mission area investments. 
For example, MDA's fiscal year 2005 budget of $8.806 billion is 
comprised of $1.605 billion for mission area investments, $2.854 
billion for Block 2004 activities, $3.216 billion for Block 2006 
activities, $817 million for Block 2008 activities, $48 million for 
Block 2010 activities, and $267 million for Block 2012 activities. 

[End of figure]

Many activities completed in fiscal year 2004 by the various element 
programs pertain to the completion of the LDO capability--the initial 
capability fielded by MDA. Although LDO is not formally listed by MDA 
as a Block 2004 goal, it does include the delivery of a capability on 
the path to meeting the fielding goals. Table 2 summarizes MDA's 
fielding goals. 

Table 2: MDA Block 2004 Fielded Configuration Goals:

BMDS element: GMD; 
Functionality: Defend the U.S. homeland against ICBM attacks; 
LDO (Sept. 30, 2004): 
* 5 Interceptors; 
* Upgraded Cobra Dane radar; 
* 1 Upgraded early warning radar (Beale); 
* Fire control nodes; 
Block 2004 (Dec. 31, 2005): 
* 20 Interceptors; 
* Upgraded Cobra Dane radar; 
* 2 Upgraded early warning radars (Beale, Fylingdales); 
* Sea-based X-band radar; 
* Fire control nodes. 

BMDS element: Aegis BMD; 
Functionality: Sea-based engagement capability against short-and medium-
range ballistic missiles; early tracking of ICBMs as a BMDS sensor; 
LDO (Sept. 30, 2004): 
* 3 Aegis destroyers (long-range surveillance and tracking only); 
Block 2004 (Dec. 31, 2005): 
* Up to 9 missiles; 
* 10 Aegis destroyers (long-range surveillance & tracking only); 
* 3 Aegis cruisers (engagement). 

BMDS element: C2BMC; 
Functionality: Integrating element of the BMDS; situational awareness; 
mission planning; 
LDO (Sept. 30, 2004): 
* Software Build 4.3; 
* Suites (command centers) and supporting hardware at various 
locations; 
Block 2004 (Dec. 31, 2005): 
* Software Build 4.5; 
* Suites (command centers) and supporting hardware at various 
locations. 

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

Note: Performance goals are not presented in this report because they 
are classified. 

[End of table]

Assessment of Scheduled Activities in Fiscal Year 2004:

The GMD, Aegis BMD, and C2BMC programs completed scheduled activities 
in fiscal year 2004 necessary to support the fielding of LDO, an 
integral part of Block 2004. Most notably, the GMD program completed 
construction activities at GMD sites, delivered and emplaced five GMD 
interceptors in their silos at Fort Greely, Alaska, and completed the 
upgrade of the Cobra Dane radar. The Aegis BMD program upgraded three 
destroyers for the long-range surveillance and tracking mission that 
supports homeland defense against ICBMs. In addition, the C2BMC program 
completed software development, activated control centers, and worked 
to integrate elements of the system. 

These programs also continued developmental and fielding activities in 
early fiscal year 2005 to enhance LDO so that the full Block 2004 
capability could be realized by the end of calendar year 2005. For 
example, the GMD program delivered a sixth interceptor at Fort Greely 
in October and two interceptors at Vandenberg Air Force Base in 
December, completed the upgrade of the Beale early warning radar, and 
initiated the upgrade of the Fylingdales early warning radar. In 
addition, the Aegis BMD program completed the assembly of five missiles 
and continued with software development in the upgrade of its cruisers 
and destroyers. Similarly, the C2BMC program continued with software 
development and testing leading to the final Block 2004 version. 

Progress made toward achieving program goals relative to the fielding 
of the LDO and Block 2004 capabilities is summarized in tables 3 and 4, 
respectively. Detailed evaluations of activities completed in fiscal 
year 2004 by all BMDS elements are given in appendices II through VIII 
of this report. 

Table 3: Progress toward Achieving LDO:

BMDS element: GMD; 
Functionality: Defend the U.S. homeland against ICBM attacks from 
Northeast Asia; 
LDO (Sept. 30, 2004): 
* 5 Interceptors; 
* Upgraded Cobra Dane radar; 
* 1 Upgraded early warning radar (Beale); 
* Fire control nodes; 
Progress assessment: The GMD program emplaced 5 interceptors at Fort 
Greely, Alaska, by September 2004. Many site preparation activities, 
including the construction of facilities and interceptor silos at Fort 
Greely to prepare the system for LDO, were completed; The GMD program 
completed the upgrade of the Cobra Dane radar on Shemya Island, Alaska. 
The upgrades, which consist of hardware and software improvements, 
enable the radar to more accurately track launched missiles for the 
planning of intercept engagements; The upgrade of the early warning 
radar at Beale Air Force Base, California, was completed in December 
2004. Although radar hardware installation is complete, final software 
installation and testing are ongoing with completion expected in the 
middle of fiscal year 2005. 

BMDS element: Aegis BMD; 
Functionality: Early tracking of ICBMs as a BMDS sensor; 
LDO (Sept. 30, 2004): 
* 3 Aegis destroyers (long-range surveillance and tracking only); 
Progress assessment: Aegis BMD will be used as a forward-deployed 
sensor to provide surveillance and early tracking of long-range 
ballistic missiles to support the GMD mission. This is being 
accomplished through the improvement of Aegis BMD software and 
hardware. The Aegis BMD program office completed the upgrade of 2 
destroyers for this role in September 2004; a third destroyer became 
available in October 2004. All 3 destroyers are available for 
operations. 

BMDS element: C2BMC; 
Functionality: Integrating element of the BMDS; situational awareness; 
mission planning; 
LDO (Sept. 30, 2004): 
* Software Build 4.3; 
* Suites (command centers) and supporting hardware at various 
locations; 
Progress assessment: The C2BMC program office completed activities 
needed to ready the C2BMC element for LDO. Of significance, the LDO 
"build" of C2BMC, known as spiral 4.3, was delivered and C2BMC suites 
activated. The program also carried out a number of activities enabling 
BMDS integration and warfighter training. 

[End of table]

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

Table 4: Progress toward Achieving Block 2004 Fielded Configuration 
Goals\:

BMDS element: GMD; 
Functionality: Defend the U.S. homeland against ICBM attacks from 
Northeast Asia and the Middle East; 
Block 2004 (Dec. 31, 2005): 
* 20 Interceptors; 
* Upgraded Cobra Dane radar; 
* 2 Upgraded early warning radars (Beale, Fylingdales); 
* Sea-based X-band radar; 
* Fire control nodes; 
Progress assessment: The GMD program continued to add interceptors to 
its inventory. As of December 2004, 6 interceptors are in silos at Fort 
Greely, Alaska, and 2 at Vandenberg Air Force Base, California. The GMD 
program aims to increase its inventory of interceptors for the Block 
2004 defensive capability to 20 by December 2005. However, MDA 
designated 2 interceptors as test assets. Therefore, the Block 2004 GMD 
inventory will consist of 18 interceptors; The GMD program began 
upgrading the early warning radar at Fylingdales Airbase in England. 
Facility modifications are on track to be completed by the first 
quarter of fiscal year 2006; The GMD program office completed a variety 
of activities in the development of the sea-based X-band radar but 
assesses its planned completion by the first quarter of fiscal year 
2006 as high risk. 

BMDS element: Aegis BMD; 
Functionality: Sea-based engagement capability against short-and medium-
range ballistic missiles; early tracking of ICBMs as a BMDS sensor; 
Block 2004 (Dec. 31, 2005): 
* Up to 9 missiles; 
* 10 Aegis destroyers (long-range surveillance & tracking only); 
* 3 Aegis cruisers (engagement); 
Progress assessment: As of December 2004, the Aegis BMD program 
completed assembly of 5 missiles, which are available for fielding. 
Program officials stated that the program expects to have available a 
slightly smaller inventory of missiles by December 2005 than was 
originally planned; The Aegis BMD program aims to increase to 10 by 
December 2005 the number of upgraded destroyers providing surveillance 
and early tracking of long-range ballistic missiles in support of the 
GMD mission. As of January 2005, 5 had been upgraded; The Aegis BMD 
program is also upgrading Aegis cruisers for the element's engagement 
role; that is, to defend against short-and medium-range ballistic 
missiles. This requires physical modification to the ships as well as 
software upgrades for the engagement role. As of December 2004, 1 
cruiser--a ship dedicated to testing--has been upgraded. The program 
expects to complete the upgrade of 1 additional cruiser (rather than 2) 
by December 2005. 

BMDS element: C2BMC; 
Functionality: Integrating element of the BMDS; situational awareness; 
mission planning; 
Block 2004 (Dec. 31, 2005): 
* Software Build 4.5; 
* Suites (command centers) and supporting hardware at various 
locations; 
Progress assessment: The C2BMC program office continued with activities 
needed to ready the C2BMC element for the full Block 2004 capability. 
In particular, development of the interim build, spiral 4.4, was 
completed in November 2004. The program office anticipates that 
development of the final Block 2004 build, spiral 4.5, will be 
completed in March 2005, after which testing will begin. 

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

[End of table]

DOD did not activate the LDO capability MDA developed and fielded. 
Although the LDO capability was expected to be placed on alert by the 
end of September 2004, officials from the office of the Commander of 
U.S. Strategic Command (USSTRATCOM) told us that September 30, 2004, 
was a planning date rather than a "hard date." The officials indicated 
that the system had not been put on alert for the following reasons:

* Shakedown. Since October 2004, the system has been undergoing a 
"shakedown"--a necessary transition phase between development and 
operations. During this time, the system is exercised as though an 
attack is under way. It enables the warfighter to become familiar with 
the system and, importantly, to plan for unexpected failures. 

* Training. While initial training of operators has been completed, 
more is needed. For weapon systems in general, the warfighter does not 
have a military capability without trained operators, and training 
cannot begin until a weapon system is delivered (or at least far along 
in development). 

* Policy. USSTRATCOM must receive an Execution Order from the Secretary 
of Defense before the LDO capability is declared operational. This 
order, which would reflect DOD policy, is to include a clear 
identification of command and control relationships. USSTRATCOM plans 
to advise the Secretary of Defense on the military utility of the 
system and could advise against declaring the system operational if, 
for example, more testing were needed to increase the command's 
confidence in the system's effectiveness. Also, the concept of 
operations (CONOPS) was not finalized, and issues such as the 
integration of defensive and offensive operations still had to be 
worked out. 

USSTRATCOM officials further explained that the declaration of LDO may 
or may not mean the system is "on alert" for defensive operations--LDO 
operation is more complicated than "being on" or "being off" alert. For 
example, the system could be in "developmental mode" when operated by 
MDA for testing but capable of being transitioned to an "operational 
mode" for defensive operations given sufficient time.[Footnote 13] As 
of March 2005, DOD had not announced a specific date for activating the 
initial missile defense capability. 

Assessment of Testing in Fiscal Year 2004:

MDA completed a number of ground tests and exercises in fiscal year 
2004, but key flight tests using LDO-configured components were 
delayed. For example, MDA verified integration and connectivity between 
its GMD, Aegis BMD, and C2BMC elements, and the warfighter participated 
in several missile defense exercises (wargames) as part of their 
training to understand and operate the system. However, the GMD program 
office conducted two booster tests (non-intercept attempts) in fiscal 
year 2004 even though six flight tests were planned. As a result, GMD 
interceptors were emplaced in silos before flight testing was completed 
to verify that LDO hardware and software could function in an 
operational environment. 

Significant Testing Was Completed:

A summary of significant testing completed during fiscal year 2004 by 
each of the respective element programs is presented in table 5. More 
thorough discussions of element testing are given in appendices II 
through VIII of this report. 

Table 5: Status of Element Testing--Planned and Achieved:

Element: Aegis BMD; 
Key testing accomplished: The Aegis BMD program conducted Flight 
Mission 6 (FM-6) in December 2003, during which an SM-3 missile 
successfully intercepted a short-range ballistic missile target. In 
addition, the Aegis BMD element participated in non-intercept test 
events to assess the element's long-range tracking and surveillance 
(LRS&T) function--that is, using its shipboard SPY-1 radar to track 
long-range ballistic missiles--and to verify connectivity with the 
BMDS, that is, pass track data to the C2BMC and GMD elements; The 
program also conducted a series of ground tests focused on validating 
design updates to its Solid Divert and Attitude Control System (SDACS)-
-a collection of solid-fuel thrusters used to steer the kinetic warhead 
(kill vehicle) into its designated target. In response to a flight test 
failure in 2003, the program modified the design of this subcomponent 
to improve its performance and reliability during high-energy pulse 
operation. 

Element: ABL; 
Key testing accomplished: The ABL program demonstrated "First Light"--
the combined operation of individual laser modules to generate a single 
laser beam--in the first quarter of fiscal year 2005 (Nov. 2004). 
Although the achievement of "First Light" is a key milestone for the 
program, it was not intended to be an operational demonstration of a 
high-power laser, that is, at full power and for the length of time 
needed to shoot down a boosting missile. Rather, the laser's operation 
for a fraction of a second demonstrated successful integration of 
subsystems; The ABL program also completed "First Flight" in the first 
quarter of fiscal year 2005 (Dec. 2004). Also a key milestone for the 
program, "First Flight" demonstrated the flight worthiness of the 
demonstrator aircraft with its newly installed laser beam control 
system. 

Element: C2BMC; 
Key testing accomplished: The C2BMC program conducted system-level 
testing of its LDO software, spiral 4.3, during fiscal year 2004 and 
into fiscal year 2005. Spiral 4.3 was tested in a number of venues, 
including Pacific Explorer III,[A] Glory Trip 185,b a GMD-focused 
System Integration and Checkout,c and wargames that enabled the 
warfighter to exercise the C2BMC in a simulated operational 
environment. 

Element: GMD; 
Key testing accomplished: During fiscal year 2004, the GMD program 
conducted two non-intercept flight tests--one for each of its Lockheed 
and Orbital Sciences Corporation (OSC) boosters. Booster objectives 
were achieved in both flight tests, however, the mock kill vehicle 
failed to deploy from the Lockheed booster. The Lockheed booster test 
was conducted 11 months late because of problems with a propellant 
vendor. The OSC booster test was conducted 6 months late; GMD conducted 
a series of integrated ground tests in fiscal year 2004. These tests 
employed actual GMD-component processors integrated together in a 
hardware-in-the-loop facility that emulated GMD operation in a 
simulated environment. They also included warfighter participation to 
aid in the development of operational concepts; Finally, the GMD 
program performed a series of System Integration and Checkouts[C] of 
its fielded components. While these checkouts did not assess element 
performance, they demonstrated connectivity, functionality, and 
integration as part of final preparations for defensive operations. 

Element: KEI; 
Key testing accomplished: The KEI program initiated element development 
in December 2003 when MDA selected Northrop Grumman as the prime 
contractor. At this early stage of development, no significant testing 
has been conducted by the program office; Because of the need to 
restructure the prime contract in response to reduced funding, KEI's 
first integrated flight test is planned for no earlier than 2010, 
depending on the outcome of the program's re-planning. 

Element: STSS; 
Key testing accomplished: MDA is currently working on the first 
increment of STSS, which is focused on the preparation and launch of 
two demonstration satellites partially built under the former Space 
Based Infrared System Low program. MDA plans to launch these satellites 
in 2007. At that time, testing will be conducted to assess how well the 
satellites perform surveillance and tracking functions. 

Element: THAAD; 
Key testing accomplished: The THAAD flight-test program consists of 15 
flight-test events divided among Blocks 2006 and 2008. Because of 
delays in booster deliveries arising from the need for a new propellant 
vendor, the first set of flight tests have been delayed 3-5 months. The 
element's first test, a control test flight of the missile (non-
intercept attempt), is planned to be conducted in the third quarter of 
fiscal year 2005, a two-quarter slip. The element's first intercept 
attempt, Flight Test 4, is scheduled to be conducted during the second 
quarter of fiscal year 2006, a two-quarter slip. 

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

[A] Pacific Explorer exercises are field exercises to demonstrate BMDS 
connectivity. An Aegis destroyer participates by tracking an actual 
missile (or a simulated target) and passes track data to the C2BMC. 

[B] Glory Trips are live flight tests during which a Minuteman III 
missile is launched from Vandenberg Air Force Base as part of Follow-on 
Test and Evaluation. 

[C] System Integration and Checkouts are conducted by the GMD program 
to verify connectivity, functionality, and integration of system 
components. They are not used to assess system performance. 

[End of table]

Delays and Cancellations of GMD Flight Tests Slow Attainment of 
Knowledge:

The GMD program conducts integrated flight tests (IFT) to realistically 
demonstrate element operation using actual hardware and software. MDA 
planned to conduct several flight tests during fiscal year 2004 to gain 
knowledge about the element's effectiveness and operation under real-
world conditions. However, only two of six flight tests scheduled to 
occur in fiscal year 2004 were conducted. As noted in table 5, these 
were non-intercept tests of the Lockheed and OSC boosters. A second 
Lockheed booster test (IFT-13A) was deferred indefinitely; two 
intercept attempts utilizing LDO-configured hardware and software (IFT-
14 and -15) were either delayed or cancelled; and, IFT-13C, the first 
flight test in 2 years with the potential for an intercept,[Footnote 
14] was delayed 9 months. When IFT-13C was conducted in December 2004, 
the interceptor failed to launch, which precluded the fulfillment of 
key test objectives associated with the LDO-configured interceptor. 

IFT-13C was of particular significance because it was to have 
demonstrated operational aspects of the LDO capability for the first 
time in a flight test environment. For example:

* IFT-13C was the first flight test to utilize LDO hardware and 
software. Previous intercept attempts employed a surrogate booster and 
an earlier configuration of the kill vehicle. In particular, IFT-13C 
was to have launched a GMD interceptor comprised of the operational 
kill vehicle mated to an OSC booster. 

* IFT-13C offered the opportunity to exercise Aegis BMD tracking and 
connectivity in a manner consistent with an actual defensive mission, 
that is, to demonstrate Aegis BMD's ability to serve as a fire-control 
radar[Footnote 15] for ICBM engagements. However, because weather 
exceeded peacetime operational safety limits, Navy commanders withdrew 
Aegis BMD participation from IFT-13C; the program office concurred with 
the decision. 

The delay of IFT-13C by 9 months demonstrates that MDA is responsibly 
following an event-driven test program, that is, conducting tests only 
when ready. IFT-13C was delayed more than once to correct technical 
problems with the interceptor and to upgrade the test interceptor to a 
configuration that matches the ones deployed. However, the event-driven 
approach was not carried over into fielding. Eight GMD interceptors 
were in their silos by the end of December 2004 before flight testing 
was completed to verify that LDO hardware and software could function 
in an operational environment. If future flight testing identifies 
problems with the interceptor, MDA could incur added costs to recall 
and update fielded assets. 

Aegis BMD Conducted Limited Testing of Its Long-Range Surveillance and 
Tracking Capability:

In anticipation of fielding for LDO, the Aegis BMD flight test program 
focused on long-range surveillance and tracking--that is, to operate 
the element as a forward-deployed BMDS sensor--in support of the GMD 
mission. To this end, by October 2004, the Aegis BMD program completed 
software development and upgraded three Aegis destroyers for this role; 
they are available for operations. However, the surveillance and 
tracking function has only been partially demonstrated. For example:

* Aegis BMD participated in Glory Trip 185, during which an Aegis 
destroyer successfully tracked a Minuteman III ICBM launched from 
Vandenberg Air Force Base. However, the test did not exercise Aegis BMD 
tracking and connectivity in a manner needed for an actual defensive 
mission, that is, as an integral part of the system during which the 
destroyer acts as a fire control radar. In addition, the software 
tested was not the version installed on fielded destroyers. 

* During the Pacific Explorer II field exercise, a destroyer in the Sea 
of Japan successfully passed track data of a simulated target, thereby 
demonstrating connectivity with the BMDS. In Pacific Explorer III, an 
Aegis destroyer planned to track an actual missile and pass track data 
to the BMDS. Although the destroyer tracked the live target missile, a 
malfunction with the target limited the amount of data collected by the 
Aegis destroyer. Specifically, the target ended its flight before Aegis 
BMD could send the GMD element all of the information needed for 
engaging the target. 

* Finally, delays in the GMD flight test program precluded Aegis BMD 
from participating in two planned integrated flight tests, IFT-13C and 
IFT-14, during fiscal year 2004. Without these tests, MDA has not 
verified that the element's long-range surveillance and tracking 
capability will perform as desired in an actual defensive mission. 

MDA Mandated to Conduct Operationally Realistic Testing:

The 2005 Defense Authorization Act, section 234, directed DOD to 
conduct an operationally realistic test of the BMDS by October 1, 2005, 
and required the Secretary of Defense, in consultation with the 
Director, Operational Test and Evaluation (DOT&E),[Footnote 16] to 
prescribe appropriate test objectives. Such a test is expected to 
exercise the LDO and Block 2004 configuration in a more realistic 
manner. Officials from the office of DOT&E told us that the test would 
be derived from an existing flight test with objectives focused more on 
operational than developmental aspects. 

DOT&E recently approved the operational test portion of MDA's 
Integrated Master Test Plan. The Integrated Master Test Plan 
establishes the framework for BMDS ground and flight testing through 
Block 2006. It is an overarching document that defines the test plans 
for the BMDS and its elements, identifies operational test objectives 
to support continuous characterization of demonstrated operational 
capability, and identifies associated test resources. 

Assessment of System Performance in Fiscal Year 2004:

MDA has conducted various ground and flight tests that provide some 
degree of confidence that the LDO capability--consisting of the GMD 
element, Aegis BMD destroyers for surveillance and tracking, and C2BMC 
for command and control--will operate as intended. In addition, MDA 
predicts that the LDO capability, although limited in inventory, will 
be effective[Footnote 17] in providing some protection of the United 
States against ICBM attacks from Northeast Asia. However, the agency 
has not verified that the LDO capability can operate as an integrated 
system without range-test limitations and artificialities (for example, 
using surrogate components to emulate missile defense functions), and 
operational testers within DOD state that there is not enough data to 
accurately characterize system performance. 

Assessment of LDO Effectiveness Subject to Interpretation:

MDA and DOT&E differ on derived estimates of LDO effectiveness. Both 
offices employed similar methodologies--that is, they identified 
critical functions needed to carryout a BMD engagement, estimated the 
probability of success for each function, and combined results into a 
"probability chain" to calculate a total probability of success for a 
given scenario. However, the assessments made by MDA and DOT&E differ 
in that they are based on different types and sources of information. 

MDA's assessment is based on the output from BMDS-level simulations 
using data derived from a variety of sources, including design 
specifications and output from high-fidelity simulations of various 
components (such as radars and interceptors). By employing digital 
simulations, estimates of system effectiveness are obtained over a wide 
range of conditions, scenarios, and system architectures. These 
simulations are anchored by data collected during flight testing so 
that their underlying models are reflective of real-world operation. 

DOT&E generated its estimates of system effectiveness by also 
approximating each factor of the "probability chain," but it relied on 
historical data and results from recent ground and flight tests. Based 
on this methodology, DOT&E concluded that there is not enough test data 
to accurately characterize system effectiveness--that is, the estimates 
are too uncertain to make definitive conclusions. In commenting on 
MDA's methodology, DOT&E officials made the following points:

* MDA's computer-based assessments are appropriate for a developmental 
program, but there could be difficulty in interpreting results for 
operational considerations. 

* A noteworthy limitation of MDA's assessment is the lack of system-
level performance data. Although its models provide a good 
representation of the system being built, fundamentally they are not 
predictive of actual system performance. 

The uncertainty in LDO effectiveness has a direct impact on how the 
warfighter operates the system. As noted by officials from USSTRATCOM, 
the uncertainty limits the warfighter's ability to formulate tactics 
and procedures in operating the system, especially with limited 
inventory. 

In addition, knowledge of component performance can play a useful role 
in fielding decisions by assisting decision makers in determining 
whether the capability available at the time warrants the cost of 
fielding, operating, and sustaining the system, or whether additional 
investment and development to enhance the capability are needed. 

Integrated Operation of LDO Capability Remains Unverified:

MDA has conducted a variety of tests that provide some degree of 
confidence that the LDO capability will operate as intended. For 
example, since 1999, the GMD program has conducted eight flight tests 
(intercept attempts)[Footnote 18] that emulated system operation 
against ICBM attacks. In addition, based on MDA documentation, the 
various functions of the BMD engagement--such as launch detection, 
tracking, interceptor launch, and intercept--have been demonstrated in 
a variety of venues, including simulations, ground tests, and flight 
tests. Technical indicators monitored by GMD, Aegis BMD, and C2BMC show 
that the elements' various components are on track to function as 
expected during a BMD engagement. For example, the Aegis BMD program 
projects that the Aegis SPY-1 radar is able to deliver adequate 
performance in support of the GMD mission. Furthermore, based on past 
flight tests, MDA states that discrimination performance of the GMD 
kill vehicle is adequate to meet system-level objectives relative to 
the Block 2004 threat. 

However, collectively, these accomplishments do not verify integrated 
system operation of the LDO capability because of inherent limitations 
and artificialities. An end-to-end test of system operation--beginning 
with launch detection and ending with intercept confirmation--should 
incorporate operational test objectives such as test realism, lack of 
scripting, and the utilization of production-representative hardware. 
Although MDA has progressed in demonstrating such objectives in a 
ground-test setting, they have yet to be demonstrated in end-to-end 
flight tests. As we reported in February 2004,[Footnote 19] GMD flight 
tests to date have demonstrated basic functionality of a representative 
missile defense system using surrogate and prototype components. In 
addition, they have shown success in intercepting a mock reentry 
vehicle in a developmental test environment. However, as developmental 
tests, they were scripted, did not use production-representative 
hardware and software, and required the placement of a C-band 
transponder[Footnote 20] on the target reentry vehicle. The transponder 
was essential for the execution of the flight tests--no ground radar of 
sufficient accuracy for guiding the interceptor to the intercept point 
was available. 

Although MDA has conducted many tests to exercise separate functions of 
the BMD mission, component-level testing in preparation for LDO has 
been incomplete. For example, MDA conducted wargames that enabled the 
warfighter to exercise the C2BMC in a simulated operational environment 
to gain insight in and provide feedback on C2BMC capabilities. Also, 
GMD radars and Aegis BMD destroyers took advantage of other DOD 
missions[Footnote 21] that enabled these elements to exercise radar and 
battle management operations. However, some components have not been 
fully tested:

* The Cobra Dane radar is located at Eareckson Air Station in Shemya, 
Alaska, at the western end of the Aleutian chain. Its close proximity 
to Russia allows it to perform its primary mission of collecting data 
on ICBMs and submarine-launched ballistic missiles launched into the 
Kamchatka impact area. In fiscal year 2004, the GMD program completed 
hardware installation and software upgrades to the Cobra Dane radar. To 
test these upgrades, Cobra Dane tracked a foreign missile launch and 
participated in an integrated ground test. However, the upgraded Cobra 
Dane radar has not participated in a flight test event as the primary 
fire control radar--a role it would need to fill in the event of a real 
threat. MDA may conduct a test during the third quarter of fiscal year 
2005 using a long-range air-launched target to demonstrate the upgraded 
Cobra Dane under more operationally realistic conditions. 

* Aegis destroyers upgraded for the long-range surveillance and 
tracking capability have not been exercised in a manner consistent with 
an actual defensive mission. That is, the Aegis BMD element has not 
provided track data of a target, in real time, for use in planning a 
BMD mission against a target ICBM. Aegis BMD will first participate in 
a GMD flight test in this role in fiscal year 2005.[Footnote 22] 
Despite this concern, DOT&E officials believe that Aegis BMD can 
adequately perform its detection and tracking functions. 

Assessment of System Cost in Fiscal Year 2004:

We used contractor Cost Performance Reports in combination with Earned 
Value Management (EVM)[Footnote 23] analysis to assess progress made by 
the various element prime contractors toward MDA's cost and schedule 
goals during fiscal year 2004. The government routinely uses such 
reports to independently evaluate these aspects of the prime 
contractors' performance. Generally, the reports detail deviations in 
cost and schedule relative to expectations established under the 
contract. Contractors refer to deviations as "variances." Positive 
variances are generally associated with the accomplishment of 
activities under cost or ahead of schedule, while negative variances 
are often associated with the accomplishment of activities over cost or 
behind schedule. Cost Performance Reports provide program mangers and 
others with information on a contractor's ability to perform work 
within estimated cost and schedule. When reports show that the 
contractor is encountering problems that cause cost growth, program 
officials can then take actions to prevent further growth. 

We assessed MDA fiscal year 2004 cost performance by reviewing the cost 
performance of each system element, which, in turn, is based on the 
cost performance of its element prime contractor. We used this 
methodology because a large percentage of MDA's budget is allocated to 
prime contractors that develop the various BMDS elements. As summarized 
in table 6, prime contractors responsible for developing three of the 
seven BMDS elements we reviewed--C2BMC, KEI, and THAAD--completed their 
fiscal year 2004 work at or near budgeted costs. Activities cost more 
than budgeted for the ABL, GMD, and the STSS elements by $114 million, 
$220 million, and $35 million, respectively. Also, our analysis of cost 
and schedule performance for the entire Aegis BMD element could not be 
conducted, because Cost Performance Reports for the Standard Missile 3 
contract were not issued until September 2004. Our detailed findings 
are presented in appendices II through VIII of this report. 

Table 6: Prime Contractor Cost and Schedule Performance in Fiscal Year 
2004:

Dollars in millions. 

BMDS element: ABL; 
Cost variance: ($114.4); 
Schedule variance[A]: ($47.6); 
Percent of contract completed: N/A[B]; 
Comments: Variances reflect cumulative prime contractor cost and 
schedule performance for the first half of fiscal year 2004--October 
2003 through March 2004. Program officials indicated that hardware 
delivery delays, design problems, and integration issues were the 
primary drivers of the cost variances. After this time, the program was 
restructured and the prime contract rebaselined. Program officials 
directed the contractor to suspend normal contractor performance 
reporting between April and July 2004, during which the contractor 
expended $129 million. During this time, the contractor provided 
forecasts of expenditures to the program. The contractor resumed normal 
cost performance reporting in August 2004. As of September 2004, the 
contractor was performing work under budget but slightly behind 
schedule; As part of the restructuring, the prime contract's cost 
increased by $1.5 billion and its term extended over 3 years to 
accomplish the objective of developing a prototype aircraft. In total, 
ABL prime contract costs have increased from $1.0 billion at the time 
of contract award in 1996 to $3.6 billion in 2004. 

BMDS element: Aegis BMD; 
Cost variance: $3.5; 
Schedule variance[A]: ($2.0); 
Percent of contract completed: 43%; 
Comments: The Aegis BMD element has two prime contracts: the Aegis 
Weapon System contract, consisting of software and hardware upgrades of 
existing Navy cruisers and destroyers to make them BMD capable; and the 
Standard Missile 3 (SM-3) contract for the development of the element's 
missile. Both were awarded in the second half of 2003. Variances shown 
are of the Aegis Weapon System contract only, which shows that the 
contractor completed fiscal year 2004 work under budget. The contractor 
who develops the SM-3 missile began reporting cost and schedule 
performance in the last month of fiscal year 2004; therefore, this 
contractor's cost and schedule performance for the year is not 
reported. 

BMDS element: C2BMC[C]; 
Cost variance: ($3.6); 
Schedule variance[A]: ($5.7); 
Percent of contract completed: 100% (Part 2); 31% (Part 3); 
Comments: Overall, the prime contractor is under budget. But when 
considering performance in fiscal year 2004 alone, the contractor 
performed work slightly over budget and behind schedule. The declining 
performance is largely attributed to issues pertaining to algorithm 
development and site integration. 

BMDS element: GMD; 
Cost variance: ($219.6); 
Schedule variance[A]: ($59.9); 
Percent of contract completed: 69%; 
Comments: Developmental issues with the GMD interceptor--booster and 
kill vehicle--remain the leading cause of negative cost and schedule 
variances. In fiscal year 2004, interceptor-related work cost $204 
million more than budgeted, of which the kill vehicle accounted for 40 
percent of the variance. Flight test delays also contributed to 
unfavorable cost and schedule performance. 

BMDS element: KEI; 
Cost variance: $0.04; 
Schedule variance[A]: ($1.6); 
Percent of contract completed: 1%; 
Comments: The KEI prime contractor performed work in fiscal year 2004 
near its budgeted costs. Program officials indicated that the slightly 
unfavorable schedule variance was the result of the contractor delaying 
activities so that it could conduct trade studies on new requirements 
imposed by MDA; Because of plans to restructure the KEI program--to 
defer the land-based capability from Block 2010 to Block 2012--the long-
term performance measurement baseline[D] is no longer relevant. In 
August 2004, the program suspended contractor cost and schedule 
performance reporting until a reliable baseline to reflect the full 
extent of the program's restructure became available. The contractor is 
reporting actual costs until program restructure efforts are complete. 

BMDS element: STSS; 
Cost variance: ($34.6); 
Schedule variance[A]: ($20.7)[E]; 
Percent of contract completed: 29%; 
Comments: Prime contract cost and schedule performance eroded 
throughout fiscal year 2004. The erosion in cost performance was 
largely attributed to cost overruns by a subcontractor who had a number 
of quality and systems-engineering problems. Delays in software and 
hardware deliveries were the major causes for the unfavorable schedule 
variance. Despite these issues, the program office maintains that the 
prime contractor is expected to complete the contract early and with 
minimal cost overruns. 

BMDS element: THAAD; 
Cost variance: $0.7; 
Schedule variance[A]: $8.1; 
Percent of contract completed: 61%; 
Comments: Overall, the prime contractor is under budget and ahead of 
schedule. However, the contractor's favorable cost and schedule 
performance eroded somewhat during the second half of fiscal year 2004. 
The declining performance was largely driven by issues in missile 
development. Specifically, two explosions at a subcontractor's 
propellant mixing facility resulted in the need to find a new vendor. 

Sources: Contractors (data); GAO (analysis). 

Note: Negative variances are shown with parentheses around the dollar 
amounts. 

[A] Schedule variance represents the value of planned work by which the 
prime contractor is behind schedule. 

[B] As of March 2004, the program completed 88 percent of the contract 
under the former contract structure. However, because the prime 
contract was extended over 3 years, this figure is no longer accurate. 

[C] C2BMC development is being carried out through a contractual 
vehicle known as an Other Transaction Agreement, which functions much 
like a prime contract. Values reflect the combined variances incurred 
during fiscal year 2004 by parts 2 and 3 of the C2BMC contract. 

[D] A performance measurement baseline identifies and defines work 
tasks, designates and assigns organizational responsibilities for each 
work task, schedules the work tasks in accordance with established 
targets, and allocates budget to the scheduled work. 

[E] The contractor implemented a performance measurement baseline that 
reflects a 6-month accelerated schedule. This means the contractor 
might be performing work on schedule, allowing it to complete all the 
work by the end of the contract, but schedule performance data would 
show otherwise. 

[End of table]

Negative Cost Variances Incurred by ABL, GMD, and STSS Prime 
Contractors:

ABL incurred a negative cost variance of $114 million during the first 
half of fiscal year 2004, before the program was restructured to make 
its cost and schedule targets more realistic. This variance stemmed 
primarily from two sources. First, the program encountered 
unanticipated complexity in manufacturing and in integrating advanced 
optics and laser components for the prototype system. Second, the push 
to rapidly develop the prototype aircraft caused the program to limit 
testing of subcomponents, which, in turn, generated rework and modified 
requirements. To address the negative variance for ABL, program 
officials told us that they redirected funds originally earmarked for 
other program efforts. 

GMD incurred a negative cost variance of $220 million. The contractor 
originally underestimated the cost of readying the element for LDO and 
experienced unexpected problems requiring some rework of its kill 
vehicle. Additionally, in response to explosions at a subcontractor's 
propellant mixing facility, the program incurred cost to transition 
operations to a new vendor. To address its negative cost variance for 
GMD, MDA deferred some work planned for completion in fiscal year 2004 
into fiscal year 2005, and, to cover these increased costs, requested 
and received additional money in its fiscal year 2005 budget. MDA also 
directed other programs within the agency, such as Test and Evaluation, 
to pick up GMD's portion of the cost of work tasks that benefited both 
programs. Employing established EVM analysis techniques, we estimate 
that the GMD contract--which ends in September 2007--will overrun its 
budget by between $593 million and $950 million at its completion 
assuming no corrective actions are taken. 

The negative STSS cost variance was largely attributed to a 
subcontractor who had a number of quality and systems-engineering 
problems in developing the payload--sensors and supporting subsystems-
-onboard the two STSS demonstration satellites. The program office 
maintains that there is enough management reserve to cover the overrun 
at the end of the contract, assuming that the reserve is not used for 
other purposes before then. 

Lack of Cost Performance Data for ABL, Aegis BMD, and KEI Elements 
Prevented Full Assessment:

ABL program officials' insight of their prime contractor's cost and 
schedule performance between April and July 2004 was somewhat limited. 
During this time, program officials directed the contractor to suspend 
normal cost performance reporting while they restructured the ABL prime 
contract to make its target cost and schedule more realistic. In lieu 
of providing normal Cost Performance Reports, the contractor provided 
the program office with monthly forecast expenditure plans, detailed 
work activities, and the number of staff needed to complete planned 
tasks. The program office relied on these metrics to determine the 
program's status and to provide insight into the contractor's cost and 
schedule performance. In the 5 months since cost reporting resumed, the 
cost and schedule variance has been relatively stable. 

We could not fully assess cost performance for the Aegis BMD program in 
fiscal year 2004. The prime contractor developing the SM-3 missile did 
not generate Cost Performance Reports until September 2004, even though 
the prime contract was awarded in August 2003. Program officials told 
us that, instead, they monitored contractor performance through monthly 
management and business meetings where cost performance, milestones, 
and future performance were reviewed. Program officials indicated that 
the delay in issuing Cost Performance Reports stemmed from the late 
establishment of the contract's performance management baseline. It was 
established 7 months after contract award because of the need for the 
program office to react to funding issues. In addition, the program 
suspended contractor cost and schedule performance reporting until 
after the Aegis BMD program office completed an integrated baseline 
review[Footnote 24] 5 months later. 

KEI program officials also had reduced insight into its prime 
contractor's work efforts for a portion of fiscal year 2004. After 
contract award in December 2003, the prime contractor began submitting 
Cost Performance Reports in May 2004. Program officials suspended cost 
performance reporting after August 2004 because of the need to 
restructure the prime contract in response to reduced funding. Program 
officials told us that the contractor will resume reporting in 2005 
after a reliable baseline that reflects the full extent of the 
program's restructure is available. 

Funding Risks Expected to Increase for Ballistic Missile Defense 
Program:

A number of factors portend an increasing level of funding risk for the 
ballistic missile defense program in the years ahead. Based on DOD's 
Future Years Defense Plan for fiscal years 2006-2011, MDA plans to 
request, on average, Research, Development, Test, and Evaluation 
(RDT&E) funding of about $10 billion annually. This funding supports 
continued development, procurement, and sustainment of hardware and 
software that MDA is fielding.[Footnote 25] However, sources outside 
and within DOD are expected to put pressure on MDA's share of research 
and development dollars. 

One factor for the increasing pressure is that DOD's acquisition 
programs such as ballistic missile defense are likely to be competing 
for a decreasing share of the federal budget. These programs are 
categorized as "discretionary spending" as opposed to "mandatory 
spending," such as Social Security, Medicare, and Medicaid. In fiscal 
year 2004, discretionary spending accounted for about 39 percent of the 
federal budget. The Congressional Budget Office projects that 
discretionary spending is likely to decrease to 36 percent of the 
federal budget by fiscal year 2009 and to 32 percent in by fiscal year 
2014.[Footnote 26]

A second factor is competing demands for funding within DOD. For 
example, although missile defense is seen as a national priority and 
has been funded nearly at requested levels in the past few years, MDA 
is facing budget cuts. Indeed, DOD's Program Budget Direction of 
December 2004 called for MDA to plan for a $5 billion reduction in 
funding over fiscal years 2006-2011. In addition, MDA is receiving 
about 13 percent of the $70 billion RDT&E budget in fiscal year 2005 
but must continue to compete with hundreds of existing and planned 
technology development and acquisition programs for RDT&E funding. Cost 
growth of existing weapon programs puts additional pressure on MDA's 
share. We found, for example, that RDT&E cost estimates grew $6.7 
billion for the Joint Strike Fighter in calendar year 2003 and $9.2 
billion for the Future Combat System in fiscal year 2004. 

The third factor comes from within MDA itself. The agency continues to 
respond to cost growth of ongoing programs to enhance the components 
and elements of the BMDS. As noted above, ABL, GMD, and STSS incurred a 
collective negative cost variance of approximately $370 million in 
fiscal year 2004 and, as we reported last year, MDA elements incurred a 
collective negative cost variance of about $380 million in fiscal year 
2003.[Footnote 27] Unless MDA can mitigate these cost variances, 
significant cost overruns could occur on these contracts in the future. 
Estimating cost and schedule targets of new and complex technologies 
can be difficult and, as demonstrated, are often underestimated. 
Furthermore, hardware made available for operational purposes is not 
being fully tested before being fielded. If the need arises to correct 
problems identified in subsequent testing, removing and recalling this 
hardware could prove costly. 

A fourth factor for the increasing pressure on MDA's RDT&E budget is 
that MDA is starting to field components of the BMDS, whose production, 
operation, and sustainment are also funded by RDT&E dollars. A flat 
RDT&E budget combined with growing fielding costs would result in a 
decrease in investment in research and development--MDA's primary 
mission. According to program documentation, MDA's budget for its 
fielding activities between fiscal years 2006 and 2011 includes an 
average of $1.76 billion per year for procuring BMDS assets and an 
additional $400 million per year for sustaining the fielded capability. 
However, the fielding costs can be expected to increase in the years to 
come as more components of GMD, Aegis BMD, and THAAD are integrated 
into the BMDS. 

Operations and support (O&S) costs of fielded systems are generally 
significant and can be expected to be substantial for operational 
capabilities of the BMDS. In our 2003 report on total-ownership (life-
cycle) cost,[Footnote 28] we found that the cost to develop and procure 
a weapon system usually represents about 28 percent of the weapon 
system's life-cycle cost; O&S costs typically account for the remaining 
72 percent of a weapon's systems total life-cycle cost. The only BMDS 
element thus far with a life-cycle cost estimate, the Army's Patriot-
MEADS missile defense program, has comparable life-cycle cost 
percentages. According to the Army's Lower-Tier Project Office, the 
Patriot-MEADS development cost accounts for 6.4 percent, procurement 
accounts for 21.2 percent, and O&S costs account for 72.4 percent of 
the total life-cycle cost of $151 billion. 

DOD officials cautioned us that estimating life-cycle costs of missile 
defense capabilities involves considerable uncertainty. For example, 
O&S costs depend on the state of readiness of the fielded system, which 
is difficult to predict. In addition, historical data of component 
reliability in the field and the cost to repair operational missile 
defense assets are essentially nonexistent. Furthermore, life-cycle 
cost estimates of standard DOD weapon systems assume O&S costs apply 
for long periods of time, on the order of 20 years. Components of the 
BMDS, however, might be in the field for shorter durations. Finally, 
our previous work[Footnote 29] recognized that life-cycle cost 
estimates for revolutionary systems such as the ABL program, which 
utilize new technologies in unproven applications, are unknown. When 
fielded, operation and support efforts for ABL could be substantial 
because ABL will require unique support for its laser and beam-control 
components and ground infrastructure for chemical storage, mixing, and 
handling.[Footnote 30]

MDA Is Not Consistently Matching Cost and Fielding Goals:

In assessing the extent MDA achieved its stated goals in fiscal year 
2004, we observed that MDA's cost goal for a given block is not 
consistently aligned with that block's fielding goals. According to MDA 
policy, for example, interceptors identified with the Block 2004 
fielding goals and fielded during calendar years 2004-2005 should be 
funded as part of the Block 2004 cost goal. As originally designed, the 
block approach would provide MDA with the flexibility to deliver a 
basic capability initially and enhance it during subsequent blocks to 
respond to the changing threat and to insert new technologies for 
enhanced performance. The block approach also would provide for 
accountability, because MDA would identify for decision makers the 
promised capabilities to be delivered by the end of each block for a 
specified investment of funds. 

In the following instances, however, we found that MDA has not been 
consistently matching a block's cost and fielding goals thereby 
obscuring the relationship between requested funding and delivered 
capabilities:

* Funds accounted for in the Block 2004 cost goal are being used to 
procure 32 Aegis BMD SM-3 missiles. Of these missiles, 11 will be 
delivered in 2004-2005, and the remaining missiles will be delivered 
during 2006-2007. Similarly, funds accounted for in the Block 2006 cost 
goal are being used to procure 40 missiles. Of these missiles, 7 will 
be delivered in 2006-2007, and the remaining delivered during 2008-
2009. 

* The THAAD program is funding a "fire unit" as part of its Block 2006 
program. Operated by the Army, it will consist of a radar, a battle 
management unit, 3 launchers, 24 missiles, and equipment for support, 
maintenance and training. Even though MDA refers to this fire unit as a 
Block 2006 fielding, it will not be delivered until 2009 (i.e., during 
Block 2008).[Footnote 31]

In addition, counter to the definition of a block as an integrated set 
of capabilities fielded during the 2-year block window, the Airborne 
Laser program will not field any capabilities during Block 2004 
although Block 2004 funds are used in the program's development. 
Rather, the ABL program is focused on developing a prototype aircraft 
for use in a lethality demonstration--a flight test in which the ABL 
aircraft will attempt to shoot down a short-range ballistic missile. 
However, ABL's funding is broken out by block--2004, 2006, and 2008--
even though the program is developing a single configuration of the 
element that will not be integrated into the BMDS earlier than Block 
2008. 

Conclusion:

MDA delivered much of what it planned in fiscal year 2004, and DOD is 
on the verge of standing up an initial capability against long-range 
ballistic missiles launched from Northeast Asia. Despite this success, 
the performance of the system remains uncertain and unverified because 
of recurrent test delays and failures. Also, Ground-based Midcourse 
Defense developmental costs continue to increase and the Airborne Laser 
program was restructured when it became clear that much more time and 
money would be needed to develop and demonstrate a prototype aircraft. 

Looking to the future, decision makers in Congress and DOD face billion 
dollar investment decisions in allocating funds both within MDA's RDT&E 
activities and between MDA and other DOD programs. In exercising their 
funding and oversight responsibilities, these decision makers would 
benefit from a consistent implementation of a block policy for which 
delivered capability is aligned with tax dollars received. 

Recommendation for Executive Action:

To assist decision makers in Congress and DOD in exercising their 
oversight of MDA's acquisition plans and in evaluating MDA's budget 
requests, we recommend that the Director, MDA, clarify and modify, as 
needed, its block policy to ensure that a block's cost and fielding 
goals are consistently aligned. 

Agency Comments and Our Evaluation:

DOD's comments on our draft report are reprinted in appendix I. DOD 
concurred with our recommendation. Acknowledging our observations, the 
Department noted that the policy for ballistic missile defense block 
definitions should provide for consistent accounting of the various 
features of each block. MDA is taking steps to clarify and modify the 
block definitions for that purpose. 

We are sending copies of this report to the Secretary of Defense and to 
the Director, MDA. We will make copies available to others upon 
request. In addition, the report will be available at no charge on the 
GAO Web site at http://www.gao.gov. 

If you or your staff have any questions concerning this report, please 
contact me at (202) 512-4841. The major contributors to this report are 
listed in appendix XI. 

Signed by: 

Robert E. Levin: 
Director: 
Acquisition and Sourcing Management:

List of Congressional Committees:

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

The Honorable Ted Stevens: 
Chairman: 
The Honorable Daniel K. Inouye: 
Ranking Minority Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate:

The Honorable Duncan Hunter: 
Chairman: 
The Honorable Ike Skelton: 
Ranking Minority Member: 
Committee on Armed Services: 
House of Representatives:

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

[End of section]

Appendix I: Comments from the Department of Defense:

OFFICE OF THE UNDER SECRETARY OF DEFENSE:
ACQUISITION, TECHNOLOGY AND LOGISTICS:

3000 DEFENSE PENTAGON: 
WASHINGTON, DC 20301-3000:

Mr. Robert E. Levin:
Director, Acquisition and Sourcing Management: 
Government Accountability Office:
441 G. Street, N.W.: 
Washington, DC 20548:

MAR 09 2005:

Dear Mr Levin:

This is the Department of Defense (DoD) response to the Government 
Accountability Office (GAO) draft report, "DEFENSE ACQUISITIONS: Status 
of Ballistic Missile Defense Program in 2004," dated February 3, 2005, 
(GAO Code 120360/GAO-05-243). Our official comment is enclosed. 
Technical comments to this report were provided separately. 
Additionally, the Department is conducting a security review of the 
draft report and will forward the results of the review as soon as it 
is completed.

My point of contact for this effort is COL Dan Hughes, (703) 695-7329, 
daniel.hughes@osd.mil. We appreciate the opportunity to comment on the 
draft report.

Sincerely,

Signed by: 

Glenn F. Lamartin: 
Director: 
Defense Systems:

Enclosure: As stated:

GAO FINAL REPORT -DATED March, 2005 GAO CODE 120360/GAO-05-243:

"DEFENSE ACQUISITIONS: Status of Ballistic Missile Defense Program in 
2004":

RECOMMENDATION 1: To assist decision makers in the Congress and DOD in 
exercising their oversight of MDA's acquisition plans and in evaluating 
MDA's budget requests, we recommend that the Director, MDA, clarify and 
modify, as needed, its block policy to ensure that a block's cost and 
fielding goals are consistently aligned. (P. 32/GAO Final Report):

DOD RESPONSE: Concur -The Department agrees that the policy for 
ballistic missile defense block definitions should provide for 
consistent accounting of the various features of each block. MDA is 
taking steps to clarify and modify the block definitions for that 
purpose. 

[End of section]

Appendix II: Summary:

Aegis Ballistic Missile Defense: 

[See PDF for image]

Source: Missile Defense Agency. 

[End of figure]

Program Description: 

The Aegis Ballistic Missile Defense (Aegis BMD) element is designed to 
protect U.S deployed forces, friends, and allies from short-and medium-
range ballistic missile attacks. Additionally, its shipboard radar can 
serve as a forward-deployed sensor for surveillance and early tracking 
of long-range ballistic missiles in support of the Ground-based 
Midcourse Defense (GMD) mission. To provide these capabilities, the 
Missile Defense Agency (MDA) is upgrading existing Aegis Navy ships for 
the BMD mission. MDA completed an initial surveillance and tracking 
capability in fiscal year 2004 and plans to field an initial intercept 
capability in April 2005. 

DOD’s planned investment in the Aegis BMD program from program 
inception in 1996 through 2011 is approximately $10 billion. DOD 
expended $3.67 billion between fiscal years 1996 and 2004, Congress 
appropriated $1.14 billion for fiscal year 2005, and MDA is budgeting 
about $5.22 billion between fiscal years 2006 and 2011 for Aegis BMD 
development, procurement, and operations.

Fiscal Year 2004 Progress Assessment: 

The Aegis BMD program completed work planned for fiscal year 2004 
generally on schedule and is largely on track to upgrade system 
software and expand missile inventory for an enhanced capability by the 
end of December 2005 (Block 2004). However, Aegis destroyers upgraded 
for the long-range surveillance and tracking (LRS&T) mission had 
limited opportunities to be exercised in a manner consistent with an 
actual defensive mission.

Schedule: In fiscal year 2004 and early 2005, the Aegis BMD program 
completed the upgrade of three Aegis destroyers for the LRS&T 
mission—all are available for operations. In addition, the program 
delivered five missiles, known as the Standard Missile 3 (SM-3), in the 
first quarter of fiscal year 2005 for the element’s Block 2004 
engagement capability. Because of funding constraints and ship 
availability, missile deliveries and ship upgrades were delayed. In 
particular, the program expects to have available a slightly smaller 
inventory of SM-3 missiles by December 2005 than was originally 
planned. Also, the program expected to upgrade three cruisers by the 
end of Block 2004, but only two will be completed by this time.

Testing: Aegis BMD flight testing conducted in fiscal year 2004 focused 
on the LRS&T mission, including the element’s connectivity with the 
BMDS. Because there were limited opportunities to track actual targets 
using the fielded version of the LRS&T system, this capability was only 
partially demonstrated prior to the destroyers’ fielding. The Aegis BMD 
program also conducted one successful intercept attempt against a short-
range ballistic missile target during fiscal year 2004. Finally, design 
changes to the missile’s divert system underwent ground testing and are 
planned to be tested in flight in fiscal year 2005.

Performance: The Aegis BMD program has demonstrated the capability to 
intercept a non-separating target through its successes in five of six 
flight tests. The root cause of a failure in the missile’s divert 
system during the one unsuccessful attempt is understood, and design 
changes are expected to be tested in flight in fiscal year 2005. 
Although the program has exercised the element’s LRS&T capability in a 
small number of flight-test events, it has not yet used the fielded 
version of the system software to provide real-time track data of a 
target for use in planning a BMD mission, as it would need to do in an 
actual defensive operation.

Cost: We could not fully assess cost performance for the Aegis BMD 
program in fiscal year 2004 based on an analysis of prime contractor 
Cost Performance Reports. We found that the contractor responsible for 
upgrading existing Aegis ships for the BMD mission completed fiscal 
year 2004 work $3.5 million under budget but was unable to complete 
$2.0 million worth of work. However, we were unable to assess cost and 
schedule performance of the prime contractor who develops the SM-3 
missile because Cost Performance Reports were not available during 
fiscal year 2004.

[End of section]

Appendix II: Aegis Ballistic Missile Defense:

Element Description:

The Aegis Ballistic Missile Defense (Aegis BMD) element is a sea-based 
missile defense system being developed to protect deployed U.S. forces, 
allies, and friends from short-and medium-range ballistic missile 
attacks. It will also be used as a forward-deployed Ballistic Missile 
Defense System (BMDS) sensor, employing its shipboard SPY-1 radar, to 
perform surveillance and tracking of long-range ballistic missiles in 
support of the Ground-based Midcourse Defense (GMD) mission. 

The Aegis BMD element builds upon the existing capabilities of Aegis-
equipped Navy cruisers and destroyers. Planned hardware and software 
upgrades to these ships will enable them to carry out the missile 
defense mission in addition to their current role of protecting U.S. 
Navy ships from air, surface, and subsurface threats. The program is 
also developing the Standard Missile 3 (SM-3)--the system's interceptor 
missile, which is designed to destroy enemy warheads through hit-to-
kill collisions above the atmosphere. The SM-3 is comprised of a kill 
vehicle[Footnote 32] mounted atop a 3-stage booster. 

History:

In 1996, the Department of Defense (DOD) initiated the Navy Theater 
Wide program, the predecessor to Aegis BMD. The Navy Theater Wide 
system was to be a ship-based missile defense system capable of 
destroying short-range ballistic missiles above the atmosphere. At the 
time, plans called for deploying the first increment of the Navy 
Theater Wide system in 2010 and a final increment with an improved kill 
vehicle at a later, undefined date. 

Developmental Phases:

The Missile Defense Agency (MDA) currently manages and funds the Aegis 
BMD program, although the U.S. Navy has a role in its development and 
management. Accordingly, the Aegis BMD element is being developed under 
MDA's acquisition approach, which delivers system capabilities in 2-
year block increments. The first increment of the Aegis BMD element, 
Block 2004, is expected to deliver a limited operational capability in 
the 2004-2005 time frame. It provides for surveillance and tracking of 
long-range ballistic missiles and an intercept capability (engagement 
role) against shorter-range ballistic missiles. The Block 2004 
capability is being rolled out in three phases:

* Initial fielding of the surveillance and tracking capability. By 
October 2004, the program office upgraded three Aegis destroyers with 
the ability to perform the long-range surveillance and tracking (LRS&T) 
function as a BMDS sensor in support of the GMD mission. All three 
destroyers are available for operations. This capability is the 
element's contribution to MDA's fielding of Limited Defensive 
Operations (LDO), MDA's first increment of fielded capability. 

* Initial fielding of an intercept capability. By April 2005, MDA plans 
to have available two cruisers, along with a combined inventory of 
approximately five SM-3 missiles. The cruisers are expected to be 
capable of performing its two BMD missions, LRS&T and the engagement of 
short-and medium-range ballistic missiles. This configuration could be 
deployed operationally if so directed in an emergency. 

* Completion of the Block 2004 element. The program expects to increase 
the number of Aegis destroyers capable of providing LRS&T from 3 to 10 
by the end of December 2005.[Footnote 33] In addition, the program 
plans to deliver eight SM-3 missiles available to be deployed on 
upgraded cruisers available for the engagement role.[Footnote 34]

Future block configurations of the Aegis BMD element build upon the 
Block 2004 capability. In Block 2006, MDA plans to add the capability 
to defeat intermediate-range ballistic missiles with limited 
countermeasures and to increase Aegis BMD's role as a remote sensor by 
upgrading radar capabilities. The Aegis BMD Block 2008 configuration 
will incorporate upgrades to the SPY-1 radar to improve the radar's 
discrimination capability and to enhance the element's command and 
control component so that the element can engage multiple threats 
simultaneously. Finally, the Aegis BMD Block 2010 and 2012 
configurations are expected to incorporate missile enhancements, 
improve discrimination capability against advanced countermeasures, and 
improve planning and coordination as part of the BMDS. 

Planned Accomplishments for Fiscal Year 2004:

The Aegis BMD program establishes annual element-level goals by 
outlining specific activities the program plans to complete during a 
given fiscal year. In fiscal year 2004, the program focused largely on 
delivering the LRS&T capability for LDO and continuing with activities 
leading to the full Block 2004 capability. These activities can be 
grouped into three categories: fielding, testing, and design reviews. 

* Fielding. The Aegis BMD program planned to install the initial 
version of the operational computer program and make associated 
hardware upgrades on three Aegis destroyers enabling them to perform 
the LRS&T mission. In addition, the program planned to continue its 
activities leading to the initial delivery of SM-3 missiles during 
fiscal year 2005. 

* Testing. The Aegis BMD program office planned to conduct an intercept 
attempt against a short-range ballistic missile--Flight Mission 6 (FM-
6)--and to participate in other events that exercise the system's LRS&T 
functionality and connectivity with the BMDS. 

* Design reviews. The program planned to conduct design reviews of the 
final Block 2004 Aegis Weapon System software, the final Block 2004 
missile configuration, and the SM-3 missile's shipboard launch system. 

Assessment of Scheduled Activities:

In fiscal year 2004, the Aegis BMD program completed the upgrade of 
three Aegis destroyers[Footnote 35] for the LRS&T mission. In addition, 
the program was completing the final assembly of the first five SM-3 
missiles for the Block 2004 engagement capability, which were delivered 
in early fiscal year 2005. The program is largely on track to upgrade 
software, expand missile inventory, and conduct flight tests to deliver 
an enhanced capability for Block 2004 by the end of December 2005. 
However, funding modifications and ship availability delayed final 
missile deliveries and ship upgrades. In particular, although the 
program expected to field nine SM-3 missiles by the end of Block 2004, 
only eight will be delivered by this time. Also, the program expected 
to upgrade three cruisers by the end of Block 2004, but only two will 
be completed by this time. Specific progress made in fiscal year 2004 
relative to fielding, testing, and design is given in the narrative 
below and summarized in tables 7 to 12. 

Fielding Activities:

The Aegis BMD program has plans to eventually upgrade 18 Aegis-equipped 
Navy ships (15 destroyers and 3 cruisers) with enhanced planning, 
surveillance, tracking, and engagement functions to make them capable 
of performing the BMD mission. These upgrades will improve the 
capability of the element's SPY-1 radar to discriminate a missile's 
warhead from decoys, enable tracking of long-range ballistic missiles 
as a BMDS sensor, plan engagements, and launch SM-3 missiles to engage 
ballistic missiles. To achieve this enhanced functionality, the Aegis 
BMD program office is upgrading the Aegis Weapon System on designated 
ships through a series of software builds and hardware upgrades, 
referred to as BMD 3.0E, BMD 3.0, and BMD 3.1. 

Each BMD upgrade will increase the element's capability. The Aegis BMD 
program has successfully installed BMD 3.0E in three destroyers, which 
enables the ships to carry out long-range surveillance and tracking. 
However, the ships are not yet capable of launching missiles to engage 
ballistic missiles. Rather, the next software build, BMD 3.0, will be 
needed to provide the preliminary engagement capability for Aegis 
cruisers. It is expected to be approved for use in April 2005 and could 
be deployed operationally if so directed in an emergency. The third 
version of the BMD upgrade--BMD 3.1--will eventually enable the 
destroyers to also launch missiles, but because other hardware upgrades 
are needed, only Aegis cruisers will be equipped to do so by the end of 
Block 2004. BMD 3.1 is the last weapon system upgrade planned for the 
Block 2004 time frame. Table 7 summarizes the principal software 
development and installation activities completed in fiscal year 2004. 

Table 7: Status of Aegis BMD Fiscal Year 2004 Planned Accomplishments-
-Fielding Activities:

Activity: Complete and deliver long-range surveillance and tracking 
(LRS&T) software BMD 3.0E; 
Description/Progress assessment: The program completed BMD 3.0E 
development for the initial fielding of the LRS&T capability. 

Activity: Install LRS&T BMD 3.0E on three Aegis destroyers; 
Description/Progress assessment: The program installed BMD 3.0E on two 
Aegis destroyers by September 30, 2004, and on a third Aegis destroyer 
in October 2004. 

Activity: Begin training Aegis destroyer crews for the LRS&T mission; 
Description/Progress assessment: Crew training was completed on 
schedule, which included tactical operations and team certification, 
personnel standards, and BMD 3.0E familiarization. 

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

[End of table]

As software builds and hardware upgrades are completed and installed, 
Navy cruisers and destroyers will become available to perform their 
expected missions. Table 8 summarizes the availability of Aegis ships 
for the BMD mission in the Block 2004 time frame. Although MDA program 
goals specified that three cruisers would be available by the end of 
Block 2004 (December 2005), only two are expected to be upgraded by 
this time; the third is expected to be upgraded in early 2006, 
depending on ship availability. 

Table 8: Aegis Ship Availability for the BMD Mission (Block 2004):

Ship function: Destroyers; Capable of only LRS&T. Engagement capability 
will be added starting in 2006; 
September 2004: 3[B]; 
December 2004: 5[B]; 
April 2005: 9; 
December 2005: 10[ C]. 

Ship function: Cruisers[A]; Capable of surveillance, tracking, and 
engagement; 
September 2004: 0; 
December 2004: 1; 
April 2005: 2; 
December 2005: 2. 

Ship function: Total destroyers and cruisers available for BMD mission; 
September 2004: 3; 
December 2004: 6; 
April 2005: 11; 
December 2005: 12. 

Source: MDA. 

[A] The total number of Aegis cruisers includes one being used as a 
test ship, which was scheduled to begin installation of BMD 3.0 in 
December 2004. 

[B] The third LRS&T ship was completed in October 2004, and the fifth 
was completed in January 2005. 

[C] 15 LRS&T "equipment sets" will be available at this time, but 
installations may not be completed owing to the ships' operational 
schedules. The remaining five upgrades are planned for the Block 2006 
time frame. 

[End of table]

In fiscal year 2004, the Aegis BMD program office continued to procure 
SM-3 missiles for delivery in the 2004-2005 time frame. In particular, 
11 "Block I" SM-3 missiles are expected to be delivered by the end of 
calendar year 2005, some of which will be used in flight testing. Table 
9 summarizes the status of SM-3 deliveries through December 2005. 

Table 9: SM-3 Missile Deliveries:

SM-3 deliveries; 
Sept. 2004 -Dec. 2004: 5; 
Dec. 2004 -Apr. 2005: 1; 
Apr. 2005 -Dec. 2005: 5; 
Total (Dec. 2005): 11. 

Source: MDA. 

[End of table]

Prior to September 2004, three SM-3 missiles of an earlier 
configuration were delivered and subsequently used in flight missions 
(intercept attempts), FM-4, FM-5, and FM-6. "Block I" SM-3 missiles, 
which are being fielded during 2004-2005, are an operational 
configuration that evolved from this earlier design. Fiscal year 2004 
funding modifications impacted SM-3 missile integration and delivery; 
consequently, the Aegis BMD program expects to have available a 
slightly smaller inventory of SM-3 missiles by December 2005 than was 
originally planned. 

Testing Activities:

The Aegis BMD program conducts both ground and flight tests to 
demonstrate and validate element performance. Ground tests serve to 
reduce risk and, in some cases, are conducted under conditions that are 
difficult to replicate in flight. Flight tests verify the element's 
ability to engage ballistic missile targets using actual equipment, 
computer programs, and an operational ship with a Navy crew. 

Ground Testing:

Ground tests completed during fiscal year 2004 included those focused 
on a subcomponent of the missile's divert system--the Solid Divert and 
Attitude Control System (SDACS). This subcomponent is a collection of 
solid-fuel thrusters used to steer the kill vehicle into its designated 
target. When an updated SDACS design proved successful in earlier 
ground tests, the program flight-tested it during Flight Mission 5 (FM-
5) in June 2003. However, during this test, the subassemblies 
supporting the energetic pulse-mode failed, causing the kill vehicle to 
be less maneuverable and miss its target. Program officials stated that 
the failure likely stemmed from a "diverter ball" in the SDACS, which 
acts as a valve to control pulses that allow the missile to maneuver 
quickly. The exercising of the high-energy pulse mode of the SDACS 
increased internal operating pressures, and, under the thermal stress, 
the protective coating of the diverter ball cracked, disabling normal 
SDACS operation. The root cause of this failure has been traced to a 
material failure under intense temperature and pressure. 

In response to this failure, during fiscal year 2004, the program 
modified the SDACS design to improve its switching performance and 
reliability during high-energy pulse operation. A series of ground 
tests and engineering analysis is ongoing to validate the design 
updates. Following completion of ground tests and analysis, future 
flight tests are planned to demonstrate operation of the SDACS using 
its high-energy pulse mode. 

Flight Testing:

Since 1999, there have been six intercept attempts using variants of 
the SM-3 missile. In five of the six, the SM-3 successfully intercepted 
targets. In fiscal year 2004, the program conducted one of these 
successful intercept attempts--FM-6.[Footnote 36] Additionally, the 
Aegis BMD element participated in other non-intercept test events to 
assess the Aegis destroyer's ability to track targets of opportunity 
and pass data to the BMDS. Because of the technical issues associated 
with the SDACS reliability that arose in FM-5, the program office 
delayed FM-6 from September 2003 to December 2003 and did not exercise 
the SDACS high-energy pulse mode as originally planned. 

After the FM-6 flight mission in December 2003, Aegis BMD flight 
testing conducted in fiscal year 2004 focused on the LRS&T mission 
although there were limited opportunities to track actual targets using 
the fielded version of the LRS&T software, BMD 3.0E. For example, 
delays in the GMD flight test program prevented Aegis BMD from 
participating in two integrated flight tests, IFT-13C and IFT-14, 
during fiscal year 2004. In addition, the Aegis BMD program 
participated in Glory Trip 185, during which an Aegis destroyer 
successfully tracked a Minuteman III ICBM launched from Vandenberg Air 
Force Base. However, it exercised an earlier version of the LRS&T 
software, rather than BMD 3.0E, which is installed on fielded 
destroyers. Finally, in Pacific Explorer III, an Aegis destroyer 
planned to track an actual missile and pass track data to the BMDS. 
Although the destroyer tracked the live target missile, a malfunction 
with the target limited the amount of data collected by the Aegis 
destroyer. Specifically, the target ended its flight before Aegis BMD 
could send the GMD element enough information needed for engaging the 
target. 

Although there were limited opportunities to track actual targets, 
Aegis BMD participated in other tests that verified connectivity with 
the BMDS. For example, in Pacific Explorer II, Glory Trip 185, Pacific 
Explorer III, and Pacific Explorer IV (conducted in fiscal year 2005), 
simulated or real ballistic missile target track data was successfully 
transmitted to the BMDS. 

Table 10 summarizes the flight test and LRS&T activities completed in 
fiscal year 2004 by the Aegis BMD program. 

Table 10: Aegis BMD Fiscal Year 2004 Planned Accomplishments--Flight 
Test and LRS&T Activities:

Activity: Flight Mission 6 (FM-6); 
Occurred: Dec. 2003; 
Description/Progress assessment: An SM-3 missile successfully 
intercepted a short range ballistic missile (SRBM) target (SDACS used 
in sustain-mode only). 

Activity: Participate in GMD integrated flight tests as a surveillance 
and tracking sensor; 
Planned: Throughout FY2004; 
Description/Progress assessment: GMD flight tests were deferred until 
fiscal year 2005. IFT-13C was conducted in December 2004 and would have 
offered Aegis BMD the opportunity to exercise its LRS&T role. However, 
because of rough seas caused by severe weather that exceeded safety 
limits, the element did not participate. IFT-14 was conducted in 
February 2005, but this test failed to execute fully because the 
interceptor did not launch from its silo. 

Activity: Pacific Explorer II; 
Occurred: Mar. 2004; 
Description/Progress assessment: An Aegis destroyer in the Sea of Japan 
and an Aegis destroyer in Hawaii established full satellite 
communication connectivity with the BMDS across the Pacific Ocean to 
multiple land-based participants in Hawaii and the Continental United 
States. Although no actual target was launched, the ship successfully 
passed track data of a simulated target to exercise system 
connectivity. 

Activity: Glory Trip 185; 
Occurred: June 2004; 
Description/Progress assessment: Aegis BMD successfully exercised its 
role as a forward-deployed sensor. During this test, an Aegis destroyer 
detected and tracked a Minuteman III ICBM launched from Vandenberg Air 
Force Base and provided track and covariance data to GMD. However, the 
test did not exercise Aegis BMD tracking and connectivity in a manner 
consistent with an actual defensive mission; that is, as an integral 
part of the system during which the destroyer acts as a fire control 
radar. In addition, the Aegis destroyer was not upgraded with the 
newer, LDO version of the long-range surveillance and tracking 
software. 

Activity: Pacific Explorer III; 
Occurred: July 2004; 
Description/Progress assessment: This event provided exposure and 
training to the crew of an Aegis BMD destroyer. Although the destroyer 
tracked the live target missile, a malfunction with the target limited 
the amount of data collected by the Aegis destroyer--the target's 
flight was terminated early. 

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

[End of table]

In fiscal year 2005, the program office scheduled three more Block 2004 
flight tests, all of which are planned as intercept attempts. These 
tests aim to progressively demonstrate the element's capability against 
short-and medium-range unitary and separating targets, as well as 
demonstrate that Aegis BMD can support the BMDS as a forward-deployed 
sensor. FM-7 was the first flight test to use BMD 3.0 and the Block I 
SM-3 missile, which is the configuration of the first set of SM-3 
missiles that will be made available for fielding. Table 11 provides a 
summary of the Block 2004 flight tests the program expects to conduct 
through fiscal year 2005. 

Table 11: Planned Aegis BMD Fiscal Year 2005 Accomplishments--Remaining 
Block 2004 Flight Tests:

Activity: FTM 04-1 (FM-7); 
Date: Feb 24, 2005; 
Description: FM-7 was successfully conducted. An SM-3 missile 
intercepted an SRBM target (SDACS used in sustain-mode only). 

Activity: FTM 04-2 (FM-8); 
Date: 3Q FY2005[A]; 
Description: FM-8 is an intercept attempt against a separating, medium-
range ballistic missile (MRBM) target. The target will fly a trajectory 
more distant from the Aegis cruiser than in previous tests. Pending the 
results of ground testing, the SDACS will be tested in high-energy 
pulse mode. 

Activity: FTM 04-3 (FM-9); 
Date: 4Q FY2005; 
Description: FM-9 is an intercept attempt against a separating, MRBM 
target. The target will include additional decoys and clutter. The 
SDACS could be tested in high-energy pulse mode. 

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

[A] We use the notation "3Q FY2005" to mean the third quarter of fiscal 
year 2005 and an identical format for other time periods. 

[End of table]

Design Reviews:

The Aegis BMD program scheduled four component-level design reviews in 
fiscal year 2004 to evaluate the design maturity of the Aegis Weapon 
System software, launch system, and upgraded SM-3 missile, known as 
"Block IA." The program successfully completed three of these design 
reviews but delayed the fourth until early 2005. Table 12 summarizes 
the principal activities related to each review. 

Table 12: Aegis BMD Fiscal Year 2004 Planned Accomplishments--Design 
Reviews:

Activity: Aegis BMD 3.1 System Design Disclosure; 
Completed Jan. 2004; 
Description/Progress assessment: The system design disclosure for the 
final version of Block 2004 software, BMD 3.1, was successfully 
completed. This review evaluated the performance of BMD 3.1 for the 
LRS&T mission as well as engagement scenarios with both sustain-mode 
and pulse-mode SDACS. 

Activity: Vertical Launch System Phase I Critical Design Review; 
Completed Feb. 2004; 
Description/Progress assessment: The critical design review of the 
vertical launch system phase I was successfully completed. The review 
examined the expected performance of the Vertical Launch System 
associated with BMD 3.0. 

Activity: Vertical Launch System Phase II Preliminary Design Review; 
Completed June 2004; 
Description/Progress assessment: The preliminary design review of the 
vertical launch system phase II was successfully completed. This review 
presented requirements (design specifications) and early designs for 
the Vertical Launch System associated with BMD 3.1. 

Activity: SM-3 Block IA Critical Design Review; 
Completed Oct. 2004; 
Description/Progress assessment: The initial critical design review of 
the SM-3 Block IA--the upgraded configuration of the Block I missile--
was successfully completed and gave the program permission to begin 
missile assembly and testing. This review examined the maturity of the 
design and expected performance of the Block IA SM-3 missile 
configuration. A "close out" critical design review is planned to be 
conducted in April 2005. 

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

[End of table]

Assessment of Element Performance:

We identified areas for which the Aegis BMD program has not fully 
demonstrated element performance and reliability. First, the program 
has demonstrated its intercept capability under limited conditions; 
second, the program has not successfully demonstrated, in a flight 
test, SDACS operation using its high-energy pulse mode; and third, the 
program has only exercised the element's LRS&T capability in a small 
number of flight-test events. 

The Aegis BMD program demonstrated the capability to intercept a non-
separating target through its successes in FM-2, FM-3, FM-4, FM-6, and 
FM-7. Although these tests were scripted, they are noteworthy, given 
the difficulty of "hit-to-kill" intercepts. Officials with the office 
of Director, Operational Test and Evaluation (DOT&E), pointed out that 
the Aegis BMD program has conducted the most operationally realistic 
testing of all BMDS elements, especially because they utilize an 
operational U.S. Navy cruiser. They recognize, however, that the 
targets in FM-2 and FM-3 flew trajectories that facilitated radar 
detection and tracking. More realistic engagement scenarios will be 
tested in Block 2006, for example, tests with multiple simultaneous 
engagements. 

As we reported last year,[Footnote 37] the Aegis BMD program faced 
challenges with ensuring the reliability of SDACS operation; the issue 
continues to be relevant. The root causes of the SDACS failure in FM-5 
are understood and the program is implementing four design changes to 
correct the problem. After completing ground tests to verify these 
changes, the program plans to flight test the modified multi-pulse 
SDACS no earlier than FM-8, scheduled for the third quarter of fiscal 
year 2005. Even if the design changes prove to resolve the SDACS issue, 
program officials do not expect to implement any design changes in the 
first 11 Block 2004 missiles being delivered. Program officials believe 
that these missiles provide a credible defense against a large 
population of the threat even with reduced divert capability. 

The program has exercised the element's LRS&T capability in a limited 
number of flight-test events, as noted above. Nonetheless, the Aegis 
BMD program predicts that the Aegis SPY-1 radar is able to deliver 
adequate performance in support of the BMD mission, and DOT&E officials 
believe that Aegis BMD can adequately perform its detection and 
tracking functions. Although the Aegis destroyers have been upgraded 
for the LRS&T capability, they have not been exercised in a manner 
consistent with an actual defensive mission. That is, the Aegis BMD 
element has not provided track data of a target, in real time, to plan 
a BMD mission and launch GMD interceptors. 

Assessment of Element Cost:

DOD's planned investment in the Aegis BMD program from program 
inception in 1996 through 2011 is approximately $10 billion. As broken 
out in table 13, DOD expended $3.67 billion between fiscal years 1996 
and 2004,[Footnote 38] Congress appropriated $1.14 billion for fiscal 
year 2005, and MDA is budgeting about $5.22 billion between fiscal 
years 2006 and 2011 for Aegis BMD development, procurement, and 
operations. Budgeted activities in the "cooperative work" column 
include SM-3 component development between the United States and Japan. 

Table 13: Aegis BMD Cost:

Dollars in millions of then-year dollars. 

FY 1996[A] -FY 2003; 
Other: $$2,985; 
Block 2004: $$$0; 
Block 2006: $$0; 
Block 2008: $$0; 
Block 2010: $$0; 
Cooperative work: $0; 
Total: $2,985. 

FY 2004 (Actuals); 
Other: $0; 
Block 2004: $606; 
Block 2006: $24; 
Block 2008: $0; 
Block 2010: $0; 
Cooperative work: $51.8; 
Total: $682. 

FY 2005 (Appropriated); 
Other: $0; 
Block 2004: $943; 
Block 2006: $122; 
Block 2008: $0; 
Block 2010: $0; 
Cooperative work: $71.3; 
Total: $1,136. 

FY 2006; 
Other: $0; 
Block 2004: $101; 
Block 2006: $575; 
Block 2008: $135; 
Block 2010: $0; 
Cooperative work: $24.8; 
Total: $836. 

FY 2007; 
Other: $0; 
Block 2004: $15; 
Block 2006: $547; 
Block 2008: $354; 
Block 2010: $0; 
Cooperative work: $52.8; 
Total: $969. 

FY 2008; 
Other: $0; 
Block 2004: $0; 
Block 2006: $69; 
Block 2008: $637; 
Block 2010: $20; 
Cooperative work: $112.5; 
Total: $838. 

FY 2009; 
Other: $0; 
Block 2004: $0; 
Block 2006: $15; 
Block 2008: $546; 
Block 2010: $185; 
Cooperative work: $131.5; 
Total: $878. 

FY 2010; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $205; 
Block 2010: $576; 
Cooperative work: $129.5; 
Total: $911. 

FY 2011; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $44; 
Block 2010: $644; 
Cooperative work: $100.0; 
Total: $788. 

FY 1996 -FY 2011; 
Other: $$2,985; 
Block 2004: $$1,665; 
Block 2006: $$1,352; 
Block 2008: $$1,921; 
Block 2010: $$1,425; 
Cooperative work: $$674; 
Total: $10,022. 

Source: MDA. 

Notes: Aegis BMD budget as of February 2005. Numbers may not add due to 
rounding. 

[A] Program inception (FY 1996). 

[End of table]

Contract Activities:

In the second half of 2003, two new prime contracts for the Aegis BMD 
element were awarded, one for the Aegis Weapon System and one for the 
SM-3 missile. Aegis Weapon System efforts, previously part of five Navy 
contracts, were merged into one contract, which was awarded to Lockheed 
Martin in October 2003. This contract covers Block 2004 activities, 
including upgrades to BMD software, upgrades to the SM-3 missile launch 
system, and planning activities for future blocks. The two previous 
Navy SM-3 contracts were merged into a new contract, which was awarded 
to Raytheon in August 2003. It covers development and delivery of SM-3 
missiles and related engineering efforts. 

Prime Contractor Cost and Schedule Performance:

The government routinely uses contractor Cost Performance Reports to 
independently evaluate a prime contractor's cost and schedule 
performance. Generally, the reports detail deviations in cost and 
schedule relative to expectations established under the contract. 
Contractors refer to deviations as "variances." Positive variances are 
generally associated with the accomplishment of activities under cost 
or ahead of schedule, while negative variances are often associated 
with the accomplishment of activities over cost or behind schedule. 

We used the Cost Performance Reports to evaluate the cost and schedule 
performance of the Aegis Weapon System prime contractor but had 
insufficient data to assess the performance of the SM-3 contractor. Our 
analysis of the Aegis Weapon System found that the prime contractor 
performed at or near budgeted cost and schedule during fiscal year 
2004. Specifically, since contract inception in October 2003 through 
September 2004, the prime contractor was $3.5 million under budget. 
However, it was unable to complete $2 million of work because of 
fluctuations in ship and testing schedules (see fig. 3). 

Figure 3: Aegis BMD Fiscal Year 2004 Cost and Schedule Performance:

[See PDF for image]

[End of figure]

The Defense Contract Management Agency is concerned with the delay that 
occurred in the implementation of the SM-3 contract's performance 
measurement baseline,[Footnote 39] which reflects the schedule and 
budget for all work tasks that must be performed to meet contract 
objectives. Although the contract was awarded to the prime contractor, 
Raytheon, in August 2003, the contract's baseline was not reviewed at 
an Integrated Baseline Review (IBR)[Footnote 40] until almost a year 
after contract award. Program officials indicated that the delay 
stemmed from the late establishment of the contract's performance 
management baseline, which was established 7 months after contract 
award because of the need for the program office to react to funding 
issues. Raytheon was allowed to postpone issuing Cost Performance 
Reports until after the Aegis BMD program office held an IBR 5 months 
after establishment of the baseline. 

Until the completion of the Raytheon IBR, program officials monitored 
contractor performance through monthly management and business meetings 
where cost and performance data, milestones, and projections of future 
performance were reviewed. The program office stated that these monthly 
meetings provided sufficient data to monitor contractor performance. 
Nonetheless, without these reports, it is difficult for the program 
office (and other independent agencies) to monitor cost and schedule 
performance of the contract's various components and, therefore, to 
identify areas in need of corrective action. Additionally, although we 
are aware of past problems with SDACS performance on the SM-3 contract, 
we did not have any data to evaluate its impact on the contract's cost 
and schedule. 

[End of section]

Appendix III Summary:

Airborne Laser: 

[See PDF for image]

Source: Missile Defense Agency: 

[End of figure]

Program Description: 

The Airborne Laser (ABL) is being developed to shoot down enemy 
missiles during the boost phase of flight. Integrated onboard a Boeing 
747 aircraft, ABL is designed to use a high-energy chemical laser to 
rupture the enemy missile’s fuel or oxidizer tanks, causing the missile 
to lose thrust or flight control. As part of its development effort, 
the Missile Defense Agency (MDA) plans to demonstrate the feasibility 
of using the prototype ABL aircraft to shoot down a short-range 
ballistic missile. This event is referred to as the lethal 
demonstration. 

DOD’s planned investment in the ABL program from program inception in 
1996 through 2011 is about $7.3 billion. DOD expended $2.52 billion 
between fiscal years 1996 and 2004, Congress appropriated $458 million 
for fiscal year 2005, and MDA is budgeting about $4.32 billion between 
fiscal years 2006 and 2011 for ABL research and development.

Fiscal Year 2004 Progress Assessment: 

During fiscal year 2004, MDA restructured the ABL program to focus on 
near-term milestones and to improve confidence in longer-term schedule 
and cost projections. The restructuring placed the near-term focus on 
two events: (1) the combined operation of individual laser modules to 
generate a single laser beam, known as “First Light,” and (2) a flight 
test of the prototype aircraft with an installed laser beam control 
system, known as “First Flight.” In light of the program’s restructure, 
ABL completed most of its planned fiscal year 2004 activities on 
schedule. However, total contract costs through calendar year 2008 
increased by approximately $1.5 billion, and the program’s schedule was 
extended over 3 years.

Schedule: The program completed on schedule most of its fiscal year 
2004 activities associated with the preparation for “First Light” and 
“First Flight.” However, as a result of the recent program 
restructuring, the demonstration to shoot down a short-range ballistic 
missile—the focus of the program—was delayed from 2005 and is now 
scheduled to occur no earlier than 2008.

Testing: Both “First Light” and “First Flight” were achieved in early 
fiscal year 2005. Although the achievement of “First Light” is a key 
milestone for the program, it was not intended as an operational 
demonstration of a high-power laser, that is, at full power and for the 
length of time needed to shoot down a boosting missile. Rather, the 
laser’s operation for a fraction of a second demonstrates successful 
integration of subsystems. “First Flight” is also a key milestone for 
the program. It is the first of a series of flights to demonstrate the 
completion of design, safety, and verification activities that are 
necessary to assure flight worthiness of the aircraft with the laser 
beam control system installed.

Performance: At this stage of ABL development—before the laser has been 
operated at full power or critical technologies have been demonstrated 
in flight tests—any assessment of effectiveness is questionable. 
Nonetheless, the program office monitors performance indicators to 
assess the element’s readiness for successfully completing the 
lethality demonstration. One indicator in particular—atmospheric 
compensation, the process whereby a system of deformable mirrors and 
electronics is used to minimize the degradation of the laser beam as it 
travels through the atmosphere—is not meeting its performance 
objectives. Program officials told us that a recovery plan for this 
indicator is in place.

Cost: ABL program costs continue to grow. During the first half of 
fiscal year 2004, prior to the restructuring of the program, the ABL 
prime contractor incurred a negative cost variance of $114 million and 
could not complete $47 million of planned work. MDA’s restructuring of 
the ABL program increased program cost by about $1.5 billion—the prime 
contract is currently valued at approximately $3.6 billion, more than 
three times its original value of $1.02 billion—although overall 
program objectives did not change.

[End of section]

Appendix III: Airborne Laser:

Element Description:

The Airborne Laser (ABL) is a missile defense system designed to shoot 
down enemy missiles during the boost phase of flight, the period after 
launch during which the missile's rocket motors are thrusting. By 
engaging ballistic missiles during the boost phase, ABL destroys enemy 
missiles early in their trajectory before warheads and countermeasures 
can be released. ABL plans to use a high-energy chemical laser to 
defeat enemy missiles by rupturing a missile's fuel or oxidizer tanks, 
causing the missile to lose thrust or flight control. ABL's objective 
is to prevent the delivery of the missile's warhead to its intended 
target. 

ABL was initially conceived as a theater system to defeat short-and 
medium-range ballistic missiles. However, its role has been expanded to 
include the full range of ballistic missile threats, including 
intercontinental ballistic missiles (ICBM).[Footnote 41] In addition, 
ABL could be used as a forward-deployed Ballistic Missile Defense 
System (BMDS) sensor to provide launch point, impact point, and 
trajectory data of enemy missiles in support of engagements by other 
system elements. 

The ABL element consists of the following three major components 
integrated onboard a highly modified Boeing 747 aircraft. In addition, 
the element includes ground support infrastructure for storing, mixing, 
and handling the chemicals used in the laser. 

* High-energy chemical oxygen-iodine laser (COIL). The laser, which 
generates energy through chemical reactions, consists of six laser 
modules linked together to produce megawatt levels of power. Because 
the laser beam travels at the speed of light, ABL is expected to 
destroy missiles quickly, giving it a significant advantage over 
conventional boost-phase interceptors. 

* Beam control/fire control (BC/FC). The BC/FC component's primary 
mission is to maintain the beam's quality as it travels through the 
aircraft and atmosphere. Through tracking and stabilization, the BC/FC 
ensures that the laser's energy is focused on a targeted spot of the 
enemy missile. 

* Battle management/command and control (BMC2). The BMC2 component 
plans and executes the element's defensive engagements. It is being 
designed to work autonomously using its own sensors for launch 
detection, but it could also receive early warning data from other 
external sensors. 

History:

In 1996, the Air Force initiated the ABL program to develop a defensive 
system that could destroy enemy missiles from a distance of several 
hundred kilometers. Developmental testing of the first prototype 
aircraft was originally planned to conclude in 2002 with an attempt to 
shoot down a short-range ballistic missile target. 

In 2002, management authority and funding responsibility transferred 
from the Air Force to the Missile Defense Agency (MDA). In accordance 
with MDA planning, the ABL program restructured its acquisition 
strategy to conform to an evolutionary, capabilities-based approach. 

Developmental Phases:

The ABL program is focused on developing a prototype aircraft for use 
in a lethality demonstration--a flight test in which the ABL aircraft 
will attempt to shoot down a short-range ballistic missile. If this 
test is successful, MDA believes it will prove out the concept of using 
directed energy for missile defense. Although ABL's funding is broken 
out by block--2004, 2006, 2008, and 2010--the program is developing a 
single configuration of the element leading to the lethality 
demonstration, which will occur no earlier than 2008. A specific date 
for the demonstration has not been scheduled and depends on the success 
of ground testing. Furthermore, there is uncertainty as to when ABL 
will provide an initial operational capability. MDA plans to provide 
this capability through the development of a second aircraft, but the 
purchase of this aircraft is contingent upon the successful test of the 
prototype aircraft. 

In January 2004, MDA restructured the ABL program to focus on near-term 
milestones and to improve confidence in longer-term schedule and cost 
projections. The near-term focus of the program was shifted toward two 
events: (1) the achievement of a key laser demonstration known as 
"First Light"--the first demonstration of the integration of six 
individual laser modules to produce a single beam of laser energy--and 
(2) the initial flight test of the prototype aircraft with the BC/FC 
installed, which is referred to as "First Flight."[Footnote 42] Key 
provisions of the restructure call for the program office to complete 
the following activities during the next few years:

* Ground test and flight test the BC/FC segment independent of high-
energy laser testing activities. BC/FC testing would utilize a low-
power, substitute laser in place of the high-energy laser, as needed. 

* Ground test the high-energy laser independent of BC/FC testing 
activities. 

* Integrate and ground test the complete ABL weapon system (i.e., 
combined laser, BC/FC, and battle management segments). 

* Flight test the ABL weapon system, culminating in a lethality 
demonstration against a boosting missile. 

The lethal demonstration has been delayed by about 6 years. This event 
was originally scheduled to occur in 2002 and, as we reported last 
year,[Footnote 43] was later rescheduled to be conducted in early 2005. 
However, as a result of the January 2004 restructuring of the program, 
the event is now scheduled to occur no earlier than 2008. 

In its report accompanying the 2005 Defense Authorization Act, the 
House Armed Services Committee noted its approval of the restructured 
program. However, the Committee also recognized that the future of the 
ABL program depended upon successful completion of "First Light" and 
"First Flight." The Committee stated that these milestones must be 
completed in order for the Committee to further support the program 
after fiscal year 2005. 

Fiscal Year 2004 Planned Accomplishments:

The program planned to complete several activities during fiscal year 
2004 commensurate with the program's restructuring. As noted above, the 
program shifted its near-term focus toward key demonstrations within 
the BC/FC and laser segments. The following activities were identified 
as the key milestones for the fiscal year. 

* BC/FC Segment. Complete ground integration and testing of the BC/FC 
segment and begin integration of beam control segment into the ABL 
prototype aircraft in preparation for "First Flight."

* Laser Segment. Complete integration of the six laser modules in the 
System Integration Laboratory (SIL)--a ground-test facility located at 
Edwards Air Force Base, California--in preparation for "First Light."

Assessment of Scheduled Activities:

In fiscal year 2004, the program completed most of its planned 
activities on schedule. Tables 14 and 15 summarize the progress made 
toward completing BC/FC and laser activities in fiscal year 2004. 

Table 14: Status of ABL Fiscal Year 2004 Planned Accomplishments--BC/FC 
Segment:

Activity: Complete ground integration and testing of the BC/FC; 
Description/Progress assessment: In September 2004, the program 
completed this activity, which is comprised of a BC/FC ground test and 
a test of the aircraft's flight turret. These tests were conducted in 
an effort to demonstrate the functionality of the full-up BC/FC and 
turret segments with flight hardware. 

Activity: Begin integration of BC/FC segment into the ABL aircraft; 
Description/Progress assessment: In October 2004, the last major BC/FC 
component--the flight turret--was installed on the aircraft at Edwards 
Air Force Base in preparation for "First Flight."

Activity: Aircraft Readiness for Flight; 
Description/Progress assessment: In November 2004, the program verified 
the air-worthiness of the ABL with the BC/FC and BMC4I components 
installed. 

Activity: Conduct "First Flight"; 
Description/Progress assessment: "First Flight" was conducted in 
December 2004, the first of 22 planned flight tests with the BC/FC 
segment. The flight test was originally planned for 2-½ hours but was 
terminated early due to erroneous instrument readings. These readings 
were corrected and a full duration flight was achieved the following 
week. One of its objectives was to demonstrate that all necessary 
design, safety, and verification activities to assure flight worthiness 
had been completed. "First Flight" also began the process of expanding 
the aircraft flight envelope--types and combinations of flight 
conditions--in which the ABL can operate. Finally, "First Flight" was 
designed to measure the environment of the BC/FC system while the 
aircraft is in flight. 

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

[End of table]

Table 15: Status of ABL Fiscal Year 2004 Planned Accomplishments--Laser 
Segment:

Activity: Complete integration of the 6 laser modules in the SIL; 
Description/Progress assessment: The integration of individual modules 
in preparation for "First Light" was completed successfully. The 
completion of this activity enabled testing of the six integrated 
modules in the ground-test facility. 

Activity: Achieve "First Light" in the SIL; 
Description/Progress assessment: "First Light" was successfully 
conducted in fiscal year 2005 (November 2004); "First Light" refers to 
the ABL ground-test event during which individual laser modules are 
successfully integrated and operated to generate a single laser beam. 

Activity: Continue large optics fabrication and optical coating 
efforts; 
Description/Progress assessment: Efforts to complete studies of 
technologies are ongoing; Long-lead optics production is ongoing and 
improvements to the production process are being studied. 

Activity: Continue jitter reduction and illuminator improvement; 
Description/Progress assessment: Efforts to upgrade hardware to reduce 
jitter--vibrations onboard the ABL aircraft that degrades the focus of 
the high-energy laser beam--are still ongoing; Use of advanced cooling 
methods to improve the power, efficiency, beam quality, and start-up 
time of the illuminator laser are also still ongoing. 

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

[End of table]

Demonstration of "First Light"

The demonstration of "First Light"--to prove that individual laser 
modules can be successfully integrated and operated to generate a 
single laser beam--was achieved on November 10, 2004, at the SIL ground 
facility. In general, "First Light" is an important milestone for any 
laser system because it demonstrates the ability to get all major laser 
subsystems to work together. 

Although the achievement of "First Light" is a key milestone for the 
program, it was not intended as an operational demonstration of a high-
power laser, that is, at full power and for the length of time needed 
to shoot down a boosting missile. Rather, the laser's operation for a 
fraction of a second demonstrates successful integration of subsystems. 
"First Light" demonstrated that the six modules are aligned optically 
and the flow system is functioning, but program officials noted that 
the operation of the laser was too short to make meaningful predictions 
of power and beam quality.[Footnote 44] The program plans to conduct a 
series of tests that will gradually increase the length and power of 
the laser operation until full power lasing objectives are achieved. 

Demonstration of "First Flight"

The achievement of "First Flight"--the first of 22 planned tests--is 
also a key milestone for the program. This flight test was conducted on 
December 3, 2004, and served as the functional check of the aircraft 
with its newly installed laser beam control system. This event is 
critical because:

* It demonstrates that all necessary design, safety, and verification 
activities to assure flight worthiness have been completed. 

* It begins the process of expanding the aircraft flight envelope--
types and combinations of flight conditions--in which the ABL can 
operate. 

* It offers the program the opportunity to collect data on the effects 
of the environment on the BC/FC system while the aircraft is in flight. 
The data gathered during this test will be used to address jitter 
issues. 

Although "First Flight" was conducted, the program was unable to 
achieve all of its intended test objectives. The test was originally 
planned for 2-½ hours but was terminated early due to some erroneous 
instrumentation readings. Program officials made several attempts to 
resolve the readings in flight but were unsuccessful and the aircraft 
was landed early. However, the instrumentation anomalies were all fixed 
and the program conducted a second flight test on December 9, 2004, 
which lasted the intended duration of 2-½ hours. The primary objective 
of the second test was the same as that for "First Flight"--to perform 
all necessary in-flight functional checks to ensure flight worthiness 
of the aircraft. The flight test was completed and all remaining test 
points not completed during "First Flight" were completed successfully. 

Assessment of Element Performance:

The program office monitors performance indicators to determine the 
program's readiness for successfully completing the lethality 
demonstration in 2008. Based on its assessment, 11 of 15 of these 
indicators point to some risk in achieving this goal. For example, one 
indicator--atmospheric compensation[Footnote 45]--is not meeting its 
performance objectives. Program officials identified a shortfall in the 
bandwidth of the adaptive optics control system--the system of 
deformable mirrors and electronics that focus the laser beam on the 
target--as the primary cause of this deficiency. Program officials told 
us that a recovery plan for this indicator is already in place and that 
the contractor is in the process of fixing the shortfall. 

Another important indicator pertaining to the technology of controlling 
and stabilizing the high-energy laser beam so that vibration unique to 
the aircraft does not degrade aimpoint--a phenomenon referred to as 
"jitter"--was identified as a risk item by the program office early on 
and continues to be a program risk. Jitter control is crucial to the 
operation of the laser because the laser beam must be stable enough to 
impart sufficient energy on a fixed spot of the missile target to 
rupture its fuel or oxidizer tank. Because jitter is among the least 
mature of ABL's critical technologies, the program office is conducting 
ground tests and, in the future, flight tests to learn more about 
jitter control. 

Assessment of Element Cost:

DOD's planned investment in the ABL program from program inception in 
1996 through 2011 is approximately $7.3 billion. As broken out in table 
16, DOD expended $2.52 billion between fiscal years 1996 and 2004, 
Congress appropriated $458 million for fiscal year 2005, and MDA is 
budgeting about $4.32 billion between fiscal years 2006 and 2011 for 
ABL research and development. 

Table 16: ABL Cost:

Dollars in millions of then-year dollars. 

FY 1996[A] -FY 2003; 
Other: $$2,058; 
Block 2004: $$0; 
Block 2006: $$0; 
Block 2008: $$0; 
Block 2010: $$0; 
Total: $2,058. 

FY 2004 (Actuals); 
Other: $0; 
Block 2004: $459; 
Block 2006: $0; 
Block 2008: $0; 
Block 2010: $0; 
Total: $459. 

FY 2005 (Appropriated); 
Other: $0; 
Block 2004: $458; 
Block 2006: $0; 
Block 2008: $0; 
Block 2010: $0; 
Total: $458. 

FY 2006; 
Other: $0; 
Block 2004: $0; 
Block 2006: $465; 
Block 2008: $0; 
Block 2010: $0; 
Total: $465. 

FY 2007; 
Other: $0; 
Block 2004: $0; 
Block 2006: $630; 
Block 2008: $0; 
Block 2010: $0; 
Total: $630. 

FY 2008; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $601; 
Block 2010: $0; 
Total: $601. 

FY 2009; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $669; 
Block 2010: $0; 
Total: $669. 

FY 2010; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $0; 
Block 2010: $792; 
Total: $792. 

FY 2011; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $0; 
Block 2010: $1,163; 
Total: $1,163. 

FY 1996 -FY 2011; 
Other: $$2,058; 
Block 2004: $$917; 
Block 2006: $$1,095; 
Block 2008: $$1,270; 
Block 2010: $$1,955; 
Total: $7,295. 

Source: MDA. 

Note: ABL budget as of February 2005. 

[A] Program inception (FY 1996). 

[End of table]

ABL was funded as an Air Force program from 1996 through 2001 and 
during that time a little over $1 billion was spent. After the program 
was transferred to MDA in fiscal year 2002, MDA expended approximately 
$1 billion in fiscal years 2002 and 2003 on ABL development. 

Major Contracting Activity in Fiscal Year 2004:

The cost of the ABL program continues to grow. In May 2004, we reported 
that the prime contractor's costs for developing ABL had nearly doubled 
from the Air Force's original estimate.[Footnote 46] In addition, the 
program incurred cost overruns. In fiscal year 2003 alone, the 
contractor overran its budget by $242 million, which resulted primarily 
from integration and testing issues. 

The program office recognized that the contractor's unfavorable cost 
and schedule performance would eventually cause the contract to reach 
its ceiling price by May 2004. Consequently, MDA considered three 
alternatives to the contract: (1) continue to work toward the planned 
schedule, (2) develop a new schedule that scaled back planned 
activities, or (3) discontinue the contract. Agency officials decided 
to continue with the existing contract and refocus the program on near-
term technical progress. In an effort to continue with the current 
contract, program officials reevaluated the program schedule and 
extended the contract period of performance, established a new estimate 
to complete the contract, and increased the contract cost ceiling by 
about $1.5 billion. Prior to the recent program restructure, the Block 
2004 prime contract was valued at approximately $2.1 billion and was 
scheduled to end six months after the lethality demonstration in June 
2005. However, as a result of the recent program changes, the lethality 
demonstration is now expected to occur no earlier than 2008 and the 
contract's period of performance was extended through December 2008. 
The prime contract to conduct the lethality demonstration is currently 
valued at approximately $3.6 billion--more than three times its 
original value of $1.02 billion. Figure 4 summarizes the major activity 
for the program's prime contract since inception. 

Figure 4: ABL Block 2004 Prime Contract:

[See PDF for image]

[End of figure]

Prime Contractor Fiscal Year 2004 Cost and Schedule Performance:

The government routinely uses contractor Cost Performance Reports to 
independently evaluate prime contractor performance relative to cost 
and schedule. Generally, the reports detail deviations in cost and 
schedule relative to expectations established under the contract. 
Contractors refer to deviations as "variances." Positive variances are 
generally associated with the accomplishment of activities under cost 
or ahead of schedule, while negative variances are often associated 
with the accomplishment of activities over cost or behind schedule. 

Our analysis of prime contractor Cost Performance Reports indicates 
that ABL cost and schedule performance declined during the first half 
of fiscal year 2004 even though the program implemented a new 
performance measurement baseline[Footnote 47] at the beginning of the 
fiscal year. As illustrated in figure 5, the program incurred a 
negative cost variance of $114 million and a negative schedule variance 
of $47 million during the first 6 months of fiscal year 2004. Program 
officials indicated that delays in hardware delivery, design problems, 
and integration issues were the primary drivers of cost growth. 

Figure 5: ABL Fiscal Year 2004 Cost and Schedule Performance:

[See PDF for image]

Note: Insufficient data is available to perform earned value management 
analysis beyond March 2004. Contractor performance reporting was 
suspended from April 2004 through July 2004 because the program was re-
planning its efforts and implementing a new performance measurement 
baseline. 

[End of figure]

Between April and July 2004, while the contractor was re-planning its 
work effort, the program was unable to fully evaluate the contractor's 
progress against its cost and schedule objectives. During this time, 
program officials directed the contractor to suspend normal cost 
performance reporting and redirected resources to complete the re-
planning effort. Since the contractor was not required to provide 
program officials with full Cost Performance Reports, the program was 
unable to perform meaningful Earned Value Management (EVM) 
analysis.[Footnote 48] However, in the absence of these reports, 
program officials took steps to ensure that some insight into the 
contractor's progress was maintained throughout the re-planning effort. 
For example, the program measured schedule progress by comparing actual 
progress against the completion of detailed activities associated with 
"First Light" and "First Flight" and gauged the contractor's cost 
performance by comparing contractor forecasted expenditures to the 
actual costs of the work performed. 

The contractor resumed normal cost performance reporting in August 
2004. As of September 2004, the contractor was performing work under 
budget but slightly behind schedule--the program had a positive cost 
variance of $6.6 million and a negative schedule variance of $1.6 
million. According to Cost Performance Reports, the program experienced 
delays associated with the integration and checkout of the turret 
assembly--a subcomponent of the BC/FC system--which caused schedule 
slips through the end of the fiscal year. The late delivery of laser 
spare material and assembly parts caused additional schedule delays for 
the program. 

Award Fee Plan Unchanged:

Although the program was restructured in spring 2004 and the ABL prime 
contract modified to extend the contract period and increase its value, 
the associated award fee plan was not adjusted. Therefore, the 
contractor currently has no opportunity to earn any fee for successful 
demonstration, since the current award fee plan was tied to a 
successful completion of shoot down by December 2004. 

[End of section]

Appendix IV Summary:

Command, Control, Battle Management, and Communications: 

[See PDF for image]

Source: Missile Defense Agency. 

[End of figure]

Program Description: 

The Command, Control, Battle Management, and Communications (C2BMC) 
element is the integrating and controlling element of the Ballistic 
Missile Defense System (BMDS). It is designed to link all system 
elements, manage real-time battle information for the warfighter, and 
coordinate element operation to counter ballistic missile attacks in 
all phases of flight. 

The C2BMC element is being developed under MDA’s evolutionary 
acquisition approach, which delivers system capabilities in 2-year 
blocks beginning with Block 2004. Within each block, C2BMC software is 
developed incrementally through a series of software builds known as 
“spirals.” The principal function of the Block 2004 C2BMC element is to 
provide situational awareness, that is, to monitor the operational 
status of each BMDS component and to display threat information such as 
missile trajectories and impact points. It also performs deliberate 
planning activities for developing battle plans and other operational 
concepts.

DOD’s planned investment in the C2BMC program from program inception in 
2002 through 2011 is approximately $2.2 billion. DOD expended $344 
million between fiscal years 2002 and 2004, Congress appropriated $191 
million for fiscal year 2005, and MDA is budgeting about $1.65 billion 
for C2BMC development and operations between fiscal years 2006 and 2011.

Fiscal Year 2004 Progress Assessment: 

The C2BMC team executed the program within budget but slightly behind 
schedule in fiscal year 2004. Important activities—such as the 
completion of software development and testing, integration activities, 
and operator training continued in fiscal year 2004 to ready the 
element for Limited Defensive Operations (LDO)—were completed.

Schedule: By the end of September 2004, the C2BMC program office 
completed activities needed to ready the C2BMC element for LDO. The LDO 
software “build” (spiral 4.3) was delivered. The program office also 
carried out a number of activities enabling BMDS integration and 
communications. Finally, C2BMC suites at U.S. Strategic Command and 
U.S. Northern Command were activated, and “web browsers” providing 
summary screens of the unfolding battle (such as trajectories of 
attacking missiles and launched interceptors) were installed at U.S. 
Pacific Command and locations in the National Capital Region.

Testing: Testing to evaluate C2BMC functionality, interoperability, and 
system-level integration for LDO was completed. For example, Cycle-3 
testing—the third of four cycles of testing to verify that C2BMC 
interfaces with each BMDS element individually—was completed in August 
2004. Cycle-4 testing, which is ongoing, is the final cycle of testing 
to verify system-level integration. During these tests, the C2BMC 
element participates in flight tests planned and conducted by MDA.

Performance: During testing of its software, the C2BMC program 
uncovered a performance issue with its “track correlation and 
association” algorithm in scenarios involving multiple tracks. The 
program monitored this issue as a high-risk item because it had the 
potential to impact situational awareness. In particular, threat 
information could be displayed differently at C2BMC suites and GMD fire 
control nodes, possibly causing confusion within the command structure. 
The problem was resolved with software fixes and the issue retired in 
July 2004.

Cost: Our analysis of the prime contractor’s Cost Performance Reports 
shows that the contractor continued to carry a positive cost variance, 
that is, in total it completed work under budget. However, the 
contractor experienced a modest erosion in cost performance in fiscal 
year 2004. In particular, it completed fiscal year 2004 activities 
slightly over budget, incurring a negative cost variance of $3.6 
million. The prime contractor’s schedule performance was slightly, yet 
consistently, behind schedule for most of fiscal year 2004. In total, 
the contractor incurred a negative schedule variance of $5.7 million 
because of unanticipated technical issues.

[End of section]

Appendix IV: Command, Control, Battle Management, and Communications:

Element Description:

The Command, Control, Battle Management, and Communications (C2BMC) 
element is being developed as the integrating and controlling entity of 
the Ballistic Missile Defense System (BMDS). It is designed to provide 
connectivity between the various BMDS elements and to manage their 
operation as part of an integrated, layered missile defense system. 

C2BMC has neither a sensor nor weapon. As a software system housed in 
command centers known as suites,[Footnote 49] C2BMC provides network-
centric warfare capabilities that provide the warfighter with the 
capability to plan and monitor the missile defense mission. The C2BMC 
element will track ballistic missile threats--utilizing all available 
sensors from the various elements--and direct weapons systems to engage 
the threat. 

As the name indicates, the C2BMC is comprised of three major components:

* Command and control. The command and control component enables the 
warfighter to monitor the operational status of each BMDS component, 
display threat information, such as missile trajectory and impact 
point, and control defensive actions. In other words, it provides the 
situational awareness and planning tools to assist the command 
structure in formulating and implementing defensive actions. 

* Battle management. The battle management component formulates the 
detailed instructions (task plans) for executing various missile 
defense functions, such as tracking enemy missiles, discriminating the 
warhead from decoys and associated objects, and directing the launch of 
interceptors. Once implemented, the battle manager will direct the 
operation of system elements and components, especially under evolving 
battle conditions. 

* Communications. Leveraging existing infrastructure, the 
communications component manages the exchange and dissemination of 
information necessary for carrying out the battle management and 
command and control objectives. 

History:

The Missile Defense Agency (MDA) initiated the C2BMC program in 2002 as 
a new element of the BMDS. Program officials noted that initial 
versions of C2BMC software are based on existing Air Force and GMD-
developed fire control (battle management) software. 

Developmental Phases:

The C2BMC element is being developed under MDA's evolutionary 
acquisition approach, which delivers system capabilities in 2-year 
blocks, beginning with Block 2004. Within each block, C2BMC software is 
developed incrementally through a series of software builds known as 
"spirals." Over time, the C2BMC element will be enhanced to provide 
overarching control and execution of missile defense engagements with 
the aim of implementing layered defense through the collective use of 
individual BMDS elements. 

The principal function of the Block 2004 C2BMC element is to provide 
situational awareness, that is, to monitor the operational status of 
each BMDS component and to display threat information such as missile 
trajectories and impact points. The program expects to develop this 
capability incrementally through spirals 4.1 -4.5. The interim 
delivery, spiral 4.3, is available for Limited Defensive Operations 
(LDO) and is on the path to full Block 2004 functionality. 

The incorporation of battle management capabilities in the C2BMC 
element begins with Block 2006. In the 2006-2007 time frame, the 
element is expected to track that ballistic missile threat throughout 
its entire trajectory and select the appropriate elements to engage the 
threat. For example, the Block 2006 C2BMC configuration would be able 
to generate a single, more precise track from multiple radars and to 
transmit it to the other elements. Together, this functionality enables 
each element to "see farther" than it could using its own radar system. 
This allows elements to launch interceptors earlier, which provides 
more opportunity to engage incoming ballistic missiles. 

Block 2006 is also expected to make a significant improvement over 
Block 2004 with respect to BMDS communications. During this time, the 
C2BMC program office will work to establish communications to all 
elements of the BMDS, overcome limitations of legacy satellite 
communications protocols, and establish redundant communications links 
to enhance robustness. Such upgrades serve to improve operational 
availability and situational awareness. 

Planned Accomplishments for Fiscal Year 2004:

Planned accomplishments for the C2BMC program in fiscal year 2004 
centered on completing activities to ready the element for LDO by the 
end of September 2004. To achieve this goal, the C2BMC element planned 
to complete the following specific activities:

* Software development. Complete the design, development, and testing 
of LDO C2BMC software spirals 4.1 -4.3. 

* BMDS integration and communications. Integrate the C2BMC element into 
the BMDS; install and activate global communications capabilities. 

* Make BMDS operational. Complete and activate C2BMC suites; train 
operators. 

Assessment of Scheduled Activities:

By the end of September 2004, the C2BMC program office completed 
activities needed to ready the C2BMC element for LDO. The LDO "build" 
of C2BMC (spiral 4.3) was delivered and installed at the various 
suites. The program office also carried out a number of activities 
enabling BMDS integration and communications. Finally, C2BMC suites at 
U.S. Strategic Command (USSTRATCOM) and U.S. Northern Command 
(USNORTHCOM) were activated, and "web browsers" providing summary 
screens of the unfolding battle (such as trajectories of attacking 
missiles and launched interceptors) were installed at U.S. Pacific 
Command (USPACOM) and locations in the National Capital Region (such as 
the White House). 

Status of C2BMC Software Development:

Table 17 summarizes the principal development and testing activities 
for the first three spirals of Block 2004 C2BMC element software. Most 
notably, development of the LDO build, spiral 4.3, was completed in May 
2004. Testing to evaluate C2BMC functionality, interoperability, and 
system-level integration was also completed. For example, Cycle-3 
testing--the third of four cycles of testing to verify that C2BMC 
interfaces with each BMDS element individually--was completed in August 
2004. Cycle-4 testing, the final cycle of testing to verify system-
level integration, is ongoing. During these tests, the C2BMC element 
participates in flight tests planned and conducted by MDA. 

Table 17: C2BMC Fiscal Year 2004 Accomplishments--Software Development 
and Testing:

Software build: Spiral 4.1; 
Activity: Development; 
Completion date: Mar. 2003; 
Comments: All functional and performance testing was completed 
successfully. 

Software build: Spiral 4.1; 
Activity: Testing; 
Completion date: Oct. 2003. 

Software build: Spiral 4.2; 
Activity: Development; 
Completion date: Sept. 2003; 
Comments: Spiral 4.2 was tested in a number of venues, including 
Missile Defense Integration Exercise 04a (Mar. 2004), Integrated 
Missile Defense War Game 03.2 (Nov. 2003), and Pacific Explorer II 
(Mar. 2004).[A,B,C]. 

Software build: Spiral 4.2; 
Activity: Testing; 
Completion date: Cycle-3: Feb. 2004. 

Software build: Spiral 4.3; 
Activity: Development; 
Completion date: May 2004; 
Comments: Spiral 4.3 is the LDO build. It was tested in Pacific 
Explorer III (Jul. 2004), Glory Trip 185 (June 2004), Integrated 
Missile Defense War Games 04.2 -04.4 (June -Sept 2004), System 
Integration and Checkout 6A (Sept. 2004), and other tests.[B,C,D]. 

Software build: Spiral 4.3; 
Activity: Testing; 
Completion date: Cycle-3: Aug. 2004; Cycle-4: Ongoing. 

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

[A] Missile Defense Integration Exercises are hardware-in-the-loop 
ground tests conducted to characterize the degree of integration and 
interoperability between BMDS elements. 

[B] Integrated Missile Defense War Games are ground tests that enable 
the warfighter to exercise the C2BMC in a simulated operational 
environment. In general, the warfighter community uses them to gain 
insight in, and provide feedback on, C2BMC capabilities. 

[C] Pacific Explorers are field exercises to demonstrate BMDS 
connectivity. An Aegis destroyer participates by tracking an actual 
missile (or a simulated target) and passes track data to the C2BMC. 

[D] Glory Trips are live flight tests during which a Minuteman III 
missile is launched from Vandenberg Air Force Base as part of Follow-on 
Test and Evaluation. C2BMC objectives are geared to evaluating the 
element's interfacing with, and processing of track data from, forward-
deployed radars. 

[End of table]

The program office plans to complete, by the end of calendar year 2005, 
key activities pertaining to the development and testing of spirals 4.4 
and 4.5--the final two builds of Block 2004 C2BMC element software. For 
example, development of spiral 4.4 was completed in November 2004 and 
Cycle-3 testing is expected to be completed in April 2005. In addition, 
the program office expects to complete development of spiral 4.5 in 
March 2005 and begin Cycle-3 testing in June 2005. Cycle-4 testing of 
spiral 4.5 is scheduled to begin during the first quarter of fiscal 
year 2006 with completion coinciding with the completion of Block 2004. 

Status of BMDS Integration and Communications:

The C2BMC program office carried out a number of activities in fiscal 
year 2004 related to C2BMC's role in BMDS integration and 
communications. For example, interface specifications between C2BMC and 
other elements were completed. In addition, communications software and 
hardware were installed at the various C2BMC sites, including 
USSTRATCOM, USNORTHCOM, and USPACOM. Finally, the C2BMC element 
participated in a number of MDA test events to verify system 
integration. 

Status of Steps Taken to Make BMDS Operational:

The C2BMC program completed a variety of activities in fiscal year 2004 
to make the BMDS operational. These activities included activation of 
C2BMC suites at the various command sites and the training of military 
operators for conducting ballistic missile defense missions. Table 18 
summarizes the program's efforts in making the system available for 
LDO. 

Table 18: C2BMC Fiscal Year 2004 Planned Accomplishments--Making System 
Operational:

Activity: Site Activation; 
Description/Progress assessment: C2BMC suites at USSTRATCOM and 
USNORTHCOM were fully activated to support defensive operations. 
Furthermore, so-called "web browsers" that provide situational 
awareness are ready to support LDO at USPACOM and three National 
Capital Region sites. At all sites, hardware installation, software 
installation, testing, and a readiness review were completed by Sept. 
30, 2004. 

Activity: Training; 
Description/Progress assessment: C2BMC operator training was completed 
at USNORTHCOM, USSTRATCOM, USPACOM, and three National Capital Region 
sites by Sept. 30, 2004, to support LDO. The warfighter completed a 
number of training courses--Joint Defense Planner Class, Situational 
Awareness Class, and Flag Officer Class--at all locations and 
participated in training events. Operator training continued through 
the beginning of fiscal year 2005 as part of the "shakedown" process. 

Source: MDA. 

[End of table]

Assessment of Element Performance:

During testing of C2BMC software, the C2BMC program uncovered a 
performance issue with its "track correlation and association" 
algorithm in scenarios involving multiple tracks. During a portion of 
fiscal year 2004, the program monitored this issue as a high-risk item 
because it had the potential to impact situational awareness. In 
particular, threat information could be displayed differently at C2BMC 
suites and GMD fire control nodes, possibly causing confusion within 
the command structure.[Footnote 50] The program implemented a 
mitigation plan to resolve this issue, including the formation of a 
"Blue Ribbon Panel" in June 2004 to analyze the problem. The problem 
was resolved with software fixes and the issue retired in July 2004. 

Assessment of Element Cost:

DOD's planned investment in the C2BMC program from program inception in 
2002 through 2011 is approximately $2.2 billion. As broken out in table 
19, DOD expended $343 million between fiscal years 2002 and 2004, 
Congress appropriated $191 million for fiscal year 2005, and MDA is 
budgeting $1.65 billion for C2BMC development and operations between 
fiscal years 2006 and 2011. 

Table 19: C2BMC Cost:

Dollars in millions of then-year dollars. 

FY 2002[A] -FY 2003; 
Other: $$179.4; 
Block 2004: $$0; 
Block 2006: $$0; 
Block 2008: $$0; 
Block 2010: $$0; 
Core[B]: $0; 
Total: $179.4. 

FY 2004 (Actuals); 
Other: $0; 
Block 2004: $92.4; 
Block 2006: $52.5; 
Block 2008: $0.7; 
Block 2010: $0; 
Core[B]: $18.3; 
Total: $163.9. 

FY 2005 (Appropriated); 
Other: $0; 
Block 2004: $154.0; 
Block 2006: $24.0; 
Block 2008: $10.8; 
Block 2010: $0; 
Core[B]: $1.7; 
Total: $190.5. 

FY 2006; 
Other: $0; 
Block 2004: $22.5; 
Block 2006: $142.2; 
Block 2008: $75.9; 
Block 2010: $0; 
Core[B]: $0; 
Total: $240.6. 

FY 2007; 
Other: $0; 
Block 2004: $16.2; 
Block 2006: $153.0; 
Block 2008: $100.0; 
Block 2010: $11.5; 
Core[B]: $0; 
Total: $280.7. 

FY 2008; 
Other: $0; 
Block 2004: $0; 
Block 2006: $23.8; 
Block 2008: $197.0; 
Block 2010: $60.6; 
Core[B]: $0; 
Total: $281.4. 

FY 2009; 
Other: $0; 
Block 2004: $0; 
Block 2006: $16.7; 
Block 2008: $166.0; 
Block 2010: $104.6; 
Core[B]: $0; 
Total: $287.3. 

FY 2010; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $65.7; 
Block 2010: $217.8; 
Core[B]: $0; 
Total: $283.5. 

FY 2011; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $56.0; 
Block 2010: $223.7; 
Core[B]: $0; 
Total: $279.7. 

FY 2002 -FY 2011; 
Other: $$179.4; 
Block 2004: $$285.1; 
Block 2006: $$412.2; 
Block 2008: $$672.1; 
Block 2010: $$618.2; 
Core[B]: $$20.0; 
Total: $$2,187.0. 

Source: MDA. 

Note: C2BMC budget as of February 2005. 

[A] Program inception (FY 2002). 

[B] Core funding is part of Program Element 0603890C, "BMD Project." 
Core activities involve the hiring of skilled individuals to aid in the 
development of the C2BMC element. 

[End of table]

Prime Contractor Cost and Schedule Performance:

C2BMC development is being carried out through a contractual vehicle 
known as an Other Transaction Agreement (OTA),[Footnote 51] which 
functions much like a prime contract. MDA believes that an OTA allows 
the C2BMC element to take advantage of more collaborative relationships 
between industry, the government, Federally Funded Research and 
Development Centers, and University Affiliated Research Centers. OTAs 
generally are not subject to federal procurement laws and regulations. 
The OTA did implement the earned value management system used to assess 
the cost and schedule performance of contractors developing large 
weapon systems. The C2BMC Missile Defense National Team, for which 
Lockheed Martin Integrated System and Solutions serves as the industry 
lead, is developing and fielding the C2BMC element of the BMDS. 

The government routinely uses contractor Cost Performance Reports to 
independently evaluate a prime contractor's cost and schedule 
performance. Generally, these reports detail deviations in cost and 
schedule relative to expectations established under the contract. 
Contractors refer to deviations as "variances." Positive variances are 
usually associated with the accomplishment of activities under cost or 
ahead of schedule, while negative variances are often associated with 
the accomplishment of activities over cost or behind schedule. 

During fiscal year 2004, C2BMC development was performed under two 
parts of the existing OTA--Part 2, for which work was completed in 
March 2004, and Part 3, for which work began in March 2004. As 
illustrated in figure 6, Cost Performance Reports show that Lockheed 
Martin, the industry lead for the OTA, continued to carry a positive 
cost variance, that is, in total it completed work under budget. 
However, Lockheed experienced a modest erosion in cost performance in 
fiscal year 2004. In particular, it completed fiscal year 2004 
activities slightly over budget, incurring a negative cost variance of 
$3.6 million on combined Part 2 and Part 3 work efforts. 

Figure 6: C2BMC Fiscal Year 2004 Cost and Schedule Performance:

[See PDF for image]

[End of figure]

The prime contractor's schedule performance was slightly, yet 
consistently, behind schedule for most of fiscal year 2004. However, 
beginning in May 2004, schedule performance sharply declined. In total, 
Lockheed incurred a negative schedule variance of $5.7 million for 
combined Part 2 and Part 3 work performed in fiscal year 2004. 

The C2BMC program office reported the following two drivers as 
contributing to fiscal year 2004 cost and schedule variances. 

* Track association algorithm. As noted in the performance section, the 
C2BMC program uncovered a performance issue with its "track correlation 
and association" algorithm during spiral testing. Resources allocated 
to spiral 4.4 development were used to address this problem, including 
the convening of a Blue Ribbon panel to analyze it. In the course of 
analyzing and correcting this issue, more time and money were needed 
for additional testing of spiral 4.3 and associated risk reduction 
efforts on developing an alternative algorithm. 

* Site activation. C2BMC suites are being integrated with existing 
systems at USSTRATCOM, USNORTHCOM, and USPACOM. The integration 
efforts, particularly those aspects pertaining to information 
assurance, were considerably more difficult that anticipated. The 
result was the need for more travel by the engineering team to field, 
install, and troubleshoot problems at the three activation sites. 

[End of section]

Appendix V Summary:

Ground-Based Midcourse Defense: 

[See PDF for image]

Source: Missile Defense Agency. 

[End of figure]

Program Description: 

The Ground-based Midcourse Defense (GMD) element is a missile defense 
system being developed to protect the United States against limited 
long-range ballistic missile attacks launched from Northeast Asia and 
the Middle East. The first increment of this capability, Block 2004, is 
being developed and fielded during the 2004-2005 time frame. 

By the end of September 2004, the GMD program put in place the 
components of a limited capability, which is known as Limited Defensive 
Operations (LDO). MDA plans to augment this capability with additional 
interceptors and radars by the end of calendar year 2005 to complete 
the full Block 2004 increment.

DOD’s planned investment in the GMD program from program inception in 
1996 through 2011 is approximately $31.6 billion. DOD expended $15.3 
billion between fiscal years 1996 and 2004, Congress appropriated $3.3 
billion for fiscal year 2005, and MDA is budgeting about $13.0 billion 
between fiscal years 2006 and 2011 for GMD development, procurement, 
and operations.

Fiscal Year 2004 Progress Assessment: 

By the end of fiscal year 2004, GMD carried out planned activities 
needed to field an initial missile defense capability, including, as 
summarized below, the emplacement of interceptors at Fort Greely, 
Alaska. However, delays of flight tests prevented MDA from 
demonstrating the operation of the integrated system in a realistic 
environment before placing interceptors in silos for defensive 
operations. The program also showed unfavorable trends in contractor 
cost and schedule performance in fiscal year 2004.

Schedule: The GMD program completed construction of missile silos and 
facilities at Fort Greely, Alaska, and Vandenberg Air Force Base, 
California; emplaced five GMD interceptors in their silos at Fort 
Greely by the end of September 2004; and completed the upgrade of the 
Cobra Dane radar. MDA is on track to add additional interceptors and 
radar capabilities throughout Block 2004, although there is some risk 
that the sea-based X-band radar will not be completed by the first 
quarter of fiscal year 2006, as planned.

Test: The GMD program office conducted two flight tests (non-intercept 
booster tests) in fiscal year 2004 out of six events that were 
planned—no intercept attempts were conducted. Accordingly, GMD 
interceptors were fielded before flight testing was performed to verify 
that LDO hardware and software could function in an operational 
environment. In preparation for defensive operations, the GMD program 
also completed a series of System Integration and Checkouts that 
demonstrated connectivity, functionality, and integration of its 
fielded components.

Performance: While ground and flight tests have demonstrated each step 
of the missile defense engagement sequence—detect, track, 
launch/engage, and intercept—collectively, these accomplishments do not 
verify integrated operation of the GMD capability. For example, BMDS 
and GMD radars have not performed their primary function as a fire 
control radar in a flight test event.

Cost: Our analysis of the prime contractor’s Cost Performance Reports 
shows that the contractor overran its budgeted costs in fiscal year 
2004 by $219.6 million and was unable to complete $59.9 million worth 
of scheduled work. Developmental issues with the interceptor’s booster 
and kill vehicle remain the leading causes of cost overruns and 
schedule slips. For example, interceptor development cost $204 million 
more in fiscal year 2004 than the contractor budgeted. Flight test 
delays also contributed to unfavorable cost and schedule performance.

[End of section]

Appendix V: Ground-Based Midcourse Defense:

Element Description:

The Ground-based Midcourse Defense (GMD) element is a missile defense 
system designed to protect the U.S. homeland against intercontinental 
ballistic missile (ICBM)[Footnote 52] attacks. As an integral part of 
the Ballistic Missile Defense System (BMDS), GMD functions to destroy 
long-range ballistic missiles during the midcourse phase of flight, the 
period after booster burnout when the warhead travels through space on 
a predictable path. 

The GMD element relies on a broad array of components, including (1) 
space-and ground-based sensors to provide early warning and tracking of 
missile launches; (2) ground-and sea-based radars to identify and 
refine the tracks of threatening objects; (3) ground-based interceptors 
to destroy enemy missiles through "hit-to-kill" impacts outside the 
atmosphere; and (4) fire control and communications nodes for battle 
management and execution of the GMD mission. Figure 7 illustrates GMD 
components, current and planned, which are situated at several 
locations within and outside of the United States. 

The program office produced, emplaced, and upgraded all GMD components 
needed for an initial capability by the end of September 2004 and is 
working to augment this initial capability with additional interceptors 
and radars by the end of calendar year 2005. This first block of 
capability--Block 2004--is estimated to provide the U.S. with 
protection against ICBMs launched from Northeast Asia and the Middle 
East. 

Figure 7: Components of the GMD Element:

[See PDF for image]

[End of figure]

History:

The Department of Defense (DOD) established the National Missile 
Defense program in 1996 to develop a missile defense system capable of 
protecting the United States from ICBM attacks. The program was to be 
in a position to deploy the system by 2005, if the threat warranted. 
Many of the components used in the current GMD program are based 
directly on the research and development conducted by the National 
Missile Defense program. 

In response to the President's December 2002 directive to field a 
missile defense system, the Missile Defense Agency (MDA) accelerated 
its developmental activities to make the GMD element operational--that 
is, to field a working system operated by trained warfighters. GMD 
remains a capabilities-based research and development program with 
enhanced capabilities delivered periodically in block upgrades. 

Developmental Phases:

GMD's development and fielding are proceeding in a series of planned 2-
year blocks, which incrementally increase the element's capability by 
maturing the design of element components and upgrading software. Block 
2004, the first increment, is being rolled out in two major phases:

* Limited Defensive Operations (LDO). The GMD program completed an 
initial capability in September 2004, which is available for limited 
defensive operations. The principal components include five 
interceptors at Fort Greely, Alaska; GMD fire control and 
communications nodes for battle management and execution at Fort Greely 
and Schriever Air Force Base, Colorado; an upgraded Cobra Dane radar at 
Eareckson Air Station, Alaska; and connectivity to Aegis BMD for 
additional radar tracking. DOD will use this initial capability to 
provide the United States with protection against a limited ballistic 
missile attack launched from Northeast Asia. This capability was 
expanded by the end of calendar year 2004 with the addition of three 
interceptors--one at Fort Greely and two at Vandenberg Air Force Base 
(VAFB), California--and an upgraded early warning radar (UEWR) at Beale 
Air Force Base, California. 

* Block 2004 Defensive Capability. By the end of calendar year 2005, 
MDA plans to augment the LDO capability by installing 10 additional 
interceptors at Fort Greely (for a total of 18 interceptors at Fort 
Greely and VAFB); deploying a sea-based X-band radar; and upgrading the 
early warning radar at Fylingdales, England. These enhancements are 
expected to provide additional protection against ICBMs launched from 
the Middle East. 

Future block configurations of the GMD element build upon the Block 
2004 capability. As part of its Block 2006 program, MDA expects to 
field 10 additional interceptors at Fort Greely and upgrade the early 
warning radar located at Thule Airbase, Greenland. MDA also plans to 
conduct more realistic flight tests to demonstrate performance against 
more complex missile threats and environments. 

Planned Accomplishments for Fiscal Year 2004:

The GMD element plays a central role in the Block 2004 BMDS. In 
general, planned accomplishments for GMD in fiscal year 2004 centered 
on continuing development of element components, conducting ground and 
flight testing, and fielding components for LDO. Specific planned 
accomplishments include:

* Component Development. The program office planned to continue 
development of all element components for LDO, Block 2004, and the 
incremental improvement of block capability. 

* Testing. The program planned to conduct six flight tests (three 
booster tests, one "fly-by" test, and two intercept attempts), two 
integrated ground tests, and System Integration and Checkouts in 
preparation for LDO. 

* Fielding Initial Capability. The program planned to complete 
construction of facilities and the installation of five ground-based 
interceptors at Fort Greely, complete upgrades of the Cobra Dane radar, 
and activate its fire control and communications component. 

Assessment of Scheduled Activities:

MDA met its fielding goals for LDO and is on track, with some schedule 
risk, to add additional interceptors and radar capabilities throughout 
Block 2004. Ground tests were conducted to ensure interoperability of 
element components and to verify operation and performance of component 
software. However, several key flight tests needed to verify the 
effectiveness of LDO hardware and software, originally scheduled for 
fiscal year 2004, were delayed into fiscal year 2005. 

GMD Component Development:

In fiscal year 2004, a large portion of the GMD program focused on the 
development of its Block 2004 components, some of which will be fielded 
as part of LDO. Summaries of progress made by the GMD program office 
during fiscal year 2004 in developing its components are given in table 
20. 

Table 20: Status of GMD Fiscal Year 2004 Component Development:

Component: GMD Fire Control and Communications Component; 
Description: The fire control component integrates and controls the 
other components of the GMD element. With input from operators, the 
fire control software plans engagements and directs GMD components, 
such as its radars and interceptors, to carry out a mission to destroy 
enemy ballistic missiles. The in-flight interceptor communications 
system (IFICS), which is part of the fire control component, enables 
the fire control component to communicate with the kill vehicle while 
it is en route to engage a threat; 
Fiscal Year 2004 progress: In fiscal year 2004, the GMD program 
completed software development and testing of the LDO build. MDA also 
completed construction of IFICS Data Terminals at Shemya and Fort 
Greely and activated the CONUS[A] fiber optic ring, which connects all 
the command, control, and communications networks of the GMD element. 
Additionally, connectivity to Aegis BMD and the C2BMC were completed. 

Component: Upgraded Early Warning Radars; (Beale and Fylingdales); 
Description: The early warning radar is an upgraded version of existing 
Ultra High Frequency surveillance radars used by the Air Force for 
strategic warning and attack assessment. For Block 2004, the GMD 
program is upgrading two early warning radars--one at Beale AFB and 
another at Fylingdales Airbase--to enable the radars to more accurately 
track enemy missiles. The upgrades include improvements to both the 
hardware and software; 
Fiscal Year 2004 progress: In fiscal year 2004, Beale UEWR ground 
support facilities and radar hardware installation were completed. 
Although radar hardware installation is complete, final software 
installation and testing are ongoing with completion expected in the 
middle of fiscal year 2005; MDA also began facility construction and 
upgrades to the early warning radar at Fylingdales, which is on track 
to be completed by the first quarter of fiscal year 2006. 

Component: Upgraded Cobra Dane Radar; 
Description: The Cobra Dane radar, located at Eareckson Air Station on 
Shemya Island, Alaska, was primarily being used to collect data on ICBM 
test launches out of Russia. Cobra Dane's surveillance mission did not 
require real-time communications and data-processing capabilities; 
therefore, it was upgraded to be capable of performing the missile 
defense mission as part of the Block 2004 architecture. As an upgraded 
radar, Cobra Dane is expected to operate much like the upgraded early 
warning radar at Beale AFB. Although its hardware required minor 
modifications, Cobra Dane's mission software is being revised for its 
new application. The program plans to use existing software and develop 
new software to integrate Cobra Dane into the GMD architecture. It is 
also modifying the Cobra Dane facility to accommodate enhanced 
communications functions; 
Fiscal Year 2004 progress: In fiscal year 2004, the GMD program 
completed hardware installation and software upgrades to the Cobra Dane 
radar. The radar also tracked a foreign missile launch and participated 
in an integrated ground test. While Cobra Dane met most of the data 
collection objectives in these tests, the upgraded Cobra Dane radar has 
not participated in a flight test event as the primary fire control 
radar--a role it would need to fill in the event of a real threat. MDA 
may perform a radar certification flight test using a long-range air-
launched target during the third quarter of 2005. The primary objective 
of this test is to demonstrate the upgraded Cobra Dane in a more 
operationally realistic environment. 

Component: Sea-Based X-Band Radar; 
Description: The GMD program office is managing the development of a 
sea-based X-band radar (SBX) to be delivered and integrated into the 
BMDS by the end of Block 2004. SBX will consist of an X-band radar--
based on the technologies of the X-band radar prototype located at 
Reagan Test Site--positioned on a sea-based platform, similar to those 
used for offshore oil drilling. The radar is designed to track and 
discriminate enemy missiles with high accuracy and assess whether an 
intercept was successful; 
Fiscal Year 2004 progress: During fiscal year 2004, MDA completed most 
platform modifications and assembly of the radar structure. Key 
electronic components have been completed, and all software design 
reviews conducted; The program office assesses the delivery of SBX by 
the first quarter of fiscal year 2006 as the program's only significant 
risk item. If complications occur in final integration, checkout, or 
verification, delivery could be delayed; MDA plans to exercise the SBX 
in flight tests beginning in fiscal year 2006. 

Component: Ground-Based Interceptor; 
Description: The ground-based interceptor--the weapon component of the 
GMD element--consists of a kill vehicle mounted atop a three-stage 
booster. The booster, which is essentially an ICBM-class missile, 
delivers and deploys the kill vehicle into a trajectory to engage the 
threat. Once deployed, the kill vehicle uses its onboard guidance, 
navigation, and control subsystem (along with target updates from the 
fire control node component) to detect, track, and steer itself into 
the enemy warhead, destroying it above the atmosphere through a hit-to-
kill collision; 
Fiscal Year 2004 progress: In fiscal year 2004, MDA placed the first 
five interceptors into silos at Fort Greely; a sixth interceptor was 
delivered in October 2004; MDA continued to work toward building and 
integrating pieces of additional missiles that will be delivered 
throughout 2005. For example, interceptors #7 and #8 were placed into 
VAFB silos during December 2004, as scheduled. 

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

[A] CONUS refers to the Continental United States, i.e., the lower 48 
states. 

[End of table]

In our April 2004 report on missile defense,[Footnote 53] we noted that 
MDA is pursuing the development of two types of boosters for the GMD 
interceptor, one referred to as the Lockheed BV+ booster and the other 
known as the Orbital Sciences Corporation (OSC) booster. We also 
described how problems with the development and delivery of Lockheed's 
BV+ booster contributed to cost growth and schedule slips for the 
program. For example, BV+ production was temporarily suspended because 
of two separate explosions at a subcontractor's propellant-mixing 
facility. 

Despite these problems, MDA is dedicated to pursuing a dual-booster 
strategy. However, the problems with Lockheed's booster in fiscal year 
2003 had ramifications for the program's fiscal year 2004 activities. 
For example, MDA planned to use BV+ boosters in alternating Block 2004 
flight tests and in about half of the interceptors fielded. However, 
because of BV+ development and production problems, MDA deferred BV+ 
participation in integrated flight tests into Block 2006, and the Block 
2004 inventory of GMD interceptors will consist entirely of those 
utilizing OSC boosters. MDA plans to restart the manufacturing of BV+ 
boosters in fiscal year 2005 and to field the first BV+ booster in 
2007. 

GMD Testing:

The GMD program conducts a variety of tests, the most visible being 
flight test events. For example, the program conducted booster 
validation (BV) flight tests to assess the operation of GMD's two 
booster designs. In addition, the program conducts integrated flight 
tests (IFT) to more realistically demonstrate the GMD element using 
actual hardware and software. IFTs are reflective of the environment in 
which the GMD element would operate for a given threat trajectory and 
given set of conditions. 

Although MDA hoped to gain knowledge about the element's effectiveness 
by conducting several integrated flight tests throughout fiscal year 
2004, only two of six scheduled tests--non-intercept tests of the 
Lockheed BV+ booster and the OSC booster--were executed. Table 21 
summarizes the major GMD flight tests that MDA planned to conduct in 
fiscal year 2004. 

Table 21: Status of Major GMD Flight Tests (Fiscal Year 2004):

Test event: BV-5[A]; 
Date: Original date: Feb. 20, 2003. 
Actual date: Jan. 9, 2004; 
Description: BV+ Booster Test. 
Objectives: 
* Characterize Lockheed's BV+ booster performance; 
Outcome: All booster objectives were achieved. However, the mock kill 
vehicle failed to deploy. 

Test event: IFT-13A; 
Date: Original date: May 2003. 
Planned date: Deferred indefinitely; 
Description: BV+ Booster Test. 
Objectives: 
* Characterize booster and kill vehicle environments; 
* Engage simulated target as part of an integrated system; 
Outcome: The program deferred this test until BV+ production resumes. 

Test event: IFT-13B; 
Date: Original date: July 2003. 
Actual date: Jan. 26, 2004; 
Description: OSC Booster Test[B]. 
Objectives: 
* Characterize booster and kill vehicle environments; 
* Engage simulated target as part of an integrated system; 
Outcome: The test was a successful demonstration of the OSC booster--
all test objectives were achieved. 

Test event: IFT-13C; 
Date: Original date: Mar. 2004. 
Actual date: Dec. 14, 2004; 
Description: Non-intercept attempt (zero-offset flyby)[C] with the OSC 
booster. 
Configuration: 
* Target launch from Kodiak; 
* Interceptor launch from Reagan Test Site; 
* Interceptor: LDO configuration; 
Outcome: Because the interceptor failed to launch from its silo, test 
objectives associated with booster and kill vehicle functioning could 
not be assessed. The root cause of the test failure was attributed to a 
timing problem with the interceptor's flight computer, which caused the 
interceptor to abort its launch. 

Test event: IFT-14; 
Date: Original date: Oct. 2003. 
Actual date: Feb. 14, 2005; 
Description: System test (intercept attempt) with OSC booster. 
Configuration: 
* Target launch from Kodiak; 
* Interceptor launch from Reagan Test Site; 
* Interceptor: LDO configuration; 
Outcome: Because the interceptor failed to launch from its silo, test 
objectives associated with booster and kill vehicle functioning could 
not be assessed. The reason for the launch failure is under 
investigation. 

Test event: FTG-04-1; 
Date: Planned date: 4Q FY2005[D]; 
Description: System test (intercept attempt) with OSC booster. 
Configuration: 
* Target launch from Kodiak; 
* Interceptor launch from VAFB; 
* Interceptor: LDO configuration; 
Outcome: TBD. 

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

Note: Test schedule as of October 2004. 

[A] BV-5 was the last flight test to use Lockheed's BV+ booster. 

[B] Orbital Sciences Corporation builds the OSC boost vehicle. MDA 
accelerated the production of OSC boosters to compensate for the 
undelivered BV+ boosters. All of the Block 2004 interceptors use OSC 
boosters. 

[C] A "zero-offset flyby" means that intercepting the target is not a 
test objective. However, no action is taken to prevent an intercept. 

[D] We use the notation "4Q FY2005" to mean the fourth quarter of 
fiscal year 2005 and an identical format for other time periods. 

[End of table]

IFT-13C, which was the first flight test in 2 years with the potential 
for an intercept,[Footnote 54] was delayed several times during fiscal 
year 2004. Part of the delay was attributed to technical problems with 
the interceptor. In addition, MDA upgraded the test interceptor to a 
configuration that more closely matches the ones deployed. The test was 
conducted in December 2004, but failed to execute fully because the 
interceptor did not launch from its silo. IFT-13C was of particular 
significance, because it was to have demonstrated operational aspects 
of the LDO capability for the first time in a flight test environment. 
For example, it was to have demonstrated: (1) the operation of LDO 
hardware and software; (2) the operation of the kill vehicle mated with 
an OSC booster; and (3) "real-time" connectivity between Aegis 
destroyers and the C2BMC. IFT-14 was conducted in February 2005 as a 
repeat of IFT-13C but with the added objective to achieve an intercept. 
However, as in IFT-13C, it failed to execute fully because the 
interceptor did not launch from its silo. 

MDA relies heavily on its ground test program to characterize element 
and system performance (especially under a broad set of conditions not 
testable in flight), to demonstrate interoperability, and to develop 
operational doctrine. MDA conducted two integrated ground tests (IGT) 
in fiscal year 2004, IGT-2 and IGT-4a. These tests employed actual GMD-
component processors integrated together in a hardware-in-the-loop 
facility that emulated GMD operation in a simulated environment. They 
also included warfighter participation to aid in the development of 
operational concepts. Although the tests demonstrated that GMD 
components could work together, its utility in assessing element 
performance was limited. Officials in the office of DOT&E told us that 
such assessments should be anchored by flight test data so that models 
and simulations accurately characterize the system. Delays in the GMD 
flight test program precluded these tests from being adequately 
anchored and, therefore, limited its usefulness in assessing element 
performance. 

The GMD program also participated in a series of System Integration and 
Checkouts (SICO) of its fielded components. While these checkouts do 
not assess element performance, they do demonstrate connectivity, 
functionality, integration, and configuration in preparation for 
defensive operations. During fiscal year 2004, MDA successfully 
conducted SICOs 1, 3, 5, and 6A. SICO 3 demonstrated the integration of 
non-LDO interceptor equipment at Fort Greely into the overall BMDS; 
SICO 5 confirmed that the upgraded Cobra Dane radar was properly 
connected to the Communications Network; and SICO 6A confirmed 
integration of LDO interceptor equipment at Fort Greely into the BMDS. 
Finally, SICO 6B was successfully conducted in the beginning of fiscal 
year 2005 (December 2004). It demonstrated the integration of 
interceptor equipment at Vandenberg into the BMDS. 

Fielding Initial Capability:

The GMD program completed the development, emplacement, and/or upgrade 
of element components planned for LDO, including ground-based 
interceptors, the Cobra Dane radar, the Beale UEWR (in fiscal year 
2005), and the GMD fire control and communications. Most notably, five 
interceptors were placed in silos at Fort Greely and are available for 
defensive operations. GMD also completed hardware and software upgrades 
to the Cobra Dane and Beale radars, both of which met objectives in 
ground tests and tracked targets of opportunity. Fire control and 
communications nodes have been activated and linked to all GMD 
locations. Finally, facility construction at Fort Greely and other GMD 
sites was completed. Table 22 summarizes main accomplishments made in 
fiscal year 2004 for each activity. 

Table 22: Status of GMD Fiscal Year 2004 Planned Accomplishments--
Fielding Initial Capability:

Activity: Ground Based Interceptor: Deliver and install 5 interceptors 
at Fort Greely; 
Description/Progress assessment: Five interceptors were delivered and 
installed at Fort Greely by September 30, 2004. Three additional 
interceptors were delivered (1 to Fort Greely; 2 to VAFB) by December 
2004; MDA plans to have 18 interceptors available for defensive 
operations by the end of the first quarter of fiscal year 2006, two 
less than the agency's Block 2004 fielding goal. Of the 20 interceptors 
originally planned, two were designated as test assets. 

Activity: Cobra Dane Radar: Complete upgrades, checkout, and 
activation; 
Description/Progress assessment: Installation and checkout of Cobra 
Dane's mission equipment was completed ahead of schedule. Cobra Dane 
software development was also completed. The radar successfully tracked 
a foreign missile launch but has not participated in any BMDS flight 
tests that demonstrate real-time tracking and communications as part of 
an integrated system. 

Activity: Beale UEWR: Complete upgrades, checkout, and activation; 
Description/Progress assessment: All planned hardware upgrades and GMD 
software for LDO were completed. The Beale UEWR is now integrated with 
the BMDS. Although radar hardware installation is complete, final 
software installation and testing are ongoing with completion expected 
in the middle of fiscal year 2005; The upgraded radar successfully 
tracked a Titan missile launched out of VAFB and several satellites but 
has not participated in any MDA-dedicated tests like radar 
certification flights or integrated flight tests in its upgraded 
configuration. The full checkout of the upgraded software will not be 
verified in a flight test until fiscal year 2005. 

Activity: GMD fire control and communications: Complete installation, 
checkout, and activation; 
Description/Progress assessment: GMD fire control and communications 
were completed on schedule to support fielding of the GMD element. The 
CONUS fiber optic ring and spurs to all GMD locations were activated. 
Satellite communication links were established and all IFICS Data 
Terminals were completed. 

Activity: Construction: Complete construction and installation at Fort 
Greely and Shemya; 
Description/Progress assessment: All facilities required for alert at 
Fort Greely were completed, including the first missile field, 
Readiness and Control Building, Mechanical Electrical Building, and the 
on-site IFICS Data Terminals. The Missile Assembly Building and the 
interim power plant, although not required for LDO, were also 
completed. 

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

[End of table]

Assessment of Element Performance:

GMD, the centerpiece of the BMDS Block 2004 defensive capability, has 
demonstrated its ability to intercept target warheads in several flight 
tests since 1999. Indeed, the program has achieved five successful 
intercepts out of eight attempts.[Footnote 55] In addition, according 
to MDA officials, ground and flight tests have demonstrated each step 
of the engagement sequence--detect, track, launch/engage, and 
intercept--collectively, although these accomplishments do not verify 
integrated operation of the GMD capability. 

Although GMD flight tests have demonstrated basic functionality of a 
representative missile defense system using surrogate and prototype 
components, the tests were developmental in nature and relied on 
artificialities to overcome test-range limitations. For example, flight 
tests required the placement of a C-band transponder and Global 
Positioning System instrumentation on the target reentry vehicle. In 
addition, engagement conditions were limited to low closing velocities 
and short interceptor fly-out ranges. Finally, the tests were scripted 
and did not use production-representative hardware and software. 

In its push to field the first eight GMD interceptors by the end of 
December 2004, MDA is assuming both performance and cost risk. As noted 
above, the GMD program emplaced interceptors in silos before 
successfully conducting a flight test utilizing components with the LDO 
configuration. For example, the program did not demonstrate that the 
kill vehicle could operate with the OSC booster prior to placing it in 
the silo for future operational use (even though this booster puts more 
stress on the kill vehicle). If future flight testing identifies 
problems with fielded interceptors, the need for corrective actions 
could be costly, but confidence would increase as corrections are made 
and capability is understood. 

Assessment of Element Cost:

DOD's planned investment in the GMD program from program inception in 
1996 through 2011 is approximately $31.6 billion. As broken out in 
table 23, DOD expended $15.3 billion between fiscal years 1996 and 
2004,[Footnote 56] Congress appropriated $3.3 billion for fiscal year 
2005, and MDA is budgeting about $13.0 billion between fiscal years 
2006 and 2011 for GMD development, procurement, and operations. 

Table 23: GMD Cost:

Dollars in millions of then-year dollars. 

FY 1996[A] -FY 2003; 
Other: $$12,370; 
Block 2004: $$0; 
Block 2006: $$0; 
Block 2008: $$0; 
Block 2010: $$0; 
Total: $$12,370. 

FY 2004 (Actuals); 
Other: $0; 
Block 2004: $1,357; 
Block 2006: $1,587; 
Block 2008: $0; 
Block 2010: $0; 
Total: $2,944. 

FY 2005 (Appropriated); 
Other: $0; 
Block 2004: $2,756; 
Block 2006: $563; 
Block 2008: $0; 
Block 2010: $0; 
Total: $3,319. 

FY 2006; 
Other: $0; 
Block 2004: $0; 
Block 2006: $2,224; 
Block 2008: $74; 
Block 2010: $0; 
Total: $2,298. 

FY 2007; 
Other: $0; 
Block 2004: $0; 
Block 2006: $2,232; 
Block 2008: $281; 
Block 2010: $189; 
Total: $2,702. 

FY 2008; 
Other: $0; 
Block 2004: $0; 
Block 2006: $331; 
Block 2008: $1,425; 
Block 2010: $717; 
Total: $2,473. 

FY 2009; 
Other: $0; 
Block 2004: $0; 
Block 2006: $234; 
Block 2008: $1,176; 
Block 2010: $655; 
Total: $2,065. 

FY 2010; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $338; 
Block 2010: $1,557; 
Total: $1,895. 

FY 2011; 
Other: $0; 
Block 2004: $0; 
Block 2006: $0; 
Block 2008: $213; 
Block 2010: $1,350; 
Total: $1,563. 

FY 1996 -FY 2011; 
Other: $$12,370; 
Block 2004: $$4,113; 
Block 2006: $$7,171; 
Block 2008: $$3,507; 
Block 2010: $$4,468; 
Total: $$31,629. 

Source: MDA. 

Note: GMD budget as of February 2005. 

[A] Program inception (FY 1996). 

[End of table]

Prime Contractor Fiscal Year 2004 Cost and Schedule Performance:

GMD's prime contract consumes the bulk of the program's budget. The 
contract originally covered Block 2004 and Block 2006 developmental 
activities, not the procurement and fielding of interceptors for the 
initial defensive capability. Therefore, the program significantly 
modified the contract in October 2003. The $823 million modification 
directed the delivery of Block 2004 interceptors 6-20. The program is 
expected to modify the contract again to procure additional 
interceptors. The added cost of these interceptors is already reflected 
in the planned GMD budget and MDA cost goals. 

The government routinely uses contractor Cost Performance Reports to 
independently evaluate prime contractor performance relative to cost 
and schedule. Generally, the reports detail deviations in cost and 
schedule relative to expectations established under the contract. 
Contractors refer to deviations as "variances." Positive variances are 
usually associated with the accomplishment of activities under cost or 
ahead of schedule, while negative variances are often associated with 
the accomplishment of activities over cost or behind schedule. 

The GMD program showed an unfavorable trend in contractor performance 
in fiscal year 2004. According to our analysis, the contractor exceeded 
its budgeted costs during fiscal year 2004 by $219.6 million, which 
equates to 11.6 percent of the contract value over the fiscal year. In 
addition, the contractor fell behind schedule in its work plan. In 
fiscal year 2004, the contractor was unable to complete $59.9 million 
of planned work. Figure 8 shows how the contractor's cumulative cost 
and schedule performance declined during fiscal year 2004. 

Figure 8: GMD Fiscal Year 2004 Cost and Schedule Performance:

[See PDF for image]

[End of figure]

Our analysis shows that developmental issues with the interceptor 
continue to be the leading contributor to cost overruns and schedule 
slips. Interceptor-related work cost $204 million more than budgeted in 
fiscal year 2004, with the kill vehicle accounting for approximately 40 
percent of this overrun. Delays in flight tests IFT-13C and IFT-14 also 
caused unfavorable cost and schedule variances. 

Based on the contractor's cost and schedule performance in fiscal year 
2004, we estimate that the current GMD contract--which ends in 
September 2007--will overrun its budget by between $593 million and 
$950 million. The contractor, in contrast, estimates a $200 million 
overrun at contract completion. However, as of the end of fiscal year 
2004, the contractor had already incurred a negative cumulative cost 
variance of approximately $348 million. In order for the prime 
contractor to complete the contract within the established budget, the 
contractor must not incur any additional cost overruns through contract 
completion and recoup at least $148 million. The Defense Contract 
Management Agency believes that the prime contractor is optimistic in 
projecting that it can limit further cost growth and schedule slips. 
Indeed, the Defense Contract Management Agency predicts that the 
contractor will continue to fall behind and be unable to recover from 
past cost growth and schedule slips. 

[End of section]

Appendix VI Summary:

Kinetic Energy Interceptors: 

[See PDF for image]

Source: Missile Defense Agency. 

[End of figure]

Program Description: 

The Kinetic Energy Interceptors (KEI) element is a new Missile Defense 
Agency (MDA) program in its early stage of development. The program is 
building on existing missile defense technology to develop an 
interceptor capable of destroying long-range ballistic missiles during 
the boost phase of flight—the period after launch when rocket motors 
are thrusting. KEI also provides the opportunity to engage an enemy 
missile in the early-ascent phase, the period after booster burnout 
before warheads are released. MDA expects to have available a land-
based capability in the 2012-2013 time frame.

DOD’s planned investment in the KEI program from program inception in 
2003 through 2011 is approximately $6.0 billion. DOD expended $192 
million between fiscal years 2003 and 2004, Congress appropriated $267 
million for fiscal year 2005, and MDA is budgeting about $5.5 billion 
for KEI research and development between fiscal years 2006 and 2011.

Fiscal Year 2004 Progress Assessment: 

KEI program activities completed in fiscal year 2004 include the 
selection of Northrop Grumman as prime contractor for KEI development, 
associated planning activities, and experimental work geared toward 
collecting data of boosting missiles. Of significance, the amount 
appropriated by Congress for missile defense in fiscal years 2004 and 
2005 did not include the amount of funding for KEI that was requested 
in the President’s Budget. As a result, the program delayed its land-
based capability from the originally planned Block 2008 time frame to 
Block 2012.

Schedule: In December 2003, MDA awarded Northrop Grumman a $4.6 billion 
prime contract to develop and test the KEI element over the next 8 
years. The award follows an 8-month concept design effort between 
competing contractor teams, each of which was awarded $10 million 
contracts to design concepts for KEI. 

Testing: In fiscal year 2004, the KEI program office continued with 
activities designed to reduce technical risks in developing the KEI 
interceptor. In particular, the program office is working on an 
experiment to collect data on boosting missiles, known as the Near 
Field Infrared Experiment. At this early stage of development, however, 
no significant testing of the land-based capability has been conducted 
by the program office.

Performance: Because this element is still in its infancy, data are not 
yet available to make a performance assessment. However, the program 
office identified areas of high risk that could have an impact on the 
element’s future performance. All risks are associated with interceptor 
development—including motor development and plume-to-hardbody 
handover—stemming from the demands required of the boost phase 
intercept mission.

Cost: Our analysis of the prime contractor’s cost performance report 
shows that the contractor completed planned work under budget but was 
slightly behind schedule in performing planned activities. 
Specifically, during fiscal year 2004, the contractor could not 
complete about $1.6 million worth of work. The program was unexpectedly 
tasked to complete trade studies of how to incorporate new requirements 
being imposed by MDA. Due to plans to restructure the KEI program, the 
prime contract’s long-term baseline is no longer relevant; a reliable 
baseline will not be available until 2005. 

[End of section]

Appendix VI: Kinetic Energy Interceptors:

Element Description:

The Kinetic Energy Interceptors (KEI) element is a missile defense 
system designed to destroy ballistic missiles during the boost phase of 
flight, the period after launch during which the missile's rocket 
motors are thrusting. KEI is also planned to engage enemy missiles in 
the early ascent-phase, the period after booster burnout before the 
missile releases warheads and countermeasures. Unlike the Airborne 
Laser element, which utilizes directed energy to disable boosting 
missiles, the KEI element launches interceptors to engage and destroy 
these threats through hit-to-kill collisions. 

The KEI program is currently focused on developing a mobile, land-based 
system--to be fully demonstrated by the Block 2012 time frame--to 
protect the United States against long-range ballistic missile 
attacks.[Footnote 57] The land-based system will be a deployable unit 
consisting of a command and control/battle management unit, mobile 
launchers, and interceptors. The KEI element has no sensor component, 
such as radars, for detecting and tracking boosting missiles. Instead, 
it will rely on Ballistic Missile Defense System (BMDS) sensors, such 
as space-based infrared sensors and forward-deployed radars, for such 
functions. 

Concurrent with KEI development, the program is proceeding with its 
Near Field Infrared Experiment (NFIRE). The experiment consists of 
launching an experimental satellite in fiscal year 2006 to collect 
infrared imagery of boosting intercontinental ballistic missiles 
(ICBM). The data it collects will support the program's efforts in 
developing the software that operates the interceptor's kill vehicle, 
in addition to enhancing plume[Footnote 58] models and boost-phase 
simulations. 

History:

In fiscal year 2003, MDA initiated the KEI program as part of its Boost 
Defense Segment. To select a contractor and a concept for the element, 
the KEI program office awarded competitive contracts to teams headed by 
Northrop Grumman and Lockheed Martin. Each contractor was given the 
flexibility to design a system that met only one broad requirement--
that the KEI element be capable of reliably intercepting missiles in 
their boost/ascent phases. MDA did not set cost or schedule 
requirements or specify how the contractors should design the system. 

MDA initially requested funds for the KEI element along with other 
boost-phase defense elements, such as the Airborne Laser, in its Boost 
Defense Segment. However, in fiscal year 2004, MDA budgeted the KEI 
program under a new area known as BMDS Interceptors. 

Developmental Phases:

The KEI element is being developed under MDA's acquisition approach, 
which delivers system capabilities in 2-year block increments. When the 
KEI concept was first being pursued in fiscal year 2003--during which 
Northrop Grumman and Lockheed Martin were competing for the prime 
contract--the program planned on developing a mobile, land-based system 
to be available in the Block 2008 time frame and expanding it to sea-
based platforms in Block 2010. However, the amount appropriated by 
Congress for missile defense in fiscal year 2004 did not include the 
amount of funding for KEI that was requested in the President's Budget. 
As a result, the program delayed completion of its land-based 
capability into Block 2010 and delayed the expansion of the sea-based 
capability into Block 2012. 

In fiscal year 2004, the KEI program underwent a second re-plan to 
compensate for anticipated fiscal year 2005 funding cuts and the 
addition of new requirements (such as nuclear hardening) imposed by 
MDA. In the re-plan, the land-based capability was combined with the 
sea-based capability of Block 2012, both of which utilize the same 
interceptor. 

The KEI program has undergone further restructuring, as reflected in 
the fiscal year 2006 President's Budget submitted in February 2005. 
Based on revised funding levels beyond fiscal year 2005, the program 
deferred the sea-based capability into Block 2014 (2014-2015 time 
frame), removed the international program, and initiated plans for a 
Space Test Bed. 

The program now expects to develop KEI capabilities as follows:

* Block 2012--land. MDA envisions that the first-generation land based 
interceptors would be launched from trucks that can be driven up close 
to the border of the threatening nation. An initial land-based 
capability will be declared after the final flight test, Integrated 
Test 5 (IT-5), is conducted by the end of 2013. 

* Block 2014--sea. This block increment expands KEI's land-based 
capabilities to include the capability to launch KEI interceptors from 
sea-based platforms, such as Aegis cruisers. The sea-based capability 
will use the same interceptor as the land-based capability. 

* Blocks 2012/2014--space test bed. Development of the space test bed 
is planned to be carried out concurrently with the development of KEI's 
terrestrial (land and sea) capabilities. Consisting of a limited 
constellation of space-based interceptors, the test bed is envisioned 
to provide an additional layer of defense against ICBMs. MDA plans to 
initiate a concept design phase in fiscal year 2008 and conduct space-
based intercept tests in the Block 2012/2014 time frame. 

Planned Accomplishments for Fiscal Year 2004:

The KEI program planned to accomplish several activities during fiscal 
year 2004 associated with the land-based capability, with its primary 
focus being the selection of a prime contractor for KEI's developmental 
phase. In the first quarter of fiscal year 2004, the program selected 
Northrop Grumman as its prime contractor and awarded the company a 
contract valued at $4.6 billion that covers a 98-month performance 
period. 

The program office also planned to complete design, test, and risk 
reduction efforts in fiscal year 2004. However, budget reductions 
forced Northrop Grumman to delay several of these planned activities 
until fiscal year 2005. The program office originally told the 
contractor to plan for a $90 million budget during fiscal year 2004, 
but only $47 million was available. Because program funding in fiscal 
year 2004 was much less than requested, several design and test 
activities were postponed into fiscal year 2005. For example, the 
program's System Requirements Review (SRR)--a review during which 
mission objectives are documented, critical components are identified, 
and program planning is established--was postponed into fiscal year 
2005. 

Assessment of Scheduled Activities:

While the program completed a number of its planned activities, 
overall, the KEI program progressed much more slowly than anticipated. 
As noted above, Northrop Grumman was forced to re-plan several 
scheduled activities because of reduced funding for the KEI program in 
fiscal years 2004 and 2005. Progress made toward achieving scheduled 
activities is summarized in tables 24 through 27. 

A key program accomplishment in fiscal year 2004 was the selection of 
Northrop Grumman as the KEI prime contractor. The KEI program office 
employed a unique acquisition strategy in the award of the contract by 
making mission assurance--the successful operation of the element to 
perform its mission--the basis for the amount of the contractor's 
profit from the performance of the contract. MDA built incentives into 
the contract that require the prime contractor to assure mission 
assurance through a disciplined execution of quality processes. For 
example, the contractor earns an award fee only if flight tests are 
successful, and the percentage of the award fee earned is determined by 
whether the tests are conducted on schedule. The program's intention is 
to maximize the contractor's incentives to develop a quality product on 
schedule and at the originally proposed price. 

Table 24: Status of KEI Fiscal Year 2004 Planned Accomplishments--
Contract Award and Planning:

Activity: Award KEI Block 2010 Development and Test Contract; 
Description/Progress assessment: In December 2003, Northrop Grumman was 
awarded the prime contract for KEI development. The cost-plus-award-fee 
contract is valued at $4.6 billion and covers a 98-month performance 
period (Dec. 2003 to Jan. 2012). 

Activity: Conduct Integrated Baseline Review (IBR)[A]; 
Description/Progress assessment: The IBR for the Development and Test 
Contract was completed in March 2004. The review concluded with a 
decision to re-plan work given the funding constraints and to have the 
contractor address the cost of adding additional MDA-imposed 
requirements, such as anti-tampering, nuclear hardening, and 
insensitive munitions.[B]. 

Activity: Conduct Block 2010 System Requirements Review (SRR); 
Description/Progress assessment: The SRR is being deferred until April 
2005. At that time, program officials will set specific requirements 
for the KEI element based on detailed design trades, risk reduction 
tests, and performance assessments at both the element and component 
level. 

Activity: Conduct "Continuation Review"; 
Description/Progress assessment: The fiscal year 2004 Continuation 
Review--a review to assess whether the program should continue--was 
deferred until the 4th quarter of fiscal year 2005. The program office 
reasoned that the value offered by such a review would be limited with 
only eight months of performance toward a 98-month contract. 

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

[A] An integrated baseline review is the program manager's review of a 
contractor's performance measurement baseline. The review is conducted 
by the program manager and the manager's technical staff. It verifies 
the technical content of the baseline and ensures that contractor 
personnel understand and have been adequately trained to collect earned 
value management data. The review also verifies the accuracy of the 
related budget and schedules, ensures that risks have been properly 
identified, assesses the contractor's ability to implement earned value 
management properly, and determines if the work identified by the 
contractor meets the program's objectives. 

[B] An insensitive munition is one that will not detonate under any 
condition other than its intended mission to destroy a target. 

[End of table]

Table 25: Status of KEI Fiscal Year 2004 Planned Accomplishments--
Design Activities:

Activity: Develop element simulations and models; 
Description/Progress assessment: The Kinetic Energy Interceptors 
Simulation was delivered by Northrop Grumman to MDA in July 2004. The 
simulation will be used to evaluate the end-to-end performance of the 
KEI element. 

Activity: Develop interface requirements between KEI and C2BMC; 
Description/Progress assessment: The KEI program completed an initial 
draft of the KEI-to-C2BMC Interface Control Document in June 2004. 

Activity: Finalize acquisition plans for sea-based test bed platform; 
Description/Progress assessment: The KEI program is investigating the 
use of a CG-47 class vessel to be used as a test asset so that a better 
understanding of the effects of the sea environment on KEI operation is 
gained. A survey is underway to determine the condition of the vessel 
and whether the vessel could accommodate a launcher. 

Activity: Initiate Concept of Operations (CONOPS) development with the 
warfighter; 
Description/Progress assessment: The KEI program provided a draft 
CONOPS to the Army community for review in May 2004. Additionally, the 
program office commissioned the Navy to conduct a CONOPS study to 
determine the feasibility of integrating and operating KEI from 
cruisers, destroyers, and/or submarines. The Navy completed this study 
in August 2004. 

Activity: Initiate launcher control electronic assembly development; 
Description/Progress assessment: As a result of program re-planning, 
this activity was deferred into fiscal year 2005. 

Activity: Design and fabricate Special Test Equipment for interceptor 
design verification testing; 
Description/Progress assessment: As a result of program re-planning, 
this activity was deferred into fiscal year 2005. 

Activity: Establish interceptor manufacturing process laboratory; 
Description/Progress assessment: As a result of program re-planning, 
this activity was deferred into fiscal year 2005. 

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

[End of table]

Table 26: Status of KEI Fiscal Year 2004 Planned Accomplishments--Key 
Test Activities:

Activity: Initiate range planning; 
Description/Progress assessment: Northrop Grumman continues to work on 
facilities as well as environmental and commercial support agreements 
with the ranges. 

Activity: Establish target requirements; 
Description/Progress assessment: The KEI program office initiated a 
draft Target System Requirements Document in January 2004. Working with 
Northrop Grumman, KEI will deliver the final version to the MDA 
Configuration Control Board following the SRR in April 2005. 

Activity: Establish Developmental Master Test Plan; 
Description/Progress assessment: The delay in the SRR resulted in a 
delay in Developmental Master Test Plan delivery. Based on the current 
schedule, the program expects to deliver the test plan in July 2005, 90 
days after the SRR. 

Activity: Static booster motor firing; 
Description/Progress assessment: This activity, which would have been 
the first firing of booster motors for the interceptor, was deferred 
into fiscal year 2005. 

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

[End of table]

Table 27: Status of KEI Fiscal Year 2004 Planned Accomplishments--Risk 
Reduction Activities:

Activity: Continue collection of boost/ascent phenomenology data; 
Description/Progress assessment: The KEI program received high-
resolution data sets from several Target of Opportunity data 
collections during fiscal year 2004. These series of data collections 
provide realistic, high-resolution data sets of plumes for a variety of 
missile launches. 

Activity: NFIRE activities; 
Description/Progress assessment: MDA directed the program to proceed 
with the experiment but remove the kill vehicle payload from the 
experiment's satellite, thereby reducing funding needs for fiscal year 
2005. 

Activity: Liquid Divert and Attitude Control System demonstration 
activities; 
Description/Progress assessment: As a result of program re-planning, 
this activity was deferred into fiscal year 2005. 

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

[End of table]

Assessment of Element Performance:

At this early stage of element development, data are not available to 
evaluate element performance through the use of technical indicators. 
However, the program office identified areas of high risk[Footnote 59] 
that may have an impact on the element's future performance. Table 28 
summarizes these risks. All risks are associated with interceptor 
operation for the boost-phase intercept mission. 

Table 28: KEI High-Risk Areas:

Technology: Motor Development; 
Risk/Area of concern: According to program officials, there is 
significant risk in achieving the required booster thrust and burn time 
performance to meet element requirements. 

Technology: Plume-to-hardbody handover[A]; 
Risk/Area of concern: The risk pertaining to plume-to-hardbody handover 
arises from a lack of phenomenology data. The program initially planned 
to utilize a 1-color infrared seeker for the kill vehicle, a plan 
driven by schedule constraints. However, because of program changes 
resulting in more time for element development, the program is 
proceeding with a 2-color seeker that enables the kill vehicle to 
better differentiate between the plume and hardbody. 

Technology: Thrust Vector Control; 
Risk/Area of concern: The thrust vector control component of the 
booster is used to steer the interceptor during its boost phase. 
Program officials rated its development as a high-risk item. The risk 
stems from the need for highly capable steering of the boosting 
interceptor under stressing scenarios. 

Technology: Predicted Impact Point/Divert Trades; 
Risk/Area of concern: This risk pertains to maintaining a balanced 
design trade to enable the kill vehicle to intercept the missile given 
targeting uncertainty. The design trade is between (1) predicted impact 
point accuracy (achieved by the KEI battle manager component) and (2) 
kill-vehicle divert requirements to compensate for targeting errors. 

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

[A] Plume-to-hardbody handover refers to the identification of the 
actual missile from among the plume of hot exhaust gas that obscures 
the body of the boosting missile. 

[End of table]

In its July 2003 report on the boost-phase intercept mission,[Footnote 
60] the American Physical Society indicated that "time line" is a major 
challenge for boost phase defense systems. In particular, boost phase 
defense against ICBMs hinges (in large part) on the length of time an 
attacking missile is in boost phase and on the speed of the defending 
interceptor. Accordingly, KEI program officials recognize the time 
constraints of the boost phase intercept mission and the challenge in 
developing quicker interceptors--as is evident by the first high-risk 
item of table 28. 

This same report also questions the feasibility of a land-based boost-
phase intercept concept, especially against large nations. For example, 
the report states that a boost-phase intercept system employing 
terrestrial-based interceptors would generally be ineffective against 
ICBMs launched from the interiors of large countries--those having 
dimensions greater than 1,000 kilometers. Nonetheless, the program 
office contends sufficient coverage is possible given adequate numbers 
and stationing of KEI units. Furthermore, sea basing, which offers more 
options for boost phase defense, builds directly upon the investments 
being made in the land-based capability. 

Finally, a scientific study on boost phase defense commissioned by 
MDA[Footnote 61] focused on selected issues of high risk. Plume-to-
hardbody handover was identified as high risk because of a lack of 
plume phenomenology data available for determining the appropriate 
sensor combination for the interceptor. The program office recognizes 
this challenge, as noted in table 28. As a result, the KEI program is 
proceeding with a 2-color seeker, better enabling the kill vehicle to 
differentiate between the plume and hardbody of a missile. In addition, 
the program is sponsoring NFIRE and participating in targets of 
opportunity to collect data of boosting missiles. 

Assessment of Element Cost:

DOD's planned investment in the KEI program from program inception in 
2003 through 2011 is approximately $6.0 billion. As broken out in table 
29, DOD expended $192 million between fiscal years 2003 and 2004, 
Congress appropriated $267 million for fiscal year 2005, and MDA is 
budgeting about $5.5 billion for KEI research and development between 
fiscal years 2006 and 2011. 

Table 29: KEI Cost:

Dollars in millions of then-year dollars. 

FY 2003[A]; 
Other: $$91.5; 
Block 2010: $$0; 
Block 2012: $$0; 
Space Test Bed: $0; 
Total: $$91.5. 

FY 2004 (Actuals); 
Other: $0; 
Block 2010: $100.6; 
Block 2012: $0; 
Space Test Bed: $0; 
Total: $100.6. 

FY 2005 (Appropriated); 
Other: $0; 
Block 2010: $0; 
Block 2012: $267.4; 
Space Test Bed: $0; 
Total: $267.4. 

FY 2006; 
Other: $0; 
Block 2010: $0; 
Block 2012: $218.7; 
Space Test Bed: $0; 
Total: $218.7. 

FY 2007; 
Other: $0; 
Block 2010: $0; 
Block 2012: $420.2; 
Space Test Bed: $0; 
Total: $420.2. 

FY 2008; 
Other: $0; 
Block 2010: $0; 
Block 2012: $604.6; 
Space Test Bed: $45.0; 
Total: $649.6. 

FY 2009; 
Other: $0; 
Block 2010: $0; 
Block 2012: $961.1; 
Space Test Bed: $150.0; 
Total: $1,111.1. 

FY 2010; 
Other: $0; 
Block 2010: $0; 
Block 2012: $1,189.3; 
Space Test Bed: $248.0; 
Total: $1,437.3. 

FY 2011; 
Other: $0; 
Block 2010: $0; 
Block 2012: $1,453.5; 
Space Test Bed: $230.0; 
Total: $1,683.5. 

FY 2003-FY 2011; 
Other: $$91.5; 
Block 2010: $$100.6; 
Block 2012: $$5,114.8; 
Space Test Bed: $$673.0; 
Total: $$5,978.9. 

Source: MDA. 

Note: KEI budget as of February 2005. 

[A] Program inception (FY 2003). 

[End of table]

Table 29 reflects the planned funding profile of the KEI program as 
presented in the President's Budget for fiscal year 2006, which was 
submitted in February 2005. When compared with the fiscal year 2005 
President's Budget--submitted last year in February 2004--KEI's current 
funding level is considerably less. Indeed, last year MDA budgeted 
$7.87 billion for KEI program activities between fiscal years 2004 and 
2009. The current budget of $2.77 billion over the same time period 
represents a 65 percent reduction in program funding. 

Prime Contractor Cost and Schedule Performance:

The government routinely uses contractor Cost Performance Reports to 
independently evaluate prime contractor performance relative to cost 
and schedule. Generally, the reports detail deviations in cost and 
schedule relative to expectations established under the contract. 
Contractors refer to deviations as "variances." Positive variances are 
usually associated with the accomplishment of activities under cost or 
ahead of schedule, while negative variances are often associated with 
the accomplishment of activities over cost or behind schedule. 

The KEI prime contractor performed work in fiscal year 2004 near its 
budgeted costs. From contract inception through August 2004 (which 
covers less than 1 percent of the contract), the contractor completed 
work slightly under budget but was behind schedule in performing about 
$1.6 million worth of planned work. Program officials indicated that 
the negative schedule variance was the result of the contractor 
delaying activities so that it could conduct trade studies on new 
requirements imposed by MDA. For example, the contractor has been 
directed to determine the cost of adding requirements for anti-
tampering, nuclear hardening, and insensitive munitions. 

Because of plans to restructure the KEI program, the long-term 
performance measurement baseline[Footnote 62] is no longer relevant. 
Near-term work is still being performed according to plan, but the 
program suspended contractor cost and schedule performance reporting 
for current work efforts after August 2004. As a result, KEI program 
officials had reduced insight into its prime contractor's work efforts 
for a portion of fiscal year 2004. The program office told us that the 
contractor will resume reporting in 2005 after a reliable baseline that 
reflects the full extent of the program's restructure is available. 

[End of section]

Appendix VII Summary:

Space Tracking and Surveillance System: 

[See PDF for image]

Source: Missile Defense Agency. 

[End of figure]

Program Description: 

The Space Tracking and Surveillance System (STSS) is being developed as 
a constellation of low-orbiting satellites to detect and track enemy 
missiles throughout all phases of flight. Funded and managed by the 
Missile Defense Agency (MDA), STSS replaces the Air Force’s Space-Based 
Infrared System-Low (SBIRS-Low) program. The STSS program office is 
preparing to launch in 2007 two technology demonstration satellites 
that were partially built under the SBIRS-Low program. MDA intends to 
assess how well these satellites perform missile defense surveillance 
and tracking functions and use this information to establish 
capabilities and goals for next-generation STSS satellites. 

DOD’s planned investment in the STSS program from program inception in 
2002 through 2011 is approximately $4.5 billion. DOD expended $819 
million between fiscal years 2002 and 2004, Congress appropriated $305 
million for fiscal year 2005, and MDA is budgeting about $3.35 billion 
for element development between fiscal years 2006 and 2011.

MDA’s planned budget for the next 6 years through 2011 funds activities 
associated with the assembly and launch of the two demonstrator 
satellites (Block 2006), ground segment upgrades (Block 2008), and the 
development of an operational constellation of satellites (Block 2012).

Fiscal Year 2004 Progress Assessment: 

The STSS program office accomplished all but one of the principal Block 
2006 activities planned for completion in fiscal year 2004 and 
initiated work planned for completion in fiscal year 2005. Although the 
prime contractor is working to an accelerated delivery schedule, 
quality and systems-engineering problems with a subcontractor are 
jeopardizing the early delivery of a satellite’s payload.

Schedule: Program activities completed in fiscal year 2004 include the 
complex tasks of systems integration, testing, and software 
development. The program office completed a critical design review on 
time. Hardware modifications to the satellites were completed, but a 
heat problem resulting from the redesign of the electrical power 
subsystem caused a delay of three months. Software development 
activities were also completed, and reviews to ensure that the design 
for the STSS ground system could accommodate a larger constellation of 
satellites were conducted. 

Testing: Functional tests on components of the second technology 
demonstration satellite were completed several months late because of 
minor problems with the spacecraft’s computer processor and other 
components. Planned integration tests on the track sensor were not 
completed, and integration testing of an interim version of the 
software that controls the sensors onboard the satellites took longer 
than planned. Although final acceptance testing for the ground software 
is expected to be completed 2 months late, all software development 
tasks are scheduled to be completed two years before satellite launch.

Performance: Data provided by MDA indicate that two STSS performance 
indicators do not meet their respective requirements—one pertaining to 
the acquisition sensor and a second pertaining to the tracking sensor. 
Program officials stated that degradation in performance is within 
acceptable limits. The program considers the demonstration of STSS 
functionality more critical than verifying the effectiveness of the 
demonstrator satellites.

Cost: Our analysis of prime contractor Cost Performance Reports shows 
that the contractor completed work in fiscal year 2004 over budget by 
about $34.6 million. In addition, the contractor could not complete 
$20.7 million of scheduled work (relative to a 6-month accelerated 
schedule). Quality and systems-engineering problems with a 
subcontractor contributed to the overruns in cost and schedule.

[End of section]

Appendix VII: Space Tracking and Surveillance System:

Element Description:

The Space Tracking and Surveillance System (STSS) is being developed as 
a space-based sensor for the Ballistic Missile Defense System (BMDS). 
As envisioned by the Missile Defense Agency (MDA), the full STSS 
element will be comprised of a constellation of low-orbiting 
satellites[Footnote 63] designed to detect and track enemy missiles 
throughout all phases of flight. Each satellite making up the program's 
"space segment" includes a space vehicle and a payload of two infrared 
sensors--the acquisition sensor to watch for the bright plumes (hot 
exhaust gas) of boosting missiles, and the tracking sensor to follow 
the missile through midcourse and reentry. The STSS element also has 
supporting ground infrastructure, known as the "ground segment," which 
includes a ground station and mission software to support the 
processing and communication of data from the satellites to the BMDS. 

MDA is currently working on the first increment of STSS, known as Block 
2006, which is focused on the preparation and launch of two technology 
demonstration satellites[Footnote 64] partially built under the Space 
Based Infrared System Low (SBIRS-Low) program. MDA plans to launch 
these satellites in 2007, in tandem, in an effort to assess how well 
they perform surveillance and tracking functions. Using data collected 
by the satellites, MDA will determine what capabilities are needed and 
what goals should be set for the next generation of STSS satellites. 
Any real operational capability, however, would not be realized until 
the next decade. 

History:

Initiated in 1996, SBIRS-Low was the latest in a series of Department 
of Defense (DOD) satellite programs attempting to deliver an 
operational capability for detecting and tracking missiles from low-
earth orbits. The program experienced cost and schedule growth and 
performance shortfalls. In response, DOD cancelled the accompanying 
demonstration program in 1999 and put the partially constructed 
satellite equipment into storage. 

In October 2000, Congress directed the Air Force to transfer the SBIRS-
Low program to the Ballistic Missile Defense Organization (MDA's 
predecessor). When MDA inherited SBIRS-Low, the agency decided to make 
use of the equipment that was partially built under the SBIRS-Low 
technology demonstrator program. By completing the assembly of the two 
satellites and launching them in 2007, MDA intends to use the 
satellites in missile defense flight tests. At the end of 2002, the 
SBIRS-Low program was renamed STSS. 

Developmental Phases:

STSS's development is proceeding in a series of 2-year blocks, namely, 
Blocks 2006, 2008, and beyond. As noted above, Block 2006 involves the 
assembly, integration, testing, and launch of two research and 
development satellites in 2007. The first satellite is expected to be 
ready in September 2005 and the second in early fiscal year 2007. Block 
2008 is primarily an upgrade of the Block 2006 ground stations, which 
are used to collect and analyze data from the two satellites. As 
technology matures and as lessons are learned from the first 
satellites, more capable satellites will be designed and launched in 
subsequent blocks.[Footnote 65]

Planned Accomplishments for Fiscal Year 2004:

The STSS program office intended to accomplish several activities 
during fiscal year 2004 related to the preparation of the two 
demonstration satellites for launch in 2007. Specifically, the program 
office planned to complete the following space-and ground-segment 
activities:

* Space Segment. The program planned to complete a design review to 
ensure the STSS design can support the BMDS mission; complete the 
reactivation of hardware components for the second satellite; modify 
two satellite hardware components to enhance spacecraft performance; 
continue to develop the payload software; and start the assembly, 
integration, and testing of satellite components. 

* Ground Segment. The program planned to complete activities to ensure 
that the STSS element has a mature ground system design and to continue 
with the development of software for the ground segment of the program. 

Assessment of Scheduled Activities:

The STSS program office completed all but one of the principal Block 
2006 activities planned for fiscal year 2004, including the complex 
tasks of systems integration, testing, and software development. 
Moreover, the program office initiated work planned for completion in 
fiscal year 2005. The contractor has been performing to an accelerated 
delivery schedule, that is, attempting to complete all contracted 
activities six months earlier than required by the contract. However, 
according to the program office, quality and systems-engineering 
problems at the payload subcontractor are jeopardizing the early 
delivery. Progress made toward achieving the space-and ground-segment 
activities is summarized in tables 30 and 31, respectively. 

Table 30: Status of STSS Fiscal Year 2004 Planned Accomplishments--
Space Segment:

Activity: Critical Design Review; 
Actual/Planned completion date: Nov. 2003; (Completed on schedule); 
Comments: The STSS program office conducted a critical design review in 
the first quarter of fiscal year 2004. Sixteen issues were identified 
during the review, and all were satisfied and closed out in March 2004. 
According to the program office, the review was on time and the outcome 
was successful. 

Activity: Reactivation of Satellite #2 Hardware; 
Actual/Planned completion date: Oct. 2003; (Completed 5 months late); 
Comments: The second satellite has been completely reactivated, which 
involved the contractor taking 58 hardware components out of storage 
and running tests on them to determine if they still worked. All but 
one of the components passed the appropriate functional tests. 
Functional tests for the final component--the spacecraft computer 
processor--are being deferred until the next higher-level of hardware 
integration. During the reactivation of this hardware, the contractor 
experienced minor problems with some components. Though these issues 
have since been resolved, they contributed to the five-month delay in 
the reactivation schedule. Overall, however, the components survived 
storage rather well, according to program officials. 

Activity: Hardware Modifications. 

* Electrical Power Subsystem; 
Actual/Planned completion date: * Sept. 2003 (Completed 3 months late); 
* Sun Shield; 
Actual/Planned completion date: * Sept. 2004 (Completed on schedule); 
Comments: Performance modifications to the Sun Shield were completed as 
planned, but modifications to the Electrical Power Subsystem were 
completed three months later than expected. Although the upgrades to 
the power system are to result in a 200 percent improvement in on-orbit 
operation, the redesign was more complex than originally planned and 
resulted in the problem of removing excess heat produced by the power 
system. To resolve the heat problem, the contractor had to use $2-3 
million from its management reserve to add air ducts to the spacecraft. 

Activity: Payload Software. 

* Build 2. 
Actual/Planned completion date: * July 2004 (Completed 1 month late). 

* Closed Loop Testing of Sensor Payload Software; 
Actual/Planned completion date: * May 2005 (Ongoing); 
Comments: Software builds for the space and ground segments are 
proceeding as planned. The program office characterized software 
development as being the "gem" of the program. Version 2 of the 
software that controls the sensors onboard the satellite was completed 
in mid-August 2004. Although the software team encountered problems 
while integrating and testing this version, the problems were resolved 
in time to limit the delay to one month in building the software. At 
the end of fiscal year 2004, the contractor had completed about half of 
Version 3 software for the payload data processor. A partial build of 
this version is undergoing integration testing and is scheduled for 
completion in May 2005. According to the program office, the software 
is on schedule to be completed two years before the satellites are 
launched. 

Activity: Assembly, Integration, and Testing (AI&T). 

* Track Sensor; 
Actual/Planned completion date: * Aug. 2004 (Ongoing); 

* Spacecraft #1;
Actual/Planned completion date: * July 2004 (Completed 1 month late). 

* Payload #1; 
Actual/Planned completion date: * Jan. 2005 (Ongoing); 
Comments: The STSS program scheduled several assembly, integration, and 
testing activities for completion in fiscal years 2004 and 2005, which 
were (or expected to be) completed behind schedule. First, the program 
office had planned to assemble, integrate, and test the track sensor 
for the first satellite by the end of August 2004. Second, the program 
office had planned to integrate and test the spacecraft for the first 
payload by the end of July 2004, but did not complete the task until 
mid-August 2004. The objective of the tests was to demonstrate the 
electrical integration of the spacecraft. Third, the program office 
planned to start integrating and testing the payload for the first STSS 
space vehicle. The testing of the payload components was expected to be 
completed by January 2005. However, the program office reported that 
the schedule will be tight and will likely slip by a couple of months 
primarily because of quality and systems engineering problems at the 
payload subcontractor. 

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

[End of table]

Table 31: Status of STSS Fiscal Year 2004 Planned Accomplishments--
Ground Segment:

Activity: Mature Ground System Design; Actual/Planned completion date: 
Oct. 2003; (Completed 1 month late); 
Comments: Reviews were conducted to ensure that the STSS program has a 
mature ground system design. Because of issues related to paperwork, 
the reviews were completed about a month later than planned. The 
contractor presented a detailed design for the STSS ground system at 
the November 2003 critical design review, and according to the program 
office, the proposed design is robust enough to accommodate a larger 
STSS constellation in the future. 

Activity: Develop Ground Software; Actual/Planned completion date: Dec. 
2005; 
Comments: The STSS ground software development was completed in 
December 2005. The contractor is following a "build a little" and "test 
a little" approach in order to catch defects early in the process 
before they are costly to fix, according to program officials. 

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

[End of table]

Assessment of Element Performance:

The Block 2006 STSS satellites will be used as technology demonstrators 
(rather than for operational missions) and have an in-orbit life of 18-
24 months. To keep costs within budget, the program considers the 
demonstration of STSS functionality more critical than the 
demonstration of STSS effectiveness in performing the functions. MDA 
decided to fly these demonstration satellites before developing and 
producing them in larger numbers to see how components and subsystems 
work together as a system in a realistic environment before a greater 
investment of resources is made, thereby reducing program risk. As 
noted above, each satellite contains two infrared sensors--an 
acquisition sensor to detect a missile launch and a tracking sensor to 
track the missile through space once it has been detected. The tracking 
sensor would continue tracking the missile after the acquisition sensor 
has completed its detection function. The ability of one satellite to 
detect or "acquire" a missile launch and to transmit this data to its 
internal tracking sensor has not yet been demonstrated in space, 
although DOD has had successes in demonstrating some related on-orbit 
capabilities through experimental satellites. 

Even with a focus on system functionality over effectiveness, the prime 
contractor continues to track 12 system level technical parameters that 
are critical to the performance of the sensors onboard the Block 2006 
satellites. Data provided to us by MDA indicate that 2 of the 12 
indicators do not meet their respective requirements. The details on 
these issues, including the impact on STSS performance, are classified. 
However, shortfalls in performance involve both sensors. The ability of 
the acquisition sensors to properly detect a missile launch is falling 
below performance margins and the accuracy of the tracking sensor is 
getting close to the margin. Program officials stated that the 
degradation in acquisition sensor performance is within allowable 
limits and steps are being taken to improve tracking sensor 
performance. 

Assessment of Element Cost:

DOD's planned investment in the STSS program from program inception in 
2002 through 2011 is approximately $4.5 billion.[Footnote 66] As broken 
out in table 32, DOD expended $819 million between fiscal years 2002 
and 2004, Congress appropriated $302 million for fiscal year 2005, and 
MDA is budgeting about $3.35 billion between fiscal years 2006 and 2011 
for element development. MDA's planned budget for the next 6 years 
through 2011 funds activities associated with the assembly and launch 
of the two demonstrator satellites (Block 2006), ground segment 
upgrades (Block 2008), and the development of an operational 
constellation of satellites (Block 2012). 

Table 32: STSS Cost:

Dollars in millions of then-year dollars. 

FY 2002[A] -FY 2003; 
Other: $$544; 
Block 2006: $$0; 
Block 2008: $$0; 
Block 2010: $$0; 
Block 2012: $$0; 
Total: $$544. 

FY 2004 (Actuals); 
Other: $0; 
Block 2006: $263; 
Block 2008: $0; 
Block 2010: $12; 
Block 2012: $0; 
Total: $275. 

FY 2005 (Appropriated); 
Other: $0; 
Block 2006: $254; 
Block 2008: $0; 
Block 2010: $48; 
Block 2012: $0; 
Total: $302. 

FY 2006; 
Other: $0; 
Block 2006: $231; 
Block 2008: $0; 
Block 2010: $0; 
Block 2012: $1; 
Total: $232. 

FY 2007; 
Other: $0; 
Block 2006: $208; 
Block 2008: $45; 
Block 2010: $0; 
Block 2012: $167; 
Total: $420. 

FY 2008; 
Other: $0; 
Block 2006: $65; 
Block 2008: $29; 
Block 2010: $0; 
Block 2012: $440; 
Total: $534. 

FY 2009; 
Other: $0; 
Block 2006: $11; 
Block 2008: $24; 
Block 2010: $0; 
Block 2012: $579; 
Total: $614. 

FY 2010; 
Other: $0; 
Block 2006: $8; 
Block 2008: $14; 
Block 2010: $0; 
Block 2012: $737; 
Total: $759. 

FY 2011; 
Other: $0; 
Block 2006: $7; 
Block 2008: $14; 
Block 2010: $0; 
Block 2012: $773; 
Total: $794. 

FY 2002 -FY 2011; 
Other: $$544; 
Block 2006: $$1,046; 
Block 2008: $$127; 
Block 2010: $$60; 
Block 2012: $$2,697; 
Total: $$4,474. 

Source: MDA. 

Note: STSS budget as of February 2005. Numbers may not add due to 
rounding. 

[A] Program inception (FY 2002). 

[End of table]

Prime Contractor Cost and Schedule Performance:

The government routinely uses contractor Cost Performance Reports to 
independently evaluate prime contractor performance relative to cost 
and schedule. Generally, the reports detail deviations in cost and 
schedule relative to expectations established under the contract. 
Contractors refer to deviations as "variances." Positive variances are 
usually associated with the accomplishment of activities under cost or 
ahead of schedule, while negative variances are often associated with 
the accomplishment of activities over cost or behind schedule. 

Figure 9 shows the STSS contractor's cost and schedule performance 
during fiscal year 2004. According to Cost Performance Reports, the 
work completed during this time cost more than budgeted and was behind 
schedule relative to a 6-month accelerated schedule. Specifically, 
during fiscal year 2004, the work cost about $34.6 million more than 
expected, and the contractor could not complete approximately $20.7 
million of scheduled work. 

Figure 9: STSS Fiscal Year 2004 Cost and Schedule Performance:

[See PDF for image]

[End of figure]

The erosion of cumulative cost variance throughout fiscal year 2004 was 
largely attributed to cost overruns by the payload subcontractor, whose 
costs comprise about one-third of the total STSS contract. During the 
past year, the subcontractor has had a number of quality and systems-
engineering problems that contributed to overruns in cost and schedule. 
These problems are largely the result of unclear systems engineering 
procedures and the subcontractor's lack of experience with space 
hardware. In response to these problems, the prime contractor conducted 
a thorough review of the subcontractor's quality assurance program for 
the assembly, integration, and testing of satellite components. In 
addition, the subcontractor added technicians who have more experience 
working with space hardware and brought in systems engineers to work 
with the technicians. Despite these issues, the program office still 
expects the prime contractor to complete the contract early and with 
minimal cost overruns. 

The cumulative schedule variance also eroded during fiscal year 2004. 
The delay in the delivery of the payload is the major driver of the 
unfavorable schedule variance. In addition to these drivers, 
performance upgrades to the Electrical Power Subsystem were completed 
three months later than planned due to a heat-removal problem. A factor 
complicating our analysis of schedule variance is that the contractor 
implemented a performance measurement baseline[Footnote 67] that 
reflects a six-month accelerated schedule. This means the contractor 
might be performing work on a schedule that would allow it to complete 
all the work by the end of the contract, but schedule performance data 
would show that work was falling behind schedule. 

Our assessment of fiscal year 2004 activities did not identify any 
evidence that the STSS program would be unable to launch the two 
demonstration satellites in 2007. Although the payload subcontractor 
experienced schedule delays and cost overruns arising from quality 
issues, the program office is still confident that the satellites will 
be delivered early. In addition, the reactivation of components from 
storage went better than anticipated and, accordingly, the program 
office reduced the risk level associated with hardware and software 
furnished by the government. Furthermore, the prime contractor is 
making progress on the parts obsolescence issue. For example, the prime 
contractor located most replacement parts and is assembling a database 
to track them. 

[End of section]

Appendix VIII Summary:

Terminal High Altitude Area Defense

[See PDF for image]

Source: Missile Defense Agency. 

[End of figure]

Program Description: 

The Terminal High Altitude Area Defense (THAAD) element is a ground-
based missile defense system designed to protect deployed military 
forces and civilian population centers from short- and medium-range 
ballistic missile attacks. THAAD engages ballistic missiles during the 
late-midcourse and terminal phases of flight, that is, before or after 
the warhead reenters the atmosphere. The THAAD program expects to field 
an initial capability consisting of 24 interceptors during the 2009 
time frame. 

DOD’s planned investment in the THAAD program from program inception in 
1992 through 2011 is approximately $12.3 billion. DOD expended $7.2 
billion between fiscal years 1992 and 2004, Congress appropriated $760 
million for fiscal year 2005, and MDA is budgeting about $4.3 billion 
for THAAD development and procurement between fiscal years 2006 and 
2011. 

Fiscal Year 2004 Progress Assessment: 

The bulk of fiscal year 2004 activities focused on developing and 
ground-testing THAAD components in preparation for the first round of 
flight tests in mid-fiscal year 2005. At the end of fiscal year 2004 
with 61 percent of the THAAD prime contract completed, THAAD’s prime 
contractor was under budget and ahead of schedule. However, the 
contractor’s favorable cost and schedule performance eroded somewhat 
during fiscal year 2004. Our analysis indicates that problems with 
missile development were a major driver of the deteriorating 
performance.

Schedule: During fiscal year 2004, the THAAD program accomplished key 
activities ahead, on, or slightly behind schedule. The program 
conducted the missile-component design readiness review ahead of 
schedule, completed radar assembly on schedule, but was behind schedule 
on missile delivery for the element’s first flight test, Flight Test 1. 
In addition, the program successfully conducted ground tests in 
preparation for the initial flight test. 

Testing: Two explosions in the summer of 2003 at a subcontractor’s 
propellant mixing facility impacted THAAD’s fiscal year 2004 funding, 
delayed the start of flight testing, and led to a revision of the 
flight test program.

Performance: The program office told us that key indicators show that 
THAAD is on track to meet operational performance goals. However, an 
assessment of THAAD’s effectiveness remains uncertain until the program 
conducts flight tests with updated hardware and software. Data from 
flight testing are needed to “anchor” simulations of THAAD’s 
performance and to more confidently predict the element’s effectiveness.

Cost: Our analysis of prime contractor cost performance reports shows 
that the contractor’s favorable cost and schedule performance eroded 
somewhat during fiscal year 2004. The declining schedule performance 
was largely driven by unfavorable performance in the missile 
component—caused by two separate explosions at a subcontractor’s 
propellant mixing facility—but offset by other THAAD components with 
favorable performance. Overall, the prime contractor is under budget 
and ahead of schedule.

[End of section]

Appendix VIII: Terminal High Altitude Area Defense:

Element Description:

The Terminal High Altitude Area Defense (THAAD) element[Footnote 68] is 
being developed as a ground-based missile defense system to protect 
forward-deployed military forces, population centers, and civilian 
assets from short-and medium-range ballistic missile attacks. THAAD 
provides the opportunity to engage ballistic missiles--outside or 
inside the earth's atmosphere--not destroyed earlier in the boost or 
midcourse phases of flight by other elements of the Ballistic Missile 
Defense System (BMDS). 

A THAAD unit consists of a command, control, battle management, and 
communications (C2/BMC) component for controlling and executing a 
defensive mission, truck-mounted launchers, ground-based radar, 
interceptor missiles, and ground support equipment. The ground-based 
radar is a solid-state, phased-array, X-band radar that performs 
search, track, discrimination, and other fire-control functions. The 
THAAD missile is comprised of a kill vehicle mounted atop a single-
stage booster and is designed to destroy enemy warheads through hit-to-
kill collisions. 

History:

The THAAD program entered the Program Definition and Risk Reduction 
phase of acquisition in 1992 but was plagued by missed intercepts in 
its first six attempts. As noted in our 1999 report,[Footnote 69] 
THAAD's failures were caused by a combination of a compressed test 
schedule and quality control problems. The Director, Operational Test 
and Evaluation (DOT&E), reported in his Fiscal Year 1999 Annual Report 
to the Congress that the sense of urgency to deploy a prototype system 
resulted in an overly optimistic development schedule. 

The THAAD program conducted two successful intercept attempts in 1999 
after devoting substantial time to pretest activities. The program then 
transitioned to the product development phase[Footnote 70] of 
acquisition, in which program activities shifted from technology 
development and demonstration to missile redesign and engineering. The 
Department of Defense (DOD) transferred the THAAD program from the U.S. 
Army to the Ballistic Missile Defense Organization (now MDA) on October 
1, 2001. 

Developmental Phases:

The THAAD program is pursuing its goals within the MDA block approach, 
which incrementally increases the element's capability against the 
ballistic missile threat. We reported[Footnote 71] last year that 
THAAD's development was structured around a Block 2004-2006-2008 
program, with program funding aligned accordingly. However, with the 
submission of the fiscal year 2006 President's Budget in February 2005, 
MDA implemented a new BMDS baseline approach for the THAAD program. 
Under this new program, THAAD development is structured around a Block 
2006-2008-2010 program, with funding broken out by Block 2006/2008 and 
Block 2010. 

* Block 2006. Block 2006 incorporates the activities of the former 
Block 2004 program. The Block 2006 THAAD program is expected to 
demonstrate an engagement capability against short-and medium-range 
ballistic missiles above the atmosphere. 

* Block 2008. By the end of Block 2008, the THAAD element will have 
completed additional flight tests (including attempts employing a salvo-
firing doctrine), demonstrated an engagement capability inside and 
above the atmosphere, and be configured to accept data from other BMDS 
sensors for launching its interceptor missiles. THAAD's integration 
with the BMDS is expected to increase its defended area by more than a 
factor of three. 

The THAAD program includes a "fire unit" for delivery in fiscal year 
2009. Operated by the Army, it will consist of a radar, a C2/BMC unit, 
3 launchers, 24 missiles, and equipment for support, maintenance and 
training. The Army has "signed on" to receive the equipment and is 
planning to allocate nearly 100 soldiers for training and operations. 

* Block 2010. The THAAD program plans to enhance the element's ability 
to interoperate with other elements and sensors of the BMDS. By 
engaging threats with external BMDS data, THAAD is expected to increase 
its defended area by more than a factor of ten. 

Planned Accomplishments for Fiscal Year 2004:

The bulk of the fiscal year 2004 activities focused on developing and 
ground-testing THAAD components in preparation for the first round of 
flight tests in mid-fiscal year 2005. We grouped activities into three 
categories: (1) design, (2) build, and (3) integration and test. 
Progress on key activities scheduled for fiscal year 2004 is discussed 
below. 

Assessment of Scheduled Activities:

During fiscal year 2004, the THAAD program accomplished key activities 
ahead, on, or slightly behind schedule. As examples, the program 
conducted the missile-component design readiness review ahead of 
schedule, completed radar assembly on schedule, but delivery of the 
missile for Flight Test 1 slipped into fiscal year 2005. Specifics 
regarding progress in achieving these and other key scheduled 
activities are summarized below in tables 33 through 35. 

Table 33: Status of THAAD Fiscal Year 2004 Planned Accomplishments--
Design Activities:

Activity: Missile-component design readiness review. 
Planned: 1Q FY2004[A]; 
Completed: 4Q FY2003; 
Description/Progress assessment: This event was accomplished ahead of 
schedule. The missile component design readiness review demonstrated 
that the missile-component design, including internal and external 
interfaces, met all applicable design requirements with acceptable 
risk. 

Activity: THAAD element design readiness review. 
Planned: 1Q FY2004; 
Completed: 1Q FY2004; 
Description/Progress assessment: This event was accomplished on 
schedule. The stakeholders agreed during the design readiness review 
that they understood the THAAD system and its final integrated design, 
and that the design met BMDS objectives. Stakeholders included the 
THAAD Project Office, supporting contractors, representatives of the 
Army Air Defense School, and MDA. 

Activity: Radar block process validation. 
Planned: 2Q FY2004; 
Completed: 2Q FY2004; 
Description/Progress assessment: This event was accomplished on 
schedule. The radar block process validation examined the contractor's 
operations to determine adequacy of production planning, processes, and 
controls; the existence of suitable production facilities; and the 
radar's design stability. 

Activity: C2/BMC block process validation. 
Planned: 4Q FY2004; 
Completed: Under revision; 
Description/Progress assessment: The C2/BMC block process validation 
was delayed to address defective government-furnished C2/BMC shelters 
and was somewhat behind schedule at the end of fiscal year 2004. 
Significant progress was made toward its completion, but the remaining 
work is planned to carry over into fiscal year 2005. The purpose of the 
validation is to assess the contractor's ability to manufacture C2/BMC 
production representative hardware to support future fielding 
decisions. 

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

[A] We use the notation "1Q FY2004" to mean the first quarter of fiscal 
year 2004 and an identical format for other time periods. 

[End of table]

Table 34: Status of THAAD Fiscal Year 2004 Planned Accomplishments--
Build Activities:

Activity: Radar assembly. 
Planned: 1Q FY2004; 
Completed: 1Q FY2004; 
Description/Progress assessment: This event was accomplished on 
schedule. The radar was assembled in the first quarter of fiscal year 
2004. 

Activity: Missile delivery for Flight Test 1 (FT-01). 
Planned: 4Q FY2004; Scheduled: 2Q FY2005; 
Description/Progress assessment: Delivery of the FT-01 missile to White 
Sands Missile Range (WSMR)[A] was delayed to respond to a new program 
schedule that addresses funding shortfalls and two separate explosions 
at a subcontractor's propellant mixing facility. Delivery is now 
scheduled for the second quarter of fiscal year 2005. 

Activity: WSMR activation. 
Planned: 2Q FY2004; 
Completed: 2Q FY2004; 
Description/Progress assessment: This event was accomplished on 
schedule. All THAAD facilities at WSMR were activated by March 2004 and 
are preparing for FT-01. 

Activity: WSMR safety qualification tests. 
Planned: 3Q FY2004; 
Completed: 4Q FY2004; 
Description/Progress assessment: Although this event was completed 1 
quarter behind schedule, there was no impact on FT-01's schedule. 

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

[A] WSMR is a U.S. Army missile test range in New Mexico. Because of 
test range limitations at WSMR, flight testing will be conducted at the 
Pacific Missile Range Facility, a U.S. Navy missile test range in 
Kauai, Hawaii, beginning with FTT-06-1 (formerly FT-05) in the fourth 
quarter of fiscal year 2006. 

[End of table]

Table 35: Status of THAAD Fiscal Year 2004 Planned Accomplishments--
Integration and Test Activities:

Activity: Kill vehicle destruct test. 
Planned: 1Q FY 2004; 
Completed: 1Q FY2004; 
Description/Progress assessment: This event was accomplished on 
schedule. Testing of the kill vehicle flight termination system met 
objectives. 

Activity: Integrate launch and test support equipment at SIL[A]. 
Planned: 2Q FY2004; 
Completed: 3Q FY2004; 
Description/Progress assessment: Because of two separate explosions at 
a subcontractor's propellant mixing facility in the summer of 2003, 
this event was accomplished about one quarter behind schedule. The 
launch and test support equipment completed its system checkout in June 
2004. The THAAD program reports that the launch and test support 
equipment is on schedule to support the revised schedule of FT-01 
planned for the third quarter of fiscal year 2005. 

Activity: Kill vehicle qualification tests. 
Planned: 4Q FY2004; 
Completed: 4Q FY2004; 
Description/Progress assessment: Kill vehicle qualification testing in 
preparation for FT-01 was completed in September 2004. 

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

[A] The System Integration Lab (SIL) refers to ground facilities at 
Lockheed Martin Space Systems Company, Sunnyvale, California. 

[End of table]

THAAD Flight Test Program Delayed 3-5 Months:

The THAAD flight-test program consists of 15 flight-test events divided 
among Blocks 2006 and 2008. Two explosions in the summer of 2003 at a 
subcontractor's propellant mixing facility impacted THAAD's fiscal year 
2004 funding, delayed the start of flight testing, and led to revisions 
of the flight test plans. 

The first set of flight tests have been delayed 3-5 months. The first 
flight test, referred to as a control test flight (CTF), is a missile-
only, non-intercept test that focuses on how the missile operates under 
high endoatmospheric environmental conditions. The second flight test 
is an integrated system test with a "virtual target" to demonstrate 
system performance under conditions comparable to the next flight test 
(first flight test utilizing a real target). The third flight test is a 
seeker characterization flight (SCF), which ensures proper functioning 
of the seeker. This SCF is also a non-intercept test, but the seeker 
will demonstrate the ability to view a real target. The fourth flight 
test, FT-04, is the first intercept attempt with a configuration--
target and engagement geometry--comparable to that used in flight tests 
conducted during the Program Definition and Risk Reduction phase of 
development. Table 36 summarizes the first six flight test events, 
including current and prior flight test dates with their objectives. 

Compared to test plans of fiscal year 2004, the THAAD program deferred 
two test events. A second control test flight conducted at WSMR--
formerly FT-02--and an intercept attempt against a threat-
representative target at the Pacific Missile Range Facility (PMRF)--
formerly FT-05--have been deferred to a later time. 

Table 36: Planned THAAD Flight Testing:

Flight test event: FT-01 (CTF) at WSMR; Non-intercept flight test 
(missile only/no target); 
Date: Current: 3Q FY2005 Previously: 1Q FY2005; 
Objectives: 
* Validate missile performance in a high-endoatmospheric flight 
environment; 
* Verify missile integration with WSMR. 

Flight test event: FT-02 at WSMR; Integrated system test -virtual 
target. (New test); 
Date: Current: 4Q FY2005 Previously: N/A; 
Objectives: 
* Integrated system test dry run (virtual target); 
* Demonstrate missile launch and control for conditions comparable to 
FT-03. 

Flight test event: FT-03 (SCF) at WSMR; Non-intercept flight test; 
Date: Current: 1Q FY2006. 
Previously: 3Q FY2005; 
Objectives: 
* Characterize seeker in flight against a high-endoatmospheric unitary 
target; 
* Verify element integration with WSMR. 

Flight test event: FT-04 at WSMR; First intercept flight test; 
Date: Current: 2Q FY2006. 
Previously: 4Q FY2005; 
Objectives: 
* Demonstrate exoatmospheric discrimination and intercept of a 
separating target; 
* Demonstrate lethality assessment of recovered debris. 

Flight test event: FT-05 (CTF) at WSMR; Non-intercept flight test; 
(Formerly FT-02); 
Date: Current: 2Q FY2006. 

Previously: 2Q FY2005; 
Objectives: 
* Characterize missile performance in a low-endoatmospheric flight 
environment; 
* Assesses effects of heat on seeker window; 
* Tests performance in a high dynamic pressure fly-out. 

Flight test event: FTT-06-1 at PMRF; Second intercept flight test. 
(Formerly FT-05); 
Date: Current: 4Q FY2006. 
Previously: 1Q FY2006; 
Objectives: 
* Demonstrate exoatmospheric aimpoint selection and intercept against a 
non-separating liquid-fueled target; 
* Demonstrate integration with PMRF. 

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

Note: Test schedule as of December 2004. 

[End of table]

Assessment of Element Performance:

Any assessment of THAAD's effectiveness is uncertain at this time. The 
program office told us that key indicators show that THAAD is on track 
to meet operational performance goals. However, the THAAD program has 
not conducted any recent flight tests and, as a result, performance 
indicators[Footnote 72] used to gauge progress toward meeting 
performance objectives are based only on engineering analysis and 
ground testing. Until data collected during flight tests are used to 
"anchor" simulations of THAAD operation, the program cannot be 
confident that current indicators accurately predict THAAD's 
performance in actual combat conditions. 

Assessment of Element Cost:

DOD's planned investment in the THAAD program from program inception in 
1992 through 2011 is approximately $12.3 billion. As broken out in 
table 37, DOD expended $7.2 billion between fiscal years 1992 and 2004, 
Congress appropriated $760 million for fiscal year 2005, and MDA is 
budgeting about $4.3 billion for THAAD development and procurement 
between fiscal years 2006 and 2011. 

Table 37: THAAD Cost:

Dollars in millions of then-year dollars. 

FY 1992[A] -FY 2003; 
Other: $$6,500; 
Block 2006/2008: $$0; 
Block 2010: $$0; 
Total: $$6,500. 

FY 2004 (Actuals); 
Other: $0; 
Block 2006/2008: $717.9; 
Block 2010: $0; 
Total: $717.9. 

FY 2005 (Appropriated); 
Other: $0; 
Block 2006/2008: $759.7; 
Block 2010: $0; 
Total: $759.7. 

FY 2006; 
Other: $0; 
Block 2006/2008: $1,046.1; 
Block 2010: $0; 
Total: $1,046.1. 

FY 2007; 
Other: $0; 
Block 2006/2008: $931.0; 
Block 2010: $0; 
Total: $931.0. 

FY 2008; 
Other: $0; 
Block 2006/2008: $779.4; 
Block 2010: $0; 
Total: $779.4. 

FY 2009; 
Other: $0; 
Block 2006/2008: $353.0; 
Block 2010: $168.0; 
Total: $521.0. 

FY 2010; 
Other: $0; 
Block 2006/2008: $0; 
Block 2010: $635.1; 
Total: $$635.1. 

FY 2011; 
Other: $0; 
Block 2006/2008: $0; 
Block 2010: $395.0; 
Total: $$395.0. 

FY 1992 -FY 2011; 
Other: $$6,500; 
Block 2006/2008: $$4,587.1; 
Block 2010: $$1,198.1; 
Total: $$12,285.2. 

Source: MDA. 

Note: THAAD budget as of February 2005. MDA implemented a new BMDS 
baseline approach that redirected funding from Block 2004 and 2006 to 
Block 2006/2008. 

[A] Program inception (FY 1992). 

[End of table]

Prime Contractor Fiscal Year 2004 Cost and Schedule Performance:

The government routinely uses contractor Cost Performance Reports to 
independently evaluate the prime contractor's performance relative to 
cost and schedule. Generally, the reports detail deviations in cost and 
schedule relative to expectations established under the contract. 
Contractors refer to deviations as "variances." Positive variances are 
usually associated with the accomplishment of activities under cost or 
ahead of schedule, while negative variances are often associated with 
the accomplishment of activities over cost or behind schedule. At the 
end of fiscal year 2004, the THAAD prime contractor was carrying a 
positive cumulative cost and schedule variance of $3.9 million and 
$14.7, respectively.[Footnote 73] That is, overall, the prime 
contractor was under budget and ahead of schedule. 

As figure 10 shows, declining cumulative schedule variance during the 
latter portion of fiscal year 2004 was eroding overall performance. The 
decline in the positive schedule variance was largely caused by 
problems with the missile component, which were the result of two 
explosions at a subcontractor's propellant mixing facility. In January 
2004, these incidents and efforts to reestablish booster production 
caused MDA to revise THAAD's baseline.[Footnote 74] The new baseline 
recognizes the inevitable delay to initial flight testing and all 
supporting tasks.[Footnote 75] It also provides a new starting point 
for measuring the prime contractor's schedule performance. Therefore, 
even though the prime contractor completed $8.1 million worth above 
that scheduled for fiscal year 2004 (that is, incurred a positive 
schedule variance of $8.1 million), the variance would have been less 
favorable had the contractor not established a new baseline. 

Figure 10: THAAD Fiscal Year 2004 Cost and Schedule Performance:

[See PDF for image]

[End of figure]

The favorable cumulative cost variance incurred during fiscal year 2004 
masks problems with the cost variance incurred by the missile 
component, which was unfavorable for the year. Major factors 
contributing to the missile's unfavorable cost variance include 
explosions at a subcontractor's facility used to mix missile propellant 
and the cost of efforts to reestablish booster production, as noted 
above; delays in activating a test facility at the Air Force Research 
Laboratory; and re-design efforts on a faulty valve thrust vector 
assembly. Favorable cost variances in other THAAD areas, such as the 
radar segment, offset the missile's unfavorable cost variance. 

[End of section]

Appendix IX: Information on the Army's Missile Defense Programs:

Background:

The Army is responsible for funding and managing two missile defense 
programs. The programs--which ultimately will be fielded as a single 
missile defense system--include the Patriot missile defense system 
including its newest missile variant, the Patriot Advanced Capability-3 
(PAC-3), and the Medium Extended Air Defense System (MEADS), which is 
currently under development. The Army intends to incrementally replace 
fielded Patriot components with more-capable MEADS components as they 
become available. The resulting system is expected to better protect 
deployed U.S. forces and critical assets from short-and medium-range 
tactical ballistic missile attacks. The Army's Lower Tier Project 
Office manages Patriot and MEADS development, procurement, and 
fielding. 

Now operational with the U.S. Army, Patriot with its PAC-3 missiles is 
the latest evolution of the Patriot air and missile defense system. The 
Patriot system has four basic components: (1) ground-based radar to 
detect and track targets; (2) engagement control station to provide 
command, control, and communications; (3) launcher; and (4) interceptor 
missiles. Compared with earlier versions of the Patriot missile, PAC-3 
provides improved performance against short-and medium-range tactical 
ballistic missiles, cruise missiles, and aircraft. The PAC-3 missile is 
in production and successfully achieved initial fielding[Footnote 76] 
in September 2001. 

MEADS is an international co-development program between the United 
States, Germany, and Italy with a cost share of 58, 25, and 17 percent, 
respectively. MEADS expands upon Patriot capability with four new 
components: (1) a launcher; (2) battle management, command, control, 
communications, computer and intelligence (BMC4I) equipment; (3) a 
surveillance radar; and (4) a multi-function fire control radar. MEADS 
is expected to offer significant improvements in tactical mobility and 
strategic deployability over existing Patriot units. In addition, MEADS 
is designed to be interoperable with other airborne and ground-based 
sensors and utilize a netted architecture to provide a robust, 360-
degree defense against cruise missiles, unmanned-aerial-vehicles, 
tactical air to surface missiles, rotary-wing and fixed-wing threats, 
and very short and medium range theater ballistic missiles. 

Combined Aggregate Program:

In 2003, the Under Secretary of Defense for Acquisition, Technology, 
and Logistics approved plans for combining management, development, and 
fielding of the Patriot and MEADS programs.[Footnote 77] The approach 
calls for incremental fielding and early insertion of MEADS components 
within existing Patriot batteries rather than delivering MEADS as a 
single system. The Army uses the term "Combined Aggregate Program 
(CAP)" to refer to the transitional activities leading up to full 
fielding of the MEADS and replacement of Patriot components. CAP also 
includes an enhanced PAC-3 missile--funded 100 percent by the United 
States--called the Missile Segment Enhancement (MSE). The MSE missile 
is intended to operate at higher altitudes and longer ranges than 
existing PAC-3 missiles. 

The plan calls for MEADS components to be inserted into Patriot 
battalions in three time-phased increments, as follows:

* Increment one. Scheduled for initial fielding in fiscal year 2009, 
increment one consists of the insertion of the MEADS BMC4I to begin 
replacing the Patriot engagement control station component and 
associated equipment. This increment is considered the highest 
acquisition priority because it (a) integrates with existing sensors to 
provide 360-degree coverage to counter cruise missiles, and (b) 
supports targeting by using data from external sensors, which is 
referred to as "engage on remote."

* Increment two. Scheduled for initial fielding in fiscal year 2011, 
increment two consists of the insertion of the MEADS launcher to begin 
replacing the Patriot launcher. This increment is expected to enhance 
system mobility and be capable of firing either the existing PAC-3 
missile or the new MSE missile. The MSE missile is scheduled for 
initial fielding in 2011. It does not replace the PAC-3 missile but, 
rather, supplements fielded inventory. 

* Increment three. Scheduled for initial fielding in fiscal year 2015, 
increment three consists of the insertion of the MEADS Ultra High 
Frequency surveillance radar and the X-band multifunction fire control 
radar to replace the Patriot C-band radars. These radars are expected 
to provide (a) 360-degree coverage for defense against cruise missiles 
and fire control to engage low-altitude, stressing targets; and (b) 
surveillance and fire control for high-value asset defense against 
short-range ballistic missiles. 

The overall Patriot/MEADS CAP is scheduled for initial fielding in 2015 
when increment three is available. MEADS production is scheduled to 
continue through fiscal year 2028. The 2015 fielding date, approved by 
the Under Secretary for Defense, represents a three-year delay from the 
fielding date planned in the previous MEADS program. According to a 
Lower Tier Project Office spokesperson, constraints in developmental 
funding caused the delay in initial fielding of MEADS components. 
Specifically, out-year Research, Development, Test and Evaluation 
(RDT&E) funding was insufficient to field MEADS in fiscal year 2012. 

Patriot/MEADS CAP Funding:

The Army's Lower Tier Project Office estimates that the life-cycle cost 
for the United States' portion of the Patriot/MEADS CAP program--which 
includes PAC-3 and MEADS-component development, procurement, and 
operations and support (O&S) costs--will be $150.6 billion through 
approximately fiscal year 2048. Of this amount:

* $109 billion (72.4 percent) is for O&S. 

* $31.9 billion (21.2 percent) is for procurement. 

* $9.7 billion (6.4 percent) is for RDT&E. 

Operations and support costs are a large proportion of the total cost 
largely because of the length of time a fielded unit is supported. 
Although production is scheduled to end in fiscal year 2028, these 
newest units are expected to be in the field for another 20 years. 

Table 38 summarizes the funding requested by the U.S. Army to fund 
development and missile procurement of the Patriot/MEADS Combined 
Aggregate Program over the Future Years Defense Plan (fiscal years 2006-
2011). The requested funding supports the procurement of 108 PAC-3 
missiles per year. 

Table 38: Patriot/MEADS CAP Planned Costs:

Dollars in millions of then-year dollars. 

FY 2006; 
RDT&E: $288.8; 
Missile procurement: $489.7. 

FY 2007; 
RDT&E: $$326.4; 
Missile procurement: $494.8. 

FY 2008; 
RDT&E: $454.5; 
Missile procurement: $466.0. 

FY 2009; 
RDT&E: $510.7; 
Missile procurement: $471.8. 

FY 2010; 
RDT&E: $510.4; 
Missile procurement: N/A. 

FY 2011; 
RDT&E: $490.4; 
Missile procurement: N/A. 

Source: Department of the Army. 

Note: Budget as of February 2005. 

[End of table]

[End of section]

Appendix X: Scope and Methodology:

The accomplishment of Missile Defense Agency (MDA) program goals is 
ultimately achieved through the efforts of individual Ballistic Missile 
Defense System (BMDS) elements. Therefore, we based our assessment on 
the progress made in fiscal year 2004 by those seven elements that (1) 
are under the management of MDA and (2) are being developed as part of 
a block capability. The elements we reviewed accounted for 72 percent 
of MDA's fiscal year 2004 research and development budget. We compared 
each element's completed activities, test results, demonstrated 
performance, and prime contractor cost and schedule performance in 
fiscal year 2004 with those planned for the year. We also completed an 
abbreviated evaluation of an eighth BMDS element, the U.S. Army's 
Combined Aggregate Program, which consists of Patriot and the Medium 
Extended Air Defense System. 

Many activities completed in fiscal year 2004 by the various element 
programs pertained to the completion of Limited Defensive Operations, 
which is an integral part of the Block 2004 goals. To assess progress 
toward schedule goals--that is, program activities including test 
events scheduled for completion in fiscal year 2004--we examined each 
element's prime contractor Cost Performance Reports, Defense Contract 
Management Agency's analyses of these reports (if available), quarterly 
reviews of element progress (known as System Element Reviews), and 
other agency documents to determine whether key activities were 
accomplished as planned. We also developed a data collection 
instrument, which was submitted to MDA, to gather detailed information 
on completed program activities, including tests, design reviews, prime 
contracts, and estimates of element performance. 

We assessed MDA's fiscal year 2004 cost performance by separately 
reviewing the cost performance of each BMDS element's prime contractor. 
We used this methodology because MDA allocates a large percentage of 
its budget to fund prime contractors that develop system elements. To 
make these assessments, we applied established earned value management 
techniques to data captured in contractor Cost Performance Reports. 
Results were presented in graphical form to determine trends. We also 
used established earned value management formulas to project the likely 
costs of the contracts at completion. 

To assess MDA's progress toward its performance goals, we analyzed data 
provided by MDA on the Ground-based Midcourse Defense, Aegis Ballistic 
Missile Defense, and Command, Control, Battle Management, and 
Communications elements--the elements that comprise the Block 2004 
defensive capability. We supplemented this information by holding 
discussions with, and attending overview briefings presented by, 
various program office officials. Furthermore, we interviewed officials 
from the office of the Director, Operational Test and Evaluation, 
within the Department of Defense (DOD) to learn more about their 
assessment of the operational capability of the initial BMDS. Finally, 
we met with officials from U.S. Strategic Command to discuss the 
initial capability's military utility from the warfighter's 
perspective. 

During our review, we observed that MDA is expected to face increasing 
funding risks--arising from sources both within and outside DOD--in the 
years ahead as MDA attempts to enhance and field its missile defense 
capabilities. To examine this issue further, we reviewed life-cycle 
cost documentation from the U.S. Army Lower Tier Project Office, our 
report on total ownership costs,[Footnote 78] a Congressional Budget 
Office report,[Footnote 79] and MDA documentation on the agency's plans 
for development and fielding. 

We also observed inconsistencies in how MDA is implementing its block 
approach. To gain insight into this issue, we examined element-level 
documents and answers to a data collection instrument that we generated 
to extract specific information on planned deliveries of fielded 
assets. We also examined MDA's Statement of Goals, budget statements 
for fiscal years 2004 and 2005, and other documents provided by MDA, 
such as Missile Defense Plan II. 

To ensure that MDA-generated data used in our assessment are reliable, 
we evaluated the agency's internal management control processes. We 
discussed these processes extensively with MDA upper management. In 
addition, we confirmed the accuracy of MDA-generated data with multiple 
sources within MDA and, when possible, with independent experts. To 
assess the validity and reliability of prime contractors' Earned Value 
Management systems and reports, we analyzed audit reports prepared by 
the Defense Contract Audit Agency. Finally, we assessed MDA's internal 
accounting and administrative management controls by reviewing MDA's 
Federal Managers' Financial Integrity Report for Fiscal Years 2003 and 
2004. 

Our work was performed primarily at MDA headquarters in Arlington, 
Virginia. At this location, we met with officials from the Kinetic 
Energy Interceptors Program Office; Aegis Ballistic Missile Defense 
Program Office; Airborne Laser Program Office; Command, Control, Battle 
Management, and Communications Program Office; and Ground-based 
Midcourse Defense Program Office. In addition, we met with officials 
from the Space Tracking and Surveillance System Program Office, Los 
Angeles, California; Terminal High Altitude Area Defense Project 
Office, Huntsville, Alabama; and the U.S. Army Lower Tier Program 
Office, Huntsville, Alabama. We also interviewed officials from the 
office of the Director, Operational Test and Evaluation, Arlington, 
Virginia; U.S. Strategic Command, Omaha, Nebraska; and the Joint 
Theater Air Missile Defense Organization, Arlington, Virginia. 

We conducted our review from May 2004 through February 2005 in 
accordance with generally accepted government auditing standards. 

[End of section]

Appendix XI: GAO Contact and Staff Acknowledgments:

GAO Contact:

Barbara Haynes (256) 922-7500:

Acknowledgments:

In addition to the individual named above, Tony Beckham, Ivy Hübler, 
Stan Lipscomb, LaTonya Miller, Karen Richey, Adam Vodraska, Jonathan 
Watkins, and Randy Zounes (Analyst-in-Charge) made key contributions to 
this report. 

FOOTNOTES

[1] DOD also funds missile defense activities outside of MDA. The Army 
requested approximately $4.5 billion for the development and 
procurement of its Combined Aggregate Program--consisting of Patriot 
and the Medium Extended Air Defense System--during fiscal years 2006 
through 2011. Appendix IX provides additional information on this 
program. 

[2] Pub. L. No. 107-107, section 232. 

[3] Functional pieces of system equipment, such as radars and 
interceptors, are referred to as "components."

[4] GAO, Missile Defense: Actions Are Needed to Enhance Testing and 
Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004). 

[5] Ronald W. Reagan National Defense Authorization Act for Fiscal Year 
2005, Pub. L. No. 108-375, section 233. 

[6] Congress authorized DOD's use of funds appropriated for MDA 
research, development, test, and evaluation for the fielding of 
ballistic missile defense capabilities. Pub. L. No. 108-136, section 
222; Pub. L. No. 108-375, section 231. 

[7] We found, for example, that research and development cost estimates 
grew $6.7 billion for the Joint Strike Fighter in calendar year 2003 
and $9.2 billion for the Future Combat System in fiscal year 2004. 

[8] Table 1 lists those elements of the BMDS for which we completed a 
detailed review of progress achieved in fiscal year 2004. Because we 
were directed to assess MDA's progress in achieving its program goals 
and MDA does not have funding and management responsibility for the 
Patriot system, our review of this program--provided in appendix IX--is 
not as detailed. Rather, we provide information on how Patriot's 
eventual replacement, Medium Extended Air Defense System (MEADS), will 
be inserted into fielded Patriot units. 

[9] MDA goals are formally detailed in the agency's budget estimates 
and in the top-level MDA document, Statement of Goals. 

[10] The KEI program is funded by the Block 2012 program and, 
accordingly, is not part of the Block 2004 and 2006 goals. 

[11] In budget documentation submitted in February 2004, MDA referred 
to these goals as "Operational Alert Configuration" Goals. "Fielded 
Configuration" is new terminology. 

[12] Mission area investment noted in figure 2 represent funding of 
major mission areas that contribute to the development and enhancement 
of all blocks. For example, these investments fund system design and 
engineering activities, testing, advanced concept development, and 
other special programs. 

[13] Additional details on system availability and readiness are 
classified. 

[14] IFT-13C was a "zero-offset flyby." Although intercepting the 
target was not a test objective, no action was taken to prevent an 
intercept. 

[15] The fire control radar is the primary radar for providing the 
necessary targeting data to the fire control node (battle management 
component). In particular, data provided by the fire control radar are 
used to generate an interceptor flyout solution that guides the 
interceptor to the target. 

[16] DOT&E is responsible for providing independent oversight of 
operational test and evaluation of major defense acquisition programs 
to verify their operational effectiveness and suitability for combat 
use. The Director is the principal operational test and evaluation 
official within DOD and advises the Secretary of Defense and Under 
Secretary of Defense for Acquisition, Technology, and Logistics on 
operational test and evaluation. The Director also provides responsible 
officials with advice on developmental testing. 

[17] The term "effective" means that the BMDS can destroy an ICBM with 
a high probability of success. The exact figures, which depend on 
scenario, are classified. 

[18] GMD's December 2004 flight test, IFT-13C, and its February 2005 
flight test, IFT-14, are not counted. 

[19] GAO, Missile Defense: Actions Being Taken to Address Testing 
Recommendations, but Updated Assessment Needed, GAO-04-254 (Washington, 
D.C.: Feb. 26, 2004). 

[20] A transponder is a receiver-transmitter that will generate a reply 
signal under proper interrogation. The missile defense community also 
refers to the transponder as the "C-band beacon."

[21] Most notably are Glory Trips, which are live flight tests during 
which a Minuteman III missile is launched from Vandenberg Air Force 
Base as part of Follow-on Test and Evaluation. 

[22] With the objective of acting as the fire control radar for an ICBM 
engagement, Aegis BMD planned to participate in GMD flight test IFT-14 
in February 2005. The test could not be fully executed because the GMD 
interceptor failed to launch. 

[23] The EVM system is a management tool widely used by DOD to compare 
the value of a prime contractor's work performed to the work's actual 
cost. The tool measures the contractor's actual progress against its 
expected progress and enables the government and contractor to estimate 
the program's remaining cost. 

[24] An integrated baseline review is the program manager's review of a 
contractor's performance measurement baseline. The review is conducted 
by the program manager and the manager's technical staff. It verifies 
the technical content of the baseline and ensures that contractor 
personnel understand and have been adequately trained to collect earned 
value management data. The review also verifies the accuracy of the 
related budget and schedules, ensures that risks have been properly 
identified, assesses the contractor's ability to implement earned value 
management properly, and determines if the work identified by the 
contractor meets the program's objective. 

[25] Congress authorized DOD's use of funds appropriated for MDA 
research, development, test, and evaluation for the fielding of 
ballistic missile defense capabilities. Pub. L. No. 108-136, section 
222; Pub. L. No. 108-375, section 231. 

[26] Congressional Budget Office, The Budget and Economic Outlook: An 
Update (Washington, D.C.: Sept. 2004). 

[27] GAO, Missile Defense: Actions Are Needed to Enhance Testing and 
Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004). 

[28] GAO, Best Practices: Setting Requirements Differently Could Reduce 
Weapon Systems' Total Ownership Costs, GAO-03-57 (Washington, D.C.: 
Feb. 11, 2003). 

[29] GAO, Uncertainties Remain Concerning the Airborne Laser's Cost and 
Military Utility, GAO-04-643R (Washington, D.C.: May 17, 2004). 

[30] The ABL program manager agrees that operating costs of the ABL 
element are not well defined due to its technical maturity. However, as 
with the fielding of any new technology, the initial operating costs 
may be substantial. As the support concept matures, the ABL program 
manager expects these costs to decrease and be comparable with other 
Air Force high-value assets. 

[31] With the submission of the fiscal year 2006 President's Budget in 
February 2005, MDA implemented a new BMDS baseline approach for the 
THAAD program. The agency now refers to the fielding of the fire unit 
as a Block 2006/2008 fielding. 

[32] The program office refers to the kill vehicle as the "kinetic 
warhead."

[33] Five additional destroyers will be upgraded during Block 2006, 
bringing the total number of upgraded destroyers to 15, which was MDA's 
original Block 2004 goal. 

[34] MDA program goals called for the delivery of nine SM-3 missiles by 
the end of calendar year 2005. 

[35] The third destroyer was upgraded in October 2004. 

[36] The program also conducted FM-7 in February 2005, which resulted 
in a successful intercept of a short-range ballistic missile target. 

[37] GAO, Missile Defense: Actions Are Needed to Enhance Testing and 
Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004). 

[38] Includes funds expended to develop the Navy Theater Wide system. 

[39] A performance measurement baseline identifies and defines work 
tasks, designates and assigns organizational responsibilities for each 
task, schedules the work tasks in accordance with established targets, 
and allocates budget to the scheduled work. 

[40] An integrated baseline review is the program manager's review of a 
contractor's performance measurement baseline. The review is conducted 
by the program manager and the manager's technical staff. It verifies 
the technical content of the baseline and ensures that contractor 
personnel understand and have been adequately trained to collect earned 
value management data. The review also verifies the accuracy of the 
related budget and schedules, ensures that risks have been properly 
identified, assesses the contractor's ability to implement earned value 
management properly, and determines if the work identified by the 
contractor meets the program's objectives. 

[41] The terms "intercontinental ballistic missile" and "long-range 
ballistic missile" are used interchangeably. 

[42] "First Flight" was planned as a "passive" flight test, that is, 
without the use of the Track Illuminator Laser (TILL) and the Beacon 
Illuminator Laser (BILL). The TILL and BILL are part of the laser-beam 
control system used to focus the laser beam on the target and to 
mitigate the effects of the atmosphere on beam quality. 

[43] GAO, Missile Defense: Actions Are Needed to Enhance Testing and 
Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004). 

[44] The quality of a laser beam is measured by attributes such as beam 
width, coherency, and sustained power. 

[45] Atmospheric compensation is the process whereby the high-energy 
laser beam uses a system of deformable mirrors to minimize the 
degradation of the laser caused by distortions in the atmosphere. 

[46] GAO, Uncertainties Remain Concerning the Airborne Laser's Cost and 
Military Utility, GAO-04-643R (Washington, D.C.: May 17, 2004). 

[47] A performance measurement baseline identifies and defines work 
tasks, designates and assigns organizational responsibilities for each 
task, schedules the work tasks in accordance with established targets, 
and allocates budget to the scheduled work. 

[48] The EVM system is a management tool widely used by DOD to compare 
the value of the prime contractor's work performed to the work's actual 
cost. The tool measures the contractor's actual progress against its 
expected progress and enables the government and contractor to estimate 
the program's remaining cost. 

[49] The C2BMC element also consists of supporting hardware, such as 
workstations and communications equipment. 

[50] Details of this issue are classified. 

[51] An OTA refers to transactions other than contracts, grants, or 
cooperative agreements. OTAs are entered into under the authority of 10 
U.S.C. § 2371 (2000 & Supp. II 2004) for basic, applied, and advanced 
research projects or under the authority of section 845 of the National 
Defense Authorization Act for Fiscal Year 1994 (10 U.S.C. § 2371 note) 
for prototype projects. 

[52] The terms "intercontinental ballistic missile" and "long range 
ballistic missile" are used interchangeably. They are, by definition, 
ballistic missiles with ranges greater than 5,500 kilometers (3,400 
miles). 

[53] GAO, Missile Defense: Actions Are Needed to Enhance Testing and 
Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004). 

[54] Technically, IFT-13C was a "zero-offset flyby." Although 
intercepting the target was not a test objective, no action was taken 
to prevent an intercept. 

[55] The December 2004 flight test, IFT-13C, and the February 2005 
flight test, IFT-14, are not counted. 

[56] Includes funds expended to develop the National Missile Defense 
system. 

[57] In our report, GAO, Missile Defense: Actions Are Needed to Enhance 
Testing and Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 
2004), we stated that the land-based system would be available in the 
Block 2010 time frame. Because of budget cuts and a restructuring of 
the program, the land-based KEI capability will not be available until 
Block 2012. 

[58] The plume is the hot exhaust gas emanating from the missile during 
boost phase. 

[59] High risk means that the program will not meet its objectives 
without priority management actions and risk reduction activities. 

[60] Report of the American Physical Society Study Group on Boost Phase 
Defense Intercept Systems for National Missile Defense (July 2003). 

[61] Battleson, Kirk, et al., Phase One Engineering Team, Parameters 
Affecting Boost Phase Intercept System (February 2002). 

[62] A performance measurement baseline identifies and defines work 
tasks, designates and assigns organizational responsibilities for each 
task, schedules the work tasks in accordance with established targets, 
and allocates budget to the scheduled work. 

[63] The satellites are expected to orbit the earth at an altitude much 
less than satellites in geo-synchronous orbit. 

[64] The two technology demonstration satellites were part of the 
Flight Demonstration System. 

[65] Program content of Block 2010 and beyond is classified. 

[66] Prior to 2002, the SBIRS-Low program invested $686 million to 
develop the demonstration satellites that are now part of the STSS 
program. 

[67] A performance measurement baseline identifies and defines work 
tasks, designates and assigns organizational responsibilities for each 
task, schedules the work tasks in accordance with established targets, 
and allocates budget to the scheduled work. 

[68] In early 2004, MDA changed the name of the THAAD element from 
"Theater High Altitude Area Defense" to "Terminal High Altitude Area 
Defense."

[69] GAO, THAAD Restructure Addresses Problems but Limits Early 
Capability, GAO/NSIAD-99-142 (Washington, D.C.: June 30, 1999). 

[70] "Product development" is referred to by DOD as the "System 
Development and Demonstration" phase of acquisition and formerly as 
"Engineering and Manufacturing Development."

[71] GAO, Missile Defense: Actions Are Needed to Enhance Testing and 
Accountability, GAO-04-409 (Washington, D.C.: Apr. 23, 2004). 

[72] The THAAD program monitors numerous performance indicators as part 
of its management process. For example, element effectiveness, as 
measured by the probability of a successful kill, is one such 
indicator. 

[73] The cost and schedule variance incurred during fiscal year 2004 
was $0.673 million and $8.1 million, respectively. 

[74] A performance measurement baseline identifies and defines work 
tasks, designates and assigns organizational responsibilities for each 
task, schedules the work tasks in accordance with established targets, 
and allocates budget to the scheduled work. 

[75] The explosions caused the program to seek an alternate source. 
According to the program office's current risk assessment, "source 
replacements have the potential for delaying booster delivery during 
the fight test program and into production."

[76] Initial fielding, sometimes called First Unit Equipped, refers to 
the date a system and support elements are issued to the designated 
unit and specified training has been accomplished. 

[77] Evolution from Patriot to MEADS--Acquisition Decision Memorandum, 
dated August 12, 2003. 

[78] GAO, Best Practices: Setting Requirements Differently Could Reduce 
Weapon Systems' Total Ownership Costs, GAO-03-57 (Washington, D.C.: 
Feb. 11, 2003). 

[79] Congressional Budget Office, The Budget and Economic Outlook: An 
Update (Washington, D.C.: Sept. 2004). 

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