Index

Missile Defense: Schedule for Navy Theater Wide Program Should Be Revised
to Reduce Risk (Letter Report, 05/31/2000, GAO/NSIAD-00-121).

Pursuant to a congressional request, GAO provided information on the
Navy Theater Wide system, focusing on: (1) how the additional funding
provided by Congress for the program in fiscal years (FY) 1997 through
1999 was used; and (2) whether significant risks to the program remain.

GAO noted that: (1) the Navy used the $663 million in increased funding
as intended to reduce technical risks and develop system technologies
earlier than originally planned; (2) about 41 percent was used for
system design and analysis efforts, such as reducing the technical risks
associated with improving the system's ability to differentiate intended
targets from other objects; (3) about 20 percent of the funding was used
for procuring hardware items, such as rocket motors and test interceptor
missiles; (4) according to program officials, the additional funding
also allowed the program to shift from a demonstration effort to an
acquisition program in which a weapon system will be fully developed and
produced; (5) although the Navy used this additional funding to reduce
technical risk and develop the system sooner, significant technical and
schedule risks still exist; (6) technological advancement is required to
differentiate the target from other objects; (7) such discrimination
requires that the system's computer network can process an enormous
amount of data in real time; (8) this network has not been built, and
its software must be integrated with the computer code that is already
installed on each ship's computer system; (9) current activities include
writing software, examining several computer architectures for the
network, and building the capability to test the network; (10)
technological advancement is also required in developing the capability
of the interceptor missile to seek and destroy the target; (11) GAO is
concerned that the program office has proposed a schedule calling for
initial operational testing of the missile in 2010 even though 50
percent of the required 80 missiles would be produced and delivered by
2008 and 100 percent by 2010; (12) operational testing is designed to
provide an independent evaluation of whether a system meets required
performance levels prior to beginning production; (13) GAO has found
that cost overruns and the deployment of substandard systems occur when
the Department of Defense proceeds into production before systems are
tested under operational conditions; (14) the Navy has scheduled up to 7
flight tests between July 2000 and September 2001; (15) according to
testing officials, test programs typically separate flight tests by
about 6 months; (16) a longer interval between tests gives officials
better opportunities to evaluate test results, understand problems, and
incorporate solutions into the next test; and (17) the approved level of
funding does not match the Navy program office's estimate of how much it
needs to implement the program on schedule.

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

 REPORTNUM:  NSIAD-00-121
     TITLE:  Missile Defense: Schedule for Navy Theater Wide Program
	     Should Be Revised to Reduce Risk
      DATE:  05/31/2000
   SUBJECT:  Ballistic missiles
	     Defense capabilities
	     Operational testing
	     Weapons systems
	     Naval procurement
	     Cost overruns
	     Air defense systems
IDENTIFIER:  Navy Theater Wide System
	     Patriot Missile Advanced Capability-Three Upgrade
	     DOD National Missile Defense System
	     SDI Theater High Altitude Area Defense System
	     Navy Area Defense Program
	     Aegis Weapon System
	     Standard Missile System
	     AN/SPY-1 Radar

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GAO/NSIAD-00-121

Appendix I: Description of Block II Technologies for Navy Theater
Wide Program

24

Appendix II: Research, Development, Test, and Evaluation Funds Budgeted and
Allocated for Navy Theater Wide in
Fiscal Years 1997-1999

26

Appendix III: Comments From the Department of Defense

28

30

Table 1: Allocations of Congressional Funding Increases for Fiscal
Years 1997 Through 1999 11

Figure 1: Depiction of the Navy Theater Wide System 8

Figure 2: Proposed Navy Theater Wide Block I Schedule 18

DOD Department of Defense

NTW Navy Theater Wide

National Security and
International Affairs Division

B-282711

May 31, 2000

The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Mary Landrieu
Ranking Member
Strategic Forces Subcommittee
Committee on Armed Services
United States Senate

The Navy Theater Wide system is being developed to defend military and
civilian assets, including U.S. and allied military forces in the field,
against attacks by medium- and long-range ballistic missiles while they are
still outside the atmosphere. The Navy is developing the system in two
segments. The first segment, or Block I, is intended to provide an initial
capability by 2010 involving the deployment of 80 interceptor missiles
aboard 4 ships. The Block II segment is expected to provide an enhanced
capability at a yet-to-be-defined date. Total Block I costs are estimated at
about $6.4 billion; Block II costs have not yet been estimated.

For fiscal years 1997 through 1999, the Congress increased funding for the
program by 150 percent--about $663 million--over the $444 million requested
in the President's budgets for those years. The purpose of the increase was
to enable the Navy to reduce technical risks and develop system technologies
earlier than planned.

You expressed concern that, despite the funding increases, the program was
viewed in 1998 by a high ranking Department of Defense official and an
independent panel of experts as "high risk" because of technical challenges,
such as improving the system's capability to track and destroy enemy
ballistic missiles.1 As a result, you asked us to determine (1) how the
additional funding provided by the Congress for the program in fiscal years
1997 through 1999 was used and (2) whether significant risks to the program
remain. Within the next month, we also plan to issue reports on the status
of two other missile defense systems under development--the Patriot Advanced
Capability-3 and National Missile Defense.2 (A list of related products is
included at the end of our report.)

The Navy used the $663 million in increased funding as intended to reduce
technical risks and develop system technologies earlier than originally
planned. About 41 percent, or $270 million, was used for system design and
analysis efforts, such as reducing the technical risks associated with
improving the system's ability to differentiate intended targets from other
objects, such as debris. About 20 percent of the funding was used for
procuring hardware items, such as rocket motors and test interceptor
missiles, earlier than planned. According to program officials, the
additional funding also allowed the program to shift from a demonstration
effort to determine whether a target in outer space could be hit to an
acquisition program in which a weapon system will be fully developed and
produced.

Although the Navy used this additional funding to reduce technical risk and
develop the system sooner, significant technical and schedule risks still
exist. Specifically, the following technical risks remain.

 Technological advancement is required to differentiate the target from
other objects. Such discrimination requires, for example, that the system's
computer network can process an enormous amount of data in real time. This
network has not been built, and its software must be integrated with the
computer code that is already installed on each ship's computer system.
Current activities include writing software, examining several computer
architectures for the network, and building the capability to test the
network.

 Technological advancement is also required in developing the capability of
the interceptor missile to seek and destroy the target. We are concerned
that the program office has proposed a schedule calling for initial
operational testing of the missile in 2010 even though 50 percent of the
required 80 missiles would be produced and delivered by 2008 and 100 percent
by 2010. Operational testing3 is designed to provide an independent
evaluation of whether a system meets required performance levels prior to
beginning production. We have frequently found that cost overruns and the
deployment of substandard systems occur when the Department of Defense
proceeds into production before systems are tested under operational
conditions.

The following schedule risks exist.

 The Navy has scheduled up to seven initial flight tests between July 2000
and September 2001--about one every 2.5 months. This rapid test schedule
raises concerns because, according to testing officials, test programs
typically separate flight tests by about 6 months. A longer interval between
tests gives program officials better opportunities to evaluate test results,
understand problems, and incorporate solutions into the next test.

 The Department's approved level of funding does not match the Navy program
office's estimate of how much it needs to implement the program on schedule.
According to the office, funding levels set by the Department average $282
million per year for fiscal years 2002 through 2005, whereas it estimates a
need for an average of $567 million per year to keep to its proposed
schedule.

This report contains a recommendation that the Navy revise the proposed
funding profile and test schedule for the Navy Theater Wide program to
ensure that the Navy can undertake initial operational testing before
producing most of its missiles. The Department partially concurred with our
recommendation. It agreed to review the funding and schedule. However, the
Department did not commit to revising its plans as we recommended.

The Navy Theater Wide (NTW) system is being developed by the Navy and the
Department of Defense's (DOD) Ballistic Missile Defense Organization4 to
intercept enemy missiles while they are still above the Earth's atmosphere
in a region known as the exoatmosphere. The Army's Theater High Altitude
Area Defense system is a land-based counterpart to the Navy's system; it is
intended to intercept warheads in the exoatmosphere and as they reenter the
atmosphere.5 The Navy and the Army systems are considered "upper-tier"
systems in that they are expected to act as a first line of defense against
theater ballistic missiles, which have shorter ranges than intercontinental
ballistic missiles. "Lower-tier" systems, such as the Navy Area Defense and
Army Patriot Advanced Capability-3 systems, will complement the upper-tier
systems, attacking remaining enemy warheads only after they have reentered
the atmosphere. In addition, the National Missile Defense system is being
developed to defend all 50 states against a limited intercontinental
ballistic missile attack.

The Navy Theater Wide system consists of modifications to the Navy's Aegis
weapon system and Standard missile. The Aegis weapon system, which is used
by certain classes of Navy cruisers and destroyers, is a multimission combat
system capable of simultaneous operations against air, surface, and
submarine threats. The NTW system, as depicted in
figure 1, employs radar (called the AN/SPY-1) to detect and track targets.
The NTW system is designed to employ a version of the Navy's Standard
missile known as the Standard Missile-3, which is a four-stage guided
missile.6 The missile would be launched from a vertical launching system,
which would stow and launch various missiles from Aegis cruisers.
NTW-equipped cruisers are expected to use their radar to track enemy
missiles and guide the modified Standard missiles to them. The Standard
missile features a solid-fueled third stage designed to be fired in two
pulses in order to allow the warhead to close on its target. Once in close
proximity to its target, the intercepting missile is expected to use an
onboard infrared detection system, or "seeker," to discern the heat
signature of the incoming warhead. The Standard missile's warhead would then
ram the target with enough speed, and in precisely the right location, to
significantly damage or destroy it. This "kinetic warhead" is being designed
to contain no explosives, it will rely on the force of impact to obliterate
its target. This concept is known as "hit-to-kill."

Source: U.S. Navy.

In December 1999, DOD restructured its upper-tier ballistic missile defense
programs--NTW and the Army's Theater High Altitude Area Defense--to make
possible the funding of both programs in future years. Prior to the
restructuring, NTW Block I was scheduled for deployment in 2007. Block I is
now scheduled to be deployed in three stages:

 By 2006, Block IA is expected to consist of an Aegis test ship armed with
up to six test missiles for use against nonseparating and simple separating
enemy missiles.7

 By 2008, Block IB is expected to use two Aegis cruisers armed with 50
missiles. The ships would have the capability to change from the missile
defense to anti-air warfare mission. They would not, however, be able to
operate in both missile and anti-air defense modes simultaneously and would
likely require another ship for their own defense against airborne and
seaborne threats while conducting the missile defense mission. Block IB is
designed to counter all of the Block I threats, including warheads that
separate from their missiles.

 By 2010, Block IC is expected to deploy 80 missiles aboard four Aegis
cruisers.8 These ships are intended to perform all of their defense missions
simultaneously against all of the Block I threats.

The Navy plans to conduct five series of flight tests in developing the NTW
system between 2000 and 2010. The first of these tests, known as the Aegis
Lightweight Exoatmospheric Projectile Intercept tests, are designed to test
the system's ability to intercept simple targets. If these initial tests are
successful, program officials plan to conduct the more challenging Threat
Representative Testing against nonseparating targets, followed by the Threat
Representative Separating Testing against separating targets. If these tests
are successful, the Navy plans to conduct the final two series of tests--the
Developmental Test/Operational Assessment and the Developmental
Test/Operational Test. The series of operational tests is to be conducted by
an independent Navy testing organization in conditions that simulate actual
operational conditions.

The Navy also plans to develop a Block II version of the NTW system with
increased capability. Block II is expected to intercept more types of
theater ballistic missiles at greater ranges than Block I is capable of
reaching. Although the Navy is not due to define the Block II architecture
and prepare preliminary cost and schedule estimates until November 2000, DOD
has begun exploring some of the advanced technologies likely to be required
by the system. A description of these technologies is provided in appendix
I. Some DOD officials have stated that the Navy should proceed directly to
the development of the Block II system. According to these officials,
development resources should be concentrated on the more capable Block II
system since Block I will provide only a limited capability and may not be
"on the path" to the development of Block II. Other DOD officials have
stated that Block I is needed because it would provide a theater missile
defense capability that does not currently exist. DOD has required the Navy
to report by June 2000 on whether the program should proceed directly to
developing the Block II system.

As directed by the conferees for the National Defense Authorization Act for
Fiscal Year 1998,9 DOD has also been exploring what would be involved in
adding a sea-based national missile defense capability to the NTW
architecture. In response to the conferees, DOD submitted a report in 1999
describing whether and how NTW could be upgraded in the future to provide a
limited national missile defense capability.10 DOD concluded that the Block
II system, without upgrades, would have "no useful capability" against
longer-range ballistic missiles, but may be useful against shorter-range
missiles. Developing a capability against longer-range missiles would
involve several improvements, including greater target identification and
tracking accuracy, better target discrimination, and a faster and more
lethal warhead. In its report, DOD also stated that the yet-to-be-defined
Block II system could include a sea-based national missile defense
capability and, if fully funded, could be deployed within 4 years of NTW's
Block I deployment date (currently estimated to be 2010).

Technologies Earlier

The Navy used the increased funding provided by the Congress for the Navy
Theater Wide program to reduce risks and develop system technologies earlier
than planned. From the NTW program office perspective, the additional
funding also allowed the program to shift from a demonstration effort
(designed to determine whether the Standard missile could be modified to hit
a target in outer space) to an acquisition program (in which a weapon system
will be fully developed and produced).

Recent annual reviews of the program issued by DOD's office for operational
testing and evaluation and a review in 1998 by an independent panel of
experts found NTW to be "high risk" because of technical challenges such as
improving the system's capability to track and destroy enemy ballistic
missiles. These reviewers noted that NTW needed to improve its test program
in order to address these technical challenges. The additional funding
provided by the Congress helped the program to address some of these
challenges.

The Congress provided DOD with $663 million more than the $444 million
requested for NTW in the President's budgets for fiscal years 1997 through
1999. Over 90 percent of the additional funding has been allocated to seven
program areas--design and analysis, hardware fabrication and procurement,
systems engineering, test and evaluation, ship system modifications,
software development, and engineering support. Table 1 shows how the funding
increases for the 3-year period, fiscal years 1997 through 1999, have been
allocated. Appendix II shows, in detail, the amounts proposed in the
President's budget and allocated by DOD after congressional appropriations
for fiscal years 1997 through 1999 for the various program areas.

 Dollars in millions
 Program area                         Funding increase  Percent of total
 Design and analysis                  $270              41
 Hardware fabrication and procurement 135               20
 Systems engineering                  67                10
 Test and evaluation                  47                7
 Ship system modifications            32                5
 Software development                 30                4
 Engineering support                  24                4
 Othera                               57                9
 Total                                $663              100

Note: Totals may not add due to rounding.

aFunding for several other program areas, including program management, test
equipment, and program support.

Source: Navy.

Details on how the increased funds were used for the top seven program areas
are provided below.

 Forty-one percent of the additional funding was used for design and
analysis. This program area primarily consisted of design efforts for the
Aegis weapon system, the Standard Missile-3, and the vertical launching
system. For example, to improve the ability of the system's radar to
differentiate the target from other objects, such as debris, engineers
developed the High Range Resolution concept for Aegis. High Range Resolution
studies were done in 1997 to determine the effectiveness of the AN/SPY-1
radar system in conducting target length measurements, which are used to
discriminate the target warhead from the other objects. The additional
funding allowed the radar work to be done earlier and allowed a successful
at-sea demonstration to be conducted in 1998. The additional funding also
led to earlier than planned specification changes, studies, and missile
design reviews that determined the Standard Missile-3 had only a minimal
impact on the vertical launching system.

 Hardware fabrication and procurement accounted for 20 percent of the
additional funding. These funds allowed the program to procure, earlier than
planned, rocket motors and material for the fabrication of the initial Aegis
Lightweight Exoatmospheric Projectile Intercept test missiles and the Threat
Representative Test missiles. In addition, funding went to a laboratory
effort that determined the program's signal processing requirements could be
met using commercial software. Signal processing requires a large
computational capacity, which in the past has been met using computers
specifically designed for DOD.

 Systems engineering, which works to match system design to system
requirements, accounted for 10 percent of the additional funds. Several
documents necessary to initially define requirements for the program were
prepared in early 1999. Studies of alternative seekers and other
technological options were also completed and provided input into system
design decisions. Program officials said that without the additional
funding, these efforts would not have been completed until later.

 Test and evaluation accounted for 7 percent of the additional funding.
Program officials said that the additional funding allowed them to plan more
tests, which should help them to reduce technical risk. The revised test
plan increases the number of Aegis Lightweight Exoatmospheric Projectile
Intercept test flights from six to seven and starts the flight tests sooner.
Furthermore, the revised plan adds the Threat Representative Testing and
Threat Representative Separating Testing to reduce risk. It also increases
the number of developmental and operational tests in the last two series of
tests from 6 to 20. Overall, the program office was able to triple the
number of planned flight tests. The additional funding also allowed program
officials to add more ground tests and to conduct them sooner. For example,
wind tunnel tests were conducted for the interceptor nose cone and guidance
system. In addition, the NTW program used a simulator to test hardware,
computer programs, and the AN/SPY-1 radar. Program officials told us that
the enhanced test plan should help the program to address the independent
review panel's concern that ballistic missile defense programs had not built
sufficient developmental testing into their schedules.

 Ship system modifications accounted for 5 percent of the additional
funding. To reduce technical risks, program managers used the additional
funding to procure and install modifications to an Aegis weapon system
development site and to the U.S.S. Paul Hamilton and other test ships. They
also procured hardware modifications for vertical launching system test
sites, including the purchase of prototype circuit cards for the launch
sequencer, and procured and installed the High Range Resolution test bed in
the simulator and the test ships.

 Funding for software development, about 4 percent of the additional
funding, was used to develop software for the Standard Missile-3, the Aegis
weapon system, and the vertical launching system earlier than planned. Much
of the funding for Aegis has involved upgrading the Aegis software and
ensuring computer software compatibility with commercial computer systems.
To achieve the accuracy required for targeting the Standard Missile-3,
system engineers had to write a new computer program for the launch control
computer so that integration of the launch system with the Global
Positioning System11 could be achieved.

 Engineering support accounted for 4 percent of the additional funding.
Most of these funds were used to reduce technical risks by ground testing
the NTW system's ability to destroy enemy targets.

Although the additional funding provided by the Congress was used to reduce
technical risk and develop the system sooner, some significant technical and
schedule risks remain as the Navy Theater Wide program prepares for flight
testing later this year. Technical risks remain, particularly in the areas
of target discrimination and the Standard missile. In addition, the program
office's proposal to produce the Block I missiles before conducting the
initial operational testing is risky because testing frequently reveals
problems that require system redesign or modification. The schedule risks
stem from (1) compression of the proposed testing schedule and (2) the
uncertainty over future budget levels.

Technical risks for the Block I system remain in the areas of
differentiating the target from other objects and upgrading the Standard
missile. NTW program documents assess the overall Block I technical risk as
moderate to high pending demonstration that the NTW system can hit an
exoatmospheric target. The demonstration of a hit-to-kill capability has
generally proven to be a difficult technical challenge. Since 1982, even in
controlled flight tests, various missile defense programs have successfully
demonstrated the hit-to-kill capability above the atmosphere in only 4 of 14
intercept attempts--some 29 percent of the tests. Navy officials
acknowledged that developing a hit-to-kill technology has been a difficult
technical challenge, but noted that recent intercept attempts have been
successful.

Target discrimination

Program managers have to determine whether the Block I system can
effectively identify an enemy's ballistic missile warhead above the
atmosphere and then guide NTW's Standard missiles to the target. One area of
technical risk is the use of the Aegis system's AN/SPY-1 radar. The radar
must obtain sufficiently accurate length measurements of objects above the
earth's atmosphere to allow the NTW system to discriminate among the
warhead, its missile body, and debris created by the release of the warhead
from the missile. One DOD testing official described the radar as the "weak
link in NTW," and several DOD officials also expressed concerns about the
radar's abilities. The AN/SPY-1 is an S-band radar12 originally designed to
deal with targets at lower altitudes, including airplanes and cruise
missiles. The NTW program has already begun to test a potential enhancement
to the radar's discrimination capability."13 An NTW program official noted
that if the system can discriminate among the objects it will have to deal
with, Block I should be able to counter expected threats.

Another risk area is "signal processing," which helps to differentiate the
target from other objects. NTW's signal processing would be carried out by a
computer network that breaks down large volumes of data in real time and
parcels them out to multiple processors. This network has yet to be built,
and the NTW computer software must be integrated with the computer code in
the existing Aegis weapon system software. Current activities include
writing system software, examining several computer architectures for the
network, and building test beds to demonstrate the signal processing
options.

Standard missile

The NTW system is designed to use a variant of the Navy's Standard
missile--the Standard Missile-3--to intercept enemy warheads in the
exoatmosphere. Technical concerns about the Standard Missile-3 include: (1)
whether it will be able to "see" the enemy warhead through debris created by
its own kinetic warhead, (2) whether the kinetic warhead is lethal enough to
destroy enemy warheads, and (3) whether all of the technical concerns have
been tested and resolved before the Navy produces all of the Block I
missiles.

NTW uses a kinetic, rather than exploding, warhead to ram and destroy enemy
ballistic missiles by force of impact. In such a hit-to-kill system, the
interceptor missile must be able to hit the target in the right place with
enough speed to significantly damage or destroy the missile. The NTW's
Standard Missile-3 would be guided to its target by shipborne radar, but in
the final moments of flight the missile would be guided by an onboard
detection system, known as a seeker.14 The Block I seeker has already been
flown aboard aircraft used to observe flight tests of other missile defense
programs and has successfully tracked targets during tests of the Theater
High Altitude Area Defense program.

Program officials are generally confident that the seeker will be able to
counter the expected threat, but Ballistic Missile Defense Organization
officials and testing officials have raised concerns about whether the
seeker will be able to "see" the target through the debris cloud created by
the kinetic warhead's own "solid divert and attitude control" system, which
maneuvers the warhead toward the target. This control system would fire hot
gases and solid fuel debris into space around the warhead, possibly creating
"plume effects" that could reduce the sensitivity of the infrared seeker.
Although ground tests are to be conducted using computers to simulate these
effects, program officials have acknowledged that they do not yet know
whether this debris cloud will be a problem. These officials said that
upcoming initial flight tests are designed to determine the magnitude of the
challenge posed by the plume effects. DOD testing officials are concerned,
however, that if the number of flight tests is reduced because early
intercept attempts are successful, the plume effects may not be sufficiently
studied.

In addition to finding the target, NTW's warhead must hit it with enough
force to degrade its mission or destroy it outright. Some DOD officials are
concerned about the ability of the lightweight kinetic warhead to destroy
enemy ballistic missiles. Program engineers have conducted extensive ground
tests of the warhead's lethality against targets with chemical payloads, and
they have run computer simulations to predict impact effects on all targets,
including those carrying explosive or nuclear payloads. Based on test
results to date, program officials have expressed confidence in the ability
of the warhead to damage the target sufficiently to degrade its mission.
However, they plan additional ground tests and acknowledge that flight
testing is required to prove the viability of the hit-to-kill concept.

Operational testing is designed to independently evaluate whether a system
meets required performance levels prior to beginning production and that
technical challenges have been resolved. The program office intends, if it
gains DOD's approval, to produce all of the Block I interceptor missiles
before conducting the initial operational testing. As shown in figure 2,
procurement of 20 Block I missiles per year would begin in 2005. After
procurement funding is received, the program office estimates that at least
24 months are needed to build a missile. The first delivery is scheduled for
2007 and the last in 2010. However, 50 percent of the missiles are scheduled
for delivery before completion of the fourth testing series in 2008 and
100 percent of the missiles before completion of the fifth series, which is
operational testing, in 2010.

Source: GAO.

Program officials told us that they structured the production schedule to
achieve deployment of the Block IB system no later than 2008 and Block IC by
2010. They also told us that the risk is low of producing a missile that
would require extensive changes based on the later tests. They stated that
the design of the Standard Missile-3 is only an evolutionary change from
designs of previous Standard missiles; the engineering effort for the
missile was "front-loaded;" and successful completion of the earlier tests
should enable DOD to fully evaluate the NTW's missile. They said that the
main purpose of operational testing will be to evaluate the missile's
integration into the Aegis weapon system rather than the missile's design.
They also told us that funding constraints prevent them from conducting the
operational test series any sooner.

As discussed above, however, some technological advances in the missile have
yet to be proven, such as the ability of the missile's seeker to "see" the
target through a debris cloud. Even if program officials are correct in
assessing the technical risk with the Standard missile upgrade as low, no
guarantee exists that the missile would still not require extensive changes
based on operational testing. In the case of the seeker, if testing shows
that the seeker's performance is degraded by the debris cloud created by the
kinetic warhead's solid divert and attitude control system, then redesign of
the control system and the kinetic warhead may be necessary. If it becomes
necessary to use a liquid-fueled control system, Navy officials have told us
that a redesign of the ship's vertical launching system would be necessary
since liquid fuel is more explosive and corrosive than solid fuel.

Our past work has frequently shown that cost overruns and the deployment of
substandard systems occur when DOD proceeds into production before systems
are tested under operational conditions.15 When operational testing reveals
problems, some of these systems experience design changes and modifications
or are never able to perform as required. Also, according to DOD's Risk
Management Guide, significant risks result when production begins before the
development effort has sufficiently matured.16 In the case of NTW, DOD
testing officials stated that they share our concern about operational
testing and said they are currently discussing with the Navy how to revise
the proposed schedule for testing and production.

We have two concerns about the proposed NTW schedule. Our first concern is
compression of the initial flight-test schedule. According to DOD's Risk
Management Guide, a program faces significant schedule risk if insufficient
time is allotted for thorough testing. The first set of NTW flight tests
(the Aegis Lightweight Exoatmospheric Projectile Intercept tests) is to
consist of up to seven flight tests within the 15-month period between July
2000 and September 2001--about one every 2.5 months. Program officials told
us that the maturity of the missile technology and their extensive
ground-test program has mitigated the schedule risk. As a result, they
believe that although the lack of test targets could cause delays, the gap
between flight tests should be sufficient to set up a test and incorporate
lessons learned from the previous missile shot. A Navy testing official told
us that, in his view, the Navy has a 50-percent chance of maintaining its
schedule. He said that programs typically separate flight tests by about
6 months. The longer gap between flight tests helps program officials to
better evaluate test results, understand problems, and incorporate solutions
into the next test.

We found that the Army's Theater High Altitude Area Defense program took an
average of about 3 months between its initial flight tests. However, after
three successive test failures, an independent review panel17 reported that
schedule compression may have contributed to problems discovered in one
flight test not being fully understood before conducting the next test.
Subsequent to this report, the Army's program took over a year between some
tests.

Our second concern about the proposed schedule is the mismatch between
approved funding levels and the planned activities. According to DOD's Risk
Management Guide, significant schedule risks can occur if resources are not
available to meet the schedule. In December 1999, DOD restructured NTW's
projected funding levels to be able to fund both it and the Army's Theater
High Altitude Area Defense programs. Proposed DOD funding for the NTW
program averages $282 million per year for fiscal years 2002 through 2005,
whereas Navy program officials estimate that they will need an average of
$567 million per year to implement the program on its proposed schedule.
According to NTW program officials, NTW's proposed schedule is not currently
executable because of the budget shortfalls.

The Navy is planning to produce the Block I missiles before it has
demonstrated their effectiveness in operational testing. A more prudent,
less risky strategy would be to revise the proposed NTW schedule so that the
Navy conducts initial operational testing before it produces most of the
interceptor missiles. Key technical advances have yet to be proven and
conducting operational testing earlier would reduce the risk of incurring
additional costs or deploying substandard missiles if testing shows that
significant redesign or modification of the missiles is necessary. In our
view, the Navy should not defer needed testing because of program officials'
concerns about the availability of funding for such testing. A mismatch
already exists between approved funding levels and planned activities. It
would make more sense to request the funds for operational testing when that
testing is most needed--namely, before most of the missiles are produced.

To reduce the risk of producing unproven missiles, we recommend that the
Secretary of Defense direct the Secretary of the Navy to revise the proposed
funding profile and test schedule for the Navy Theater Wide program to
ensure that the Navy conducts initial operational testing before producing
most of the Block I missiles.

In written comments to a draft of this report, DOD stated that it partially
concurs with our recommendation. It agreed that the NTW program's funding
and schedule require review and stated that DOD, the Ballistic Missile
Defense Organization, and the Navy are currently reviewing proposed changes
to the NTW program test schedule. In addition, DOD said it will review
funding profiles for the NTW program in the fall of 2000. However, the
Department did not commit to revising its plans to ensure that the Navy
conducts initial operational testing before producing most of the Block I
missiles, as we recommended. DOD's comments are reprinted in appendix III.
We have incorporated DOD's suggested technical changes, as appropriate.

We are concerned about DOD's position because it is only during operational
testing that independent testing officials can test the complete weapon
system under conditions that simulate actual operational conditions. As
noted earlier, we have frequently found that cost overruns and the
deployment of substandard systems occur when DOD proceeds into production
before systems are operationally tested.

To determine how DOD and the Navy have used the additional funding provided
by the Congress for the program in fiscal years 1997 through 1999, we
compared original budget documents to current funding allocation documents
and discussed reasons for differences in funding levels with officials
responsible for managing various elements of the NTW program, such as the
ship design and test and evaluation managers.

To identify the program's current risks, we analyzed the program's status,
strategy for accomplishing the remaining development work and meeting Block
I fielding requirements, and approaches to demonstrating the system's
capabilities and military suitability. We also reviewed an independent study
of the system's risk and discussed risk levels and approaches to mitigating
risk with DOD program and testing officials. We discussed possible Block II
technologies with agency officials and reviewed program documentation.

We interviewed responsible agency officials at the Office of the Secretary
of Defense, the Joint Staff, Ballistic Missile Defense Organization, and the
Office of the Director for Operational Test and Evaluation, in Washington,
D.C.; the Navy Program Executive Office for Theater Surface Combatants,
Office of the Deputy Chief of Naval Operations, in Washington, D.C.; the
Navy Operational Test and Evaluation Force, Norfolk, Virginia; and the
Office of the Army Deputy Chief of Staff for Operations and Plans, in
Washington, D.C.

We conducted our review from May 1999 through March 2000 in accordance with
generally accepted government auditing standards.

As arranged with your staff, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 7 days from
its issue date. At that time, we plan to provide copies of this report to
the Honorable William Cohen, Secretary of Defense; the Honorable Richard
Danzig, Secretary of the Navy; the Honorable Jacob Lew, Director, Office of
Management and Budget; and key committees of the Congress. We will make
copies available to others upon request.

If you or your staff have any questions concerning this report, please
contact me on (202) 512-4841. Major contributors to this report were
Bob Levin, Lee Edwards, David Hand, and Richard Irving.

Allen Li
Associate Director
Defense Acquisitions Issues

Description of Block II Technologies for Navy Theater Wide Program

Although the Block II version of the Navy Theater Wide program has not yet
been defined, program officials recognize that the Block II system depends
on substantial advances in state-of-the-art technology.18 A few of the Block
II technologies that we have discussed with program officials are as
follows.

 The Block II system is expected to differ from Block I in its need to
counter a greater range of threats, some of which could employ
countermeasures designed to foil missile defense efforts. As a result, Block
II is likely to require more sensitive target discrimination systems that
are able to differentiate among warheads and various types of
countermeasures at greater distances. To improve Block II discrimination
capability, the Navy plans to use improved hardware for the AN/SPY-1 radar.
It is exploring a technology called the High Power Discriminator that would
enable the radar to pick out smaller objects while searching for the
incoming warhead. This capability is critical to the differentiation of the
actual warhead from various countermeasures. The basic technology of the
High Power Discriminator, which is an adjunct piece of hardware to be
mounted in the ship's antennae and integrated into the radar system, is not
considered by program officials as high risk. An integration issue does,
however, exist. The discriminator would need to be developed for use with
Aegis equipment. Currently, two contractor teams are examining the use of
X-band and other radar bands for inclusion in the Navy's next-generation
radar system, an effort expected to be completed in 2004. Also, a Navy study
of future radar systems is ongoing.

 The Navy also plans to develop the Cooperative Engagement Capability to
leverage its detection and tracking technologies and enable "shooters" to
take advantage of multiple sources of information during battle. Thus, the
crew of an Aegis ship could potentially use aircraft or other surface
vessels to direct missiles at a target well beyond the range of the ship's
radar. If NTW Block II and the Cooperative Engagement Capability could be
integrated, battlefield commanders would have a substantial advantage in
conducting the theater ballistic missile defense mission, since enemy
missiles could be engaged well beyond the line-of-sight radar range of the
defending cruisers. Currently, this integration has not occurred, and thus
represents an unknown risk.

 One of the technologies under consideration for Block II is the two-color
infrared seeker, which, unlike Block I, has to defeat various
countermeasures during the final phase of the intercept; therefore, it
requires greater sensitivity than its Block I counterpart. Officials told us
that this two-color seeker would take advantage of the greater volume of
information that can be gained by using two portions of the infrared region
of the electromagnetic spectrum to discern the heat signature of the target
warhead. The program is attempting to develop a small, lightweight seeker
that could switch from one infrared band to the other rapidly enough to
provide nearly simultaneous two-band measurements. The Navy is currently
exploring this technology with experimental equipment in a laboratory, but
it has not yet been flown. Officials plan to test an experimental version of
the seeker during a Ballistic Missile Defense Organization test scheduled
for 2001. Even so, one official emphasized that even a two-color seeker
might not be able to defeat every type of countermeasure. Also, since the
two-color seeker is larger than the one-color seeker, program officials have
said that the Standard missile will have to be redesigned to accommodate it,
resulting in extensive integration efforts. They said that the two-color
seeker would represent a substantial improvement over the Block I seeker in
terms of its ability to discriminate between actual warheads and intentional
countermeasures. According to a program official, the two-color seeker is
already in the early stages of development because it is the highest risk
technology envisioned for Block II.

 Program engineers are reviewing the level of lethality needed against
high-velocity Block II targets and are considering using kinetic energy
devices to enhance Block II's lethality.

 For Block II to counter all of its expected threat, it would require a
missile with a higher velocity than that used by Block I. Program officials
told us that the simplest way to give the Standard missile greater speed
would be to retain the existing first stage and use a larger-diameter second
stage, which has yet to be developed. This approach would increase the
missile's propellant load and give it greater speed. NTW program officials
have already examined this technological approach and consider it to be low
risk. Integration into the ship's vertical launch system is also not seen as
a major problem.

Research, Development, Test, and Evaluation Funds Budgeted and Allocated for
Navy Theater Wide in Fiscal Years 1997-1999

                         Dollars in millions
                                             Fiscal year 1997
           Program element            Budget  Allocation  Difference
 Design and analysis                  $31.00  $129.61     $98.61
 Hardware fabrication and procurement 0.00    59.90       59.90
 Systems engineering                  11.49   23.47       11.98
 Test and evaluation                  3.50    19.61       16.11
 Ship system modifications            0.00    12.68       12.68
 Software development                 4.00    20.62       16.62
 Engineering support                  2.00    9.75        7.75
 Program management                   3.66    9.02        5.36
 Test equipment                       0.00    10.55       10.55
 Program support                      2.23    5.36        3.14
 Other                                0.30    3.61        3.31
 Total                                $58.17  $304.17     $246.00

       Fiscal year 1998                  Fiscal year 1999

 Budget  Allocation  Difference   Budget  Allocation  Difference    Total
                                                                  increase
 $45.12  $149.47    $104.35       $43.46  $110.34     $66.88     $269.84
 58.43   106.75     48.32         55.49   82.63       27.14      135.36
 37.62   54.91      17.29         12.92   51.01       38.09      67.36
 7.81    39.06      31.25         30.20   30.10       -0.10      47.26
 3.88    16.45      12.57         7.16    14.21       7.05       32.31
 18.80   20.85      2.05          10.03   21.05       11.02      29.69
 6.98    14.82      7.85          5.75    14.64       8.88       24.48
 5.82    11.93      6.11          5.69    12.88       7.19       18.66
 3.30    10.48      7.18          16.05   15.82       -0.22      17.51
 5.39    8.26       2.87          3.39    8.13        4.75       10.75
 1.78    4.94       3.16          0.30    3.47        3.17       9.64
 $194.90 $437.90    $243.00       $190.45 $364.28     $173.84    $662.84

Comments From the Department of Defense

Related GAO Products

Ballistic Missile Defense: Prototype THAAD System (GAO/NSIAD-97-137R, Mar.
27, 1997).

Ballistic Missile Defense: Improvements Needed in THAAD Acquisition Planning
(GAO/NSIAD-97-188, Sept. 12, 1997).

Theater Missile Defense: Significant Technical Challenges Face the Airborne
Laser Program (GAO/NSIAD-98-37, Oct. 23, 1997).

Ballistic Missile Defense: Improvements Needed in Navy Area Acquisition
Planning (GAO/NSIAD-98-34, Nov. 14, 1997).

National Missile Defense: Schedule and Technical Risks Represent Significant
Development Challenges (GAO/NSIAD-98-28, Dec. 12, 1997).

Defense Acquisition: Decision Nears on Medium Extended Air Defense System
(GAO/NSIAD-98-145, June 9, 1998).

National Missile Defense: Even With Increased Funding Technical and Schedule
Risks Are High (GAO/NSIAD-98-153, June 23, 1998).

Cruise Missile Defense: Progress Made but Significant Challenges Remain
(GAO/NSIAD-99-68, Mar. 31, 1999).

Defense Acquisitions: DOD Efforts to Develop Laser Weapons for Theater
Defense (GAO/NSIAD-99-50, Mar. 31, 1999).

Ballistic Missile Defense: More Common Systems and Components Could Result
in Cost Savings (GAO/NSIAD-99-101, May 21, 1999).

Missile Defense: THAAD Restructure Addresses Problems but Limits Early
Capability (GAO/NSIAD-99-142, June 30, 1999).

(707420)

Table 1: Allocations of Congressional Funding Increases for Fiscal
Years 1997 Through 1999 11

Figure 1: Depiction of the Navy Theater Wide System 8

Figure 2: Proposed Navy Theater Wide Block I Schedule 18

  

1. Report of the Panel on Reducing Risk in Ballistic Missile Defense Flight
Test Programs, Institute for Defense Analyses (Alexandria, Va.: Feb. 1998).
The report evaluated the test programs of several missile defense programs.

2. The ground-based Patriot Advanced Capability-3 system is designed to
protect ground troops and assets such as airfields against enemy ballistic
missiles while they are within the atmosphere. The space- and ground-based
National Missile Defense system is designed to protect the entire United
States against long-range enemy missiles while they are outside the
atmosphere.

3. Operational testing means the field test, under realistic combat
conditions, of any item of (or key component of) weapons, equipment, or
munitions for the purpose of determining the effectiveness and suitability
of the weapons, equipment, or munitions for use in combat by typical
military users.

4. The Ballistic Missile Defense Organization is responsible for managing,
directing, and executing DOD's ballistic missile defense program. In the
case of NTW, the Organization funds and oversees the Navy's development and
implementation of the system.

5. Missile Defense: THAAD Restructure Addresses Problems but Limits Early
Capability (GAO/NSIAD-99-142, June 30, 1999).

6. Multiple stages increase the missile's range. The first and second stages
are designed to boost the missile into the atmosphere. The purpose of the
third stage is to boost the missile further into the exoatmosphere and then
guide the missile to the target after separation from the first two stages.
The fourth stage, or kinetic warhead, is designed to impact the target.

7. A nonseparating target is one in which the warhead has not separated from
the missile. A separating target is one in which the warhead and missile
have separated. To destroy a separating target, the system would have to
differentiate among the warhead, its missile, and the debris created when
the warhead is separated from the missile. A simple separating target is one
that, for example, lacks an attitude control module to guide the warhead.

8. The 80 missiles would include the 50 Block IB missiles as well as 30
additional missiles.

9. H.R. Conf. Rep. No. 105-340, at 658 (1997).

10. Summary of Report to Congress on Utility of Sea-Based Assets to National
Missile Defense. Ballistic Missile Defense Organization (Washington, D.C.:
June 1999).

11. The Global Positioning System is a space-based radio navigation network
designed to provide precise positioning and navigation capabilities to the
military services.

12. "S-band" and "X-band" refer to particular portions of the radio wave
region of the electromagnetic spectrum. Radar employs radio waves to
determine characteristics of distant objects, including their ranges. The
X-band portion of the spectrum has a shorter wavelength than the S-band and
is more useful in determining the length of objects.

13. Called the High Range Resolution waveform, this software modification
pulses emissions from the AN/SPY-1 radar differently than normal and helps
process the returning radar signal. It is not in itself a radar wave
emitter.

14. The seeker uses a portion of the infrared region of the electromagnetic
spectrum to discern the heat signature of the target warhead. Block I is
designed to employ a one-color seeker, utilizing only a single part of the
spectrum.

15. Major Management Challenges and Program Risks: Department of Defense
(GAO/OCG-99-4, Jan. 1999).

16. Risk Management Guide for DOD Acquisition, Department of Defense,
Defense Acquisition University, Defense Systems Management College (Second
Edition, May 1999), pp. 40-41.

17. Final Report, THAAD Independent Review Panel (July 29, 1996).

18. DOD has entered into a cooperative program with the Government of Japan
to jointly develop selected Block II technologies.
*** End of document. ***