Index

Defense Acquisitions: Need to Revise Acquisition Strategy to Reduce Risk
for Joint Air-to-Surface Standoff Missile (Letter Report, 04/26/2000,
GAO/NSIAD-00-75).

Pursuant to a congressional request, GAO reviewed the Air Force's and
the Navy's development of the Joint Air-to-Surface Standoff Missile
(JASSM) and the recent extension of the program's development schedule,
focusing on: (1) what the program's status is and what the causes of the
schedule slip and cost increase were; and (2) whether the Air Force is
following the most effective acquisition strategy to reduce the risk of
cost growth and schedule delays.

GAO noted that: (1) since the program's inception, the development
schedule has lengthened from 56 months to 78 months, and total program
costs have increased from $1.6 billion to $2.1 billion; (2) in the most
recent extension, approved in October 1999, the Air Force added 10
months to the missile's development schedule and increased estimated
program costs by about $90.1 million; (3) factors leading to the
schedule delay varied and included prime and subcontractor changes to
missile design to: (a) correct problems discovered during testing; (b)
decrease production costs; or (c) improve performance; (4) program
officials stated that contractors underestimated the time and personnel
required to design the missile and prepare for production; (5) the Air
Force employed acquisition reform strategies, such as using technologies
already proven in other systems and establishing a cost goal as an
independent requirement, which helped reduce overall development time
and costs; (6) as a result, the 78-month development program timeframe
is substantially less than the historical average of 118 months for
other missile programs; (7) also, the missile's production unit cost is
projected to be well under the price limit; (8) however, the program is
still vulnerable to significant cost increases and schedule delays
because the design of some components is not yet stable; (9) further,
the missile production prices within the JASSM contract are based on
starting production by a specific date but without the adequate
assurance that the missile will be ready for production by that date;
(10) the Air Force will not have specific, detailed knowledge of the
missile's ability to meet its performance requirements until after
production is scheduled to start; and (11) also, there is much
engineering and development work to be done to obtain full assurance
that the production processes are under control and that the production
line is producing the quality and volume of needed missiles.

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

 REPORTNUM:  NSIAD-00-75
     TITLE:  Defense Acquisitions: Need to Revise Acquisition Strategy
	     to Reduce Risk for Joint Air-to-Surface Standoff
	     Missile
      DATE:  04/26/2000
   SUBJECT:  Defense capabilities
	     Schedule slippages
	     Weapons research and development
	     Missiles
	     Cost overruns
	     Air Force procurement
	     Naval procurement
	     Procurement planning
IDENTIFIER:  Joint Air-to-Surface Standoff Missile

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GAO/NSIAD-00-75

National Security and
International Affairs Division

B-283201

April 26, 2000

The Honorable Jerry Lewis, Chairman
Subcommittee on Defense
Committee on Appropriations
House of Representatives

Dear Mr. Chairman:

This report responds to your request that we review the Air Force's and the
Navy's development of the Joint Air-to-Surface Standoff Missile and the
recent extension of the program's development schedule. The missile is the
successor of the Tri-Service Standoff Attack Missile, which was canceled
because of its high projected unit cost--over $2 million each--and because
development costs had grown to over $4 billion. Rather than modifying
another weapon to meet their requirements, the Air Force and the Navy
believed that they could rely on existing technologies and improved
acquisition strategies to develop a lower-cost weapon more rapidly than
previous missile acquisition programs.

Less than a year after approving the Joint Air-to-Surface Standoff Missile's
engineering and manufacturing development schedule, the Air Force extended
the development schedule, delaying the beginning of production and
increasing the cost estimate. As you requested, we reviewed the program to
determine (1) what the program's status is and what the causes of the
schedule slip and cost increase were and (2) whether the Air Force is
following the most effective acquisition strategy to reduce the risk of cost
growth and schedule delays.

Since the program's inception, the development schedule has lengthened from
56 months to 78 months, and total program costs have increased from $1.6
billion to $2.1 billion.1 In the most recent extension, approved in November
1999, the Air Force added 10 months to the missile's development schedule
and increased estimated program costs by about $90.1 million. Factors
leading to the schedule delay varied and included prime and subcontractor
changes to missile design to (1) correct problems discovered during testing,
(2) decrease production costs, or (3) improve performance. Program officials
stated that contractors underestimated the time and personnel required to
design the missile and prepare for production.

The Air Force employed acquisition reform strategies, such as using
technologies already proven in other systems and establishing a cost goal as
an independent requirement, which helped reduce overall development time and
costs. As a result, the current 78-month development program time frame is
substantially less than the historical average of 118 months for other
missile programs. Also, the missile's production unit cost is projected to
be well under the price limit. However, the program is still vulnerable to
significant cost increases and schedule delays because the design of some
components is not yet stable. Further, the missile production prices within
the Joint Air-to-Surface Standoff Missile contract are based on starting
production by a specific date but without adequate assurance that the
missile will be ready for production by that date. The Air Force will not
have specific, detailed knowledge of the missile's ability to meet its
performance requirements until after production is scheduled to start. Also,
there is much engineering and development work to be done to obtain full
assurance that the missile production processes are under control and that
the production line is producing the quality and volume of needed missiles.

We recommend that the Air Force revise its acquisition strategy for the
Joint Air-to-Surface Standoff Missile program to move away from an
arbitrarily set production date to one that is more closely linked to the
attainment of knowledge that the missile design is stable, the missile can
meet performance requirements, and the production line can produce the
needed missiles.

The Joint Air-to-Surface Standoff Missile (JASSM) is an air-delivered,
long-range weapon for use outside enemy area defenses. It is a weapon
expected to be heavily used in the early stages of a conflict to attack
targets such as communication centers and integrated air defense sites so
that enemy air defenses can be suppressed. The Air Force and the Navy are
jointly developing JASSM at a currently estimated cost of $892 million, with
the Air Force as the lead service. The Air Force plans to spend about
$1.2 billion procuring 2,400 JASSMs. The Navy has not allocated any funding
in its future years' defense planning budgets to procure the JASSM, but Navy
officials stated that they are still considering the possibility of some
procurement.

The program has completed the initial phase of development and is over
1 year into the second development phase−engineering and manufacturing
development.2 The initial production decision is expected to be made, and
the contract option exercised, by November 2001. Independent operational
testing to verify the operational effectiveness of the weapon is scheduled
from February through December 2002.

In the past, weapon programs often experienced cost overruns and schedule
delays because they were based on unproven or immature technologies, or they
made design changes late in development and entered production prematurely.
In our recent work, we analyzed the practices commercial firms use to reduce
the time spent developing products and bringing them into production.3 We
found that commercial firms center their development and production
decisions around the attainment of three areas of knowledge before
production begins: (1) knowledge that the technology to fulfil the
requirements is mature; (2) knowledge that the design is stable and will
work as required; and (3) knowledge that the design can be produced within
cost, schedule, and quality requirements.

The Under Secretary of Defense for Acquisition and Technology has called for
reforms to substantially reduce the time needed to move a weapon system from
development to production--the cycle time. Historically, the average cycle
time for precision-guided missiles has been 118 months. To reduce cycle
time, the Department of Defense (DOD) has approved a number of acquisition
reforms that include reducing the amount of data contractors are required to
deliver, eliminating the use of military standards and specifications,
allowing the use of commercial components, and forming working groups
composed of both government and contractor personnel to coordinate
development activities such as testing.

Increased Costs

Since the program's inception, the development schedule has lengthened from
56 months to 78 months, and program costs have increased from
$1.6 billion to $2.1 billion. In the most recent extension, approved in
November 1999, the Air Force added 10 months to the JASSM development
schedule and increased estimated program costs by about $90.1 million.
Factors leading to the schedule delay varied and included prime and
subcontractor changes to missile design to (1) correct problems discovered
during testing, (2) decrease production costs, or (3) improve performance.
Program officials stated that the contractors underestimated the time and
personnel required to design the missile and prepare for production. The
estimated development cost increased by $38.2 million as a result of the
time added to the schedule and additional developmental flight hardware.
Estimated production costs increased by about $51.9 million mostly because
of the schedule slip that moved the beginning of production past the date
specified in the contract and required prices of production quantities to be
renegotiated.

At the program's inception, the Air Force planned to develop the missile and
begin production in 56 months. The Air Force's strategy was to conduct a
competitive 24-month program definition and risk reduction phase with two
contractors. The contractors' tasks during this phase were to design the
missile and demonstrate that the design worked. The Air Force was to select
one of the two contractors to complete development testing, establish
production processes, and begin production during a 32-month engineering and
manufacturing development phase. The program definition and risk reduction
phase actually lasted 28 months, and the transition to one contractor was
made before the end of that phase. The engineering and manufacturing
development phase was lengthened to
40 months in November 1998, when the program was reviewed for approval to
enter engineering and manufacturing development. Table 1 shows the schedule
and costs just before and after the latest slip.

Table 1: Changes in JASSM Schedule and Costs

 Dollars in millions

 Event                          Program before        Program after
                                schedule delay        schedule delay
 Total development time         68 months             78 months
 Engineering and manufacturing
 development                    40 months             50 months
 Low-rate production approval   January 2001          November 2001
 Last developmental test flight March 2001            February 2002
 Development cost               $853.8                $892.0
 Procurement cost               $1,157.5              $1,209.4

Sources: Defense Acquisition Executive Summary, June 1999, and Selected
Acquisition Report, December 1999.

The schedule delays were caused by a combination of (1) underestimating the
time and personnel required for the engineering and manufacturing
development effort, (2) late deliveries of components to the prime
contractor, and (3) increasing the time between flight tests and adding two
flight tests. Generally, subcontractor deliveries were late due to design
and manufacturing problems. Some of these problems originated with the prime
contractor, others with the subcontractors. Three missile components that
required significant development efforts−the engine, the airframe
shell, and the wing deployment actuators−all experienced design and
manufacturing difficulties, as well as related schedule slips, caused by
both the prime contractor and the subcontractors.

The prime contractor requested changes to the engine design in order to
achieve cost goals and improve performance. According to program officials,
the basic engine design had been used in other missiles, but the
subcontractor had not developed a new engine in several years and
underestimated the work needed to make the desired design changes. As a
result, the subcontractor has not met the delivery schedule, delaying the
assembly of development missiles.

The subcontractor for another critical missile component−the airframe
shell−has also been unable to meet the delivery schedule for several
reasons. First, the prime contractor changed the design of the outer mold
line to improve the missile's performance in dropping away from the
aircraft. Second, the subcontractor had problems with manufacturing
processes due at least in part to lack of experience with the process used
to build the missile shell. According to program officials, the molding
process was new to the subcontractor, who could not initially produce
missile shells with consistent quality, and the shells sometimes had to be
hand-finished. Third, one of the suppliers had difficulties casting missile
frames with consistent quality.

Subcontractors for the wings also spent an unexpectedly long time resolving
technical issues. According to program officials, one significant problem
has been stabilizing the production configuration of the wing deployment
actuators, which control the movement of the missile. During testing,
designers believed that the actuators allowed the missile's wings to come
out with too much force. As a result of this problem, the subcontractor
spent considerable time redesigning and testing a new actuator design.

Program officials told us that they expected deliveries of all missile
sub-components, including the engine, the shell, and the actuators, to be
back on schedule by the end of December 1999. As of January 2000, the
airframe shell deliveries were on schedule, but deliveries of the engine and
wing actuators had fallen further behind schedule (see table 2).

Table 2: Status of JASSM Sub-component Deliveries

                         Deliveries behind
 Sub-component           schedule              Deliveries behinds schedule
                                               January 2000
                         October 1999
 Engine                  2                     3
 Airframe shell          6                     0
 Wing deployment
 actuator                13                    23

Program officials were not definite about when deliveries of the other
sub-components would be back on schedule, but they stated that they expected
this to happen within a few months. Final assembly of developmental missiles
will continue to be delayed until these components are delivered.

The most recent schedule delay increased JASSM development costs by $38.2
million and production costs by $51.9 million. According to program
officials, development costs increased because of the additional 10 months
of development effort and the increased contractor personnel needed for
additional design work and test management. More than two-thirds of the
$51.9-million production cost increase−$36 million−resulted from
a negotiated increase in the price of the missiles in the first five
production lots because the government would not exercise the first
production option as originally scheduled. The contractor and the government
have agreed to a 4.99-percent price increase to the fixed price of the first
five lots plus the cost of extending the schedule for 10 months, for a total
of about
$36 million. The remaining $15.9 million production cost increase was due to
DOD revising inflation indexes and reducing the quantities of missiles
purchased.4 According to the Air Force, reductions or additions to
quantities in the first five lots will raise the unit cost of each missile
in those lots.

Significant Risks Remain

Although the Air Force employed acquisition reforms to accelerate JASSM
development and contain program costs within established guidelines, the
program is still vulnerable to significant cost increases and schedule
delays because the missile's design has not yet been stabilized. Further,
the missile production prices within the JASSM contract are based on a
specific production starting date but without adequate assurance that the
missile will be ready for production by that date. Our examinations of best
practices by commercial firms have shown that the risk of cost increases and
schedule delays is reduced significantly if production decisions are linked
to having mature technology, stable designs, and proven manufacturing
capabilities rather than to specific points in time.

The Air Force has implemented a streamlined acquisition strategy that
incorporates reforms intended to reduce time spent designing a weapon system
by eliminating unneeded military standards and specifications, relying on
mature technologies, and limiting changes in performance requirements. As a
result, the current 78-month development time frame for the JASSM program
represents a substantial reduction from the historical average of 118 months
for other programs.

In contrast to many acquisition programs that have required advances in
technology to meet performance requirements, the JASSM program's goal was to
use a derivative of an existing missile design with proven technologies
rather than new technologies. The initial program definition phase was
intended to verify the capability of the design to meet performance
requirements, trade off performance requirements for cost, and develop
manufacturing processes to build the missile in a cost-efficient manner.

By the end of the program definition phase, the government required
competing contractors to be ready to build the system for development and
operational testing. Several major reform initiatives helped contractors
focus their efforts. For example, in keeping with acquisition reforms that
stress greater government/private sector coordination and less direct
government oversight, the Air Force considered the winning contractor
responsible for missile design, developmental testing and evaluation, and
tracking design changes. Instead of assuming its traditional oversight role,
which usually involves requirements that contractors submit large quantities
of data, the government reduced the amount of data required and established
teams of government and contractor personnel to resolve problems jointly.
According to program officials, these teams have proven adept at maintaining
JASSM development on schedule because they have worked to prevent addition
of requirements that could drive changes to the missile's design.

JASSM was also designated as one of the first programs to use the concept of
cost as an independent variable. The concept gives contractors the
flexibility to trade off specific performance features to achieve
established cost objectives. The JASSM program has had success in staying
within established cost goals because the Air Force and the Navy limited
specific performance requirements to a few key areas−range, mission
effectiveness, and suitability for Navy carriers. For example, the JASSM
program reduced the missile's cost by not requiring it to be launched under
the most extreme speed, altitude, or other conditions that each aircraft can
generate. Instead, a common set of launch conditions was established for a
variety of aircraft. The operational requirements document established a
ceiling of $700,000 (in base year 1995 dollars) for the average unit
procurement price. The currently projected average unit procurement price
for the first five lots of production missiles is about $327,000, well under
the price limit.

Despite the significant steps taken to accelerate the development program,
the program is not adequately linked to knowledge that the missile design is
stable, the missile will perform as required, and the manufacturing
processes are under control. As a result, the program is vulnerable to
further cost increases and schedule delays. Our past work has shown that DOD
can reduce cost and schedule risks in weapon system acquisition programs by
developing an acquisition strategy that centers on the government and the
contractor obtaining specific and timely knowledge of (1) the maturity of
the technology needed to meet established requirements, (2) the stability of
the design and its ability to meet performance requirements, and (3) the
ability of the production processes to deliver quality items within cost and
schedule agreements. In response to our reports, the Office of the Under
Secretary of Defense for Acquisition and Technology agreed with these
concepts and stated that DOD would establish specific standards for
technology design and production knowledge points and apply them to weapon
system acquisition programs.

Although the Air Force did not specifically organize the JASSM acquisition
strategy around these knowledge points, the program has taken steps to
achieve one of them--knowledge that mature technologies are available to
meet performance requirements. These efforts have reduced technology
risk--usually the most problematic one--significantly. The Air Force has not
achieved the other two knowledge points even though commercial firms usually
expect to achieve the second point--knowledge that the design is stable and
will meet performance requirements--about halfway through product
development. The JASSM program is currently beyond the halfway point in its
product development phase. This lack of knowledge of the missile's design,
while less critical than the first point, is the result of the contractor
underestimating the efforts required to manage the design and is the direct
cause of current cost and schedule problems. Further, the program cannot
expect to obtain knowledge of manufacturing processes until the design's
stability and its ability to meet requirements are known.

Knowledge That the Technology Is Mature Was Obtained

The technologies required to meet the missile's key performance
characteristics were mature enough to reduce risk at the beginning of the
engineering and manufacturing development phase. The Air Force used
performance-based requirements and allowed the contractor to determine how
the requirements were to be met rather than having the government tell the
contractor how to accomplish the required performance. Also, the contractor
was encouraged to use tested commercial technology, as well as technologies
already used in other military systems, to complete the design. The major
components of the missile have been used in other products or are in an
advanced stage of development (see table 3). When DOD approved the decision
to proceed to engineering and manufacturing development, the contractor had
already achieved this first knowledge point.

Table 3: Production History of Selected Components

 Component                 Previous use

 Engine                    Standoff Land Attack Missile--Expanded Response,
                           Harpoon
 Airframe technology       Boating industry
 Infrared seeker           Javelin command and launch unit

 Inertial measurement unit Joint Direct Attack Munition, Joint Standoff
                           Weapon

Uncertain Design Stability and Untested Performance Raise Risks

The contractor has not obtained knowledge that the design is stable and
meets requirements. Commercial firms expect that halfway through product
development, they will have conducted a critical design review and that 90
percent of all engineering drawings for the entire product and its component
parts will be completed. According to Air Force officials, a design review
of JASSM was conducted in March 1999, about halfway through product
development. The review found that about 80 percent of engineering drawings
for the entire missile were complete but that only a small percentage of
drawings for the missile sub-components were. Moreover, additional design
changes were still being made to some missile components in October 1999.

Although the government and the contractor have conducted extensive
component-level testing, the contractor is not expected to have specific,
detailed knowledge of the design's ability to meet requirements until after
the decision to begin production has already been made and the contract
option has been exercised. According to contract provisions, the low-rate
initial production option is required to be exercised by a particular date
to maintain prices unchanged, but the date is not based on the accumulation
of specific knowledge of the product being developed.

The contractor originally planned to have greater knowledge of how the
design would work earlier in the program. The program definition phase was
to include three test flights of a prototype missile, but the flights were
postponed. The first flight in April 1999 (after the beginning of
engineering and manufacturing development in November 1998) failed because
an electrical current leak from the battery resulted in flight termination.
A second test flight in August 1999 and a third in November 1999
demonstrated that the missile separated from the aircraft, acquired guidance
from the global positioning system satellites, started its engine, and flew
a predetermined 180-mile course to attack a target. Only after these test
flights did the contractor have some assurance that the missile could meet
its basic performance requirements. Getting to this point, however, required
a series of unanticipated design changes relatively late in the missile's
development.

Production Processes Are Unproven

Some components of the missile have stable production processes, but others
do not yet have them because their production configuration is not final.
Also, the production processes for the complete missile are not yet final.
There is much engineering and development work to be done to obtain full
assurance that production processes are under control, the production line
is producing the quality and volume of production units needed, and the
costs are within program projections. For example, engine and wing actuator
deliveries are still behind schedule (engines are a major component of the
missile and among the first to be installed). Late deliveries delay the
development of production processes, creating inefficiencies and making it
more difficult to control production processes.

The Air Force has adopted acquisition reform initiatives that have
significantly accelerated the development program and contained the
production price of the missile within established guidelines. The Air Force
has taken steps to link production decisions for the Joint Air-to-Surface
Standoff Missile to critical knowledge of the missile's design stability,
tested performance, and demonstrated manufacturing capabilities. However, if
it exercises the current contract options, the Air Force may begin
production without assurance that the government or the contractor will know
enough about whether the design meets requirements or can be produced. As a
result, the program will be vulnerable to future cost increases and schedule
delays if the contractual provisions are exercised before critical knowledge
is obtained related to the missile's design stability, tested performance,
and demonstrated manufacturing capabilities.

We recommend that the Secretary of Defense direct the Air Force to revise
its acquisition strategy for the Joint Air-to-Surface Standoff Missile
program to link production decisions more closely to knowledge points. In
revising its strategy, the Air Force should take steps to ensure that before
beginning initial production (1) the missile design is stable; (2) flight
testing fully establishes the missile's ability to meet performance
requirements; and
(3) key manufacturing processes are under control so that the quality,
volume, and cost of their output are proven and acceptable.

In commenting on a draft of this report, DOD generally agreed with our
recommendation, stating that the current acquisition strategy for the Joint
Air-to-Surface Standoff Missile meets the objective of our recommendation
that production decisions be closely linked to design, performance, and
production knowledge points. DOD stated that these knowledge points are
directly linked to specific criteria established for making the low-rate
initial production decision and that the contractor is required to meet this
criteria. DOD agreed, however, that there is cost risk associated with the
missile's contracts that contain production options to be exercised on or
before a certain date. DOD stated that it was working with the contractor to
reduce this risk.

We agree that the Air Force has taken steps to link production decisions for
the Joint Air-to-Surface Standoff Missile to the knowledge points described
in our report and have revised our report to clarify this point. However, we
do not believe that the specific criteria established to support the
production decision are sufficient to minimize cost and schedule risks. For
example, the Air Force will not have completed developmental flight tests
related to the missile's performance (1) against hard targets and (2) when
launched from the B-52. In addition, although the Air Force may be able to
demonstrate that missiles can be produced at the production facility, this
does not necessarily demonstrate--as called for in the third knowledge
point--that missiles can be produced within cost, schedule, and quality
requirements. Moreover, we continue to be concerned about the pressure to
exercise the current contract options to start production at a fixed time,
even if sufficient knowledge about the missile has not yet been obtained. We
believe our recommendation is still valid and needed to more closely link
production decisions to knowledge points.

We incorporated DOD's technical comments into our report where appropriate.
DOD's written comments are reprinted in their entirety in appendix I.

To understand and determine the causes of recent JASSM schedule delays and
cost increases, we interviewed program officials and contractor personnel at
Lockheed Martin Integrated Systems and reviewed program schedules, program
management assessments, and cost performance reports. We analyzed schedule
variances and obtained explanations for the differences.

To determine whether the Air Force is following the most effective
acquisition strategy to reduce risk, we interviewed program officials and
officials from the Office of the Under Secretary of Defense for Acquisition
and Technology, about program elements affected by acquisition reform. We
compared their answers with the description of commercial best practices
contained in our previous work on the subject. We compared best practices
criteria to the current program status to determine whether JASSM
development is following best practices and where following best practices
would help reduce risk.

We interviewed officials from the Office of the Director, Program Analysis
and Evaluation, Cost Analysis Improvement Group, from Lockheed Martin
Integrated Systems, and from the JASSM Program Office.

We visited the Office of the Secretary of Defense, Program Analysis and
Evaluation, Washington, D.C.; the Office of the Under Secretary of Defense
for Acquisition and Technology, Washington, D.C.; the Navy Aviation
Requirements Branch, Washington, D. C.; the Aeronautical Systems Center,
Eglin Air Force Base, Florida; Lockheed Martin Integrated Systems, Orlando,
Florida; and the JASSM Production Facility, Troy, Alabama.

We performed our review from July 1999 through April 2000 in accordance with
generally accepted government auditing standards.

We are sending copies of this report to other interested congressional
committees; the Honorable William S. Cohen, Secretary of Defense; the
Honorable F. Whitten Peters, Secretary of the Air Force; the Honorable
Richard Danzig, Secretary of the Navy; General James L. Jones, Commandant of
the Marine Corps; and the Honorable Jacob L. Lew, Director, Office of
Management and Budget. We will also make copies available to others upon
request.

If you or your staff have any questions concerning this report, please call
me on (202) 512-4841. Key contributors to this report were Tana M. Davis,
William R. Graveline, and Carol T. Mebane.

Sincerely yours,

James Wiggins
Associate Director
Defense Acquisition

Comments From the Department of Defense

(707435)
  

1. Initial estimates placed development costs at $675 million and
procurement costs between $960 million and $1.68 billion because the
development contractor had not been selected. We used the lower procurement
cost because it was closer to the winning contractor's proposal. In the most
recent program estimate, development costs were $892 million and production
costs $1.21 billion.

2. DOD manages weapon programs in three stages: (1) program definition and
risk reduction, (2) engineering and manufacturing development, and (3)
production. During program definition and risk reduction, called Milestone
I, the program is defined and various concepts and technologies are
investigated. During engineering and manufacturing development, Milestone
II, the design is chosen, manufacturing processes are validated, testing
begins, and low-rate initial production occurs. At production, Milestone
III, testing verifies that the weapon is suitable and effective for
operations, deficiencies encountered in testing are resolved, and fixes are
verified.

3. Best Practices: Successful Application to Weapon Acquisitions Requires
Changes in DOD's Environment (GAO/NSIAD-98-56 , Feb. 24, 1998) and Best
Practices: Better Management of Technology Development Can Improve Weapons
System Outcomes (GAO/NSIAD-99-162 , July 30, 1999).

4. The Air Force originally planned to procure 1,165 missiles with the first
five production lots, but it reduced the number to 1,128.
*** End of document. ***