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GAO Briefing on Commercial and Department of Defense Space System Requirements and Acquisition Practices

Status Report From: Government Accountability Office
Posted: Thursday, January 14, 2010

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Summary

We found that although DOD and the commercial sector both use satellites for missions such as communications and imagery, DOD's requirements are often more demanding. Consequently, while the commercial sector prefers to utilize only mature technologies in satellite development, DOD satellite development typically involves the development of new technologies to meet its more stringent needs. Additionally, DOD--in mission areas such as missile warning and space surveillance--has requirements that do not exist in the commercial sector. In these areas, DOD funds technology development and acquires specific capabilities because they are not commercially available. Overall, the commercial satellite sector delivers satellites faster than the DOD space sector and it typically does so within estimated costs. In many cases, there is no commercial market that DOD can turn to for innovations in space systems--it must either assume leadership in technology invention or partner with other space development agencies such as NASA. Moreover, the missions and requirements DOD is pursuing, along with the need to serve a variety of highly specialized users, have significant implications on the size, complexity, and risk of its space programs.

While commercial and DOD space system missions, requirements, and technology development differ in key ways, the commercial sector has adopted practices that could be applied to DOD space system acquisitions to improve cost, schedule, and performance outcomes. For instance, commercial firms define their requirements before initiating development programs, which helps to close resource gaps prior to program start and limit requirements growth. They tie contractor award and incentive fees to acquisition outcomes. They follow evolutionary product development approaches that enable them to achieve gradual gains in capability in relatively short periods while limiting the extent of technology risk they take on in any one increment. The commercial approach, overall, emphasizes gaining critical knowledge before making long-term commitments. GAO has already recommended these practices for DOD adoption. DOD, in fact, has recognized a need to adopt several of these practices and initiated efforts to do so.

At the same time, some acquisition practices adopted by the commercial sector, including exclusive use of firm, fixed-price contracts and developing highly accurate cost estimates, may not be successfully applied to DOD in its current acquisition environment because of factors such as unique requirements and immature technologies at program start. For instance, the use of firm, fixed-price contracts for procuring satellites would require a change in paradigm for DOD space programs--a much higher level of knowledge, including mature technologies and mature design--prior to the start of a program. Currently, however, DOD accepts greater technology and development risks and typically uses cost-reimbursement contracts for the first two satellites to be developed and produced. Some programs use fixed-price contracts for any additional satellites. Using fixed-price contracts for the development phase of a program has not worked well, partly due to the high level of unknowns accepted at program start. In addition, other factors, such as launch delays, program funding instability, changing needs, and the diverse array of organizations involved in DOD space programs pose additional challenges to the use of firm, fixed-price contracts.

In our briefing, we concluded that given the magnitude of unanticipated cost and schedule growth on DOD space system acquisition programs over the last decade, there is a clear need to adopt practices that emphasize attaining knowledge up front, minimize requirements changes late in programs, and provide the right support and accountability to both program managers and contractors. The commercial companies we studied were consistent in their adoption of such approaches and the belief that knowledge-based development has enabled them to shorten delivery time frames and limit cost growth. While DOD programs have more inherent risks, DOD has recognized that its programs can greatly benefit from adopting similar practices and has initiated actions to do so.

Previous GAO reports and testimonies have identified potential obstacles to making these improvements as well as areas that still need to be addressed. We have also stressed that adopting commercial approaches should not equate to relaxed oversight and decreased government technical expertise, as has been the case in the past. Rather, we have recommended how DOD can make trade-offs to reduce risks earlier and better manage those risks that it does accept. DOD has generally concurred with these recommendations and has taken measures to address them, including changes to acquisition policies and acquisition practices.

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