The Army Can Take Steps to Improve the Way Army Futures Command Operates Army Futures Command Established to Lead Modernization Efforts In January 2019, we reported on the initial steps the Army has taken to consolidate all its modernization efforts under one authority. Establishing Army Futures Command is reported to be the most significant institutional change to the Army since it reorganized in 1973 after the Vietnam War. According to Army documentation, the intent of the new command is to provide unity of command, accountability, and modernization at the speed and scale required to prevail in future conflicts. The organization is led by a four-star general like its organizational peers: Army Materiel Command, Training and Doctrine Command, and Forces Command. The Army declared the commencement of operations for the command in July 2018, and has begun to define its organizational structures. Army Futures Command is expected to be fully operational by July 2019, meaning it will have sufficient staff with operational facilities, secure funding, and the ability to execute its assigned mission, roles, and responsibilities. Army Futures Command is headquartered in Austin, Texas. According to Army officials and documentation, the Army chose Austin because of its proximity to science, technology, engineering, and mathematics talent, as well as private sector innovators that officials believe will assist the command in achieving its modernization goals. According to senior Army leadership, the new command headquarters will have around 300 staff in place by July 2019, a workforce that may grow to as many as 500 employees—100 military and 400 civilians. Our analysis of Army’s plans for initial staffing at the Army Futures Command headquarters, based on data from July 1, 2018, found that about one-third of headquarters staff would be involved directly in modernization efforts, such as engineers and operations specialists, and the remaining two-thirds would consist of support staff, including legal counsel and contracting professionals. According to Army Futures Command officials and documentation, the new organization will be organized around three major components: Futures and Concepts Center is responsible for identifying and prioritizing capability and development needs and opportunities. This organization subsumed the Army Capabilities Integration Center on December 7, 2018. The center was formerly part of Army Training and Doctrine Command and is located at Fort Eustis, Virginia. Combat Capabilities Development Command is responsible for conceptualizing and developing solutions for identified needs and opportunities. This organization subsumed the Research, Development and Engineering Command on February 3, 2019 and is located at Aberdeen Proving Ground, Maryland. Combat Systems Directorate is responsible for refining, engineering, and producing new capabilities. This directorate will communicate with the program executive offices and program management offices reporting to the Assistant Secretary of the Army for Acquisition, Logistics and Technology. Combat Systems Directorate is in the process of being established and is located in Austin, Texas. Among other things, the reorganization is intended to establish Army Futures Command to oversee development of Army’s six modernization priorities. The Army’s then-Acting Secretary and the Chief of Staff in an October 3, 2017 memorandum identified these priorities to guide Army modernization: next generation combat vehicle, air and missile defense, and soldier lethality. Army Established Cross- Functional Teams to Improve How it Develops Capabilities As we reported in January 2019, to pursue the six priority areas, the Army established eight cross-functional teams. These teams were initially created as a pilot effort to increase the efficiency of requirements and technology development for modernization before the announcement of the new command. They were subsequently moved into Army Futures Command in 2018. These cross-functional teams are located throughout the country in areas of relevance to their mission. The eight cross- functional teams and the priority areas they address are outlined in table 1. These cross-functional teams are intended to: take steps toward achieving the six modernization priorities; leverage expertise from industry and academia; identify ways to use experimentation, prototyping, and demonstrations; and identify opportunities to improve the efficiency of requirements development and the overall defense systems acquisition process. The cross-functional team pilots were structured to help achieve these goals. Each cross-functional team consists of core staff and subject matter experts from across the Army. To facilitate the rapid approval of requirements, each cross-functional team is led by a general officer or a senior civilian official who could communicate directly with the highest levels of the Army. The goal of staffing these teams is to ensure that each team had individuals who specialized in acquisition, requirements, science and technology, test and evaluation, resourcing, contracting, cost analysis, sustainment, and military operations. The goal of bringing different experts together is to facilitate collaboration and immediate opportunities for stakeholders to provide input as opposed to the more traditional requirements development process, in which input has typically been provided separately. Officials told us that, while all of these subject matter experts may have provided input on the requirements development process in the past, placing them on a single team offers the promise of streamlining those efforts and could eliminate the need for multiple reviews. Figure 1 below compares the requirements development process under cross-functional teams to how the Army has traditionally developed requirements. Further Implementation of Leading Practices Could Reduce Risk for Army Futures Command In January 2019, we recommended that Army Futures Command incorporate leading practices for effective cross-functional teams. We determined that the documentation that established the cross-functional team pilots fully addressed four of our eight leading practices for effective teams, and at least partially addressed another four. The leading practices and their implementation by the cross-function teams are described in table 2 below. In addition to the practices listed above, the cross-functional team pilots generally applied leading practices for requirements development. One leading practice the teams generally applied was promoting communication between requirements developers, warfighters, and industry representatives. This enables the cross-functional teams to better match developer resources with end-user needs. While applying this practice, the cross-functional team pilots had initial progress in writing requirements documents more efficiently. According to cross-functional team officials, they were able to shorten the requirements development process for several capabilities. However, we found that Army Futures Command does not have a formal plan to identify and share lessons learned from cross-functional team pilots to incorporate or expand application of these leading practices. Doing so would allow Army Futures Command the opportunity to accelerate the progress these teams made and spread the benefits across all of the teams and a wider range of specific military capabilities they are pursuing. We recommended that the Army (1) incorporate cross- functional teams’ experiences in applying leading practices and (2) execute a process for identifying and incorporating lessons learned. The Department of Defense concurred with these recommendations, and stated that Army Futures Command expects to apply leading practices and capture lessons learned by the end of 2019. Our January 2019 report also identified leading practices for mergers and organizational transformations. These leading practices are listed in table 3 below. We found that the Army Futures Command had implemented some of these practices, particularly leadership’s dedication to the new command and the clear statement of its mission. However, we have previously reported that, according to federal internal controls standards, it is important to implement all of these practices in order to establish the organizational structure necessary to enable an entity to plan, execute, control, and assess the organization in achieving its objectives. Establishment of this structure is particularly important for the Army where leadership and its priorities can change frequently. Therefore, we recommended in January 2019 that Army Futures Command fully apply these leading practices. The Department of Defense concurred with the recommendation, and stated that it would start pilot processes in fiscal years 2019 and 2020. Army Futures Command Should Assess Availability of Key Acquisition Personnel Needed for Requirements Development In addition to further implementing leading practices, Army Futures Command can reduce risk to meeting its goals by fully assessing the workforce necessary to develop requirements—the testable and measurable characteristics necessary for the design of a proposed system. Historically, the Army has been unable to ensure that requirements for new capabilities are feasible due, in part, to a declining workforce for requirements development. In June 2017, we reported that the Army had prioritized combat readiness over resourcing its requirements development process to meet future readiness needs. We recommended that the Army assess the resources, particularly personnel, necessary for requirements development. The Army concurred with the recommendation, and has stated it would implement this recommendation once Army Futures Command is fully operational. As Army Futures Command centralizes and takes responsibility for requirements development, this recommendation is even more pertinent. Therefore, we recently elevated the status of the recommendation to a priority recommendation for the Secretary of the Army, as we believe it warrants greater attention from the Department of the Army. Army Futures Command Has Not Developed Formal Policies and Procedures for Coordination with Other Army Acquisition Entities As Army Futures Command approaches full operating status, it is important to define not only how the command functions, but how it works with other organizations. In our January 2019 report, we found that Army Futures Command had not yet established policies and procedures detailing how it will execute its responsibilities in coordination with other Army organizations that do not directly report to it. One such organization is the Office of the Assistant Secretary of the Army for Acquisition, Logistics, and Technology—the civilian authority responsible for the overall supervision of Army acquisition matters—and the acquisition offices it oversees. To mitigate concerns about coordination, the Army issued a directive in August 2018, signed by the Secretary of the Army, designating the military deputy to the Assistant Secretary as an advisor to Army Futures Command, and Army Futures Command officials have stated that the Assistant Secretary will retain full acquisition authorities as required by law. The command expects to continue to refine its coordination with the Office of the Assistant Secretary of the Army for Acquisition, Logistics, and Technology. The Army Is Funding Modernization Priorities, but Further Steps Can be Taken to Manage Risk Army Modernization Has Prioritized Near-Term Capability Gaps while Identifying and Beginning to Fund Long-Term Needs Since announcing the modernization efforts in 2017, the Army has directed more funding toward closing near-term capability gaps, focused on fiscal years 2019 through 2023. For example, as part of the planning for the fiscal year 2019 budget process, the Army identified 67 high- priority programs, such as the M-1 Abrams tank and the AH-64 Apache helicopter, which require further investment. To support these priorities, the Army identified a need for $16 billion in increased funding in fiscal years 2019 through 2023. The 2018 Army Modernization Strategy report identified the need for additional resources for near-term efforts, including plans to spend billions of dollars for acquisition of maneuverable short range air defense capabilities in fiscal years 2020 through 2024. In addition to the near-term capabilities the Army is pursuing, it has identified a number of long-term needs—those focused after fiscal year 2024—and begun to align research and development efforts with these needs. The Army identified long-term capabilities for all of the modernization priorities, as well as dates that science and technology efforts should transition to programs of record. As part of this overall effort, the Army has evaluated its science and technology portfolio to realign funding toward its six modernization priorities. In an October 2017 Army review, the eight cross-functional teams examined science and technology investments to identify which efforts contributed to the priorities and which did not. The review was performed for the Office of the Deputy Under Secretary of the Army. Based on that work, as of our January 2019 report, the Army had taken steps to realign over $1 billion from previous priorities and toward the new priorities for fiscal years 2019 through 2023. Army officials stated that they expect to undertake similar reviews annually. Tracking Near-Term Modernization Efforts and Costs Could Address Management Challenges The Army is executing near-term modernization programs, but could better manage how it evaluates them and estimate their costs. In September 2018, we reported that the Army used its six priority capabilities to identify key mission areas—such as long-range artillery, air and missile defense, brigade combat teams, and cyber and electronic warfare—that require near-term modernization investments. Based on its assessments, the Army prioritized and proposed several near-term solutions to address its critical capability gaps. These solutions included adding personnel—and different types of personnel—to combat forces, updating existing weapon systems, and investments in research and development. However, the Army had not established processes for evaluating whether its modernization efforts allow it to deter or defeat potential adversaries during a major conflict. We also found that the Army had not fully estimated the costs or sources of funding for its near-term modernization efforts. In particular, we found that the Army did not report in its modernization strategy the extent to which it relied on Overseas Contingency Operations appropriations. We recommended that the Army (1) develop a plan to finalize the processes for evaluating how its near-term investments contribute to the Army’s ability to decisively defeat a major adversary, and (2) finalize its cost analysis of near-term investments and report those costs to Congress in its fiscal year 2020 budget request. Army officials told us in April 2019 that the Army has taken steps to implement these recommendations. Addressing Past Challenges with Technology Development Could Help Address Long- Term Modernization Risks The most recent efforts to modernize follow several past efforts. Unfortunately, the Army has a history of failed, costly weapon system procurements to replace older weapons systems. These failures are due, in part, to requirements that could not be met and the immaturity of key technologies. Many of these programs failed to provide any capability to the warfighter despite the considerable time and funding expended. Some examples of these cancelled programs are listed in table 4 below. While the Army has dedicated significant funding towards its long-term modernization priorities, other changes may also be needed. Among them, we recommended in our January 2019 report, that Army Futures Command take steps to follow our leading practices to mature technology to a sufficiently high level prior to system development, which can reduce risk. There are indications that, in some cases, the Army plans to mature technology to a sufficiently high level prior to system development. For example, officials from the Future Vertical Lift cross-functional team told us they will complete technology demonstrations on two competitive prototypes before choosing to develop a design for the Future Attack Reconnaissance Aircraft. However, we found that the Army may continue its past practice of proceeding into system development with less mature technologies. In particular, we identified some plans to mature technologies in a relevant environment prior to authorizing the start of a new acquisition program, rather than the higher level of demonstrating them in an operational environment as recommended by our leading practices. This increases risk that new capabilities will require further maturation in system development, which could raise costs and extend timelines for delivery of equipment to the warfighter. We recommended in our January 2019 report that the Army should demonstrate technologies in an operational environment before starting a formal acquisition program. The Department of Defense concurred with the recommendation and stated that the Army Futures Command will execute a new development process that will include operational technology demonstrations. Pilot processes for this are expected to begin in 2019. In summary, we recognize that the Army is early in its modernization efforts but could make changes now that would be helpful. Army Futures Command should implement not only the leading practices we describe as well as the lessons learned by its own cross-functional teams. The Army should also increase the transparency of its efforts by clarifying how it evaluates its progress towards modernization goals and clearly stating the full costs of pursuing those goals. Finally, the Army can reduce the risk to the long-term modernization of its capabilities by ensuring that the technologies it uses in future weapon systems are fully mature. Chairman Norcross, Ranking Member Hartzler, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to answer any questions that you may have at this time. GAO Contact and Staff Acknowledgment If you or your staff have any questions about this testimony, please contact Jon Ludwigson, Acting Director, Contracting and National Security Acquisitions at (202) 512-4841, or ludwigsonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are J. Kristopher Keener (Assistant Director), Joe E. Hunter (Analyst-in-Charge), Emily Bond, Matthew T. Crosby, Cale Jones, Kevin O’Neill, John Pendleton, and Roxanna Sun. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.


The Biodefense Strategy Provides Opportunity to Create an Enterprise-Wide Approach, but Implementation Challenges Remain We found that the National Biodefense Strategy and associated plans bring together all the key elements of federal biodefense capabilities, which presents an opportunity to identify gaps and consider enterprise- wide risk and resources for investment trade-off decisions. However, challenges with planning to manage change; limited guidance and methods for analyzing capabilities; and lack of clarity about decision- making processes, roles, and responsibilities while adapting to a new enterprise-wide approach could limit the success of the Strategy’s implementation. Framework Created to Assess Enterprise-Wide National Biodefense Capabilities The National Biodefense Strategy and its associated plans bring together the efforts of federal agencies with significant biodefense roles, responsibilities, and resources to address naturally-occurring, accidental, and intentional threats. The Strategy and plans also provide processes for collecting and analyzing comprehensive information across the enterprise, an important step toward the kind of enterprise-wide strategic decision-making we have called for. The Strategy defines the term “biothreat” broadly to include all sources of major catastrophic risk, including naturally-occurring biological threats, the accidental release of pathogens, and the deliberate use of biological weapons. Officials we interviewed noted that this is the first time that the federal government has identified activities across the whole biodefense enterprise and assessed resources and gaps to address multiple sources of threat regardless of source. The Strategy also outlines high-level goals and objectives to help define priorities. NSPM-14, which was issued to support the strategy, established a structure and process by which federal agencies can assess enterprise-wide biodefense capabilities and needs, and subsequently develop guidance to help inform agency budget submissions. NSPM-14 lays out, in broad strokes, a process to identify biodefense efforts and assess how current resources support the Strategy, how existing programs and resources could better align with the Strategy, and how additional resources, if available, could be applied to support the goals of the Strategy. As shown in figure 1, this process begins through a data call with participating agencies documenting all biodefense programs, projects, and activities within their purview in a biodefense memorandum. In interviews, officials from participating agencies stated that the NSPM- 14 processes constitute a new approach to identifying gaps and setting budget priorities for biodefense, and that they viewed the approach as generally well designed. Additionally, agency officials said that the assessment and joint policy guidance development process outlined in NSPM-14 offered some promise for helping agencies identify the resources necessary to achieve the Strategy’s goals. Nevertheless, officials from all of the agencies we interviewed, even those with the most optimistic views on the leadership and governance structure design, tempered their responses with the caveat that implementation is in such early stages that it remains to be seen how effective these structures will actually be once tested. Implementation Challenges Remain In our February 2020 report, we also identified challenges that if not addressed could hinder enterprise-wide biodefense efforts. Specifically, although the Strategy and associated plans establish the foundation for enterprise risk management, we and biodefense agency officials identified multiple challenges that could affect the Strategy’s implementation. These include challenges individual agencies faced during the initial data collection process as well as a lack of planning and guidance to support an enterprise-wide approach. In our analyses and interviews, we found that parts of the process in the first year were underdeveloped, raising questions about (1) the plans to support change management practices and ensure that early-implementation limitations do not become institutionalized in future years’ efforts; (2) guidance and methods for meaningfully analyzing the data; and (3) the clarity of decision-making processes, roles, and responsibilities. Challenges adapting to new procedures. During our interviews, agency officials reported challenges they faced in the first-year’s data collection effort. These challenges may have led to incomplete data collection, but are not wholly unexpected given they occurred in the context of the individual agencies and officials adapting to new procedures and a broader cultural shift from how they have approached their biodefense missions in the past. Officials told us that because of the learning involved the first time through the process, agencies may not have submitted complete or detailed information about their biodefense programs. Some officials we interviewed voiced concern that this first-year effort could set a poor precedent for these activities in future years if the challenges are not acknowledged and addressed. For example, an official noted that committing to the first-year’s results as the “baseline” for future years of the Strategy’s implementation could compound or institutionalize the issues encountered in the first year. Officials from HHS and Office of Management and Budget staff stressed that this process will be iterative, with the first year being primarily about outlining the existing biodefense landscape. Our prior work on organizational transformations states that incorporating change management practices improves the likelihood of successful reforms and notes that it is important to recognize agency cultural factors that can either help or inhibit reform efforts. However, the agencies involved in implementing the Strategy do not have a plan that includes change management practices that can help prevent these challenges from being carried forward into future efforts, and help reinforce enterprise-wide approaches, among other things. To address this issue, we recommended the Secretary of HHS direct the Biodefense Coordination Team to establish a plan that includes change management practices—such as strategies for feedback, communication, and education—to reinforce collaborative behaviors and enterprise-wide approaches and to help prevent early implementation challenges from becoming institutionalized. HHS concurred with this recommendation. Guidance and methods for analyzing data. We found a lack of clear procedures and planning to help ensure that the Biodefense Coordination Team is prepared to analyze the data, once it has been collected, in a way that leads to recognition of meaningful opportunities to leverage resources in efforts to maintain and advance national biodefence capabilities. In particular, HHS (1) has not documented guidance and methods for analyzing the data, including but not limited to methods and guidance for how to account for the contribution of nonfederal capabilities; and (2) does not have a resource plan for staffing and sustaining ongoing efforts. Specifically, we found that the processes for the Biodefense Coordination Team to analyze the results of all the individual agency data submissions and identify priorities to guide resource allocation were not agreed upon or documented prior to the agency efforts and continue to lack specificity and transparency. In our interviews, officials from four agencies said they were uncertain about fundamental elements of the implementation process, including how information gathered will be used to identify gaps and set priorities. Additionally, the initial effort to collect information on all programs, projects, and activities focused on existing federal activities and did not include a complete assessment of biodefense capabilities at the nonfederal level ̶ capabilities needed to achieve the goals and objectives outlined in the Strategy. Officials we interviewed also expressed concern about the resources that the Biodefense Coordination Team had available to it, both in the first year and on an ongoing basis. The officials told us that not all agencies were able to provide a full-time detailee to help support the team. We have previously reported that agencies need to identify how interagency groups will be funded and staffed. However, officials from multiple agencies told us that the initial planning for the staffing and responsibilities for the Biodefense Coordination Team had not been finalized. Without a plan to help ensure sufficient resources and mitigate resource challenges for ongoing efforts, the Biodefense Coordination Team risks not having the capacity it needs to conduct meaningful analysis, which would undermine the vision created by the Strategy and NSPM-14. To address these issues, we recommended the Secretary of HHS direct the Biodefense Coordination Team to (1) clearly document guidance and methods for analyzing the data collected from the agencies, including ensuring that nonfederal resources and capabilities are accounted for in the analysis, and (2) establish a resource plan to staff, support, and sustain its ongoing efforts. HHS concurred with both recommendations. Roles and responsibilities for joint decision-making. The governing bodies overseeing the National Biodefense Strategy’s implementation— the Biodefense Steering Committee and Biodefense Coordination Team—did not clearly document key components of the assessment process and roles and responsibilities for joint decision-making in the first year of NSPM-14 implementation. This raises questions about how these bodies will move from an effort to catalog all existing activities to decision- making that accounts for enterprise-wide needs and opportunities. For example, officials from multiple agencies were not certain how the governing bodies would make joint decisions regarding priority-setting and the allocation of resources, how they would assign new biodefense responsibilities if gaps were identified, and to what extent the Biodefense Steering Committee could enforce budgetary priorities, if at all. We also found a lack of shared understanding and agreement about how the interagency process would work to align resources toward any identified gaps and reconfigure resources for any identified redundancies or inefficiencies. Additionally, we found that Presidential memorandums guiding the process did not detail specific decision-making principles or steps for reaching consensus or even for raising decision points about how to best leverage or direct resources across the enterprise in response to any gaps or inefficiencies. Similarly, agency officials we interviewed were not clear how this process would work, how decisions would be made, or how agencies would agree to take on new responsibilities to bridge gaps to achieve the Strategy’s goals. Further, the governing bodies have not fully defined the roles and responsibilities for making enterprise-wide decisions that affect individual agency budgets and for enforcing enterprise-wide budget priorities. As with other parts of the NSPM-14 implementation process, the details regarding specific roles and responsibilities for directing and enforcing budget decisions lack detail and specificity. Additionally, officials from four agencies stated that the charter for the Biodefense Coordination Team has not been finalized, further delaying the articulation of roles and responsibilities and the ability to establish a shared agenda and common operating picture. As a result, some officials remain skeptical of the effectiveness of any decisions made. We previously reported that effective national strategies should help clarify implementing organizations’ relationships in terms of leading, supporting, and partnering. In the context of the Strategy, that includes how enterprise-wide decisions about leveraging or directing resources to fill gaps and reduce inefficiency will be made and by whom. Similarly, our previous work has found that articulating and agreeing to a process for making and enforcing decisions and clarifying roles and responsibilities can improve the clarity surrounding a shared outcome, and that articulating these agreements in formal documents can strengthen agency commitment to working collaboratively and provide the overall framework for accountability and oversight. Uncertainty around the mechanisms to identify enterprise-wide priorities along with the lack of clearly documented and agreed upon processes, roles, and responsibilities for joint decision-making jeopardize the Strategy’s ability to enhance efficiency and effectiveness of the nation’s biodefense capabilities. To address this issue, we recommended that the Secretary of HHS direct the Biodefense Coordination Team to clearly document agreed upon processes, roles, and responsibilities for making and enforcing enterprise-wide decisions. HHS concurred. In conclusion, the current COVID-19 outbreak demonstrates that responding to the ever-changing nature and broad array of biological threats is challenging. The National Biodefense Strategy calls for the need to improve state, local, tribal, territorial, private sector, federal, regional, and international surveillance systems and networks to contain, control and respond to biological incidents. As the current coronavirus outbreak continues to cross regional and international borders, the federal government must take necessary steps to protect the American public. At the same time, we must not lose sight of the next threat. The National Biodefense Strategy and NSPM-14 put in place a framework to be able to assess threats and make difficult decisions about how to apply limited resources to achieve the best benefit. However, the Strategy is only as good as its implementation. Taking the necessary steps to address the recommendations we have made regarding managing this cultural change, analyzing data, ensuring sufficient resources to maintain implementation efforts, and clearly articulating roles and responsibilities for joint decision-making will better position our nation for the threats we face today and in the future. Chairwoman Maloney, Ranking Member Jordan, and Members of the Committee, this concludes our prepared statement. We would be happy to respond to any questions you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff has any questions concerning this testimony, please contact Christopher P. Currie at (404) 679-1875, CurrieC@gao.gov or Mary Denigan-Macauley at (202) 512-7114, DeniganMacauleyM@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include Kathryn Godfrey (Assistant Director), Susanna Kuebler (Analyst- In-Charge), Michele Fejfar, Eric Hauswirth, Tracey King, and Jan Montgomery. Key contributors for the previous work that this testimony is based on are listed in each product. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.


The Coast Guard Did Not Establish a Sound Business Case for the Polar Icebreaker Program In September 2018, we found the Coast Guard did not have a sound business case when it established the acquisition baselines for its polar icebreaker program in March 2018 due to risks in four main areas— design, technology, cost, and schedule. Our prior work has found that successful acquisition programs start with solid, executable business cases before setting program baselines and committing resources. A sound business case requires balance between the concept selected to satisfy operator requirements and the resources—design knowledge, technologies, funding, and time—needed to transform the concept into a product, which in this case is a ship with polar icebreaking capabilities. Without a sound business case, acquisition programs are at risk of breaching the cost, schedule, and performance baselines set when the program was initiated—in other words, experiencing cost growth, schedule delays, and reduced capabilities. At the heart of a business case is a knowledge-based approach. We have found that successful shipbuilding programs build on attaining critical levels of knowledge at key points in the shipbuilding process before significant investments are made (see figure 1). We provide additional information below on each of the four main risks that affect the soundness of the polar icebreaker program’s business case. The Coast Guard Plans to Have a Stable Design before Starting Construction but Did Not Assess Design Maturity Prior to Setting Program Baselines The Coast Guard expressed a commitment to having a stable design for the polar icebreaker program prior to the start of lead ship construction, but it set the program’s baselines before conducting a preliminary design review—a systems engineering event that is intended to verify that the contractor’s design meets the requirement of the ship specifications and is producible. Shipbuilding best practices we identified in 2009 found that design stability on a ship is achieved upon completion of the basic and functional designs. The basic design includes fixing the ship steel structure; routing all major distributive systems, including electricity, water, and other utilities; and ensuring the ship will meet the performance specifications. The functional design includes further iteration of the basic design, such as providing information on the exact position of piping and other outfitting in each block, and completing a 3D product model. At this point of design stability, the shipbuilder has a clear understanding of the ship structure as well as how every system is set up and routed throughout the ship. Consistent with our best practices, prior to the start of construction on the lead ship, the Coast Guard plans to require the shipbuilder to complete basic and functional designs, develop a 3D model output, and provide at least 6 months of production information to support the start of construction. Although the Coast Guard plans to have a stable design prior to ship construction, it set the program’s acquisition program baselines prior to gaining knowledge on the feasibility of the selected shipbuilder’s design. Program baselines inform DHS’s and the Coast Guard’s decisions to commit resources. Our best practices for knowledge-based acquisitions state that before program baselines are set, programs should hold key systems engineering events, such as a preliminary design review, to help ensure that requirements are defined and feasible and that the proposed design can be met within cost, schedule, and other system constraints. The Coast Guard has yet to conduct a preliminary design review for the program because DHS’s current acquisition policy does not require programs to do so until after setting program baselines. However, in April 2017, we found that DHS’s sequencing of the preliminary design review is not consistent with our acquisition best practices, which state that programs should pursue a knowledge-based acquisition approach that ensures program needs are matched with available resources—such as technical and engineering knowledge, time, and funding—prior to setting baselines. As a result, we recommended that DHS update its acquisition policy to require key technical reviews, including the preliminary design review, to be conducted prior to approving programs’ baselines. DHS concurred with this recommendation and stated that it planned to initiate a study to assess how to better align its processes for technical reviews and acquisition decisions. Upon completion of the study, DHS plans to update its acquisition policies, as appropriate. As of June 2018, DHS indicated that it had completed its study and was in the process of updating its acquisition policies. GAO will review the policies once complete to determine if the updates meet the intent of this recommendation. By setting the polar icebreaker program’s baselines prior to gaining knowledge on the shipbuilder’s design, the Coast Guard has established cost, schedule, and performance baselines without a stable or mature design. Although completing the preliminary design review after setting program baselines is consistent with DHS policy, this puts the Coast Guard at risk of breaching its established baselines and having to revise them later in the acquisition process, after a contract has been signed and significant resources have been committed to the program. At that point, the program will be well underway and it will be too late for decision makers to make appropriate tradeoff decisions between requirements and resources without causing disruptions to the program. Coast Guard Intends to Use Proven Technologies for the Polar Icebreaker Program but Has Not Assessed Their Maturity The Coast Guard intends to use what it refers to as “state-of-the-market” or “proven” technologies for the polar icebreaker program, but it has not yet conducted a technology readiness assessment to determine the maturity of key technologies prior to setting program baselines. This approach is inconsistent with our best practices for technology readiness. A technology readiness assessment is a systematic, evidence-based process that evaluates the maturity of critical technologies—hardware and software technologies critical to the fulfillment of the key objectives of an acquisition program. According to our best practices, a technology readiness assessment should be conducted prior to program initiation. At the time of our earlier review, Coast Guard officials told us the polar icebreaker program does not have any critical technologies and thus, does not need to conduct a technology readiness assessment. From design studies and industry engagement, Coast Guard officials determined that the key technologies required for the polar icebreakers, such as the integrated power plant and azimuthing propulsors, are available commercially and do not need to be developed. Figure 2 provides additional information on the risks for these key technologies, as well as design risks for an icebreaker’s hull form. Coast Guard officials stated that the integrated power plant is the standard power plant used on domestic and foreign icebreakers. Coast Guard officials told us that similarly, market survey data on azimuthing propulsors show that ice-qualified azimuthing propulsors in the power range required have been used on foreign icebreakers. However, according to our best practices, critical technologies are not just technologies that are new or novel. Technologies used on prior systems can also become critical if they are being used in a different form, fit, or function. Based on our analysis of available Coast Guard information, we believe the polar icebreaker program’s planned integrated power plant and azimuthing propulsors should be considered critical technologies given their criticality in meeting key performance parameters, how the technologies are being reapplied to a different operational environment from prior uses of the technologies, and the extent to which they pose major cost risks. By not conducting a technology readiness assessment and identifying, assessing, and maturing its critical technologies prior to setting the program’s program baselines, the Coast Guard is potentially underrepresenting technical risk and understating its cost, schedule, and performance risks. Polar Icebreaker Program’s Cost Estimate Substantially Met Best Practices but Is Not Fully Reliable We found that the Navy’s lifecycle cost estimate used to inform the polar icebreaker program’s $9.827 billion cost baseline substantially adheres to most of our cost estimating best practices; however, the estimate is not fully reliable. The cost estimate is not fully reliable because it only partially met best practices for being credible. Highlights from our assessment of the polar icebreaker program’s lifecycle cost estimate are detailed below: Comprehensive: substantially met. The estimate includes government and contractor costs over the full lifecycle of all three ships and documents detailed ground rules and assumptions, such as the learning curve used to capture expected labor efficiencies for follow-on ships. However, the costs for disposal of the three ships were not at a level of detail to ensure that all costs were considered and not all assumptions, particularly regarding operating and support costs, were varied to reflect the impact on cost should these assumptions change. Well-documented: substantially met. The estimate’s documentation mostly captured the source data used as well as the primary methods, calculations, results, rationales, and assumptions used to generate each cost element. However, the documentation alone did not provide enough information for someone unfamiliar with the cost estimate to replicate what was done and arrive at the same results. Accurate: substantially met. The estimate was properly adjusted for inflation, and we did not find any mathematical errors in the estimate calculations we inspected. Officials stated that labor and material cost data from recent, analogous programs were used in the estimate. While the documentation does not discuss the reliability, age, or relevance of the cost data, Navy officials provided us with additional information regarding those data characteristics. Credible: partially met. The Navy only modeled cost variation in the detail design and construction portion of the program and excluded from its analyses any risk impacts related to the remainder of the acquisition, operating and support, and disposal phases, which altogether comprise about 75 percent of the lifecycle cost. Without performing a sensitivity analysis on the entire life cycle cost of the three ships, it is not possible for the Navy to identify key elements affecting the overall cost estimate. Further, without performing a risk and uncertainty analysis on the entire life cycle cost of the three ships, it is not possible for the Navy to determine a level of confidence associated with the overall cost estimate. By not quantifying important risks, the Navy may have underestimated the range of possible costs for about three-quarters of the entire program. The estimate provides an overly optimistic assessment of the program’s vulnerability to cost growth should risks be realized or current assumptions change. This, in turn, may underestimate the lifecycle cost of the program. Polar Icebreaker Program’s Optimistic Schedule Is Driven by Capability Gap and Does Not Reflect Robust Analysis The Coast Guard’s planned delivery dates of 2023, 2025, and 2026 for the three ships were not informed by a realistic assessment of shipbuilding activities, but rather were primarily driven by the potential gap in icebreaking capabilities once the Polar Star reaches the end of its service life (see figure 3). The Polar Star’s service life is estimated to end between fiscal years 2020 and 2023. This creates a potential heavy polar icebreaker capability gap of about 3 years, if the Polar Star’s service life were to end in 2020 and the lead polar icebreaker were to be delivered by the end of fiscal year 2023 as planned. If the lead ship is delivered later than planned in this scenario, the potential gap could be more than 3 years. The Coast Guard is planning to recapitalize the Polar Star’s key systems starting in 2020 to extend the service life of the ship until the planned delivery of the second polar icebreaker (see figure 4). Further, we compared the program’s planned construction schedule to the construction schedules of delivered lead ships for major Coast Guard and Navy shipbuilding programs active in the last 10 years as well as the Healy, the Coast Guard’s only medium polar icebreaker. We found that the polar icebreaker’s lead ship construction cycle time of 2.5 to 3 years is optimistic, as only 3 of the 10 ships in our analysis were constructed in 3 years or less. Further, as another point of comparison, the Healy was constructed in just under 4.5 years. An unrealistic schedule puts the Coast Guard at risk of not delivering the icebreakers when promised and the potential gap in icebreaking capabilities could widen. Just as importantly, our prior work on shipbuilding programs has shown that establishing optimistic program schedules based on insufficient knowledge can create pressure for programs to make sacrifices elsewhere, which can lead to work being performed concurrently, costly rework, and further delays. To address the risks we identified and establish a sound business case, we made a number of recommendations in our September 2018 report to DHS, Coast Guard, and the Navy, including: Conducting a technology readiness assessment in accordance with best practices, identifying critical technologies, and developing a plan to mature any technologies not designated to be mature before detail design of the lead ship begins; Updating the program’s cost estimate in accordance with best practices before the contract option for construction of the lead ship is awarded; Developing a program schedule in accordance with best practices to set realistic schedule goals for all three ships before the contract option for construction of the lead ship is awarded; and Updating the program’s acquisition program baselines prior to authorizing lead ship construction, after completion of the preliminary design review, and after it has gained the requisite knowledge on its technologies, cost, and schedule. DHS concurred with all of our recommendations and identified actions it planned to take to address them. For example, earlier this month, the Coast Guard indicated that it has identified a preliminary list of potential critical technologies and is in the process of developing a technology readiness assessment plan. The Coast Guard also plans to update the program’s cost estimate within 8 months of the contract award and update the program schedule within 3 months of the contract award. How the Polar Icebreaker Program Will Be Funded Moving Forward is Unclear Of the $9.827 billion estimated for the lifecycle costs of the polar icebreaker program, about $3 billion is for acquisition costs. From 2013 through 2018, the polar icebreaker program has received $360 million in funding—$60 million in Coast Guard appropriations and $300 million in Navy appropriations. In addition, according to Coast Guard officials, in fiscal year 2017, Coast Guard reprogrammed $30 million in fiscal year 2016 appropriations for the polar icebreaker program from another program (see figure 5). According to Coast Guard and Navy officials, the Navy plans to use the $300 million in Navy appropriations in fiscal year 2019 to fund the advanced planning, design, engineering, and long lead time materials for the first polar icebreaker. As part of the polar icebreaker program’s acquisition strategy and reflected in the March 2018 request for proposals, the Navy plans to establish options for the subsequent detail design and construction of each of the three ships. The request for proposals specified that the options will be priced as fixed-price incentive type (see table 1). The Navy did not request any funding in fiscal year 2019 for the polar icebreaker program, while Coast Guard requested $30 million. Subsequently, after discretionary budget caps were relaxed by Congress, the administration’s fiscal year 2019 budget addendum requested an additional $720 million in fiscal year 2019 Coast Guard appropriations for the program. As the program prepares to award a contract in fiscal year 2019 worth billions of dollars if all the options are exercised, it is unclear to what extent the program will be funded using Coast Guard or Navy appropriations or how much total funding will be provided. In conclusion, as the Coast Guard embarks on the acquisition of its new polar icebreakers to address capability gaps in the Arctic and Antarctic regions, it faces a number of key acquisition and funding risks. DHS, the Coast Guard, and the Navy must gain key acquisition knowledge before committing significant resources to the program while Congress faces key funding and tradeoff considerations. To put the polar icebreaker program in a position to succeed, Congress and the agencies must remain committed to establishing and executing a sound business case for the program. Chairman Mast, Ranking Member Garamendi, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions. GAO Contact and Staff Acknowledgments If you or your staff have any questions about this statement, please contact Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony include Rick Cederholm, Assistant Director; Peter Anderson; Kurt Gurka; Claire Li; and Roxanna Sun. This is a work of the U.S. government and is not subject to copyright protection in the United States. 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The Coast Guard Has Taken Actions to Help Mitigate Arctic Capability Gaps but Has Not Yet Systematically Assessed Its Progress in This Effort The Coast Guard is a multimission, maritime military service that is responsible for maritime safety and security, environmental protection, and national security, among other missions. Given the Arctic region’s expansive maritime domain, the Coast Guard plays a significant role in Arctic policy implementation and enforcement. Therefore, as we have reported, as more navigable ocean water has emerged in the Arctic and human activity increases, the Coast Guard has faced, and will continue to face, expanding responsibilities in the region. In June 2016, we found that the Coast Guard assessed its capability to perform its missions in the Arctic in fiscal year 2012 and identified various capability gaps, including the following: Communications: including the lack of communications architecture. Harsh weather conditions, high latitude disturbances, and geomagnetic storms combine to make communications in the Arctic difficult. Arctic maritime domain awareness: including limited nautical charting, inadequate navigation systems, and insufficient surveillance. Extremely limited operational assets and support infrastructure in the Arctic, as well as the harsh operating environment, make achieving maritime domain awareness a challenge. Infrastructure: including limited aircraft infrastructure on the North Slope in northern Alaska and limited logistical support. Facilities located below the Arctic Circle, and even those within Alaska, provide limited capability to support Arctic missions due to the long transits to the Arctic region. No deepwater ports currently exist on the North Slope or near the Bering Strait that are capable of refueling and re- provisioning polar capable cutters. This forces the Coast Guard’s polar capable cutters to expend significant time transiting long distances to and from replenishment ports. Development of infrastructure to support operations is challenging, in part, due to the high cost of transporting materials to the Arctic and short construction seasons. Training and exercise opportunities: including a limited pool of Arctic-trained and experienced Coast Guard personnel, and limited training, exercise, and educational opportunities to enhance Arctic skills among staff. According to Coast Guard officials, few opportunities exist to train in the Arctic, in part, because of limited Coast Guard icebreaking capacity. Icebreaking: including limited icebreaking capacity given the Coast Guard’s existing active inventory of one medium and one heavy polar icebreaker, as discussed later in this testimony. At the time of our June 2016 review, Coast Guard officials stated that the capability gaps were not the sole responsibility of the Coast Guard to mitigate and did not completely impair or eliminate their ability to perform operations. For example, while communications can be a challenge in remote regions, the risk of lost communications can be mitigated by using multiple assets working together to mitigate risk if lost communications is anticipated. Coast Guard officials also stated that given its activity levels at the time, the mobile and seasonal nature of its Arctic presence, and its ability to leverage partners’ resources, the Coast Guard has had sufficient resources to fulfill its Arctic responsibilities. However, Coast Guard officials stated they would reassess their approach as Arctic activity and resulting mission requirements change over time. As we reported in June 2016, if Arctic activity continues to increase, as anticipated, the Coast Guard may have insufficient resources to meet expanded Arctic requirements. In June 2016, we also found that the Coast Guard worked with its Arctic partners—such as other federal agencies—to carry out actions to help mitigate Arctic capability gaps. For example, the Coast Guard took steps to enhance Arctic maritime domain awareness by testing communications equipment belonging to DOD during a 2015 annual operation in the Arctic, extending communications capabilities further north than previously possible. However, we found that the Coast Guard did not systematically assess how its actions helped to mitigate these gaps. Such an assessment—which includes developing measures for gauging its progress, when feasible—is critical to the Coast Guard’s understanding of its progress towards addressing these gaps. By systematically assessing and measuring how its actions have helped to mitigate capability gaps, the Coast Guard will be better positioned to effectively plan its Arctic operations, including its allocation of resources and prioritization of activities to target the gaps. As a result, we recommended in June 2016 that the Coast Guard (1) develop measures for assessing how its actions have helped to mitigate Arctic capability gaps and (2) design and implement a process to systematically assess its progress on this. DHS concurred with our recommendations. As of January 2020, the Coast Guard had not yet taken action to implement these two recommendations, in part because the Coast Guard issued its Arctic strategic outlook in April 2019 and is currently updating its corresponding implementation plan for this strategy. The plan is expected to provide the foundation for systematically assessing efforts to address Arctic capability gaps. Coast Guard officials stated that they are also developing a strategic metrics framework for measuring progress in addressing the capability gaps. Coast Guard officials did not identify when they plan to complete the plan and framework, stating that these are longer-term efforts. The Coast Guard highlighted the Arctic capability gaps in its 2013 Arctic Strategy and again in its 2019 Arctic strategic outlook. The 2019 strategy highlighted the need to elevate the Arctic region’s prominence as a strategically competitive space due to (1) the resurgence of nation-state competition from the United States’ two nearest-peer powers, Russia and China, and (2) reduced ice conditions in the Arctic which have led to increased human and economic activity in the region. In addition, the 2019 Arctic strategy highlighted three overarching goals: enhance capability to operate effectively in a dynamic Arctic domain, strengthen the rules-based order, and innovate and adapt to promote resilience and prosperity. Further, the 2019 Arctic strategy noted that the Coast Guard is the sole provider and operator of the U.S. polar icebreaking fleet—a critical component in achieving the Coast Guard’s overarching goals in the strategy—but currently does not have the capability or capacity to ensure access in the Arctic region. The Coast Guard’s polar icebreaking fleet comprises two operational polar icebreakers—the Polar Star and Healy— of which only the Healy is currently active and operating in the Arctic. The Healy is a medium icebreaker that primarily supports Arctic research, and while it is capable of carrying out a wide range of activities, it cannot ensure timely access to some Arctic areas in the winter given that it does not have the icebreaking capabilities of a heavy polar icebreaker. See figure 1 for photographs of the Coast Guard’s active icebreakers. In November 2018, the Coast Guard Assistant Commandant for Acquisition testified that the Coast Guard’s current polar icebreaking fleet provides minimal capacity to carry out current icebreaking missions and that the nation must take swift action to rebuild and enhance this critical national capability. To this end, DHS approved the Coast Guard’s Polar Security Cutter acquisition program’s cost, schedule, and performance baselines in February 2018. The Coast Guard Has Taken Steps to Address Technology, Design, Cost, and Schedule Risks for the Polar Security Cutters In September 2018, we found that the Coast Guard did not have a sound business case when it established the acquisition baselines for the Polar Security Cutter program in March 2018 due to risks in four key areas: technology, design, cost, and schedule. Our prior work has found that successful acquisition programs start with solid, executable business cases before setting program baselines and committing resources. A sound business case requires balance between the concept selected to satisfy operator requirements and the resources—design knowledge, technologies, funding, and time—needed to transform the concept into a product, which in this case is a ship with polar icebreaking capabilities. Without a sound business case, acquisition programs are at risk of breaching the cost, schedule, and performance baselines set when the program was initiated—in other words, experiencing cost growth, schedule delays, and reduced capabilities. To address the key risks we identified and help establish a sound business case for the Polar Security Cutter program, we made six recommendations to DHS, Coast Guard, and the Navy in our September 2018 report. The agencies concurred with all six recommendations and have taken steps to address some of the risks, as noted below. Technology. The Coast Guard planned to use proven technologies for the program, but did not conduct a technology readiness assessment to determine the maturity of key technologies prior to setting baselines. As a result, the Coast Guard did not have full insight into whether these technologies were mature and was potentially underrepresenting the technical risk of the program. We recommended that the program conduct a technology readiness assessment, which DHS completed in June 2019. DHS determined that two of the three key technologies were mature and the remaining technology was approaching maturity. The Coast Guard now has plans in place to use testing results to increase the maturity and reduce risks for the remaining technology—the hull form. Design. The Coast Guard set program baselines before conducting a preliminary design review. This review is a systems engineering event intended to verify that the contractor’s design meets the requirement of the ship specifications and is producible. By not conducting this review before establishing program baselines, the program is at risk of having an unstable design, thereby increasing the program’s cost and schedule risks. We recommended that the program update its baselines prior to authorizing lead ship construction and after completion of the preliminary design review. DHS and the Coast Guard agreed and plan to take these steps by fiscal year 2022. Cost. The cost estimate that informed the program’s $9.8 billion cost baseline—which includes life cycle costs for the acquisition, operations, and maintenance of three polar icebreakers—substantially met our best practices for being comprehensive, well-documented, and accurate. But the estimate only partially met best practices for being credible. The cost estimate did not quantify the range of possible costs over the entire life of the program, such as the period of operations and support. As a result, the cost estimate was not fully reliable and may underestimate the total funding needed for the program. We recommended that the program update its cost estimate to include risk and uncertainty analysis on all phases of the program life cycle, among other things. Subsequently, in December 2019, we found that while the Coast Guard updated the cost estimate in June 2019 to inform the budget process, the estimate did not reflect cost changes resulting from the contract award two months prior. Coast Guard officials acknowledged these cost risks and plan to address them as part of the next update to the program’s cost estimate. Coast Guard officials told us that they plan to update the cost estimate by the end of February 2020. Schedule. The Coast Guard’s initial planned delivery dates of 2023, 2025, and 2026 for the three ships were not informed by a realistic assessment of shipbuilding activities. Rather, these dates were primarily driven by the potential gap in icebreaking capabilities once the Coast Guard’s only operating heavy polar icebreaker—the Polar Star—reaches the end of its service life. In addition, our analysis of selected lead ships for other Coast Guard and Navy shipbuilding programs found the icebreaker program’s estimated construction time of 3 years to be optimistic. An unrealistic schedule puts the Coast Guard at risk of not delivering the icebreakers when promised. As a result, the potential gap in icebreaking capabilities could widen. We recommended that the program develop a realistic schedule, including delivery dates, and determine schedule risks during the construction phase of the program. In response, the Coast Guard is now tracking additional schedule risks for the program and is in the process of updating its program schedule. Further, in December 2019, we found that the contract delivery date for the lead ship, May 2024, is 2 months after the delivery date in the program’s schedule baseline. Coast Guard officials said they plan to address this risk when they update the program’s schedule by the end of March 2020. In summary, the Arctic region has increased in strategic importance in recent years, and with the increase comes more responsibility for the Coast Guard. The Coast Guard has emphasized that as the Arctic continues to open and strategic competition drives more actors to look to the Arctic for economic and geopolitical advantages, the demand for Coast Guard leadership and presence will continue to grow. As the Coast Guard embarks on the acquisition of its new polar icebreakers, it faces a number of key acquisition risks. The Coast Guard has begun to take steps to address these risks and must remain committed to executing a sound business case for the program to mitigate capability gaps in the Arctic. To this end, we will continue to monitor the Coast Guard’s progress in addressing our recommendations. Chairman Correa, Ranking Member Lesko, and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff have any questions about this statement, please contact Marie A. Mak, (202) 512-4841 or makm@gao.gov. In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals who made key contributions to this testimony include Rick Cederholm, Assistant Director; Claire Li, Analyst-in-Charge; Peter Anderson; Jay Berman; Tracey Cross; Laurier Fish; Miranda Riemer, and Roxanna Sun. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.