WASHINGTON — The U.S. Missile Defense Agency needs to improve its cost estimates for missile defense programs and flight tests, the Government Accountability Office said in a Feb. 2 report.

“Over the years, we have reported on MDA’s progress developing and testing the [Missile Defense System]; however, we have faced challenges assessing the associated costs due to a number of shortcomings in the agency’s cost information, such as its comprehensiveness, accuracy, transparency, and traceability,” the report stated.

GAO continues to find that estimates are not accurate as the agency “continues to omit” military services’ operations and sustainment costs from the estimate across the life cycle of programs, the report said.

“By omitting these costs, MDA limits decision-makers’ insight into the full financial commitments needed for affordability and funding determinations,” the report explained.

The agency has also had issues with the accuracy of flight test cost estimates, which “could skew the agency’s annual $1.3 billion funding request” because actual costs of tests are not updated.

While Congress required MDA to report on flight test costs, the GAO said due to the agency’s reporting methodology, information was lacking. For instance, MDA only accounted for about $1.3 billion of at least $3.5 billion the agency requested for flight testing between March 2017 and September 2020.

And the requirement established in 2016 to report these flight test costs to Congress every 180 days ended in December. “Without further reporting on complete flight test costs, Congress does not have information needed to facilitate holding the agency accountable for its spending,” the report stated.

Congress has injected substantial extra funding into the MDA’s top-line budget in the last two fiscal years because it did not think the MDA was coming in with a request high enough to meet all of its critical needs.

The GAO also found that MDA continues to adjust program baseline costs “without clear traceability over time” and “forgoes recurrent comparisons to the original baseline.”

The GAO looked at seven MDA program cost estimates for its report and did find a “marked improvement” from its last assessment.

Life cycle costs

Yet, many of the current program cost estimates “fell short” of what is considered leading practices to include all life cycle costs regardless of how those costs are funded — possibly outside of MDA’s budget — according to the report.

The report noted this can get tricky since the MDA often develops and serves as the overarching manager of the missile defense systems, but in some cases a service will take over a program.

“Accounting for all operations and sustainment costs is critical,” the GAO noted, because this can make up to 70% of a system’s cost over the life of the program.

“When we attempted to identify the military services’ operations and sustainment costs, we found that there were multiple and disparate sources not connected in any centralized way, which made quantifying these costs difficult or, in some instances, impossible,” the report stated.

The GAO said MDA was able to provide operations and sustainment costs of programs covered by the services when asked for the purposes of the report. This included providing the Terminal High Altitude Area Defense System and the AN/TPY-2 radar’s $3 billion cost estimate from FY19 through FY24 with an amount for each fiscal year.

But when asked why MDA didn’t cite this in its estimates or baseline reporting, officials said they were not responsible for services’ funds.

The GAO disagreed with the position because its cost-estimate best practices include accounting for life cycle costs regardless of funding source.

Flight test costs

The agency’s flight test cost estimates are not accurate, but the GAO reports MDA is taking steps to improve them.

But out of the seven flight test cost estimates, the GAO found six of those only partially met accuracy standards.

Still, flight test costs did not fully use estimating methodology and historical data, contained mistakes, and were not regularly updated when costs changed, the report found. When making flight test cost estimates, the methodology is to use an analogy of previous and similar flight test and then adjusting for any differences, the GAO explained.

But when MDA used an analogy, “there were considerable differences, such as location of the test range, and no adjustments were made,” the report said. For instance, a THAAD flight test at a test range in New Mexico was based on two prior Aegis ballistic missile defense flight tests out of Hawaii.

The MDA did not record its rationale for using prior flight tests as a guide or cite any expert’s inputs and validation on whether it was appropriate to compare various flight tests when making estimates, according to the report.

However, the GAO said MDA recently created a form to capture expert input and validation as part of its effort to improve flight test cost estimates.

MDA officials also made mistakes: “Some costs were not traceable to the source data or assumptions,” GAO found.

In one case, the estimate for a THAAD flight test is $2 million for contractor mission engineering, but the source data coming from two prior flight tests show a cost of more than $20 million for the same activity, the report noted.

Another issue stems from MDA waiting until a flight test is executed to then update cost estimates with actual costs. GAO noted this could take years.

The watchdog did not receive a cost estimate for a THAAD flight test in October 2019 until July 2020, and that estimate wasn’t updated with actual costs, the report noted as an example. It recommended updating estimates as soon as new information becomes available as a best practice.

The GAO said MDA has a new flight test cost model and a daily logbook that reflects the amount of funding that has been expended on a flight test it is now working to implement across the agency, including contractors.

The new model replaces program-unique, manually compiled flight test cost models, according to the report.

Revisions to the estimating process include compiling more than 600 commonly used costs across programs — such as engineering, contractor support and flight test range costs — and preparing and updating cost estimates for flight tests.

Baseline reporting

The MDA made improvements to its baseline reporting, GAO said, but it continues to make “untraced baseline adjustments and consistently reports against the original baseline, both of which obscure insight into the cost performance of each program and the total system costs.”

GAO identified untraced adjustments in the programs it assessed including the Aegis Weapon System. A software spiral moved from a consolidated baseline with two other software spirals to its own dedicated baseline. The reporting did not trace how the consolidated costs were distributed over three newly separate baselines.

GAO traced it together and found a $1.5 billion increase in development costs for the Aegis software spiral between 2019 and 2020 baseline reporting. MDA only reported a $664 million increase.

MDA has also stopped recurrent comparison to the original program baselines, instead comparing new baselines to the most recently revised one. GAO found the agency had revised the baseline at least once over half its programs reviewed.

“MDA’s comparisons to revised rather than original baselines conceal program cost performance information needed by decision makers,” the report stated.

GAO also found MDA shifts costs across and outside of program baselines, and also made untraced adjustments to the program baselines, which negatively impacts the accuracy of estimates.

Jen Judson is the land warfare reporter for Defense News. She has covered defense in the Washington area for 10 years. She was previously a reporter at Politico and Inside Defense. She won the National Press Club's best analytical reporting award in 2014 and was named the Defense Media Awards' best young defense journalist in 2018.

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