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Audit of the Service Acquisition Executives’ Management of Defense Acquisition Category 2 and 3 Programs DODIG-2020-042

Audit

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Publicly Released: December 23, 2019

Objective

The objective of this audit was to determine whether Army, Navy, and Air Force acquisition officials appropriately identified Acquisition Category (ACAT) 2 and 3 programs and monitored whether program costs and schedules aligned with their respective acquisition category designation.

Background

A DoD acquisition program is a funded effort that provides a new, improved, or continuing materiel, weapon, or information system or service capability in response to an approved need. DoD acquisition programs are classified into the appropriate ACAT level depending on estimated program costs and the type of acquisition. DoD Instruction 5000.02, "Operation of the Defense Acquisition System," establishes policy for the management of all acquisition programs and defines ACAT program designations.

ACAT 2 programs are major systems estimated to cost between $185 million and $480 million for research, development, test, and evaluation (RDT&E) or between $835 million and $2.8 billion for procurement. ACAT 3 programs are those programs that fall below the ACAT 2 minimum thresholds for RDT&E and procurement.

Each DoD acquisition program has a designated Milestone Decision Authority who has the overall responsibility for the program and is accountable for cost, schedule, and performance reporting to a higher authority, including congressional reporting.

The DoD requested a total of $236.7 billion in the FY 2019 President's budget for acquisition funding. Of the $236.7 billion, $144.4 billion was designated for ACAT 2 and 3 programs. ACAT 2 and ACAT 3 program management and oversight is delegated to the Military Departments. Each Department has its own procedures to identify and manage cost overruns, schedule slips, and overall program health.

We obtained a list of all acquisition programs from the Army, Navy, and Air Force. We identified 820 active ACAT 2 and 3 programs listed in the acquisition program master lists. We generated a statistical sample and selected 160 active programs across the Departments to review.

Findings

Army, Navy, and Air Force Service Acquisition Executives (SAEs) did not appropriately identify or monitor whether their Departments' ACAT 2 and 3 program costs and schedules aligned with their respective ACAT designation.1 For example, in our sample each Department had programs, in their respective acquisition databases, that were not appropriately identified, monitored, or both, including:

  • 21 Army programs, valued at $8.8 billion, out of 65 Army programs with estimated total acquisition costs of $22.5 billion,
     
  • 24 Navy programs, valued at  $16.8  billion,  out  of 40 Navy programs with estimated total acquisition costs of $21 billion, and
  • 33 of 55 Air Force programs, 16 of which were valued at $9.7 billion (Air Force acquisition officials did not provide cost estimates for the remaining 17 programs that we reviewed).

These conditions occurred because the SAEs delegated their ACAT 2 and 3 program oversight responsibilities to their respective Program Executive Offices (PEOs) and did not perform required reviews of their Department's ACAT 2 and 3 programs.

As a result, the Army, Navy, and Air Force cannot accurately account for programs and program acquisition costs of up to $144.4 billion dollars. Specifically, the SAEs did not know:

  • the total number of ACAT 2 and 3 programs within their respective Departments;
     
  • individual and total program costs of ACAT  2  and 3 programs;
     
  • whether programs were approaching or have exceeded an ACAT threshold, requiring a higher level of oversight; or
     
  • ​whether ACAT 2 or 3 programs were within budget and schedule.

Additionally, the Army's Program Executive Office for Combat Support and Combat Service Support did not inform or receive required approval from the Army Headquarters Data Administrator prior to deleting two programs from the Army's database used to track acquisition programs. This occurred because the permissions for the Army database do not restrict individuals from deleting programs without first receiving approval from the Army Headquarters Data Administrator. As a result, the Army has no assurance that the database is complete.

Recommendations

We recommend, among other recommendations, that the Under Secretary of Defense for Acquisition and Sustainment establish a common data framework for all Service acquisition databases that describes the core program information.

We recommend that the SAEs:

  • verify and validate that their databases contain accurate lists of programs, and that programs have the correct active or inactive status; and
     
  • verify and validate that all programs have approved Acquisition Program Baselines (APBs) as required by DoD Instruction 5000.02 and that program officials report when acquisition  costs or schedules exceed  thresholds  established  in the APB.

Finally, we recommend that the Assistant Secretary of the Army for Acquisition, Logistics, and Technology update the Army Acquisition Program Master List user guide to accurately reflect which roles have the authority to delete programs from the Army Acquisition Program Master List.

Management Comments and Our Response

This report contains 42 recommendations addressed to the Under Secretary of Defense for Acquisition and Sustainment; the Assistant Secretary of the Army for Acquisition, Logistics, and Technology; the Assistant Secretary of the Navy for Research, Development, and Acquisition; and the Assistant Secretary of the Air Force for Acquisition, Technology, and Logistics. Of the 42 recommendations, 13 were unresolved; 28 were resolved but will remain open until further actions are taken; and 1 was closed.

The Assistant Secretary of Defense for Acquisition, responding for Under Secretary of Defense for Acquisition and Sustainment, agreed to establish and populate a common data framework for all Service acquisition databases. The comments from the Assistant Secretary addressed all specifics of the recommendation; therefore, recommendation is resolved but will remain open. We will close this recommendation once we verify that Defense Acquisition Visibility Environment has established and documented  a  common  framework  for all ACAT 1, 2, and 3 programs and Military Departments have modernized their acquisition databases to  include the core program information required.

The Army Deputy for Acquisition and Systems Management, responding for the Army SAE; the Principal Civilian Deputy, Assistant Secretary of the Navy for Research, Development, and Acquisition, responding for the Navy SAE; and the Principal Deputy Assistant Secretary of the Air Force, responding for the Air Force SAE, agreed to verify and validate that their Service's respective databases contain an accurate list of programs. Their comments addressed the recommendation; therefore, the recommendations are resolved but will remain open. We will close the recommendations once the SAEs for the Army, Navy, and Air Force provide the processes used to verify and validate the program lists in their respective databases, along with evidence to ensure the programs are accurately represented in their databases.

The Army Deputy for Acquisition and Systems Management, responding for the Army SAE; the Principal Civilian Deputy, Assistant Secretary of the Navy for Research, Development, and Acquisition, responding for the Navy SAE; and the Principal Deputy Assistant Secretary of the  Air  Force,  responding  for the Air Force SAE, agreed to verify and validate that each program has an approved APB,  as  required  by DoD Instruction 5000.02, and report when cost or schedules exceed the thresholds established in the APB. However, comments from the Army did not address the recommendation; therefore, that recommendation is unresolved. The comments from the Navy and Air Force addressed the recommendations; therefore, those recommendations are resolved but will remain open.

We will close these recommendations once the SAEs for the Army, Navy, and Air Force provide the processes used to verify and validate that all programs have an approved APB and evidence that all programs have an approved APB. In addition, the SAEs should provide the processes used to verify and validate that program officials are reporting when program costs or schedules exceed APB thresholds and provide evidence that all program officials have reported programs that have exceeded the cost or schedule thresholds established in the APB.

The Deputy for Acquisition and Systems Management, responding for the Assistant Secretary of the Army for Acquisition, Logistics, and Technology, agreed to update the Army Acquisition Program Master List User Guide to accurately reflect which roles have the authority to delete programs from the database. Comments from the Deputy addressed the recommendation; therefore, the recommendation is resolved but will remain open. We will close this recommendation when the Army provides the updated Army Acquisition Program Master List User Guide that shows which roles have authority to delete programs.

All of the recommendations, summaries of management's comments to the recommendations, and our responses are located in the "Recommendations, Management Comments, and Our Response" sections of the report. Additionally, summaries of management comments to each Finding of the report and our responses are located in Appendixes B and C.

This report is the product of Proj. No. D2018-D000AU-0148.000