The Missile Defense Agency (MDA) has improved its budget processes so they are more like those in conventional federal agencies, but MDA still needs to improve the transparency and accountability in the way it keeps its books, according to a Government Accountability Office (GAO) presentation to Congress.

Paul Francis, GAO director of acquisition and sourcing management, presented the report and testified before the House

Appropriations Committee defense subcommittee at a closed hearing. His prepared testimony and report was available on the GAO website.

“In the past year, MDA has fielded additional and new assets, enhanced the capability of some existing assets, and achieved most test objectives,” Francis testified.

MDA has seen missile defense systems score repeated hits against target missiles, with repeated successes over the past several years.

But the GAO frowns upon some MDA budgeting moves. Congress gave the agency extraordinary budget flexibility to help spur rapid development of a shield against enemy missiles, as ballistic weapons proliferate around the globe, and are now found in rogue states.

GAO criticized the way MDA uses budgetary “blocks,” such as Block 2006.

“MDA did not meet the goals it originally set for the block,” the GAO stated. “Ultimately, MDA fielded fewer assets, increased costs by about $1 billion and conducted fewer tests. Even with the cost increase, MDA deferred work to keep costs from increasing further, as some contractors overran their fiscal year 2007 budgets. Deferring work obscures the cost of the block because such work is no longer counted as part of Block 2006.”

And the GAO took issue with some other MDA budget procedures.

“The cost of the block may have been further obscured by a way of planning work used by several contractors that could underestimate the actual work completed. If more work has to be done, MDA could incur additional costs that are not yet recognized.”

On another point, the GAO quarreled with the way MDA measures performance of ballistic missile defense systems (BMDS).

“MDA also sets goals for determining the overall performance of the BMDS,” the GAO official noted. “Similar to other DOD programs, MDA uses models and simulations to predict BMDS performance. We were unable to assess whether MDA met its overall performance goal because there have not been enough flight tests to provide a high confidence that the models and simulations accurately predict BMDS performance. Moreover, the tests done to date have been developmental in nature, and do not provide sufficient realism for DOD’s test and evaluation Director to determine whether BMDS is suitable and effective for battle.”

On one point, however, the GAO conceded that giving MDA its extraordinary budget flexibility helped MDA get missile defense systems developed and ready for work.

“While this flexibility has expedited BMDS fielding, it has also made MDA less accountable and transparent in its decisions than other major programs, making oversight more challenging,” the GAO stated.

To be sure, “MDA, with some direction from Congress, has taken significant steps to address these concerns. MDA implemented a new way of defining blocks — its construct for developing and fielding BMDS increments — that should make costs more transparent. For example, under the newly-defined blocks, MDA will no longer defer work from one block to another.”

On another point, the GAO also praised MDA.

“Accountability should also be improved as MDA will for the first time estimate unit costs for selected assets and report variances from those estimates. DOD also chartered a new executive board with more BMDS oversight responsibility than its predecessor.

“Finally, MDA will begin buying certain assets with procurement funds like other programs. This will benefit transparency and accountability, because to use procurement funding generally means that assets must be fully paid for in the year they are bought.

Previously, MDA has been able to pay for assets incrementally using research and development funds.”

But even with all of those moves and acknowledged progress, the GAO still isn’t satisfied with the MDA budget process.

“Some oversight concerns remain, however,” according to Francis. “For example, MDA does not plan to estimate the total cost of a block, nor to have a block’s costs independently verified — actions required of other programs to inform decisions about affordability and investment choices. Also, the executive board faces a challenge in overseeing MDA’s large technology development efforts and does not have approval authority for some key decisions made by MDA.”

To view the report and testimony titled “Defense Acquisitions: Assessment of DOD Efforts to Enhance Missile Defense Capabilities and Oversight” in full, please go to GAO-08- 506T at on the Web.