Summary: In response to a congressional request, GAO developed a historical case study of the Advanced Medium Range Air-to-Air Missile (AMRAAM) Program, focusing on its requirements determination, contracting strategy, testing, and program management to determine why cost overruns and schedule delays occurred.
GAO found that underestimates of risk, schedule, and costs by the Air Force and contractor were the primary causes of the AMRAAM cost increases. Some of the factors that contributed to the underestimates or added to development time and costs included: (1) competition for program funding and pressure to justify the program over other programs; (2) contractor competition for the missile design and development contracts; and (3) frequent program manager turnover. GAO noted that the contractor: (1) did not meet all of the program's design and performance requirements due to technological, time, and cost limitations; (2) absorbed $255 million in cost overruns because the procurement was under a competitive fixed-price rather than a cost-reimbursement contract; and (3) stated that future price proposals would probably be more conservative and reflect the cost risks of system development. GAO is currently reviewing the adequacy and realism of AMRAAM flight tests prior to production decisions.
