United States Gen~eral Accounting Office

GAO Brieffing Report to the Chairman,Subcom-mittece on Research andd1)covelopment, Committee, on ArmedServices, House of Representatives*

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B-2,18235Ju2,19923 By..... ............July 6, 1992 D~stribu~tiu•/

The Honorable Ronald V. Dellums Av,,l.i i &, f• IChairman, Subcommittee on A,,1i o,(: .. o

Research and Development Dist SI ,L I

Comnilttee on Armed ServicesHouse of Representatives

Dear Mr. Chairman:

Today's complex weapons systems cannot work without reliable software.As such, the importance and cost of this software has increasedtremendously in recent years. This report responds to discussions initiatedon December 2, 1991, with staff of the full committee .and subsequentdiscussions with your office, requesting that we (1) determine if theDepartment of Defense knows how much it spends on software embeddedin weapons systems, and (2) examine what Defense is doing to track andreduce embedded software costs.

We briefed your office earlier this year on the results of our work to thattime. As agreed, this report documents the results presented at thatbriefing, and provides additional information concerning Defense'stracking of weapons systems software costs. The briefing charts areincluded in appendix I.

Results in Brief Defense weapons systems capabilities are increasingly dependent onsoftware, which is rapidly becoming a very costly and technicallychallenging component. However, Defense does not know how much itspends on this critical technology. Estimates of software costs range from$24 billion to $32 billion annually-about 8 to i1 percent of Defense's totalbudget. However, these estimates are rough at best because Defense hasnot identified or tracked software costs as a discrete Item In Its weaponssystems development programs. Recognizing the importance of trackingsoftware costs, Defense has recently taken action to require new weaponsprograms to separately identify and report software costs. Defense is alsoexploring wayr, to reduce the cost of software. Collecting more completeembedded software cost information could enable Defense to moreeffectively manage its weapons programs.

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Blackround Software is critical to a modem weapons system's ability to perform keyfunctions, such as commxuitcations, detecting and tracking enemies, andtargeting and firing weapons. Failure to perform these functions correctlyand in a timely manner can endanger lives and equipment and threatennational security.

In addition to performing critical functions, software offers increasedflexibility and can replace costly manpower, For instance, updatedsoftware gave the Patriot missile added capability to defend against SCUDmissiles in the Persian Gulf. The Patriot was originally designed to targetcruise missiles and aircraft, but modifications to its software made itadaptable to intercept SCUD missiles. In addition, as our military forces arereduced, software will be increasingly relied upon to perform roles oncereserved for trained personnel. For example, software for the C-17 aircraftis expected to eliminate the need for a navigator and a flight engineer.However, any new software must be appropriately designed and developedto ensure that weapons systems effectively perform their missions.

Because of software's critical role in weapons systems, Defense's demandfor software is continuously increasing. For example, the Air Force's F-4fighter of the Vietnam war era had practically no software, while today'sF-14D fighter relies upon over I million lines of computer code to performits mission. The next generation fighter aircraft, the Advanced TacticalFighter, Is expected to rely upon 7 million lines of code. According to someestimates, the ballistic missile defense system, known as the StrategicDefense Initiative, could have 40 million to 100 million lines of code.

Defense Has Not Despite its increasing importance, Defense has not tracked embeddedsoftware costs and therefore does not know how much it spends on this

Tracked Embedded critical technology. Estimates of total 1992 software expenditures rangeSoftware Costs from $24 billion to $32 billion, or approximately 8 to 11 percent of

Defense's budget. However, these estimated costs are for developing andmaintaining software for all Defense systems, including embedded,command and control, and automated Information systems. Estimates alsoindicate that total annual software costs could increase to about $50 billionin the next 15 years, eventually accounting for almost 20 percent ofDefense's overall budget. While these estimated software costs aresignificant by themselves, they are dwarfed by the billions of dollars beinginvested by Defense in the weapons systems that depend so heavily uponthe software

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This estimate of annual software costs is not, however, well-supported. Thecost estimates were not generated by Defense statistics, but rather byexternal sources, such as trade associations and defense media. Accordingto both senior Defense information technology officials and these externalsources, the estimates were not developed using actual software cost data.F'or example, information used to develop the software cost estimates wasgenerally drawn from budget projections and trend analyses, which wereoften based on insufficient or incomplete information. In addition, thesetotal software cost estimates do not separate embedded software costsfrom total weapon system costs.

It Is important that Defense track its software costs because of the billionsof dollars involved. Good cost data are needed to assess and help managesoftware expenditures, as well as to help develop more effective softwaremetricsa for future software cost estimating. Moreover, Defense'sprediction that software costs will increase dramatically over the next 15years underscores the need to obtain as much reliable data as possible.

Defense has not tracked embedded software costs in the past because, inmost cases, software has not been managed as a discrete item. Weaponssystems programs and contractors have not been required to separatelyidentify and report software costs because the work breakdown structure2

and cost accounting for weapons systems make it difficult to separatelyidentify software costs. Furthermore, Defense does not have a focal pointto plan and manage software issues including costs. Consequently, there isno Defense repository for collecting and analyzing overall embeddedsoftware costs. According to Defense officials, software cost informationhas generally been (1) reported as part of the total system or subsystem inwhich the software is embedded and (2) available only at the contractorlevel.

Isoftware metrics are tools for monitoring and managing software projects. These tonts use,nathemat, l(M modelm to me"s81ro, elements uf the development process, such at time, cost, andresources. This Information allows organizations to better understand and manage the relationshipsamong resource decisions, development schedules, and the cost of software projects,2A work breakdown structure is a description of work tasks that describes the required product, as wellas any work that needs to be accomplished to develop the required product.

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Defense Is Now Acting In recognition of the importance of tracking software costs to improvesoftware managementi Defense recently revised its policy guidance for

to Track and Reduce acquiring weapons systems. Defense Instruction 5000.2, "DefenseSoftware Costs Acquisition Management Policies and Procedures," was changed to require

that any weapons systems begun after February 23, 1991, should identifyand report software costs separate from other costs. The effect of thisrevision is that embedded software costs will be more visible, sinceweapons systems contractors will have to provide software costinformation as part of the work breakdown structure. Thesoftware-intensive Advanced Tactical Fighter program is one of the firstweapons systems to require software cost reporting under this guidance.

Defense also recently prepared its "Software Technology Strategy," along-term strategy intended to cut software costs, reduce softwaredevelopment problems, and use software to increase the capability ofmission-critical systems by the year 2000. In its strategy, Defense proposesto take actions to reuse software, avoid expensive rework duringdevelopment, make software easier to modify once developed, leveragecommercial technology, and explore new software engineering techniques.Defense predicts that implementing this plan will cut software life-cyclecosts-in half, thereby providing savings as well as the means to obtainadditional software capability. Defense is currently obtaining publiccomments on its strategy and hopes to issue a final version by the end of1992.

Observations Software has become one of the most critical and expensive elements oftoday's weapons systems, yet Defense has only recently begun to trackthese software costs. We believe Defense cannot effectively manage itsweapons programs unless it separately identifies, tracks, and managessoftware as a dlscrcte item. Defense's new requirement that weaponsprograms report software costs separately is a step in the right direction.However, most weapons system programs do not report software costsbecause they began prior to implementation of the new policy.

Until more complete embedded software cost information is collected,Defense will not accurately know how much it is spending on this criticaltechnology area. More importantly, greater visibility of software costs Isessential for effect,,'- management of cxpensivc weapons systemsdevelopment programs. As Defense improves its collection of basicembedded cost data, it should be able to use these data to more effectivelyestimate and control software costs. In addition, rellable software cost

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information should support better decision-making, software risk control,and improve management of weapons systems development programs.

We performed our work in accordance with generaly acceptedgovernment auditing standards between February 1992 and June 1992. Wedid not provide a draft of this report to the Department of Defense for itsreview and comment. Instead, we discussed the draft report's contents withsenior Defense information technology officials and have incorporatedtheir views as appropriate. These officials generally agreed with the factsand observations in this report.

As arranged with your office, unless you publicly announce its contentsearlier, we plan no further distribution of this report until 30 days from thedate of this letter. At that time, we will send copies to the Chairmen of theSenate and House Appropriations Committees; the Chairman of the SenateArmned Services Committee; the Secretaries of Defense, the Air Force, theArmy, and the Navy; and the Director, Office of Management and Budget.We will also make copies available to others upon request.

If you have any questions about this report, please contact me at(202) 512-6240. Other major contributors are listed in appendix II.

Sincerely yours,

Samuel W. BowlinDirector, Defense and Security

Information Systems

Page 5 GAO/IMTEC.02.OMDR Defense's Embedded Software Costs

Appendix I

Brief'mg Charts

GAO Information Managementand Technology Division

Embedded Computer Systems:Defense Does Not Know HowMuch It Spends on Software

Presented to theSubcommittee on Researchand Development, House ArmedServices Committee

Page 6 GAO/IMTBC-92.OZBR Defense's Embedded Software Costs

Appendix IBriefing Charts

GAD Objectives

"• Determine if Defense knowshow much it spends onembedded software

"• Examine what Defenseis doing to track/reducesoftware costs

Page 7 GAO/IITDSO.9.603B Defense's Embedded Softwere Costs

Appendix IBriefing Charts

GO Points for Discussion

* Embedded software is criticalto weapons systems

* Defense demand for softwarecontinues to grow

"* Embedded software costsare not tracked

"* Actions being taken totrack/reduce software costs

" Observations

Page 8 GAOIIMTEC-92-.2•R Defense's J, mbedded Software Costs

Appendix IBriefing Charts

GAD Embedded Software Is Criticalto Weapons Systems

* Performs critical functionssuch as

*Navigation*Enemy detection

o Offers flexibility to changeweapon capability, e.g., Patriot

o Can replace costly manpower

Page 9 GAO/IMrEC.-9a-o2BR Defense's Rmbedded Software Coats

Appendix IBriefing Charts

GA Defense Demand for SoftwareContinues to Grow

* 1960s F-4: almost no

computer code

e 1970s F-14: 32K lines

* 1980s C-17: 1.3M lines

e 1990s ATF: 7M lines

e 1990s SDI: 40-1OOM lines

Page 10 GAOIMTEC.92-62BR Defense'. Embedded Srftware Coste

Appendix IBriefing Charts

GAO Embedded Software CostsAre Not Tracked

• No reliable embeddedsoftware costs

* No one responsiblefor collectingsoftware costs

* Rough estimates placetotal annual software costsat $24 billion to $32 billion

Page I1 GAO/IMTEC-92-62BR Defense's Embedded Software Costs

Appendix IBriefing Charts

GM Embedded Software CostsAre Not Tracked (cont.)

* Total software costs areabout 8-11% of Defensebudget; may reach 20% by2008

* Embedded software notmanaged as a discreteitem

Page 12 GAO/IMTEC.92.62BR Defense's Embedded Software Costs

Appendix IBriefing Charts

A Embedded Software CostsAre Not Tracked (cont.)

*Defense needs good softwarecost data to

*Assess and help controlsoftware expenditures toavoid costly overruns

*Help develop effectivesoftware metrics for futureestimates

Pase 18 GAO/IMTEC-92-62BR Defen.e's Embedded Software Costs

Appendix IBriefing Charts

G Actions Being Taken ToTrack/Reduce Software Costs

*New Instruction 5000.2requires reporting ofsoftware costs

* Defense Software TechnologyStrategy aims to reduce cost

*ATF is one of the firstweapon systems to requiresoftware cost reporting

Page 14 GAO/IMTEC.92-62B1R Defense's Embedded Software Costs

Appendix IBriefing Charts

A Observations

* Defense does not know howmuch it spends on software

* Difficult to manage whatcannot be measured

* Defense needs reliablesoftware cost data toeffectively manage weaponsprograms

Page is GAO/IMTEC-02-63BR Defense'. Embedded Software Costs

Appendix II

Major Contributors to This Report

Innformai•t John B. Stephenson, Assistant DirectorKirk J. Daubenspeck, Assignment Manager

Management and Alicia L. Sommers, Evaluator-in-ChargeTechnology Division, Cheryl M. Dottermusch, Technical Adviser

Washington, D.C. Shane D. Hartzler, Writer-Editor

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