It's all about the incentives ...

Quality problems have caused cost overruns, schedule delays, and reduced weapon system availability on the 11 DOD weapon systems we reviewed. ... the Wideband Global SATCOM communications satellite’s initial operating capability date was delayed by 18 months because a supplier had installed some fasteners incorrectly and 1,500 fasteners on each of the first three satellites had to be reinspected. ... Prime contractors’ poor practices related to systems engineering, manufacturing, and supplier quality contributed to these problems.

... leading commercial companies ... apply more discipline and ... set well-defined product requirements and performed appropriate testing, which are critical systems engineering practices.

DOD’s acquisition environment does not provide incentives to prime contractors to use best practices to efficiently build high-quality weapon systems. The department faces challenges setting achievable requirements for systems development and providing effective oversight during the development process. In conducting systems development, DOD generally pays the allowable costs incurred for the contractor’s best efforts and accepts most of the financial risks associated with development because of technical uncertainties. However, DOD and its contractors often enter into development contracts before requirements have been analyzed with disciplined systems engineering practices. This introduces significant cost and schedule risk to a development program, risk that is not borne by the prime contractor, but by DOD. Contractors have little incentive to utilize the best systems engineering, manufacturing, and supplier quality practices to control costs ...

The Under Secretary of Defense for Acquisition, Technology and Logistics has identified several initiatives DOD recently started that might eventually help improve weapon system quality. Some of its new initiatives address problems we noted in this report, such as placing greater emphasis on setting achievable requirements before starting development. However, DOD has not taken actions that would address problems related to prime contractor systems engineering, manufacturing, and supplier quality practices we found in our review of the 11 weapon systems.

We are making recommendations that the Secretary of Defense improve weapons system quality by setting achievable requirements at the start of weapon system development, overseeing and expanding initiatives that could improve quality, and using data to assess prime contractor performance and weapon system quality.