Running head: THAAD CASE STUDY 1

THAAD Case Study

Andrew D. Bessette

BQM 444 Project Management

November 9, 2013

Tony Sines

Southwestern College Professional Studies

THAAD CASE STUDY 2

THAAD Case Study

According to the National Missile Defense act of 1999, “It is the policy of the United

States to deploy as soon as is technologically possible an effective National Missile Defense

system capable of defending the territory of the United States against limited ballistic missile

attack…” (Missile Defense Agency website, 2013) Because of this policy, the U.S. Government

levied the requirement for a strong missile defense system. With any program, comes someone

to make sure it is a success. This is where the U.S. Government Accountability Office (GAO) is

concerned. Their duty according to the U.S. Government Accountability Office website (2013) is

to ensure improvement and performance and hold accountable the federal government and their

implemented programs. Also according to their website, “We provide Congress with timely

information that is objective, fact-based, nonpartisan, non-ideological, fair, and balanced.” (U.S.

Government Accountability Office website 2013) It was their duty (the GAO) along with the

Department of Defense (DOD) to investigate the failing Theater High Altitude Area Defense

(THAAD) program. During the course of the project, many program and project management

errors caused multiple failures during the programs continuing lifecycle. The case study provided

by Meredith and Mantel Jr. (2012) explains what their findings were, why the investigation took

place. The case study also explains all of the contracting agency shortcomings. Additionally, it

explains how their decisions directly influenced the outcome of the project. Furthermore, the

text explains all of the lessons that were learned by the program managers and the companies

taking control of the program. I will further explain what the THAAD project was, and if having

the GAO and DOD conduct the inquiry was a good decision and the types of audits completed to

improve the project itself. So what is the THAAD project and what was it purpose?
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THAAD Explained

The Theater High Altitude Area Defense (which is now) known as Terminal High

Altitude Area Defense (THAAD) is a program initially requested by the United States Army. Its

design, according to the Missile Defense Agency’s website is to “provide(s) the Ballistic Missile

Defense System (BMDS) with a globally transportable, rapidly deployable capability to intercept

and destroy ballistic missiles inside or outside the atmosphere during their final, or terminal,

phase of flight.” (Missile Defense Agency website, 2013) This means that if a weapon like an

intercontinental ballistic missile or even some smaller attack medium focused at a target within

the United States, or within its ally’s territory, the mobile defense system provided will be able to

neutralize the threat before or shortly after it enters the protected airspace. A current example of

this is the Patriot Missile Defense System. This system deployed to the Middle East as part of

Operation Iraqi Freedom where it intercepted “SCUD” ballistic missiles shot by Iraqi military

forces. (Missile Defense Agency website, 2013) The THADD project began in 1993 with a

request from the United States Army to build a mobile missile defense system capable of

intercepting long-range missiles before their hazardous and massive destructive force could

cause any damage. This system must work in all areas of defense; land, air, sea, and space. The

system is extremely complex and incorporates many different facets to ensure proper operational

capability. The Missile Defense Agency’s (MDA) website (2013) explains that in order to

ensure proper operation of the missile system a multifaceted approach must be taken. The site

further explains how this multifaceted approach incorporates multiple types of sensors on

different sensor platforms to track when a threat is encountered. That specific threat, once

detected, is intercepted by use of one of many types of defense measures. Some examples of

these defensive measures are in use today. Weapons systems like the Patriot Missile Defense
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System, The Aegis Ballistic missile Defense standard Missile-3, and the Sea-Based terminal are

all available for use, and are in the active stockpile. (Missile Defense Agency website, 2013) Of

course, none of this happens without the proper command and control of the deployed defense

systems, and their users. The MDA explains that U.S. military personnel operate these missile

defense elements across many commands. Additionally, many of the US’s allies operate the

systems on their own counties land to protect their borders. I have personally witnessed many of

these defense systems incorporated into a few military base defense plans (Missile Defense

Agency website, 2013)According to the GAO report on the MDA, the projects are still in

progress and has been going on a lengthy 17 years. Naturally, the MDA has branched out from

the original project to provide multiple system types, but overall the project is expensive and

expansive. The MDA’s project has had an overall total cost of over 90 billion dollars since

2002, and plans to spend approximately another 8 billion dollars per year until around the year

2017. (U.S. Government Accountability Office website 2013) Obviously, with this much time,

an extensive array of weapons system applications, and 90+ billion dollars spent there were

many mistakes. So what did the GAO and DOD find?

Case Study Findings

During the course of the project audit the GAO found many interesting missteps in the

original project. These missteps are attributed to both program management, contract

performance and contract administration. According to the case study in the textbook, many

issues and lessons were found. Specifically, with programmatic management, the DOD and

GAO found that the program’s flight test schedule was shortened and did not allow for sufficient

testing on the ground. This misstep created a speeding up of processes in order to get into the

actual flight-testing. Because of this there was also not enough time allocated for pre and post
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flight evaluation and adjustments (Meredith and Mantel pp. 541 2012). The second thing that the

investigation or audit found was that there was a requirement levied to produce a prototype early

in the program. This requirement caused a diversion of focus from building working interceptors

with strong test data to the deployment of a prototype not ready for testing. The third thing that

the case study found was that there was a lack of focus on quality assurance. Quality assurance

is responsible to the contractor and overall the customer to ensure all parts and actions completed

are up to specification. Because of the lack of focus on quality assurance and lack of funding to

them, this caused many parts to be manufactured at less than desired quality specifications.

These parts caused many problems for the company in the future. (Meredith and Mantel Jr.

2012) The last thing the investigation/audit found was that the contract was developed on a

“cost-plus-fixed-fee contract, a contract type that placed all of the program’s financial risk on the

government and did not include provisions that could be used to hold the contractor

accountable…” (Meredith and Mantel pp. 54-542 2012) All of these errors or missteps were

addressed after the audit. According to the reading, four main steps were taken to fix the

problems with the program. The first thing that was changed was that the company lengthened

and increased the flight-testing schedule and ground testing. The next thing fixed was that the

contractor and the customer removed the requirement to field the early interceptor prototypes

until the organization could accomplish proper testing. The next thing accomplished to help fix

the earlier problems was that there was a marked increase in the contractors’ emphasis on

quality. There was an increase in the funding and staffing so a proper quality assurance

assessment of items could be accomplished. The final thing that was accomplished in order to

alleviate problems was the fact that the contract was modified to provide more performance

based incentives and penalties. This gave the contractors more motivation and reason to
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accomplish the tasks on time, and in good quality. Like I stated earlier, all of these changes may

have helped but the past mistake with the lack of focus on quality assurance came back to haunt

them. Despite the changes, the reliability of the remaining interceptors was in question due to

the fact that the parts were manufactured when quality assurance standards were lacking, and the

section was not funded or staffed to be fully engaged. The solutions for these issues is not all

that changed after the investigation by the GAO and DOD.

THAAD Lessons Learned

The THAAD program had dealt with many issues in the past years. Primarily, the

program had not had any early successes with its prototypes, and they were not held accountable

for that issue. According the reading, one way that the developer of the system was brought

back to accountability was when Lockheed Martin Space Systems Company, Missile and Space

Operations was awarded a 3.8 billion dollar contract in 2000. (Meredith and Mantel Jr. 2012)

This contract had a bonus and penalty clause that helped ensure quality progress. According to

the Army Acquisition Reform newsletter, focus was placed on successful flight testing by

providing a bonus for the first two flights. If they were successful, then the company was given

a substantial bonus; 25 million dollars. However, if Lockheed Martin Space Systems Company

failed after the first attempt, they would be penalized by sharing 20 million in contract cost. A

great bonus for success, or a huge penalty for failure is great motivation. (Meredith and Mantel

Jr. 2012) Other lessons that were learned had to do with the contract performance itself.

According to the reading, because of the earlier design and manufacturing errors, new

modifications and manufacturing of quality parts had to be completed before the first missiles

could be built and fielded. (Meredith and Mantel Jr. 2012) This was the only way to get past the

earlier failures because without improving the hardware, performance would remain at a low
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level. Along with these newly manufactured parts and components, there had to be a much

stronger testing and quality control process. This quality control process had to incorporate more

active and thorough ground testing of components and systems. (Meredith and Mantel Jr. 2012)

Additionally, the quality of the components and parts had to be validated by a strong Quality

Assurance Department. On the administrative side of the lessons learned, the reading explained

that the audit showed a need for a couple improvements. One improvement or change that

needed to be made was improving the team concept within the organization and with outside

contractors. This improvement would ensure that when problems surface, all the affected

departments could attack the problem together and solve the issue much faster. Another issue

that Meredith and Mantel highlighted was the need to use an electronic data management system.

This electronic data management system, if used properly would provide all the necessary

individuals and sections with accurate and real-time information on the status of each part of the

program. (Meredith and Mantel Jr. 2012) According to Eduardo Miranda author of “Running the

Successful Hi-Tech Project Office, “…data management systems can provide organizations with

a competitive edge, not only because they enable them to do things that could not otherwise be

done, but because the tools themselves become knowledge containers.” So, without this system,

the company had no idea where other parts of the project were at any given point. The text

identified many mistakes found in the audit completed by the GAO and the DOD. However,

what type of audit was this? How does a company decide on where the problem is, and how to

solve it?

Types of Audits

What happens when a project is off course and does not have the resources to get back on

track. A project review or audit can bring things back to where they need to be. According to T.
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Ryu (2005), audits, reviews, and investigations are a constant worry for companies. Many of the

concerns are if the audit or investigation is looking at their section or process. Questions like,

what are they here for, or did I make a mistake somewhere, are all common concerns voiced.

(Ryu, T 2005) Many types of audits or investigations can occur during this period. These audits

help ground people and keep them close to reality, oftentimes they can help bring their section

back to the proper course of action. They types of audits that normally occur are financial audits,

management audits, and project audits. According to the businessdictionary.com website (2013),

financial audits are “A third-party examination of a company's financial records and reporting

activities. An audit is conducted for disclosure, compliance, taxation, legal or other purposes.

The examiner will check for accuracy and full representation of financial activities and claims”

These audits according to S.J. Gauthier, are predicated on the assurance that all of the provided

financial statements are not only accurate, but reliable to the point where a financial statement

reader would not make a misinterpretation of the data. The financial statement audit is when an

auditor obtains all the required information and evidence to support whether the financial

statements are accurate enough so there will not be a misinterpretation of the data. (Gauthier, S.

J. 2007) According to Meredith and Mantel Jr. (2012) the project audit is simply a formal

inquiry into any part or all of a project. For example, the THAAD program audit could be

considered a project audit, however it was not only programmatic items that were looked into.

There was also inquiry into the financial aspects as well. Management audits are a little different.

Additionally, according to the text, a management audit takes place later in the project. The

management audit focuses on things that management could do differently or should do late in

the project to reallocate assets or personnel. A management audit concentrates on management

procedures and the overall organizational performance. A management audit is designed for the
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discovery of weaknesses and to improve the overall organization or company. The THAAD

project audit could also have been considered a management audit due to what the findings were,

and what improvements had to be made to compensate for earlier poor decisions. The bottom

line type of audit that occurred with the THAAD project is not so clear.

Due to the fact that there was a multi-faceted approach at the audit designed to investigate

multiple sections from different angles, there is no conclusive answer as to the type. However,

that is not the main issue. The type of audit does not matter as much as what information or

shortfalls discovered during the course of the investigation. I have personally been on many

inspection teams, and have had the opportunity to complete multiple types of inspections. What

we accomplished as a team appears to be very similar to what the GAO and DOD did with the

THAAD program. The GAO and DOD, discovered many areas for improvement. They then left

multiple suggestions to help the company fix the identified processes and errors. Because of

these audits, investigations and reviews the MDA was able to make improvements that affected

the outcome of the THAAD program. (Meredith and Mantel 2012)

Where THAAD is now

According to Meredith and Mantel Jr. (2012) the THAAD program has almost gotten

completely back on track. The reading explains that between 2000 and 2003 engineering

departments completed a thorough rework of the entire system and fixed many of the issued

discovered. The rework of the system lead the THAAD program to a production spike of 16

actual flight tests in 2004. In 2007 the initial operating capability was met, and the systems were

fielded for limited use. The THAAD program has continued to improve and to expand its initial

operational ideas into all of the realms of battle; land, sea, air, and space. Recently, the GAO

completed another case study. According to the GAO “…Missile Defense Agency (MDA) has
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made some progress, the new MDA Director faces challenges developing and deploying new

systems to achieve increasingly integrated capabilities as well as supporting and upgrading

deployed systems while providing decision makers in the Department of Defense (DOD) and

Congress with key oversight information in an era of fiscal constraints” (U.S. Government

Accountability Office website 2013) As you can see, the MDA still has many lessons to learn in

the development of multiple weapons systems, the contracting agreements, and fiscal

responsibility. However, due to the initial changes the company has made, and the continuing

process improvements the THAAD programs and the company is now a success. This year

alone the MDA has reported (during the second thru the fourth quarter) that there has been three

successful Aegis Ballistic Missile Defense (BMD) system tests, and two other tests. The other

two tests were also successful, and constituted multiple targets, lending further evidence that the

program is on track and is successful. Although the GAO states that the MDA has some more

room for improvement, there has been a significant increase in the quality and capability of the

Terminal High Altitude Area Defense program.

Summary

Whether or not you see a company as large as the Missile Defense Agency with a

contract to build a complicated defense system as a success can only be made by using the

information available. The U.S. Government Accountability Office and the Department of

Defense did a great job overall, and kept a keen eye on a very expensive (90+ billion dollars and

counting) project. Because of their audits, investigations, and suggestions, the Missile Defense

Agency was able to adjust its management practices and its processing/testing actions to move a

failing project, into a reliable missile defense system. This multi-dimensional system is currently

protecting our homeland and the land of our allies. The types of audits that were accomplished
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impacted the outcome of many sections associated to the THAAD project. By lengthening the

flight-test schedule, increasing ground testing more test data could be analyzed. Additionally, by

ensuring that the requirement for early prototypes was lifted helped the company focuses on

improving quality. Quality exponentially improved by ensuring the parts were remanufactured

to exacting standards. Additionally, the quality assurance standards and funding/manning

increased to allow for a more robust program and testing of parts. Finally, by making the MDA

fully responsible and accountable for failures and rewarding them for successes, the motivation

to build a quality product within specified timelines improved. (Meredith and Mantel Jr. 2012)

Additionally, many issues were solved in the areas of performance and administration.

By improving hardware production and testing procedures/funding, the Missile Defense Agency

was able to produce reliable assets to demonstrate military capability and to ensure fielding the

system to the U.S. military and its allies. Furthermore, by improving the teaming environment,

the THAAD stakeholders built a community where problems could be solved quicker, and

teamwork enabled much better cross talk. Finally, an implementation of a strong program

electronic data management system was key to providing real-time and accurate information to

all interested parties. (Meredith and Mantel Jr. 2012) This information was imperative in helping

all aspects of the project. It enabled the tracking of where progress was, and how to help each

other section when necessary. All of these program and administrative improvements led to the

THAAD project and the MDA transitioning from a failing activity to deploying a successful

threat deterrent and defense system. Without the audits completed by the GAO and the DOD

there may not be a reliable deployable missile defense system. The GAO completed a

multidimentional review of the project, the company and its practices to ensure a successful

THAAD project. The THAAD system is one that helps protect the United States citizens, its
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allies, and all of the territories under our protection from any threat that could invade our

airspace by land, air, sea, and space.

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References

Meredith, J.R., Mantel Jr., S. J., (2012). Project Management, A Managerial Approach (Eighth
Edition). Hoboken, NJ, John Wiley & Sons, Inc

Missile Defense Systems., In Missile Defense Agency online website. Retrieved from
http://www.mda.mil/system/thaad.html

United States Government Accountability Office THAAD program audits Retrieved from
http://www.gao.gov/products/GAO-13-432

Gauthier, S. J. (2007). How new standards for auditors will likely affect the governments they
audit. Government Finance Review, 23(3), 40-44. Retrieved from
http://ezproxy.sckans.edu/login?url=http://search.proquest.com/docview/229703223?accountid=
13979

Ryu, T. (2005). AUDITOR CHOICE AND AGENCY COSTS. Allied Academies International
Conference.Academy of Accounting and Financial Studies.Proceedings, 10(2), 71. Retrieved
from
http://ezproxy.sckans.edu/login?url=http://search.proquest.com/docview/192400226?accountid=
13979

Financial audits, financial records audit., In Business Dictionary online. Retrieved from
http://www.businessdictionary.com/definition/financial-audit.html

Miranda, Eduardo. Running the Successful Hi-Tech Project Office. Norwood, MA, USA: Artech
House, 2003. p 111. Retrieved from
http://site.ebrary.com/lib/southwesternks/Doc?id=10081960&ppg=125