GAO: Staggering cost overruns dwarf modest improvements in Defense acquisition

By Katherine McIntire Peters

March 31, 2009

Research and development costs of the Pentagon's weapons programs have increased 42 percent more than originally estimated, with an average delay of 22 months in delivering initial capabilities, according to a new assessment of the Defense Department's major acquisition programs in 2008.

Of the 96 weapons programs the auditors at the Government Accountability Office reviewed, 64 percent had reported cost increases and only 28 percent were expected to be delivered on time or ahead of schedule. The report, released on Monday, will provide ammunition to Obama administration officials and lawmakers seeking opportunities to cut poorly performing programs and scale back weapons purchases while the nation digs out of the current recession.

"Every dollar of cost growth on a DoD weapon system represents a lost opportunity to pay for another national priority," the report said.

Auditors cited various reasons for the runaway costs, including evolving technical requirements of the weapons, which cost more time and money to develop, to a shortage of qualified government personnel available to oversee and manage the programs.

Of the 59 Defense program offices that responded to questions from GAO about staffing, 46 said they had authority to fill all the positions they had requested, but fewer than half had been successful in doing so.

"As a result, program offices reported degradation in oversight, delays in certain management and contracting activities, increased workloads for existing staff, and a reliance on support contractors to fill some void," GAO reported.

GAO's assessment of the department's $1.6 trillion portfolio of major weapons does show some modest improvement in cost control at the department: The 2008 portfolio's cost growth of $296 billion is actually less than the 2007 portfolio's cost growth of $301 billion (costs are in 2009 dollars).

One reason for the $5 billion decrease during the last year is skyrocketing costs have forced the Pentagon to purchase fewer weapons than originally planned in many programs. Quantities have been reduced by 25 percent or more for 15 of the programs in the 2008 portfolio. Ten of the largest acquisition programs, which account for half the overall acquisition dollars in the portfolio, have seen quantities reduced by almost one-third.

The two most expensive programs, the multiservice Joint Strike Fighter and the Army's Future Combat Systems, are now projected to cost 38 percent and 45 percent more respectively than original estimates.

John Young, undersecretary of Defense for acquisition, technology and logistics, took issue with some of GAO's assertions in a letter responding to a draft of the report. Among other things, the agency's analysis did not reflect increases in the quantities of some weapons purchased over original baseline figures, he said.

"Purchasing greater quantities, and the associated cost of these items, is not acquisition program cost growth and does not reflect poor acquisition management," Young wrote.

In addition, GAO's metrics did not necessarily reflect current program performance, Young said, noting that the Defense Department recently revised acquisition policy to jibe with many of the watchdog's recommendations. "Looking forward, I am mindful that cost growth cited in this report will not vanish in the short run, and it will take years for the new initiatives to work their way into the majority of the programs in the portfolio."

Even if the Joint Strike Fighter and the Future Combat Systems programs experience no further cost growth, they will retain $78 billion of cost growth in the portfolio for the next 25 years, Young noted.

Newer programs, on average, have not shown the same cost growth and schedule delays as many older programs, GAO found.


By Katherine McIntire Peters

March 31, 2009

http://www.govexec.com/defense/2009/03/gao-staggering-cost-overruns-dwarf-modest-improvements-in-defense-acquisition/28872/