The total cost of 77 selected Department of Defense (DoD) major acquisition programs decreased by $9.1 billion (-.06 percent) in 2014, according to a report issued by DoD last week. 

This small increase reflects increased planned quantities (+$2.5 billion), program schedule changes (+$2.4 billion), higher costs due to engineering changes (+$5.4 billion), increased program cost estimates (+$0.2 billion), and other changes ($0.2 billion). Extending Offsetting these increases were cost decreases due to lower escalation rates (-$10.8 billion) and a drop in support costs (-$9.0 billion).

When $6.964.4 billion is added to extend the funding for Ballistic Missile Defense through FY2020 (previous reports limited BMD funding through FY2019) and adjustments are made for final and initial reports, the total cost of DOD major acquisition programs as of December 31, 2014 is $1.622 trillion.

The DoD report also identified one program that experienced critical Nunn-McCurdy unit cost breaches—unit cost increases of 25 percent or more to the current Acquisition Program Baseline (APB) or 50 percent or more to the original APB. The Joint Standoff Weapon—Baseline Variant and Unitary Warhead Variant (JSOW). The breach occurred because JSOW production was terminated after FY2015 in the president’s FY2016 budget resulting in a significant reduction in quantities.

The Warfighter Information Network—Tactical Increment 2 (WIN-T Inc2) experienced a significant McCurdy breach—unit cost increases of 15 percent, but less than 25 percent of the current APB or 30 percent, but less than 50 percent of the original APB. The WIN-T Inc 2 breach was due to a 32 percent quantity decrease (5,267 to 3,583) and a procurement schedule extension.

Programs submitting their initial SAR reports are not represented in the total cost growth estimates for a particular year. For this reporting period, the initial report was submitted for the Air Force Intercontinental Ballistic Missile Fuze Modernization (ICBM Fuze Mod) program at a cost estimate of $2.076 billion.

The cost estimates for selected programs are reported in the congressionally-required Selected Acquisition Reports (SAR).  SAR estimates of total program costs include actual costs to date and estimated future costs.  Program costs include research and development, procurement, military construction, and operations and maintenance costs that are acquisition-related. 

DoD prepares these congressionally-required reports annually (with submission of the budget).  Quarterly reports are prepared for programs that experience cost increases of 15 percent or more, and schedule delays of at least six months.  DoD also submits quarterly reports for a program’s initial and final report, or for programs that are rebaselined during major milestone reviews.