The total cost of 79 selected Department of Defense (DoD) major acquisition programs increased by $7.0 billion (+.43 percent) in 2015, according to a report issued by DoD last month.
The small increase reflects increased planned quantities (+$17.9 billion), higher costs due to engineering changes (+$7.1 billion) and program schedule changes (+$1.3 billon). Offsetting some of these increases were decreased program cost estimates (-$9.7 billion), lower escalation rates (-$4.8 billion), and a drop in support costs (-$4.8 billion).
When $7.1 billion is added to extend the funding for the Ballistic Missile Defense System (BMDS) through FY2021 (previous reports limited BMDS funding through FY2020) and adjustments are made for final and initial reports (+$8.3 billion), the total cost of DOD major acquisition programs as of December 31, 2014 is $1.644 trillion.
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.
The DoD report for the December 2015 period 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 breach occurred for the Navy Remote Minehunting System (RMS) was terminated after 2016 in the FY2017 president's budget resulting in a significant reduction in quantities (from 54 to the 10 already delivered).
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 Armored Multi-Purpose Vehicle (AMPV) and the Joint Air-to-Ground Missile (JAGM) program.
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.