Major Acquisitions

Despite the regularity with which defense acquisition programs have experienced cost overruns and schedule delays, the Pentagon does have an extensive system intended to provide managers with early warnings of cost and schedule problems. In 1967, the Defense Department (DOD) issued a set of cost/schedule control system criteria that it required defense contractors to meet. However, DOD and the defense industry alike generally accept that this process needs reform. This report discusses the (1) problems confronting the cost-schedule control system, (2) progress DOD has made with reforms, and (3) challenges that DOD faces in fostering and managing potentially significant changes.

GAO noted that: (1) the core concept of the CS2 process, earned value, is recognized as a sound way to measure progress on major acquisition programs; (2) over the years, however, the process has evolved to where the needs of some of its key users are being satisfied, while others are not; (3) because the data contained in the CS2 reports are typically up to 2 months old, the reports do not function as an early warning system needed by program managers; (4) moreover, the process has not fully integrated cost, schedule, and technical data as intended; (5) DOD has acknowledged the problems with CS2 for a decade, but reforms have proceeded slowly mainly because responsibility for the process has resided with the oversight organizations that have been its architects; (6) DOD attempted to effect change in 1989 by transferring top-level responsibility for the system from the comptroller staff to the acquisition staff; (7) despite this transfer, little progress was made because execution of CS2 at the field level remained within the comptroller community; (8) nonetheless, DOD has embarked on several reforms that could dramatically change the CS2 process; (9) recently, DOD accepted industry's earned value management criteria as a replacement for the government's long-standing CS2 criteria; (10) DOD has also transferred responsibility and control over the process from the services to the Defense Contract Management Command (DCMC), which currently provides the on-site interface between the government program office and the contractor; (11) another reform underway involves giving DOD program managers latitude to tailor their contract data to the specific needs of their program, such as the categories and the level of detail; (12) these recent steps to reform the CS2 process have potent implications; (13) for example, adopting the industry criteria could result in less burdensome and more useful contractor management information systems, but could also lessen the government's ability to oversee defense programs; (14) in light of both the day-to-day demands of managing the process on individual contracts and implementing recent reforms, DCMC faces a significant challenge as it takes over stewardship of the process; (15) service officials are concerned about how quickly it can meet these demands, given its decline in staffing over the last several years; and (16) ultimately, DCMC will have to ensure that the process meets the basic needs of all its key users, program managers, contractors, and oversight personnel.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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