Defense Acquisitions
Information for Congress on Performance of Major Programs Can Be More Complete, Timely, and Accessible Gao ID: GAO-05-182 March 28, 2005DOD has more than $1 trillion worth of major defense acquisition programs, on which it must report to Congress, including a comparison of a current program's costs to a baseline containing its cost, quantity, schedule, and performance goals. When these goals are changed, the program is "rebaselined" to reflect current status. However, measuring current estimates against the most recent baseline without additional perspectives may obscure for Congress how programs are performing over time. Concerned over this, you asked GAO to examine how DOD's use of rebaselining has affected the adequacy of data provided to Congress on major defense acquisition programs.
DOD could be reporting more complete information beyond what is required by law on the unit cost performance of major defense acquisition programs to Congress for its authorization and appropriations deliberations. DOD does present Congress with valuable information about a program's performance by comparing the latest unit cost estimate against the most recent approved baseline. However, this provides only one perspective on performance because rebaselining shortens the period of performance reported and resets the measurement of cost growth to zero. Other meaningful perspectives are not reported. First, DOD does not report the cumulative unit cost growth, in constant dollars, that a program has experienced since the first full baseline was established. For example, DOD reported in the 2003 Selected Acquisition Report (SAR), the most recent available, that the F/A-22 Raptor program's unit cost decreased by 0.33 percent in the previous 4 months--since the latest rebaselining. DOD did not report that the program's unit cost had cumulatively increased by 72 percent in the last 143 months. Second, the change in unit cost between one budget request to Congress and the next is not measured or reported. For example, DOD reported in the 2003 SAR that unit cost for the Stryker program increased by 1.34 percent in the 2 months since the latest rebaselining; it did not report that unit cost had grown by 21 percent in the previous 12 months. DOD could be more timely in reporting to Congress that it has rebaselined individual programs. A key factor is that DOD is not required by statute or its own policies to report a program's rebaseline to Congress. Although DOD includes the latest rebaselining actions in the April SARs, a rebaseline approved after early April may not be reported to Congress before it enacts the authorization and appropriations legislation. For example, the DD(X) Destroyer program established a new baseline on April 23, 2002, but did not report this new baseline to Congress in a SAR until April 2003. As a result, between April 2002 and the passage of the fiscal year 2003 defense budget, the SAR provided Congress did not reflect the approved baseline for the DD(X) program. Congressional oversight of DOD's adherence to established cost and schedule baselines is unnecessarily constrained because DOD classifies about 50 percent of the SARs it submits to Congress, despite the fact that only a small amount of data in each of these SARs is actually classified. This reporting practice restricts access to the unclassified cost, quantity, and schedule data for congressional staff without security clearances and requires special handling procedures of that unclassified data by those with clearances.
RecommendationsOur 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.
Director: Team: Phone:GAO-05-182, Defense Acquisitions: Information for Congress on Performance of Major Programs Can Be More Complete, Timely, and Accessible
This is the accessible text file for GAO report number GAO-05-182
entitled 'Defense Acquisitions: Information for Congress on Performance
of Major Programs Can Be More Complete, Timely, and Accessible' which
was released on March 28, 2005.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to the Subcommittee on Defense, Committee on Appropriations,
U.S. Senate:
United States Government Accountability Office:
GAO:
March 2005:
Defense Acquisitions:
Information for Congress on Performance of Major Programs Can Be More
Complete, Timely, and Accessible:
GAO-05-182:
GAO Highlights:
Highlights of GAO-05-182, a report to the Subcommittee on Defense,
Committee on Appropriations, U.S. Senate:
Why GAO Did This Study:
DOD has more than $1 trillion worth of major defense acquisition
programs, on which it must report to Congress, including a comparison
of a current program‘s costs to a baseline containing its cost,
quantity, schedule, and performance goals. When these goals are
changed, the program is ’rebaselined“ to reflect current status.
However, measuring current estimates against the most recent baseline
without additional perspectives may obscure for Congress how programs
are performing over time.
Concerned over this, you asked GAO to examine how DOD‘s use of
rebaselining has affected the adequacy of data provided to Congress on
major defense acquisition programs.
What GAO Found:
DOD could be reporting more complete information beyond what is
required by law on the unit cost performance of major defense
acquisition programs to Congress for its authorization and
appropriations deliberations. DOD does present Congress with valuable
information about a program‘s performance by comparing the latest unit
cost estimate against the most recent approved baseline. However, this
provides only one perspective on performance because rebaselining
shortens the period of performance reported and resets the measurement
of cost growth to zero. Other meaningful perspectives are not reported.
First, DOD does not report the cumulative unit cost growth, in constant
dollars, that a program has experienced since the first full baseline
was established. For example, DOD reported in the 2003 Selected
Acquisition Report (SAR), the most recent available, that the F/A-22
Raptor program‘s unit cost decreased by 0.33 percent in the previous 4
months”since the latest rebaselining. DOD did not report that the
program‘s unit cost had cumulatively increased by 72 percent in the
last 143 months. Second, the change in unit cost between one budget
request to Congress and the next is not measured or reported. For
example, DOD reported in the 2003 SAR that unit cost for the Stryker
program increased by 1.34 percent in the 2 months since the latest
rebaselining; it did not report that unit cost had grown by 21 percent
in the previous 12 months.
DOD could be more timely in reporting to Congress that it has
rebaselined individual programs. A key factor is that DOD is not
required by statute or its own policies to report a program‘s
rebaseline to Congress. Although DOD includes the latest rebaselining
actions in the April SARs, a rebaseline approved after early April may
not be reported to Congress before it enacts the authorization and
appropriations legislation. For example, the DD(X) Destroyer program
established a new baseline on April 23, 2002, but did not report this
new baseline to Congress in a SAR until April 2003. As a result,
between April 2002 and the passage of the fiscal year 2003 defense
budget, the SAR provided Congress did not reflect the approved baseline
for the DD(X) program.
Congressional oversight of DOD‘s adherence to established cost and
schedule baselines is unnecessarily constrained because DOD classifies
about 50 percent of the SARs it submits to Congress, despite the fact
that only a small amount of data in each of these SARs is actually
classified. This reporting practice restricts access to the
unclassified cost, quantity, and schedule data for congressional staff
without security clearances and requires special handling procedures of
that unclassified data by those with clearances.
What GAO Recommends:
To provide Congress with more complete, timely, and accessible
information, GAO recommends that the Secretary of Defense implement the
following changes: measure and report a full history of unit cost
performance in constant dollars; notify Congress when a program is
rebaselined; and separately report classified and unclassified data.
DOD concurred with GAO‘s recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-05-182.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Robert E. Levin at (202)
512-4841 or levinr@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Information for Congress on Unit Cost Performance Could Be More
Complete:
Reporting of Rebaselinings Could Be More Timely and Unclassified Data
Is Unnecessarily Restricted:
Conclusions:
Recommendations for Executive Action:
Matters for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Tables:
Table 1: Examples of the Highest Number of Rebaselinings:
Table 2: Examples Showing Cumulative Changes to Unit Cost Not Reported,
in Constant Dollars:
Table 3: F/A-18E/F Effects of Inflation on Reporting Cost Changes:
Table 4: Illustration of Differences in PAUC Calculations When Annual
Changes Are Shown:
Table 5: Example of the Impact of Programmatic Adjustments in the
Comanche Helicopter Program:
Table 6: PAUC growth and Nunn-McCurdy Determinations from 2001 to 2003,
in Percent:
Table 7: Examples of the Longest Time Lags in Reporting Program
Rebaselines to Congress:
Abbreviations:
AAWS-M: Advanced Anti-Tank Weapon System-Medium:
AEHF: Advanced Extremely High Frequency Satellites:
AMRAAM: Advanced Medium Range Air-to-Air Missile:
APB: Acquisition Program Baseline:
APUC: Average Procurement Unit Cost:
CMUP: Conventional Mission Upgrade Program:
DOD: Department of Defense:
FBCB2: Force XXI Battle Command Brigade and Below:
FMTVFamily of Medium Tactical Vehicle:
JASSM: Joint Air-to-Surface Standoff Missile:
RDT&E: Research, Development, Testing, and Evaluation:
NAS: National Airspace System:
PAUC: Program Acquisition Report:
SAR: Selected Acquisition Report:
SM-2: Standard Missle-2:
SSN-21: High Speed Submarine Nuclear Combat System:
USMC: United States Marine Corps:
United States Government Accountability Office:
Washington, DC 20548:
March 28, 2005:
The Honorable Ted Stevens:
Chairman:
Subcommittee on Defense:
The Honorable Daniel I. Inouye:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations:
United State Senate:
The Department of Defense (DOD) has more than $1 trillion worth of
major defense acquisition programs[Footnote 1] in development and
production. For the purposes of congressional oversight and decision
making, DOD is required by law to report to Congress the unit costs
(costs divided by quantities) for each program. DOD reports this unit
cost for both the current budget estimate and the most recent
acquisition program baseline, which describes the cost, quantity,
schedule, and performance goals of a program.[Footnote 2] DOD reports
these comparisons in a Selected Acquisition Report (SAR).[Footnote 3]
These reports, typically provided in early April, aid the Congress
during its deliberations over the defense authorization and
appropriations legislation.
As an acquisition program proceeds, DOD may determine that the original
baselined goals approved by decision makers are unachievable. Under
such circumstances, DOD will "rebaseline" the program so the goals more
realistically reflect the program's current status. However, to the
extent that current estimates are only measured against the most recent
baseline, Congress may not be getting in each SAR a clear picture on
just how well programs are performing over time.
Concerns over these issues led you to request that we evaluate how
DOD's use of rebaselining has affected the adequacy of data provided to
Congress on the performance of major defense acquisition programs. To
address this objective, we assessed SAR cost, schedule, and quantity
data for individual acquisition programs using federal control
criteria[Footnote 4] such as accuracy, completeness, timeliness, and
accessibility. This report focuses on (1) the completeness of unit cost
reporting and (2) the timeliness of reporting on rebaselining and the
accessibility of unclassified data.
In conducting our review, we reviewed pertinent statutes and DOD
acquisition system guidance; analyzed more than 650 SARs, both
quarterly and annual, of all major defense acquisition programs for the
period 1996 to 2003; and interviewed cognizant DOD officials. We
conducted our work from February 2004 to January 2005 in accordance
with generally accepted government auditing standards.
Results in Brief:
DOD could be reporting more complete information beyond what is
required by law on unit cost performance to Congress for its
authorization and appropriations deliberations. DOD does present
Congress with valuable information about a program's performance by
comparing the latest unit cost estimate against the most recently
approved baseline. However, this provides only one perspective on
performance because rebaselining shortens the period of performance
reported and resets the measurement of cost growth to zero. Other
meaningful perspectives are not reported. For example, DOD reported in
the 2003 SAR, the most recent available, that the F/A-22 Raptor
program's unit cost decreased by 0.33 percent in the previous 4 months-
-since the latest rebaselining. DOD did not report that the program's
unit cost had cumulatively increased by 72 percent in the last 143
months. Second, the change in unit cost between one budget request to
Congress and the next is not measured or reported. For example, DOD
reported in the 2003 SAR that unit cost for the Stryker program
increased by 1.34 percent in the 2 months since the latest
rebaselining; it did not report that unit cost had grown by 21 percent
in the previous 12 months.
DOD could be more timely in reporting to Congress that it has
rebaselined individual programs. A key factor is that DOD is not
required by statute or its own policies to report a program's
rebaseline to Congress. Although DOD includes the latest rebaselining
actions in the April SARs, a rebaseline approved after early April may
not be reported to Congress before it enacts the authorization and
appropriations legislation. Although the DD(X) Destroyer program
established a new baseline on April 23, 2002, for example, it did not
report it to Congress in a SAR until April 2003. As a result, between
the April 2002 SAR and the passage of the fiscal year 2003 defense
budget, the SAR provided to Congress did not reflect the approved
baseline for the DD(X) program.
DOD classifies about 50 percent of the SARs it submits to Congress,
despite the fact that only a small amount of data in each of them is
actually classified. This classification and reporting policy restricts
access to the unclassified cost, quantity, and schedule data for
congressional staff without security clearances and requires special
handling procedures of that unclassified data by those with clearances.
As a result, congressional oversight of DOD's adherence to established
cost and schedule baselines is unnecessarily constrained.
Taken altogether, current reporting policies and practices for
rebaselining could be improved to provide more useful information to
decision makers and strengthen accountability for performance. This
report makes recommendations that the Secretary of Defense strengthen
the SARs for major defense acquisition programs by requiring them to be
more complete, timely, and accessible. DOD concurred with our
recommendations and provided technical comments, which were
incorporated, as appropriate.
Background:
In 1967, to obtain consistent, reliable data on major defense
acquisition programs, DOD instituted a reporting system to summarize
program cost, schedule, and performance information called the SAR. The
purpose was to focus management attention on a program's performance
and changes to its acquisition plan. In 1975, Congress established the
SAR as a statutory reporting requirement to Congress[Footnote 5].
Consistent with statute, DOD requires an acquisition program baseline
at program initiation that establishes objective and threshold values
for cost, quantity, schedule, and performance parameters. Objective
values represent what the user desires and expects. Thresholds
represent the acceptable limits to those values that, in the user's
judgment, still provide the needed capability. The acquisition program
baseline is derived from the user's performance and schedule needs and
the best estimates of total program cost consistent with projected
funding.
A baseline, according to DOD acquisition guidance,[Footnote 6] consists
of the following:
* Performance parameters---The total number of performance parameters
should be the minimum number needed to characterize the major drivers
of operational performance. The number and specificity of performance
parameters may change over time.
* Schedule parameters---Schedule parameters should include, at a
minimum, the projected dates for program initiation, other major
decision points, and initial operating capability. The program manager
may propose, and the milestone decision authority[Footnote 7] may
approve, other critical system events.
* Cost parameters---Cost parameters should reflect realistic cost
estimates of the total program and/or increment, and should be
identified as life-cycle cost. The elements of program life-cycle cost
include:
* research, development, test, and evaluations;
* procurement costs;
* military construction costs;
* acquisition-related operations and maintenance costs, if any;
* total system quantity (to include both fully configured development
and production units);
* average procurement unit cost (defined as total procurement cost
divided by total procurement quantity);
* program acquisition unit cost (defined as the total of all
acquisition-related appropriations divided by the total quantity of
fully configured end items); and:
* any other cost objectives established by the milestone decision
authority.
The defense acquisition management framework defines the stages through
which typical programs proceed. As each stage concludes, a decision
must be made to initiate, continue, advance, adjust, or terminate a
project or program work effort or phase. The review associated with
each of these decision points typically addresses program progress and
risk, affordability, program trade-offs, acquisition strategy updates,
and the development of exit criteria for the next phase or effort. The
milestone decision authority is responsible for approving the program
structure as part of the acquisition strategy. Milestone decision
points are Milestone A, for entry into the technology development
phase; Milestone B, for entry into the system development and
demonstration phase (acquisition program initiation); and Milestone C,
for entry into the production and deployment phase.
There are three fixed acquisition program baselines (APB) tied to these
milestone decisions. The concept baseline approved at Milestone A; the
development baseline approved at Milestone B; and the production
baseline approved at Milestone C. This first full estimate, generally
established at Milestone B, is sometimes referred to as the original
business case for the program. All estimates include a mix of both sunk
and projected remaining costs.
Programs are rebaselined based on a change in requirements, a change in
acquisition phase, or a program restructuring. They are also
rebaselined when there is a realized cost overrun or schedule slip
beyond certain thresholds. Rebaselining can occur at any time and cover
any phase of the defense acquisition program. All rebaselines must be
approved by the milestone decision authority. A program may therefore
have several approved program baselines during development, but only
one currently approved program baseline. Programs also monitor a
current estimate of the elements of a baseline and report differences
as they develop.
Recognizing the need to establish a monitoring mechanism to provide
oversight of cost growth in DOD major defense acquisition programs,
Congress has required[Footnote 8] DOD to (1) notify Congress whenever
unit cost growth is at least 15 percent, and (2) "certify" the program
to Congress when the unit cost growth is at least 25 percent above the
latest approved acquisition program baseline cost estimate.[Footnote 9]
However, Congress did not require DOD to report when a program has been
rebaselined.
The reporting requirement is commonly referred to as Nunn-McCurdy,
after the congressional leaders responsible for the
requirement.[Footnote 10] Exceeding either the 15 or 25 percent unit
cost threshold is referred to as a Nunn-McCurdy unit cost breach. The
unit cost reporting includes two elements--program acquisition unit
cost (PAUC) and procurement unit cost (PUC).[Footnote 11] DOD refers to
the PUC as the average procurement unit cost (APUC). Unit cost is
considered a key measure because it describes buying power--the average
cost to buy each unit.
Unit cost information is submitted to Congress in DOD's annual
comprehensive SARs. In addition to the comprehensive annual report to
Congress for the period ending December 31, DOD also prepares a
quarterly report for the second, third, and fourth quarters of the
fiscal year when there has been:
* an increase of 15 percent or greater in the current estimate of the
program acquisition unit cost or average procurement unit cost in base-
year dollars;
* a 6-month or greater delay in the current estimate of any schedule
milestone since the current estimate of the previous report; or:
* a milestone B or C and associated acquisition program baseline
approval within 90 days prior to the quarterly report as of that date.
Information for Congress on Unit Cost Performance Could Be More
Complete:
DOD could be reporting more complete information on unit cost
performance to Congress for its authorization and appropriations
deliberations. A new baseline serves an important management control
purpose when program goals are no longer achievable, because it
presents an important perspective on the program's current status and
acquisition strategy. However, by comparing the latest unit cost
estimate with the most recent approved baseline, DOD provides an
incomplete perspective on a program's performance because a rebaseline
shortens the period of performance reported and resets the measurement
of cost growth to zero. In providing information to Congress, DOD does
not measure and report two meaningful perspectives--cumulative unit
cost growth in constant dollars and the change in unit cost between one
budget request and the next. In its SARs, DOD also does not present how
unit cost growth is adjusted for Nunn-McCurdy determinations when a
rebaselining reduces the number of units to be procured or increases
system capabilities. Current reporting policies and practices could be
improved to provide more useful information to decision makers and
strengthen accountability for performance.
Cumulative Unit Cost Changes Are Not Measured and Reported in Constant
Dollars:
DOD does not measure and report cumulative unit cost growth in constant
dollars. Cumulative cost data provides an important perspective because
it reflects changes and performance over the life of a program---from
the first full estimate, when the business case was first made to
Congress, to the present. Measuring change in constant dollars removes
the effects of inflation, which are beyond the control of individual
programs, and is used to measure real program cost growth.
DOD reports to Congress on the unit cost growth of programs in two
different sections of the SAR. One section reports the current estimate
against the latest approved baseline in both then-year and constant
dollars. However, because of rebaselining, the latest approved baseline
may be in place for only a short period of time and the measurement of
unit cost growth is reset to zero. The other section reports the
cumulative historical change only in then-year dollars, which includes
the effects of inflation.
Rebaselining can occur during each phase of acquisition, sometimes
frequently on individual programs. For example, in 2003, DOD reported
on 81 programs; of this number, 49 or (60 percent) had multiple
rebaselinings over the life of the program. Table 1 provides examples
of the highest number of rebaselinings in individual DOD acquisition
programs.
Table 1: Examples of the Highest Number of Rebaselinings:
Program: F/A-22;
Year of program start: 1992;
Date of latest rebaseline: 04/01/2004;
Number of rebaselines: 14.
Program: DDG 51;
Year of program start: 1988;
Date of latest rebaseline: 08/31/2002;
Number of rebaselines: 11.
Program: SM-2 Block IV;
Year of program start: 1993;
Date of latest rebaseline: 08/04/1999;
Number of rebaselines: 11.
Program: SSN-21;
Year of program start: 1988;
Date of latest rebaseline: 04/19/2000;
Number of rebaselines: 10.
Source: GAO analysis of DOD data.
[End of table]
As illustrated in table 2, DOD reports unit cost growth in constant
dollars only for the most recent period of performance. It does not
present a full history of a program's unit cost growth in a single
document. For example, DOD reported in the December 2003 SAR that the
Marine Corps' H-1 helicopter upgrade program's unit cost has shrunk by
1 percent in the last 20 months; however, DOD did not report that the
program's unit cost had, in constant dollars, doubled in the last 87
months.
Table 2: Examples Showing Cumulative Changes to Unit Cost Not Reported,
in Constant Dollars:
Program: AMRAAM;
Reported to Congress change based on latest APB: Percentage of APUC
change: (3.71)%;
Reported to Congress change based on latest APB: Time elapsed (in
months): 87;
Not reported to Congress change based on original APB: Percentage of
APUC change: 125.52%;
Not reported to Congress change based on original APB: Time elapsed (in
months): 254.
Program: AAWS-M (Javelin);
Reported to Congress change based on latest APB: Percentage of APUC
change: 4.14%;
Reported to Congress change based on latest APB: Time elapsed (in
months): 34;
Not reported to Congress change based on original APB: Percentage of
APUC change: 207.87%;
Not reported to Congress change based on original APB: Time elapsed (in
months): 174.
Program: FMTV;
Reported to Congress change based on latest APB: Percentage of APUC
change: (4.67)%;
Reported to Congress change based on latest APB: Time elapsed (in
months): 7;
Not reported to Congress change based on original APB: Percentage of
APUC change: 154.52%;
Not reported to Congress change based on original APB: Time elapsed (in
months): 177.
Program: USMC H-1 Upgrades;
Reported to Congress change based on latest APB: Percentage of APUC
change: (.98)%;
Reported to Congress change based on latest APB: Time elapsed (in
months): 20;
Not reported to Congress change based on original APB: Percentage of
APUC change: 101.52%;
Not reported to Congress change based on original APB: Time elapsed (in
months): 87.
Program: V-22 Vertical Lift Aircraft;
Reported to Congress change based on latest APB: Percentage of APUC
change: 6.00%;
Reported to Congress change based on latest APB: Time elapsed (in
months): 20;
Not reported to Congress change based on original APB: Percentage of
APUC change: 132.46%;
Not reported to Congress change based on original APB: Time elapsed (in
months): 212.
Program: F/A-22;
Reported to Congress change based on latest APB: Percentage of APUC
change: (.33)%;
Reported to Congress change based on latest APB: Time elapsed (in
months): 4;
Not reported to Congress change based on original APB: Percentage of
APUC change: 72.40%;
Not reported to Congress change based on original APB: Time elapsed (in
months): 143.
Source: GAO analysis of 2003 SAR data.
[End of table]
DOD reports in another section of the SAR the cumulative unit cost
change, but only in then-year dollars which includes the effects of
inflation. The statute that requires submission of SARs to Congress
calls for reporting the history of the Program Acquisition Unit Cost
and the Procurement Unit Cost from the date the program was first
included in the SAR to the end of the quarter for which the current SAR
is submitted.[Footnote 12] Determining the change in constant dollars,
which removes the effects of inflation, provides more meaningful data.
For example, as shown in table 3, the unit cost growth reported to
Congress for the F/A-18E/F was almost zero percent because it was
presented in then-year dollars. DOD did not report that the costs
increased by more than one-third, once the effects of inflation are
removed.
Table 3: F/A-18E/F Effects of Inflation on Reporting Cost Changes:
Dollars in millions:
Development Estimate;
Reported to Congress PAUC in then-year dollars: $94.58;
Not reported to Congress PAUC in 2005 dollars: $70.20.
Current Estimate;
Reported to Congress PAUC in then-year dollars: $94.90;
Not reported to Congress PAUC in 2005 dollars: $96.01.
Percentage Change;
Reported to Congress PAUC in then-year dollars: 0.003%;
Not reported to Congress PAUC in 2005 dollars: 36.78%.
Source: GAO analysis of the F/A-18E/F SAR.
[End of table]
Year-to-Year Unit Cost Changes Are Not Measured and Reported:
DOD does not measure and report the changes in unit cost between the
latest budget request and the prior budget. Between the 2004 and 2005
budget requests, DOD rebaselined 7 of the 81 major defense acquisition
programs. When DOD rebaselined these programs, it reset the cost growth
to zero. For example, the Stryker armored vehicle program reported a
little over 1 percent unit cost growth in the 2 months since it
rebaselined, but DOD did not report the meaningful perspective that the
program experienced a 20 percent growth between annual budget requests.
(Table 4 illustrates the differences in program acquisition unit cost
when annual changes are not reported.)
Table 4: Illustration of Differences in PAUC Calculations When Annual
Changes Are Shown:
Program: Advanced Extremely High Frequency Satellites;
Reported to Congress: Current estimate compared to latest APB:
Percentage of PAUC Change: 2.78%;
Reported to Congress: Time elapsed (in months): 1.5;
Not Reported to Congress: Current estimate compared to prior year
estimate: Percentage of PAUC change: 49.88%;
Not Reported to Congress: Time elapsed (in months): 12.
Program: FA-22 Raptor;
Reported to Congress: Current estimate compared to latest APB:
Percentage of PAUC Change: 0.0%;
Reported to Congress: Time elapsed (in months): 3;
Not Reported to Congress: Current estimate compared to prior year
estimate: Percentage of PAUC change: 27.39%;
Not Reported to Congress: Time elapsed (in months): 12.
Program: Stryker;
Reported to Congress: Current estimate compared to latest APB:
Percentage of PAUC Change: 1.34%;
Reported to Congress: Time elapsed (in months): 2;
Not Reported to Congress: Current estimate compared to prior year
estimate: Percentage of PAUC change: 20.97%;
Not Reported to Congress: Time elapsed (in months): 12.
Program: Force XXI Battle Command;
Reported to Congress: Current estimate compared to latest APB:
Percentage of PAUC Change: 0.0%;
Reported to Congress: Time elapsed (in months): 2.5;
Not Reported to Congress: Current estimate compared to prior year
estimate: Percentage of PAUC change: 72.79%;
Not Reported to Congress: Time elapsed (in months): 12.
Source: GAO analysis of 2002 and 2003 SAR data.
[End of table]
In Some Cases, DOD Reduces the Magnitude of Unit Cost Growth for Nunn-
McCurdy Determinations:
Congress established unit cost as a key measure of buying power--the
average cost to buy each unit. Congress also established the Nunn-
McCurdy cost increase thresholds of 15 percent and 25 percent for unit
cost growth that require detailed reporting. As defined by law, unit
costs are determined by dividing total cost by total
quantities.[Footnote 13] If quantities decrease but costs stay the same
or do not decrease proportionately, unit costs would necessarily
increase.
For determining Nunn-McCurdy breaches, DOD policy[Footnote 14] allows
the exclusion of the unit cost increases associated with reductions in
quantity or increases in capabilities on individual programs. DOD
refers to these actions as programmatic adjustments, which require the
approval of a new acquisition program baseline. DOD believes that these
adjustments clarify legitimate cost growth and applies its exclusion
policy to determine all Nunn-McCurdy breaches.
By making these adjustments, DOD reduced the number and the magnitude
of unit cost increases reported to Congress that would have otherwise
exceeded the Nunn-McCurdy thresholds. The effects of these adjustments
are generally not visible in the reports to Congress. As a result,
Congress may not be getting the information it sought on program buying
power in requiring unit cost reporting.
For example, as seen in table 5, in December 2002, the Comanche
Helicopter program experienced a PAUC growth of about 62 percent over
27 months. However, after excluding the unit cost increases associated
with a program restructure and a reduction in quantity of 561
aircraft,[Footnote 15] DOD reported a Nunn-McCurdy breach of 18
percent, less than the 25 percent threshold that would have triggered a
certification. DOD explained that the 18 percent cost growth was driven
by weight growth, functionality changes, overhead rates, and estimating
differences. The quantity reduction accounted for the other 44 percent
of the cost growth.
Table 5: Example of the Impact of Programmatic Adjustments in the
Comanche Helicopter Program:
Dollars in millions.
Total Cost;
Baseline: $37,936.1;
Current estimate: $32,903.5.
Quantity;
Baseline: $1,213;
Current estimate: $650.
Unit Cost;
Baseline: $31.275;
Current estimate: $50.621;
Percentage change: 61.86%.
Source: GAO analysis of the December 2002 SAR.
[End of table]
DOD would have reported or would have had to certify many more Nunn-
McCurdy breaches if not for the adjustments made to unit cost growth to
account for reduced quantities or increased capabilities. The number of
programs that would have had Nunn-McCurdy breaches reported to Congress
between fiscal years 2001 and 2003 would have increased by about 50
percent--from 17 to 25 programs. The number of programs that reported a
breach of the 25 percent threshold, which requires a formal
certification by the Secretary of Defense to Congress, would have
increased by 90 percent, going from 10 to 19 programs during the same
period. Three of those programs--the Joint Strike Fighter, Comanche,
and the MH-60R--reported breaching the 15 percent level. These three
programs notified Congress of an APUC breach and therefore also
reported the PAUC changes. Other than those three programs, the
adjustments made to unit costs in table 6 were not disclosed in the
relevant SAR. For example, the Bradley Upgrade program experienced a
PAUC growth of 16 percent, but reported to Congress a 0.4 percent PAUC
reduction. (Table 6 below shows the full unit cost growth and the
adjusted unit cost growth used to determine breaches of Nunn-McCurdy
thresholds.)
Table 6: PAUC growth and Nunn-McCurdy Determinations from 2001 to 2003,
in Percent:
Program: Joint Strike Fighter;
Year: 2003;
Full PAUC growth (not reported to Congress): 26.22%;
PAUC Nunn-McCurdy Breach (reported to Congress): 19.4%;
PAUC growth (reported to Congress): Both.
Program: FBCB2;
Year: 2003;
Full PAUC growth (not reported to Congress): 73.2%;
PAUC Nunn-McCurdy Breach (reported to Congress): No;
PAUC growth (reported to Congress): 0.
Program: Stryker;
Year: 2003;
Full PAUC growth (not reported to Congress): 25.2%;
PAUC Nunn-McCurdy Breach (reported to Congress): No;
PAUC growth (reported to Congress): 1.34%.
Program: Comanche;
Year: 2002;
Full PAUC growth (not reported to Congress): 61.86%;
PAUC Nunn-McCurdy Breach (reported to Congress): 23%;
PAUC growth (reported to Congress): Both.
Program: AEHF;
Year: 2002;
Full PAUC growth (not reported to Congress): 52.4%;
PAUC Nunn-McCurdy Breach (reported to Congress): No;
PAUC growth (reported to Congress):-2.78%.
Program: Bradley upgrade;
Year: 2002;
Full PAUC growth (not reported to Congress): 16.1%;
PAUC Nunn-McCurdy Breach (reported to Congress): No;
PAUC growth (reported to Congress):-.04%.
Program: F/A-22;
Year: 2002;
Full PAUC growth (not reported to Congress): 15.7%;
PAUC Nunn-McCurdy Breach (reported to Congress): No;
PAUC growth (reported to Congress): 0%.
Program: NAS;
Year: 2002;
Full PAUC growth (not reported to Congress): 37.4%;
PAUC Nunn-McCurdy Breach (reported to Congress): No;
PAUC growth (reported to Congress):-.43%.
Program: B-1 CMUP;
Year: 2001;
Full PAUC growth (not reported to Congress): 42.04%;
PAUC Nunn-McCurdy Breach (reported to Congress): No;
PAUC growth (reported to Congress): 6.41%.
Program: MH-60R Helicopter;
Year: 2001;
Full PAUC growth (not reported to Congress): 27.97%;
PAUC Nunn-McCurdy Breach (reported to Congress): 19%;
PAUC growth (reported to Congress): Both.
Program: Global Hawk;
Year: 2001;
Full PAUC growth (not reported to Congress): 69.7%;
PAUC Nunn-McCurdy Breach (reported to Congress): No;
PAUC growth (reported to Congress): 0%.
Source: GAO analysis of DOD data.
[End of table]
Reporting of Rebaselinings Could Be More Timely and Unclassified Data
Is Unnecessarily Restricted:
DOD could be more timely in reporting to Congress that it has
rebaselined individual programs. Although DOD's time lines for
reporting program acquisition breach data to Congress are consistent
with statute, in most instances the establishment of a new baseline is
not reported to Congress until months after the rebaseline has
occurred. A key factor here is DOD is not required by statute or its
own policies to report a program's rebaseline to Congress.
DOD typically reports the latest program rebaseline information in its
December SAR, which is actually submitted to Congress the following
April. Sometimes data can arrive for congressional consideration as
much as 12 months after a program has rebaselined. Between the April
2003 and the April 2004 SARs to Congress, DOD rebaselined 9 programs
and on average these rebaselines were not reported for 6 months.
Between 1996 and 2003 about two-thirds of the rebaselinings occurred
between April and December. A new baseline approved after early April
may not be reported to Congress before the enactment of authorization
and appropriations legislation.
For example, the DD(X) Destroyer program established a new baseline on
April 23, 2002, but did not report this new baseline to Congress in a
SAR until April 2003. As result, between the April 2002 and the passage
of the fiscal year 2003 defense budget, the SAR provided to Congress
did not reflect the approved baseline for the DD(X) program. (Table 7
shows instances of the time lag in reporting rebaselines to Congress.)
Table 7: Examples of the Longest Time Lags in Reporting Program
Rebaselines to Congress:
Program: Bradley Fighting Vehicle system upgrade;
Date new baseline approved: 08/04/1997;
Date rebaseline available to Congress in the SAR: April 1998;
Lag time between rebaselining and reporting (in months): 8.
Program: CH-47 Cargo Helicopter;
Date new baseline approved: 07/26/2002;
Date rebaseline available to Congress in the SAR: April 2003;
Lag time between rebaselining and reporting (in months): 9.
Program: LPD-17 Amphibious Transport Dock Ship;
Date new baseline approved: 06/04/2002;
Date rebaseline available to Congress in the SAR: April 2003;
Lag time between rebaselining and reporting (in months): 10.
Program: Family of medium tactical vehicles;
Date new baseline approved: 05/26/1999;
Date rebaseline available to Congress in the SAR: April 2000;
Lag time between rebaselining and reporting (in months): 11.
Program: Minuteman III Guidance Replacement Program;
Date new baseline approved: 05/12/1997;
Date rebaseline available to Congress in the SAR: April 1998;
Lag time between rebaselining and reporting (in months): 11.
Program: AV 8B remanufacture;
Date new baseline approved: 04/10/1998;
Date rebaseline available to Congress in the SAR: April 1999;
Lag time between rebaselining and reporting (in months): 12.
Program: DD(X) Destroyer;
Date new baseline approved: 04/23/2002;
Date rebaseline available to Congress in the SAR: April 2003;
Lag time between rebaselining and reporting (in months): 12.
Program: Strategic sealift;
Date new baseline approved: 04/10/1998;
Date rebaseline available to Congress in the SAR: April 1999;
Lag time between rebaselining and reporting (in months): 12.
Program: National Polar-Orbiting Operational Environmental Satellite
System;
Date new baseline approved: 04/19/1999;
Date rebaseline available to Congress in the SAR: April 2000;
Lag time between rebaselining and reporting (in months): 12.
Program: National airspace system;
Date new baseline approved: 04/22/1998;
Date rebaseline available to Congress in the SAR: April 1999;
Lag time between rebaselining and reporting (in months): 12.
Source: GAO analysis of DOD data.
[End of table]
In addition, the accessibility of unclassified SAR data is
unnecessarily restricted. DOD classified about 50 percent of the SARs
it submitted to Congress in 2003, involving a total acquisition
investment of $454 billion. However, only a small amount of data
contained in each classified SAR is actually classified. The classified
data is generally only one of the eighteen sections in a report--
performance characteristics. Performance characteristics include such
items as speed, range, and reliability. Because these SARs are
classified, special handling procedures must be used by those
congressional staff with the appropriate clearances even to access the
unclassified cost and schedule data. This practice also completely
blocks access for those staff without clearances to the unclassified
cost and schedule data. As a result, congressional oversight of DOD's
adherence to established cost and schedule baselines is unnecessarily
constrained.
Conclusions:
Congress faces hard choices in trying to balance competing demands for
funds for major defense acquisition programs and for ongoing defense
operations as well as for increasing levels of funding needed for other
federal programs. A number of opportunities exist for DOD to give
Congress more complete information on the performance of major defense
acquisition programs for its oversight and decision-making
responsibilities. Although DOD has provided unit cost data required by
law, DOD would better capture the true nature of program performance by
also measuring and reporting unit cost changes in constant dollars
using cumulative and year-to-year perspectives. Basic data to measure
and report such changes is already collected. To provide these
additional perspectives, DOD would have to make the necessary
comparisons and present them in the SARs.[Footnote 16]
Because of DOD's policy to adjust unit cost growth when determining
Nunn-McCurdy breaches by excluding the costs associated with reductions
in quantities or increases in capabilities, Congress is not receiving
information on the full extent of unit cost growth for these programs.
Therefore, DOD should fully disclose the nature and extent of these
adjustments. Congress may also wish to determine the appropriateness of
these adjustments.
Other changes would result in more timely and accessible reporting of
unit cost data. One would be to inform Congress when a rebaselining
action occurs, without issuing a new SAR and the other would be to
separate the reporting of classified and unclassified information.
Recommendations for Executive Action:
To provide Congress with more complete, timely, and accessible
information, we recommend that the Secretary of Defense implement the
following four recommendations in the department's reporting of data on
major defense acquisition program baselines (APB) and performance:
* measure and report a full history of unit cost performance in
constant dollars by comparing the latest cost and quantity estimates
with:
* the first full estimate (typically the original acquisition program
baseline established at Milestone B);
* the current approved program baseline or, if the program rebaselines,
the prior approved program baseline; and:
* the estimate established with the previous year's budget request.
* fully disclose to Congress the nature and extent of programmatic
adjustments affecting Nunn-McCurdy threshold determinations, pending
any congressional direction on this issue;
* notify Congress when rebaselining actions are approved; and:
* separately report classified and unclassified SAR information.
Matters for Congressional Consideration:
DOD's policy of excluding the effects of quantity reductions or
capability increases in determining unit cost breaches of Nunn-McCurdy
thresholds may not provide Congress the information it sought on
program buying power in requiring unit cost reporting. Therefore,
Congress may wish to consider whether DOD's use of these programmatic
adjustments is appropriate.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, DOD concurred with our
recommendations. DOD also provided us with technical comments, which we
have incorporated as appropriate. DOD expressed concern that the report
could be misinterpreted to imply that DOD is not fully complying with
statutory reporting requirements. As a result, with the exception of
the issue of programmatic adjustments, we have clarified the language
of the report to focus on the benefits to Congress of providing more
complete information, beyond what the law currently requires. In the
case of the programmatic adjustments, we believe that Congress may wish
to determine whether DOD is providing it with the information it sought
on buying power when it required unit cost reports. Their written
comments to our recommendations appear in appendix II.
On our first recommendation, DOD stated that a unit cost comparison in
constant dollars from the current estimate back to multiple reference
points (i.e., Milestone B, approved APB, and previous year's President
budget) would be more useful than what is currently being reported to
Congress. DOD agreed to make these comparisons and also stated that it
will inform the Congress of this change in the SAR content.
On our second recommendation, DOD acknowledged that it has been
excluding programmatic changes from Nunn-McCurdy unit cost breach
determinations since February 1995, just after the Federal Acquisition
Streamlining Act established the APB as the Nunn-McCurdy unit cost
baseline. DOD agreed with GAO that the programmatic impacts to unit
cost are not entirely clear in the SAR as currently reported and agreed
to provide full details of programmatic adjustments in future reports
to the Congress. DOD stated that it will inform the Congress of this
change in the SAR content.
On our third recommendation, DOD stated that notification of revised
APBs could be accomplished if Congress so requests. While we are not
advocating that a SAR be generated to notify the Congress when a major
defense acquisition program is rebaselined, we remain convinced that
DOD should initiate notification via an appropriate medium to the
Congress whenever these programs are rebaselined.
We are sending copies of this report to the Secretary of Defense and
other interested parties. We will also provide copies to others on
request. In addition, the report will be available at no charge on the
GAO Web site at http://www.gao.gov.
Should you or your staff have any questions on matters discussed in
this report, please contact me on (202) 512-4841 or David Best,
Assistant Director, at (202) 512-8078. Principal contributors to this
report were Leon S. Gill, Danny Owens, Adam Vodraska, Robert Swierczek,
Wendy Smythe, Tana Davis, and Judy Lasley.
Signed by:
Robert E. Levin:
Director, Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
To evaluate to what extent DOD's use of rebaselining affected the
adequacy of data provided to Congress on the performance of major
defense acquisition programs, we relied on the Federal Internal Control
Standards to assess the comprehensiveness, timeliness, accessibility,
and appropriateness of the contents of data provide by DOD to Congress.
Due to the classified nature of most defense system's performance
parameters, our analysis of rebaselining did not include the baseline
system's operational performance parameters. We reviewed pertinent
statutes, such as 10 U.S.C. § 2432 (SAF), § 2433 (Unit Cost Reports),
and § 2435 (Baseline Description) and DOD acquisition system guidance,
both the current version and proposed revisions. We analyzed more than
650 SARs, both quarterly and annual reports covering an 8 year period
from 1996 to 2003, to determine which program had growth that exceeded
DOD's internal 10-percent or the Nunn-McCurdy 15-and 25-percent
thresholds. We arrayed the data extracted from these reports to show
all program breaches and rebaselines by service, programs, breach
types, and year. To assess the reliability of the data contained in the
SARs, we used the standardized GAO data reliability interview template
to interview cognizant DOD officials from the office of the Under
Secretary of Defense for Acquisition, Technology, and Logistics
(Acquisition Resources and Analysis). After reviewing DOD's management
controls in place for assessing data reliability, we concluded that
management controls were adequate and the data was sufficiently
reliable for our engagement purposes. Further, we also interviewed
cognizant DOD officials in Washington, D.C., from the offices of the
Under Secretary of Defense for Acquisition, Technology, and Logistics
(Acquisition Resources and Analysis); Program Analysis and Evaluation;
Cost Analysis Improvement Group (Weapons System Cost Analysis
Division); and Office of General Counsel. We conducted our review
between February 2004 and January 2005 in accordance with generally
accepted government auditing standards.
[End of section]
Appendix II: Comments from the Department of Defense:
Note: Page numbers in the draft report may differ from those in this
report.
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
ACQUISITION TECHNOLOGY AND LOGISTICS:
3000 DEFENSE PENTAGON:
WASHINGTON, DC 20301-3000:
MAR 07 2005:
Mr. Robert E. Levin:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, N.W.:
Washington, D.C. 20548:
Dear Mr. Levin:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-05-182, "DEFENSE ACQUISITIONS: Information for Congress on
Performance of Major Programs Can Be More Complete, Timely, and
Accessible," dated February 9, 2005 (GAO Code 120323).
The Department of Defense, in general, concurs with the draft report.
However, the Department believes that two of the GAO findings in the
draft report appear to be overly harsh and could be misinterpreted. The
first finding is that "DOD is not reporting complete information on
unit cost performance . . .," although DoD is not in violation of
statute and has provided requested Congressional unit cost information
for almost 30 years. The specifics the draft report cites are for
information not currently requested, not instances where currently
requested information is not complete. If there are such instances, GAO
should cite them. The Department would suggest a more appropriate
finding would be that "Changes to the unit cost information that the
DoD provides to the Congress would provide more useful information."
The same is true of GAO's second finding-that "DOD is not timely in
reporting to Congress." Again, DoD is providing the information on the
schedule directed by Congress in Section 2432, Title 10, United States
Code. Instead GAO might more appropriately have found that "Changes to
the timing of the Selected Acquisition Reports (SARs) would improve
their usefulness to the Congress."
The Department will work with the Congress on the information on unit
cost performance and on the timing of the SAR submissions, within data
production constraints. DoD's specific comments on each recommendation
are attached.
The Department appreciates the opportunity to comment on the draft
report. For further questions concerning this report, please contact
Larry Axtell, 703-695-0707.
Sincerely,
Signed for:
Nancy L. Spruill:
Director, Acquisition Resources and Analysis:
Enclosure:
As stated:
GAO DRAFT REPORT DATED FEBRUARY 9, 2005:
GAO-05-182 (GAO CODE 120323):
"DEFENSE ACQUISITIONS: INFORMATION FOR CONGRESS ON PERFORMANCE OF MAJOR
PROGRAMS CAN BE MORE COMPLETE, TIMELY, AND ACCESSIBLE"
DEPARTMENT OF DEFENSE COMMENTS TO THE GAO RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of Defense
measure and report a full history of unit cost performance in constant
dollars by comparing the latest cost and quantity estimates with: a.
the first full estimate (typically the original acquisition program
baseline established a Milestone B); b. the current approved program
baseline or, if the program rebaselines, the prior approved program
baseline; and c. the estimate established with the previous year's
budget request. (p. 15/GAO Draft Report):
DoD RESPONSE: Concur. Pursuant to 10 USC §2432, DoD has been providing
in the Selected Acquisition Report (SAR) a unit cost history from the
initial SAR baseline (normally Milestone B) to the current estimate. A
comparison back to the last major milestone (e.g., Milestone C) is also
provided, when applicable. This unit cost history is reported for the
Program Acquisition Unit Cost (PAUC) and the Average Procurement Unit
Cost (APUC) in then-year dollars. The Department agrees with the GAO
that a unit cost comparison from the current estimate back to multiple
reference points (i.e., Milestone B, approved Acquisition Program
Baseline (APB), and previous year's President's budget) would be more
useful than what is currently being reported. Since the Congress
appropriates funds in then-year dollars, we recommend that both
constant (base-year) and escalated (then-year) dollars be included.
There is no change required to the current statute; however, DoD will
inform the Congress of this change in SAR content.
RECOMMENDATION 2: The GAO recommended that the Secretary of Defense
fully disclose to Congress the nature and extent of the programmatic
adjustment affecting Nunn-McCurdy threshold determinations, pending any
congressional direction on this issue. (p. 15/GAO Draft Report):
DoD RESPONSE: Concur. As the GAO pointed out in this report, DoD has
been excluding programmatic changes from Nunn-McCurdy unit cost breach
determinations since February 1995, just after the Federal Acquisition
Streamlining Act established the APB as the Nunn-McCurdy unit cost
baseline. Programmatic changes include revised quantities and
additional capabilities. A significant reduction in quantities procured
or the approval of an additional increment of capability normally
results in at least a 15 percent or more increase in unit cost. This is
especially true with the recent advent of evolutionary acquisition.
Since we believe the original intent of Nunn-McCurdy was to report real
unit cost growth to Congress, the programmatic exclusion policy was
implemented. If a unit cost increase of 15 percent or more is due to
programmatics, the APB is revised to "zero out" the increase and a Nunn-
McCurdy breach determination is not made. Unit cost increases of 15
percent or more due to changes other than programmatics are reported as
Nunn-McCurdy breaches; increases of 25 percent or more require
certification. Regardless of the reason (programmatic or otherwise),
all dollar changes are reported in the cost variance analysis of the
SAR. However, we agree with the GAO that the programmatic impacts to
unit cost are not entirely clear in the SAR as currently reported.
Therefore, in future reports the Department will provide full details
of the programmatic adjustment to the APB. As discussed under the DoD
response to Recommendation 1, there is no change required to the
current SAR or Nunn-McCurdy statutes (10 USC §2432 and 10 USC §2433);
however, DoD will inform the Congress of this change in SAR content.
RECOMMENDATION 3: The GAO recommended that the Secretary of Defense
notify Congress when rebaselining actions are approved. (p. 15/GAO
Draft Report):
DoD RESPONSE: Concur. Pursuant to 10 USC §2435, DoD is not required to
submit revisions of the APB to Congress. The SAR is the primary
reporting vehicle for providing cost, schedule, and performance status
to the Congress on Major Defense Acquisition Programs (MDAPs). Annual
December SARs (submitted in early April) are mandatory for all
reporting MDAPs. Quarterly SARs (as of March 31, June 30, and September
30) are submitted on an exception basis for schedule slips of six
months or more and unit cost increases of 15 percent or more. The
Department also submits quarterly exception SARs to rebaseline at major
milestones. All SARs provide a current estimate, the current approved
APB, and the estimate at the last major milestone (Milestone B or
Milestone C, whichever is applicable). It is DoD policy to rebaseline
the APB at major milestones, major restructurings, and following an APB
breach. Although SARs are submitted for rebaselines at major
milestones, we agree with the GAO that rebaselines due to major
restructures or breaches are not provided to Congress, primarily
because revisions to APBs do not necessarily generate a requirement for
a SAR. Neither the Department nor the GAO believes that quarterly
exception SARs should be submitted for revised APBs. However,
notification of revised APBs could be accomplished if Congress so
requests.
RECOMMENDATION 4: The GAO recommended that the Secretary of Defense
separately report classified and unclassified SAR information. (p.
15/GAO Draft Report):
DoD RESPONSE: Concur. DoD will work with the Congress on providing
separate classified and unclassified SAR information.
[End of section]
FOOTNOTES
[1] Major defense acquisition programs are defined as those estimated
as requiring an eventual total expenditure for research, development,
test, and evaluation of more than $365 million or for procurement of
more than $2.190 billion in fiscal year 2000 constant dollars. Using
constant dollars removes the effects of inflation and shows all dollars
at the value they would have in a selected base year. All cost figures
in this report are presented in constant dollars, unless otherwise
noted.
[2] 10 U.S.C. § 2435 establishes the requirement for program baselines.
[3] 10 U.S.C. § 2432 establishes the SAR requirements, which include
providing cost information to Congress. Another statute, 10 U.S.C. §
2433, establishes the requirement for unit cost reports. If certain
program cost increase thresholds are exceeded (known as unit cost or
Nunn-McCurdy breaches), DOD is required to report to Congress and, if
applicable, certify the program to Congress.
[4] GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 Washington, D.C.: November 1999) and GAO, Internal
Control Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.:
August 2001).
[5] Public Law 94-106, § 811.
[6] Defense Acquisition Guidebook, dated 2004, Chapter 2.1.1, The
Acquisition Program Baseline.
[7] The milestone decision authority is a designated DOD individual
with the authority to approve entry of an acquisition program into the
next phase of the acquisition process and is accountable for cost,
schedule, and performance reporting to higher authority, including
congressional reporting.
[8] 10 U.S.C. § 2433.
[9] A breach of the 25 percent threshold requires the Secretary of
Defense to certify that the program is (1) essential to national
security, (2) no alternatives exist which will provide equal or greater
military capability at less cost, (3) new unit acquisition or
procurement cost estimates are reasonable, and (4) the management
structure is adequate to control unit cost.
[10] This requirement became permanent law in 1982 in Public Law 97-
252, § 1107.
[11] In essence, PAUC includes both the total costs and total
quantities, while PUC only includes procurement costs and procurement
quantities. By law, PAUC is an amount equal to the total cost for
development and procurement of, and system specific military
construction for, the acquisition program divided by the number of
fully configured end items to be produced and PUC is the amount equal
to the total of all funds programmed to be available for obligation for
procurement for the program divided by the number of fully configured
end items to be procured. 10 U.S.C. § 2432(a) (1) and (2).
[12] 10 U.S.C. § 2432(c) (1).
[13] This reflects the definitions of program acquisition and
procurement unit cost in 10 U.S.C. § 2432(a).
[14] DOD issued this policy in February 1995 and reaffirmed it in 2001.
[15] DOD excluded two prototype helicopters from the total quantity.
[16] Whenever the Secretary of Defense proposes to make changes in the
content of the SAR, the Secretary is required by 10 U.S.C. § 2343(c)
(2) to first notify the Senate and House Armed Services Committees. The
changes may be considered approved by the Secretary and incorporated
into the report only after the end of the 60 day period following the
notification.
GAO's Mission:
The Government Accountability Office, the investigative arm of
Congress, exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability
of the federal government for the American people. GAO examines the use
of public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO's commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through the Internet. GAO's Web site ( www.gao.gov) contains
abstracts and full-text files of current reports and testimony and an
expanding archive of older products. The Web site features a search
engine to help you locate documents using key words and phrases. You
can print these documents in their entirety, including charts and other
graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document
files. To have GAO e-mail this list to you every afternoon, go to
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order
GAO Products" heading.
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office
441 G Street NW, Room LM
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm
E-mail: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director,
NelliganJ@gao.gov
(202) 512-4800
U.S. Government Accountability Office,
441 G Street NW, Room 7149
Washington, D.C. 20548:
