Sources of Weapon System Cost Growth Analysis of 35 Major Defense Acquisition Programs

by Bolten, Joseph G.; Leonard, Robert S.; Arena, Mark V.; Younossi, Obaid; Sollinger, Jerry M.

• ISBN13: 9780833042897
• ISBN10: 0833042890
• Format: Paperback
• Copyright: 2008-07-02
• Publisher: RAND Corporation

Summary

"Previous studies have shown that the Department of Defense (DoD) and the military departments have historically underestimated the cost of new weapon systems. Quantifying cost growth is important, but the larger issue is why cost growth occurs. To address the question of causality, this analysis uses data from Selected Acquisition Reports to examine 35 mature, but not necessarily complete, major defense acquisition programs similar to the type and complexity of those typically managed by the Air Force. The programs are first examined as a complete set, then Air Force and non-Air Force programs are analyzed separately to determine whether the causes of cost growth in the two groups differ. Four major sources of cost growth were identified: (1) errors in estimation and scheduling, (2) decisions made by the government, (3) financial matters, and (4) miscellaneous sources. Total (development plus procurement) cost growth, when calculated as simple averages, is dominated by decisions, which account for more than two-thirds of the growth. Most decisions-related cost growth involves quantity changes (22 percent), requirements growth (13 percent), and schedule changes (9 percent). Cost estimation (10 percent) is the only large contributor in the errors category. Less than 4 percent of the overall cost growth is due to financial and miscellaneous causes. Because decisions involving changes in requirements, quantities, and production schedules dominate cost growth, program managers, service leadership, and Congress should look for ways to reduce changes in these areas while providing the right capabilities to the warfighter."--BOOK JACKET.

Table of Contents

Introduction	p. 1
Background	p. 1
Objective of This Study	p. 2
Organization of This Report	p. 4
Study Approach	p. 5
Selection of Programs for Analysis	p. 5
Selected Acquisition Reports	p. 8
Classifying Cost-Growth Variances	p. 9
Problems in Interpreting SAR Cost-Variance Data	p. 11
Analysis of Programs	p. 13
Cost-Variance Categories	p. 14
Mapping of SAR Variance Categories	p. 20
Problems in Categorizing Cost Growth	p. 22
Cost Growth in Selected Programs	p. 25
Presentation of Data	p. 25
Multiservice Program Sample	p. 27
Comparison of Cost Growth in Air Force and Non-Air Force Programs	p. 35
Total Cost Growth, by Type of Program	p. 40
Summary and Recommendations	p. 45
Cost-Allocation Challenges	p. 45
Results of This Analysis	p. 46
Where Should Air Force Decision makers Direct Their Focus?	p. 49
Future Research	p. 50
Cost Growth of Individual Programs	p. 53
Weighted Cost Growth	p. 71
Trigger Events	p. 77
OSD Guidance and Definitions of the SAR Cost-Variance Categories	p. 83
Bibliography	p. 89
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