The Department of Defense has released details on major defense acquisition program cost, schedule, and performance changes since the September 2010 reporting period. This information is based on the Selected Acquisition Reports (SARs) submitted to the Congress for the December 2010 reporting period.
SARs summarize the latest estimates of cost, schedule, and performance status. These reports are prepared annually in conjunction with submission of the President’s budget. Subsequent quarterly exception reports are required only for those programs experiencing unit cost increases of at least 15 percent or schedule delays of at least six months. Quarterly SARs are also submitted for initial reports, final reports, and for programs that are rebaselined at major milestone decisions.
The total program cost estimates provided in the SARs include research and development, procurement, military construction, and acquisition-related operation and maintenance (except for pre-Milestone B programs, which are limited to development costs pursuant to section 2432 of title 10, United States Code). Total program costs reflect actual costs to date as well as future anticipated costs. All estimates include anticipated inflation allowances.
The current estimate of program acquisition costs for programs covered by SARs for the prior reporting period (September 2010) was $1,679,305.3 million. The AB3 (Apache Block III) program was divided into two separate programs (AB3A Remanufacture and AB3B New Build). After subtracting the costs for a final report on C-17A and adding the costs for an initial report on Small Diameter Bomb II (SDB II) from the September 2010 reporting period, the adjusted current estimate of program acquisition costs is $1,615,018.7 million.
Current Estimate ($ in millions)
- September 2010 (94 programs): 1,679,305.3
- Plus one additional program from dividing AB3 into two
programs (AB3A Remanufacture and AB3B New Build): 0.0 - Less final report on one program (C-17A): 69,497.0
- Plus initial report on one program (SDB II) +$5,210.4
September 2010 Adjusted (95 programs): 1,615,018.7
Changes Since Last Report:
- Economic: +882.1
- Quantity: +10,580.5
- Schedule: +1,640.2
- Engineering: +7,030.4
- Estimating: +33,623.6
- Other: 0.0
- Support: +10,225.5
Net Cost Change: +63,982.3
- Plus initial procurement and construction cost estimates for LCS: + 32,625.9 (Littoral Combat Ship; previous reports were limited to development)
- Plus BMDS (Ballistic Missile Defense System) development, procurement, and construction funding for fiscal 2016; previous reports limited total funding through fiscal 2015: +8,480.6
December 2010 (95 programs) 1,720,107.5
For the December 2010 reporting period, there is a net cost increase of $63,982.3 million or +4.0 percent for the 95 programs covered relative to the same programs in previous SARs.
New SAR
DoD is submitting an initial SAR for the following program for the December 2010 reporting period. This report does not represent cost growth. The baseline established on this program will be the point from which future changes will be measured.
Current Estimate
Program ($ in Millions)
- KC-130J Cargo/Transport Aircraft: 9,941.8
Summary Explanations of Significant SAR Cost Changes
(As of December 31, 2010)
A. Nunn-McCurdy Unit Cost Breaches for 2010
For the December 2010 reporting period, there are seven programs with critical or significant Nunn-McCurdy unit cost breaches to their current or original APB. The Department will follow the provisions of section 2433 of title 10, United States Code, and for the programs with critical breaches, a certification determination by the Under Secretary of Defense for Acquisition, Technology and Logistics in accordance with section 2433a of title 10, United States Code, will be made no later than June 14, 2011.
Critical Breaches: (Unit cost increases of 25 percent or more to the current APB or of 50 percent or more to the original APB)
Chemical Demilitarization-Assembled Chemical Weapons Alternatives (Chem Demil-ACWA):
The Program Acquisition Unit Cost (PAUC) increased 39.2 percent to the current APB, due primarily to increased construction material based on design evolution, construction material cost escalation, increased staffing level and labor costs, and the addition of cost risk during systemization and operations. The unit cost growth also reflects an assessment, by the Director, Cost Assessment and Program Evaluation (D, CAPE), of higher risk, additional cost to prove out first-of-a-kind equipment, and a change in the program schedule.
Expeditionary Fighting Vehicle (EFV):
The PAUC and the Average Procurement Unit Cost (APUC) breached, due to a decision not to fund the program in the fiscal 2012 President’s Budget. The Secretary of the Navy has been directed to prepare an orderly shutdown and cancellation plan.
RQ-4/AB Unmanned Aircraft System (UAS) Global Hawk:
The PAUC increased 14.0 percent and the APUC increased 22.8 percent to the current APB, due primarily to changing the mix of aircraft to a larger percentage of the more expensive Block 30 aircraft and less of the Block 40 aircraft, along with a stretch-out of the procurement buy profile (quantities in fiscal 2012-fiscal 2014 were reduced from five to three aircraft per year, and quantities in fiscal 2015-fiscal 2016 were reduced from five to one aircraft per year). There are additional unit cost increases for sensor depot activation and for ground station and communications re-architecture efforts that will resolve diminishing manufacturing source issues and provide critical added capabilities for the Warfighter.
While Global Hawk has only now breached the Nunn-McCurdy critical threshold, the Department anticipated this development and began a review of the program in June 2010 at the direction of the Under Secretary of Defense for Acquisition Technology and Logistics. This review resulted, in December 2010, in a decision to restructure the program into subprograms. At the same time, the Air Force assembled a Blue Ribbon Panel to review the program.
Recently, the Secretary of the Air Force determined that unit cost increases do exceed the critical 25 percent threshold, and hence the Department will formally review the program under the Nunn-McCurdy process, including a cost estimate by the D, CAPE, relying heavily on the work already done by the Department prior to the fiscal 2012 budget submission.
Significant Breaches: (Unit cost increases of 15 percent, but less than 25 percent, to the current APB or of 30 percent, but less than 50 percent, to the original APB)
C-27J (formerly Joint Cargo Aircraft, JCA):
The PAUC increased 18.6 percent to the current APB, due primarily to a reduction in quantity from 78 aircraft for both the Army and the Air Force to 38 aircraft for the Air Force only. There are also unit cost increases associated with the revision in long-term sustainment strategy from contractor logistics support to organic support.
Increment 1 Early-Infantry Brigade Combat Team (E-IBCT):
The PAUC increased 18.5 percent to the current APB, because the program quantity was reduced from nine to three brigade combat teams. That is, the Department approved continued low rate initial production for two additional brigade sets of the E-IBCT Small Unmanned Ground Vehicle (SUGV) and one additional brigade set of the Network Integration Kit (NIK). All efforts on the Tactical-Unattended Ground Sensors (T-UGS), Urban-Unattended Ground Sensors (U-UGS), Non Line of Sight-Launch System (NLOS-LS), and Class I Unmanned Aircraft System (UAS) were cancelled.
Joint Land Attack Cruise Missile Defense Elevated Netted Sensor System (JLENS):
The PAUC increased 17.9 percent and the APUC increased 13.3 percent to the current APB, because the development program was extended six months due to delays in testing resulting from engineering challenges. The increases in unit costs are also attributable to the addition of preplanned product improvements for reliability, safety, affordability, or producibility of the JLENS systems.
National Polar-Orbiting Operational Environmental Satellite System (NPOESS):
The PAUC increased 23.1 percent to the current APB, due primarily to a decrease in quantity from four to two satellites resulting from a program restructure in which the DoD, the Department of Commerce, and the National Aeronautics and Space Administration will no longer jointly acquire NPOESS.
B. Nunn-McCurdy Unit Cost Breaches for 2009
There were six programs that had critical Nunn-McCurdy breaches in the December 2009 reporting period. Therefore, most of the December 2010 cost increase of $63,982.3 million was already reported to Congress when these programs were certified by the Department in June 2010. The majority of the cost increase attributable to these six programs was for the F-35 program, with much smaller increases for the Apache Block III (AB3), Advanced Threat Infrared Countermeasures/Common Missile Warning System (ATIRCM/CMWS), DDG 1000, Remote Minehunting System (RMS), and Wideband Global SATCOM (WGS) programs. The cost increase for the remaining 89 programs is due primarily to a net increase in planned quantities.
C. Other Significant Program Cost Changes
ARMY:
Family of Medium Tactical Vehicles (FMTV):
Program costs decreased $1,895.2 million (-9.2 percent) from $20,626.6 million to $18,731.4 million, due primarily to reductions in costs resulting from the award of a new competitive re-buy contract (-$2,308.6 million), acceleration of the procurement buy profile (-$328.9 million), and a change in the model mix (-$230.4 million). There are additional decreases for fielding and non-recurring costs (-$236.7 million) and other support (-$149.1 million) due to early completion of the program. These decreases are partially offset by a quantity increase of 4,654 trucks from 83,185 to 87,839 trucks (+$786.5 million) and associated schedule, engineering, and estimating allocations* (+$588.8 million).
Patriot/Medium Extended Air Defense System Combined Aggregate Program (MEADS CAP) Fire Unit:
Program costs decreased $18,661.8 million (-85.0 percent) from $21,965.3 million to $3,303.5 million, due primarily to the Department’s decision to remove the production funding for the fire unit from the program and modify the design and development phase to continue as a proof of concept effort ending in fiscal 2014.
Stryker:
Program costs increased $1,887.4 million (+12.4 percent) from $15,196.0 million to $17,083.4 million, due primarily to a quantity increase of 237 vehicles from 3,998 to 4,235 vehicles (+$707.8 million) and associated schedule, engineering, and estimating allocations* (-$151.3 million). There are also quantity related increases due to a change in the model mix of the Double V Hull (DVH) equipment set for the Operation Enduring Freedom (OEF) theater (+$318.2 million), the procurement of hardware for DVH vehicle production (+$316.7 million), and systems engineering and program management support for the additional vehicles (+$190.0 million). There are additional increases for new development efforts for OEF (+$226.8 million) and new requirements to build operations facilities/complexes and barracks (+$574.5 million). These increases are partially offset by a reduction in funding requirements for Flat Bottom Stryker survivability enhancements to support DVH (-$313.6 million).
UH-60M Black Hawk:
Program costs increased $3,658.8 million (+15.5 percent) from $23,681.7 million to $27,340.5 million, due primarily to a quantity increase of 140 aircraft from 1,235 to 1,375 aircraft (+$3,291.3 million) and associated schedule, engineering, and estimating allocations* (+$146.8 million). There are also increases in other support costs (+$170.2 million) and initial spares (+$66.0 million), partially offset by a decrease in the engineering estimate resulting from a technology upgrade and deletion of a system requirement (-$117.8 million).
Warfighter Information Network-Tactical (WIN-T) Increment 1:
Program costs increased $468.1 million (+12.2 percent) from $3,835.0 million to $4,303.1 million, due primarily to a quantity increase of 83 communications nodes from 1,777 to 1,860 communications nodes (+$119.5 million) and an increase in other support costs for modification work (+$477.4 million), partially offset by a decrease in the estimating costs for a volume discount due to the quantity increase (-$129.8 million).
WIN-T Increment 2:
Program costs increased $1,354.8 million (+27.1 percent) from $4,997.8 million to $6,352.6 million, due primarily to a quantity increase of 630 communications nodes from 2,216 to 2,846 communications nodes (+$983.4 million) and a resulting increase in other support costs due to an additional year of procurement and the refinement of the fielding schedule (+$476.6 million). There are additional increases in the cost of government furnished software due to the transfer in procurement responsibility from the contractor to the government (+$89.5 million) and in non-recurring production costs due to additional platforms requiring integration (e.g., the Mine Resistant Ambush Protected Vehicle) (+$62.3 million). These increases are partially offset by reductions in contract costs due to definitized prices, quantity lot discounts, and a decrease in actual contract hardware costs (-$272.8 million).
NAVY:
DDG 51:
Program costs increased $8,008.9 million (+9.7 percent) from $80,407.7 million to $88,416.6 million, due primarily to a quantity increase of 4 ships from 71 to 75 ships (+$4,376.1 million) and associated schedule, engineering, and estimating allocations* (+$2,585.8 million), and related outfitting and post delivery for the revised quantity (+$265.8 million). There are also increases in engineering costs for Advanced Missile Defense Radar (AMDR) integration plans for Flight III (+$646.7 million), additional Flight III/AMDR requirements in fiscal 2016 and fiscal 2017 (+$1,558.0 million), and the application of revised escalation indices (+$363.8 million). These increases are partially offset by decreased estimates for ship construction and government furnished equipment associated with multi-year procurement, program efficiencies, and inflation impacts on future ships (-$1,670.3 million).
F/A-18 E/F:
Program costs increased $2,888.8 million (+6.0 percent) from $48,091.4 million to $50,980.2 million, due primarily to a quantity increase of 41 aircraft from 515 to 556 aircraft (+$3,105.4 million) and associated schedule, engineering, and estimating allocations* (+$208.6 million), the application of revised escalation indices (+$392.2 million), and an increase in initial spares for the additional 41 aircraft (+$94.1 million). These increases are partially offset by a reduction due to multi-year procurement contract award (-$390.4 million), adjustments for current and prior escalation (-$397.8 million), and decreases in other support costs (-$56.5 million).
Integrated Defensive Electronic Countermeasures (IDECM) Block 4:
Program costs increased $126.7 million (+17.2 percent) from $736.5 million to $863.2 million, due primarily to a quantity increase of 24 ALQ 214 systems from 166 to 190 systems (+$51.2 million), additional funding for ALQ 214 software/firmware improvements (+$63.3 million), and increases in other support costs and initial spares (+$12.2 million).
Joint Mine Resistant Ambush Protected (MRAP) Vehicle:
Program costs increased $4,614.9 million (+12.7 percent) from $36,291.6 million to $40,906.5 million, due primarily to a net quantity increase of 3,670 vehicles from 22,882 to 26,552 vehicles (+$2,266.3 million) and associated initial spares and other support (+$2,325.0 million).
Littoral Combat Ship (LCS):
Procurement and construction cost estimates for LCS have been incorporated into the SAR following approval of Milestone B (entry into Engineering and Manufacturing Development) on April 8, 2011. Previous reports were limited to development costs in accordance with section 2432 of title 10, United States Code. Since the December 2009 SAR, development costs increased $1,080.4 million (+3.0 percent) from $36,358.4 million to $37,438.8 million, due primarily to fully funding the required planning and execution of the post-Milestone B program, to include the requirements for developmental/operational testing and live fire test and evaluation (+$822.0 million). There are also increases to complete shipboard trainers (+$189.3 million) and post delivery efforts for LCS-1 and LCS-2 (+$60.9 million).
LHA 6 America Class:
Program costs increased $4,498.5 million (+65.9 percent) from $6,826.8 million to $11,325.3 million, due primarily to a quantity increase of one ship from two to three ships.
Trident II Missile:
Program costs increased $1,087.3 million (+2.8 percent) from $39,546.0 million to $40,633.3 million, due primarily to the addition of the Joint Warhead Fuze Life Extension Program, which will conduct a one-time refurbishment of the Mk5 Reentry Body during a planned W88/Mk5 Arming, Fuzing and Firing Limited Life Component Replacement (+$668.0 million). Costs also increased due to the addition of the Explosive Handling Wharf #2 project to rebalance the Trident fleet between the east and west coasts (+$700.6 million) and the D5 Life Extension Program restructure (+$93.9 million). These increases are partially offset by the realignment of funding from procurement to operating and support for the replacement of rocket motors for the previously delivered missiles (-$363.2 million).
AIR FORCE:
Advanced Extremely High Frequency (AEHF):
Program costs increased $1,065.1 million (+8.6 percent) from $12,448.9 million to $13,514.0 million, due primarily to a revised procurement estimate to fully fund the fifth and sixth satellites (+$1,620.7 million) and an extension of interim contract support due to the launch delay for the first satellite (+214.5 million). These increases are partially offset by an estimating decrease due to an acquisition strategy change from full funding to a block buy for the fifth and sixth satellites (-$798.5 million).
Family of Advanced Beyond Line-of-Sight Terminals (FAB-T):
Program costs increased $630.9 million (+15.8 percent) from $3,981.9 million to $4,612.8 million, due primarily to complexities with software integration and challenges with hardware qualification (+$260.1 million), higher manufacturing costs due to loss of learning and production inefficiencies (+$258.9 million), and other increases due to the schedule stretch-out (+$134.7 million), partially offset by decreases in other support costs (-$32.7 million).
HC/MC-130 Recapitalization:
Program costs increased $5,311.7 million (+60.7 percent) from $8,745.3 million to $14,057.0 million, due primarily to a quantity increase of 48 aircraft from 74 to 122 aircraft (+$5,240.4 million) and quantity related increases in other support costs (+$263.8 million) and initial spares (+$208.6 million), partially offset by decreases resulting from refinements to the MC-130J basing plan (-$208.2 million) and an acceleration of the procurement buy profile (-$193.1 million).
NAVSTAR User Equipment:
Program costs decreased $662.2 million (-32.2 percent) from $2,049.1 million to $1,386.9 million, due primarily to the removal of Military GPS User Equipment (MGUE) development funding (-$412.3 million) from the report. There are additional cost decreases to also remove all Current User Equipment (CUE) funding from the report (-$243.0 million). [The SAR now correctly reflects only Modernized User Equipment (MUE) development and procurement funding.]
Space-Based Infrared System (SBIRS) High:
Program costs increased $2,459.6 million (+16.3 percent) from $15,115.6 million to $17,575.2 million, to fully fund the fifth and sixth Geosynchronous Earth Orbit (GEO) satellites (GEOs 5 and 6) (+$1,883.6 million), plus associated support requirements in fiscal 2018 (+$212.7 million). There are additional increases to complete the Engineering, Manufacturing, and Development (EMD) space segment effort for GEOs 1 and 2 integration, launch, early orbit test, and check out (+$206.8 million), and to complete the EMD ground effort to satisfy the August 1996 Operational Requirements Document requirements (+$717.1 million). This completes the final block (Increment 2) of the SBIRS ground segment capability, which funds fiscal 2016 and beyond, and reflects total acquisition cost. These increases are partially offset by a revision in the acquisition strategy from full funding to a block buy for GEOs 5 and 6 (-$520.9 million).
DoD:
Ballistic Missile Defense System (BMDS):
Program costs decreased $2,821.9 million (-3.0 percent) from $92,843.5 million to $90,021.6 million, due primarily to Departmental Efficiency reductions (-$2,926.8 million), adjustments to realign to higher priorities (-$1,089.2 million), realigned funding for operation and maintenance of AN/TPY-2 radars from research, development, test and evaluation to operations and maintenance (-$715.4 million), and a revised cost estimate for the acceleration of AN/TPY-2 radars (-$228.2 million). These decreases are partially offset by the addition of the new Standard Missile Block IIB (SM-3) development effort (+1,412.9 million), increased costs for the revised Integrated Master Test Plan (+$427.3 million), the addition of two AN/TPY-2 radars through fiscal 2015 (+$399.0 million), and Special Programs adjustments (+$252.9 million).
Chemical Demilitarization-Chemical Materials Agency (Chem Demil-CMA):
Program costs decreased $1,311.2 million (-5.1 percent) from $25,754.4 million to $24,443.2 million, due primarily to adjustments to the disposal facility schedules to reflect the latest processing rates, resulting in earlier than expected completion of operations and closure (-$1,302.4 million).
Joint Tactical Radio System Handheld, Manpack, and Small Form Fit (JTRS HMS):
Program costs increased $571.0 million (+10.9 percent) from $5,240.4 million to $5,811.4 million, due to a quantity increase of 6,017 Army radios from 215,961 to 221,978 radios (+$184.1 million), increased funding to cover shortfalls and additional enhancements (+$320.1 million), and increases for support to recurring manufacturing, change orders, training, data, and modifications (+$118.8 million).
* Note: Quantity changes are estimated based on the original SAR baseline cost-quantity relationship. Cost changes since the original baseline are separately categorized as schedule, engineering, or estimating “allocations.” The total impact of a quantity change is the identified “quantity” change plus all associated “allocations.”
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