95 U.S. Programs Show $64B Increase in Costs

By MARCUS WEISGERBER Published: 15 Apr 2011 18:16

The Pentagon is expected to revise its total program cost estimate for the recently restructured F-35 Joint Strike Fighter effort next month, according to a Defense Department information paper.

The F-35 Joint Strike Fighter is one the programs the Pentagon is expected to revise cost estimates for after a review of 95 major acquisitions programs. (CHERIE CULLEN / U.S. DEPARTMENT OF DEFENSE)

This comes as the Pentagon told Congress today that its latest review of 95 major acquisition programs showed $64 billion in increases, or 4 percent, over already projected program price tags. DoD also told lawmakers that three of its programs - Chemical Demilitarization-Assembled Chemical Weapons Alternatives; Expeditionary Fighting Vehicle (EFV); RQ-4 Global Hawk - suffered, so-called, "critical" Nunn-McCurdy breaches.

Four others programs - the C-27J Joint Cargo Aircraft; Increment 1 of the Early-Infantry Brigade Combat Team (E-IBCT); Joint Land Attack Cruise Missile Defense Elevated Netted Sensor System (JLENS); and National Polar-Orbiting Operational Environmental Satellite System (NPOESS) - suffered "significant" breaches.

The majority of the breaches were caused by quantity changes. For instance, the Pentagon canceled the EFV program, so unit costs have soared because DoD will not buy any vehicles but has already invested billions of dollars in research and development. The same is true of the C-27J. The Air Force and Army were supposed to collectively buy 78 aircraft, however, the Army bowed out of the program and the air service only plans to purchase 38. The Army dramatically reduced the buy in the E-IBCT program and the Pentagon canceled the NPOESS program.

Pentagon officials have been aware of issues within the Global Hawk program for awhile. Last year, acquisition officials initiated a major review of the program in June. The Air Force began its own review in December and declared the breach on April 6.

The program's cost growth is primarily due to quantity reduction, spares and sensor depot standup, diminishing manufacturing sources, and ground station and communications system modernization, according to the information paper.

Engineering problems, schedule slips and the addition of new requirements have contributed to the JLENS program breach. The Chemical Demilitarization program breach is attributed to design changes, construction costs and increased staffing and labor costs.

The previous two Selected Acquisition Reports pegged the F-35's total program cost at $328 billion. Since then, some cost estimates have put the program's overall price tag at around $380 billion. Last year, Defense Secretary Robert Gates ordered a major review of the effort, leading the program to slow production and focus on development.

Officials will now develop a new program baseline next month. After that, DoD will prepare an updated Selected Acquisition Report that will "provide higher fidelity unit cost data for the F-35 program," the information paper states.

The Nunn-McCurdy statute requires the Pentagon to notify Congress when a program's cost has risen 15 percent above its original baseline estimate. The statute calls for a program's termination once costs exceed 25 percent of the original estimate unless the defense secretary deems the system essential to national security, there are no alternates that will provide equal or greater capability, new program acquisition costs are reasonable, and the management structure for such a system is adequate to manage and control program costs.

A significant breach occurs at the 15 percent threshold and critical at the 25 percent level.

The Pentagon attributes the other 89 programs' cost increases primarily to a rise in planned quantities.

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