By Cliff Montgomery – Apr. 10th, 2015
It seems that even the Pentagon now has trouble reigning in the growing cost of America’s military-industrial complex.
“Costs on 47 of the 78 [major Pentagon war acquisition] programs increased over the past year,” even as the Defense Department produced “the smallest portfolio in terms of cost and number of programs in a decade,” according to a recent report from the Government Accountability Office (GAO).
Below, prints the cover letter for this study. It was written by Gene Dodaro, Comptroller General of the United States.
GAO – U.S. Government Accountability Office
441 G St. N.W.
Washington, D.C. 20548
Comptroller General of the United States
March 12, 2015
Congressional Committees: I am pleased to present GAO’s 13th annual assessment of the Department of Defense’s (DOD) major defense acquisition programs. This report offers observations on the performance of DOD’s current $1.4 trillion portfolio of 78 programs, the smallest portfolio in terms of cost and number of programs in a decade.
Despite the decrease in portfolio size, these 78 programs require approximately 30 percent of all development and procurement funding for all DOD acquisition programs over the next 5 years. Given the magnitude of the investment at stake in these programs in a time of continuing budgetary constraints, DOD cannot afford to pass up any opportunity to address inefficiencies and free up resources for higher priority needs.
In our prior assessments, we reported that Congress and DOD had taken steps to address long-standing problems with DOD acquisitions—an area that has been on GAO’s high-risk list for 23 years—by making legislative and policy changes that endorse a knowledge-based acquisition approach.
As a result of these initiatives, some programs have realized significant cost savings or avoided cost and schedule growth.
However, not all of these initiatives have been implemented to the same extent, and as a result, some programs may be less successful at avoiding future cost and schedule growth than others.
Our current assessment shows that the estimated cost of DOD’s 2014 portfolio of major defense acquisition programs is $90 billion less than the 2013 portfolio and decreased from 80 to 78 programs as well. As a result, the portfolio is the smallest it has been in a decade.
Similarly, the cost of the 78 programs in the 2014 portfolio has decreased by more than $7 billion over the past year, a net cost decrease partially attributable to significant quantity reductions in two programs—the Littoral Combat Ship and the Warfighter Information Network—Tactical Increment 3.
However, the portfolio’s overall cost decrease is not necessarily indicative of the performance of every program, as costs on 47 of the 78 programs increased over the past year. This undesirable cost performance shows the need for continued oversight.
Our assessment also shows that the implementation of knowledge-based acquisition practices among programs is showing little improvement as programs continue to progress through the acquisition cycle without the appropriate levels of knowledge at key junctures, making them less likely to achieve their cost, schedule, and performance objectives.
Of particular concern are those programs that have recently entered system development before satisfying best practices, leaving them at risk for future cost and schedule growth.
However, our analysis shows that more programs are implementing selected acquisition reforms focused on affordability, cost savings, and competition than in the past, although DOD continues to accept risks by allowing programs to waive important certifications at the start of their development or to begin production before completing developmental testing.
This report also includes brief assessments of 38 current and 15 future major defense programs that provide additional insights at a programmatic level.
Continued strong leadership on the part of DOD is essential in enforcing a broader implementation of best practices in all aspects of weapon system acquisition. Today, more programs are using acquisition strategies and program management tools to find efficiencies and reduce costs while still providing the needed capability.
Given the prospect of shrinking or stagnant defense budgets, it is important that the department continue and even increase the use of these practices, as well as more fully implement the other best practices we assessed to avoid the problematic strategies of the past. The potential for savings and for better serving the war-fighter argue against complacency.
Gene L. Dodaro
Comptroller General of the United States
