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DoD RELEASES ACQUISITION REPORTS

07 Apr 06. The Department of Defense has released details on major defense acquisition program cost, schedule, and performance changes since the September 2005 reporting period. This information is based on the Selected Acquisition Reports (SARs) submitted to the Congress for the December 2005 reporting period.

SARs summarize the latest estimates of cost, schedule, and performance status. These reports are prepared annually in conjunction with 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 10 USC §2432). 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 2005) was $1,539,048.8 million. After adding the costs for two new programs ARH (Armed Reconnaissance Helicopter) and JLENS (Joint Land Attack Cruise Missile Defense Elevated Netted Sensor System) and subtracting the costs for final reports on a completed program (LHD 1 Amphibious Assault Ship), a restructured program (TSAT (Transformational Satellite Communications System)), the completed Fire Unit portion of Patriot PAC-3 (Patriot Advanced Capability), and the completed MK 1 portion of SSDS (Ship Self Defense System) from the September 2005 reporting period, the adjusted current estimate of program acquisition costs was $1,517,182.4 million.

Current Estimate

($ in Millions)

September 2005 (85 programs)

_$ 1,539,048.8

Plus two new programs (ARH and JLENS)
+10,719.7
Less final reports on a completed program (LHD 1), a restructured program (TSAT), the completed Fire Unit portion of Patriot PAC-3, and the completed MK 1 portion of SSDS)
-32,586.1

_September 2005 Adjusted (85 programs)
_$ 1,517,182.4

Changes Since Last Report:

Economic
$ +21,194.6

Quantity

+446.6

Schedule

+5,627.0

Engineering

+2,325.6

Estimating

+2,589.5

Other

+17.8

Support

+7,521.9

Net Cost Change

$ +39,723.0

Plus initial procurement cost estimates for DD(X) Destroyer (previous
reports limited to development costs per 10 USC 2432)

+27,813.3

December 2005 (85 programs)

_$1,584,718.7

For the December 2005 reporting period, there was a net cost increase of $39,723.0 million billion or +2.6% for programs that have reported previously, resulting in a new current estimate of $1,584,718.7 million. The net cost increase was due primarily to the application of higher escalation rates (+$21,194.6 million), an increase in support requirements (+$7,521.9 million), a net stretch-out of development and procurement schedules (+$5,627.0 million), higher program cost estimates (+$2,589.5 million), additional engineering changes (hardware/software) (+$2,325.6 million), and a net increase of planned quantities to be purchased (+$446.6 billion). Further details of the most significant changes are summarized below by program.

The National Defense Authorization Act (NDAA) for FY 2006 made changes to the Nunn-McCurdy unit cost reporting statute for DoD major defense acquisition programs (10 USC 2433). The primary change was the addition of 30% and 50% unit cost thresholds against the original baseline estimate approved at System Development and Demonstration (Milestone B). The existing 15% and 25% unit cost thresholds were retained against the current baseline estimate. For

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