Twenty five of the US Department of Defense’s major programmes are more than 50% over their original cost estimates, but only a handful - including the Northrop Grumman Global Hawk unmanned air vehicle – are in any real danger of cancellation, a new report reveals.
Changes in reporting rules mean the DoD has had to acknowledge for the first time massive increases in projected costs over the original estimates made at the time the programmes entered development. The changes were mandated by Congress, which accused the Pentagon of hiding the real cost escalation by rebaselining the programmes.
The new rules set thresholds of 30% and 50% unit cost growth against original estimates, while retaining the existing 15% and 25% unit-cost thresholds against current baseline estimates. Cost growth is deemed “critical” if it exceeds 25% of the current baseline or 50% of the original estimate, and “significant” if it exceeds 15% and 30% respectively.
Of the 85 programmes covered by the DoD’s latest selected acquisition report, 25 have critical cost growth. Of these, the Global Hawk and National Polar Orbiting Operational Environmental Satellite System programmes have breached their current baseline unit cost estimates by more than 25% – requiring the DoD to certify to Congress that they should continue, or face cancellation.
A long list of programmes have unit cost increases of more than 50% over their original estimates, including the Bell H-1 upgrade; Bell Boeing V-22; Boeing C-17, AH-64D, CH-47F and T-45TS; Lockheed Martin F-22 and MH-60R; Raytheon AMRAAM and JSOW missiles; and Sikorsky UH-60M. A further slew of programmes have had cost increases of 30-50% over their original estimates, including the Boeing F/A-18 and C-130 AMP upgrade; Lockheed Joint Strike Fighter and JASSM cruise missile; Raytheon T-6 JPATS trainer; and Sikorsky MH-60S.
Most of the programmes are in no danger of imminent cancellation because of escalating costs, and the DoD is expected to certify to Congress that the Global Hawk should continue. Cost estimates for the UAV programme increased 19% between September and December last year, to $7.8 billion, for several reasons, the DoD says. Correcting design deficiencies in the production RQ-4B contributed towards $710 million of the increase, while extending the development schedule added $147 million, capability improvements $148 million, and sensor retrofits $143 million, plus $164 million to buy three more vehicles, for a total of 54. Just under $145 million was saved, meanwhile, by deleting the requirement for defensive aids and bit fault isolation.
GRAHAM WARWICK / WASHINGTON, DC
Read the US Department of Defense's reports on major defence acquisition programme cost, schedule, and performance changes since the September 2005 reporting period by downloading the Selected Acquisition Reports in portable document format (PDF).