Cost-conscious DoD reduces pricetag of big-ticket acquisition programs

Tuesday - 4/2/2013, 5:53pm EDT

Mike Sullivan, director of acquisition and sourcing management issues, Government Accountability Office

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The size and cost of the Defense Department's portfolio of major weapons acquisition programs have fallen to their lowest levels in five years, according to a new report from the Government Accountability Office

DoD's major weapons portfolio decreased by 10 programs in 2012 — to 86 programs — while the total cost of DoD's big-ticket procurements fell by $152 billion to $1.6 trillion.

Much of that reduction comes from the fact that 14 costly programs, accounting for about $168 billion, left the portfolio. Programs typically exit the portfolio when they are 90 percent completed or if the Pentagon terminates them.

Among those that exited the portfolio in 2012 were the F-22 Raptor ($81 billion) and the mine-resistant ambush protected (MRAP) vehicles ($40 billion), said Mike Sullivan, director of acquisition and sourcing management at GAO, in an interview on In Depth with Francis Rose.

However, DoD also found savings in the programs that remained in the portfolio, according to GAO.

For example, eight of the 10 most expensive programs in DoD's portfolio reported cost reductions over the past year, totaling as much as $5 billion, according to GAO's review.

Sullivan said there was also an increased percentage of programs meeting cost-performance metrics.

Many of the programs performed should-cost analyses that helped drive down cost estimates, to the tune of about $45 billion, Sullivan said. "So, that's not necessarily a lot of money, but it's a trend that we have not seen in the past," Sullivan said.

In addition, DoD's Cost Assessment and Program Evaluation Office seemed to be more consistent about enforcing should-cost guidelines and affordability targets, Sullivan said.

"I think the department is taking an interest in enforcing them a little bit more," he said. "And programs are beginning to use them and are being able to identify some cost savings ... they're looking out in the future and seeing where they might save money out there."

Twelve of the 17 new programs that were recently added to the portfolio established these affordability requirements, Sullivan said. Overall, 35 of the 40 programs currently in the development phase have completed a should-cost analysis and 29 of those 35 have realized savings. "I believe the environment has changed," Sullivan said.

Knowledge-based acquisition on the rise?

Along with the total cost of DoD's portfolio of major acquisitions, GAO also examined a few other key factors. Among them was "knowledge attained" at key points during the acquisition process.

The more acquisition and program officials know about a program and its needs, the less risk there is in terms of technology, design and productions.

"A knowledge deficit early in a program can cascade through design and production leaving decision makers with less knowledge to support decisions about when and how best to move into subsequent acquisition phases that commit more budgetary resources," the report stated.

GAO specifically examined 40 programs that had started development but were not yet in the production phase. Overall, newer acquisition programs demonstrated higher levels of knowledge at key points in the acquisition process, such as the beginning of the design phase and the beginning of production, Sullivan said.

Sullivan credited the 2009 Weapons Systems Acquisition Reform Act with driving a more knowledge-based approach to acquisition.

In addition, "the department's budget is facing an awful lot of turbulence now," Sullivan said, "so I think there's more seriousness brought to these things."

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