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Sources of Weapon System Cost Growth

Sources of Weapon System Cost Growth: Analysis of 35 Major Defense Acquisition Programs

Joseph G. Bolten
Robert S. Leonard
Mark V. Arena
Obaid Younossi
Jerry M. Sollinger
Copyright Date: 2008
Edition: 1
Published by: RAND Corporation
Pages: 116
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  • Book Info
    Sources of Weapon System Cost Growth
    Book Description:

    This analysis uses data from Selected Acquisition Reports to determine the causes of cost growth in 35 mature major defense acquisition programs. Four major sources of growth are identified: (1) errors in estimation and scheduling, (2) decisions by the government, (3) financial matters, and (4) miscellaneous. The analysis shows that more than two-thirds of cost growth (measured as simple averages) is caused by decisions, most of which involve quantity changes, requirements growth, and schedule changes.

    eISBN: 978-0-8330-4524-9
    Subjects: Technology

Table of Contents

  1. Front Matter
    (pp. i-ii)
  2. Preface
    (pp. iii-vi)
  3. Table of Contents
    (pp. vii-viii)
  4. Figures
    (pp. ix-x)
  5. Tables
    (pp. xi-xii)
  6. Summary
    (pp. xiii-xx)
  7. Acknowledgments
    (pp. xxi-xxii)
  8. Abbreviations
    (pp. xxiii-xxvi)
  9. CHAPTER ONE Introduction
    (pp. 1-4)

    Weapon-system cost growth has been a subject of interest in the Department of Defense (DoD) for many years—early RAND studies of weapon-system cost growth date back to the 1950s (Marshall and Meckling, 1959). McNicol (2004), Wandland and Wickman (1993), Tyson, Nelson, and Utech (1992), Shaw (1982), Tyson et al. (1989), Asher and Maggelet (1984), and Drezner et al. (1993) studied cost growth in weapon systems of all types, using data from Selected Acquisition Reports (SARs) and other sources, and reported mixed results, using different measures for varying numbers of weapon systems.

    The findings of these studies, described and summarized...

  10. CHAPTER TWO Study Approach
    (pp. 5-24)

    We selected our sample of 35 acquisition programs from a list of 125 SAR reporting programs that were either completed or currently under way. We used the following selection criteria:

    1. At least 35 percent of the planned procurement was funded through fiscal year (FY) 2004.

    2. The MS B (full-scale development decision) occurred after 1980.

    3. At MS B, the program had a solid baseline estimate for costs and procurement quantity.

    4. The program was not canceled or truncated after early production.

    5. The program was similar in technical complexity to those undertaken by the Air Force (i.e., ships and submarines were excluded).


  11. CHAPTER THREE Cost Growth in Selected Programs
    (pp. 25-44)

    In this chapter, we present the results of our analysis. We begin by describing alternative ways to examine the data: weighted and simple averages, medians, etc. We then focus on our analytic results, using simple averages. After showing the total of development plus procurement cost growth for all programs, we present a breakout by development and procurement budget categories. We then compare our results with the total cost growth as reported in the SAR variance categories. Following this comparison, we show the distribution of cost growth, broadening the presentation of data beyond simple averages. We next analyze cost growth for...

  12. CHAPTER FOUR Summary and Recommendations
    (pp. 45-52)

    In this study, we examined 35 mature acquisition programs—16 Air Force programs and 19 non–Air Force programs—to identify the sources of cost growth. We found no statistically significant differences in the causes of cost growth between the two subsets of programs.

    Because the approach we used is different from that used in prior studies, it is difficult to compare the results. In order to allocate all the variance data provided in the SAR for each program, we did not normalize our results for changes in quantity, as was done in most prior studies. In addition, we chose...

  13. APPENDIX A Cost Growth of Individual Programs
    (pp. 53-70)
  14. APPENDIX B Weighted Cost Growth
    (pp. 71-76)
  15. APPENDIX C Trigger Events
    (pp. 77-82)
  16. APPENDIX D OSD Guidance and Definitions of the SAR Cost-Variance Categories
    (pp. 83-88)
  17. Bibliography
    (pp. 89-90)