U.S. Department of Defense Office of the Assistant Secretary of Defense (Public Affairs) News Release

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		No. 276-08
IMMEDIATE RELEASE		April 07, 2008

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The Department of Defense (DoD) has released details on major defense acquisition program cost, schedule, and performance changes since the September 2007 reporting period. This information is based on the Selected Acquisition Reports (SARs) submitted to the Congress for the December 2007 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 2007) was $1,702,133.0 million. After subtracting the costs for two final reports for Evolved Expendable Launch Vehicle (EELV) and Warfighter Information Network-Tactical (WIN-T) and adding the costs for two new programs, WIN-T Increment 1 and WIN-T Increment 2, from the September 2007 reporting period, the adjusted current estimate of program acquisition costs is $1,657,829.4 million. For the December 2007 reporting period, Chemical Demilitarization-Chemical Materials Agency Newport (Chem Demil-CMA Newport) was consolidated into Chem Demil-CMA.

                For the December 2007 reporting period, there was a net cost decrease of $14,855.9 million or -0.9 percent for the programs that have reported previously. The cost decrease was due primarily to a net decrease in planned quantities (-$7,765.0 million), the application of lower escalation rates (-$4,300.5 million), and a net decrease in support requirements (-$9,928.1 million).¹ These decreases were partially offset by additional engineering changes (hardware/ software) (+$1,856.6 million) and a net increase in program cost estimates (+$6,233.9 million)¹. Further details of the most significant changes are summarized below by program.

                There are three programs with Nunn-McCurdy unit cost breaches to their current Acquisition Program Baseline (APB): AEHF (Advanced Extremely High Frequency Satellite), JAVELIN, and JTRS GMR (Joint Tactical Radio System Ground Mobile Radios). That is, the program acquisition or average procurement unit costs for these programs have increased by 15 percent or more to their current APB. For “significant” Nunn-McCurdy breaches, notification and unit cost breach information will be provided to the Congress, but there are no certification requirements.

New SARs

(As of December 2007)

                The Department of Defense has submitted initial SARs for the following programs for the December 2007 reporting period. These reports do not represent cost growth. Baselines established on these programs will be the point from which future changes will be measured. 

Summary Explanations of Significant SAR Cost Changes

As of December 31, 2007

Army:

ATIRCM/CMWS (Advanced Threat Infrared Countermeasure/Common Missile Warning System) – Program costs decreased $851.0 million (-15.0 percent) from $5,666.9 million to $4,815.9 million, due primarily to quantity decreases of 634 B-kits from 1,710 to 1,076 B-kits (-$675.4 million), reduced support costs resulting from the B-kit quantity reduction (-$186.5 million), economic savings from completing the buy of A-kits by fiscal 2010 (-$52.2 million), and unit cost reductions from accelerating the buy of CMWS mission kits (-$52.2 million). These savings were partially offset by increased costs of adding a fifth Electro-Optic Missile Sensor to each CMWS (+$181.6 million) and supporting integration of Inertial Navigation System data into CMWS in fixed wing aircraft applications (+$14.7 million).

FBCB2 (Force XXI Battle Command Brigade and Below)– Program costs increased $685.0 million (+25.5 percent) from $2,686.1 million to $3,371.1 million, due primarily to a quantity increase of 28,895 systems from 44,568 to 73,463 systems to support Operation Iraqi Freedom and Operation Enduring Freedom (+$683.0 million) and associated schedule, engineering, and estimating allocations* (+$99.0 million). There was an additional increase in other support for retrofit of Type I encryption for the increased quantities (+$114.1 million). These increases were partially offset by lower unit costs from beneficial contract pricing of the increased quantities
(-$131.3 million) and lower estimates for the aviation A- kits (i.e., modification kits) based on current contract data (-$45.7 million). 

FCS (Future Combat System) – Program costs decreased $2,609.9 million (-1.6 percent) from $161,930.1 million to $159,320.2 million, due primarily to the application of revised escalation indices (-$1,331.0 million) and a correction of previously reported costs that were overstated due to the use of incorrect escalation indices (-$913.2 million). There were additional decreases in other support (-$190.6 million) and Congressional statutory reductions and budget decrements
(-$146.5 million).

GMLRS (Guided Multiple Launch Rocket System) – Program costs decreased $764.2 million (-11.3 percent) from $6,772.5 million to $6,008.3 million, due primarily to lower estimates of hardware costs for the Unitary variant at the production decision (Milestone C) (-$496.6 million) and an acceleration in the procurement buy profile (-$68.9 million). Because of the shorter buy schedule, there were lower estimates for systems engineering/program management costs (-$84.5 million), engineering services (-$44.8 million), and Government production verification testing
(-$19.4 million).

LUH (Light Utility Helicopter) – Program costs increased $208.4 million (+11.1 percent) from $1,881.8 million to $2,090.2 million, due primarily to a quantity increase of 23 aircraft from 322 to 345 aircraft ($139.3 million). There was an additional cost increase for modifications to address issues identified during the Initial Operational Test (+$171.1 million). These modifications included ARC-231 secure radios and cabin ventilation kits for all 345 aircraft, engine inlet (air) filters for 66 aircraft, and medical evacuation kits for 84 aircraft.

STRYKER – Program costs increased by $2,560.2 million (+19.5 percent) from $13,130.9 million to $15,691.1 million, due primarily to a quantity increase of 640 vehicles from 2,887 to 3,527 vehicles (+$1,907.2 million) and associated schedule, engineering, and estimating allocations* (+$621.8 million), and spares and support associated with the quantity increase (+$425.1 million), There were additional increases for survivability enhancements (+$502.6 million), revised testing and management costs (+$375.7 million), and updated MILCON estimates (+$340.9 million). These increases were partially offset by a change in the mix of models procured and new cost estimates (-$797.1 million) and removal of Stryker Product Improvement Program funding (-$816.0 million).

Navy:

DDG 1000 – Program costs decreased $7,135.4 million (-19.8 percent) from $36,022.1 million to $28,886.7 million, due primarily to a quantity decrease of 3 ships from 10 to 7 ships (-$8,495.0 million) and revised estimates for budget reductions and inflation impacts on future ships (-$275.8 million). These decreases were partially offset by increases in fiscal 2009 to fully fund ships 5-7 (+$693.6 million), quantity allocations* for schedule, engineering, and estimating (+$603.7 million), additional funding for the Advanced Gun System Pallets and Sea Strike capabilities (+$308.3 million), and the application of revised escalation indices (+$291.0 million).

LCS (Littoral Combat Ship) – Program costs increased $909.7 million (+46.9 percent) from $1,938.9 million to $2,848.6 million, due primarily to a revised estimate in Seaframe pricing that reflects substantial cost growth and post delivery work (+$496.1 million) and a revised estimate for Mission Module development and phasing due to maturation of the definition of the Mission Modules (+$271.2 million). Costs also increased due to a lengthening of the Flight 0 schedule to incorporate additional effort (+$71.3 million), a revised estimate for program development of Flight 0 and Flight 0+ planning and execution (+$42.3 million), and additional scope for Mission Module development (+$40.7 million).

SSN 774 (Virginia Class) – Program costs decreased by $1,043.0 million (-1.1 percent) from $93,008.2 million to $91,965.2 million, due primarily to a lower estimate for labor and material costs (-$773.7 million) and an acceleration of the procurement buy profile that moved the fiscal 2020 ship up to fiscal 2111 (-$281.2 million).

T-AKE (Dry Cargo/Ammunition Ship) – Program costs increased by $1,086.4 million (+23.5 percent) from $4,628.8 million to $5,715.2 million, due primarily to the addition of one ship from 11 to 12 ships (+$471.0 million), associated outfitting and post delivery costs (+$84.5 million), and cost growth on previous ships (+$520.6 million).

Air Force:

AEHF (Advanced Extremely High Frequency) – Program costs increased $940.5 million (+14.6 percent) from $6,421.5 million to $7,362.0 million, due primarily to a quantity increase of one satellite from three to four satellites (+$946.0 million). Congress appropriated advance procurement for Space Vehicle 4 (SV-4) in the fiscal 2008 Appropriations Act. The Department added SV-4 Full Procurement in fiscal 2010, with a launch capability targeted in fiscal 2014.

C-130J – Program costs increased $3,958.2 million (+49.0 percent) from $8,071.1 million to $12,029.3 million, due primarily to a quantity increase of 52 aircraft from 82 to 134 aircraft (+$2,937.8 million) and associated estimating and schedule allocations* (+$399.6 million). There were additional increases in initial spares (+$85.7 million) and other support costs (+$546.9 million) associated with the higher aircraft quantity. These increases were partially offset by decreases from the acceleration of the procurement buy profile (-$18.1 million) and withholds for higher Air Force priorities and programming changes (-$12.6 million).

C-5 RERP (Reliability Enhancement and Re-engining Program) – Program costs decreased $6,375.3 million (-36.4 percent) from $17,506.2 million to $11,130.9 million, due primarily to net reductions in the Air Force cost estimate for equipment (-$3,332.0 million), installation (-$1,602.2 million), engineering change order estimates (-$505.5 million), and Government Furnished Equipment (-$210.2 million). Additionally, program costs decreased due to the application of revised escalation indices (-$41.0 million), a decrease in advance procurement costs (-$192.1 million), and decreases in initial spares (-$414.2 million) and other support and training costs (-$417.6 million).

FAB-T (Family of Advanced Beyond Line-of-Sight Terminals) – Program costs increased $454.8 million (+14.4 percent) from $3,167.4 million to $3,622.2 million, due primarily to a revised cost estimate resulting from analysis by the OSD Cost Analysis Improvement Group (+$348.8 million). Costs also increased due to a net quantity increase of 6 terminals from 216 to 222 terminals (+$44.7 million), adjustments in real and predicated escalation (+$26.6 million), an increase in initial spares (+$25.5 million), and a net stretch-out of the procurement buy profile (+$9.2 million).

NAVSTAR GPS (Global Positioning System) User Equipment – Program costs increased $718.4 million (+52.2 percent) from $1,375.3 million to $2,093.7 million, due to an increase to allow for continuation of a multi-vendor strategy through delivery of prototype cards, and to facilitate transitioning the prototype program into a full development/production program focusing on integration of military code (M-Code) capable receivers into Service-nominated lead platforms.

SBIRS (Space Based Infrared Systems) High – Program costs increased $1,675.0 million (+17.0 percent) from $9,879.5 million to $11,554.5 million, due primarily to a quantity increase of one Geosynchronous Earth Orbit (GEO) satellite (+$821.6 million) from three to four GEO satellites and to fully fund the latest OSD Cost Analysis Improvement Group (CAIG) cost estimate (+$866.1 million), which includes increased costs for Flight Software System (FSS) schedule slips and follow-on production efforts for host support, launch support, and other Government costs.

 

DoD:

Chem Demil-CMA (Chemical Demilitarization–Chemical Materials Agency) – Program costs decreased $1,220.5 million (-4.3 percent) from $28,643.1 million to $27,422.6 million, due primarily to adjustments to disposal facility schedules to reflect the latest operational processing rates and reduced closure durations for sites where secondary wastes can be shipped offsite or destroyed during operations (-$1,138.3 million), and the application of revised escalation indices (-$127.9 million).

F-35 (Joint Strike Fighter) – Program costs decreased by $981.3 million (-0.3 percent) from $299,824.1 million to $298,842.8 million, due primarily to the application of revised escalation indices (-$1,955.8 million), lower material estimates because of prime contractor’s material agreements (-$1,650.6 million), and incorporation of revised prime/subcontractor labor rates      (-$879.4 million). There was an additional reduction for a revised estimate of support costs       (-$7,445.0 million). These decreases were partially offset by higher estimates for elements of procurement nonrecurring costs (+$4,369.0 million), an adjustment to reflect manufacturing actuals for the System Demonstration and Development (SDD) flight test articles (+$3,849.9 million), and a revised propulsion estimate to include additional hardware and increased lift fan cost (+$2,769.1 million). Overall, it should be noted that the Nunn-McCurdy unit costs are stable relative to the current and original baseline estimates.

JTRS HMS (Joint Tactical Radio System Handheld, Manpack, and Small Form Fit) – Program costs decreased $8,421.7 million (-71.4 percent) from $11,788.6 million to $3,366.9 million, due primarily to a quantity decrease of 232,963 radios from 328,924 to 95,961 radios (-$5,444.4 million), a reduction in costs because of a change in the type of radios purchased (i.e., change in model mix) (-$2,554.7 million), and a decrease in initial spares and other support associated with the reduced quantities (-$842.2 million). These decreases were partially offset by the addition of porting efforts for the Mobile User Objective System (MUOS) waveform (+$219.3 million) and a net stretchout of the procurement buy profile (+$157.6 million).

* Note: Quantity changes are estimated based on the original SAR baseline cost-quantity relationship. Cost changes since the original baseline are separately categorized as schedule, engineering, or estimating "allocations." The total impact of a quantity change is the identified "quantity" change plus all associated "allocations."

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[1]The large increase in Estimating and the large decrease in Support include an F-35 transfer of $9,151.0 million, primarily to recategorize Diminishing Manufacturing Sources and Technology Refresh costs from Support to Estimating (nonrecurring flyaway).

 

 

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