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No. 135-M
MEMORANDUM FOR CORRESPONDENTS August 8, 1997

(NOTE: The DoD Selected Acquisition Reports (SARs) summarize the latest estimates of cost, schedule, and technical 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.

SAR program acquisition cost summary . News media queries regarding overall SAR policy should be directed to Lt. Col. Bob Potter, Directorate for Defense Information, (703) 697-3189. For system-specific questions, contact the appropriate Military Department Public Affairs office.

The Department of Defense has released details on major defense acquisition program cost and schedule changes since the December 1996 reporting period. This information is based on the Selected Acquisition Reports submitted to the Congress for the June 30, 1997 reporting period.

The total program cost estimates provided in the SARs include research and development, procurement, military construction, and acquisition-related operation and maintenance. Total program costs reflect actual costs to date as well as anticipated costs for future efforts. All estimates include allowances for anticipated inflation.

The current estimate of program acquisition costs for programs covered by SARs for the prior reporting period (December 1996) was $716,908.4 million. After subtracting the costs for terminated reports and adding the costs for new programs, the December 1996 adjusted current estimate of program acquisition costs was $725,888.1 million. There was a net increase of $1,423.3 million during the current reporting period (June 1997). The cost changes between December 1996 and June 1997 are summarized below:

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Current Estimate
($ in Millions)
December 1996 (71 programs*) $ 716,908.4**
Less final reports on completed programs (CMU and -22,881.7
Plus new programs (ABL, C-130J, EELV, JSF, and +31,861.4

USMC H-1 UPGRADE)

December 1996 Adjusted (74 programs*) $ 725,888.1

Changes Since Last Report:

Economic $ 0.0
Quantity 0.0
Schedule +299.2
Engineering +471.2
Estimating +652.9
Other 0.0
Support 0.0
Net Cost Change $ +1,423.3
June 1997 (74 programs*) $ 727,311.4

The net increase of $1,423.3 million or +0.2 percent during the current reporting period (June 1997) was due to a restructuring of the THAAD program to reflect decisions made in the Quadrennial Defense Review (QDR). As of the June 1997 reporting period, there were three quarterly SARs submitted on programs that have reported previously:

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DoD:

THAAD -- The Quadrennial Defense Review (QDR) noted that a program restructure was required due to technical failures in the test program. This restructure will improve the stability of the program, lower risk, and allow DoD to explore increased commonality between the interceptor missiles and kill vehicles used in the THAAD and Navy Theater-Wide programs. Accordingly, the THAAD production schedule now supports a First Unit Equipped in FY 2006. The THAAD SAR reflects only research and development costs. Program costs increased $1,423.3 million (+22.5%) from $6,339.6 million to $7,762.9 million, due to increased flight test costs, an extended flight test schedule, risk reduction activities for engineering and manufacturing development (EMD) ($+1,194.0 million), and targets for two additional Program Definition and Risk Reduction (PDDR) flight tests ($+41.7 million). In addition, a revised estimate that incorporates actual cost experience also contributed to the overall increase ($+227.6 million). These increases were partially offset by a Congressional rescission ($-40.0 million).

New SARs (As of June 30, 1997)

The Department of Defense has submitted initial SARs for three new programs. These reports do not represent cost growth. Baselines established on these programs will be the point from which future changes will be measured. The current cost estimates are provided below:

Current Estimate
Program ($ in Millions)
B-1 Conventional Mission Upgrade Program (CMUP) $ 700.3
NPOESS (National Polar-orbiting Operational 5,333.8*

Environmental Satellite System)

Navy Area TBMD (Theater Ballistic Missile Defense) 6,230.0
Total $ 12,264.1
* Pre-Milestone II program reporting research and development (RDT&E) costs only, in accordance with the provisions of Section 2432, Title 10, United States Code.