|MEMORANDUM FOR CORRESPONDENTS||April 6, 1998|
The Department of Defense today released details on major defense acquisition program cost and schedule changes since the September 1997 reporting period. This information is based on the Selected Acquisition Reports (SARs) submitted to the Congress for the December 31, 1997 reporting period.
The 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.
The total program cost estimates provided in the SARs include research and development, procurement, military construction, and acquisition-related operation & 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 (September 1996) was $739,637.9 million. After subtracting the costs for a terminated reports (AN/SQQ-89 and AOE 6) and adding the costs for a new program (NMD), the September 1997 adjusted current estimate of program acquisition costs was $739,791.6 million. There was a net decrease of $60,959.2 million during the current reporting period (December 1997). The cost changes between September and December 1997 are summarized below:
|($ in Millions)|
|September 1997 (77 programs*)||$ 739,637.9|
|Less final reports on completed programs (AN/SQQ-89 and AOE 6)||-6,475.3|
|Plus new program (NMD)||+6,629.0**|
|September 1997 Adjusted (76 programs*)||$ 739,791.6|
|Net Cost Change||$ -60,959.2|
|Removal of costs from the Navy's E-2C program that||-186.4|
were double counted in previous reports
|December 1997 (76 programs*)||$ 678,646.0|
For the December 1997 reporting period, there was a net decrease of $61.0 billion or -8.3 percent. This decrease was due primarily to an overall reduction in program quantities (-$42.4 billion) and associated support costs (-$6.7 billion). The application of lower escalation rates also contributed to the decrease (-$10.2 billion). In addition, there were net reductions in engineering (hardware/software) (-$3.2 billion) and accelerated schedules (-$1.1 billion). These decreases were partially offset by net increases in program cost estimates (+$2.7 billion). Details of the most significant changes are attached.
The Department of Defense has submitted initial SARs for two new programs, the Global Broadcast Service (GBS) and the Multiple Launch Rocket System (MLRS) Upgrade. These reports do not represent cost growth. Baselines established on these programs will be the point from which future changes will be measured. The current cost estimates are provided below:
|Program||($ in Millions)|
|GBS (Global Broadcast Service)*||$ 431.7|
|Multiple Launch Rocket System (MLRS) Upgrade||3,900.4|
* Excludes classified costs for the Air Force's MILSTAR program.
ASAS (All Source Analysis System) - Program costs increased by $334.4 million (+38.3%) from $872.9 million to $1,207.3 million, due primarily to equipment re-buys not previously included in the SAR.
ATIRCM/CMWS (Advance Threat Infrared Countermeasures/Common Missile Warning System - Program costs decreased by $429.5 million (-15.0%) from $2,863.7 million to $2,434.2 million, due primarily to the acceleration of the Navy's outyear buy profile (-$357.8 million) and to a quantity decrease of 96 units from 2673 to 2577 (-$79.3 million). In addition, decreases due to revised escalation rates (-$74.3 million) and reduced Navy development funding (-$34.2 million) were offset by increases for program support costs (+$101.5 million) and congressional plus-ups, operational test funding, and added Air Force development funding (+$16.5 million).
BLACKHAWK (UH-60L) - Program costs increased $544.8 million (+13.7%) from $3,984.5 million to $4,529.3 million, due primarily to an increase in aircraft procurement quantity of 60 from 547 to 607 (+$498.6 million) and an associated increase in program management administration and fielding costs (+$62.6 million).
CHEM DEMIL (Chemical Demilitarization) - Program costs increased $1,542.5 million (+11.2%) from $13,720.0 million to $15,262.5 million, due primarily to the addition of program risk for stockpile (+1,233.1 million) and for non-stockpile (+$208.4 million). There were also schedule slips in delivery of the Assembled Chemical Weapon Assessment Report at Pueblo and Blue Grass and schedule slips at Umatilla and Pine Bluff due to permitting delays (+$243.4 million). These increases were partially offset by the application of revised escalation indices (-$327.9 million).
CRUSADER - Program costs increased $325.9 million (+12.4%) from $2,633.0 million to $2,958.9 million, due primarily to a stretchout of development efforts resulting from changing to a solid propellant-based armament system and to a revised program funding profile (+$183.1 million). In addition, funding for nine Independent Operational Test and Evaluation units was changed from the Procurement Appropriation (which is not yet included in this pre-Milestone II SAR) to the Research, Development, Test and Evaluation Appropriation (RDT&E) (+$140.0 million). These increases were partially offset by application of revised escalation indices (-$58.7 million).
FAAD C2I BLOCKS II-IV (Forward Area Air Defense Command, Control and Intelligence) - Program costs increased $209.2 million (+18.2%) from $1,148.9 million to $1,358.1 million, due primarily to a quantity increase of 4 units from 14 to 18 (+$30.7 million), additional Sentinel radars (+$65.7 million) for Sentinel radars, and additional support requirements due to the quantity increase (+$10.6) million. The increase is also due to additional engineering to procure and field the 10-year rebuy of Common Hardware/Software (CHS) equipment (+$62.1 million), to procure and field Enhanced Position Location Reporting System installation kits in place of the Single Channel Ground and Airborne Radio System for FAAD C2 divisions (+$16.4 million), and to procure and field FAAD C2 2 CHS workstations and handheld units for the first 5 FAAD C2 units (+$10 million).
LONGBOW APACHE - Program costs increased $967.3 million (+11.5%) from $8,401.7 million to $9,369.0 million, due primarily to a transfer of funding for pre-production efforts from the Operations and Maintenance, Army Appropriation to the Aircraft Procurement, Army Appropriation (+$443.2 million) and to a revised program estimate (+$221.7 million), increased cost for safety of flight (+$183.0 million), and cancellation of the cost reduction program for A model launchers (+$156.9 million). Associated support costs increased by $320.9 million. The increases were offset partially by the application of revised escalation indices (-$274.8 million).
SADARM (Search and Destroy Armor) - Program costs decreased $420.0 million (-15.0%) from $2,801.0 million to $2,381.0 million, due primarily to a quantity reduction of 23,589 munitions from 73,778 to 50,189 (-$449.6 million) and associated schedule and estimating allocations* (-$210.3 million).
CEC (Cooperative Engagement Capability) - Program costs increased $507.0 million (+16.5%) from $3,069.1 million to $3,576.1 million, due primarily to a quantity increase of 20 units from 206 to 226 (+$102.9 million) and associated support costs (+$96.2 million). Congress also added RDT&E funds (+$74.0 million) for additional effort for HAWK, E-2C, Light Airborne Multipurpose System (LAMPS), and satellites. The Navy also programmed additional funds for E-2C, LAMPS, development of the Low Cost Common Equipment Set, and participation of CEC equipped ships in Fleet exercises ($152.1 million). Additional scope in the development program and 7 additional years added to the procurement program also contributed to the increase (+$81.8 million).
DDG 51 - Program costs decreased by $2,634.5 million (-4.7%) from $56,515.8 million to $53,881.3 million, due primarily to the acquisition reform multi-year procurement (MYP) acquisition strategy (-$1,245.7 million) and to revised escalation rates (-$1,198.1 million). A change in the outyear buy profile due to the acquisition reform MYP also contributed to the program cost decrease (-$252.8 million).
F/A-18 E/F - Program costs decreased $33,427.5 million (-42.1%) from $79,491.6 million to $46,064.1 million, due primarily to a decrease in aircraft procurement quantity of 452 from 1,000 to 548 (-$31,895.2 million), associated reductions in support (-$3,697.6 million) and FLIR requirements (-$3,050.6 million), and revised inflation indices (-$3,854.1 million). These decreases were partially offset by an economic adjustment related to the negative program changes (+$8,855.1 million).
MIDS-LVT (Multi-Functional Information Distribution System - Low Volume Terminal) - Program costs decreased $329.1 million (-18.7%) from $1,764.4 million to $1,435.3 million, due primarily to a variety of acquisition reform initiatives including use of open architecture, adoption of industrial parts and reduction of military specifications and standards.
NSSN (New Attack Submarine) - Program costs decreased $3,341.9 million (-5.0%) from $67,033.9 million to $63,692.0 million, due primarily to the application of revised escalation rates (-$4,376.3 million). The increases were partially offset by a revised initial outfitting cost estimate based on recent information from the Seawolf (SSN 21) program (-$1,296.2 million).
V-22 - Program costs decreased $8,193.6 million (-18.0%) from $45,528.0 million to $37,334.4 million. A reduced MV-22 aircraft buy of 65 from 425 to 360 resulted in a $3,119.0 million decrease. Cost savings of $1,576.9 are associated with an accelerated production schedule which increases the MV-22 program by 11 aircraft in the Future Years Defense Program, increases from 24 to a 30 aircraft per year rate beginning in FY 2004, accelerates the CV-22 annual procurement buy profile from 7 to 9 per year rate in FY 2003, and shortens the CV-22 buy one year from FY 2008 to FY 2007. The reduced MV-22 buy and change from parametric estimate to bottom-up build for CV-22 resulted in a decrease in V-22 support requirements (-$2,765.0 million). Escalation and economic adjustments also decreased program costs (-$732.7 million).
C-130J - Program costs increased $598.4 million (+99.7%) from $600.5 million to $1,198.9 million, due primarily to a quantity increase of eleven units (+$578.1 million) and an associated increase in support costs (+$133.1 million). The increase was partially offset by the application of revised escalation indices (-$18.1 million) and a revised program estimate based on improved contract information (-$76.9 million).
EELV (Evolved Expendable Launch Vehicle) - Development program costs decreased $510.9 million (-25.6%) from $1,999.0 million to $1,488.1 million, due primarily to the transfer of two launches from development to production (-$211.1 million) and a change in the EELV Acquisition Strategy (-$240.6 million) to allow contractor cost sharing and commercial launch services.
JSTARS (Joint Surveillance and Target Attack Radar System) - Program costs decreased by $1,177.8 million (-12.4%) from $9,515.0 million to $8,337.2 million, due primarily to a quantity reduction of 6 aircraft from 19 to 13 (-$1,488.4 million), revised program estimates for funding and engineering change proposals (-$240.1 million), and the application of revised escalation rates (-$108.4 million).
Offsetting these decreases were increases for the Radar Technology Insertion Program (+$309.0 million), increased support costs associated with the Computer Replacement Program (CRP) and the Satellite Communications (SATCOM) program (+$110.7 million), revised estimates for the CRP (+$96 million), and inclusion of last production lot costs (+$80.0 million).
MINUTEMAN III GRP (Guidance Replacement Program) - Program costs increased $225.8 million (+12.0%) from $1,889.1 million to $2,114.9 million, due primarily to an increase in contractor production costs (+$157.6 million), additional Air Force requirements (+$48.3 million), rephasing of the production buy and stretchout of the program to FY 2005 (+$18.6 million), and miscellaneous funding adjustments (+$29.3 million). These increases were partially offset by the application of revised escalation rates (-$32.0 million).
SBIRS (Spaced Based Infrared System) - Development program costs decreased $460.9 million (-12.0%) from $3,840.0 million to $3,379.1 million, due primarily to a revised estimate of RDT&E costs for Geosynchronous Earth Orbit (GEO) Satellites G1-G3 (-$147.2 million), a revised of procurement costs for GEO Satellites G4 and G5 (-$137.2 million), the application of revised escalation indices (-$84.8 million), a revised estimate for transition of SBIRS ground system from Air Force Materiel Command to Air Force Space Command (-$67.3 million), and changes due to general Congressional and DoD reductions (-$43.4 million). These decreases were partially offset by an increase to cover Miniature Sensor Technology Insertion (MSTI) schedule delays and additional operational requirements ($+10.4 million).
TITAN IV - Program costs decreased $2,350.4 million (-11.1%) from to $21,180.8 million to $18,830.4 million, due primarily to the decrease from 41 to 40 vehicles (-$492.3 million), the associated reduction in launch services due to truncating the Titan launch schedule from FY 2005 to FY 2004 (-$327.8 million), the associated reduction for mission integration (-$52.8 million), revised escalation indices (-$186.5 million), and the descope of the 40-vehicle completion program. Additional decreases included the removal of environmental clauses and the assumption of a follow-on procurement program (-$1,205.2 million), and the reduction of one solid rocket motor upgrade (SRMU) re-qualification test firing (-$62.8 million) and associated systems engineering and program management costs (-$63.8 million). These decreases were partially offset by a revised estimate for contract close-out (+$236.5 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."