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Abstract

Previous studies have shown that the Department of Defense (DoD) and the military departments have historically underestimated the cost of new weapon systems. Quantifying cost growth is important, but the larger issue is why cost growth occurs. To address that issue, this analysis uses data from Selected Acquisition Reports to examine 35 mature, but not necessarily complete, major defense acquisition programs similar to the type and complexity of those typically managed by the Air Force. The programs are first examined as a complete set, then Air Force and non-Air Force programs are analyzed separately to determine whether the causes of cost growth in the two groups differ. Four major sources of cost growth were identified: (1) errors in estimation and scheduling, (2) decisions made by the government, (3) financial matters, and (4) miscellaneous sources. Total (development plus procurement) cost growth, when measured as simple averages among the program set, is dominated by decisions, which account for more than two-thirds of the growth. Most decisions-related cost growth involves quantity changes (22 percent), requirements growth (13 percent), and schedule changes (9 percent). Cost estimation (10 percent) is the only large contributor in the errors category. Less than 4 percent of the overall cost growth is due to financial and miscellaneous causes. Because decisions involving changes in requirements, quantities, and production schedules dominate cost growth, program managers, service leadership, and Congress should look for ways to reduce changes in these areas.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Study Approach

  • Chapter Three

    Cost Growth in Selected Programs

  • Chapter Four

    Summary and Recommendations

  • Appendix A

    Cost Growth of Individual Programs

  • Appendix B

    Weighted Cost Growth

  • Appendix C

    Trigger Events

  • Appendix D

    OSD Guidance and Definitions of the SAR Cost-Variance Categories

The research described in this report was sponsored by the United States Air Force and conducted by RAND Project AIR FORCE.

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