The Effect of the Nunn-McCurdy Amendment on Unit Cost Growth of Defense Acquisition Projects

Abstract

The Department of Defense (DoD) has faced significant acquisition problems over an extended period of time. As noted by one GAO report, the DoD's major weapon system programs continue to take longer, cost more, and deliver fewer quantities and capabilities than originally planned (Sullivan, 2008). For example, the programs that comprise the DoD's Major Defense Acquisition Projects (MDAPs) for 2007 had an average program cost-growth of 26% when compared to initial estimates, which collectively culminated in $295 billion dollars in additional costs (Sullivan, 2008). Given other pressing financial obligations, the DoD cannot afford to incur in the future similar development problems as it has experienced in the past. Cost-growth is defined as the positive difference between actual cost and budgeted costs. Due to its relative ease of measurement, cost-growth provides a simple barometer to determine if the acquisition process is achieving its stated goals. Since the 1950s, numerous reports have found that, in general, the DoD's acquisition process experiences high cost-growth at both the program and unit levels.