The cost of the Department of Defense's (DoD) major acquisition programs grew by $74.4 billion in the past year and now totals more than $1.58 trillion, according to a recent Government Accountability Office (GAO) report. And, this $74.4 billion is just a fraction of the overall cost growth in a DoD weapons acquisition portfolio that, on balance, is delivering fewer weapons for more money.
The defense acquisitions portfolio has been plagued by reductions in the number of weapons delivered, delayed delivery times, and enormous cost overruns. In fact, the total acquisition cost of this portfolio has grown by $447 billion, 40 percent above initial cost estimates.
More Bucks, Less Bang
Despite the cost growth, many of these programs, will deliver fewer quantities of weapons (e.g. fewer numbers of planes). Because the total cost of these programs is divided over fewer quantities of weapons, there has been an average 46 percent increase in the per unit cost of the 38 major weapons programs for which the GAO provided baseline and currents estimates of cost and quantity, according to a Project on Government Oversight (POGO) analysis.
With increasing costs, even if the quantity of purchases don't decline, the military is getting far less bang for each buck it spends. For example, the cost of each Littoral Combat Ship (LCS) on average has increased by more than $257 million. With 55 of these ships set to be procured, this increase will cost taxpayers more than $14 billion. Similarly, the cost of each of the six satellites in the Space-Based Infrared System (SBIRS) has more than tripled -- increasing by more than $2 billion each.
This was a major problem during the past year, as the GAO report noted, "Over 60 percent of programs have lost buying power in the last year -- as measured by an increase in program acquisition unit cost -- depriving DOD of funding that could have been used for additional quantities or other priorities."
The F-35 is perhaps the highest profile program where U.S. taxpayers are seeing a price tag spiraling out of control. According to the most recent DoD figures, the costs of acquiring the F-35 are now $395 billion -- nearly double the baseline estimate. But wait until you hear about the unit cost increase. Several years ago, earlier in the JSF program, the military reduced its planned buy of JSF planes by 409 aircraft from 2,866 planes to 2,457. Accordingly, the unit cost has more than doubled from $74.5 million to just over $160 million.
Furthermore, the cost to operate and support these aircraft has also climbed to over $1.15 trillion. Thus, the F-35 program is now estimated to cost nearly $1.51 trillion altogether and that price may still rise.
The failures of the F-35 program are particularly troubling given its predominant position in future procurement budgets. According to the GAO report, "The Joint Strike Fighter program alone is expected to account for 38 percent -- or almost $246 billion -- of the future procurement funding needed. This amount is enough to fund the remaining procurement costs of the next 15 largest programs." In the past year alone, the F-35 was responsible for 52 percent of the $74.4 billion increase in the cost of the weapons acquisition portfolio, according to the GAO report. The JSF's sheer size coupled with cost growth may indeed crowd out other programs in DoD's acquisition budget.
"Delays in Delivering Capability to the Warfighter"
According to the GAO report the "delays in delivering capability to the warfighter have gotten longer." Specifically, the average delay in delivering initial capabilities is almost two years.
According to the GAO, when measured against a program's first full estimate, the average program is delivering capabilities 23 months later than anticipated. In other words, soldiers are waiting nearly two additional years to receive the weapons they need, and for many programs they're waiting much longer. The most egregious cases are the cycle times for three programs -- the DDG 1000 Destroyer, the Global Hawk drone, and the LCS -- which have all grown by more than five years.
Inefficient Acquisitions, Unbelievable Estimates
The primary culprit for the cost growth during the past year is procurement inefficiencies -- such as production problems or flawed initial cost estimates according to the GAO. Those initial cost estimates tend to be flawed in one overarching way -- they are unrealistically low.
The DoD consistently understates the cost and acquisition cycle times of weapons programs. Our analysis of the weapons in the GAO report shows that, on average, the current cost estimate of a weapons program is more than double its initial cost estimate. The average unit cost is up more than 46 percent and the weapons are arriving almost two years late.
The takeaway for taxpayers and Congress when considering initial estimates is simple: Don't believe them. They paint an unrealistic picture of cost, delivery times, and, often, capabilities. This baits Congress and the president into making ill-advised acquisition decisions, costs taxpayers billions, and increases the time it takes for our soldiers to get the weapons they need.
This problem is supposed to be mitigated by the Weapons Systems Acquisition Reform Act of 2009 that requires programs get a certification prior to development starting, which, amongst other things, includes having cost and schedule estimates conducted with the DoD's office of Cost Assessment and Program Evaluation (CAPE). Unfortunately, according to the GAO report, "current programs have a mixed record in regards to implementing certification requirements from the act," thus, "we have not yet seen improvements in outcomes that are commensurate with the improvements in law and policy."
And, the consequences of this lack of improvement in outcomes are significant. The cost growth in these weapons systems could pay for more than two-thirds of the military's sequestration -- the outcome of last year's debt deal that will reduce Pentagon spending by more than $500 billion over the next ten years. Perhaps Secretary of Defense Leon Panetta should spend less time fear-mongering about the "doomsday" scenario of sequestration, and more time figuring out how to reduce wasteful spending in the weapons acquisition bureaucracy.