Rethinking Acquisition Reform: Cost Growth Solutions May Aggravate the More Important Problems

Report Number: NPS-AM-08-037

Series: Acquisition Management

Category: Costing

Report Series: Proceedings Paper

Authors: Phil Candreva

Title: Rethinking Acquisition Reform: Cost Growth Solutions May Aggravate the More Important Problems

Published: 2008-04-01

Sponsored By: Acquisition Research Program

Status: Published--Unlimited Distribution

Research Type: NPS Faculty

Full Text URL: http://acquisitionresearch.net/files/FY2008/NPS-AM-08-037.pdf

Keywords: Cost Growth, Defense Acquisition Programs

Abstract:

There is increasing dissatisfaction with cost growth in major defense acquisition programs. Cost growth crowds out other investments, stresses budgets or causes schedule slips, all of which result in a military force that is less capable than previously expected. Several recent studies have recommended two categories of reforms: capital budgeting reforms seek stability in acquisition accounts, and rational cost model reforms seek to reduce the percentage increase of final cost over budget estimates. In both categories, undesirable secondary effects may be worse than the desirable primary effects; specifically, reforms that reduce cost growth may do so by driving total costs higher. This study examines these reforms and discusses their secondary effects. The paper concludes that the current practice of generating low estimates, coupled with dissatisfaction with cost growth may best serve to limit total cost.