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Best Practices: Setting Requirements Differently Could Reduce Weapon Systems' Total Ownership Costs

GAO-03-57 Published: Feb 11, 2003. Publicly Released: Feb 11, 2003.
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Highlights

For fiscal year 2003, the Department of Defense (DOD) asked for about $185 billion to develop, procure, operate, and maintain its weapon systems. This request represents an increase of 18 percent since 2001 for the total ownership costs of DOD weapon systems. Often, DOD systems need expensive spare parts and support systems after they are fielded to meet required readiness levels. DOD has been increasingly concerned that the high cost of maintaining systems has limited its ability to modernize and invest in new weapons. This report examines the best practices of leading commercial firms to manage a product's total ownership costs and determines if those practices can be applied to DOD.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense To ensure that the user's requirements for a weapon system can be met within a reliable design, the Secretary of Defense should revise the Chairman of the Joint Chiefs of Staff Instruction 3170.01B on the requirements generation process to include total ownership cost, especially operating and support cost, and weapon system readiness rates as performance parameters equal in priority to any other performance parameters for any major weapon system before beginning the acquisition program.
Closed – Not Implemented
DOD is currently revising the supporting guidance in the Joints Chiefs of Staff Instruction 3170.01, and has not decided whether to clarify it with a more specific description towards weapon system readiness rates. In August, 2004, the guidance was revised, but did not include making Operating and support costs key5 performance parameters.
Department of Defense To ensure that the user's requirements for a weapon system can be met within a reliable design, the Secretary of Defense should revise the current policy governing the operation of the defense acquisition system (currently under revision) to require that the product developer establish a firm estimate of a weapon system's reliability based on demonstrated reliability rates at the component and subsystem level no later than the end of the system integration phase, coinciding with the system-level critical design review, before proceeding into the system demonstration phase of product development; and at the system level no later than the full-rate production decision.
Closed – Implemented
DOD included this recommendation in its revised 5000 Series Acquisition Policies dated May 2003.
Department of Defense To ensure that the user's requirements for a weapon system can be met within a reliable design, the Secretary of Defense should structure DOD contracts for major systems acquisitions so that at Milestone B the product developer has incentives to ensure that proper trades are made between reliability and performance prior to the production decision. One option is to provide specific clauses in the development contract to address reliability growth.
Closed – Not Implemented
DOD does not believe additional emphasis is needed to give incentives to product developers to ensure proper trades are made between reliability and performance. The Department believes that it encourages system design trades throughout development, and that other approaches they are using, including the Total System Support Responsibility approach, provides incentives to the developer to make the proper trades.
Department of Defense DOD should take steps to make the cost to operate and support weapon systems at required readiness rates a priority when setting weapon system requirements for an affordable weapon system and finalizing the design of the selected system. To do this, its requirements and acquisition communities must collaborate to fully understand and control the costs to operate and support a weapon system prior to and early in product development, when it is possible to have significant impact on those costs. In establishing requirements for a weapon system, the requirements community should include the costs to operate and support the weapon system over its life cycle and the readiness rate for the weapon system. To establish an affordable design for the weapon system, the acquisition community and acquisition programs should be required to accurately estimate--based on demonstrated component and subsystem reliability testing--that portion of the costs that DOD plans to spend on operations and support of the weapon system throughout its life cycle before the design is finalized.
Closed – Not Implemented
The Department did not specifically address this global recommendation mentioned in GAO's report. Instead, the Department focused its response on the three more specific recommendations. However, in general, it is clear that DOD believes no further action is needed to lower its total ownership costs.

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Topics

Best practicesCost analysisDefense cost controlDefense procurementMaintenance costsPrivate sector practicesWeapons research and developmentWeapons systemsComparative benchmarking productsMilitary forces