Defense Acquisitions:

Higher Priority Needed for Army Operating and Support Cost Reduction Efforts

NSIAD-00-197: Published: Sep 29, 2000. Publicly Released: Sep 29, 2000.

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Pursuant to a congressional request, GAO provided information on the Department of Defense's (DOD) efforts to reduce weapon system operating and support costs, focusing on the Army's efforts to reduce: (1) projected operating and support costs for weapon systems under development; and (2) operating and support costs of fielded weapon systems.

GAO noted that: (1) the Army is unlikely to be effective in significantly reducing the projected operating and support costs of its weapon systems under development because it has not established a sufficiently high priority for operating and support costs and has not put the needed mechanisms in place to achieve such reductions; (2) specifically, the Army: (a) has not assigned accountability for operating and support cost reductions nor established a requirement that each weapon system achieve a specific level of cost reductions; and (b) lacks complete and reliable data on the actual operating and support costs of the weapon systems that are being replaced; (3) without a requirement to achieve a specific level of operating and support cost reductions, program managers have little incentive or priority to trade off acquisition cost, schedule, and performance requirements during development to achieve long-term operating and support cost savings; (4) for the two developmental systems in GAO's review--the Comanche Helicopter and the Crusader Self-Propelled Howitzer--efforts are underway to improve the systems' supportability, reliability, and maintainability; (5) while these efforts should have an impact on the systems' operating and support costs, GAO was unable to link any actions or tradeoffs to specific reductions in operating and support costs; (6) further, the Army does not have complete and reliable data on the operating and support costs for systems that are being replaced; as a result, program managers lack the data needed to accurately project operating and support costs and to determine whether they can achieve DOD's goal of reducing new systems' life-cycle costs by 20 to 50 percent over those of the systems they are replacing; (7) in addition, because the Army has not historically budgeted or managed in this way, it has not collected and maintained data on all elements of each weapon system's operating and support costs; and (8) although the Army has identified some potential reductions, its operating and support cost reduction efforts for fielded systems lack the priority they need to be effective in meeting DOD's goals.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In its June 2001 update of its acquisition policies, DOD instructed acquisition and user communities to treat weapon system total ownership cost as a military requirement for each program; develop cost thresholds and objectives; and to reassess those objectives and progress toward achieving them at each milestone. In these revised policies, DOD has significantly increased the priority given to addressing total ownership costs (which includes operating and support costs) issues throughout the acquisition process.

    Recommendation: To increase the priority of and to provide the mechanisms needed to achieve significant reductions in operating and support costs, the Secretary of Defense should direct the Secretary of the Army to establish operating and support cost requirements for developmental and fielded systems and regularly monitor each system's progress in meeting the requirement.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: The Army initially responded that, as the lessons and data are gleaned from its Total Ownership Cost initiatives, an alternative to the current accounting approach may be adopted. However, the Army has since reorganized its headquarters' organizations and has transferred the staff and functions of the Total Ownership Cost Directorate to other organizations. GAO does not anticipate any near-term actions to improve the total ownership cost accountings systems or processes.

    Recommendation: To increase the priority of and to provide the mechanisms needed to achieve significant reductions in operating and support costs, the Secretary of Defense should direct the Secretary of the Army to develop a more complete and accurate accounting of each weapon system's operating and support costs by expanding the Army's current cost data system to include additional cost elements such as software and supply system support costs.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: Initally, the Army appeared to be poised to provide funding and staffing to fully establish the Total Ownership Cost Directorate. However, pursuant to DOD guidance that the Army reorganize its headquarters staff, all efforts to add more funding and staffing to the Directorate have been deferred. In addition, the functions and personnel of the Directorate have been transferred to another organization within the Army.

    Recommendation: To increase the priority of and to provide the mechanisms needed to achieve significant reductions in operating and support costs, the Secretary of Defense should direct the Secretary of the Army to promptly provide the necessary funding and staffing to fully establish the Total Ownership Cost Directorate.

    Agency Affected: Department of Defense

 

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