Strategic Defense Initiative Program:

Basis for Reductions in Estimated Cost of Phase I

NSIAD-90-173: Published: May 9, 1990. Publicly Released: May 10, 1990.

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Pursuant to a congressional request, GAO reviewed the Strategic Defense Initiative Organization's (SDIO) reasons for reducing its cost estimate for the Phase 1 Strategic Defense System, and the credibility of its October 1988 estimate of $69.1 billion.

GAO found that: (1) SDIO appropriately prepared the October 1988 cost estimate, but made errors that understated the cost by $2.1 billion; (2) SDIO relied on overly optimistic assumptions, resulting in an understatement of at least $5 billion; (3) the $19.3-billion reduction in estimated Phase 1 costs was due to a quantity reduction, a change in technical characteristics and the cost estimate models, and a reduction in support costs; and (4) SDIO deferred development costs to subsequent programs, resulting in a $2-billion reduction in support costs.

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