Financial Status of Major Acquisitions June 30, 1976

PSAD-77-62: Published: Jan 18, 1977. Publicly Released: Jan 18, 1977.

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Cost increases of $176 billion, or 64 percent, over baseline estimates are shown in this report of 753 civil and military acquisitions currently in development, test, production, or construction phases. The acquisitions were expected to cost $276 billion at their early or developmental stages, while present agency estimates are $452 billion. The acquisitions reviewed in this report include both acquisitions financed solely with federal funds and those financed jointly with federal, state, and other funds. Civil agencies and departments provided cost growth analyses for acquisitions having increases of 100 percent or more. DOD provided cost growth breakdowns for only the weapons systems included in selected acquisition reports.

The agencies attributed cost increases to: (1) changes in quantity; (2) engineering changes; (3) support system changes, including changes involving spare parts, ancillary equipment, warranty provisions, and government-furnished property and/or equipment; (4) schedule changes; (5) economic changes, including inflation; (6) errors in original cost estimates; and (7) other changes such as environmental costs and relocation assistance for water and highway projects. Analyses of 148 civil acquisitions having 100 percent or more cost growth show that economic change, primarily inflation, accounts for 47 percent of the total cost growth and is the principal cause of increased project costs.

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