Impediments to Reducing the Costs of Weapon Systems

PSAD-80-6: Published: Nov 8, 1979. Publicly Released: Nov 8, 1979.

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The Congress and the Department of Defense have been increasingly concerned over the ever-rising costs of weapon systems. The dramatic increase in costs since World War II, coupled with constrained peacetime budgets, has resulted in the production of relatively small quantities of many weapon systems and has seriously affected overall military capabilities.

GAO believes the major effects on the costs have resulted from: (1) attempts to deploy systems with new technology and high performance; (2) low rates of production due to budget constraints and desires to maintain active production bases as long as possible; (3) absence of price competition between contractors; (4) lack of real motivation on the part of contractors to reduce costs; (5) the impact of socioeconomic programs, Government controls, and red tape; and (6) a nationwide problem of reduced research and development expenditures and lessening productivity. Some steps that have been taken by the Department of Defense in attempts to eliminate costs include: (1) revising profit policies to provide incentives for contractors to increase capital investments; (2) providing protection against contract terminations; (3) conducting design-to-cost programs; (4) providing value engineering incentives; (5) conducting a manufacturing technology improvement program; (6) increasing attention to contractors' work measurement systems; (7) performing should-cost analysis of contractors' operations; and (8) supporting contractor independent research and development. While these programs are generally worthwhile, they will not have a major impact on overall costs because of the desire for high technology systems, the budget constraints, and the military and political considerations which may preclude any radical departure from current practices.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: The Armed Services and Appropriations Committees should carefully examine lower cost options before approving new weapon programs. In particular, the committees should explore with senior military officials the pros and cons of larger quantities of alternative weapons versus smaller numbers of highly sophisticated and expensive systems. The Committees also should, after being satisfied that a weapon system is ready for production, consider multiyear funding in order to take advantage of more economical production practices. The Congress should take the initiative in responding to the recommendations of the Commission on Government Procurement to: (1) reexamine the full range of socioeconomic programs applied to the procurement process and the administrative practices followed in their application; and (2) raise the minimum dollar thresholds at which such programs are applied to the procurement process.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should make a comprehensive study to identify those aspects of contract administration that can be relaxed or modified in order to reduce costs and paperwork. The Secretary should also take stronger initiatives to accelerate the implementation of management policies for major weapon system acquisitions, as set forth in the Office of Management and Budget Circular A-109.

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