Estimated costs for the Department of Defense's (DOD) major space acquisition programs have increased by about $12.2 billion from initial estimates for fiscal years 2006 through 2011. Cost growth for ongoing Air Force programs above initial estimates accounts for a substantial portion of this 44 percent increase. In light of the role that optimistic estimating is believed to have played in exacerbating space acquisition cost growth, you requested that we examine (1) in what areas space system acquisition cost estimates have been unrealistic and (2) what incentives and pressures have contributed to the quality and usefulness of cost estimates for space system acquisitions.
Recommendations for Executive Action
|Department of Defense||1. To increase accountability and transparency of decisions in space programs where an independent estimate produced by the Cost Analysis Improvement Group (CAIG) or the Air Force Cost Analysis Agency (AFCAA) is not chosen, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics or the Secretary of the Air Force, as appropriate, to require officials involved in milestone decisions to document and justify the reasons for their choice and the differences between the program cost estimate and the independent cost estimate.|
|Department of Defense||2. To better ensure investment decisions for space programs are knowledge-based, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics or the Secretary of the Air Force, as appropriate, to instill processes and tools necessary to ensure lessons learned are incorporated into future estimates. This could include conducting postmortem reviews of past space program cost estimates (program office and independent cost estimates) to measure cost-estimating effectiveness and to track and record cost-estimating mistakes; developing a centralized cost-estimating database that provides realistic and credible data to cost estimators; establishing protocols by which cost estimators working with the National Reconnaissance Office can share data with the DOD space cost-estimating community while still maintaining appropriate security over classified data; and ensuring estimates are updated as major events occur within a program that could have a material impact on cost, such as budget reductions, integration problems, hardware/software quality problems, and so forth.|
|Department of Defense||3. To optimize analysis and collaboration within the space cost-estimating community, the Secretary of Defense should direct the Under Secretary of Defense for Acquisition, Technology and Logistics or the Secretary of the Air Force, as appropriate, to clearly articulate the roles and responsibilities of the various Air Force cost-estimating organizations, and ensure that space system cost estimators are organized so that the Air Force can gain the most from their knowledge and expertise. In taking these actions for programs for which no independent estimate is developed by the CAIG, consider assigning AFCAA the responsibility for the development of independent cost estimates for space system acquisitions, since it is outside of the acquisition chain of command and therefore likely to be unbiased and not pressured to produce optimistic estimates.|