Cost Overruns

I found a Washington Post Article about a proposed law to avoid cost overruns on weapons systems. You can also find more here.

It would create a “Director of Independent Cost Assessment” and essentially isolate the Undersecretary of Defense for Acquisition, Technology and Logistics so that branch requesting the project is no longer involved in the costing. They would have more authority to get costs from contractors and things like that.

Here a couple of highlights I pulled from Levin’s web page:

“…requiring DOD to: (1) assess the extent to which the Department has in place the systems engineering capabilities needed to ensure that key acquisition decisions are supported by a rigorous systems analysis and systems engineering process; and (2) establish organizations and develop skilled employees needed to fill any gaps in such capabilities.”

At least there will be demand for what I do.

 

Here’s one that I’m not to sure about:

Section 105. Role of Combatant Commanders. In a February 2009 report, the Government Accountability Office (GAO) recommended that the acquisition process be modified to allow combatant commanders (COCOMs) more influence and ensure that their long-term needs are met. The GAO report states: “a COCOM-focused requirements process could improve joint war-fighting capabilities by ensuring that the combatant commander – the customer – is provided the appropriate level of input regarding the capabilities needed to execute their missions rather than relying on the military services – the suppliers – to drive requirements.” Section 105 would address this problem by requiring the Joint Requirements Oversight Council (JROC) to seek and consider input from the commanders of the combatant commands in identifying joint military requirements.”

And one more:

“As a result, DOD officials often fail to consider the impact of requirements decisions on the acquisition and budget processes, or to make needed trade-offs between cost, schedule and requirements on major defense acquisition programs. Section 201 would address this problem by requiring consultation between the budget, requirements and acquisition stovepipes – including consultation in the joint requirements process – to ensure the consideration of trade-offs between cost, schedule, and performance early in the process of developing major weapon systems”

 

 

Here are my thoughts

  1. I think it could lead to  the elimination of anything high risk/ high reward in a major weapons systems.
  2. Congress is will be more involved in the oversight and in my opinion that’s never a good thing
  3. So much of the cost overruns are related to project funding. If you siad you wanted 200 F-22’s and now only want 50 of course those 50 will cost more per unit the R&D cost didn’t go away.
  4. I don’t think new legislation is needed just enforce what is on the books
  5. Until the DoD can get it’s requirements definition and project scope right the first time cost overruns will happen.

 

The simple solution is for the government to correctly define and scope the project with a fixed minimum order sized locked into place. The contractors submit per unit prices for that min order size and that’s how much they get it.

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