By Dana Hedgpeth

The Washington Post

Tuesday 01 April 2008

Cost overruns hit $295 billion.

Government auditors issued a scathing review yesterday of dozens of the Pentagon's biggest weapons systems, saying ships, aircraft and satellites are billions of dollars over budget and years behind schedule.

The Government Accountability Office found that 95 major systems have exceeded their original budgets by a total of $295 billion, bringing their total cost to $1.6 trillion, and are delivered almost two years late on average. In addition, none of the systems that the GAO looked at had met all of the standards for best management practices during their development stages.

Auditors said the Defense Department showed few signs of improvement since the GAO began issuing its annual assessments of selected weapons systems six years ago. "It's not getting any better by any means," said Michael Sullivan, director of the GAO's acquisition and sourcing team. "It's taking longer and costing more."

Chris Isleib, a Pentagon spokesman, said in a written statement, "We'd like to look at what GAO has said, and then at the appropriate time make an informed comment."

The Pentagon has doubled the amount it has committed to new systems, from $790 billion in 2000 to $1.6 trillion last year, according to the 205-page GAO report. Total acquisition costs in 2007 for major defense programs increased 26 percent from first estimates. In 2000, 75 programs had cost increases totaling 6 percent. Development costs in 2007 for the systems rose 40 percent from initial projections, compared with 27 percent in 2000. Current programs are delivered 21 months late on average, five months later than in 2000.

"In most cases, programs also failed to deliver capabilities when promised - often forcing war fighters to spend additional funds on maintaining" existing weapons systems, the report says.

The GAO chose 72 of the 95 systems to examine, based on high-dollar value and congressional interest. The various systems were at different stages of the acquisition process over the last year.

The report details such projects as the Navy's $5.2 billion Littoral Combat Ship, which has had such extensive troubles that the service expects the cost of its first two ships to exceed their combined budget of $472 million by more than 100 percent. The Navy canceled construction of the planned third and fourth ships by Lockheed Martin and General Dynamics, the prime contractors on the project.

The government is facing higher development costs on eight major programs, including Lockheed Martin's Joint Strike Fighter and Boeing's Future Combat Systems, a technology to connect unmanned aircraft and vehicles. The prices for those two programs have risen 36 percent and 40 percent, respectively, from the initial contracts, the GAO said, partly because the government wants "new and unproven technologies" and did not undertake early analysis to make sure its requirements could be met.

In a statement, Lockheed said that the Joint Strike Fighter "is performing solidly, making outstanding technical progress in the context of the most complex aircraft ever built" and that "the bedrock and the cornerstone" of the F-35 program have been "affordability and cost containment."

In another case, the initial contract target price of Boeing's program to modernize avionics in the C-130 cargo plane is expected to skyrocket 323 percent, to $2 billion. Another Boeing program, for a radio system, is up 310 percent, to $966 million.

"Boeing's commitment is to deliver on our promises to our military customers and meeting their requirements in the most cost-effective way possible," the company said in a statement.

The GAO's Sullivan said the reasons for the cost overruns and delays are threefold: There are too many programs chasing too few dollars; technologies are often not mature enough to go into production; and it takes too long to design, develop and produce a system.

"They're asking for something that they're not sure can be built, given existing technologies, and that's risky," Sullivan said in an interview.

Costs of some systems were driven up as much as 72 percent when changes were made to the program requirements after development of the system had begun, the report says. Half of the programs studied had 25 percent increases in the expected lines of code in their software.

Steven L. Schooner, co-director of the government procurement law program at George Washington University, said the GAO's report reveals the recurring problems the Pentagon faces with its costly procurements.

"The nature of major weapon systems development is that you have to expect that the initial estimates, and typically the initial contracts, are overly optimistic and unrealistic," he said. "Unfortunately the purchaser - the government - typically lacks the discipline to freeze the configuration such that the contractor has any reasonable chance of developing what it promised on time and for the price promised."

Defense Department officials have tried to improve the procurement process, the GAO said, by doing more planning and review in the early stages of a contract. But "these significant policy changes have not yet translated into best practices on individual programs," Gene L. Dodaro, acting comptroller general of the GAO, wrote in the report.

"Flagship acquisitions, as well as many other top priorities in each of the services, continue to cost significantly more, take longer to produce, and deliver less than was promised," Dodaro said. "This is likely to continue until the overall environment for weapon system acquisitions changes."

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