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1 [1] (June 12, 2025)

handle is hein.crs/dodcstov0001 and id is 1 raw text is: Intrrnmn th leUltv eaesne11 June 12, 2025 DOD Cost Overruns and The Nunn-McCurdy Act Since the U.S. Department of Defense's (DOD) establishment, Congress has expressed interest in ensuring that DOD procures major weapons systems efficiently, including that a program maintain the same projected costs throughout its lifecycle. DOD requested a total of $168 billion for defense-wide procurement for fiscal year (FY) 2025. Controlling DOD procurement costs has typically challenged DOD, which periodically has cost overruns, or instances when a program surpasses its initial cost estimate. Congressional efforts to maintain DOD program costs have included defining programs in statute and creating reporting requirements, including Selected Acquisition Reports (SARs), in statute. SARs require DOD to notify Congress about changes to baseline cost estimates of major defense acquisition programs (MDAPs) and potential risk factors and requirements originally outlined in the 1982 Nunn- McCurdy Act. The Nunn-McCurdy Act (10 U.S.C. §§4371- 4377) requires DOD to report to Congress if an MDAP experiences a cost overrun that exceeds certain thresholds. Depending on the size of the program and extent of the cost overrun, DOD is legally required to take certain actions and report its findings to Congress. DOD Acquisition Categories The level of management and congressional oversight of an acquisition program generally corresponds with the cost and technical complexity of the program. All DOD acquisition programs are designated by an acquisition category (ACAT). The category is primarily based on the program's total cost. ACAT I refers to the largest acquisition programs in terms of dollar amounts, and are also known as MDAPs. An MDAP is defined in statute as any program that is (1) not a highly sensitive classified program, and (2) so designated by the Secretary of Defense, or (3) has an eventual total expenditure for procurement of more than $1.8 billion or, for research and development (R&D), of more than $300 million (both in FY1990 constant dollars). According to DOD estimates, these dollar amounts are adjusted to $3.065 billion for procurement and $525 million for R&D in FY2020 constant dollars. ACAT I programs are also further divided into sub-categories depending on their level of decision authority, or which DOD office is designated to determine whether or not the program should advance throughout DOD's acquisition process milestones. ACAT I programs have three major milestones, (Milestones, A, B, and C) requiring milestone decision authority (MDA) approval. For the highest cost or most technically complex ACAT I programs, the Undersecretary of Defense for Acquisition and Sustainment (USD(A&S)) is typically the MDA, the DOD entity responsible for certifying and approving a program's procession through the different formal stages of acquisition. Although there are three other acquisition program categories, only ACAT I/MDAP programs are subject to the statutory reporting and oversight requirements of Nunn- McCurdy, including reporting requirements concerning the program's cost, and procedures DOD must follow should an MDAP's eventual cost exceed by a certain percentage its original estimated cost. Selected Acquisition Reports (SARs) Selected Acquisition Reports (SARs) consist of information detailing an MDAP's cost, schedule, and performance. Per Title 10, SARS must be provided to Congress either annually (within 30 days after the President's budget is transmitted to Congress) or quarterly (within 45 days after the end of the fiscal year quarter). Quarterly SARs are required if DOD finds that the program had a 15% or more cost increase and/or a six-month or more delay of one of the major program milestones in the last quarter. Title 10 also requires that DOD establish a program's baseline description, including a program's baseline estimate, or a description of the program that must be prepared early in the program's acquisition lifecycle. Should the program experience a cost overrun, the baseline description is to be used as a point of reference concerning DOD's original intentions for the program. Baseline descriptions may be revised or adjusted, including in the event of a cost breach, but DOD is to report such an update in the program's next SAR. The Nunn-McCurdy Act The Nunn-McCurdy Act requires that DOD report to Congress if an MDAP experiences a cost overrun that exceeds certain tiers of percentages. Depending on the threshold, DOD must take certain actions and report its findings to Congress. Two major types of cost growth threshold breaches (also called a Nunn-McCurdy breach or a Nunn-McCurdy, after the sponsors of the original legislation, in the DOD acquisition community) exist: 1) Significant breach. A significant breach occurs when a program's cost increases either 15% from its current baseline estimate, or 30% from its original baseline estimate; and 2) Critical breach. A critical breach occurs when a program's cost increases either 25% from its current baseline estimate or 50% from its original baseline estimate. ittps://crsreports.congress.gt