Trends in Nunn-McCurdy Cost Breaches for Major Defense Acquisition Programs

For nearly 30 years, the statutory provision, known as Nunn-McCurdy (NM), has been an oversight tool for Congress to hold the DoD accountable for cost growth on major defense programs. A NM breach occurs when a program's unit cost exceeds certain thresholds. When that happens, DoD must notify Congress of the breach. There are a number of statutory provisions that help implement cost growth reporting under NM. Referring to these statutory provisions as the NM process, this report examines trends in NM breaches and factors that may be responsible for these trends. It also discusses changes DoD is making or proposing to make to the NM process. Charts and tables. This is a print on demand report.

Congressional concern with cost overruns, or breaches, in several major defense acquisition programs led the authors, in a partnership with the Performance Assessments and Root Cause Analysis Office in the Office of the Secretary of Defense, Acquisition, Technology, and Logistics, to investigate root causes by examining program reviews, analyzing data, participating in contractor briefings, and holding meetings with diverse stakeholders.

In recent decades, there have been numerous attempts to rein in the cost growth of U.S. Department of Defense (DoD) acquisition programs. Cost growth is the ratio of the cost estimate reported in a program's final Selected Acquisition Report (SAR) and the cost-estimate baseline reported in a prior SAR issued at a particular milestone. Drawing on prior RAND research, new analyses of completed and ongoing weapon system programs, and data drawn from SARs, this study addresses the following questions: What is the cost growth of DoD weapon systems? What has been the trend of cost growth over the past three decades? To address the magnitude of cost growth, it examines cost growth in completed programs; to evaluate the cost growth trend over time, it provides additional analysis of a selection of ongoing programs. This sample of ongoing programs permits a look at growth trends in the more recent past. Changes in the mix of system types over time and dollar-weighted analysis were also considered because earlier studies have suggested that cost growth varies by program type and the cost of the program. The findings suggest that development cost growth over the past three decades has remained high and without any significant improvement.