March 30, 2009 / 8:15 PM / 11 years ago

Nearly 7 in 10 major U.S. arms programs over budget

WASHINGTON (Reuters) - Nearly 70 percent of the Pentagon’s 96 major weapons-buying programs were over budget in 2008 for combined cost growth of $296 billion above original estimates, congressional auditors said in an annual report released on Monday.

The total estimated development cost for 10 of the largest acquisition programs, commanding about half the overall arms- purchasing dollars in the portfolio, has shot up 32 percent from initial estimates, from about $134 billion to more than $177 billion, the Government Accountability Office said.

The two largest programs — Lockheed Martin Corp’s F-35 Joint Strike Fighter aircraft and the Boeing Co-led Future Combat Systems Army modernization — “still represent significant cost risk moving forward” and will dominate the portfolio for years, the survey said.

Ashton Carter, the Obama administration’s choice to become the Pentagon’s top arms buyer, told his Senate confirmation hearing on Thursday he would go program by program to crack down on cost overruns if confirmed.

Of those reporting relevant cost data, 69 percent, or 64 programs, chalked up increases in total acquisition costs, the GAO said.

A total of 75 percent, or 69 programs, reported increases in research and development costs and these were 42 percent above their original estimates in 2008, up from 40 percent above the year before.

At the same time, the average delay in delivering weapons’ “initial operating capabilities” rose to 22 months from 21 months, the seventh annual survey of its kind showed.

Cumulative cost overruns for major U.S. Defense Department acquisition programs, or $296 billion, were down slightly from 2007 when adjusted for inflation, the auditors said.

GAO said new programs in the portfolio were performing better than older ones.

Last year, GAO reported total acquisition cost growth for the 2007 portfolio was $295 billion in fiscal 2008 dollars. Now expressed in 2009 dollars, this figure was put at $301 billion in the new report.

Since 2003, the Pentagon’s portfolio of major acquisition programs has grown from 77 to 96, with investment in them swelling from $1.2 trillion to $1.6 trillion in fiscal 2009 dollars, the GAO said.

The change in the makeup of the 2008 portfolio is one of the reasons for the $5 billion decrease in total acquisition cost growth over the last year.

Three programs left the mix, knocking $15.6 billion off total cost overruns, the GAO said. The three were the Evolved Expendable Launch Vehicle, which involves rockets built by Lockheed Martin Corp and Boeing; Northrop Grumman Corp’s E-2C Hawkeye battle-management aircraft; and Raytheon Co’s Land Warrior infantry modernization project.

The cost of the new and remaining programs in the 2008 portfolio has increased by about $10.7 billion since last year, even though quantities have been cut 25 percent or more for 15 of the programs, GAO said.

“The time for change is now,” Gene Dodaro, the acting U.S. Comptroller General said in a cover letter to Congress.

He said it was essential to eliminate underperforming or lower-priority programs by completing or canceling them.

Reporting by Jim Wolf; Editing by Andre Grenon

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