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TITLE II--ACQUISITION POLICY

Section 206

House Conference Report 111-124

(a) Actions Following Critical Cost Growth-

(1) IN GENERAL- Chapter 144 of title 10, United States Code, is amended by inserting after section 2433 the following new section:

`Sec. 2433a. Critical cost growth in major defense acquisition programs

`(a) Reassessment of Program- If the program acquisition unit cost or procurement unit cost of a major defense acquisition program or designated subprogram (as determined by the Secretary under section 2433(d) of this title) increases by a percentage equal to or greater than the critical cost growth threshold for the program or subprogram, the Secretary of Defense, after consultation with the Joint Requirements Oversight Council regarding program requirements, shall--

`(1) determine the root cause or causes of the critical cost growth in accordance with applicable statutory requirements and Department of Defense policies, procedures, and guidance; and

`(2) in consultation with the Director of Cost Assessment and Program Evaluation, carry out an assessment of--

`(A) the projected cost of completing the program if current requirements are not modified;

`(B) the projected cost of completing the program based on reasonable modification of such requirements;

`(C) the rough order of magnitude of the costs of any reasonable alternative system or capability; and

`(D) the need to reduce funding for other programs due to the growth in cost of the program.

`(b) Presumption of Termination- (1) After conducting the reassessment required by subsection (a) with respect to a major defense acquisition program, the Secretary shall terminate the program unless the Secretary submits to Congress, before the end of the 60-day period beginning on the day the Selected Acquisition Report containing the information described in section 2433(g) of this title is required to be submitted under section 2432(f) of this title, a written certification in accordance with paragraph (2).

`(2) A certification described by this paragraph with respect to a major defense acquisition program is a written certification that--

`(A) the continuation of the program is essential to the national security;

`(B) there are no alternatives to the program which will provide acceptable capability to meet the joint military requirement (as defined in section 181(g)((1) of this title) at less cost;

`(C) the new estimates of the program acquisition unit cost or procurement unit cost have been determined by the Director of Cost Assessment and Program Evaluation to be reasonable;

`(D) the program is a higher priority than programs whose funding must be reduced to accommodate the growth in cost of the program; and

`(E) the management structure for the program is adequate to manage and control program acquisition unit cost or procurement unit cost.

`(3) A written certification under paragraph (2) shall be accompanied by a report presenting the root cause analysis and assessment carried out pursuant to subsection (a) and the basis for each determination made in accordance with subparagraphs (A) through (E) of paragraph (2), together with supporting documentation.

`(c) Actions if Program Not Terminated- (1) If the Secretary elects not to terminate a major defense acquisition program pursuant to subsection (b), the Secretary shall--

`(A) restructure the program in a manner that addresses the root cause or causes of the critical cost growth, as identified pursuant to subsection (a), and ensures that the program has an appropriate management structure as set forth in the certification submitted pursuant to subsection (b)(2)(E);

`(B) rescind the most recent Milestone approval, or Key Decision Point approval in the case of a space program, for the program and withdraw any associated certification under section 2366a or 2366b of this title;

`(C) require a new Milestone approval, or Key Decision Point approval in the case of a space program, for the program before taking any contract action to enter a new contract, exercise an option under an existing contract, or otherwise extend the scope of an existing contract under the program, except to the extent determined necessary by the Milestone Decision Authority, on a non-delegable basis, to ensure that the program can be restructured as intended by the Secretary without unnecessarily wasting resources;

`(D) include in the report specified in paragraph (2) a description of all funding changes made as a result of the growth in cost of the program, including reductions made in funding for other programs to accommodate such cost growth; and

`(E) conduct regular reviews of the program in accordance with the requirements of section 205 of the Weapon Systems Acquisition Reform Act of 2009.

`(2) For purposes of paragraph (1)(D), the report specified in this paragraph is the first Selected Acquisition Report for the program submitted pursuant to section 2432 of this title after the President submits a budget pursuant to section 1105 of title 31, in the calendar year following the year in which the program was restructured.

`(d) Actions if Program Terminated- If a major defense acquisition program is terminated pursuant to subsection (b), the Secretary shall submit to Congress a written report setting forth--

`(1) an explanation of the reasons for terminating the program;

`(2) the alternatives considered to address any problems in the program; and

`(3) the course the Department plans to pursue to meet any continuing joint military requirements otherwise intended to be met by the program.'.

(2) CLERICAL AMENDMENT- The table of sections at the beginning of chapter 144 of such title is amended by inserting after the item relating to section 2433 the following new item:

`2433a. Critical cost growth in major defense acquisition programs.'.

(3) CONFORMING AMENDMENT- Paragraph (2) of section 2433(e) of such title 10 is amended to read as follows:

`(2) If the program acquisition unit cost or procurement unit cost of a major defense acquisition program or designated major subprogram (as determined by the Secretary under subsection (d)) increases by a percentage equal to or greater than the critical cost growth threshold for the program or subprogram, the Secretary of Defense shall take actions consistent with the requirements of section 2433a of this title.'.

(b) Treatment as MDAP- Section 2430 of such title is amended--

(1) in subsection (a)(2), by inserting `, including all planned increments or spirals,' after `an eventual total expenditure for procurement'; and

(2) by adding at the end the following new subsection:

`(c) For purposes of subsection (a)(2), the Secretary shall consider, as applicable, the following:

`(1) The estimated level of resources required to fulfill the relevant joint military requirement, as determined by the Joint Requirements Oversight Council pursuant to section 181 of this title.

`(2) The cost estimate referred to in section 2366a(a)(4) of this title.

`(3) The cost estimate referred to in section 2366b(a)(1)(C) of this title.

`(4) The cost estimate within a baseline description as required by section 2435 of this title.'.

Congressional Record, Senate, February 23, 2009, Summary of S. 454, the Weapon Systems Acquisition Reform Act of 2009, P. S2367

Since the beginning of 2006, nearly half of DOD's 95 Major Defense Acquisition Programs (MDAPs) have experienced critical cost growth, as defined in the Nunn-McCurdy provision, as amended. Overall, these 95 MDAPs have exceeded their research and development budgets by an average of 40 percent, seen their acquisition costs grow by an average of 26 percent, and experienced an average schedule delay of almost two years. Such cost growth has become so pervasive that it may come to be viewed as an expected and acceptable occurrence in the life of a weapons program. Section 204 would address this problem and enhance the use of Nunn-McCurdy as a management tool by requiring MDAPs that experience critical cost growth: (1) be terminated unless the Secretary certifies (with reasons and supporting documentation) that continuing the program is essential to the national security and the program can be modified to proceed in a cost-effective manner; and (2) receive a new Milestone Approval (and associated certification) prior to the award of any new contract or contract modification extending the scope of the program. In accordance with section 104, a certification as to the reasonableness of costs would have to be supported by an independent cost estimate and a stated confidence level for that estimate.

House Committee on Armed Services Report 111-101 with H. R. 2101

SECTION 204--CRITICAL COST GROWTH IN MAJOR DEFENSE ACQUISITION PROGRAMS

This section would amend section 2433 of title 10, United States Code, to modify the requirements for review of major defense acquisition programs (MDAP) that experience critical Nunn-McCurdy breaches. This section would require the Secretary of Defense, after consultation with the Joint Requirements Oversight Council regarding program requirements, to determine the root cause or causes of the cost growth experienced by such program and determine whether to terminate or restructure the program. This section would require the Secretary to submit such determination to Congress, and if the program is restructured, to certify that: the program as restructured is essential to national security; there are no alternatives to such program that will provide acceptable military capability at less cost; new cost estimates are reasonable; the program is a higher priority than programs whose funding must be reduced to accommodate the program's cost growth; and that the management structure for the program is adequate.

This section would require that, after a program is restructured under Nunn-McCurdy, the next selected acquisition report for the program submitted after a new budget is transmitted to Congress contain a description of all funding changes included in the budget as a result of the cost growth on the program including reductions made in the budgets of other programs. This section would further require the milestone decision authority for the program to return the program to the last milestone decision point for review of the program as restructured. This section would also amend section 2430 of title 10, United States Code, to require unit cost reports under such section to include all planned increments or spirals of the program in the calculation of total expenditure for procurement of such program.