Cost Estimation Lessons Learned for Future Submarine Acquisition Programs

The passage and signing of the Weapons Systems Reform Act of 2009 indicated the concern of the President and Congress that Major Defense Acquisition Programs (MDAPs) continue to experience cost problems. One of the most significant cost issues is the Navy's $13 billion annual ship building budget. Indeed, the Government Accounting Office (GAO) reported it is not uncommon for estimates to be off by 20 to 50 percent of the acquisition cost and that the Navy exceeded the budget on a total of 41 ships for $4 billion. The Virginia class submarine program accounted for approximately $1 billion of this cost overrun on its first two hulls . Unplanned acquisition and operations cost growth impacts the Navy's ability to reconstitute and maintain the fleet as planned. A 2005 GAO report stated that 14 percent of the $52 billion allocated for shipbuilding went to pay for cost growth over the previous five year period. In addition, with the increasing federal deficit, continued war in Iraq and Afghanistan, and need for expansion of other government programs, the days of accounting for cost overruns with additional funding may be disappearing.