GAO Blasts Pentagon Budget

Tuesday, April 1, 2008 8:35 AM

WASHINGTON -- The Pentagon has doubled its investment in new weapons systems over the past six years to $1.6 trillion in 2007, but the programs remain plagued by cost overruns and schedule delays, said a Government Accountability Office report released on Monday.

"Flagship acquisitions... continue to cost significantly more, take longer to produce, and deliver less than was promised. This is likely to continue until the overall environment for weapons systems acquisitions changes," said the GAO's sixth annual review of big weapons programs.

Chronic problems contributing to delays averaging about 21 months were caused by starting programs too early before technologies were mature, failure to conduct preliminary design reviews and build prototypes, and a lack of mature production processes, the report said.

Other problems included requirement changes after the start of a program, high turnover in program managers and difficulties with software development.

Pentagon spending on weapons is one of the largest discretionary items in the federal budget, and while overall discretionary spending is declining, spending on weapons is now at its highest level in two decades, the report said.

The Defense Department expects to spend about $900 million over the next five years on development and procurement, with more than $335 billion going specifically for new weapons.

"Every dollar spent inefficiently in developing and procuring weapons systems is less money available for many other internal and external budget priorities -- including the global war on terror and growing entitlement programs," such as Medicare, GAO wrote in its report.

Moreover, the cost overruns and schedule delays often meant that U.S. troops got less weapons than initially expected or they received them later.

Current Pentagon leaders have launched initiatives to address these issues, which provides some cause for optimism. But the upcoming change in administration could make it difficult to keep up the momentum, GAO said.

The report looked at 72 specific weapons programs, and drew on audits conducted from June 2007 through March 2008.

Total acquisition costs of those programs rose 26 percent from first estimates, compared to cost growth of just six percent over initial estimates that was reported in 2000.

Development costs increased by 40 percent, compared to 27 percent for fiscal year 2000 programs.

Officials changed the requirements for 63 percent of programs after they began, resulting in cost increases among those programs of 72 percent. Programs that did not change requirements saw costs increase just 11 percent.

The GAO said a key problem was the Pentagon's use of cost reimbursement contracts that left the government responsible for big cost increases.

For instance, it said defense officials expected to pay nearly $7 billion more than expected to Lockheed Martin Corp (LMT.N: Quote, Profile, Research) for its work on the F-35 Joint Strike Fighter contract over 12 years due to these cost-plus contracts.

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