	Background

		O&S Costs Constitute a Significant Portion of a System’s Life-Cycle Costs

A system’s life-cycle costs include the costs for research and development,  procurement, sustainment, and disposal. Better Information and Guidance Could Help DOD to More Effectively Manage and Reduce O&S Costs of Major Weapons Systems

		Life-Cycle O&S Cost Estimates for the Production Milestone Were Not Available for Five of the Seven Systems Reviewed

The services did not have the life-cycle O&S cost estimates that were  prepared at the production milestone for most of the aviation weapon  systems in our sample. In addition, at a time when the nation faces fiscal  challenges and defense budgets may become tighter, the lack of this key  information hinders sound weapon-system program management and  decision making in an area of high costs to the federal government. Without complete data on actual O&S costs, DOD officials do  not have important information necessary for analyzing the rate of O&S  cost growth, identifying cost drivers, and developing plans for managing  and controlling these costs. Navy’s VAMOSC System

For the F/A-18E/F, the Navy’s VAMOSC system collected data on many of  DOD’s recommended cost elements but did not collect actual O&S costs  for interim contractor support costs, civilian personnel, and indirect  infrastructure costs by weapon system. The Services Generally Do Not Use Updated Life-Cycle Estimates to Assess O&S Cost Growth for Fielded Weapon Systems

		Life-Cycle O&S Cost Estimates Were Not Periodically Updated after Fielding for Six of the Seven Systems Reviewed

For six of the seven systems selected for our review, the services did not  periodically update life-cycle O&S cost estimates after the systems were  fielded, even though most of the systems have been in DOD’s inventory for  over a decade. The guidance also notes that retrospective studies can be  valuable in determining if any corrections need to be made to existing  programs and to improve future estimates of other federal programs. When the F-22A program office  updated the 2005 cost estimate in 2009, it found a 47-percent increase in  life-cycle O&S costs. However, program changes  complicate direct comparisons between estimated and actual costs, as  they do for the F-22A. (These costs were instead included in the estimate  as costs for repair parts.) Actual O&S Costs Increased for Five Systems, but Extent of Planned Cost Growth Is Uncertain

Although we did not have production milestone estimates of life-cycle  O&S costs for the Air Force’s F-15E and B-1B or for the Army’s AH-64D,  CH-47D, and UH-60L, we reviewed changes in actual O&S costs for each  system and found that costs increased over time for a variety of reasons. 3). Updated Estimates of Life- Cycle O&S Costs and Documentation of Program Changes Are Generally Not Required after Weapon System Production Decisions

Even though periodic updates to life-cycle O&S cost estimates could  quantify any cost growth in major weapon systems and help identify cost  drivers, DOD acquisition and cost-estimating guidance do not require that  O&S cost estimates be updated after a program has completed production. Service guidance that we reviewed does not consistently and clearly  require the updating of O&S cost estimates after a program has completed  production. DOD Has Departmentwide and Service-Specific Initiatives to Address Weapon System O&S Costs

		Several Departmentwide Initiatives Address Weapon System O&S Costs

DOD has several departmentwide initiatives to address weapon system  O&S costs. DOD concurred with our four recommendations to revise guidance to  require the services to retain life-cycle O&S cost estimates and support  documentation used to develop the cost estimates; develop guidance for  documenting and retaining historical information on weapon system  program changes to aid in effective analysis of O&S costs; require that the  Director of the Cost Assessment and Program Evaluation retain any  independent life-cycle O&S cost estimates prepared by that office, along  with support documentation used to develop these cost estimates for  major weapon systems; and revise DOD guidance to require the services to  periodically update life-cycle O&S cost estimates for major weapon  systems throughout their life cycle and assess program changes and cost  growth. However, these systems are still being developed. To determine the extent to which (1) life-cycle O&S cost estimates  developed during acquisition and data on actual O&S costs are available  for program management and decision making and (2) DOD uses life-cycle  O&S cost estimates for major weapon systems after they are fielded to  quantify cost growth and identify its causes, we identified available cost  estimates, compared the estimates with actual cost data, and obtained  additional information on how O&S costs are tracked, assessed, managed,  and controlled.
Why GAO Did This Study

The Department of Defense (DOD) spends billions of dollars each year to sustain its weapon systems. These operating and support (O&S) costs can account for a significant portion of a system's total life-cycle costs and include costs for repair parts, maintenance, and personnel. The Weapon Systems Acquisition Reform Act of 2009 directs GAO to review the growth in O&S costs of major systems. GAO's report addresses (1) the extent to which life-cycle O&S cost estimates developed during acquisition and actual O&S costs are available for program management and decision making; (2) the extent to which DOD uses life-cycle O&S cost estimates after systems are fielded to quantify cost growth and identify its causes; and (3) the efforts taken by DOD to reduce O&S costs for major systems. GAO selected seven aviation systems that reflected varied characteristics and have been fielded at least several years. These systems were the F/A-18E/F, F-22A, B-1B, F-15E, AH-64D, CH-47D, and UH-60L.

What GAO Found

DOD lacks key information needed to effectively manage and reduce O&S costs for most of the weapon systems GAO reviewed--including life-cycle O&S cost estimates and complete historical data on actual O&S costs. The services did not have life-cycle O&S cost estimates developed at the production milestone for five of the seven aviation systems GAO reviewed, and current DOD acquisition and cost-estimating guidance does not specifically address retaining these estimates. Also, the services' information systems designated for collecting data on actual O&S costs were incomplete, with the Army's system having the greatest limitations on available cost data. without historic cost estimates and complete data on actual O&S costs, DOD officials do not have important information necessary for analyzing the rate of O&S cost growth for major systems, identifying cost drivers, and developing plans for managing and controlling these costs. At a time when the nation faces fiscal challenges, and defense budgets may become tighter, the lack of this key information hinders sound weapon system program management and decision making in an area of high costs to the federal government. DOD generally does not use updated life-cycle O&S cost estimates to quantify cost growth and identify cost drivers for the systems GAO reviewed. The services did not periodically update life-cycle O&S cost estimates after production was completed for six of the seven systems. The F-22A program office had developed an updated life-cycle O&S cost estimate in 2009 and found a 47-percent ($19 billion) increase in life-cycle O&S costs from what had been previously estimated in 2005. GAO's comparisons of estimated to actual O&S costs for two of the seven systems found some areas of cost growth. However, notable changes such as decreases in the numbers of aircraft and flying hours occurred in both programs after the production milestone estimates were developed, complicating direct comparisons of estimated to actual costs. According to federal guidance, agencies should have a plan to periodically evaluate program results as these may be used to determine whether corrections need to be made and to improve future cost estimates. However, DOD acquisition and cost estimation guidance does not require that O&S cost estimates be updated throughout a system's life cycle or that information on program changes affecting the system's life-cycle O&S costs be retained. The services' acquisition and cost-estimation guidance that GAO reviewed does not consistently and clearly require the updating of O&S cost estimates after a program has ended production. DOD has several departmentwide and service-specific initiatives to address O&S costs of major systems. One DOD program funds projects aimed at improving reliability and reducing O&S costs for existing systems. Other initiatives are aimed at focusing attention on O&S cost requirements and reliability during the acquisition process. In a recent assessment, DOD identified weaknesses in O&S cost management, found deficiencies in sustainment governance, and recommended a number of corrective actions. Many of DOD's initiatives are recent or are not yet implemented.

What GAO Recommends

GAO recommends that DOD take steps to retain life-cycle O&S cost estimates for major systems, collect additional O&S cost elements in its visibility systems, update life-cycle O&S cost estimates periodically after systems are fielded, and retain documentation of program changes affecting O&S costs for use in cost analysis. DOD concurred with GAO's recommendations.