A

FY 2013 Annual Report on Cost Assessment Activities

March 2014
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FY 2013 Annual Report on Cost Assessment 

Activities

Director, Cost Assessment and 

Program Evaluation

March 2014

The estimated cost of this report for the Department of 

Defense is approximately $66,000 in Fiscal Years 2013-2014. 

This includes $60,000 in expenses and $6,000 in DoD labor.
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Table of Contents

Foreword..............................................................................................................................1

Chapter I – Introduction.......................................................................................................3

Chapter II – Overview of Cost Analysis in DoD.................................................................9

Overview of Cost Analysis Organizations in DoD........................................................9

Procedures for Cost Assessments at Milestone Reviews and Other Events................10

Cost Assessment Procedures for Major Defense Acquisition Programs...............10

Cost Assessment Procedures for Major Automated Information Systems............11

Component Cost Position and Full Funding Commitment....................................11

Multi-Year Procurement ........................................................................................12

Confidence Levels in Cost Estimates ....................................................................12

Cost Estimates for Contract Negotiations..............................................................13

Cost Analysis Requirements Description ..............................................................13

DoD Cost Data Collection Systems.............................................................................13

Summary......................................................................................................................14

Chapter III – DoD Cost Assessment Activities in FY 2013 ..............................................15

MDAP Milestone or Other Review Cost Assessment Activities.................................15

Remarks about Specific Programs.........................................................................19

CAPE Independent Cost Estimates for Multi-Year Procurement................................19

MAIS Critical Change Cost Assessment Activities.....................................................22

Assessment of Compliance, Quality, and Differences in Methodology......................24

Areas for Improvement................................................................................................25

Other Cost Assessment Activities in FY 2013 ............................................................25

Missile Defense Agency Support...........................................................................25

National Nuclear Security Administration Support...............................................26

Realized Profits and Fees.......................................................................................26

Chapter IV – The Look Forward .......................................................................................27

Cost Leadership Forum................................................................................................27

Organizations and Human Resources..........................................................................27

Policies and Procedures...............................................................................................28

Cost Data Systems .......................................................................................................30

Cost Assessment Data Enterprise ................................................................................32

Tracking to Approved Estimate—Program/Budget Review and Acquisition.............33

Cost Indices..................................................................................................................33

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Cost Analysis Education and Training ........................................................................34

DoD Cost Analysis Symposium ..................................................................................35

Summary......................................................................................................................35

Appendix A. Cost Analysis Organizations in DoD ........................................................ A-1

Appendix B. Major Defense Acquisition Program Unit Cost Reporting ........................B-1

Appendix C. Major Automated Information System Reporting......................................C-1

Appendix D. DoD Cost Data Collection Systems.......................................................... D-1

Abbreviations...................................................................................................................E-1

FIGURES

Figure 1. CSDR Data Collection over Time......................................................................31

TABLES

Table 1. Major Defense Acquisition Program Milestone or Other Review Cost 

Assessment Activities in FY 2013 ......................................................................16

Table 2. Cost Analyses in FY 2013 for Multi-Year Procurement Contract Awards.........21

Table 3. Major Automated Information System Critical Change Cost Assessment 

Activities in FY 2013 ..........................................................................................23

Table B-1. Unit Cost Breach Thresholds.........................................................................B-1

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FOREWORD

The Weapon Systems Acquisition Reform Act (WSARA) of 2009, Public Law 111-23, was

intended to reform defense acquisition processes and to bring cost growth under control. 

Section 101 of WSARA established the position of Director of Cost Assessment and 

Program Evaluation (CAPE) in the Office of the Secretary of Defense (OSD). The 

Director is responsible for ensuring that program cost and schedule estimates are properly 

prepared and considered in the Department’s deliberations on major acquisition programs 

throughout the entire acquisition process.

WSARA requires the Director, CAPE to report to the Congress annually on the cost 

estimation and cost analysis activities that the Department conducted during the previous 

year, as well as the progress the Department has made in improving the accuracy of its 

cost estimates and analyses. This fifth edition of the annual report describes how the 

CAPE organization continues to mature in response to the objectives of the landmark 

legislation.

In light of the current challenging fiscal environment, the need for thorough analyses and 

rigorous cost assessments has never been greater. Independent, rigorous, unbiased cost 

and schedule estimates, paired with thorough risk assessments, are essential for effective 

acquisition decision making and oversight. Work continues to make the cost assessment 

process more effective, efficient and timely. Our commitment to continually improving 

our processes requires right-sized manpower, relevant training for the cost assessment 

community, and investments in improved analytic methods, tools, and data. Our progress 

in all of these areas is described in this report.

Scott A. Comes

Deputy Director, Program Evaluation

Performing the Duties of the Director

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CHAPTER I – INTRODUCTION

The office of Cost Assessment and Program Evaluation (CAPE) is responsible for 

providing unbiased, independent cost estimates for all major acquisition programs; 

ensuring that program cost and schedule estimates are properly prepared and considered 

in the Department’s deliberations on major acquisition programs; and providing guidance 

and oversight for Analyses of Alternatives (AoAs) to ensure that the Department 

considers the full range of program and non-materiel solutions. Additionally, the 

Director, CAPE is responsible for leading the development of improved analytical skills 

and competencies within the cost assessment and program evaluation workforce of the 

Department. Finally, the Director serves as a key advisor to the Secretary and Deputy 

Secretary of Defense for the programmatic development of the Department’s Future 

Years Defense Program (FYDP). 

This report is concerned with cost estimation and cost analysis for major acquisition 

programs (i.e., Major Defense Acquisition Programs (MDAPs) and Major Automated 

Information System (MAIS) programs).

Section 2334(f) of title 10, United States Code, requires that CAPE submit an annual 

report1 to the Congress on an assessment of:

(A) the extent to which each of the military departments and Defense 

Agencies have complied with policies, procedures, and guidance issued by 

the Director with regard to the preparation of cost estimates for major 

defense acquisition programs and major automated information systems;

(B) the overall quality of cost estimates prepared by each of the military 

departments and Defense Agencies for major defense acquisition 

programs and major automated information system programs; and

(C) any consistent differences in methodology or approach among the cost 

estimates prepared by the military departments, the Defense Agencies, and 

the Director.

The organization of this report is as follows:

• Chapter II provides an overview of cost analysis in the Department of Defense 

(DoD). It describes the range of cost analysis organizations throughout the 

Department and explains the process for preparing cost estimates that support the 

1 The scope of this report was expanded by section 812 of the National Defense Authorization Act for 

Fiscal Year 2014, Public Law 113-66. The above cited provision reflects the report requirements in 

effect prior to section 812. Beginning next year, CAPE will be required to annually review cost and 

associated information in program Selected Acquisition Reports (SARs), and to include in this annual 

report (1) a summary of the cost and associated information reviewed, (2) an identification of any trends 

in that information, (3) an aggregation of the cumulative risk of the portfolio of systems reviewed, and 

(4) recommendations for improving cost estimates on the basis of the review. 

3

 
defense acquisition process. It also identifies the main DoD systems that collect 

actual information on the contract and government costs of programs. 

• Chapter III reviews the Department’s Fiscal Year (FY) 2013 cost estimation and 

cost analysis activities associated with MDAPs and MAIS programs. These 

activities include independent cost estimates (ICEs), as well as CAPE reviews of 

military department and Defense Agency cost estimates, which inform the DoD 

decision authorities at milestone reviews and at other acquisition decision points. 

This chapter also summarizes the degree to which DoD cost estimation and 

assessment activities in FY 2013 complied with established procedures, and 

discusses overall quality and any consistent differences in methodology among 

the cost estimates. Some of the notable highlights in this chapter are:

o F-22 Operating and Support (O&S) Costs: As part of the Defense 

Acquisition Board (DAB) review of Increment 3.2B of the F-22 

modernization program, CAPE and Air Force analysts spent considerable 

efforts to fully capture actual F-22 O&S costs per flying hour. The F-22 

costs per flying hour are currently well above CAPE forecasts of costs per 

flying hour for the comparable variant of the fifth-generation F-35 aircraft

(see page 19).

o Multi-Year Procurement: In 2013, CAPE completed two more analyses 

of cost savings from the use of multi-year contract vehicles for aircraft 

programs. These analyses were made available to the congressional staff,

and supported Department certifications that the programs met applicable 

statutory requirements prior to receiving authorization and appropriations

from the Congress. Recent history of negotiated multi-year procurement 

contracts for aircraft programs have resulted in forecast savings of 10 to 18 

percent (i.e., $5.5 billion) since FY 2010. CAPE plans to work with the 

acquisition community and Congress on revising the applicable statutes to 

improve institutionalization and streamline the current process (see 

page 19). 

o Realized Profits and Fees: Electronic data warehouses of contractor cost 

reports are now being used to provide insight and to support multiple 

studies throughout the DoD cost and acquisition communities concerning 

contract profits and fees. Acquisition professionals are reviewing the 

information in order to assess the extent that realized profits and fees for 

completed acquisitions are compatible with current guidelines in defense 

policy and regulations (see page 26). 

o Improvements in Methods and Processes. CAPE is in the process of 

improving methods, tools and policies to better quantify the effects of 

expected Foreign Military Sales (FMS) on the business bases of 

organizations in the defense industrial base. The multi-year contract 

savings analyses developed in recent years have demonstrated the 

4
importance of accurately accounting for the benefits of FMS in DoD cost 

estimates. In addition, more work needs to be done to improve the 

management and preparation of cost estimates for MAIS programs (see 

page 23).

• Chapter IV describes the status of several ongoing initiatives that will ensure that 

the cost assessment and cost estimating functions for the Department will change 

as required to meet the expanded roles and responsibilities established by 

WSARA and the needs of the Department. These initiatives address a wide range 

of issues and concerns, including organizations and human resources, cost 

estimating policies and procedures, cost tools and data systems, and education 

and training opportunities for the DoD cost community. Some of the notable 

highlights in this chapter are:

o Policies and Procedures: CAPE completed a final draft of a new issuance 

that will replace DoD Manual 5000.04-M, Cost Analysis Guidance and 

Procedures, and placed the issuance into the formal coordination process. 

This issuance is the primary vehicle for implanting the cost assessment 

provisions of WSARA throughout DoD components. In addition, CAPE 

completed a final draft of the O&S Cost-Estimating Guide and distributed 

the document to the military department cost communities for review and 

comment (see pages 26–27).

o Full Cost of Manpower: CAPE completed and issued DoD Instruction 

7041.04, Estimating and Comparing the Full Costs of Civilian and Active 

Duty Military Manpower and Contract Support. The instruction establishes 

policy and provides procedures to estimate the full costs of active-duty, 

DoD civilian, and contract support manpower in support of workforce mix 

decisions. CAPE also developed and deployed an application tool to ease 

the calculation and comparison of the full cost of manpower, and the 

application has already been used to compare the costs of military and 

civilian intelligence personnel. We also assess that the tool will be useful in 

estimating the costs for the development and expansion of the cyber 

workforce (see page 27).

o Cost Assessment Data Enterprise (CADE): CAPE, working with the 

military departments, has initiated the development of the CADE system

that consists of a suite of automated net-based tools. This effort will greatly 

improve the productivity of our limited analyst resources by providing 

greater ease of access to data regarding actual costs incurred in programs.

We anticipate that this system, together with new data analysis tools, will 

eventually enable the Department to move from cost analyses based solely 

on structured data, to include consideration of less structured or 

unstructured data in future cost analyses (see page 30).

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o Working More Closely with Military Department Cost Agencies:

Because of limitations and reductions in human resources devoted to the 

performance of the cost assessment mission throughout DoD, CAPE has 

begun to work more closely with each of the cost agencies in the military 

departments to develop cost estimates to support decision making 

throughout DoD. For example, CAPE works closely with and relies heavily 

upon the military department agencies in the management and preparation 

of cost estimates for MAIS programs (see page 23). In the process of 

further developing the relationship with the military departments, we have 

taken the first steps in moving from simple sharing of information and 

analyses to joint accomplishment of the analysis mission to support certain 

decision-making processes throughout the Department (see page 25).

o Cost Indices: WSARA requires that CAPE ensure that cost indices used by 

DoD have a sound basis and meet the Department’s needs for realistic cost 

estimation. Work in this area continued in 2013, and CAPE has extended 

an earlier independent study on this subject. The follow-on study is now 

evaluating the best choice of product-specific indices by system commodity 

type, such as fighter aircraft (see page 31).

o Use of Section 852 Funds: CAPE is working with the Director of 

Procurement and Acquisition Policy to ensure that the entire cost analysis 

community in the Department retains access to use of Section 852 funds for 

purposes of training, education, and development of the human workforce 

(see page 26).

o DoD Cost Analysis Symposium (DoDCAS): Unfortunately, the 

Department was forced to cancel the DODCAS that was planned to be held 

in February 2013. This is the first time in 47 years that the Department was 

unable to conduct an annual cost analysis symposium due to fiscal 

constraints and new, restrictive rules on the conduct of professional 

meetings of all types. As a result of the cancellation, many of the analysts 

in the cost analysis community were not able to meet and discuss new 

techniques, methods, and data available to improve government cost 

estimates. The changes also resulted in the need for attendance at more 

expensive and less productive meetings for some in the DoD cost analysis 

community. We hope to reestablish a very limited version of the annual 

DoDCAS late in FY 2014, and reestablish the full-scope of the symposium 

in future years (see page 33).

The CAPE long-term vision is to ensure that the DoD cost estimating community is 

provided the necessary guidance, authorities, and resources to ensure that program cost 

and schedule estimates are properly prepared and considered in the Department’s 

deliberations on MDAPs and MAIS programs. The completion of this objective will take 

6
years, and the progress and challenges in achieving this vision will continue to be 

described in future editions of this report.

7
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CHAPTER II – OVERVIEW OF COST ANALYSIS IN DoD

This chapter provides an overview of the current organizations, policies, procedures, and 

supporting data systems for cost estimation in place throughout DoD. Chapter IV of this 

report describes the efforts to continue to strengthen these institutions to meet the 

requirements of WSARA and the evolving needs of the Department.

This report assumes a modest familiarity with the defense acquisition process on the part 

of the reader. Readers in need of an introduction to the defense acquisition process are 

encouraged to refer to the Defense Acquisition Guidebook (https://dag.dau.mil).

Overview of Cost Analysis Organizations in DoD

There are cost organizations throughout DoD—in the Office of the Secretary of Defense 

(OSD), at the headquarters of the DoD Components (military departments and Defense 

Agencies), and in the Components’ field organizations. DoD has a wide range of cost 

organizations, with each group having a unique but complementary role in support of the 

defense acquisition process and the broader and diverse operations of the Department. 

At the OSD level, the Director, CAPE is responsible for providing ICEs, for both 

MDAPs and MAIS programs, when the Milestone Decision Authority (MDA) for a 

program is the Under Secretary of Defense for Acquisition, Technology and Logistics 

(USD(AT&L)), under the specific circumstances explained later in this chapter. The 

Director, CAPE also provides policy for and oversight of preparation and review of DoD 

Component cost estimates for MDAPs and MAIS programs under other circumstances. 

Each military department headquarters has its own cost agency. These cost estimating 

agencies provide ICEs when acquisition oversight is delegated to the Component and the 

MDA is the Component Head or Component Acquisition Executive. Also, the military 

department cost agencies provide policy guidance and provide specialized cost analyses 

unique to each of the military departments. The military department cost agencies reside 

in the financial management organizations of their military departments, and are outside 

their military department’s acquisition chain of command.

There are also many field-level cost organizations. These organizations provide resources 

to support higher headquarters cost estimates and analyses, and they also provide 

assistance to support day-to-day operations of program offices and similar entities. 

Examples of such activities include evaluation of contractor proposals and should-cost 

analyses; support to competitive source selections; cost estimates in support of the 

programming and budgeting processes; and cost estimates used in specific analytic 

studies, such as systems engineering design trades or AoAs. Field-level elements of the 

cost community workforce typically possess important specialized cost and technical 

experience unique to specific system types or commodity groups--such as satellites, 

submarines, or tactical missiles.

9
Appendix A provides a brief description of the military department cost agencies and 

field-level cost organizations. 

Procedures for Cost Assessments at Milestone Reviews and Other Events

This section provides a description of DoD cost assessment procedures for MDAPs and 

MAIS programs, many of which have been updated or added after enactment of 

WSARA.

Cost Assessment Procedures for Major Defense Acquisition Programs

Public law (section 2334 of title 10, United States Code) requires that an independent 

estimate of the life-cycle cost for an MDAP be prepared and presented to the MDA 

before the approval to proceed with Milestone A or B, or any decision to enter low-rate 

initial production or full-rate production.2 At these milestone or other reviews, when the 

MDA is USD(AT&L), the ICE is prepared by the Director, CAPE. When the MDA is 

delegated to the DoD Component, the ICE supporting a milestone decision is provided by 

the applicable military department cost agency or the defense agency equivalent, and 

subsequently reviewed by CAPE. In either case, an ICE for a program in practice is 

conducted by using a combination of historical precedence, results of extensive site visits, 

and the actual performance of that program to date. It is a careful and comprehensive 

analysis that looks at all aspects of a program, including risks.

The framework for DoD policy and procedures for such ICEs and associated cost 

assessment activities is prescribed in Interim DoD Instruction 5000.02, Operation of the 

Defense Acquisition System. Additional guidance on the implementation of the prescribed 

policy and procedures is provided in DoD Manual 5000.04-M, DoD Cost Analysis 

Guidance and Procedures. 

WSARA also revised the procedures for the certification of an MDAP that experienced 

sufficient cost growth to trigger a critical unit cost breach3 (as defined in section 2433 of 

title 10, United States Code). Upon such a breach, USD(AT&L) can certify that the 

program meets certain criteria (set forth in section 2433a of title 10, United States Code), 

in which case the program can continue, or it may be terminated. One element of the 

required certification is the reasonableness of the new estimates of program unit costs. 

The determination that new program unit costs are reasonable is made by the Director, 

CAPE, and certified by USD(AT&L). As part of a standard business practice, CAPE 

prepares its own ICE that is used as a benchmark to support the assessment of 

reasonableness of the new unit cost estimates. Appendix B provides a description of the 

procedures for unit cost reporting and the criteria for a critical unit cost breach.

2 Section 2334 also requires an independent cost estimate in advance of a certification of an MDAP in a 

critical unit cost breach status (see Appendix B); in advance of a certification of a MAIS program in a 

critical change status (see Appendix C); and at any other time considered appropriate by the Director, 

CAPE or upon the request of USD(AT&L).

3 A unit cost breach is commonly referred to as a Nunn-McCurdy breach.

10

 
Cost Assessment Procedures for Major Automated Information Systems

WSARA specifies that CAPE is responsible for preparing an ICE for any MAIS program 

that has experienced a Critical Change (as explained in Appendix C) if the MDA is 

USD(AT&L). CAPE may also prepare an ICE for a MAIS program at any other time 

considered appropriate by the Director, CAPE, or upon the request of USD(AT&L). In 

addition, for the MAIS programs for which acquisition oversight has been delegated to 

the Component, CAPE is responsible for establishing policies for preparation and review 

of Component cost estimates at milestone reviews, and for revised program cost 

estimates in support of certification of a MAIS program that has experienced a Critical 

Change. A review of the FY 2013 cost assessment activities associated with certification 

of MAIS programs that experienced a Critical Change (where the MDA was 

USD(AT&L)) is provided in Chapter III. 

In FY 2013, the assignment of MDA for the Department’s 41 MAIS programs was a 

divided responsibility among USD(AT&L), the Deputy Chief Management Officer 

(DCMO), the DoD Chief Information Officer (CIO), and various Component Acquisition 

Executives. The DCMO was the MDA for MAIS programs that were regarded as defense 

business systems (used to support business activities, such as procurement, financial 

management, logistics, or human resource management). The DoD CIO was (and 

remains) the MDA for two MAIS programs that provide network and application security 

features (such as digital certificates and signatures, the Common Access Card (CAC), and 

other key-based security mechanisms). The various Component Acquisition Executives 

were (and remain) the MDAs for MAIS programs when acquisition oversight is delegated 

to a Component. These assignments were revised in the recent OSD Organizational 

Review led by former Secretary of the Air Force Mike Donley. As part of this review,

MDA and other oversight responsibilities for defense business systems subject to OSD 

oversight were realigned from the DCMO to USD(AT&L) and the DoD CIO. This was 

done to permit the DCMO to focus on broad management, business oversight, and 

administrative organization issues within OSD and across DoD. In the new roles for 

defense business systems, the DoD CIO assists in the oversight of information 

technology and cyber security requirements and issues, while USD(AT&L) assumes 

primary responsibility for acquisition oversight. Currently, for the 41 MAIS programs, 

USD(AT&L) is the MDA for 22 programs; the DoD CIO is the MDA for two programs; 

and the various Component Acquisition Executives are the MDA for the remaining 17

programs.

Component Cost Position and Full Funding Commitment

One important element of current DoD policy for major acquisition programs requires the 

Component to establish a formal position on the estimated cost of the program, and 

furthermore, to commit to fully fund the program consistent with the Component’s cost 

position. The Component and the military department cost agency (or defense agency 

equivalent) establish a documented Component Cost Position for all MDAPs and MAIS 

programs prior to the Milestone A, B, and C reviews, and the Full-Rate Production 

11
Decision (for an MDAP) or Full Deployment Decision Review (for a MAIS program). 

The Component Cost Position is signed by the appropriate military department’s Deputy 

Assistant Secretary for Cost and Economics (or defense agency equivalent). Each 

Component has its own process to arrive at the Component Cost Position. In many cases, 

the Component establishes its cost position by performing a Component-wide corporatelevel review, led by the military department cost agency (or defense agency equivalent), 

after consideration of a program office cost estimate and an assessment of that estimate 

by the military department cost agency.

At each milestone or other review, the Component must fully fund the program to the 

Component Cost Position in the current FYDP, or commit to full funding of the cost 

position in the next FYDP, with identification of specific offsets to address any funding 

shortfalls that may exist in the current FYDP. The Component Acquisition Executive and 

the Component Chief Financial Officer endorse and certify in a Full Funding 

Certification Memorandum that the FYDP fully funds, or will fully fund, the program 

consistent with the Component Cost Position. 

Multi-Year Procurement

Public law (section 2306b of title 10, United States Code) establishes several criteria that 

must be satisfied and certified by the Secretary of Defense prior to the award for a multiyear contract for supplies for a defense acquisition program. Some of these criteria 

(concerning substantial savings, realistic cost estimates, and availability of funding) must 

be supported by a CAPE cost analysis of the proposed multi-year procurement strategy 

and contract structure, which includes a comparison of the estimated costs of multi-year 

and annual contract awards. The analysis is based on actual cost data and experience to 

date, as well as an evaluation of cost realism in the contractor’s proposals. A review of 

the FY 2013 cost assessment activities associated with approval of multi-year 

procurement contracts is provided in Chapter III. 

Confidence Levels in Cost Estimates

WSARA, as originally enacted, required (1) a statement concerning the confidence level 

used in establishing a cost estimate of an MDAP or a MAIS program, (2) the rationale for 

selecting the specific confidence level used in the estimate, and (3) the justification for 

selecting a lower confidence level if it were less than 80 percent. The WSARA 

requirement for confidence levels in cost estimates was modified by section 811 of the 

National Defense Authorization Act for Fiscal Year 2011, Public Law 111-383 (section 

2334 of title 10, United States Code). With this modification, there is no longer a 

requirement to justify the choice of a confidence level that is lower than 80 percent. 

Today, the legal requirement is to select a confidence level such that it provides a high 

degree of confidence that the program can be completed without the need for significant 

adjustment to program budgets. In general, CAPE satisfies this requirement by ensuring 

that all of its cost estimates are built on a product-oriented Work Breakdown Structure

(WBS), based on historical actual cost information whenever possible, and most 

12
importantly, based on conservative assumptions that are consistent with actual 

demonstrated contractor and government performance for a series of acquisition 

programs in which the Department has been successful.

Cost Estimates for Contract Negotiations

Section 811 of the National Defense Authorization Act for Fiscal Year 2011, Public Law 

111-383 (section 2334 of title 10, United States Code), established that for MDAPs and 

MAIS programs, cost estimates developed for baselines and other program purposes are 

not to be used for the purpose of contract negotiations or obligation of funds. Section 811 

also states that cost analyses and targets developed for the purpose of contract 

negotiations shall be based on the government’s reasonable expectation of successful 

contractor performance in accordance with the contractor’s proposal and previous 

experience. 

The procedures to implement these statutory requirements were developed as part of the 

Department’s “Should Cost” initiative, which is intended to proactively target cost 

reduction and drive productivity improvement into major acquisition programs. These 

procedures are contained in Interim DoD Instruction 5000.02, Operation of the Defense 

Acquisition System. In this instruction, for MDAPs and MAIS programs, it is DoD policy 

to budget to the CAPE ICE unless an alternative estimate is specifically approved by the 

MDA. However, program managers are required to develop a “should cost” estimate as a 

management tool to control and reduce cost. The intention is that the ICE should not be 

allowed to become a self-fulfilling prophecy. The “Should Cost” initiative challenges 

managers to identify and achieve savings below budgeted most-likely costs. “Should 

Cost” analyses can be used during contract negotiations (particularly for sole source 

procurements) and throughout program execution, including sustainment. Further 

information on the “Should Cost” initiative is provided in the Defense Acquisition 

Guidebook (https://dag.dau.mil), section 10.15.2 (“Should-Cost”).

Cost Analysis Requirements Description

CAPE requires and provides guidance on the technical content and use of a document 

known as the Cost Analysis Requirements Description (CARD). The CARD provides 

information on the acquisition program that is used in preparation of both the Component 

Cost Position and the CAPE ICE. The CARD describes the key technical, programmatic, 

and operational characteristics of an acquisition program. The foundation of a sound and 

credible cost estimate is a well-defined program, and the CARD is used to provide that 

foundation. 

DoD Cost Data Collection Systems

Systematic and institutionalized cost data collection and validation is critical to the 

preparation and support of credible cost estimates. DoD has three primary collection 

systems for cost data for MDAPs. The Cost and Software Data Reporting (CSDR) system

serves as the primary source of cost data for major contracts and subcontracts associated 

13
with MDAPs and MAIS programs. The Earned Value Management (EVM) Central 

Repository is used to collect and archive EVM reporting documents (such as Integrated 

Program Management Reports). The Visibility and Management of Operating and 

Support Costs (VAMOSC) systems collect historical O&S costs for fielded major 

weapon systems. Appendix D provides additional details concerning all of these data 

collection systems, and Chapter IV discusses current CAPE efforts to improve them.

Summary

This chapter reviewed the cost assessment organizations, policies and procedures, and 

data collection systems in DoD. These provide the foundation on which the Department 

is building as it continues to implement WSARA and strengthen the cost assessment 

institutions. The initiatives that constitute this implementation and the vision of the 

changes that are being made are described in Chapter IV of this report.

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CHAPTER III – DoD COST ASSESSMENT ACTIVITIES IN FY 2013

This chapter provides a summary of the DoD cost estimates and cost analyses that were 

made in FY 2013 in support of MDAP milestone reviews and other acquisition decision 

points, award of multi-year procurement contracts, and certifications following MAIS 

critical changes. Note that there were no MDAP critical unit cost breaches in FY 2013 

(for the first time since the Nunn-McCurdy provision was established in 1983).

MDAP Milestone or Other Review Cost Assessment Activities

Table 1 provides a summary of the cost assessment activities in FY 2013 that supported 

milestone or other reviews. For each MDAP with a milestone review or other event, 

Table 1 identifies the program name and acronym, the responsible Component, the 

supporting cost estimate(s) or analyses presented to the MDA, and the review event being

supported. There were 16 MDAP milestone reviews or other events supported by cost 

assessment activities in FY 2013 (excluding several cost assessment activities associated 

with classified programs, which are not discussed in this unclassified report). 

15
16

Table 1. Major Defense Acquisition Program Milestone or Other Review Cost Assessment Activities in FY 2013

Program Name Acronym Component

Program 

Type

Cost Assessment 

Activity

Activity 

Date Supported Event

Event 

Date

MQ-9 Reaper 

Unmanned Aircraft 

System

MQ-9 Reaper Air Force Acquisition 

Category 

(ACAT) ID

CAPE Independent 

Cost Estimate

4-Oct-12 Milestone C 21-Nov-12

Air Force Cost 

Position

10-Sep-12

GPS Next 

Generation 

Operational 

Control System

GPS OCX Air Force ACAT ID CAPE Independent 

Cost Estimate

11-Oct-12 Milestone B 11-Oct-12

Air Force Cost 

Position

18-Jun-12

Navy Multiband

Terminal

NMT Navy ACAT IC Navy Cost Position 5-Nov-12 Full-Rate Production 

Decision

5-Nov-12

Navy Independent 

Cost Estimate

2-Nov-12

Airborne Warning 

and Control 

System Block 

40/45 Upgrade

AWACS Blk 40/45 Air Force ACAT IC Air Force Cost 

Position

6-Nov-12 Full-Rate Production 

Decision

21-Dec-12

Air Force 

Independent Cost 

Estimate

17-Oct-12

B61 Mod 12 Life 

Extension Program 

Tail Kit Assembly

B61 Mod 12 LEP 

TKA

Air Force ACAT ID CAPE Independent 

Cost Estimate

9-Nov-12 Milestone B 9-Nov-12

Air Force Cost 

Position

19-Oct-12

Excalibur Precision 

155mm Projectiles 

Block 1b

Excalibur Block 1b Army ACAT IC Army Cost Position 15-Nov-12 Milestone C 12-Dec-12

Army Independent 

Cost Estimate

1-Nov-12
17

Table 1. Major Defense Acquisition Program Milestone or Other Review Cost Assessment Activities in FY 2013 (cont.)

Program Name Acronym Component

Program 

Type

Cost Assessment 

Activity

Activity 

Date Supported Event

Event 

Date

B-2 Extremely 

High Frequency 

SATCOM and 

Computer 

Increment 1

B-2 EHF Inc 1 Air Force ACAT IC Air Force Cost 

Position

18-Dec-12 Full-Rate Production 

Decision

21-Dec-12

Air Force 

Independent Cost 

Estimate

24-Jul-12

Evolved 

Expendable 

Launch Vehicle

EELV Air Force ACAT ID CAPE Independent 

Cost Estimate

18-Jan-13 Milestone C restoration 10-Feb-13

Air Force Cost 

Position

10-Dec-12

E-2 D Advanced 

Hawkeye Aircraft

E-2D AHE Navy ACAT ID CAPE Independent 

Cost Estimate

30-Jan-13 Full-Rate Production 

Decision

12-Feb-13

Navy Cost Position 29-Nov-12

Standard Missile-6 SM-6 Navy ACAT ID CAPE Independent 

Cost Estimate

13-May-13 Full-Rate Production 

Decision

24-May-13

Navy Cost Position 6-May-13

F-22 

Modernization 

Increment 3.2B

F-22 Mod Inc 3.2B Air Force ACAT ID Updated CAPE 

Independent Cost 

Estimate

16-May-13 Milestone B 26-Jun-13

Air Force Cost 

Position

3-May-13

Air and Missile 

Defense Radar

AMDR Navy ACAT ID CAPE Independent 

Cost Estimate

29-May-13 Milestone B 4-Oct-13

Navy Cost Position 17-Jan-13
18

Table 1. Major Defense Acquisition Program Milestone or Other Review Cost Assessment Activities in FY 2013 (cont.)

Program Name Acronym Component

Program 

Type

Cost Assessment 

Activity

Activity 

Date Supported Event

Event 

Date

MQ-1C Gray 

Eagle Unmanned 

Aircraft System

MQ-1C Gray Eagle Army ACAT ID CAPE Independent 

Cost Estimate

13-Jun-13 Full-Rate Production 

Decision

26-Jul-13

Army Cost Position 9-May-13

Next Generation 

Jammer

NGJ Navy preMDAPCAPE Independent 

Cost Estimate

2-Jul-13 Milestone A 8-Jul-13

Navy Cost Position 4-Mar-13

Littoral Combat 

Ship Mission 

Modules

LCS MM Navy ACAT IC CAPE Independent 

Cost Estimate

22-Jul-13 Milestone B 7-Jan-14

Navy Cost Position 6-Feb-13

Navy Independent 

Cost Estimate

29-Nov-12

HC/MC-130 

Recapitalization 

Aircraft

HC/MC-130 Recap Air Force ACAT IC Air Force Cost 

Position

9-Sep-13 Full-Rate Production 

Decision

4-Oct-13

Air Force 

Independent Cost 

Estimate

21-May-13

Notes: 

The term “ACAT ID” refers to an MDAP where the MDA is USD(AT&L).

The term “ACAT IC” refers to an MDAP where acquisition oversight has been delegated to the Component.

The term “pre-MDAP” refers to a program activity that is anticipated to result in an MDAP upon formal program initiation into the defense acquisition management process 

(which usually occurs at Milestone B).
Remarks about Specific Programs

• The CAPE ICE for the Evolved Expendable Launch Vehicle (EELV) supported 

the restoration of the Milestone C approval for the program. The EELV lost its 

original Milestone C approval following the critical unit cost breach that 

occurred in 2012.

• For the DAB review of Increment 3.2B of the F-22 modernization program, 

CAPE and Air Force analysts spent considerable efforts to fully capture actual 

F-22 O&S costs per flying hour. The F-22 costs per flying hour are currently 

well above CAPE forecasts of costs per flying hour for the comparable variant of 

the fifth-generation F-35 aircraft. The CAPE ICE also recommended, and the 

Acquisition Decision Memorandum (ADM) directed, that the Air Force 

periodically report on the budgeted resources for total F-22A costs, including the 

original baseline program and additional modernization efforts, at subsequent 

Defense Acquisition Executive Summary (DAES) reviews. The ICE also 

recommended that in the future, F-22A modernization and other similar MDAPlevel block upgrade programs should report on total fleet O&S costs to improve 

the transparency and accountability of the cost impacts due to the upgrades.

• In October 2012, USD(AT&L) issued an ADM for the Littoral Combat Ship 

Mission Modules, designating it as an ACAT IC program and delegating 

acquisition authority to the Navy. CAPE supported the Navy’s subsequent 

Milestone B review by providing an ICE for the Navy’s consideration. In 

general, CAPE supports the acquisition review decisions of ACAT IC programs 

by conducting an assessment of Component cost estimates and Component Cost 

Positions, or in some cases generating its own ICE. This responsibility is 

intended to satisfy the intent of WSARA and provide higher quality cost 

positions for senior acquisition executives.

CAPE Independent Cost Estimates for Multi-Year Procurement

As noted in Chapter II, CAPE provides an ICE of a proposed multi-year procurement 

strategy and contract structure to support the Department’s certification of substantial 

savings and other criteria, prior to the award of a multi-year contract for a defense 

acquisition program. Table 2 provides a summary of the cost assessment activities in 

FY 2013 supporting the award of multi-year procurement contracts. Table 2 identifies the 

program name and acronym, the responsible Component, the supporting cost estimate(s) 

or analyses, and the date of the Department’s certification.

The Congress must provide the authority for a multi-year procurement contract prior to 

contract award. This authority must be provided in both authorization and appropriation 

acts for proposed multi-year contracts greater than $500M. For each of the E-2D AHE 

and C-130J aircraft procurements, the Congress provided authority for a multi-year 

contract in both the FY 2014 defense authorization act as well as the FY 2014 

19
consolidated appropriations act. However, at the time this report was written, awards of 

multi-year procurement contracts for these two programs remain pending.

For several aircraft program multi-year procurement contracts approved and negotiated 

during the past four years, DoD has obtained forecast savings in the range of 10 to 18 

percent ($5.5 billion) relative to the costs of using annual procurement contracts through 

the use of multi-year procurement contracts. These savings are measured relative to a 

baseline cost estimate prepared by CAPE, based on use of annual contracting strategies, 

of approximately $28 billion in procurement costs for five major aircraft programs. More 

recently, the estimates of savings for the E-2D AHE and the C-130J were consistent with 

the estimated percentage savings for the earlier aircraft programs. The use of multi-year 

procurement contracts for these programs will provide substantial savings of acquisition 

resources to the military departments involved in the programs during the next five years. 

CAPE plans to work with the acquisition community and Congress on revising the 

applicable statutes to improve institutionalization and streamline the current process.

20
21

Table 2. Cost Analyses in FY 2013 for Multi-Year Procurement Contract Awards

Program Name Acronym Component

Program 

Type

Cost Assessment 

Activity

Activity 

Date Supported Event

Event 

Date

E-2D Advanced Hawkeye 

Aircraft

E-2D AHE Navy ACAT ID CAPE Independent 

Estimate of Savings for 

Multi-Year Procurement 

Contract

28-Feb-13 USD(AT&L) certification 1-Mar-13

C-130J Hercules Transport 

Aircraft

C-130J Air Force ACAT IC CAPE Independent 

Estimate of Savings for 

Multi-Year Procurement 

Contract

28-Feb-13 USD(AT&L) certification 1-Mar-13
MAIS Critical Change Cost Assessment Activities 

Table 3 provides a summary of the cost assessment activities in FY 2013 supporting 

certification decisions associated with MAIS critical changes. For each major acquisition 

program with a critical change, Table 3 identifies the program name and acronym, the

responsible Component, the supporting cost estimate(s) or analyses presented to the 

USD(AT&L), and the date of the critical change certification provided to the Congress. 

Descriptions of MAIS reporting and the certification process associated with unit cost 

breaches are provided in Appendix C.

There were two MAIS critical change certifications in FY 2013. Both of them were 

supported by the appropriate cost estimates and analyses that complied with the 

requirements of WSARA and the established cost assessment procedures described in

Chapter II. For the critical change certifications, each event was supported by a CAPE 

ICE and a Component Cost Position.

22
23

Table 3. Major Automated Information System Critical Change Cost Assessment Activities in FY 2013

Program Name Acronym Component

Program 

Type

Cost Assessment 

Activity

Activity 

Date Supported Event

Event 

Date

Global Combat Support 

System-Marine Corps/

Logistics Chain Management 

Increment 1

GCSSMC/LCM 

Inc 1

Navy ACAT 

IAM

CAPE Independent 

Cost Estimate

7-Aug-13 Critical Change 

Certification

6-Sep-13

Navy Cost Position 17-Jun-13

Air and Space Operations 

Center – 10.2 Weapon 

System Increment

AOC-WS 

Inc 10,2

Air Force ACAT 

IAM

CAPE Independent 

Cost Estimate

20-Aug-13 Critical Change 

Certification

12-Oct-13

Air Force Cost Position 15-May-13
Assessment of Compliance, Quality, and Differences in Methodology

All of the events noted in Table 1 through Table 3 were supported by the appropriate cost 

estimates or analyses that complied with the requirements of WSARA and the established 

cost assessment procedures described in Chapter II. In particular, each MDAP and MAIS 

milestone or other review was supported by (1) a Component Cost Position and (2) the 

appropriate CAPE or military department cost agency ICE. In addition, CAPE provided 

an independent analysis of savings associated with each proposed multi-year procurement 

strategy. Additional information about the compliance of CSDR data reporting is 

provided in Appendix D.

The overall quality of the cost estimates prepared by each of the military departments 

continued to improve this year due to increased rigor. As noted in Chapter II, DoD has 

instituted a policy―currently in place for all MDAPs—requiring that a signed, dated 

Component Cost Estimate and a Component Cost Position must be delivered to CAPE 

prior to delivery of an ICE to support each milestone or other review of the DAB. Also, 

the military department’s financial and acquisition leadership must provide a statement 

affirming their commitment to fully fund the program to the Component Cost Position 

during the preparation of the next Program Objective Memorandum and President’s 

Budget FYDP. 

The quality of the cost estimates for MDAPs provided by the military departments also 

continued to improve this year due to better data. This is largely attributable to improved 

availability of actual cost information for DoD programs as a result of the long-term 

initiative to collect contractor cost and software data reports, and the long-term efforts of 

each of the military departments to improve the collection of actual O&S cost 

information through the VAMOSC systems. Further information about DoD cost data 

collection systems is provided in Chapter IV and Appendix D.

There are no consistent differences in methodology or approach between the cost 

estimates prepared by the military departments and CAPE. Generally, the approach 

employed by the military departments is evolving to become more similar to that 

employed in CAPE: collect actual cost information from ongoing and historical programs

in a product-oriented taxonomy; use that information to prepare cost and schedule 

forecasts for new programs or programs proceeding to the next milestone in the 

acquisition process; and review the actual cost information collected, as each individual 

program proceeds, to update and adjust the cost and schedule forecasts for the program to 

reflect actual experience. The goal is for the Department to improve the systematic 

collection of actual cost information over time, resulting in smaller differences between 

the cost and schedule forecasts of the military departments and CAPE in the future.

Despite the progress in improving the quality of cost estimates throughout the 

Department, there remain serious concerns about the quality of cost estimates in the 

future due to the current budget constraints and the fiscal uncertainty experienced in the 

most recent year. CAPE and the military department cost agencies are subject to the 

24
Secretary’s directive to reduce staffing and funding for headquarters operations, and the 

other major cost organizations face similar budget pressures. For the most part, the major 

cost organizations are currently operating under a hiring freeze, although some personnel 

attrition may be replaced on an exception basis, subject to waiver, meeting certain 

conditions. These pressures also provide significant constraints on each organization’s 

abilities to invest in cost tools and research, support training and education of the 

workforce, and maintain the recent progress in cost data collection. Moreover, the budget 

environment has affected the morale of the entire cost community workforce. The recent 

experience with furloughs, government shutdowns, and the threat of additional 

government shutdowns negatively affects the retention of the current workforce as well 

as the ability to recruit the next generation of cost analysis personnel. The plans and 

ongoing initiatives of CAPE and the larger cost community to deal with the challenges of 

this environment are discussed in Chapter IV.

Areas for Improvement

In a few cases, our cost estimates involved programs that had plans or the potential for 

FMS. FMS cases have significant potential benefits in lowering the costs of programs to 

the United States, since the procurement of additional systems will lead to unit cost 

reductions for all parties. In some cases, the foreign country may also contribute to the 

recoupment of prior development costs. However, quantifying these benefits in cost 

estimates can often be challenging, due to the complexities of issues such as 

coproduction, tie-ins with United States multi-year procurement contracts, and 

forecasting the effects on contractor business bases and rates. CAPE is now evaluating 

how to improve the cost community tools, methods, and policies for these cases.

For MAIS programs, due to resource constraints, direct CAPE involvement in preparing 

cost estimates has been limited to those programs for which the MDA is USD(AT&L)

that experience a critical change. For other reviews of MAIS programs, CAPE works 

closely with and relies heavily upon the military department agencies in the management 

and preparation of cost estimates. In addition, contract cost data reporting for the MAIS 

programs currently is poor, and both quality and compliance need to be improved. There 

remains much work to be done to improve the management and preparation of cost 

estimates for the approximately 40 programs now in the DoD portfolio of MAIS 

programs and automated information systems expected to become MAIS programs in the 

near future.

Other Cost Assessment Activities in FY 2013

Missile Defense Agency Support

CAPE received requests from the Missile Defense Agency (MDA) in 2013 to assess 

several MDA programs. As MDA operates largely outside of DoD 5000 regulations, 

CAPE’s cost assessment role is typically limited to supporting the agency’s production 

decisions as defined by the initial use of procurement funds. CAPE does not typically 

25
conduct cost assessments for MDA development efforts and systems acquired using 

Research, Development, Test and Evaluation funds. To support a production decision on 

Standard Missile-3 (SM-3) Block IB initially planned for FY 2014, MDA requested that 

CAPE support the review by developing an ICE. CAPE plans to complete this ICE in 

FY 2014.

In addition, MDA requested that CAPE perform cost analyses to determine if the use of a 

multi-year procurement strategy would result in substantial savings for an SM-3 Block IB 

missile contract and a Terminal High Altitude Area Defense (THAAD) interceptor 

contract. CAPE plans on conducting these analyses during FYs 2014–2015 to support

consideration for possible inclusion in the FY 2016 President’s Budget request.

National Nuclear Security Administration Support

Based on requests from the Nuclear Weapons Council (NWC), chaired by USD(AT&L), 

CAPE continued to assess various aspects of the National Nuclear Security 

Administration (NNSA) programs and revitalization of the weapons complex. On the 

weapons side, CAPE performed initial assessments that enabled appropriate budgeting 

for two proposed weapon system life extension efforts. On the complex modernization 

side, CAPE worked with NNSA headquarters and national laboratory personnel to assess 

plutonium strategy alternatives for the NWC and the Congress. Also, CAPE performed 

an independent assessment of the Y-12 Uranium Processing Facility required by the 

National Defense Authorization Act for Fiscal Year 2013, Public Law 112-239.

CAPE also assessed how economic and fiscal pressures have affected the costs of 

operating the nuclear weapon complex. The analysis documented trends in salaries, 

fringe benefits, other components of labor costs, materials, and equipment at the national 

laboratories and several production facilities.

CAPE directed nearly 5,000 man-hours in FY 2013 in support of NNSA, and this support 

is expected to continue to be a large effort in the future. It is currently planned to have 

NNSA personnel augment CAPE staff in preparation of future ICEs for NNSA activities.

Realized Profits and Fees

Electronic data warehouses of CSDR reports are now being used to provide insight and 

support multiple studies throughout the DoD cost and acquisition communities

concerning contract profits and fees. Acquisition professionals are reviewing the 

information in order to assess the extent that realized profits and fees for completed 

acquisitions are compatible with current guidelines contained in defense policy and 

regulations.

26
CHAPTER IV – THE LOOK FORWARD

WSARA introduced major reforms to the DoD cost estimation processes. Since its 

enactment, CAPE has made significant progress in implementing these reforms. This 

chapter discusses the status and future plans for several key initiatives that collectively 

will provide this implementation.

Cost Leadership Forum

The CAPE Deputy Director for Cost Assessment has established a periodic meeting with 

the senior leaders and staff of the military department cost agencies (known as the Cost 

Leadership Forum), to discuss issues of common interest to the community. The intent is 

to establish greater collaboration among CAPE and the military department cost 

organizations by sharing analytic best practices, and developing a collective vision of the 

path forward for the cost community over the next five years in meeting the WSARA 

objectives, improving cost analysis, and dealing with the challenges of the current 

constrained resource environment. This collaboration and collective vision is being 

pursued to lead to more efficient business processes, while maintaining the independence 

of CAPE and Service ICEs, and protecting the internal deliberations within each military 

department and its respective cost agency.

A two-day meeting was held on August 19–20, 2013. The Cost Leadership Forum 

discussed the following topics:

• Organizational status and human resources

• Cost assessment policies and procedures

• Defense Cost and Resource Center (DCARC) status

• CADE project

• Training and education for the cost community

• Collective vision for the cost community

The current plans and ongoing initiatives for each of these topics are described in the 

remainder of this chapter. The Cost Leadership Forum will continue to meet periodically 

and provide executive oversight for these and other initiatives.

Organizations and Human Resources

As explained in Chapter II, the DoD cost analysis workforce is distributed among several 

organizations throughout the Department. Consequently, identifying and remedying 

issues with the needed size, education, experience, organization and reporting 

relationships of the DoD cost analysis workforce requires an integrated and collaborative 

effort with the major DoD cost organizations, using the Cost Leadership Forum as a 

venue, with CAPE as the leader and primary advocate for the entire DoD cost 

community. 

27
Efforts toward that end began last year with activities to gather data on the workforce 

size, grade, and demographics, as well as experience and education levels. Beyond that, 

there is interest in measuring projected workload volume and content (i.e., what the cost 

assessment community is actually doing), to help assess whether scarce resources are 

properly focused on strategic priorities. However, these efforts, as well as the anticipated 

growth in the staffing of CAPE and other DoD cost organizations, were suspended due to 

the tremendous uncertainty in the projected DoD budget and personnel levels. OSD and 

the military departments have been operating under a hiring freeze, and face the 

possibility of further civilian reductions due to the fiscal environment and the Secretary’s 

directive to reduce staffing and funding for headquarters operations by 20 percent.

Nevertheless, despite these challenges, CAPE intends to work with the leaders of the 

military department cost agencies and resume the collaborative activities needed to 

determine the size, shape and organization of the DoD cost community aligned to meet 

current and future needs. Workforce management will be more critical in the future as the 

cost community faces downsizing pressures along with the rest of the Department. To 

help mitigate these pressures, it will be important for CAPE, working with the other 

senior members of the Cost Leadership Forum, to increase the collaboration among the 

major cost organizations and achieve significant efficiencies in cost assessment activities 

that will be less labor intensive and time consuming. Initiatives aimed to achieve such 

efficiencies, such as investments in automated tools, as well as improved training and 

education for the cost community, are described in the remainder of this chapter. 

CAPE is also evaluating the feasibility and desirability of establishing a fraction of the 

cost assessment staff as members of the Defense Acquisition Workforce. This would 

ensure that some of the CAPE cost analysts would also meet the continuing education, 

training, and experience standards required to qualify as certified acquisition 

professionals. These analysts also would be eligible for training and education funding 

provided by the Defense Acquisition Workforce Development Fund (section 852 of the 

National Defense Authorization Act for Fiscal Year 2008, Public Law 110-181).

However, CAPE is committed to ensuring that the entire cost community continues to 

receive access to section 852 funding.

Policies and Procedures 

WSARA states that the Director, CAPE—in consultation with other officials of OSD, the 

military departments, and Defense Agencies—shall prescribe policies and procedures for 

the conduct of cost estimation and cost analysis for the major acquisition programs of the 

DoD. 

CAPE completed a final draft of a new issuance that will replace DoD Manual 

5000.04-M, Cost Analysis Guidance and Procedures, and placed the issuance into the 

formal coordination process. This issuance is the primary vehicle for implanting the cost 

assessment provisions of WSARA throughout DoD components. In particular, it provides 

guidance to the military departments and Defense Agencies concerning the preparation, 

28
presentation, and documentation of life-cycle cost estimates for major acquisition 

programs. It assigns roles and responsibilities, and describes the process and the timeline, 

for each of the following:

• Preparation of CAPE ICEs supporting a USD(AT&L) decision review

• CAPE review of Component ICEs supporting a Component decision review

• Preparation of CAPE multi-year procurement cost analyses

• CAPE cost analyses supporting a critical unit cost breach certification

• CAPE cost analyses supporting a MAIS critical change certification

The Manual provides streamlined guidance for the content of the CARD that describes 

the technical and programmatic characteristics of a program for the purpose of preparing 

a cost estimate. The Manual also provides standard life-cycle cost terms and definitions 

that are used throughout DoD in cost estimation and cost data collection.

CAPE completed a final draft of the 2013 O&S Cost-Estimating Guide and distributed 

the document to the military departments for review and comment. This guide explains 

and illustrates how O&S cost estimates and analyses can support key program decisions 

throughout the life cycle. The guide provides a tutorial on the best practices for preparing, 

presenting, and documenting O&S cost estimates. The guide also addresses new 

legislative requirements for major weapon system O&S costs. The National Defense 

Authorization Act for Fiscal Year 2012, Public Law 112-81, established a provision 

concerning “Assessment, Management and Control of O&S Costs” that mandates several 

ambitious requirements intended for DoD to take specific steps to improve its processes 

concerning cost estimating and management of major system O&S costs. In particular, 

the provision requires the Department to periodically update estimates of program O&S 

costs, and track and assess these estimates relative to prior estimates. The guide describes 

how the Department has implemented this legislative provision in various DoD 

instructions and regulations, and provides recommended approaches and analytic 

methods for dealing with these new requirements.

CAPE completed and issued DoD Instruction 7041.04, Estimating and Comparing the 

Full Costs of Civilian and Active Duty Military Manpower and Contract Support. The 

instruction establishes policy and provides procedures to estimate and compare the full 

costs of active duty military, DoD civilians, and contract support. The business rules, 

potential cost factors, and data sources provided in this instruction will be used in costbenefit analyses or business case analyses in support of workforce mix decisions. To 

support the DoD community in performing the numerous calculations required by this 

instruction, CAPE has made available a web-enabled tool for estimating the Full Cost of 

Manpower (FCoM), which will automatically calculate all cost elements required to 

maintain consistency with guidance in the instruction. The FCoM tool is available on the 

CAPE website (www.cape.osd.mil) and is usable by all personnel who possess a valid 

CAC. The tool has already been used to compare the costs of military and civilian 

intelligence personnel, and in the future will be used to estimate manpower costs for the 

development and expansion of the cyber workforce.

29
Cost Data Systems

The DCARC is the CAPE field office responsible for administering the CSDR system. 

An increased management emphasis throughout the Department concerning the 

importance of cost data reporting has resulted in significant increases in the quantity of 

cost data reports compared to the acquisition reform era of the 1990s. Figure 1 shows the 

annual volume of CSDR data reports collected by the DCARC for each of the major 

system commodities.

30
31

Figure 1. CSDR Data Collection over Time
The management emphasis on cost data reporting is not limited to the quantity of data 

reports collected. The DCARC has ongoing initiatives to improve business processes and 

data quality, and maintain a high degree of compliance in reporting requirements. The 

DCARC hosts semiannual CSDR Focus Group meetings that provide a forum for DoD 

and industry stakeholders to discuss evolving CSDR policies and processes, and raise any 

issues or concerns. The DCARC continues to provide on-site training to users and data 

providers at various locations several times each year. This training addresses CSDR 

policies, CSDR plan construction and subsequent reporting requirements, and DCARC 

information technology systems and applications.

Improved versions of the CSDR electronic report formats and instructions to reporting 

contractors are being developed based on feedback from government users about desired 

report enhancements. In addition, the DCARC is working with government users to 

determine desired improvements to the plant-wide overhead report, and the sizing and 

productivity metrics used for software reporting. 

In addition to the CSDR system, DoD has two other cost data reporting systems. The 

EVM Central Repository is used for the centralized electronic warehousing of EVM data 

reports, and the VAMOSC data systems are used to collect O&S costs for the major 

fielded weapon systems. Additional information on all three of these data systems is 

provided in Appendix D.

Cost Assessment Data Enterprise

In a time of declining budgets and inability to grow the government’s analytical 

workforce, CAPE initiated the development of the CADE: the Department’s unified 

initiative to collect, organize and use data more efficiently. CAPE is partnering with the 

military department cost agencies and the USD(AT&L) staff to incrementally work 

towards its CADE vision of the government analyst’s command and control website,

housing seamless integrated authoritative data sources that are easily searchable and 

retrievable.

CADE will increase analyst productivity and effectiveness and improve data quality, 

reporting compliance and source data transparency. In addition to improving internal 

government processes and requirements, CAPE is working with industry to achieve more 

efficient and better data transfers, taking the process from retyping in data from old pdf 

reports to push-of-the-button electronic data exchange and retrieval. The project will 

automate common views of data that help to begin telling a program's story, which 

previously took analysts months to create.

The goal is to reduce time spent on ad hoc data collection and validation, allowing more 

time for actual analysis at a much deeper level, and quicker ability see how a program is 

performing between major reviews. CAPE, with its partners in the military department 

cost agencies and USD(AT&L), is taking on through CADE the integration of cost and 

technical data including EVM reports, CSDR reports, and O&S data. This involves a 

32
major effort of consolidating an authoritative collection of historical data and ensuring 

that all future data collected is exactly what the cost community needs to best perform. 

CAPE is working with USD(AT&L) to capitalize on the acquisition data already 

collected in the Defense Acquisition Visibility Environment (DAVE) and to integrate it 

with our cost data for a full government analyst view of a weapons program or portfolio. 

This initiative will increase productivity of analysts and will also provide a way for 

analysts to build upon each other’s work, where historically analysts typically engaged in 

separate efforts using separate hard drives.

To achieve a more efficient and productive workforce while we struggle at the manpower 

levels we are given, the cost community is coming together like never before to work 

towards the Cost Assessment Data Enterprise vision.

Tracking to Approved Estimate—Program/Budget Review and Acquisition

The current acquisition process in the Department is event-driven and episodic in nature, 

and is driven primarily by the key milestones and other decision points identified in 

statute. However, CAPE is working with the military department cost agencies to strive 

for more continuous involvement of the cost analysis community in tracking program 

performance, updating cost and schedule estimates, and evaluating new program risks as 

they are identified. In particular, as part of the Department’s program and budget review 

process, CAPE—in conjunction with USD(AT&L)—reviewed each acquisition program 

with significant funding changes from the latest baseline or prior year’s President’s 

Budget to determine the source of the cost estimate supporting the revised program and to 

ensure that the program remained fully funded. This process of tracking to the approved 

estimate will be even more important in the future, as the Department’s acquisition 

programs face significant funding constraints, resulting in more reductions to program 

quantities and annual procurement rates, and more pressures to budget programs at less 

than full funding. Tracking to the approved estimate will be critical to ensure that 

MDAPs and MAIS programs remain funded to appropriate, defendable, and realistic cost 

estimates.

Cost Indices

WSARA requires that CAPE periodically assess and update the cost indices used by the 

Department to ensure that such indices have a sound basis and meet the Department’s 

needs for realistic cost estimation. The Under Secretary of Defense (Comptroller), or 

USD(C), provides the DoD military departments and Defense Agencies with guidance in 

the DoD Financial Management Regulation (FMR) on how to prepare budget estimates 

that comply with guidelines issued by the Office of Management and Budget (OMB); this 

guidance includes instructions on the use of USD(C)-provided deflators that are 

calculated from the OMB inflation forecast. 

As noted in last year’s report, CAPE commissions independent studies concerning cost 

indices to provide a factual and analytical basis for responding to this provision of 

WSARA. One study focused on the treatment of indices for the acquisition costs of 

33
MDAPs. This study found that some DoD organizations—most notably the Naval Sea 

Systems Command (NAVSEA), Naval Air Systems Command (NAVAIR), and many Air 

Force program offices—have developed product-specific price escalation indices for use 

in their program cost estimates. These price indices include market price influences 

beyond just general inflation adjustments accounted for by the USD(C)/OMB deflators. 

Consistent with this study, the current practice in the cost community is to permit the use 

of product-specific price indices when there is significant evidence that the productspecific price indices reflect the most likely cost trends. In such cases, the cost estimates 

are made in base-year dollars and escalated to then-year dollars using the product-specific 

indices. However, to establish a program baseline, the then-year dollars are returned to 

base-year dollars using the USD(C)/OMB inflation indices. Using this methodology, the 

final calculated program base-year dollar estimate will reflect the anticipated higher real 

price due to product-specific market influences beyond general inflation (or the change in 

the value of the dollar). Work in this area continued in 2013, and CAPE extended an

earlier independent study. The follow-on study is now evaluating the best choices of 

product-specific indices by system commodity type, such as fighter aircraft. 

Cost Analysis Education and Training

CAPE is leading several initiatives to improve the education and training of the larger 

DoD civilian and military workforce in cost assessment, in accordance with the assigned 

responsibilities and goals of WSARA. 

The Cost Leadership Forum mentioned earlier determined that the best way for dealing 

with the education and training issue would be to establish an advisory group consisting 

of representatives from CAPE and each of the military department cost agencies. 

Initially, the purpose of the training and education advisory group will be to provide 

stakeholder input to the certification standards and course curriculum associated with cost 

estimating for the Defense Acquisition University (DAU). However, the charter of this 

advisory group is not limited to DAU, and in the future will address other sources of 

training and education.

CAPE has supported the Navy, the Naval Postgraduate School, and the Air Force 

Institute of Technology in establishing an accredited Master’s Degree Program in Cost 

Estimating and Analysis that began in April 2011. This two-year, distance-learning 

program is improving the education of the cost estimating community in both DoD and in 

the defense industrial base. The program is part-time and consists of two courses per 

quarter, for eight quarters. The program blends web-based, online instruction with video 

televised education, and is tailored to students whose careers will not allow them to 

participate in a full-time, traditional on-campus program. Tuition may be paid through the 

use of the Defense Acquisition Workforce Development Fund. The first cohort graduated 

in March 2013. The second cohort commenced in Spring 2012 and is scheduled to 

graduate in March 2014. The third cohort commenced in Spring 2013 and is scheduled to 

graduate in March 2015. The program has accepted applications for the fourth cohort,

and the acceptance process began in November 2013.

34
DoD Cost Analysis Symposium

For several decades, CAPE (and its predecessor organization) has sponsored an annual 

DoD Cost Analysis Symposium, known as DoDCAS, with attendees drawn primarily 

from government and private-sector cost research and analysis organizations. DoDCAS 

provides a valuable forum for the education, training, and improvement of 

communication within the DoD cost analysis community. The presentations made at 

DoDCAS facilitate discussion, instruction, and debate concerning cost estimating 

methods and models, data collection, and contemporary issues of interest to the DoD cost 

community. In this way, the event leverages the knowledge and experience of the 

community to increase individual and collective expertise in cost estimation and analysis. 

DoDCAS also provides members of the DoD cost community the opportunity to hear the 

insights of senior DoD and other government officials on important topics.

Unfortunately, the symposium event that had been planned for February 2013 was 

cancelled due to guidance from OMB and the Deputy Secretary of Defense to reduce 

expenditures for all conferences and travel. Also, a major concern is that the potential 

DoD and other government agency attendees would not have travel funding available to 

attend the event. CAPE is now examining options to reestablish a very limited version of 

the DoDCAS in FY 2014 and reestablish the full-scope of the symposium in future years. 

Summary

CAPE is continuing to develop and refine plans for the Department’s cost estimating and 

cost analysis functions. Implementation of these plans will ensure that the cost 

assessment organizations, workforce, policies and procedures, data collection systems, 

and training and education programs will be strengthened and improved as necessary to 

meet the expanded roles and responsibilities established by WSARA. CAPE will 

continue to work with the Department’s other cost and acquisition organizations to 

strengthen cost assessment so that better cost and schedule estimates are properly 

prepared and considered in the deliberations of all major acquisition programs. The 

progress and challenges for these initiatives will be reported in future editions of this 

report.

35
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Appendix A.

Cost Analysis Organizations in DoD

Independent Cost Assessment Organizations

There are four key offices for the preparation of ICEs. Within OSD, the office 

responsible for ICEs reports to the Director, CAPE. Within the military departments, 

these offices all report to their Assistant Secretary for Financial Management and 

Comptroller. The following paragraphs give a brief description and overview of these key 

offices responsible for ICEs.

OSD – Deputy Director for Cost Assessment

The CAPE Deputy Director for Cost Assessment prepares ICEs for all MDAPs and 

MAIS programs when acquisition oversight has not been delegated to a military 

department or Defense Agency, and reviews all cost estimates and cost analyses prepared 

by the military departments and Defense Agencies in connection with other MDAPs and 

MAIS programs. The Deputy Director for Cost Assessment provides leadership to the 

entire DoD cost community with regard to workforce development and management, 

policy and procedures, cost data collection, cost analysis education and training, and cost 

research. 

Army – Deputy Assistant Secretary of the Army for Cost and Economics 

The Deputy Assistant Secretary of the Army for Cost and Economics (DASA-CE) 

develops ICEs and Component cost analyses of Army weapon and information systems. 

DASA-CE conducts independent reviews and validation of business case analyses, 

economic analyses, and special cost studies of major weapon and information systems, 

force structure, and O&S costs. DASA-CE serves as the Cost and Economics advisor for 

Army Study Advisory Groups. It chairs and oversees the Army Cost Review Board, 

develops and approves the Army Cost Position for all major acquisition programs, and 

conducts in-depth risk analyses of major Army programs and associated costs. 

Navy – Naval Center for Cost Analysis

The Naval Center for Cost Analysis (NCCA) advises the Secretary of the Navy, Chief of 

Naval Operations, and Commandant of the Marine Corps on cost and economic issues. 

NCCA leads the Department of the Navy cost community in issues of cost policy and 

policy implementation, with the goal of increasing the capability and efficiency of the 

Naval cost community. NCCA prepares independent cost analyses for Department of the 

Navy MDAPs and MAIS programs, and also conducts economic analyses and special 

studies to support relevant defense issues. NCCA coordinates all Department of the Navy 

cost research. The Executive Director of NCCA is the Deputy Assistant Secretary of the 

Navy (Cost and Economics).

A-1
Air Force – Deputy Assistant Secretary of the Air Force for Cost and Economics / Air Force 

Cost Analysis Agency

The Air Force develops life-cycle cost ICEs and non-advocate Component cost analyses 

of Air Force aircraft, space, weapons, command and control, and automated information 

systems to support acquisition, programming, and budgeting decisions. The Air Force 

also conducts non-advocate business case analyses, economic analyses, and special cost 

studies of major systems, force structure, and O&S costs supporting multiple Air Force 

and DoD stakeholders. It maintains the Air Force Total Ownership Cost (AFTOC) 

database mandated by the Congress, and develop annual aircraft cost per flying hour 

estimates to support planning, programming, and budgeting decisions. The Deputy 

Assistant Secretary of the Air Force for Cost and Economics develops the Air Force Cost 

Position for all major acquisition programs; conducts and coordinates cost research to 

develop analytical databases, methods, and tools; and advocates for and manages the Air 

Force cost analysis workforce ranging from tactical to headquarters levels.

Additional Field-Level Cost Organizations and Activities

There are several field-level cost organizations. These typically are located at a major 

product center such as the NAVAIR or the Air Force Life Cycle Management Center

(AFLCMC). This section provides a summary of these important organizations.

Army

TACOM Life Cycle Management Command (LCMC)

The TACOM LCMC Cost and Systems Analysis organization is responsible for 

preparation of program office estimates, life cycle cost estimates, economic analyses, and 

combat effectiveness modeling that support the development of combat and tactical 

vehicles. It manages the tools and databases to support cost and systems analysis 

processes for the TACOM LCMC. The major cost analysis activities are life cycle cost 

estimating, cost reporting and EVM, O&S cost baselines, support to AoAs, source 

selection evaluations, and cost analyses associated with multi-year procurement

contracts. 

Aviation and Missile Command (AMCOM)

The AMCOM Cost Analysis Division provides cost estimation and analysis support to 

Aviation, Missiles and Space Program Executive Offices and their Program/Project 

Offices. It manages the AMCOM Cost Analysis Program and develops, updates, or 

obtains cost estimating relationships, cost factors, and mathematical and computerized 

cost models for estimating purposes. It develops cost estimates to support AoAs, tradeoff 

studies, and force structure cost estimates. It develops and prepares life cycle cost 

estimates, and it conducts other related studies in support of weapon system cost 

analyses. It performs cost risk analyses and cost risk assessments to support weapon 

system program decisions. It also provides validation/review for cost estimates, economic 

analyses, and business case analyses.

A-2
Communication-Electronics Command (CECOM)

The CECOM Cost Analysis Division provides cost estimation and analysis support to 

CECOM Program Executive Offices and their Program/Project Offices. It provides 

several cost analysis services, including life cycle cost estimating, EVM, economic 

analysis, modeling and simulation, computer software and database support, and review 

and validation of business case analyses and other cost analyses.

Navy

Naval Air Systems Command (NAVAIR)

The Cost Department of NAVAIR provides a wide variety of cost analysis products and 

services. Its primary focus is to provide a clear and comprehensive understanding of life 

cycle cost and attendant uncertainties to be used in developing, acquiring, and supporting 

affordable naval aviation systems. Besides life cycle cost estimates, the Cost Department 

provides source selection cost evaluation support, EVM analysis, cost research and 

databases, and various cost/benefit studies.

Naval Sea Systems Command (NAVSEA)

The Cost Engineering and Industrial Analysis Division of NAVSEA provides cost 

engineering and industrial base analysis for ships, ship-related combat systems, and 

weapons. It provides cost estimates in support of the DAB review process, including 

AoA studies. It also participates in contract proposal evaluations and the source selection 

process for builders and suppliers of ships and weapon systems, and it conducts analysis 

and forecasting of labor, industrial, and technical trends as they affect the overall 

acquisition of ships, combat systems, weapons, and other equipment. 

Space and Naval Warfare Systems Command (SPAWAR)

The Cost Estimating and Analysis Division (SPAWAR 01-6)—depending on a program’s 

acquisition category—may provide assistance to ACAT I program offices, perform an 

ICE for ACAT II programs prior to a Milestone B or C review, or independently review a 

program office cost estimate upon the request of the Program Executive Officer (C4I and 

Space). SPAWAR 01-6 also provides more general cost analysis support to the Program 

Executive Officer (PEO) as needed.

Naval Surface Warfare Center

The Cost and Affordability Group resides within the Warfare Analysis Branch of the 

Requirements Analysis and Advanced Concepts Division of the Warfare Systems 

Department at the Naval Surface Warfare Center, Dahlgren Division. The Group 

produces cost estimates, cost-risk assessments, and affordability analyses for Combat 

Systems. The Group also develops cost-estimating methodology in support of systems 

development and production, AoAs, and strategic planning. Particular areas of expertise 

include model development and maintenance, cost-research databases, technology 

assessments, life cycle cost estimates, budget and force-level analyses, performanceA-3
based cost models, product-oriented cost models, proposal evaluation, and source 

selection reviews.

Marine Corps Systems Command (MCSC)

The Cost and Analysis Branch (C&AB) is the MCSC authority in the field of cost 

analysis. The C&AB conducts and oversees the development of cost estimates for MCSC 

weapon, IT, and non-standard training systems programs. The C&AB advises the 

Commander, MCSC and PEOs on the historic, current, and emerging trends in all 

elements of cost estimating and cost analysis. The Branch works for the MCSC 

Commander as an independent agent that provides cost products to Program Management 

Offices (PMOs) and PEOs. The Branch is organized into analytical teams in direct cost 

support of the PMOs and PEOs and a general support studies team for conducting AoAs 

and other operations research studies and analyses. Through its processes, the C&AB 

delivers life-cycle cost estimates to satisfy the “Will-Cost” estimate, whereas PMOs 

perform the “Should-Cost” analysis. 

Air Force

Air Force Life Cycle Management Center (AFLCMC)

In 2012, the Air Force combined cost estimating activities from three product centers 

under AFLCMC (Aeronautical Systems Center, Electronic Systems Center, and Air 

Armament Center). AFLCMC leads estimates for program milestone decisions, manages 

the annual cost estimate process, supports pre-award activities and source selections, and 

participates in policy discussions resulting in high-quality cost estimates and analysis 

across the Center. 

Air Force Space Command, Space and Missile Center (SMC)

The SMC Cost Estimating Division supports cost estimates and cost analyses associated 

with Air Force Space Command and the Space and Missile Center’s mission of satellite 

acquisition, launch, and control.

Air Force Sustainment Center (AFSC)

The AFSC Cost Estimating Division supports cost estimates and cost analyses associated 

with the Air Force Sustainment Center’s mission to provide depot maintenance, supply 

chain management and installation support to Air Force weapon systems.

Air Force Nuclear Weapons Center (AFNWC)

The AFNWC Cost Estimating Division supports cost estimates and cost analysis for all 

nuclear weapon systems activities. The responsibilities of the AFNWC include 

acquisition, modernization, and sustainment of nuclear system programs for both DoD

and the Department of Energy.

A-4
Other

National Reconnaissance Office (NRO) Cost Analysis Improvement Group

The NRO Cost Analysis Improvement Group provides independent cost estimating 

support to the NRO. This support covers milestone decisions, budget submissions, EVM, 

ad hoc program support, data collection, methods development, and model/tool 

development.

Defense Information Systems Agency (DISA)

The DISA Analysis and Internal Controls Division guides, directs, and strengthens cost 

analyses within DISA; and prepares cost estimates for the development, procurement, 

and sustainment of automated information systems and information technology 

capabilities. The Division provides independent support for DISA program/project 

costing efforts, and publishes DISA policies, practices and templates for cost estimation, 

cost/benefit analysis, and economic analysis.

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Appendix B.

Major Defense Acquisition Program Unit Cost Reporting

Since 1982, the Congress has required DoD to track and report on the unit cost for most 

MDAPs. The requirement for unit cost reporting may be waived if the program has not 

entered Engineering and Manufacturing Development (EMD), a reasonable cost estimate 

has not been established for the program, and the system configuration is not well 

defined. The provisions of the law concerning unit cost reporting, commonly referred to 

as the Nunn-McCurdy provisions, are found in section 2433 of title 10, United States 

Code. A complete description of the Department’s implementation of these provisions is 

provided in the Defense Acquisition Guidebook (https://dag.dau.mil): see section 10.9 

(“Acquisition Program Baseline”) and section 10.10.1.5 (“Unit Cost Reports”).

There are two unit cost metrics subject to reporting, Program Acquisition Unit Cost 

(PAUC) and Average Procurement Unit Cost (APUC). PAUC is defined as the total 

program acquisition cost (sum of research, development, test, and evaluation; 

procurement; military construction; and acquisition-related O&M appropriations) divided 

by the total program quantity of fully configured end items from both the EMD and 

Production and Deployment Phases. APUC is defined as the program procurement cost 

divided by the procurement quantity. Both unit cost metrics are tracked in constant 

dollars of a base year established for each program.

The most current cost estimate for each unit cost metric is tracked relative to two baseline 

cost estimates. The current baseline estimate refers to the most recent baseline approved 

by the MDA. The original baseline estimate refers to the baseline approved at program 

initiation (usually Milestone B). A program is declared to have a unit cost breach when 

the current unit cost estimate exceeds either baseline unit cost estimate by more than 

certain specified percentages. Specifically, as shown in Table B-1, a unit cost breach 

takes place when any of the following criteria are met, for either version of program unit 

cost (APUC or PAUC):

Table B-1. Unit Cost Breach Thresholds

“Significant” Breach “Critical” Breach

Current Baseline Estimate +15% +25%

Original Baseline Estimate +30% +50%

Note that there are two degrees associated with the severity of the unit cost breach. For 

significant unit cost breaches, the Department notifies the Congress of the breach within 

45 days of the unit cost report and subsequently submits a program SAR with additional, 

breach-related information. For critical unit cost breaches, in addition to notifying the

Congress and submitting the SAR, the Department is required to conduct a complete 

assessment of the program, led by USD(AT&L), and determine if it should be terminated 

or continued. The Department is required to terminate the program unless a letter signed 

B-1
by USD(AT&L), providing the certification that the program currently meets certain 

criteria established in law (section 2433a of title 10, United States Code), is submitted to 

the Congress within 60 days of the SAR submission. Among other things, USD(AT&L) 

must certify that the Director, CAPE has determined the new unit cost estimates are 

reasonable. A complete description of the critical unit cost breach certification process 

can be found in the Defense Acquisition Guidebook, section 10.10.1.5.2.2 (“Critical Cost 

Breach Certification Requirements”).

B-2
Appendix C.

Major Automated Information System Reporting

Public law (section 2445c of title 10, United States Code) requires annual and quarterly 

reports from MAIS programs, pre-MAIS (now referred to as unbaselined MAIS) 

programs, and any other investment in automated information system products or 

services that is expected to exceed the MAIS thresholds. Details about the MAIS 

reporting requirements may be found in the Defense Acquisition Guidebook

(https://dag.dau.mil), section 10.11 (“Major Automated Information System Statutory 

Reporting”). Briefly, a MAIS Quarterly Report is used internally within the Department, 

and a MAIS Annual Report is provided to the congressional defense committees 45 days 

after submission of the President’s Budget. The formats of the quarterly report and annual 

report are similar. The reports provide a program description, a summary of the program 

status, and the latest estimates regarding schedule, performance characteristics, 

acquisition cost, and life-cycle cost.

The reports compare the latest estimates of schedule, performance, and costs relative to 

the program baseline approved at the previous acquisition milestone. This comparison is 

used to determine if the program has a deviation known as either a Significant Change or 

Critical Change. A Significant Change occurs when a program has a schedule delay of 

more than six months, but less than one year; there is a significant, adverse change in the 

expected performance of the system; or the estimated acquisition cost or life-cycle cost 

has increased by at least 15 percent but less than 25 percent. For a program with a 

Significant Change, the Department is required to notify the congressional defense 

committees of the change within 45 days after receiving the report that identified the 

deviation. 

A Critical Change occurs when a program has a schedule delay of one year or more or 

fails to achieve a full deployment decision within five years of when funds for the 

program were first obligated;

4 there is a change in expected performance that will 

undermine the ability of the system to perform its intended functions; or the estimated 

acquisition cost or life-cycle cost has increased by 25 percent or more. For a program 

with a Critical Change, the Department must conduct an evaluation of the program, and 

then submit a report and a formal certification to the congressional defense committees 

within 60 days after receiving the report that identified the deviation; otherwise 

appropriated funds may not be obligated for any major contract under the program until 

the certification is submitted. The certification must affirm the following:

4 A recent legislative change (section 1092 of the National Defense Authorization Act for Fiscal Year 

2014) allows for an exception to critical change reporting when the failure to achieve the full deployment 

decision within five years is due to an “extension of the program” (defined as further deployment or 

planned deployment to additional users not in the scope of the original program baseline), and the 

program is otherwise on track.

C-1

 
(1) the program is essential to the national security or to the efficient management of 

DoD;

(2) there is no alternative to the system or information technology investment which 

will provide equal or greater capability at less cost;

(3) the new estimates of the costs, schedule, and performance parameters with 

respect to the program have been determined, with the concurrence of the 

Director, CAPE, to be reasonable; and

(4) the management structure for the program is adequate to manage and control 

program costs.

C-2
Appendix D.

DoD Cost Data Collection Systems

Three primary data collection systems are used by DoD as the major sources of cost data 

for major acquisition programs:

• CSDR system – serves as the primary source of cost data for major contracts and 

subcontracts associated with MDAPs and MAIS programs

• EVM Central Repository – used to collect and archive EVM reporting 

documents

• VAMOSC systems – collect historical O&S costs for major weapon systems

Cost and Software Data Reporting System

System Description

The CSDR system is the primary means that DoD uses to collect actual cost and related 

data on major defense contracts and subcontracts. Defense contractors support the CSDR 

system, under contractual agreements, by reporting data on development, production, and 

sustainment costs incurred in executing contracts. The two principal components of the 

CSDR are contractor cost data reporting (CCDR) and software resources data reporting 

(SRDR).

CCDR is the primary means within DoD to systematically collect data on the 

development, production, and sustainment costs incurred by contractors. Interim DoD 

Instruction 5000.02, Operation of the Defense Acquisition System, establishes the CCDR 

requirements for major contracts and subcontracts (regardless of contract type) associated 

with MDAPs and MAIS programs.

The SRDR system collects software metrics data to supplement the CCDR cost data, to 

provide a better understanding and improved estimating of software-intensive programs. 

Interim DoD Instruction 5000.02 establishes SRDR requirements for major contracts and 

subcontracts (regardless of contract type) associated with MDAPs and MAIS programs. 

Data collected from applicable contracts include type and size of the software 

application(s), schedule, and labor resources needed for the software development. 

Access to CSDR data is provided by the DCARC to authorized and approved users. 

Detailed procedures and other implementation guidance for both CSDR systems are 

found in DoD 5000.04-M-1, Cost and Software Data Reporting (CSDR) Manual. This 

manual (as well as downloadable report formats and definitions, specific report examples, 

and other related information) can be found at the DCARC website 

(http://dcarc.cape.osd.mil). 

Cost and Software Data Reporting Compliance

The DCARC continually monitors each MDAP for compliance with CSDR requirements 

where applicable. CSDR reporting is not required when (1) the program is in preD-1
Milestone A status, with no prototypes, or (2) the CSDR requirements have been waived 

by CAPE. Waivers for CSDR requirements may be granted when (1) a program is a 

procurement of a commercial system, or (2) a program is purchased under competitively 

awarded, firm fixed-price contracts, as long as competitive conditions continue to exist.

For the programs for which CSDR reporting is required and that are monitored for 

compliance, the compliance ratings established by the DCARC are based on the 

following five criteria:

• CSDR reporting plans have been submitted and approved.

• Approved reporting plans have been included in the appropriate request for 

proposal.

• Supporting contract data requirements (i.e., Contract Data Requirements Lists) 

for the various CSDR reports have been submitted.

• CSDR reports have been submitted on time consistently.

• CSDR reports have passed DCARC validation procedures consistently.

A program is rated fully compliant when all five criteria are met with no missing or 

incomplete items. A program is rated mostly compliant when all CSDR reporting 

requirements are placed on contract, but one or more criteria are not completely met. A 

program is rated not compliant when either (1) contracts were awarded that did not meet 

CSDR reporting requirements, or (2) any deficiency in meeting any of the five criteria 

has been open and unresolved for more than three months past the required due date.

For FY 2013, all of the 147 programs subject to CSDR reporting were fully or mostly 

compliant based on the criteria above. This is a slight improvement over the FY 2012 

compliance statistics, in which 94 percent of the programs were considered compliant or 

mostly compliant. CAPE and the DCARC are continuing to emphasize the importance of 

CSDR reporting compliance for achieving more accurate program life-cycle cost 

estimates in the future.

Earned Value Management Central Repository

In collaboration with the staff of USD(AT&L), the DCARC hosts the EVM Central 

Repository. The central repository supports the centralized reporting, collection, 

archiving, and distribution of key EVM data reports (such as Integrated Program 

Management Reports) for MDAPs and MAIS programs. Information about the central 

repository is available at the DCARC website, http://dcarc.cape.osd.mil/EVM

/EVMOverview.aspx. More general information about EVM reporting is available in the 

Defense Acquisition Guidebook (https://dag.dau.mil), section 11.3.1 (“Earned Value 

Management”), and at the DoD Earned Value Management website, 

http://www.acq.osd.mil/evm.

The central repository supports complete, timely, and secure transfer of electronic data 

from the contractor to the repository; secure and controlled warehousing of the data; and 

controlled, timely, and secure access to the data by authorized users. The main purpose of 

D-2
these data is to provide a consistent and timely situational awareness of acquisition 

execution. 

Both the CCDR and the EVM reporting use a common, product-oriented taxonomy 

known as a WBS that follows the guidelines of the DoD Standard Practice, Work 

Breakdown Structures for Defense Materiel Items (MIL-STD-881C). The WBS is a 

hierarchy of product-oriented elements (hardware, deliverable software, data, and 

services) that collectively constitute the system to be developed or produced. Further 

information about the use of the WBS in cost reporting and cost estimating can be found 

in the Defense Acquisition Guidebook, section 3.7.1.1 (“Work Breakdown Structure”).

Visibility and Management of Operating and Support Costs Data System

DoD requires that each military department maintain a system that collects historical data 

on the O&S costs for major fielded weapon systems. The CAPE Deputy Director for Cost 

Assessment provides policy guidance on this requirement, known as the VAMOSC 

program; specifies the common format in which the data are to be reported; and monitors 

its implementation by each of the military departments. The National Defense 

Authorization Act for Fiscal Year 2012, Public Law 112-81, contains a provision that 

calls for strengthened CAPE oversight of the VAMOSC program.

Each department has its own unique VAMOSC data system that tracks actual O&S cost 

experience for major weapon systems. The data can be displayed by time frame, at 

various levels of detail, and by functional elements of cost (such as depot maintenance, 

fuel, consumable items, and so forth). Each VAMOSC system provides not only cost 

data, but related non-cost data (such as system quantities and operating tempo) as well. 

VAMOSC data can be used to analyze trends in O&S cost experience for each major 

system, as well as to identify and assess major cost drivers. VAMOSC data systems are

managed by each military department as follows: 

• The Navy’s VAMOSC management information systems (known as Navy 

VAMOSC and Marine Corps VAMOSC) collect and report US Navy and US 

Marine Corps historical weapon system O&S costs. VAMOSC provides the 

direct O&S costs of weapon systems; some indirect costs (e.g., ship depot 

overhead); and related non-cost information such as flying hour metrics, 

steaming hours, age of aircraft, personnel counts for ships, etc. It is managed by 

the Naval Center for Cost Analysis.

• The Army’s VAMOSC system, called the Operating and Support Management 

Information System (OSMIS), tracks operating and support information for over 

1,400 major Army weapon/materiel systems and is maintained by DASA-CE. 

OSMIS-tracked systems include combat vehicles, tactical vehicles, artillery 

systems, aircraft, electronic systems, and miscellaneous engineering systems.

OSMIS provides cost data for these systems, as well as non-cost information 

such as aircraft flying hours or vehicle miles, fuel consumption, demand for 

parts, and number of end-item overhauls. 

D-3
• The Air Force’s VAMOSC system, AFTOC, is managed by the Deputy Assistant 

Secretary of the Air Force for Cost and Economics. It provides O&S cost 

information on all Air Force aircraft, space systems, and missiles. The O&S cost 

information collected includes unit-level manpower, fuel, depot maintenance 

overhaul costs, depot-level reparable costs, and other costs of major US Air 

Force aircraft and engines. AFTOC also provides data on aircraft quantities and 

flying hours, numbers of personnel, and other non-cost information. 

D-4
Abbreviations

ACAT Acquisition Category

ADM Acquisition Decision Memorandum

AFLCMC Air Force Life Cycle Management Center

AFNWC Air Force Nuclear Weapons Center

AFSC Air Force Sustainment Center

AFTOC Air Force Total Ownership Cost

AHE Advanced Hawkeye Aircraft

AMCOM Aviation and Missile Command

AMDR Air and Missile Defense Radar

AoA Analysis of Alternatives

APUC Average Procurement Unit Cost

AWACS Airborne Warning and Control System

C&AB Cost and Analysis Branch

CAC Common Access Card

CADE Cost Assessment Data Enterprise

CAPE Cost Assessment and Program Evaluation

CARD Cost Analysis Requirements Description

CCDR Contractor Cost Data Reporting

CECOM Communication-Electronics Command

CIO Chief Information Officer

CSDR Cost and Software Data Reporting

DAB Defense Acquisition Board

DAES Defense Acquisition Executive Summary

DASA-CE Deputy Assistant Secretary of the Army for Cost and Economics

DAU Defense Acquisition University

DAVE Defense Acquisition Visibility Environment

DCARC Defense Cost and Resource Center

DCMO Deputy Chief Management Officer

DISA Defense Information Systems Agency

DoD Department of Defense

DoDCAS Department of Defense Cost Analysis Symposium

E-1
EELV Evolved Expendable Launch Vehicles

EHF Extremely High Frequency

EMD Engineering and Manufacturing Development

EVM Earned Value Management

FCoM Full Cost of Manpower

FMR Financial Management Regulation

FY Fiscal Year

FYDP Future Years Defense Program

GCSS-MC Global Combat Support System—Marine Corps

GPS Global Positioning System

ICE Independent Cost Estimate

LCM Logistics Chain Management

LCMC Life Cycle Management Command

LCS Littoral Combat Ship

LEP Life Extension Program

MAIS Major Automated Information System

MCSC Marine Corps Systems Command

MDA Milestone Decision Authority

MDA Missile Defense Agency

MDAP Major Defense Acquisition Program

MM Mission Modules

NAVAIR Naval Air Systems Command

NAVSEA Naval Sea Systems Command

NCCA Naval Center for Cost Analysis

NGJ Next Generation Jammer

NMT Navy Multiband Terminal

NNSA National Nuclear Security Administration

NRO National Reconnaissance Office

NWC Nuclear Weapons Council

O&M Operations and Maintenance

O&S Operating and Support

OCX Next Generation Operational Control System

E-2
OMB Office of Management and Budget

OSD Office of the Secretary of Defense

OSMIS Operating and Support Management Information System

PAUC Program Acquisition Unit Cost

PEO Program Executive Officer

PMO Program Management Office

SAR Selected Acquisition Report

SM-3 Standard Missile-3

SM-6 Standard Missile-6

SMC Space and Missile Center

SPAWAR Space and Naval Warfare Systems Command

SRDR Software Resources Data Reporting

THAAD Terminal High Altitude Area Defense

TKA Tail Kit Assembly

USD(AT&L) Under Secretary of Defense for Acquisition, Technology and 

Logistics

USD(C) Under Secretary of Defense (Comptroller)

VAMOSC Visibility and Management of Operating and Support Costs

WBS Work Breakdown Structure

WSARA Weapon Systems Acquisition Reform Act

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