A

FY 2016 Annual Report on Cost Assessment Activities

January 2017
This page intentionally left blank.
FY 2016 Annual Report on Cost Assessment Activities

Director, Cost Assessment and 

Program Evaluation

January 2017

The estimated cost of this report for the Department of Defense is 

approximately $70,000 in Fiscal Years 2016-2017. This includes 

$65,000 in expenses and $5,000 in DoD labor.
This page intentionally left blank.
iii

Table of Contents

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

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

Chapter II – Overview of Cost Analysis in DoD..............................................................................7

Overview of Cost Analysis Organizations in DoD....................................................................7

Procedures for Cost Assessments at Milestone Reviews and Other Events ..............................8

Cost Assessment Procedures for Major Defense Acquisition Programs.............................8

Cost Assessment Procedures for Major Automated Information Systems..........................9

Role of the Independent Cost Estimate ...............................................................................9

Component Cost Position and Full Funding Commitment ...............................................10

Multi-Year Procurement....................................................................................................10

Confidence Levels in Cost Estimates................................................................................11

Cost Estimates for Contract Negotiations .........................................................................11

Cost Analysis Requirements Description..........................................................................11

Operating and Support Cost Estimates..............................................................................12

Guidance and Procedures for Other Cost Assessment Activities ............................................12

Cost Comparisons of Military, Civilian, and Contractor Manpower ................................12

Economic Analysis for Decision-making..........................................................................13

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

Chapter III – DoD Cost Assessment Activities in FY 2016...........................................................15

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

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

CAPE Cost Analysis for Multi-Year Procurement..................................................................19

DoD Critical Unit Cost (Nunn-McCurdy) Breaches in FY 2016 ............................................19

MAIS Critical Change Cost Assessment Activities.................................................................21

Remarks about Specific Programs.....................................................................................23

Assessment of Compliance, Quality, and Differences in Methodology ..................................23

Compliance with Policy and Procedures...........................................................................23

Quality of the Cost Estimates............................................................................................23

Differences in Methodology..............................................................................................26

Acquisition Program Cost Performance............................................................................30

Areas for Improvement............................................................................................................32

Other Cost Assessment Activities in FY 2016.........................................................................32

CAPE ICE for F-35 Operating and Support Costs............................................................32

DoD Contract Pricing and Cost Estimating Collaboration Conference ............................33

DoD Cost Analysis Symposium........................................................................................33

Chapter IV – The Look Forward....................................................................................................35
iv

Cost Leadership Forum............................................................................................................35

Policies and Procedures ...........................................................................................................35

Recent Legislative Changes ..............................................................................................35

Acquisition of Services .....................................................................................................37

Cost Analysis Requirements Description Update .............................................................37

Enhanced Cost Data Collection ...............................................................................................37

Reinvigorate the Cost Working-group Integrated Product Team......................................38

FlexFiles Initiative.............................................................................................................38

Improved CSDR Planning.................................................................................................39

Software Data Reporting Initiatives ..................................................................................39

Technical Data...................................................................................................................40

Cost Data Reporting for Sustainment Contracts ...............................................................41

Data Collection on Indefinite Delivery/Indefinite Quantity Contracts .............................41

Data Collection on Government-Performed Efforts..........................................................42

Cost Assessment Data Enterprise ............................................................................................42

Contracts Price Database...................................................................................................44

Cost Indices..............................................................................................................................45

Cost Analysis Education and Training.....................................................................................46

Tracking to Approved Estimate—Program/Budget Review and Acquisition .........................47

Summary..................................................................................................................................47

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. CADE and Cost Data Collection Systems............................................................. D-1

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

FIGURES

Figure 1. CSDR Data Collection over Time...................................................................................25

Figure 2. Comparison of CAPE Independent Cost Estimates to Service Cost Positions ...............27

Figure 3 Assessment of Data Quality for GBSD Program.............................................................29

Figure 4. Number of Nunn-McCurdy Breaches by Year ...............................................................31

Figure 5. Cost Assessment Data Enterprise Objectives .................................................................43

Figure D-1. CADE Sitemap ........................................................................................................ D-1

Figure D-2. CADE Users ............................................................................................................ D-2

Figure D-3. CADE Data Reports and Plans ................................................................................ D-4

Figure D-4. CSDR Compliance Rating Criteria.......................................................................... D-5

Figure D-5. Quarterly CSDR Complaince History by Fiscal Year ............................................. D-6
v

TABLES

Table 1. MDAP Milestone or Other Review Cost Assessment Activities in FY 2016 ..................16

Table 2. Nunn-McCurdy Critical Unit Cost Breachesin FY 2016 .................................................20

Table 3. MAIS Critical Change Activities in FY 2016 ..................................................................22

Table B-1. Unit Cost Breach Thresholds .....................................................................................B-1
This page intentionally left blank.
1

FOREWORD

President Obama signed the Weapon Systems Acquisition Reform Act (WSARA) of 2009, Public 

Law 111-23, into law to reform the defense acquisition processes and to bring cost growth under 

control. To accomplish this, 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 the Department's cost estimation and cost analysis processes provide 

accurate information and realistic estimates of cost for the major acquisition programs. Since the 

enactment of this landmark legislation, CAPE has worked with the military department cost 

agencies and other organizations throughout the Department of Defense (DoD) cost community 

to strengthen cost estimation, ultimately reducing risk in acquisition programs. 

As this eighth edition of this Annual Report is being published, I am concluding two and one half 

years of serving as the Director of CAPE. During this time, and during the time of my 

predecessor, CAPE has completed more than 125 reports, including independent cost estimates 

for major weapons systems, estimates to support restructuring of programs and certifications 

following Nunn-McCurdy breaches, multi-year procurement contract savings certifications, and 

MAIS critical change reports. The DoD cost community writ large has made substantial progress 

since WSARA. There have been fewer acquisition program cost and schedule breaches, reduced 

cost growth, improved quality of the cost estimates made by CAPE and the military departments, 

increased emphasis on cost data reporting resulting in improved data quality and compliance with 

established standards, and a better educated and trained cost analysis work force. 

The DoD cost community is working together to achieve the objectives of WSARA. We have 

established a solid and unified working relationship among the leaders of CAPE, the military 

department cost agencies, and the field-level cost organizations, with CAPE serving as the 

advocate for the DoD cost community as a whole. We have established formal strategic direction 

for the entire cost community, as stated in written policy and procedures. We have invested in the 

Cost Assessment Data Enterprise project, which is beginning to revolutionize cost data collection 

and analysis by providing the entire DoD cost community with a centralized and authoritative 

database supported by advanced data visualization and other analytic tools. Moreover, we have 

made great strides in enhancing the underlying data that supports this project. We have restored 

rigorous and systematic cost data collection, which is essential to support accurate cost estimates 

of current and future programs. We have also worked with the Defense Acquisition University 

and other educational institutions to conduct a comprehensive review of the entire curricula and 

course content provided to the DoD cost community in order to ensure that desired core 

competencies for cost analysis are being addressed. 

Although the DoD cost community has made significant progress, many challenges remain, and 

there is more work to be done. The guiding vision for this work is the need for independent, 

rigorous, and objective program cost and schedule estimates, paired with thorough risk 

assessments, based on solid data and analytic methods and tools. The Congress has with good 

reason continued to reaffirm the importance of this role in legislation since WSARA, because 

such estimates are essential for effective acquisition decision making and oversight. Good 

3 

CHAPTER I – INTRODUCTION 

As established by WSARA, the Director of CAPE is the principal official for independent cost estimation 

and cost analysis, ensuring that the cost estimation and cost analysis processes of DoD provide accurate 

information and realistic estimates of cost for the acquisition programs of the Department. 

In fulfilling this responsibility, the Director of CAPE conducts independent cost estimates and cost 

analyses; prescribes policies and procedures for the conduct of cost estimation and cost analyses in the 

DoD; reviews all cost estimates and cost analyses conducted in connection with Major Defense 

Acquisition Programs (MDAPs) and Major Automated Information System (MAIS) programs; conducts 

cost analyses of defense acquisition programs to be carried out using multiyear contract authority; 

prescribes policies and procedures for the reporting and collection of actual cost data and other 

information for MDAPs and MAIS programs; provides leadership in the education and training of the 

DoD and the broader US Government cost analysis communities; and issues guidance relating to the full 

consideration of life-cycle management and sustainability costs in MDAPs and MAIS programs. 

This annual report describes this year’s progress in reaching these ambitious objectives. The organization 

of this report is as follows: 

 Chapter II provides an overview of cost analysis in the DoD. It describes the types and purposes 

of cost analysis organizations throughout the Department and explains the procedures for 

preparing cost estimates that support the defense acquisition process. It also introduces the main 

DoD systems that collect actual data and information on the contract and government costs of 

programs. Some of the key points in this chapter are: 

o DoD Cost Organizations. Cost organizations are embedded throughout the 

Department: at OSD, at the headquarters of the military departments and defense 

agencies, and at a wide range of field-level organizations. Each cost organization serves 

a unique role, but also contributes to the collective efforts of the cost community as a 

whole. 

o Procedures for Cost Assessments. CAPE has completed six major documents that 

provide guidance to DoD organizations concerning cost assessment policy and 

procedures. These documents are: 

 DoD Directive 5105.84, Director of Cost Assessment and Program Evaluation 

(DCAPE) 

 DoD Instruction 5000.73, Cost Analysis Guidance and Procedures

 Operating and Support Cost-Estimating Guide 

 DoD 5000.04-M-1, Cost and Software Data Reporting (CSDR) Manual 

 DoD Instruction 7041.04, Estimating the Full Costs of Civilian and Active Duty 

Manpower and Contract Support 

 DoD Instruction 7041.3, Economic Analysis for Decision-making 
4 

The first four of these documents are the primary vehicles for implementing the cost 

assessment provisions of WSARA throughout DoD. The CAPE efforts to publish 

procedures for all cost assessment activities are now for the most part complete, and all 

six of these documents are now in compliance with the OSD standard to be reviewed 

annually or updated within a ten year period. However, as discussed later in this report, 

some of these documents will need to be updated due to recent legislation. 

 Chapter III reviews the Department’s Fiscal Year (FY) 2016 cost estimation and cost analysis 

activities associated with MDAPs and MAIS programs. These activities include independent 

cost estimates (ICEs) as well as reviews of military department and defense agency cost 

estimates. These activities 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 2016 complied with established procedures, and 

discusses the overall quality and any consistent differences in methodology among the cost 

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

o MDAP/MAIS Cost Assessment Activities. In FY 2016, there were cost assessment 

activities supporting 12 MDAP milestone reviews, 3 multi-year procurements, 1 critical unit 

cost (Nunn-McCurdy) breach, and 2 MAIS critical change events. In addition, CAPE 

completed an update to its estimate of the operating and support (O&S) costs of the F-35 

fighter aircraft. 

o Assessment of Compliance, Quality, and Differences in Methodology. The cost 

assessment activities complied with the requirements of WSARA and the established 

procedures described in Chapter II. The overall quality of the cost estimates prepared by the 

military departments has continued to improve due to increased rigor. The quality of the 

cost estimates for both CAPE and the military departments has also continued to improve to 

better data. A recent CAPE analysis made a comparison between the CAPE ICEs and the 

service cost positions, and found that the difference between the two estimates since the 

enactment of WSARA in 2009 has narrowed significantly relative to the prior period 

between 1999 and the enactment of WSARA. This is a direct result of improvements to the 

systematic collection of actual cost information over time and improved availability to all 

parties in the cost community in the Cost Assessment Data Enterprise system discussed 

later in this report. 

o DoD Contract Pricing and Cost Estimating Conference. This year, CAPE worked with 

the cost and price analysts in contracting community to jointly sponsor a three-day 

conference at a low-cost facility that allowed approximately 600 cost estimators and 

contract pricing analysts to educate each other on respective missions, products, and 

processes. This provided a venue for collaboration on data sharing and analytic methods for 

mutual benefit. 

 Chapter IV describes the status of several ongoing initiatives that will ensure the cost assessment 

and cost estimating functions for the Department will be improved and modernized as required 

to meet the evolving needs of the Department. These initiatives address a wide range of issues 

and concerns, including leadership for the cost community as a whole, cost estimating policies 
5 

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 Cost Leadership Forum. CAPE has established a periodic meeting with the leaders and 

senior staff of the military department cost agencies 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 WSARA objectives, improving cost analysis, and dealing with the challenges of 

the current constrained resource environment. 

o Policies and Procedures. Efforts are ongoing to make further additions and improvements 

to the overall cost estimating guidance. It will also be necessary to update the guidance in 

FY 2017 for recent legislative changes (made in the National Defense Authorization Act 

for FY 2017) and other fact-of-life changes, as well as make desired improvements. There 

will also be an update to the procedures concerning cost data collection, which will 

implement various initiatives described below. 

o Enhanced Cost Data Collection. Over the past few years, CAPE has made considerable 

progress in restoring systematic data collection. However, based on feedback from 

government users about desired report enhancements for the data being collected, as well as 

noted gaps in coverage about important cost data not being collected, CAPE and the 

military department cost agencies have established several initiatives to improve the quality 

for data collection and reporting and to increase efficiency through better business 

processes and use of advancements in information systems technology. One of these 

initiatives has modernized cost data reporting by enabling the automated submission of lowlevel cost data directly from the contractors’ accounting systems. Other initiatives have led 

to improved software data reporting and the collection of system technical data (design and 

performance parameters) that will be useful to cost analysts. In addition, CAPE has 

continued to improve and expand cost data reporting on major weapon system sustainment 

contracts. Cost data collection and reporting is also now being extended to certain contract 

types, where quantities of supplies or levels of service are not specified up front, that have 

been used to support high-dollar value modernization and sustainment of important weapon 

system platforms. Cost data collection and reporting is also being extended to governmentperformed efforts as modern financial systems are implemented throughout the government. 

o Cost Assessment Data Enterprise. CAPE initiated the development of the Cost 

Assessment Data Enterprise (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 Under Secretary of Defense for Acquisition, Technology, and 

Logistics (USD(AT&L)) staff to incrementally work towards its CADE vision of the 

government cost analyst’s centralized database and virtual library, housing seamless 

integrated authoritative data sources that are easily searchable and retrievable. 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 providing a quicker ability to see how a program is 

performing between major reviews. This initiative will increase analyst efficiency and will 
6 

provide a way for analysts to build upon each other’s work, where historically analysts have 

typically engaged in separate efforts. 

o Cost Indices. The cost community now considers the use of both inflation and price 

escalation indices in cost estimates to be a best practice. To institutionalize this practice 

throughout the Department, CAPE published Inflation and Escalation Best Practices for 

Cost Analysis in April 2016. This publication is available on the CAPE web site. 

o Cost Analysis Education and Training. CAPE and the military department cost agencies 

formed an Education and Training Working Group that periodically reports its status to the 

Cost Leadership Forum. This working group developed a framework of desired core 

competencies—for apprentice, mid-level, and senior cost analysts—that are being used to 

guide education and training standards for course content. The working group has also 

worked with the Defense Acquisition University (DAU) to review course content and 

ensure that these desired core competencies are being addressed. Education and training 

supported by an advanced training system specific to CADE and its supporting cost data has 

been developed for incorporation into the curricula at DAU and other educational 

institutions. CAPE has also worked with DAU on the development of a five-day course 

pertaining to software cost estimating. 

The report also includes appendices that provide background information relevant to cost assessment 

activities. Appendix A enumerates the cost analysis organizations in the Department. Appendix B 

describes MDAP unit cost reporting and unit cost breach thresholds. Appendix C describes MAIS 

reporting and criteria associated with program deviations that trigger notifications or certifications to the 

Congress. Appendix D provides additional information on DoD cost data collection systems. 
7 

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 and analysis in place throughout DoD. Chapter IV of this report describes the 

efforts to continue to strengthen these institutions to meet 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 

Cost organizations are integrated throughout DoD: at OSD, at the headquarters of the Components (i.e., 

military departments and defense agencies), and across the DoD field organizations. Each cost group 

serves unique programmatic and systematic functions but also compliments the family of cost 

organizations supporting the defense acquisition process and the broad and diverse operations of the 

Department. This helps foster best practices within the cost community. 

At the OSD level, the Director, CAPE is the principal official for independent cost estimation and cost 

analysis, responsible for ensuring that the cost estimation and cost analysis processes of DoD provide 

accurate information and realistic estimates of cost for the major acquisition programs of the Department. 

The Director, CAPE provides ICEs for both MDAPs and MAIS programs when the Milestone Decision 

Authority (MDA) for a program is the 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 Analysis of Alternatives (AoAs). Field-level and program 

office members of the cost community workforce often possess important specialized cost and technical 

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

tactical missiles. 

Appendix A provides a brief description of the military department cost agencies and field-level cost 

organizations. 
8 

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; 

these procedures were added or modified to meet WSARA requirements. 

DoD Directive 5105.84, Director of Cost Assessment and Program Evaluation (DCAPE), was approved 

on May 11, 2012 and serves as the CAPE charter. The Directive defines overall CAPE roles, 

responsibilities and authorities in the PPBE, acquisition, and requirements processes. Regarding cost 

assessment, the Directive establishes the Director CAPE as the principal official for independent cost 

estimation and cost analysis for the acquisition programs of DoD. 

The framework for DoD policy and procedures for cost assessment activities is provided in Enclosure 10 

(“Cost Estimating and Reporting”) contained in DoD Instruction 5000.02, Operation of the Defense 

Acquisition System. DoD Instruction 5000.02 was issued by USD(AT&L) in January 2015. 

More specific guidance on prescribed policy and procedures is provided in DoD Instruction 5000.73, Cost 

Analysis Guidance and Procedures. This instruction was issued by the Director, CAPE in June 2015. The 

instruction is the primary vehicle for implementing the cost assessment provisions of WSARA throughout 

DoD. In particular, it provides guidance to the military departments and defense agencies concerning the 

preparation, presentation, and documentation of life-cycle cost estimates for major acquisition programs. 

It assigns roles and responsibilities, and describes the process and timelines for the cost assessment 

activities that support the various program decision points discussed later in this chapter. 

All of these directives and instructions are available on the DoD website 

http://www.dtic.mil/whs/directives/index.html. 

Cost Assessment Procedures for Major Defense Acquisition Programs 

Pursuant to statutory requirements (section 2334 of title 10, United States Code), CAPE prepares ICEs 

and conducts cost analysis for MDAPs for which the MDA is USD(AT&L): 

 In advance of any Milestone A certification or Milestone B certification under sections 2366a/b 

of title 10, United States Code. 

 In advance of any decision to enter low-rate initial production (LRIP) or full-rate production 

(FRP). 

 Any certification for critical unit cost (Nunn-McCurdy) breaches under section 2433a of title 10, 

United States Code. Appendix B provides a description of the procedures for MDAP unit cost 

reporting and the criteria for a critical unit cost breach. 

 At any other time considered appropriate by the DCAPE or upon the request of USD(AT&L) or 

other senior leaders of the Department. 

For milestone and other acquisition reviews, when the MDA is delegated to the Component, CAPE either 

(1) reviews the ICE prepared by the military department cost agency (or defense agency equivalent), and 

provides a written summary of its review and findings to the MDA, or (2) prepares the ICE when 

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

Currently, for the 109 MDAPs, USD(AT&L) is the MDA for 46 programs, and the various Component 

Acquisition Executives are the MDAs for the remaining 63 programs. 
9 

Any changes to these statutory requirements made by the National Defense Authorization Act for 

FY 2017 (enacted on December 23, 2016) will be incorporated into CAPE policy and procedures in 

FY 2017. 

Cost Assessment Procedures for Major Automated Information Systems 

As required by section 2334 of title 10, United States Code, CAPE prepares ICEs and conducts cost 

analysis for MAIS programs for which the MDA is USD(AT&L): 

 In advance of any certification following a critical change under section 2445c(f) of title 10, 

United States Code. Appendix C provides a description of the procedures for MAIS program 

reporting and the criteria for a critical change. 

 At any other time considered appropriate by the DCAPE or upon the request of USD(AT&L) or 

other senior leaders of the Department. 

For milestone and other acquisition reviews, when the MDA is delegated to the Component, CAPE 

normally reviews the ICE prepared by the military department cost agency, and provides a written 

summary of its review and findings to the MDA. However, CAPE may prepare the ICE for a delegated 

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

MDA. 

Currently, for the 34 MAIS programs, USD(AT&L) is the MDA for 19 programs, and the various 

Component Acquisition Executives are the MDAs for the remaining 15 programs. 

Note that the statutory provisions pertaining to MAIS programs, including the critical change procedures, 

are being removed from statute effective September 30, 2017. This change was made by the National 

Defense Authorization Act for FY 2017. 

Role of the Independent Cost Estimate 

Both MDAPs and MAIS programs are supported by ICEs at milestone and other program reviews. 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. 

At a minimal level, the purpose of the ICE is to allow decision makers to ensure that (1) current program 

cost estimates are reasonable, (2) initial program baselines established for cost and schedule are realistic 

and achievable, (3) subsequent program baselines remain realistic, and (4) sufficient funding is available 

in the Future Years Defense Program (FYDP) to execute the program. However, CAPE experience is that 

the ICE should also support much broader program decisions. The ICE can provide decision makers with 

insights concerning: 

 Unique challenges of each program, and options available to address them; 

 Balanced requirements based on trade-offs among cost, capabilities, and schedule; 

 Alternative acquisition strategies to improve upon ways to do business and avoid risk-prone 

models; and 

 Options to effect better program outcomes along the way as circumstances change or unexpected 

events occur. 
10 

In short, the ICE adds value by being able to tell the program's story and provide decision makers with a 

wide range of information necessary to make fully informed acquisition decisions. 

Component Cost Position and Full Funding Commitment 

One important element of current CAPE 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 in the FYDP consistent with the Component’s cost position. The Component establishes 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 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 corporate-level 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. 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. This Certification Memorandum must be submitted prior to 

the Defense Acquisition Board (DAB) review. 

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 of a multi-year contract in an amount 

equal to or greater than $500 million 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 (MYP) strategy and contract structure, 

which includes a comparison of the estimated costs of multi-year versus annual contract awards. 

For each MYP candidate, CAPE provides a preliminary cost analysis of the potential cost savings that 

could be obtained through a multi-year procurement contract compared to a baseline of annual 

procurement contracts. This analysis is used to support a DoD decision to seek a multi-year request, for a 

specific authorization by law to carry out the multi-year procurement strategy. Following Congressional 

approval (in the National Defense Authorization Act) for the use of the MYP strategy, the Component 

and the contractor negotiate and definitize the MYP contract terms. At this point, CAPE updates its 

previous cost analysis to incorporate the most recent cost information, including actual cost data and 

experience to date as well as an evaluation of cost realism in the contractor’s proposal. The updated cost 

analysis is provided in time to support a DoD notification to the congressional defense committees of the 

intent to award the multi-year contract. This notification, by law, must be provided at least 30 days before 

the contract award. 
11 

Confidence Levels in Cost Estimates 

Section 2334 of title 10, United States Code requires that cost estimates adopt a confidence level that 

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 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. 

These requirements were removed by the National Defense Authorization Act for FY 2017. In the future, 

cost estimates will now provide a discussion or program risks, and the potential impacts of risks on 

program costs. 

Cost Estimates for Contract Negotiations 

Section 2334 of title 10, United States Code requires 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 2334 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 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 neither the ICE nor the Component Cost 

Position should 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, section 10.15.2 (“Should-Cost”). 

In addition, electronic data warehouses of contractor cost data reports have been used to provide insight 

and support multiple studies throughout the DoD cost and acquisition communities concerning contract 

profits and fees for both prime contractors and major subcontractors. Acquisition professionals can review 

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

programs have been compatible with current guidelines contained in defense policy and regulations, and 

use that information in negotiations concerning ongoing acquisition programs. 

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 a complete, detailed description of the 

major acquisition program that supports preparation of the Component Cost Position, the ICE, and other 
12 

cost estimates, as required. The CARD succinctly 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. The CARD, along 

with supporting data sources, provides all of the information necessary to develop a cost estimate. 

CAPE guidance concerning the CARD was issued in a policy memorandum in June 2015. This 

memorandum is available on a Defense Acquisition University website 

(https://acc.dau.mil/CommunityBrowser.aspx?id=723238). More recent guidance was provided in the 

CAPE memorandum, DoD Cost Analysis Data Improvement, issued on January 9, 2017. 

Recent changes to improve and streamline the CARD are described in Chapter IV. 

Operating and Support Cost Estimates 

Section 2334 of title 10, United States Code requires that the Director, CAPE issue guidance relating to 

full consideration of life-cycle management and sustainability costs in major defense acquisition 

programs and major automated information system programs. To meet this requirement, CAPE issued the 

Operating and Support Cost-Estimating Guide in March 2014. This guide explains and illustrates how 

O&S cost estimates and analyses can support key program decisions throughout the life cycle. The guide 

also provides a tutorial on the best practices for preparing, presenting, and documenting O&S cost 

estimates. The guide is available on the CAPE website at 

http://www.cape.osd.mil/files/OS_Guide_v9_March_2014.pdf. 

Guidance and Procedures for Other Cost Assessment Activities 

This section provides a description of certain DoD cost assessment procedures, other than cost estimates 

for MDAPs and MAIS programs. 

Cost Comparisons of Military, Civilian, and Contractor Manpower 

CAPE issued DoD Instruction 7041.04, Estimating and Comparing the Full Costs of Civilian and Active 

Duty Military Manpower and Contract Support, in July 2013. This 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 

are used in cost-benefit analyses or business case analyses in support of workforce mix decisions. This 

instruction is available on the DoD website http://www.dtic.mil/whs/directives/index.html. 

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 Common Access Card (CAC). A classified version of the tool is available 

on the DoD Secure Internet Protocol Router Network (SIPRNet). The tool has been used to compare the 

costs of military and civilian intelligence personnel, as well as to compare military and civilian manpower 

costs for the development and expansion of the cyber workforce. The tool will also be incorporated into 

CADE. 
13 

Economic Analysis for Decision-making 

CAPE issued DoD Instruction 7041.3, Economic Analysis for Decision-making, in September 2015. This 

instruction is the DoD implementation of Office of Management and Budget (OMB) Circular A-94, 

Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs. The instruction prescribes 

the application of economic analysis concepts to the evaluation of costs and benefits of investment 

alternatives. This instruction is available on the DoD website 

http://www.dtic.mil/whs/directives/index.html. 

DoD Cost Data Collection Systems 

As noted earlier, CAPE is responsible for prescribing policy and procedures for the reporting and 

collection of actual cost data that is used throughout the cost community. 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. The Cost and Software Data Reporting (CSDR) 

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

three Visibility and Management of Operating and Support Costs (VAMOSC) systems (one system for 

each military department) collect historical O&S costs for major fielded weapon systems. 

Chapter IV discusses current CAPE efforts to improve the CSDR system and Appendix D provides 

additional details concerning all of the cost data collection systems. Chapter IV also provides discussion 

on the treatment of inflation and price escalation in adjusting cost data for use in estimates. 

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 

strengthen its cost assessment institutions. Ongoing efforts toward that end are described in Chapter IV of 

this report. 
This page intentionally left blank.
15 

CHAPTER III – DOD COST ASSESSMENT ACTIVITIES IN FY 2016 

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

FY 2016 in support of MDAP milestone and other acquisition reviews, multi-year procurement, 

MDAP critical unit cost breaches, and MAIS critical changes. There are also some observations 

regarding compliance with policy and procedures, quality of the cost estimates over time, and 

differences between the CAPE and Component cost estimates. 

MDAP Milestone or Other Review Cost Assessment Activities 

Table 1 provides a summary of the cost assessment activities in FY 2016 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 12 MDAP 

milestone reviews or other events supported by cost assessment activities in FY 2016 (excluding 

any cost assessment activities associated with classified programs). 
16 

Table 1. MDAP Milestone or Other Review Cost Assessment Activities in FY 2016 

Program Name Acronym Component 

Program 

Type 

Cost Assessment 

Activity 

Activity 

Date Supported E

B-2 Defensive Management System - Modernization 

B-2 DMS-M Air Force Acquisition 

Category (ACAT) ID 

CAPE Independent Cost Estimate 

3-Nov-15 Milestone B 

Air Force Cost Position 

2-Oct-15 

Amphibious Combat Vehicle Phase 1 Increment 1 

ACV 1.1 Navy ACAT ID CAPE Independent 

Cost Estimate Navy Cost Position 

17-Nov-15 8-Oct-15 

Milestone B 

Joint Surveillance Target Aircraft Radar System Recapitalization 

JSTARS Recap Air Force ACAT ID CAPE Independent 

Cost Estimate 

9-Dec-15 Milestone A 

Air Force Cost Position 

18-Nov-15 

Next Generation Jammer Increment 1 

NGJ Inc 1 Navy ACAT ID CAPE Independent 

Cost Estimate 

10-Mar-16 Milestone B 

Navy Program Office Estimate 

4-Mar-14 

Improved Engine Turbine Program 

ITEP Army ACAT IC CAPE 

Concurrence 

7-Jul-16 Milestone A 

CAPE Review Army Cost Position Army Independent Cost Estimate 

29-Jun-16 8-Jun-16 10-Jun-16 
17 

Table 1. MDAP Milestone or Other Review Cost Assessment Activities in FY 2016 (cont.) 

Program Name Acronym Component 

Program 

Type 

Cost Assessment 

Activity 

Activity 

Date Supported E

Joint Precision Approach and Landing System 

JPALS Navy ACAT IC CAPE 

Concurrence 

1-Jul-16 Milestone B (rest

CAPE Review Navy Cost Position Navy Independent Cost Estimate 

29-Jun-16 6-May-16 3-May-16 

KC-46 Tanker Modernization 

KC-46A Air Force ACAT ID CAPE Independent 

Cost Estimate Air Force Cost Position 

10-Aug-16 29-Jul-16 

Milestone C 

Ground Based Strategic Deterrent 

GBSD Air Force preMDAP CAPE Independent Cost Estimate 19-Aug-16 Milestone A 

Air Force Cost Position 

2-Feb-16 

MQ-4C Triton Unmanned Aircraft System 

MQ-4C Navy ACAT ID CAPE Independent 

Cost Estimate 

19-Aug-16 Milestone C 

Navy Cost Position 3-Aug-16 

Presidential Aircraft Recapitalization 

PAR Air Force ACAT ID CAPE Independent 

Cost Estimate 

16-Jul-15 Milestone B 

Air Force Cost Position 

25-Jun-15 

Mid-Tier Networking Vehicular Radio 

MNVR Army ACAT ID CAPE Independent 

Cost Estimate 

20-Sep-16 Milestone C 

Army Cost Position 18-Jul-16 
18 

Table 1. MDAP Milestone or Other Review Cost Assessment Activities in FY 2016 (cont.) 

Program Name Acronym Component 

Program 

Type 

Cost Assessment 

Activity 

Activity 

Date Supported E

F-15 Eagle Passive Active Warning Survivability System 

F-15 EPAWSS Air Force ACAT IC CAPE 

Concurrence 

30-Sep-16 Milestone B 

CAPE Review Air Force Cost Position Air Force Independent Cost Estimate 

26-Sep-16 21-Sep-16 21-Sep-16 
19 

Remarks about Specific Programs 

 The Next Generation Jammer Increment 1 is a pilot program following the so-called 

“skunkworks” streamlined acquisition process (the term skunkworks refers to the 

Lockheed Advanced Development Projects organization that developed the U-2 and 

SR-71 reconnaissance aircraft and the F-117 stealth fighter). As part of this process, the 

Navy was allowed to prepare a program office cost estimate in lieu of a formal cost 

position. 

 In FY 2016, there were three milestone reviews of ACAT IC programs (where the 

milestone decision authority was delegated to the military department). In each case, 

CAPE reviewed and concurred with the military department cost position. 

 The Joint Precision Approach and Landing System originally had Milestone B approval 

in 2008, but that approval was rescinded in 2014 due to a critical Nunn-McCurdy unit 

cost breach. Milestone B for the restructured program was restored by USD(AT&L) in 

June 2016. 

 Additional remarks about the Multi-Tier Networking Vehicular Radio and Ground 

Based Strategic Deterrent programs are provided later in this chapter. 

 In addition to the programs displayed in Table 1, an Air Force Cost Position and CAPE 

ICE were prepared in support of the B-21 bomber EMD contract award in October 2015. 

However, further details are classified. 

CAPE Cost Analysis for Multi-Year Procurement 

As noted in Chapter II, CAPE prepares a preliminary ICE for a proposed MYP strategy and 

contract structure to support the Department’s certification to the Congress of significant savings 

and other criteria, and updates the ICE (after MYP approval from the Congress) prior to the 

award of a multi-year contract. In FY 2016, CAPE completed three analyses supporting multiyear procurement. In two cases (the AH-64E Apache and the UH-60M/HH-60M Black Hawk 

variants), CAPE completed preliminary estimates of savings to support the DoD MYP proposal 

contained in the FY 2017 President’s Budget. Approval for these two cases was provided by the 

Congress in the National Defense Authorization Act for FY 2017. In the third case (the C-130J 

Super Hercules), CAPE completed an updated estimate of MYP savings in November 2015 prior 

to the contract award in December 2015. 

DoD Critical Unit Cost (Nunn-McCurdy) Breaches in FY 2016 

There was one cost assessment activity supporting a certification decision associated with a 

critical unit cost (Nunn-McCurdy) breach in FY 2016. Table 2 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 breach certification. Descriptions of unit cost 

(Nunn-McCurdy) reporting and the certification process associated with unit cost breaches are 

provided in Appendix B. 
20

Table 2. Nunn-McCurdy Critical Unit Cost Breach in FY 2016 

Program Name Acronym Component Program Type Cost Assessment Activity Activity Date Supported 

Global Positioning System Next Generation Operational Control System 

GPS OCX Air Force ACAT ID CAPE Independent Cost 

Estimate 

11-Oct-16 Nunn-McCurdy Cr

Certification 

 June 2016 Selected Acquisition 

Report 
21 

MAIS Critical Change Cost Assessment Activities 

There were two cost assessment activities in FY 2016 supporting certification decisions 

associated with MAIS critical changes. For each system 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 critical changes are 

provided in Appendix C. 
22 

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

Program Name Acronym Component 

Program 

Type 

Cost Assessment 

Activity 

Activity 

Date Supported 

Joint Space Operations Center (JSpOC) Mission System Increment 2 

JMS Inc 2 

Air Force ACAT 

IAM 

CAPE Independent Cost Estimate 

22-Jul-16 Critical Change 

Certification 

Air Force Cost Position 3-Jun-16 

Air and Space Operations Center – Weapon System Increment 10.2 

AOC-WS Inc 10.2 

Air Force ACAT 

IAM 

CAPE Independent Cost Estimate 

7-Oct-16 Critical Change 

Certification 

Previous CAPE Independent Cost Estimate 

15-May-13 
23 

Remarks about Specific Programs 

 The AOC Weapon System Increment 10.2 experienced a second critical change in 2016. 

The first critical change occurred in late 2012, when the program failed to reach its Full 

Deployment Decision (FDD) milestone within the statutory threshold. This resulted in a 

restructure and new baseline for the program, with a plan for achievement of Milestone 

C in July 2015, and a FDD in July 2016. Subsequently, when the program failed to reach 

its Milestone C within one year of its baseline date, this triggered a second critical 

change. The 2016 CAPE cost assessment memorandum made a comparison of the 2016 

CAPE ICE to the 2013 CAPE ICE, to facilitate an understanding of what change in 

program status led to the second critical change in three years. Although the CAPE ICE 

was completed in FY 2017, most of the analytic work was done in FY 2016. 

 There was another critical change in 2016 for the Defense Enterprise Accounting and 

Management System. Work on the CAPE ICE began in FY 2016, but will be completed 

in FY 2017 and will be described in next year’s Annual Report. 

Assessment of Compliance, Quality, and Differences in Methodology 

Compliance with Policy and Procedures 

All of the events noted in Tables 1through 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 (noted in Table 1) 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. 

Quality of the Cost Estimates 

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

continued to improve due to increased rigor. As noted in Chapter II, DoD has instituted a 

policy―in place since 2009 for all MDAPs—requiring that a signed, dated Component Cost 

Estimate and a Component Cost Position 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 (POM) and President’s Budget FYDP. 

The quality of the cost estimates for MDAPs provided by the military departments, as well as 

CAPE, has also continued to improve due to better data. An increased management emphasis 

throughout the Department concerning the importance of cost data reporting has resulted in 

significant increases in the quantity and frequency of cost data reports compared to the 

acquisition reform era of the 1990s. Frequency is important to get the most recent cost actuals and 

cost performance information. Figure 1 shows the annual volume of CSDR data reports collected 
24 

by the Defense Cost and Resource Center (DCARC) for each of the major system commodities. 

The DCARC is the CAPE field office responsible for administering the CSDR system. 
25 

Figure 1. CSDR Data Collection over Time 
26 

The emphasis on better data is not limited to the volume of reports. Additional ongoing efforts to 

improve the content of the specific data reports are described in Chapter IV. 

Differences in Methodology 

Since enactment of WSARA, any differences in methodology or approach between the cost 

estimates prepared by the military departments and by CAPE have decreased over time. 

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. As 

discussed in the previous section, the goal has been for the Department to improve the systematic 

collection of actual cost information over time, available to all parties, which has resulted in 

smaller differences between the cost and schedule forecasts of the military departments and 

CAPE. 

A CAPE analysis made a comparison between the CAPE ICEs and the service cost positions 

(SCPs), and found that the difference between the two estimates since the enactment of WSARA 

in 2009 has narrowed significantly relative to the period between 1999 and the enactment of 

WSARA. The most recent results of this comparison are shown in Figure 2. 
27 

Figure 2. Comparison of CAPE Independent Cost Estimates to Service Cost Position 
28 

The median difference since enactment of WSARA is 2.1 percent, compared to a median 

difference of 6.6 percent for the prior period. In addition, the statistical variances have also 

significantly narrowed, meaning that the post-WSARA estimates are more tightly clustered thus 

reflecting that the service cost positions are now more closely aligning with the CAPE ICEs. 

Despite this narrowing of differences, there have been a few outliers where there was a significant 

discrepancy (greater than 10 percent) between the service cost position and the CAPE ICE. In 

such a situation, CAPE and the military department cost agency will meet and assess the reasons 

for the discrepancy, and determine if there are better data available to reconcile the difference. 

Failing that, CAPE and the military department will work together to assess how costs can be 

controlled in the future as the program goes forward. 

This year, there were two significant outliers. These two cases were the Mid-Tier Networking 

Vehicular Radio (MNVR), and the Ground Based Strategic Deterrent (GBSD). 

In the case of MNVR, the CAPE ICE is actually 25% less than the Army SCP. The MNVR 

program will provide networking radios for a wide variety of Army ground vehicles. The MNVR 

radio hardware has significant commonality with the existing Manpack radio that is one element 

of the Handheld, Manpack and Small-Form (HMS) program, and MNVR will likely be produced 

by one of the current Manpack vendors. The primary difference between the two cost estimates is 

the assumption by CAPE that the MNVR program will benefit from lower hardware costs that 

reflect prices expected to be offered in the HMS Manpack competitively-awarded procurement 

contract. 

In the case of GBSD, the CAPE ICE is 35% more than the Air Force SCP. The GBSD will be a 

follow-on intercontinental ballistic missile to replace the aging Minuteman III. The primary 

difference between the two estimates is driven by the selection of data sources. The Air Force 

SCP primarily relied upon historical Minuteman and Peacekeeper programs; the CAPE ICE used 

additional data from the Navy Trident II and the Missile Defense Agency Ground Based 

Interceptor. Regardless of the merit of either estimate, it was unusually difficult to estimate the 

cost of a new ICBM program because there was no recent data to draw upon, and the older 

historical data was of very questionable quality or was nonexistent. This leads to considerable 

uncertainty and risk in any cost estimate. 

As part of its analysis for GBSD, CAPE presented a comprehensive review of the quality of 

available data that could be used in cost estimates for a future ICBM. A summary of this data 

review is provided in Figure 3. 

 
29 

Figure 3. Assessment of Data Quality for GBSD Program 
30 

Ongoing efforts to strengthen cost data collection and improve cost data quality for all defense 

acquisition programs are described in Chapter IV. 

Acquisition Program Cost Performance 

One simplistic measure of acquisition program cost performance is the annual rate of NunnMcCurdy unit cost breaches that have occurred over time. The number of significant and critical 

breaches by year from 1997 to 2016 is displayed in Figure 4. 
31 

Figure 4. Number of Nunn-McCurdy Breaches by Year
32 

It is important to note that the National Defense Authorization Act for FY 2006 made changes to 

the criteria for a Nunn-McCurdy breach by adding a requirement to report unit-cost growth from 

the original program baseline as well as the current (possibly revised) baseline. This additional 

requirement caused a large spike in 2005, when 11 programs had to report preexisting significant 

breaches. Thus, for historical comparisons, the period before 2006 is not comparable to the period 

after that. For the more recent period, the average annual number of breaches has declined since 

the enactment of WSARA in 2009. 

More sophisticated data-driven analyses of MDAP acquisition cost performance is provided in 

the USD(AT&L) publication, Performance of the Defense Acquisition System, 2016 Annual 

Report. This document is available on the DoD website www.acq.osd.gov/fo/docs/Performanceof-Defense-Acquisition-System-2016.pdf. 

Areas for Improvement 

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

military sales (FMS). FMS cases have significant possible 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 MYP contracts, and forecasting the effects on contractor business bases and rates. 

Nevertheless, assessing the implications of FMS provides a better understanding of the complete 

costs for the United States. CAPE is now evaluating how to improve the cost community tools, 

methods, and policies for cases involving FMS. 

Other Cost Assessment Activities in FY 2016 

CAPE ICE for F-35 Operating and Support Costs 

This year, CAPE updated its estimate of O&S costs for the F-35 fighter aircraft. This estimate 

was updated to support the preparation of the F-35 December 2015 Selected Acquisition Report 

(SAR), submitted to the Congress in March 2016. 

The CAPE O&S cost estimate includes all three U.S. F-35 aircraft variants; is based on a 30-year 

service-life forecast; and reflects planned flying hour rates for each of the applicable military 

services. The estimate incorporates updated information regarding the major elements of O&S 

costs. This includes: updated fuel consumption rates for all aircraft variants; a reduction in the 

assumed fuel price per gallon; use of updated price escalation rates of government (military and 

civilian) and contractor personnel; a revised cost estimating relationship for hardware 

modifications; and updated maintenance costs for depot level repairable items, based on the latest 

component reliability projections obtained from approximately 31,000 hours of flight testing and 

field operations. 

The December 2015 SAR also provides a normalized comparison of the cost per flying hour for 

the Air Force F-16 C/D fighter relative to the Air Force F-35 conventional takeoff and landing 

variant. In this comparison, the CAPE estimate of the F-35 cost per flying hour is roughly 20% 
33 

greater than the F-16 C/D cost per flying hour. It is reasonable to expect that the F-35 fifthgeneration fighter aircraft would be more costly to operate and sustain than the F-16 C/D fourthgeneration fighter aircraft, given the substantial increase in military capabilities provided. 

DoD Contract Pricing and Cost Estimating Collaboration Conference 

For some time, CAPE and the other organizations in the cost estimating community have 

collaborated with the cost and price analysts in the contracting community. The cost and price 

analysts support source selections, proposal evaluations, and contract negotiations, and ultimately 

ensure that the Government pays fair and reasonable prices for its purchased goods and services. 

To support such collaboration, CAPE worked with the USD(AT&L) Director of Defense Pricing, 

and the Director of Defense Procurement and Acquisition Policy, to jointly sponsor a three-day 

conference in July 2016 at a low-cost facility in Leesburg, Virginia. The conference featured 

speakers and panel discussions with representatives from both communities. It allowed cost 

estimators and contract pricing analysts to educate each other on respective missions, products, 

and process, and identified opportunities for data sharing and collaboration on analytic methods 

for mutual benefit. 

The agenda, speaker biographies, and presentations are available to registered users with a CAC 

at the web site https://extranet.acq.osd.mil/dpap/cpic/coference/index.html. 

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. 

In recent years, the symposium event has been for the most part been cancelled or curtailed due to 

guidance from OMB and the Deputy Secretary of Defense to reduce expenditures for all 

conferences and travel. Also, a major concern has been that the potential DoD and other 

government agency attendees would not have travel funding available to attend the event. In FY 

2016, CAPE did not hold a symposium in order to support the contract pricing and cost 

estimating mentioned earlier. CAPE is now examining options to hold a symposium next year at a 

low-cost facility where virtual attendance could be made available to those who could not 

physically attend. 
This page intentionally left blank. 
35 

CHAPTER IV – THE LOOK FORWARD 

Since the enactment of WSARA in 2009, CAPE has made significant progress in implementing 

the requirements of the legislation and meeting the evolving needs of the Department. This 

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

effort. 

Cost Leadership Forum 

The CAPE Deputy Director for Cost Assessment has established a periodic meeting (known as 

the Cost Leadership Forum) held with the leaders and senior staff of the military department cost 

agencies 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 WSARA objectives, improving cost analysis, and improving 

business processes to deal with the challenges of the current constrained resource environment. 

The Cost Leadership Forum meets quarterly. Some of the major topics discussed at the Forum 

include: 

 Cost assessment policies and procedures 

 Enhanced cost data collection 

 CADE improvements 

 Inflation and price escalation 

 Training and education 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 quarterly and provide executive 

oversight for these and other initiatives. 

In addition, the Cost Leadership Forum has discussed issues with staffing levels in the 

organizations in the DoD cost community. These organizations are affected by the 25 percent 

reductions in headquarters, administrative and support activities that must take place between 

FY 2015 and FY 2019, as mandated by the National Defense Authorization Act for FY 2016. 

Policies and Procedures 

The various guidance documents that were completed and issued concerning cost assessment 

policy and procedures were described in Chapter II. Efforts are ongoing to make further additions 

and improvements to the overall cost estimating guidance, and to respond to recent legislation 

and other fact-of-life changes. Additionally, there will be an update to the procedures concerning 

improvements to the cost data collection process. 

Recent Legislative Changes 

There were significant changes to acquisition policy and statutory requirements made by the 

National Defense Authorization Acts of FY 2016 and FY 2017. These changes are now being 
36 

assessed by USD(AT&L) and CAPE to determine the appropriate revisions that will need to 

incorporated into DoD Instruction 5000.02, Operation of the Defense Acquisition System, and 

DoD Instruction 5000.73, Cost Analysis Guidance and Procedures. 

The National Defense Authorization Act for FY 2016 has certain provisions intended to move 

acquisition oversight of MDAPs away from OSD and to the military department headquarters. 

Section 825 (Designation of Milestone Decision Authority) specifies that the MDA for an MDAP 

reaching Milestone A after October 1, 2016, shall be the service acquisition executive of the 

military department managing the program, unless under certain specific circumstances the 

Secretary of Defense may designate another official as the MDA. Section 802 (Role of Chiefs of 

Staff in the Acquisition Process) enhances the role of the Chiefs of Staff in the defense 

acquisition process, and provides specific responsibilities to the Chiefs of Staff and Secretaries of 

the Military Departments for balancing resources against priorities on acquisition programs and 

ensuring appropriate trade-offs are made among cost, schedule, technical feasibility, and 

performance throughout the life of each acquisition program. 

The National Defense Authorization Act for FY 2017 has additional provisions pertaining to 

defense acquisition that will affect cost assessment procedures. Section 808 (Transparency in 

Major Defense Acquisition Programs) requires that the MDA for an MDAP shall provide the 

congressional defense committees with a brief summary report (“acquisition scorecard”) no later 

than 15 days after granting approval at Milestone A, B, or C. The summary report provides 

certain information about the program pertaining to cost, schedule, and technical, manufacturing, 

and fielding risks. In particular, the summary report will provide (1) the estimated cost and 

schedule for the program established by the military department concerned, and (2) the statutory 

independent estimate for the cost of the program, and any independent estimate for the program 

schedule. Section 842 (Amendments Relating to Independent Cost Estimation and Cost Analysis) 

makes clarifying amendments to the existing statutes pertaining to independent cost estimation. 

At Milestone A, the ICE shall now include the identification and sensitivity analysis of key cost 

drivers that may affect life-cycle costs of the program. In addition, the statutory requirements for 

confidence levels in cost estimates (that were described in Chapter II) are replaced by new 

requirements for discussion of risk, the potential impacts of risks on program costs, and 

approaches to mitigate risk in cost estimates. Section 846 (Repeal of Major Automated 

Information Systems Provisions) removes the statutory provisions pertaining to MAIS programs, 

including the critical change procedures, effective September 30, 2017. Section 849 (Improved 

Life-Cycle Cost Control) makes several amendments pertaining to life-cycle cost controls of a 

program. In particular, the military departments are required to conduct a sustainment review five 

years after declaration of initial operational capability of a MDAP and throughout the system’s 

life cycle, using availability and reliability thresholds and cost estimates as the triggers that 

prompt such a review. Section 901 (Organization of the Office of the Secretary of Defense) 

modifies the position of USD(AT&L) by replacing this position with two new positions: the 

Under Secretary of Defense for Research and Engineering, and the Under Secretary of Defense 

for Acquisition and Sustainment. 
37 

Acquisition of Services 

The USD(AT&L) issued DoD Instruction 5000.74, Defense Acquisition of Services, in January 

2016 to establish new policies, responsibilities, and direction for the acquisition of contracted 

services. In this instruction, CAPE is now responsible for establishing policies and procedures for 

conducting cost estimates and analysis for the acquisition of contracted services. This is new 

ground for CAPE, and will require research and investments in methods and data. 

Cost Analysis Requirements Description Update 

As described in Chapter II, the CARD is used to establish formal program definition that is used 

as the basis for cost estimates. The CARD format is now being improved with the addition of a 

new streamlined data template for the collection of technical data (design and performance 

parameters) that will replace much of the extensive narratives and tables. In the revised format, 

the narrative format with tables and diagrams will be reduced to 20-30 pages. The technical data 

will be provided through standardized spreadsheet templates specific for each weapon system 

commodity type (such as aircraft, ships, and missiles). In the future, CARDs will be updated 

annually (in support of program and budget reviews), and not just at acquisition milestone 

reviews. It is anticipated that CARDs for milestone reviews will follow the new format beginning 

some time in 2017, and annual CARDs will use the new format beginning in October 2017. 

Enhanced Cost Data Collection 

Over the past few years, as noted in Chapter II, CAPE and the DCARC have made considerable 

progress in restoring systematic cost data collection. However, based on feedback from 

government users about desired report enhancements, as well as advancements in information 

systems technology, CAPE and the military department cost agencies have established several 

related working groups supporting various initiatives to improve the quality for data collection 

and reporting and increase efficiency through better business processes. 

The new policies and procedures that will support the enhanced cost data collection initiatives 

will be incorporated into a new issuance of DoD 5000.04-M-1, Cost and Software Data 

Reporting Manual. The revised manual will be published in 2017. 

One of these initiatives concerns cost data collections and reporting for ACAT II/III acquisition 

programs (i.e., programs that are not sufficiently expensive to qualify as MDAPs). The military 

departments will begin collecting cost data on high-priority ACAT II/III programs in 2017. Cost 

data collection on other ACAT II/III contracts over $100 million will begin in 2018. 

Current efforts to incorporate training and education concerning cost data collection into the 

curriculum at DAU and other educational institutions are discussed later in this chapter. 

CAPE is also now working with the Missile Defense Agency to establish cost data collection for 

missile defense programs. Although these programs are exempt from DoD Instruction 5000.02, 

Operation of the Defense Acquisition System, the Agency nevertheless has instituted a policy to 

collect CSDR for its high-cost programs. For such programs, the CSDR plans are subject to 

approval by CAPE. 
38 

Other specific initiatives to improve cost data collection that will be incorporated into the revised 

CSDR manual are described in the remainder of this section. 

Reinvigorate the Cost Working-group Integrated Product Team 

In the current CSDR cost data collection procedures, the stated policy has been to establish a 

formal working group (known as the Cost Working-group Integrated Product Team, or CWIPT) 

early in a program’s planning for cost data collection. In principal, the CWIPT should include 

active representation of all CSDR stakeholders, including CAPE and military department cost 

analysts, the cognizant cost field organizations, the DCARC, the program office, and 

representative contractors where appropriate. The CWIPT should be established well in advance 

of any solicitations or Request for Proposals (RFPs) to industry, and it would ensure that timely 

proper plans and reporting requirements for cost data reporting and collection were in place. The 

CWIPT should also continue to remain active during contract execution to ensure data quality and 

compliance with approved plans. However, in most cases, the formation of a strong CWIPT 

seldom occurred in practice. This led to the DCARC staff, which is limited in size, to carrying the 

major burden of monitoring program office activities for compliance with CSDR policies and 

procedures. This in turn has resulted in uneven compliance and data quality. 

To remedy this situation, CAPE and the leaders of the military department cost agencies have 

decided to reinvigorate the role of the CWIPT in actual practice. There are now monthly meetings 

with senior representatives from CAPE, the military department cost agencies, EVM proponents 

from USD(AT&L) and the military departments, and appropriate program offices. These 

meetings are held to review upcoming contractual solicitations or RFPs, and to identify a leader 

and points-of-contact for each CWIPT. The meetings also will stress the importance of 

community-wide validation of CSDR submissions. The status at each meeting will be provided to 

the leaders of CAPE and the military department cost agencies for periodic engagement to ensure 

that the leaders of the cost community are stressing the importance of community-wide cost data 

collection. 

FlexFiles Initiative 

Today acquisition cost data is collected in the many forms of the legacy CSDR report formats, 

first created in the 1960s. Contractors currently must make manual allocations from their 

financial and other accounting systems into these formats. CAPE, partnering with the military 

department cost agencies, has commissioned a government team to achieve more efficient and 

better data transfers by working with industry to enable the automated submission of low-level 

cost data directly from contractors’ accounting systems into the government systems. Instead of 

collecting data annually at best— and in some cases many years apart—the data collections will 

be available as needed and in some cases aligned with the monthly Earned Value submissions. 

This means that contractors will no longer have to manually convert one set of data into another 

structure, eliminating a source of inevitable data errors. This transformation, which is the next 

generation of cost data collection, will improve data quality, reporting compliance and timeliness, 

and also reduce the reporting burden on contractors. This initiative is known in the cost 

community as FlexFiles. 
39 

The development of the report formats, definitions, and instructions for the proposed FlexFiles 

reporting has occurred iteratively. During each iteration, there have been proof-of-concept pilot 

programs. In addition, after each iteration, a draft of the formats and instructions has been 

circulated to industry and government cost organizations for comments and suggestions. The first 

draft of the formats and instructions was completed in August 2015; a second draft was 

completed in February 2016; and third draft was completed in May 2016. The most recent draft 

was completed in October 2016 and is now out for government and industry comment. It is 

anticipated that the gradual phase-in of FlexFiles cost reporting will begin on new contracts in 

during 2017, with full implementation at the end of FY 2017. 

Improved CSDR Planning 

A CSDR plan is submitted for approval when a program begins cost and software reporting. Each 

plan specifies the required reports and submission frequency for the major contracts and 

subcontracts. The Air Force has led an effort to develop formal standards for CSDR plans that 

provide a template of the reporting structure for each weapon system commodity type (i.e., 

aircraft, electronic system, missile, etc.). These standards provide consistency in data reporting 

across programs within a commodity type, and provide better communication of government 

expectations to industry. These standard plans were placed on an initial set of Air Force contracts 

where the standards were tested. The standard plans also were reviewed by analysts in CAPE and 

the other military departments, and were extended to ships and ground vehicles. The standard 

plans are now available on the CADE website, and will be incorporated into CSDR reporting 

(subject to CWIPT review and approval) for all of DoD. 

In a related initiative, CAPE is working with USD(AT&L) and program managers to establish a 

joint planning process for CSDR and EVM reporting. This is intended to ensure more consistent 

and efficient reporting where all data requirements are simultaneously identified and on contract 

as early as possible. The format and instructions for a joint CSDR-EVM reporting plan, to be 

submitted by program offices, has been developed and will be incorporated into a standard CSDR 

co-plan. 

Software Data Reporting Initiatives 

The Cost Leadership Forum sponsored a working group devoted to improved software data 

collection and reporting. There were three main Forum-approved recommendations that have 

made significant implementation progress this year. These are (1) publishing the new software 

data formats, definitions, and instructions to reporting contractors for use in collecting key 

software metrics for cost estimators across DoD and other agencies, (2) a joint DoD validation 

and verification guide, team, and process that reached initial operational capability this year, and 

(3) an up-to-date central software database that is now available throughout DoD through the 

CADE system. These data process improvements eliminate duplication of effort that was 

occurring across the military departments and will improve the consistency and quality of 

software cost estimates for major acquisition programs. 

The new software data formats and reporting instructions remedied issues in current data 

reporting, to include lack of visibility and inconsistency in current data, as well as some reporting 
40 

elements that were too complex for submitting organizations. A critical note is that the data 

formats and reporting instructions were expanded to include major software maintenance activity. 

Working with industry, the software working group ensured these new data formats and reporting 

instructions used state-of-the-art terms, definitions, and metrics for software development and 

maintenance. 

The software reporting working group also found that data submissions were not subject to a 

complete and rigorous quality control process. As a result of this finding, the team designed and 

began institutionalizing a Verification and Validation (V&V) process. This year, a joint team of 

subject matter experts from CAPE, the military departments, and the Missile Defense Agency 

(MDA) was formed and achieved initial operating capability of the new V&V process. This team 

uses a formal V&V Guide, published last year, to review all software data reports and provide 

early, consistent, and relevant feedback to DCARC and the submitting organizations regarding 

data-quality issues. The team’s review process is making a difference, ensuring only quality data 

reports are accepted into the CADE system. 

Beyond the improvement of individual data reports and V&V process, the long-term goal is to 

assemble the data into a comprehensive and authoritative central software database with userfriendly tools available for all cost analysts. The working group found many distributed databases 

and significant duplication of effort that existed throughout the department. Additionally, the 

team determined that database quality improvement could be achieved through one centralized 

database. The working group reviewed existing databases and made several recommendations 

on features for a new central database. As of December 2016, an updated MS Excel-based 

version is complete and will be available centrally within CADE. The working group via CADE 

continues to work improvements to the timeliness and user-friendliness of the software database, 

as well as working to update its capability to accept the data reporting changes introduced by the 

new software data formats (e.g. new software maintenance elements). The software database will 

be incorporated into CADE discussed later in this chapter. 

A modification of the improved software report format is being developed for an important class 

of MAIS programs known as Enterprise Resource Planning (ERP) systems. A draft of the 

modified format has been circulated to agencies and program offices that manage ERP systems 

for comments and suggestions, and it has also been reviewed by ERP commercial vendors. Trial 

use of the modified format is now underway with two pilot ERP systems. 

Technical Data 

Cost analysts often need technical data (i.e., design and performance parameters) for legacy and 

new systems to make adjustments for complexity or develop cost estimating relationships used in 

estimates. To address this need, another working group (the Technical Data Working Group) was 

formed with representatives from CAPE, the military department cost agencies, and the Systems 

Engineering and Logistics and Materiel Readiness organizations in USD(AT&L). This 

cooperation ensures that the parameters, units, and collection methodologies proposed for 

technical data reporting are consistent with DoD and industry data taxonomies and processes. 
41 

The working group has developed standardized data template formats that specify the universe of 

technical parameters that can be collected for each weapon system commodity type (i.e., aircraft, 

ships, missiles, etc.) and defines each parameter consistent with systems engineering practices, 

military standards, and industry guidelines. The resulting data templates serve as the basis of a 

new report called the Technical Data Report that will be added to CSDR reporting on contracts in 

the future. Drafts of the data templates and instructions to reporting contractors have been 

circulated for comment throughout the military departments and industry. Final versions will be 

completed pending lessons learned from pilot programs. 

Cost Data Reporting for Sustainment Contracts 

CAPE has continued to improve the collection and reporting of contractor actual costs for major 

sustainment, logistics, and maintenance contracts. The military department VAMOSC systems 

(described in Appendix D) provide limited visibility into actual costs when a weapon system is 

sustained through Contractor Logistics Support (CLS) or similar arrangement. The VAMOSC 

systems may in some cases collect and display CLS costs in aggregate, but without providing any 

details by cost element such as depot maintenance or sustaining engineering. 

The first cost data report for sustainment was approved in May 2012 and became effective at that 

time. This summary report collects and displays contractor costs by sustainment cost element. A 

second cost data report (known as the Functional Cost-Hour Report) was approved in September 

2015. This report, for selected high-cost elements, collects and displays contractor costs by 

sustainment cost element and functional category (such as materials and maintenance labor). 

These reports are now required on major sustainment contracts and subcontracts worth more than 

$50 million. Additional data reports are now being developed to collect more detailed cost data 

for maintenance events and repair parts, similar to the data already collected by maintenance data 

collection systems for weapon system platforms supported under organic maintenance. 

Data Collection on Indefinite Delivery/Indefinite Quantity Contracts 

Currently one of the most problematic data gaps facing the DoD cost community is the lack for 

cost data for modernization upgrade and sustainment efforts on major platforms such as the B-2 

and F-22. Such efforts typically use a certain type of contract arrangement known as an Indefinite 

Delivery/Indefinite Quantity (IDIQ) or other similar arrangement such as a Basic Ordering 

Agreement. These arrangements are used to expedite contracting for supplies and services when 

specific quantities and prices are not known at the time of the award of the arrangement. As the 

requirements are established, the government places delivery orders (for supplies) and task orders 

(for services) against the basic arrangement for each discrete requirement. Cost data reporting has 

not been imposed on these arrangements, even though individual delivery orders, or the aggregate 

of several delivery orders, may exceed CSDR reporting thresholds. 

To remedy this, for contractors with modern financial systems capable of producing CSDRs, 

CAPE now requires the collection of cost and software data on delivery/task orders on IDIQ 

contracts that directly support an MDAP, MAIS program, or Major System (i.e., ACAT II 

program) where individually, or in aggregate, the value of the delivery/task order(s) related to the 

system being supported is likely to exceed existing CSDR threshold figures over the life of the 
42 

IDIQ arrangement. This data will be collected in accordance with existing CSDR policies and 

procedures. 

Data Collection on Government-Performed Efforts 

In the past few years, CAPE and the military department cost agencies have worked with 

government-executed elements of acquisition and sustainment programs, as the lack of data on 

these efforts impedes accurate compilation of total program costs. One of the roadblocks 

preventing the collection of government cost and software data has been the lack of modern 

financial systems employed by the government. With the advent of new government financial 

systems, the only remaining impediment is a lack of specific policy. Therefore, as the government 

implements modern financial systems in our organizations and depots, CAPE now requires 

government-performed efforts that meet CSDR thresholds to collect and submit cost and software 

data following the processes outlined in existing CSDR policies. 

Cost Assessment Data Enterprise 

CAPE is partnering with the military department cost agencies and USD(AT&L) staff to 

incrementally work towards the CADE vision of the government cost analyst’s centralized 

database and virtual library, housing seamless integrated authoritative data sources that are easily 

searchable and retrievable. The objectives of CADE are shown in Figure 5. CADE is now widely 

available to an expansive user community of roughly 1,870 users, with roughly 70 percent of 

them in the military departments.
43 

Figure 5. Cost Assessment Data Enterprise Objectives 
44 

CADE will provide immediate analyst access to the complete range of available cost data. 

Initially, this will include EVM reports, current CSDR reports, and O&S data. CAPE is also 

working with USD(AT&L) to capitalize on the acquisition data and reports already collected in 

the various acquisition information systems and to integrate them with the cost data to provide the 

government analyst with a full view of a weapon program or portfolio. CADE will provide visual 

analytic tools that can be used to provide automated trend analyses and other views of program 

performance. Analysts also will be able to retrieve other relevant studies and reports from other 

government agencies and Federally Funded Research and Development Centers. 

CADE not only will store authoritative cost, acquisition and technical data, it will also contain the 

Department’s own institutional knowledge for each of the programs, improving communication 

throughout our cost community and across OSD. This will allow tomorrow’s analysts to learn 

from the experiences of today’s, and it will provide today’s analysts with a way to save their 

carefully produced analytics between milestones, so they can return years later and not have to 

start their analysis all over again with no previous information. It will provide a fuller history 

capturing previous work, enabling more holistic and comprehensive analyses to be developed. 

CADE includes a document repository to house CARDs, ICEs, Component Cost Positions, DAB 

and Overarching Integrated Product Team Briefings, and Full Funding Certification memoranda. 

These documents are stored at the portion of the CADE library accessible only to government 

personnel. 

Ultimately, 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 to see how a program is 

performing between major reviews. This initiative will increase the productivity of analysts and 

will also provide a way for them to build upon each other’s work, whereas, historically, analysts 

typically engaged in separate efforts. This will allow the cost community to be a more efficient 

and productive workforce, which will become more critical in an era of human resource 

constraints. 

The CADE project is being managed using an agile software development process that is 

supported through an integrated master schedule of the development effort. The priority now is to 

incorporate the new data reports (including the FlexFiles cost reports, software data reports, and 

technical data reports all discussed earlier) into CADE as they become available. There is also on 

ongoing outreach and training program for the current 1,870 CADE users all across the country. 

CAPE is now working with the National Nuclear Security Administration (NNSA) to establish 

DCARC-like cost data collection that will be available on a CADE-like data warehouse in a 

classified environment. This effort will begin with the weapons programs, but eventually will be 

extended to NNSA infrastructure programs as well. 

Current efforts to incorporate training and education concerning CADE and its functionality into 

the curriculum at DAU and other educational institutions are discussed later in this chapter. 

Contracts Price Database 

CADE not only hosts cost data reports, but it also hosts contract data. Over the past decade, the 

military department cost agencies have funded the development of a Contracts Price and 
45 

Schedule Database. Now containing more than five hundred million dollars in contract value 

across a wide range of commodities, this database is unique in providing information at the 

Contract Line Item Number (CLIN) level. In cases where CSDR and EVM reporting 

requirements were not put in place, these CLIN-level data may be the only cost data available to 

the cost community. Where CSDR and/or EVM data do exist, the database provides useful 

contextual information (such as contract type or profit margin) and important cross-checks to 

other cost data. The database can also be used to construct metrics for cost and schedule growth 

experienced over contract execution. 

Cost Indices 

WSARA—as codified in section 2344 of title 10, United States Code—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. Based on recent 

studies, which were described in earlier editions of this Annual Report, the current practice in the 

DoD cost community now makes the distinction between inflation and price escalation. 

Inflation refers to an increase in the general price level across the entire economy as a whole. To 

account for inflation in budgeting and cost estimates, each year the Under Secretary of Defense 

(Comptroller) issues inflation guidance derived from forecasts made by the administration and 

issued by OMB. 

Price escalation refers to changes in prices of a specific good or service. Escalation accounts for 

not only inflation, but also any real price growth experienced in a specific industry or commodity 

group. Escalation may also account for any real price growth associated with a specific contractor 

(such as costs of direct labor or overhead). 

The cost community now considers the use of both inflation and appropriate escalation indices in 

cost estimates to be a best practice. This approach is intended to provide the most realistic 

forecast of future prices, taking specific markets, products, and contractors into consideration. To 

institutionalize this practice throughout the Department, CAPE has published Inflation and 

Escalation Best Practices for Cost Analysts that was released in April 2016. This publication is 

available on the CAPE web site (www.cape.osd.mil) at “Public Reports.” CAPE is now working 

with the military department cost organizations to implement these best practices. For example, 

the cost baseline for the Ohio Replacement Program used a preferred inflation index to express 

acquisition costs in constant dollars, improving comparability of cost estimates and actual across 

weapon programs. 

Additional ongoing efforts include producing a more in-depth handbook explaining specific 

processes, computations, and data sources that can be used by analysts in the preparation and 

documentation of inflation and price escalation in cost estimates. CAPE is also working with 

DAU to incorporate the standard terminology and best practices into current cost analysis training 

and education. Finally, CAPE is developing an escalation guide intended for laymen. 
46 

Cost Analysis Education and Training 

In order to improve the education and training of the DoD civilian and military workforce in cost 

assessment, CAPE and the military department cost agencies formed an Education and Training 

Working Group that periodically reports its status to the Cost Leadership Forum. The overarching 

objective of this working group is to develop relevant education and training standards across the 

cost community. 

CAPE, in partnership with USD(AT&L), now co-chairs the oversight group responsible for 

approval of the curriculum associated with DAU and other courses leading to professional 

certification in Acquisition Cost Estimating. Initially, the working group developed a framework 

of desired core competencies—for apprentice, mid-level, and senior cost analysts—that will be 

used to guide education and training standards for course content. The working group has now 

worked with DAU to review the entire curriculum and course content and to ensure that the 

desired core competencies are being addressed. In the future, this review of course content, 

relative to the desired core competencies, will be expanded to other sources of training and 

education outside of DAU. 

CAPE has supported the Navy and the Naval Postgraduate School (NPS) in establishing an 

accredited Master’s Degree Program in Cost Estimating and Analysis (MCEA) that began in 

April 2011. This two-year, distance-learning program is a vital element of the education of the 

cost estimating community and improvement of cost estimates in both DoD and the defense 

industrial base. The program is part-time and consists of two courses per quarter, for eight 

quarters, with courses taken from operations research, systems engineering, and business and 

public policy. 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. In the final two quarters of the program, each student works on a 

capstone research project that is sponsored by a government organization in the cost community. 

Tuition may be paid through the use of the Defense Acquisition Workforce Development Fund. 

The first four cohorts have graduated. The fifth and sixth cohorts are now in attendance. The 

seventh cohort will start in April 2017, and graduate in March 2019. 

The Air Force has established its own Master’s Degree Program in Cost Analysis (MCA) at the 

Air Force Institute of Technology (AFIT). This full-time graduate program is designed to advance 

the knowledge and creative problem-solving skills needed to effectively estimate program 

resources within the global military, DoD, and Air Force environments. The program curriculum 

integrates a strong foundation in quantitative concepts and techniques with specific military costrelated topics to prepare students to contribute effectively in a variety of complex and challenging 

roles in the global military arena. Besides the weapon system cost sequence, the curriculum 

includes courses in mathematical methods, quantitative decision making, economics, risk, 

systems engineering, and maintenance and production management. Program graduates are well 

grounded in course work related to follow-on assignments pertaining to cost estimating within the 

financial management field at the base, major command, and higher levels. 

CAPE and the military departments are also working to establish more specialized technical 

training. The DAU curriculum is now being modified to include a unit on DoD cost data 
47 

collection in program management and cost estimating courses. There also have been numerous 

training events on inflation and price escalation. In the future, the education and training working 

group will be conducting a review of VAMOSC training. 

In addition, education and training specific to CADE and its functionality are now being 

developed for incorporation into the curricula at DAU, NPS, and AFIT. CAPE has stood up a 

training system known as the Functional Academic Cost Assessment Data Enterprise, or 

FACADE (pronounced “fake-CADE”). FACADE has all the same functionality as the CADE 

portal but is populated with a robust set on non-proprietary programs representative of DoD 

acquisition programs. CAPE is continuing to fund the population of FACADE with additional 

data sets sufficient for the development of a wide range of case studies and other student 

exercises. Training with the FACADE system supports the teaching of analytic cost assessment 

techniques using practical, real-world examples, while simultaneously supporting the teaching of 

navigation and use of CADE, with both as important elements of the cost analysis curricula. 

Finally, CAPE has worked with DAU on the development of a five-day course specific to 

software cost estimating. The course emphasizes the unique characteristics in the software 

development environment and their effect on the cost estimating process. These characteristics 

include estimating the size of the software application; converting software size to development 

effort; estimating the schedule for completing the development effort; and maintaining the 

software throughout the operational phase. The course helps students develop reliable and 

credible software cost estimates through the use of numerous class exercises designed to convey 

the complex interrelationships of software size and complexity, programming environment, 

staffing, and scheduling. An abbreviated five-hour version of this class is available on-line as part 

of DAU’s continuous learning program. 

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 milestone and other review events identified in statute and regulation. 

CAPE and the military department cost agencies are moving to a more continuous approach in 

following and tracking program performance, updating cost and schedule estimates, and 

evaluating new program risks and issues as they are identified. 

As part of the Department's program and budget review process, CAPE—in conjunction with 

USD(AT&L)—reviews each major 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 remains fully funded. As noted 

earlier, the CARD will in the future be updated annually to support such analyses. 

Summary 

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

cost analysis functions. Implementation of these initiatives will ensure that the cost assessment 

organizations, policies and procedures, tools and methods, data collection systems, and training 

and education programs will be strengthened and improved as necessary to meet the expanded 

roles and responsibilities of the DoD cost community. 
This page intentionally left blank.
A-1 

Appendix A. 

Cost Analysis Organizations in DoD 

Independent Cost Assessment Organizations 

There are four key offices for the preparation of independent cost estimates (ICEs), one in the 

Office of the Secretary of Defense (OSD) and three within the military departments. The office 

within OSD responsible for ICEs reports to the Director, Cost Assessment and Program 

Evaluation (DCAPE). Within the military departments, the offices all report to their Assistant 

Secretary for Financial Management and Comptroller. The following paragraphs give a brief 

description and overview of these four key offices. 

OSD – Deputy Director for Cost Assessment 

The CAPE Deputy Director for Cost Assessment prepares ICEs for all Major Defense 

Acquisition Programs (MDAPs) and Major Automated Information System (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 Department of Defense (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 for 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 Operating and 

Support (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. DASA-CE also manages the Operating and Support 

Management Information System (OSMIS). 

Navy/Marine Corps – Deputy Assistant Secretary of the Navy for Cost and 

Economics/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 

ICEs for Department of the Navy MDAPs and MAIS programs, independently reviews MDAP 

program office estimates, and conducts economic analyses and special studies to support relevant 

defense issues. The Deputy Assistant Secretary of the Navy for Cost and Economics chairs the 
A-2 

DON Cost Review Board and approves all Component Cost Positions. NCCA coordinates all 

Department of the Navy cost research. NCCA also manages the Navy and Marine Corps 

Visibility and Management of Operating and Support Costs (VAMOSC) data systems. The 

Executive Director of NCCA is the Deputy Assistant Secretary of the Navy for Cost and 

Economics. 

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

Cost Analysis Agency 

The Air Force Cost Analysis Agency develops 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 agency 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 manages the Air Force Total Ownership Cost (AFTOC) data system, and 

develops 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 Naval Air Systems Command (NAVAIR) or the Air Force Space and Missile 

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

Army 

TACOM Life Cycle Management Command 

The TACOM Life Cycle Management Command (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 Earned Value Management (EVM), O&S cost baselines, support to 

Analyses of Alternatives (AoAs), source selection evaluations, and cost analyses associated with 

multi-year procurement contracts. 

Aviation and Missile Command 

The Aviation and Missile Command (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 also develops cost estimates to support AoAs, tradeoff studies, 

and force structure cost estimates; develops and prepares life cycle cost estimates; and conducts 

other related studies in support of weapon system cost analyses. The Division performs cost risk 
A-3 

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. 

Communication-Electronics Command 

The Communication-Electronics Command (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 

The Naval Air Systems Command (NAVAIR) Cost Department 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 

The Naval Sea Systems Command (NAVSEA) Cost Engineering and Industrial Analysis 

Division provides cost engineering and industrial base analysis for ships, ship-related combat 

systems, and weapons. It provides cost estimates in support of the Defense Acquisition Board 

(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 

The Space and Naval Warfare Systems Command (SPAWAR) Cost Estimating and Analysis 

Division may—depending on a program’s acquisition category (ACAT)—provide assistance to 

ACAT I program offices, perform an ICE for ACAT II programs prior to a Milestone B or C 

review, or review a program office cost estimate upon the request of the Program Executive 

Officer (C4I and Space). The Division 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, costrisk assessments, and affordability analyses for Combat Systems. The Group also develops costestimating 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, 
A-4 

performance-based cost models, product-oriented cost models, proposal evaluation, and source 

selection reviews. 

Marine Corps Systems Command 

The Cost and Analysis Branch (C&AB) is the Marine Corps Systems Command (MCSC) 

authority in the field of cost analysis. The C&AB conducts and oversees the development of cost 

estimates for MCSC weapon, information technology (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 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 

In 2012, the Air Force combined cost estimating activities from three product centers under the 

Air Force Life Cycle Management Center (AFLCMC): the Aeronautical Systems Center, the 

Electronic Systems Center, and the 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 

The SMC Cost Estimating Division supports cost estimates and cost analyses associated with Air 

Force Space Command and the SMC’s mission of satellite acquisition, launch, and control. 

Air Force Sustainment Center 

The Air Force Sustainment Center (AFSC) Cost Estimating Division supports cost estimates and 

cost analyses associated with the AFSC’s mission to provide depot maintenance, supply chain 

management and installation support to Air Force weapon systems. 

Air Force Nuclear Weapons Center 

The Air Force Nuclear Weapons Center (AFNWC) Cost Estimating Division supports cost 

estimates and cost analyses 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. 

Other 

National Reconnaissance Office Cost Analysis Improvement Group 

The National Reconnaissance Office (NRO) Cost Analysis Improvement Group provides 

independent cost estimating support to the NRO. This support covers milestone decisions, budget 
A-5 

submissions, EVM, ad hoc program support, data collection, methods development, and 

model/tool development. 

Defense Information Systems Agency 

The Defense Information Systems Agency (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 IT 

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. 

Missile Defense Agency 

The Missile Defense Agency (MDA) Director of Cost Estimating and Analysis (DOC) is 

responsible for ensuring the quality of cost estimates, providing direction on cost estimating 

processes, and working with the service cost organizations, CAPE, and the Government 

Accountability Office on all cost-related matters. In recent years MDA/DOC has worked closely 

with CAPE on preparing cost estimates for MDA programs and responding to congressional and 

Missile Defense Executive Board inquiries and tasks. In addition, the Agency has established a 

policy to collect CSDR data for its high-cost programs. For such programs, the CSDR plans are 

subject to approval by CAPE. 
This page intentionally left blank. 
B-1 

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 (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 Operations 

and Maintenance (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 Milestone Decision 

Authority (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 most 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 Selected Acquisition Report (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 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 
B-2 

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”). 
C-1 

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 or IT 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, 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 a 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; 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: 

(1) the program is essential to the national security or to the efficient management of DoD; 

(2) there is no alternative to the program 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 

The statutory provisions pertaining to MAIS programs s are being removed from statute effective 

September 30, 2017. These provisions include the definition and dollar thresholds of MAIS 

programs, the MAIS reporting requirements, and the procedures for notifying the congressional 

defense committees of a significant change or critical change. This change was made by the 

National Defense Authorization Act for FY 2017. These changes will need to be incorporated 

into the various guidance documents described in Chapter II.
D-1 

Appendix D. 

CADE and Cost Data Collection Systems 

Role of Cost Assessment Data Enterprise 

As explained in Chapter IV, the Cost Assessment Data Enterprise (CADE) provides the users in 

the cost community with single-point access to the complete range of cost and related data. The 

CADE site map presented to the users is shown in Figure D-1. 

Figure D-1. CADE Sitemap 

Note that the CADE web site not only provides access to the data, but also provides information 

about policy and procedures relevant to data reporting and collection. There is also access to a 

wide range of visual and analytic tools, and information about training opportunities concerning 

CADE, CSDR, and EVM. The specific data systems that are warehoused in CADE are described 

later in this appendix. 

Access to CADE is made available to government analysts throughout the cost and acquisition 

communities. A display of active users throughout the Department is shown in Figure D-2. Note 

the size of each circle reflects the relative number of users. Also note that roughly 70 percent of 

the 1,870 CADE users reside in the military departments.
D-2 

Figure D-2. CADE Users
D-3 

Overview of Cost Data Reporting and Collection 

Three primary data collection systems are used by DoD as the major sources of cost data for 

major acquisition programs: 

 Cost and Software Data Reporting (CSDR) system 

 Earned Value Management (EVM) Central Repository 

 Visibility and Management of Operating and Support (VAMOSC) systems 

Both the CSDR and EVM reporting use a common, product-oriented taxonomy known as a Work 

Breakdown Structure (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”). 

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 provide information to 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 

the contractor cost data reporting (CCDR) and software resources data reporting (SRDR) 

systems. These systems are hosted on a secure, web-based, information repository known as the 

Defense Automated Cost Information Management System within CADE. 

CCDR is the primary means within DoD to systematically collect data on the development, 

production, and sustainment costs incurred by contractors. 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. These 

requirements may need to be changed due to new legislation concerning cost data collection made 

by the National Defense Authorization Act for FY 2017. 

The SRDR system collects software cost metrics data to supplement the CCDR cost data, to 

provide a better understanding and improved estimating of software-intensive programs. 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. Efforts to improve SRDR reporting are described 

in Chapter IV. 

The CSDR data that is currently collected is illustrated in Figure D-3. Access to CSDR data is 

provided within CADE to authorized users. Detailed procedures and other implementation 
D-4 

guidance for both CSDR systems are found in DoD 5000.04-M-1, Cost and Software Data 

Reporting (CSDR) Manual. This Manual is now being updated as described in Chapter IV. 

 Figure D-3. CSDR Data Reports and Plans 

The CSDRs provide essential cost information based on actual cost experience not found in other 

data sources. The reports provide labor hours, material dollars, and overhead dollars by WBS 

element and cost estimating functional category. The data may also be used to investigate fixedvariable direct and indirect cost behavior, and to segregate nonrecurring and recurring costs. The 

data from these reports can be used to construct learning curve projections for labor hours and 

other recurring costs at various levels of the WBS. The timing of the periodic data reporting is 

structured to provide key support to the preparation of cost estimates at milestone and other 

acquisition reviews. 

The Defense Cost and Resource Center (DCARC) provides extensive support to the CSDR users 

and data providers. 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 Center provides 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 IT systems and applications. 
D-5 

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 pre-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) the relevant item being procured is truly a 

commercial item, or (2) an item is purchased under competitively awarded, firm fixed-price 

contracts, as long as competitive conditions continue to exist. 

The most recent CSDR compliance rating criteria for programs are provided in Figure D-4 below. 

 Figure D-4. CSDR Compliance Rating Criteria 

Figure D-5 provides a breakdown of CSDR compliance by fiscal quarter using the compliance 

ratings in effect at the time for all MDAPs since FY 2012. Note that the compliance ratings were 

revised late FY 2014, and will be revised again effective in the second quarter of FY 2017. 
Figure D-5. Quarterly CSDR Compliance History by Fiscal Year 

D-6 
D-7 

At the end of the first quarter of FY 2017, 69 percent of the programs receiving a rating were rated as 

green or green advisory, 5 percent were rated as yellow, 18 percent were rated as red, and 8 percent were 

rated as red critical. CAPE and the DCARC continue to emphasize CSDR reporting compliance in order 

to achieve more accurate and timely cost data to support program cost estimates. Specifically, in cases in 

which required cost data are not being reported in a timely fashion (i.e., are more than six months late), 

CAPE now insists that the data be provided before it can complete its ICE, or concur with a military 

department cost estimate. 

Earned Value Management Central Repository 

In support of the USD(AT&L) staff, the DCARC hosts the EVM Central Repository within CADE. 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. General 

information about EVM reporting is available in the Defense Acquisition Guidebook, section 11.3.1 

(“Earned Value Management”), and on the DoD EVM website at 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 these data is to provide a consistent 

and timely situational awareness of acquisition execution. 

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 FY 2012, Public Law 112-81, contains a provision (“Assessment, 

Management and Control of O&S Costs”) that resulted in 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 timeframe, 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. Both systems are managed by NCCA. 

 The Army’s VAMOSC system, called the Operating and Support Management Information 

System (OSMIS), tracks O&S cost data and other 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 
D-8 

miscellaneous engineering systems. OSMIS will be significantly improved in the future when it 

is fed data from the emerging Army Enterprise Resource Planning programs, including the 

General Fund Enterprise Business System. 

 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 data and related information on all 

Air Force aircraft, space systems, and missiles. 
E-1 

Abbreviations 

ACAT Acquisition Category 

ACV Amphibious Combat Vehicle 

AFIT Air Force Institute of Technology 

AFLCMC Air Force Life Cycle Management Center 

AFNWC Air Force Nuclear Weapons Center 

AFSC Air Force Sustainment Center 

AFTOC Air Force Total Ownership Cost 

AMCOM Aviation and Missile Command 

AoA Analysis of Alternatives 

AOC-WS Inc 10.2 Air and Space Operations Center – Weapon System Increment 10.2 

APUC Average Procurement Unit Cost 

B-2 DMS-M B-2 Defensive Management System - Modernization 

C&AB Cost and Analysis Branch 

CADE Cost Assessment Data Enterprise 

CAPE Cost Assessment and Program Evaluation 

CARD Cost Analysis Requirements Description 

CCDR Contractor Cost Data Reporting 

CCP Component Cost Position 

CECOM Communication-Electronics Command 

CSDR Cost and Software Data Reporting 

DAB Defense Acquisition Board 

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

DAU Defense Acquisition University 

DCARC Defense Cost and Resource Center 

DISA Defense Information Systems Agency 

DOC Director of Cost Estimating and Analysis 

DoD Department of Defense 

DoDCAS Department of Defense Cost Analysis Symposium 

EMD Engineering and Manufacturing Development 

EPAWSS Eagle Passive Active Warning Survivability System 

EVM Earned Value Management 

FCoM Full Cost of Manpower 
E-2 

FMS Foreign Military Sales 

FY Fiscal Year 

FYDP Future Years Defense Program 

GBSD Ground Based Strategic Deterrent 

GPS OCX Global Positioning System Next Generation Operational Control System 

ICE Independent Cost Estimate 

ITEP Improved Engine Turbine Program 

JMS Inc 2 Joint Space Operations Center (JSpOC) Mission System Increment 2 

JPALS Joint Precision Approach and Landing System 

JSTARS Recap Joint Surveillance Target Aircraft Radar System Recapitalization 

LCMC Life Cycle Management Command 

MAIS Major Automated Information System 

MCA Master’s Degree Program in Cost Analysis 

MCEA Master’s Degree Program in Cost Estimating and Analysis 

MCSC Marine Corps Systems Command 

MDA Milestone Decision Authority 

MDA Missile Defense Agency 

MDAP Major Defense Acquisition Program 

MNVR Mid-Tier Networking Vehicular Radio 

MYP Multi-Year Procurement 

NAVAIR Naval Air Systems Command 

NAVSEA Naval Sea Systems Command 

NCCA Naval Center for Cost Analysis 

NGJ Inc 1 Next Generation Jammer Increment 1 

NRO National Reconnaissance Office 

O&M Operations and Maintenance 

O&S Operating and Support 

OMB Office of Management and Budget 

OSD Office of the Secretary of Defense 

OSMIS Operating and Support Management Information System 

PAR Presidential Aircraft Recapitalization 

PAUC Program Acquisition Unit Cost 

PEO Program Executive Officer 

PMO Program Management Office 
E-3 

POM Program Objective Memorandum 

RFP Request for Proposal 

SAR Selected Acquisition Report 

SCP Service Cost Position 

SMC Space and Missile Center 

SPAWAR Space and Naval Warfare Systems Command 

SRDR Software Resources Data Reporting 

USD(AT&L) Under Secretary of Defense (Acquisition, Technology and Logistics) 

USD(P&R) Under Secretary of Defense (Personnel and Readiness) 

VAMOSC Visibility and Management of Operating and Support Costs 

WBS Work Breakdown Structure 

WSARA Weapon Systems Acquisition Reform Act of 2009 
This page intentionally left blank.