DEFENSE LOGISTICS

Improvements Needed 

to Enhance Oversight 

of Estimated Longterm Costs for 

Operating and 

Supporting Major 

Weapon Systems

Report to the Subcommittee on 

Readiness, Committee on Armed 

Services, House of Representatives

February 2012

GAO-12-340

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-340, a report to the 

Subcommittee on Readiness, Committee on 

Armed Services, House of Representatives

February 2012

DEFENSE LOGISTICS

Improvements Needed to Enhance Oversight of 

Estimated Long-term Costs for Operating and 

Supporting Major Weapon Systems

Why GAO Did This Study

With the nation facing fiscal challenges 

and the potential for tighter defense 

budgets, Congress and the 

Department of Defense (DOD) have 

placed more attention on controlling 

the billions of dollars spent annually on 

weapon system operating and support 

(O&S) costs. These costs include, 

costs for repair parts, maintenance, 

and personnel, and account for about

70 percent of the total costs of a 

weapon system over its life cycle. The 

selected acquisition report (SAR) is

DOD’s key recurring status report on 

the cost, schedule, and performance of 

major defense acquisition programs 

and is intended to provide authoritative 

information for congressional oversight 

of these programs. Oversight of O&S 

costs is important because many of the 

key decisions affecting these life-cycle

costs are made during the acquisition 

process. GAO reviewed weapon 

system O&S cost estimates that DOD 

submits in the SAR. Specifically, GAO 

determined the extent to which the 

SARs provide consistent and reliable 

O&S cost estimate information that 

enables effective oversight of these 

weapon system costs. To conduct its

review, GAO analyzed SAR data for 84 

major systems that submitted O&S 

cost estimates in the 2010 SAR and 

selected a nonprobability sample of 15

systems for more in-depth review.

What GAO Recommends

To enhance visibility of weapon system 

O&S costs during acquisition, GAO 

recommends that DOD improve its 

guidance to program offices on cost 

reporting and also improve its process 

for reviewing these costs prior to final 

submission of the SAR to Congress.

DOD concurred with GAO’s 

recommendations.

What GAO Found

DOD’s reports to Congress on estimated weapon system O&S costs are often 

inconsistent and sometimes unreliable, limiting visibility needed for effective 

oversight of these costs. The SAR statute requires that life-cycle cost reporting 

for major weapon systems be uniform, to the extent practicable, across the 

department, but GAO found a number of inconsistent practices in how program 

offices were reporting life-cycle O&S cost estimates in the SAR. Program offices 

were inconsistent in (1) the explanatory information they included with the cost 

estimates; (2) the source of the cost estimate they cited as the basis for the 

reported costs; (3) the unit of measure they used to portray average costs; 

(4) the frequency with which they updated reported costs; and (5) the reporting of 

costs for an antecedent system being replaced by the new weapon system. For 

example, 35 (42 percent) of the 84 programs that reported O&S costs in the 2010 

SAR did not cite a source of these data, contrary to DOD’s guidance, and 57 (68 

percent) of the programs did not report O&S costs for an antecedent system. 

Also, O&S cost submissions in the SAR did not always incorporate best practices 

for presenting cost estimates, such as tracking cost changes over time and 

identifying cost drivers. In addition, 11 systems did not provide O&S cost 

estimates in the 2010 SAR.

Although SARs are intended to provide Congress with authoritative program 

information on major weapon systems, 7 of the 15 sample programs GAO 

reviewed submitted unreliable O&S cost estimate data in the 2007, 2009, or 2010 

SARs. For example, an Air Force program underreported O&S costs by $2.1 

billion (fiscal year 2002 dollars), or 18 percent. While some of the program offices 

did not provide an explanation for the errors in the submitted data, others cited 

specific reasons. For example, one Navy program office underreported O&S 

costs in the SAR and explained that it excluded certain costs that were not under 

its control, such as externally funded spare parts and military personnel. 

However, excluding such costs is contrary to the SAR statute. An Air Force 

program reported current and projected funding for the program rather than 

estimated life-cycle O&S costs. This practice also had the effect of 

underreporting these costs.

DOD’s reports to Congress on estimated weapon system O&S costs were often 

inconsistent and sometimes unreliable due to a lack of (1) detailed 

implementation guidance for reporting these costs and (2) an effective process 

for reviewing the O&S cost sections of the SAR before final submission to 

Congress. DOD’s guidance collectively provides minimal instructions for O&S 

cost reporting. The guidance also does not incorporate some of the best 

practices GAO has identified for presenting cost estimates. Further, although the 

SAR data submitted by program offices are subject to multiple reviews within the 

military services and by the Office of the Secretary of Defense, this review 

process has not provided assurance that O&S costs are reported consistently 

and reliably. In the absence of improvements to the SAR guidance and to the 

review process, deficiencies in reporting O&S costs are likely to continue.

Improved reporting of O&S costs in the SAR could help to place more emphasis 

on assessing, managing, and controlling long-term weapon system O&S costs. View GAO-12-340. For more information, 

contact Cary B. Russell at (404) 679-1808 or 

russellc@gao.gov.
Page i GAO-12-340 Defense Logistics

Letter 1

Background 5

DOD’s Reports to Congress on Estimated Weapon System O&S 

Costs Were Inconsistent and Sometimes Unreliable 9

Conclusions 28

Recommendations for Executive Action 28

Agency Comments and Our Evaluation 30

Appendix I Scope and Methodology 33

Appendix II DOD’s Guidance for Implementing the Statutory SAR Requirements 36

Appendix III Comments from the Department of Defense 39

Appendix IV GAO Contact and Staff Acknowledgments 43

Tables

Table 1: Source of Cost Estimate Cited for 84 Programs Reporting 

O&S Costs in the 2010 SAR 12

Table 2: Major Weapon System Programs That Did Not Identify 

O&S Costs in Their 2010 SARs 21

Table 3: Major Weapon Systems in GAO’s Nonprobability Sample 35

Contents
Page ii GAO-12-340 Defense Logistics

Abbreviations

CAPE Cost Assessment and Program Evaluation

DOD Department of Defense

FBCB2 Force XXI Battle Command Brigade and Below

GPS Global Positioning System

JTRS Joint Tactical Radio System

MRAP Mine Resistant Ambush Protected

O&S operating and support

OSD Office of the Secretary of Defense

SAR Selected Acquisition Report

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Page 1 GAO-12-340 Defense Logistics

United States Government Accountability Office

Washington, DC 20548

February 2, 2012

The Honorable J. Randy Forbes

Chairman

The Honorable Madeleine Bordallo

Ranking Member

Subcommittee on Readiness

Committee on Armed Services

House of Representatives

With the nation facing fiscal challenges and the potential for tighter

defense budgets, both Congress and the Department of Defense (DOD) 

in recent years have placed more attention on controlling the billions of 

dollars spent annually on weapon system operating and support (O&S) 

costs. These costs include, among other things, costs for repair parts, 

maintenance, and personnel, and historically have accounted for about 

70 percent of a weapon system’s total costs.1 In short, the acquisition of a 

weapon system today involves a significant financial commitment to that 

system over its entire life cycle, a period that may last several decades 

from the system’s development to the time it is removed from DOD’s 

inventory. For example, the program office for the F-35 Joint Strike 

Fighter, the newest aircraft being acquired for the Air Force, Navy, and 

Marines, estimated in 2010 that life-cycle O&S costs were about $1.0 

trillion, in addition to an estimated $379.4 billion in total acquisition costs.2

Since 1969, the selected acquisition report (SAR) has been the key 

recurring summary status report to Congress on the cost, schedule, and 

 1 According to DOD officials, O&S costs generally range from 60 to 80 percent of a 

weapon system’s total costs, depending on the weapon system type. DOD previously 

estimated that weapon system product support costs in fiscal year 2008 were at least 

$132 billion. According to DOD, product support encompasses materiel management, 

distribution, technical data management, maintenance, training, cataloging, configuration 

management, engineering support, repair parts management, failure reporting and 

analysis, and reliability growth. Under this definition, product support does not include all 

the costs categorized as O&S costs.

2 These costs are expressed in then-year dollars. Estimated O&S costs in fiscal year 2002 

dollars were about $420.3 billion.
Page 2 GAO-12-340 Defense Logistics

performance of DOD’s major defense acquisition programs.3 (We also 

use the term major weapon systems to refer to these programs, although 

some programs involve other types of defense systems.) The SAR is 

intended to provide authoritative information needed for congressional 

oversight of these programs. Although much of the data reported within 

the SAR is acquisition related, in 1985 Congress amended the SAR 

statute to require that a full life-cycle cost analysis also be included in the 

SAR,4 and subsequently specified that this life-cycle cost analysis include 

estimated O&S costs.5

 3 Major defense acquisition programs are those estimated by the Under Secretary of 

Defense for Acquisition, Technology and Logistics to require an eventual total 

expenditure, including all planned increments, of more than $365 million for research, 

development, test, and evaluation, based on fiscal year 2000 constant dollars 

(approximately $509 million in fiscal year 2010 dollars), $2.190 billion for procurement, 

based on fiscal year 2000 constant dollars (approximately $3.054 billion in fiscal year 

2010 dollars), or are designated as a major defense acquisition program by the Milestone 

Decision Authority. 10 U.S.C. § 2430; Under Secretary of Defense for Acquisition, 

Technology and Logistics Directive-Type Memorandum (DTM) 09-027-Implementation of 

the Weapon Systems Acquisition Reform Act of 2009, attachment 1, para. 13 (Dec. 4, 

2009). 

This information is important for effective oversight 

because many of the key decisions affecting a weapon system’s O&S 

costs over its life cycle are made while the system is still in the acquisition 

process. Acquisition-related decisions about the design, materials, and 

technology for the system affect the logistics support that is eventually 

needed to keep the system available and ready after it enters into DOD’s 

inventory. Further, investments to improve reliability, availability, and 

maintainability during acquisition can reduce the future O&S costs of 

DOD’s weapon systems. For example, higher reliability can be designed 

into the weapon system during its development by reducing technical 

requirements, using highly reliable and proven components, or investing 

more in early testing, thus improving prospects for readiness and 

reducing O&S costs across the life cycle. As the visibility and 

management of O&S costs have become more of a focus in the 

department, the Office of the Secretary of Defense (OSD) has recognized 

the SAR as a source of O&S cost information for oversight of weapon 

system acquisitions. Therefore, the O&S costs reported in the SARs are 

4 Department of Defense Authorization Act, 1986, Pub. L. No. 99-145, § 1201 (1985).

5 See National Defense Authorization Act for Fiscal Year 1991, Pub. L. No. 101-510, § 

1407(b) (1990); Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103-355, § 

3002(c) (1994).
Page 3 GAO-12-340 Defense Logistics

not only reported to Congress, but they are also included in internal OSD 

management reports as well.

In response to the Weapon Systems Acquisition Reform Act of 2009,6 we 

previously reviewed the growth in O&S costs of major weapon systems 

and reported that DOD lacked key information needed to effectively 

manage and reduce O&S costs—including life-cycle O&S cost estimates 

and complete historical data on actual O&S costs.7 DOD generally 

concurred with the recommendations in that report and stated that it was 

taking corrective actions. More recently, the National Defense 

Authorization Act for Fiscal Year 2012 directs DOD to take a number of 

actions consistent with our recommendations, with the aim of better 

assessing, managing, and controlling weapon system O&S costs.8

To meet our objective, we reviewed statutory requirements and DOD 

guidance for reporting weapon system O&S cost estimates in the SARs. 

We also reviewed DOD cost-estimating guidance, which identifies the 

specific categories of O&S costs for weapon systems, and GAO-identified 

cost-estimating best practices to identify the scope and nature of cost 

estimate information needed for effective program management and 

oversight. We interviewed DOD and military service officials responsible 

for weapon system acquisition, logistics, and cost analysis to understand 

DOD’s approach and process for reporting O&S cost estimates in the 

SARs.

In light 

of the findings from our prior work, you requested that we review the O&S 

cost estimate information for major weapon systems that DOD submits to

Congress within the annual SARs. Specifically, our objective was to 

determine the extent to which the SARs provide consistent and reliable 

O&S cost estimate information to enable effective oversight of these 

weapon system costs.

We obtained SARs from the Defense Acquisition Management 

Information Retrieval system, which is a web-based system used within 

DOD to collect and maintain SAR information submitted by the program 

 6 Pub. L. No. 111-23 (2009).

7

GAO, Defense Management: DOD Needs Better Information and Guidance to More 

Effectively Manage and Reduce Operating and Support Costs of Major Weapon Systems, 

GAO-10-717 (Washington, D.C.: July 20, 2010).

8 Pub. L. No. 112-81, § 832 (2011).
Page 4 GAO-12-340 Defense Logistics

offices. We determined that the data in this system accurately reflected 

information submitted by weapon system program offices and therefore 

were sufficiently reliable for the purposes of our analysis. We obtained 

and analyzed annual SAR data for all 84 major weapon systems that 

reported O&S costs in their annual SAR for 2010. This analysis covered 

the time period from 2005 through 2010 with the exception of 2008.9 In 

addition, from these 84 weapon systems, we selected a sample of 15 

programs for further analysis.10 Through a data collection instrument, 

interviews, and other contacts, we obtained information from the program 

offices on the O&S cost reports they had submitted in the SAR, including 

cost estimates, where available, that formed the basis for their cost 

reports. We designed the sample to ensure that a range of weapon 

systems were represented based on commodity type11

We conducted this performance audit from February 2011 to February

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

and the military 

service under which the system acquisition was being managed. The 

results from this nonprobability sample cannot be used to make 

inferences about all major weapon systems because the sample may not 

reflect all characteristics of the population. We also obtained SARs for 11 

weapon systems that reported an annual SAR for 2010 but did not 

identify O&S costs in the SAR. We obtained information from the program 

offices about the reasons these costs were not reported. Our scope and 

methodology is discussed further in appendix I.

 9 DOD did not report annual SARs for 2008. In addition, because some of the weapon 

systems began reporting SARs at some point during this time period, our analysis for such 

systems only dates back to their initial SAR report.

10 Our original sample included 16 weapon systems. However, one system, the Army’s 

Increment 1 Early-Infantry Brigade Combat Team, was subsequently canceled. 

11 We categorized systems as aircraft, ship, ground, or “other” (e.g., missile programs and 

command and control systems).
Page 5 GAO-12-340 Defense Logistics

Requirements for submitting SARs to Congress, including the timing of 

these reports and the types of information to be included, are established 

in statute. Under 10 U.S.C. § 2432, the Secretary of Defense shall submit 

to Congress at the end of each fiscal-year quarter a report on current 

major defense acquisition programs.12

The statute also requires that the annual SAR include a full life-cycle cost 

analysis for each major defense acquisition program and each designated 

major subprogram included in the report that is in the system 

development and demonstration stage or has completed that stage.

Each SAR for the first quarter of a 

fiscal year (also known as the comprehensive annual SAR) shall be 

designed to provide to the Committee on Armed Services of the Senate 

and the Committee on Armed Services of the House of Representatives 

the information these committees need to perform their oversight 

functions. The comprehensive annual SAR shall be submitted within 60 

days after the date on which the President’s Budget is sent to Congress 

for the following fiscal year.

13

Further, the Secretary of Defense must ensure that this requirement is 

implemented in a uniform manner, to the extent practicable, throughout 

DOD. The term full life-cycle cost, with respect to a major weapon 

system, means all costs of development, procurement, military 

construction, and operations and support, without regard to funding 

source or management control. If the major weapon system has an 

antecedent system, a full life-cycle cost analysis for that system must also 

be reported. The SAR reporting requirement ceases after 90 percent of 

the items are delivered or 90 percent of planned expenditures under the 

program are made.

 12 SARs for the second, third, and fourth quarters of a fiscal year, known as quarterly 

SARs, are not required for a program if a report on the program was included in a 

previous SAR for that fiscal year and during the period since that report the program has 

not experienced cost increases or schedule delays beyond certain thresholds.

13 This stage of acquisition is now called engineering and manufacturing development.

Background

Statutory Requirements for 

Submitting SARs to 

Congress
Page 6 GAO-12-340 Defense Logistics

DOD has issued various guidance documents that implement the 

statutory SAR requirements. This guidance is contained in an acquisition 

instruction,14 a guidebook on defense acquisition best practices,15 a draft 

SAR policy,16 and an annual memorandum on preparing SARs.17 DOD 

also has developed instructions18 and training for entering SAR data into 

the Defense Acquisition Management Information Retrieval system.19

DOD’s implementation guidance states that SARs should be submitted at 

program initiation or at the time that the program is designated as a major 

defense acquisition program, and then at least annually thereafter. The 

guidance requires the submission of a quarterly SAR after a program is 

rebaselined based on a major milestone decision.

According to officials, program offices rely on DOD’s implementation 

guidance because the services do not have their own formal SAR 

reporting guidance. DOD’s guidance is summarized below and discussed 

more fully in appendix II.

20

 14 DOD Instruction 5000.02, Operation of the Defense Acquisition System (Dec. 8, 2008).

With respect to 

reporting O&S costs in the SAR, DOD’s implementation guidance states 

15 DOD, Defense Acquisition Guidebook (2011).

16 OSD, Selected Acquisition Report (draft) (2006). Although issued in draft, the policy 

was never issued in final form. 

17 At the time we conducted our review, the most recent annual guidance was issued in 

January 2011. Under Secretary of Defense for Acquisition, Technology and Logistics, 

Memorandum for Assistant Secretaries of the Military Services, December 2010 Selected 

Acquisition Reports (SARs) Guidance (Jan. 14, 2011). 

18 Under Secretary of Defense for Acquisition, Technology and Logistics, SAR Data Entry 

Instructions (draft) (Nov. 5, 2010).

19 Throughout the report, we collectively refer to all of DOD’s SAR guidance as DOD’s 

implementation guidance, including the draft SAR policy. 

20 DOD’s acquisition process includes a series of decision milestones as the systems 

enter different stages of development and production. As part of the process, the DOD 

component or joint program office responsible for the acquisition program is required to 

prepare life-cycle cost estimates, which include O&S costs, to support these decision 

milestones and other reviews. Key decision milestones include milestone B, which 

approves entry into the engineering and manufacturing development phase, and 

milestone C, which approves entry into the production and deployment phase, including 

low-rate initial production. Continuation into full-rate production occurs after the full-rate

production decision review is held. In conjunction with a milestone decision, a program 

may be rebaselined, which means that the cost, quantity, schedule, and performance 

goals are changed to reflect the current status.

DOD’s Guidance for 

Implementing the 

Statutory SAR 

Requirements
Page 7 GAO-12-340 Defense Logistics

that program offices should provide explanatory information such as the 

source and date of the cost estimate, assumptions underlying the 

estimate, the antecedent system used for comparison purposes, and an 

explanation of how average annual costs were calculated. DOD officials 

stated that programs should report the cost estimate that was developed 

for the latest acquisition milestone decision.21 According to the guidance, 

programs should report total estimated O&S costs and should also report 

average O&S costs by a unit of measure (e.g., average annual cost per 

squadron, average annual cost per system).22 DOD’s guidance states that 

if a program has an antecedent system,23

In addition to its SAR implementation guidance, DOD has issued 

guidance for developing weapon system O&S cost estimates, which 

provide the basis for the O&S cost section of each SAR. Specifically, the 

OSD Cost Analysis Improvement Group, now known as the Cost 

Assessment and Program Evaluation (CAPE) office, has established 

guidance for preparing and presenting life-cycle O&S cost estimates at 

acquisition milestone reviews.

then O&S costs and 

assumptions should be submitted for the antecedent system.

24

 21 Training materials from the Defense Acquisition University similarly reflect that the 

estimate developed for the latest acquisition milestone should be reported in the SAR.

However, the draft SAR policy differs in that it calls for reporting the “most recent” estimate 

of life-cycle O&S costs.

O&S cost elements, for example, are to 

be grouped into six major areas—unit-level personnel, unit operations, 

maintenance, sustaining support, continuing system improvements, and 

indirect support—which are further broken down into 23 subelements. In 

addition, we have identified federal government best practices for 

preparing and presenting cost estimates. These practices include tracking 

cost estimates over time; identifying the major cost drivers; identifying the 

22 The guidance directs program offices to report total estimated O&S costs in constant 

dollars as well as then-year dollars, and to report average costs in constant dollars. 

Constant dollars measure the value of purchased goods and services at price levels which 

are the same as the base year and, unlike then-year dollars, do not contain any 

adjustments for inflationary changes that have occurred or are forecasted to occur outside 

the base year. 

23 An “antecedent system” is defined by DOD as one that has been replaced by another 

due to obsolescence (technical or otherwise).

24 OSD, Operating and Support Cost Estimating Guide (October 2007).
Page 8 GAO-12-340 Defense Logistics

method and process for estimating each cost element; and comparing the 

program-developed cost estimate to an independent cost estimate.25

When required, a comprehensive annual SAR is prepared for each major 

weapon system by the program office that is managing its acquisition. 

Program offices are responsible for weapon systems throughout the life

cycle, to include implementing, managing, and/or overseeing their 

development, production, fielding, sustainment, and disposal. The 

reporting time frame for the annual SAR is linked to the issuance of the 

President’s Budget, which occurs early in the calendar year, and the cost, 

schedule, and performance data reported in the annual SAR should 

reflect this budget request.26

The Office of the Under Secretary of Defense for Acquisition, Technology 

and Logistics begins the process by sending out its annual memorandum 

guidance in mid-January. Program offices then enter data into the 

Defense Acquisition Management Information Retrieval system and 

submit the SARs to OSD acquisition officials, generally after some level of 

internal review by the program office, the Program Executive Officer,27

and the military service under which the program is organized. OSD 

officials review the SAR submissions, and officials within the Office of the 

Assistant Secretary of Defense (Logistics and Materiel Readiness) focus 

on the O&S section of the reports. OSD officials then hold a series of 

meetings with the services and program office representatives to discuss 

the SAR submissions and any recommended changes. Consistent with 

the statutory requirement, the final annual SAR is typically submitted to 

Congress in April, 60 days after the President’s Budget has been 

submitted in February.

 25 GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009).

26 The annual SAR is dated at the end of the calendar year that just ended because it is 

the first quarterly SAR of the fiscal year. For example, the annual SAR prepared and 

reported in early calendar year 2011 is dated December 2010.

27 A Program Executive Officer is the military or civilian official who has responsibility for 

directing the acquisition of several major weapon systems, as well as other acquisition 

programs. This individual reports to and receives guidance and direction from the service 

acquisition executive.

DOD’s Process and 

Schedule for Preparing 

SARs
Page 9 GAO-12-340 Defense Logistics

Program offices reporting life-cycle O&S cost estimates in the SAR were 

often inconsistent in their cost reporting and also did not follow best 

practices for presenting cost estimates. In addition, some programs did 

not provide any O&S cost estimates in the 2010 SAR. Further, several of 

the programs we reviewed in more depth reported unreliable O&S cost 

data. The main cause for these deficiencies was a lack of detailed SAR 

implementation guidance for reporting O&S costs. In addition, DOD’s 

process for reviewing the O&S cost sections of the SAR prior to their final 

submission did not provide assurance that the program offices reported 

costs uniformly, to the extent practicable, and that these reported costs 

were reliable. In the absence of improvements to the SAR guidance and 

to DOD’s review process, deficiencies in reporting estimated life-cycle 

O&S costs are likely to continue. Such deficiencies may limit visibility 

needed for effective oversight of long-term weapon system O&S costs 

during the acquisition process.

The SAR statute requires that life-cycle cost reporting for major weapon 

systems be uniform, to the extent practicable, across the department, but 

we found a number of inconsistent practices in how program offices were 

reporting life-cycle O&S cost estimates in the SAR. Based on the SAR

submissions we reviewed, program offices were inconsistent in (1) the 

explanatory information they included with the cost estimates, (2) the 

source of the cost estimate they cited as the basis for the reported costs, 

(3) the unit of measure they used to portray average costs, (4) the 

frequency with which they updated reported costs, and (5) the reporting of 

antecedent system costs. In addition to these inconsistencies, we found 

that SAR submissions also did not incorporate best practices for 

presenting cost estimates, such as tracking cost changes over time and 

identifying cost drivers. In addition, 11 systems did not provide O&S cost 

estimates in the 2010 SAR.

Submitting more consistent cost reports and incorporating best practices 

for presenting cost estimates would improve visibility of estimated lifecycle O&S costs in the SAR, as decision makers will have more 

information with which to evaluate the reported data. For example, the 

inclusion of the date and the source of the reported estimate provides 

context about the currency of the reported costs and the level of review 

(that is, whether the cost estimate was prepared by the program office, by 

the military service, or by CAPE). Likewise, the inclusion of significant 

assumptions underlying the cost estimate, an explanation of changes in 

the cost estimate from the prior year, and information on major cost 

drivers provides insight into the cost challenges facing the program. In 

DOD’s Reports to 

Congress on 

Estimated Weapon 

System O&S Costs 

Were Inconsistent and 

Sometimes Unreliable

Program Offices Were 

Inconsistent in Reporting 

Estimated Life-Cycle O&S 

Costs and Did Not 

Incorporate Best Practices 

for Presenting These Cost 

Estimates
Page 10 GAO-12-340 Defense Logistics

addition, showing average costs using a common unit of measure allows 

for easier comparison of program costs to the costs of similar 

commodities (such as other aircraft programs).

DOD’s implementation guidance for the SAR directs programs to include 

explanatory information in the narrative accompanying the O&S cost 

estimates, such as the source and date of the cost estimate, assumptions 

underlying the estimate (such as operating tempo, expected reliability and 

maintainability of the system, maintenance concept, and manning and 

logistics policies), the antecedent program used for comparison purposes, 

and an explanation of how average costs were calculated. Although 

explanatory information can provide context and background for 

understanding reported costs, we found that the explanatory information 

included in the O&S narrative was often minimal.

Of the 84 programs that reported O&S costs in the 2010 SAR, we found 

that 35 (42 percent) did not include the source of the estimate and 12 (14 

percent) did not include the date of the estimate in the O&S narrative. 

Additionally, for the 15 programs in our sample, we found that beyond 

providing a few basic details such as the number of units that were to be 

acquired, their expected service life, and operating tempo, where 

applicable, the O&S narrative contained minimal explanation of reported 

cost estimates and the assumptions underlying these estimates, as the 

following examples illustrate:

• The program office for the Army’s High Mobility Artillery Rocket 

System included several assumptions, such as the number of 

launchers and the service life. However, instead of reporting 

additional O&S cost estimate assumptions (such as operating tempo 

and expected reliability/maintainability) in the SAR narrative, the 

program stated that this information was available in the service cost 

estimate.

• The Joint Mine Resistant Ambush Protected (MRAP) vehicle program 

office noted a few specific assumptions, such as the expected service 

life of the fleet and the cost per mile for replenishing spare parts.

However, the remaining O&S narrative for the program generically 

explained that the estimate included personnel, training, facilities, 

vehicle and component repair, and sustainment overhauls, but 

provided no other specifics on these areas.

• Only three programs—the Army’s High Mobility Artillery Rocket 

System, the Air Force Joint Primary Aircraft Training System, and the 

Explanatory Information Was 

Often Minimal
Page 11 GAO-12-340 Defense Logistics

Army’s Force XXI Battle Command Brigade and Below (FBCB2)—

included the maintenance concept planned for that system in their 

O&S narratives. However, even in these cases, the explanatory 

information for O&S costs was very limited.

• None of the 15 programs included assumptions on the reliability and 

maintainability of the weapon system in their O&S narrative.

While not required by DOD’s implementation guidance, 1 of the 15 

programs in our sample included explanatory information on cost drivers 

in the SAR O&S narrative. The V-22’s SAR submission for 2009 provided 

an explanation of the significant O&S cost increase from the prior SAR in 

2007. In the 2007 SAR, the total O&S costs reported were $48.8 billion 

(fiscal year 2005 dollars). In the 2009 SAR, the program reported that this 

amount had grown to $75 billion (fiscal year 2005 dollars), and that the 

O&S cost category showing the greatest increase was unit-level 

consumption.28 In the O&S narrative, the program office attributed the 

majority of the cost increase to changes in the methodology used to 

estimate unit-level consumption costs. Specifically, the estimate was 

updated with the actual costs of parts from fiscal year 2009 and with 

projected future cost growth for parts higher than OSD’s inflation 

indices.29

GAO-identified best practices for presenting cost estimates include 

identifying the largest cost elements and cost drivers, and providing 

enough information for informed decision making. In addition, we have 

previously reported that leading companies identify major drivers of O&S 

costs and work with manufacturers to reduce these costs.

The program office also noted actions being taken to reduce 

unit-level consumption costs, such as changes to contracting strategy and 

accelerated timelines for repair capabilities.

30

 28 Unit-level consumption is an O&S cost category that includes a number of subelements 

such as the cost of fuel and energy resources; operations, maintenance, and support 

materials consumed at the unit level; depot-level reparable spares (individual parts, 

subassemblies, or assemblies) required for recurring repair; operational munitions 

expended in training; transportation in support of deployed unit training; temporary 

additional duty/temporary duty pay; and other unit-level consumption costs, such as 

purchased services (e.g., equipment leases and service contracts). 

During our 

29 OSD’s inflation indices are published annually and are used to develop cost estimates. 

30 GAO, Best Practices: Setting Requirements Differently Could Reduce Weapon 

Systems’ Total Ownership Costs, GAO-03-57 (Washington, D.C.: Feb. 11, 2003).
Page 12 GAO-12-340 Defense Logistics

current review, we found that programs typically use CAPE’s O&S cost 

element structure in reporting O&S costs, but their presentation is limited 

to the six major elements (e.g., unit-level personnel, maintenance, indirect 

support). Since each major O&S cost element includes various costs, this 

information is not sufficient to identify specific cost drivers. Using lowerlevel cost elements, as provided for in CAPE’s cost element structure, 

could provide greater visibility of O&S costs for oversight by decision 

makers. For example, as noted in the case of the V-22 discussed above, 

the unit-level consumption cost element consists of a number of 

subelements that can provide additional insight into the discrete factors 

driving a change in the estimated life-cycle O&S costs for that system.

Various cost estimates may be developed over the life cycle of a weapon 

system, and DOD officials stated that programs should report the cost 

estimate developed for the latest acquisition milestone decision. We 

found that program offices—when a source was cited—cited several 

different sources as the basis for their reported O&S cost information in 

the 2010 SAR, and they did not provide an explanation for selecting the 

source that was used rather than another source that may have been 

available. As shown in table 1, for the 84 programs that included O&S 

costs in the 2010 SAR, 42 (50 percent) of the programs cited a specific 

cost estimate as the source of reported O&S costs. These sources were 

either a program office cost estimate, service cost estimate, or CAPE 

independent cost estimate. Another 35 programs (42 percent) did not cite 

a source, as previously noted. The remaining 7 programs (8 percent) 

cited a source other than a specific cost estimate.

Table 1: Source of Cost Estimate Cited for 84 Programs Reporting O&S Costs in the 

2010 SAR

Source cited in SAR Number of programs

No source cited 35

Program office cost estimate 23

Service cost estimate 15

Other 7

CAPE independent cost estimate 4

Total 84

Source: GAO analysis of 2010 SAR data.

Five programs in the “other” category in table 1 referred to cost estimates 

but did not provide enough detail to determine what type of cost estimate 

was used. For example, one program cited a “validated cost estimate”

Sources of Reported Cost 

Estimates Varied among 

Programs
Page 13 GAO-12-340 Defense Logistics

without additional specificity about this estimate. Similarly, four programs 

stated only that the source of their SAR O&S costs was a cost estimate 

prepared for an acquisition decision, but they did not provide additional 

information to identify a specific cost estimate. The remaining two 

programs in the “other” category in table 1, both of which were included in 

our sample, cited a source other than a cost estimate. One of these 

programs, the Navy Multiband Terminal, reported total costs from the

milestone C acquisition program baseline,31

Overall, six programs in our sample were among those that did not cite 

the source of the estimate used to report O&S costs. When we asked 

these six programs what source was used, five stated that the O&S cost 

estimate data in the 2010 SAR were derived from program office cost 

estimates, and the remaining program office stated that the source was a 

CAPE independent cost estimate. The other nine programs in our sample 

had cited a source, with five citing a program office cost estimate; two 

citing a service cost estimate; and two, as noted above, citing either an 

acquisition program baseline or funding data as the source of their O&S 

costs.

despite the existence of a 

service cost estimate prepared for the acquisition decision in July 2010. 

The other program, the Air Force’s Navstar Global Positioning System 

(GPS), reported using current and future funding data instead of a cost 

estimate.

As shown in table 1, some programs cited a CAPE independent cost 

estimate as the source of the O&S costs reported in the 2010 SAR. 

However, we found that one program in our sample, the LHA 6 America

Class, cited a program office cost estimate even though CAPE had 

developed an independent cost estimate. Further, while not required, the 

program did not mention in the SAR that an independent cost estimate 

had been developed. Since 2005 the LHA 6 America Class program has 

reported total O&S costs of $4.45 billion (fiscal year 2006 dollars) in its 

SAR submissions, reflecting a 2005 program office cost estimate. 

However, CAPE’s 2006 independent cost estimate of the program’s O&S 

costs was about $300 million (7 percent) higher. According to a CAPE 

memorandum, this higher estimate was also not adjusted for cost growth 

above inflation. CAPE noted that O&S costs for the LHA 1, an antecedent 

 31 An acquisition program baseline quantifies key parameters for the performance, cost, 

and schedule of a program throughout the acquisition phase.
Page 14 GAO-12-340 Defense Logistics

system, had increased 4 percent annually since 1990 due to increased 

mission personnel and overhaul costs. According to CAPE, adjusting for 

this same rate of cost growth above inflation in its LHA 6 estimate would 

result in an additional $530 million throughout the system’s life cycle, or 

total O&S costs of $5.29 billion. Additionally, F-35 officials told us that 

they plan to continue using the program office’s cost estimate to report 

O&S costs in the SAR although CAPE is preparing an independent cost 

estimate for the program’s next acquisition milestone.

GAO-identified best practices for presenting cost estimates include 

providing a comparison of the program estimate to an independent cost 

estimate, with an explanation of results and differences. Such a 

comparison is beneficial because an independent cost estimate should 

provide an objective and unbiased assessment of expected program 

costs that tests the program’s estimate for reasonableness. History has 

shown a pattern of higher, more accurate cost estimates the further away 

from the program office the independent cost estimate is prepared. In the 

2009 Weapon Systems Acquisition Reform Act, Congress placed greater 

emphasis on independent review of program cost estimates32

DOD’s implementation guidance for the SAR states that programs should 

report average O&S costs in a unit of measure determined by the military 

service under which the system’s acquisition is being managed. 

Programs are to report these average costs using CAPE’s major cost 

elements. We found that several program offices had changed the unit of 

measure they reported in the SAR from that used in previous SARs. In 

addition, we found that the units of measure that were being reported 

varied, particularly among aircraft programs. These inconsistencies make 

it difficult to compare a program’s current and prior-year costs, or to 

compare costs of similar programs.

by requiring 

that CAPE review cost estimates prepared in connection with all major 

weapon systems, and conduct independent cost estimates for certain 

systems prior to the milestone A, milestone B, low-rate initial production, 

and full-rate production acquisition decisions. Prior to the Act, CAPE was 

required to conduct independent cost estimates for some programs, but 

was not required to review cost estimates prepared for all major weapon 

systems.

 32 According to our Cost Estimating and Assessment Guide, an independent cost estimate 

is the most rigorous form of independent review; however, other independent reviews are 

also useful for decision making.

Units of Measure for Reporting 

Average Costs Were Not 

Consistent
Page 15 GAO-12-340 Defense Logistics

Of the 84 programs that reported O&S costs in the 2010 SAR, 5 (6 

percent) changed the average unit of measure reported from that used 

the prior year. Specifically, two aircraft programs went from reporting 

costs per squadron in the 2009 SAR to reporting costs per aircraft in their 

2010 SAR, a missile program went from reporting costs per unit in the 

2009 SAR to reporting total program costs in the 2010 SAR, and two 

programs for communications systems went from reporting total program 

costs in the 2009 SAR to reporting costs per radio in the 2010 SAR. 

These last two programs— Joint Tactical Radio System (JTRS) Ground 

Mobile Radios and JTRS Handheld, Manpack, and Small Form Fit—were 

included in our sample. When we asked why they changed the unit of 

measure, program officials responded that the decision was made based 

on feedback they received from OSD when their 2010 SAR submissions

were undergoing review. Of the 5 programs, only the two aircraft 

programs disclosed in the SAR that the unit of measure for that system 

had changed from the prior year. These two programs reported that they 

changed the unit of measure in order to standardize the calculation and 

increase the comparability of programs within the same major command.

Also, based on analysis of the 84 systems, we found the most variation in 

the unit of measure among aircraft systems. Different programs reported 

the average cost per flying hour33

 33 With regard to cost per flying hour, DOD officials explained that there are numerous 

formulas used throughout DOD. Thus, while several aircraft system program offices 

reported average cost per flying hour, they may not have used comparable data and 

calculation methodologies.

or the average annual cost per aircraft, 

per squadron of aircraft, or per the entire fleet. This issue was also 

evident among the programs in our sample that we analyzed in more 

depth. For example, the F-35 program reported average cost per flying 

hour, the V-22 program reported average cost per aircraft, the F-22 

program reported average cost per squadron, and the Joint Primary 

Aircraft Training System (a training aircraft) reported average cost for the 

whole fleet. Ship costs, in contrast, were generally reported as average 

cost per ship or hull, although one ship program reported average annual 

cost per fleet. O&S costs for ground and other types of weapon systems 

were usually reported as either cost per weapon system unit or total cost 

for all weapon system units. However, a few other metrics were reported 

by these programs, such as average annual cost per battalion or per 

brigade combat team.
Page 16 GAO-12-340 Defense Logistics

Although portraying average costs with a unit of measure could be useful 

for tracking cost changes over time, we found that it was generally not 

possible to identify changes in estimated O&S costs based on the 

information reported in a single, annual SAR, since programs do not 

report costs from the prior SAR. Although major weapon system 

programs are required to identify and reconcile changes to estimated 

acquisition costs from the prior SAR, and to provide an explanation for 

each change, this is not required for O&S costs. Even though two of our 

sample programs, the V-22 and the Navstar GPS, included a statement in 

the SAR narrative that their O&S costs had changed, it was not possible 

to tell how much without the prior year’s cost data. Our year-to-year 

comparisons of reported costs in the SARs showed that cost changes 

were occurring. For example, we found that the total estimated O&S costs 

for the JTRS Handheld, Manpack, and Small Form Fit program 

decreased from $25.5 billion (fiscal year 2004 dollars) in 2009 to $10.2 

billion in 2010 (fiscal year 2004 dollars). This $15.3 billion decrease 

occurred despite an increase in acquisition quantity of about 5,000 radios, 

from around 216,000 to around 221,000. This change, as well as the 

reasons for the change, was not identified in the SAR narrative. Similarly, 

we found that the total estimated O&S costs for the F-35 program 

increased $50 billion (fiscal year 2002 dollars) from 2009 to 2010. The 

reason for this increase was not explained in the O&S narrative in the 

SAR.

According to GAO-identified best practices for presenting cost estimates, 

cost estimates should be tracked over time. Specifically, after an estimate 

is updated, a comparison of the current and prior estimate should be 

routinely performed and documented, and the results reported to decision 

makers. A documented comparison allows cost estimators to see how 

well they are estimating and how the program is changing over time. It 

also allows others to track the estimates and to identify when, by how 

much, and why the program cost more or less than planned.

Updated cost estimates can help to ensure that decision makers have the 

most current data available on a program. The SAR statute requires 

major defense acquisition programs to begin reporting when the program 

is approved to begin the development phase of the acquisition process at 

milestone B, and DOD’s implementation guidance similarly states that a 

SAR should first be submitted when a program is initiated, normally at 

milestone B, or designated as a major defense acquisition program, and 

Cost Estimates Were Updated 

at Different Intervals
Page 17 GAO-12-340 Defense Logistics

also when the program is rebaselined after a major milestone decision. 

DOD officials stated that programs should report the cost estimate 

developed for the latest acquisition milestone decision. 34 Our analysis for 

the 84 major weapon system programs that included O&S costs in the 

2010 SAR showed that program offices were inconsistent in the 

frequency of their O&S cost updates between 2005 and 2010.35 In many 

cases, programs provided more frequent updates than required by DOD’s 

guidance, sometimes annually. However, 8 (13 percent) of the 61 

programs that were included in the SAR every year during the 2005 to 

2010 period did not update their O&S costs at any time during that period. 

In contrast, 47 programs (56 percent) of the 84 programs in the 2010 

SAR reported using a cost estimate that was prepared in 2010 or 2011 as 

the source of their O&S costs.

36

Of the 15 programs in our sample, 3 did not update their SAR O&S costs 

during the period between 2005 and 2010, 5 updated their costs once, 5 

updated their costs 2 or 3 times, and 2 updated their O&S costs 4 times 

during the period.

These included 7 programs that began 

reporting SARs in 2009 or 2010.

37

 34 Training materials from the Defense Acquisition University similarly reflect that the 

estimate developed for the latest acquisition milestone should be reported in the SAR.

However, as noted earlier, the draft SAR policy differs in that it calls for reporting the “most 

recent” estimate of program O&S costs.

For example, the Navy’s LHA 6 America Class

program office has consistently reported the O&S costs estimated for 

milestone B, the program’s only acquisition milestone while under SAR 

reporting requirements, in the annual SARs since 2005. Program officials 

told us that they were in the process of developing a new cost estimate 

for the LHA 7, the next ship in the America Class, and planned to use the 

new estimate as the source to report O&S costs in the program’s 2011 

SAR submission, if complete. Also, the Army’s FBCB2 program has not 

35 As noted earlier, a number of programs did not include the date of the cost estimate 

used in the December 2010 SAR.

36 Because the annual SAR reporting process occurs in the calendar year after the date of 

the SAR, a cost estimate that was completed in early 2011 could be used to report costs 

in the 2010 SAR.

37 One of the programs that did not update O&S costs between 2005 and 2010 only 

started reporting annual SARs in 2009 and did not update the costs in 2010. Also, one of 

the programs that updated annually—the Navstar GPS—reported the program’s current 

funding and projected requirements for an 8-year period instead of a life-cycle O&S cost 

estimate. 
Page 18 GAO-12-340 Defense Logistics

updated its O&S SAR costs and is reporting costs estimated in 2004, 

even though the program’s production quantity has quadrupled since 

then.38

In contrast, several of our sample programs updated their O&S costs 

annually. The F-35 program has updated the reported SAR O&S costs 

annually since 2006, the beginning of the period we reviewed. According 

to F-35 program officials, they chose to do this because the F-35 is a 

high-visibility, high-interest program. Further, estimating O&S costs 

annually helps inform DOD leadership and keeps partner countries 

updated, program officials noted. Additionally, the Joint MRAP program 

office has updated its SAR O&S costs annually since the program began 

reporting these costs in 2009 and plans to do so until the services 

assume responsibility for the system around 2013. Program officials said 

they are incorporating actual cost data from the field as it becomes 

available and updating O&S costs annually in order to give the services 

the best data once the transfer takes place. Finally, the Army’s MQ-1C 

program has updated its SAR O&S costs annually since 2009. Although 

these costs were updated in 2010 for several reasons, including an 

increase in the number of systems to be acquired, program officials said 

they do not plan to update the program’s O&S costs annually.

FBCB2 program officials told us that since its full-rate production 

decision in 2004, the program has experienced nearly continuous 

changes to its production quantity requirement, resulting in a significant 

effort to maintain and update the acquisition portion of the cost estimates 

and little time to research and update the O&S portion of the cost 

estimates.

Officials for the remaining programs in our sample, which updated their 

O&S costs intermittently, gave various reasons for updating their

program’s SAR O&S costs when they did. While one program updated 

the SAR as required to reflect the O&S costs estimated for an acquisition 

decision, other programs in our sample chose to update the costs after 

they developed estimates to reflect changes to the acquisition program 

(e.g., changes in production quantity or schedule), to incorporate actual 

O&S costs that are considerably different than previously estimated, or to 

comply with guidance not related to the SAR. For example, the Navy’s 

 38 The O&S costs reported in the FBCB2’s 2006 SAR are different than those reported in 

the 2005 SAR. However, program officials told us that this was a mistake and the costs 

had not actually been updated. This case is discussed further later in our report.
Page 19 GAO-12-340 Defense Logistics

V-22 program office updated the O&S costs in the 2009 SAR because 

actual O&S costs incurred after the program’s initial operational capability 

in 2007 for the Marine Corps and 2009 for the Air Force were significantly 

higher than had been anticipated in the program’s most recent cost 

estimate. Prior to the 2009 update, the V-22 was reporting costs based on 

the estimate completed for an acquisition decision in 2005. The V-22 

program office, in conjunction with U.S. Naval Air Systems Command, 

plans to review the program’s O&S costs annually and update the SAR as 

necessary until the program stops reporting SARs. According to officials, 

the final deliveries of the V-22 are scheduled for 2020. As another 

example, the Joint Primary Aircraft Training System program updated 

O&S costs in the 2010 SAR after reporting the same costs since 2001. 

According to officials, an updated program office cost estimate was 

developed to comply with a policy from the program’s major command 

that cost estimates be updated annually.

DOD acquisition best practices and GAO-identified cost-estimating best 

practices call for maintaining updated estimates of program costs. 

According to the Defense Acquisition Guidebook, although a DOD or 

service cost estimate is required at milestone reviews, it is a good 

practice for this estimate, or at least its underlying program office cost 

estimate, to be updated more frequently, usually annually. Updated 

estimates should be useful in program management and financial 

management throughout the life of the program. GAO-identified best 

practices call for continual updates of cost estimates to keep them 

relevant and current, as most programs do not remain static, especially 

those in development. Routine updates that incorporate actual data result 

in higher-quality estimates as the program matures. Further, updating the 

cost estimate provides an accuracy check, defense of the estimate over 

time, shorter estimate preparation times, and archived cost and technical 

data for use in future estimates.

In accordance with the SAR statute, DOD’s implementation guidance 

states that if a program has an antecedent system, then O&S costs and 

assumptions should be submitted for the antecedent system. We found 

that program offices, however, were inconsistent in reporting on 

antecedent system costs, with many not reporting any O&S cost data. 

Specifically, 57 (68 percent) of the 84 programs reporting O&S costs in 

the 2010 SAR did not report O&S costs for an antecedent system. It was 

unclear from the SARs how program offices had identified an antecedent 

system or whether, in cases where no antecedent system costs were 

included, the program offices had determined that an antecedent system 

did not exist.

Antecedent Program Costs 

Were Often Not Reported
Page 20 GAO-12-340 Defense Logistics

Nine of the 15 programs in our sample did not report O&S costs for an 

antecedent system in the 2010 SAR. Officials from these program offices 

provided various reasons for not reporting antecedent system costs, 

including that the system was the first of its type or not intended to 

replace any other system, that the system had advanced capabilities or 

no other system was similar enough for comparison, and that the system 

was replacing several legacy systems. As an example, Joint MRAP 

program officials said other systems, such as the High Mobility 

Multipurpose Wheeled Vehicle, were too different for cost comparisons. 

As another example, the Navy Multiband Terminal program began 

reporting in the 2006 SAR and has never reported antecedent O&S costs. 

According to program officials, an antecedent system was not identified 

because the system was replacing several legacy weapon systems. 

However, during a joint OSD/Navy SAR review meeting in March 2011, 

the program office was instructed to list two systems as antecedent 

systems in the 2010 SAR. While the program identified the Super High 

Frequency and Navy Extremely High Frequency Satellite programs as 

antecedent systems in the O&S section of its SAR, it also stated that 

program costs for these systems were not readily available.

The SAR statute requires that all program costs be reported, regardless 

of funding source or management control. However, we found that of the 

95 major weapon systems that had passed milestone B and reported 

costs in the 2010 SAR,39 11 (12 percent) did not identify any O&S costs in 

their SARs. The 11 programs, as of December 2010, accounted for a total 

estimated investment of $56.7 billion (fiscal year 2011 dollars) for 

research and development, procurement, military construction, and 

acquisition-related operation and maintenance (see table 2). Most of the 

programs that did not report O&S costs were modifications to other 

weapon systems but qualify as major defense acquisition programs 

based on their procurement or research and development costs.

 39 One program submitted a 2010 SAR but had not yet passed acquisition milestone B.

Some Programs Did Not Report 

Any O&S Costs
Page 21 GAO-12-340 Defense Logistics

Table 2: Major Weapon System Programs That Did Not Identify O&S Costs in Their 2010 SARs

Dollars in billions

Major weapon system Service Estimated investment costs

C-5 Avionics Modernization Program

a

Air Force $1.3

C-5 Reliability Enhancement and Reengineering Program Air Force $7.3 

GPS III Air Force $4.3 

Multi-Platform Radar Technology Insertion Program Air Force $1.4 

Airborne Signals Intelligence Payload Air Force $0.5

Large Aircraft Infrared Countermeasures Air Force $0.5

B-2 Radar Modernization Program Air Force $1.3 

B-2 Extremely High Frequency Satellite Communications Air Force $0.6

Apache Block IIIB Army $2.2 

Chemical Demilitarization-Assembled Chemical Weapons Alternatives DOD $10.0 

Chemical Demilitarization-U.S. Army Chemical Materials Agency Army $27.4

Source: GAO analysis of 2010 SAR data.

a

Costs are in fiscal year 2011 dollars and include costs associated with research and development, 

procurement, military construction, and acquisition-related operation and maintenance.

Eight of the programs that did not report O&S costs are major 

modifications to, or subsystems of, Air Force weapon systems.40

 40 These modifications are considered major defense acquisition programs in 

development and are therefore required to report submit SARs.

When 

we asked why O&S costs were not reported, officials from six Air Force 

programs said they did not report O&S costs in the 2010 SAR because 

they do not fund or track these costs. For example, officials for two 

programs associated with the C-5 aircraft explained that all O&S fleet 

costs are the responsibility of another entity, the System Program 

Manager at Warner Robins Air Logistics Center in Georgia. Program 

officials for the other two Air Force programs, the B-2 Radar 

Modernization Program and B-2 Extremely High Frequency Satellite 

Communications program, told us that these modification programs were 

expected to reduce O&S costs and they could not input cost reductions

into DOD’s Defense Acquisition Management Information Retrieval 

system, the database that maintains SAR data. In contrast to these 

modification programs, the Air Force’s C-130 Avionics Modernization 

Program did report total estimated O&S costs in the 2010 SAR.
Page 22 GAO-12-340 Defense Logistics

According to officials, one of the remaining three programs—the Army’s 

Apache Block IIIB—was not required to report O&S costs in the SAR, as 

approved by the Defense Acquisition Executive.41 The other two 

programs are the Chemical Demilitarization-Assembled Chemical 

Weapons Alternatives, and the Chemical Demilitarization-U.S. Army 

Chemical Materials Agency. According to the SAR for each program, 

O&S costs are reported in other sections of the reports. For example, 

program officials told us that O&S costs for the Assembled Chemical 

Weapons Alternatives program are captured in research, development, 

test, and evaluation costs. According to program officials, the Chemical 

Demilitarization program is a one-of-a-kind national environmental and 

safety program that is unlike weapon systems that report SARs. Further, 

officials said that the two programs have not separately reported any O&S 

costs since they were designated major defense acquisition programs in 

1994.

SARs are intended to provide Congress with authoritative program 

information on the cost, schedule, and performance of major weapon 

systems, but we found that some programs submitted unreliable O&S 

cost data. More specifically, our review of SAR reports for the 15 

programs in our sample identified inaccurate cost estimates and other 

errors in SARs submitted in 2007, 2009, and 2010. (As noted earlier, 

DOD did not submit SARs in 2008.) While some of the program offices 

told us specific reasons for the errors, others did not provide an 

explanation.

Based on our analysis of O&S cost data reported in the SAR compared 

with the underlying cost estimates and other information provided by the 

program offices, we found that 7 of the 15 programs reported inaccurate 

O&S costs in one or more of the three annual SARs.

 41 The O&S costs of the Apache Block IIIB are captured in the SAR for the Apache Block 

IIIA Remanufacture program. According to program officials, the programs were originally 

a single program but at milestone C the decision was made to split them into two separate 

programs. The Defense Acquisition Executive approved the reporting of O&S costs in the 

Apache Block IIIA Remanufacture SAR only. SARs for both programs note that the O&S 

costs are reported in the Apache Block IIIA Remanufacture SAR, but the costs are not 

broken out between the two programs.

Program Offices 

Sometimes Provided 

Unreliable Life-Cycle O&S 

Cost Estimates in Their 

SARs
Page 23 GAO-12-340 Defense Logistics

• The F-35 Joint Strike Fighter program office underreported the 

average cost per flying hour for the aircraft in the 2010 SAR. The 

average, steady-state O&S cost per flying hour was reported as 

$16,425 (fiscal year 2002 dollars). Program officials told us that the

number of aircraft used in the estimate for the Air Force’s inventory 

was not accurate and the estimate also did not project for future cost 

growth above inflation. The estimate included approximately 528 extra 

aircraft that when calculating the average cost per flying hour, resulted 

in higher flight hours and lower average costs per hour. Further, 

according to the SAR, some of the F-35’s O&S costs were 

intentionally excluded from the estimate to enable comparison with 

the antecedent system, the F-16 C/D. Costs for support equipment 

replacement, modifications, and indirect costs were removed from the 

F-35’s cost per flying hour since they were not available for the F-16 

C/D. Officials calculated that the revised cost per flying hour for the F35 was $23,557 (fiscal year 2002 dollars), or 43 percent higher, after 

including the excluded costs, projecting for future cost growth above 

inflation, and correcting the number of aircraft. However, they noted 

that the total O&S life-cycle cost reported in the SAR for the F-35 was 

accurate because it was calculated separately from the average cost 

per flying hour.

• The Navy Multiband Terminal program office underreported estimated 

life-cycle O&S costs in the 2010 SAR. The program reported $219.1 

million in total O&S costs but excluded an additional $591.3 million for 

externally funded depot-level repairables ($148.4 million) and military 

personnel ($442.9 million), which were included in a 2010 service cost 

estimate.42 Therefore, only 27 percent of the program’s estimated 

total O&S costs were reported in the 2010 SAR. Program officials 

stated that these costs are not under the control of the program office 

and should not be reported in the SARs. However, the SAR statute 

states that full life-cycle costs, including O&S costs, should be 

reported without regard to funding source or management control.

• The Air Force Joint Primary Aircraft Training System program office 

underreported O&S costs in the 2007 and 2009 SARs, both of which 

were based on a 2001 service cost estimate. The program, which 

includes the T-6 aircraft and a ground-based training system, reported 

 42 The excluded costs in the service cost estimate were expressed only in then-year 

dollars, rather than constant dollars. Therefore, all cost figures in this example are 

presented in then-year dollars.
Page 24 GAO-12-340 Defense Logistics

total O&S costs of $9.4 billion (fiscal year 2002 dollars) in both SARs 

but excluded $2.1 billion (fiscal year 2002 dollars)—or about 18 

percent—of O&S costs for the program’s ground-based training 

system. Program officials have reported the same O&S costs since 

the annual 2002 SAR. The program, which updated its O&S estimate 

in 2011, included these costs in the total O&S costs reported in the 

2010 SAR.

• The Army’s High Mobility Artillery Rocket System program office 

overstated O&S costs in the program’s 2007, 2009, and 2010 SARs. 

Although program office estimates were provided to us for the 3 

years, the estimates did not match the costs reported in the SARs. 

The O&S costs reported in 2007 were higher than the estimate by 

$11.1 million (fiscal year 2003 dollars), and the $988 million (fiscal 

year 2003 dollars), reported in both 2009 and 2010, was higher than 

the estimates by about $300 million (fiscal year 2003 dollars), or about 

43 percent. Program officials told us that the costs had been reported 

incorrectly in each year.

• The JTRS Handheld, Manpack, and Small Form Fit program 

underreported total O&S costs in the annual 2007 SAR. The SAR 

stated that the O&S costs had been updated, but the O&S costs were 

unchanged from prior annual SARs. Program officials also provided 

us with an estimate that matched the numbers reported in the 2007 

SAR. When asked why the costs had not changed, program officials 

stated that while the costs for procurement and research, 

development, test, and evaluation were correctly updated in 2007, the 

O&S costs were not. They explained that the reported costs of $4.9 

billion (fiscal year 2004 dollars) should have been higher by $120 

million (fiscal year 2004 dollars), but they did not provide us the 

estimate on which that higher amount was based.

• The Air Force’s Navstar GPS program, as noted earlier, did not report 

a life-cycle cost estimate in the annual SARs from 2007 through 2010. 

For example, according to the 2010 SAR, the O&S costs reported 

were based on funding for fiscal years 2008 through 2016. Program 

officials confirmed that the O&S amounts reported included actual 

funding for the current year and funding from the Air Force’s budget 

system for the remaining years. However, even this amount—about 

$469 million (fiscal year 2000 dollars) in 2010, for example—was 

significantly understated. According to program officials, the amount 

reported in the SAR is only 60 percent of the program’s actual 

requirements of approximately $782 million—a difference of $313 

million—and the program has historically been funded to 90 percent of 
Page 25 GAO-12-340 Defense Logistics

requirements with supplemental funds. However, this was not noted in 

the SARs.

• The FBCB2 program underreported total O&S costs in the annual 

2007 through 2010 SARs. As explained earlier, reported O&S costs 

were estimated for the program’s final acquisition milestone, full-rate 

production, in 2004. In subsequent years, however, the program’s 

procurement quantities increased and were about 305 percent higher 

in the 2010 SAR than the amount used to develop the estimate. 

Further, total O&S costs of $468 million (fiscal year 2005 dollars) 

reported in the SARs were $129 million less than the $596.2 million 

estimated in 2004. Officials initially indicated that some of the 

estimated O&S costs were likely included with the program’s 

acquisition costs in the SAR, but they were unable to reconcile the 

costs in the two documents.

We also found examples of inaccuracies in other data reported in the 

O&S cost section of the SARs. For example, the 2010 SAR for the Joint 

MRAP states that the program’s O&S costs were reviewed by CAPE in 

2010, but program officials and prior-year SARs stated that the review 

actually occurred in 2008. Further, neither CAPE nor the program office 

was able to provide any record of the 2008 review. As another example, 

the 2010 SAR for the F-22 indicates that the reported O&S costs were 

based on a 2004 acquisition decision estimate that was updated with 

analyses from 2010 to bring the estimate in line with the current approved 

F-22 production program and operational concepts. However, the O&S 

costs reported are identical to those reported in the 2009 SAR, which 

states it was updated based on analyses from 2009.

Implementation of the GAO-identified best practices already discussed 

could improve the reliability of O&S costs reported in the SARs. Together, 

the best practices work to provide more assurance that the correct 

information is reported. For example, routinely updating O&S cost 

estimates—and related SAR data—will likely require more frequent 

changes to the reported cost data. Therefore, it is less probable that an 

error or omission will be regularly reported. In addition, as noted earlier, 

comparing a program’s cost estimate with an independent cost estimate, 

and explaining any significant differences, could help decision makers 

monitor the reasonableness of the reported data. Finally, tracking O&S 

costs over time, by presenting the current year and prior-year program 

cost estimates and explaining significant differences, would also help to 

test the reasonableness of reported costs.
Page 26 GAO-12-340 Defense Logistics

DOD’s reports to Congress on estimated weapon system O&S costs were 

often inconsistent and sometimes unreliable due to a lack of detailed 

implementation guidance for reporting these costs. In addition, DOD’s 

process for reviewing the O&S cost sections of the SAR prior to final 

submission did not provide assurance that the program offices reported 

costs uniformly, to the extent practicable, and that these reported costs 

were reliable. In the absence of improvements to the SAR guidance and 

to DOD’s review process, deficiencies in reporting estimated life-cycle 

O&S costs are likely to continue.

DOD’s existing implementation guidance collectively provides minimal, 

and in some areas conflicting, instructions for O&S cost reporting. For

example, the guidance does not identify which cost estimate or estimates 

should be used to report O&S costs when more than one estimate is 

available. Often multiple cost estimates are prepared by the program 

office, the service, and CAPE to support acquisition decisions. Further, 

DOD officials stated that O&S costs reported in the SAR should be 

updated only at acquisition milestones. Because many years may pass 

between these milestones, however, reported O&S costs may become 

outdated, no longer reflecting the status of the current acquisition 

program.

DOD’s guidance also provides very little detail on how program offices 

should discuss assumptions underlying the cost estimate. DOD’s draft 

SAR policy, for example, only mentions several assumptions for 

consideration, such as operating tempo, expected reliability and 

maintainability of the system, the maintenance concept, and manning and 

logistics policies, and does not provide specific examples. In addition, the 

statutory SAR requirement to report all program costs, regardless of 

funding source or management control, is reflected in none of DOD’s 

SAR implementation guidance; it is reflected in training course materials 

on using the Defense Acquisition Management Information Retrieval 

system. Finally, DOD’s draft SAR policy provides conflicting instructions 

on cost reporting for antecedent systems. The draft policy states that 

antecedent costs should be reported “whenever those costs have 

previously been developed.” However, in the appendix, the draft guidance 

states that O&S costs will be reported for antecedent systems “when the 

replacement system is required to report O&S costs.” DOD officials could 

not explain the reason for this variance in the guidance.

While some program offices we contacted indicated that DOD’s 

implementation guidance on reporting O&S costs in the SAR was 

sufficient, officials from several program offices in our sample indicated 

DOD Could Improve O&S 

Cost Reporting with 

Detailed Implementation 

Guidance and a More 

Effective SAR Review 

Process
Page 27 GAO-12-340 Defense Logistics

that more detailed guidance would be helpful when they prepare their 

annual SAR submissions. These officials stated that there was minimal 

guidance provided on what should be included in the O&S narrative and 

that there needed to be more consistency in SAR O&S reporting. 

Additionally, they explained that the current guidance is vague, unclear, 

open to interpretation, and does not provide useful information or 

examples for how programs should be reporting these costs. Officials 

from one program also stated that there is no direction on the comparison 

of program costs to the antecedent system’s costs, so the approach to

making this comparison is open to interpretation. They noted that the 

guidance does not specify whether the program office should alter the 

weapon system’s O&S costs to enable a true comparison with the costs 

for the antecedent system, or whether the weapon system’s O&S costs 

should be reported without modification. Finally, while several program 

offices told us that the Defense Acquisition University provides useful 

training on acquisition reporting in general, they said that the materials 

should be more readily available as program representatives could not 

always attend the class and that the O&S section of the SAR was not 

covered sufficiently.

The SAR data submitted by program offices are subject to multiple 

reviews within the military services and by OSD, but this review process 

has not provided assurance that O&S costs are reported consistently and 

reliably. Although our review did not include a full evaluation of DOD’s 

SAR review process, OSD officials explained that once they receive the 

SAR submissions, there is a relatively short amount of time to review the 

SAR O&S data. For example, according to the SAR review schedule, the 

Office of the Assistant Secretary of Defense (Logistics and Materiel 

Readiness) usually has about a week to review the O&S cost 

submissions. We also noted that “SAR review guidance” that is included 

with the annual memorandum on preparing SARs does not provide 

additional direction to the program offices on what to include in their O&S 

cost submissions. In some cases, the annual memorandum is less 

specific than the draft SAR policy. The deficiencies in DOD’s 

implementation guidance likely hinder the effective review of SAR O&S 

cost information at all levels.

The department’s emphasis on weapon system O&S costs has been 

increasing in recent years,43

 43 This increased emphasis is discussed in 

but the primary focus continues to be on 

GAO-10-717.
Page 28 GAO-12-340 Defense Logistics

acquisition costs. According to OSD acquisition officials, the SAR started 

as—and is still often viewed as—primarily an acquisition report. This 

perspective was reflected in comments from some program officials. For 

example, officials at one program office told us that, due to a constantly 

changing acquisition program, their time was largely spent on estimating 

acquisition costs. Another program office noted that the focus of the SAR 

statute was acquisition costs and that O&S costs will vary based on 

emerging needs. Several other programs indicated that O&S cost 

estimating was not particularly useful, as their systems had not yet 

entered into production or sustainment, and actual cost data were either 

not yet available or could not be obtained by the program office. Finally, 

other program offices stated that since they do not fund the support of the 

weapon system, the O&S cost estimates should be done by the 

organizations responsible for providing this funding.

Without more consistent and reliable reporting of estimated weapon 

system O&S costs, Congress and senior DOD officials may have limited 

visibility of information needed to effectively oversee the full life-cycle 

costs associated with weapon system acquisitions. Improvements in the 

reporting of these data could provide a more complete picture of the 

potential total financial commitment being made to these systems over a 

period lasting many decades. SAR cost estimates are reported early 

during acquisition, when there is the greatest chance for managing or 

reducing future O&S costs. By facilitating inquiries on changes from prior 

cost estimates and cost drivers, such information could affect acquisition 

investment decisions and result in tradeoffs that otherwise might not be 

considered. Furthermore, improvements to SAR reporting would be 

consistent with a provision in the National Defense Authorization Act for 

Fiscal Year 2012 directing DOD to take actions aimed at better 

assessing, managing, and controlling weapon system O&S costs.

To improve visibility over estimated life-cycle O&S costs during weapon 

system acquisition, we recommend that the Secretary of Defense take the 

following two actions.

First, we recommend that the Secretary of Defense direct the Under 

Secretary of Defense for Acquisition, Technology and Logistics to revise 

DOD’s guidance for implementing statutory SAR requirements. The 

Conclusions

Recommendations for 

Executive Action
Page 29 GAO-12-340 Defense Logistics

revisions, at a minimum, should provide additional detail on the following 

areas:

• the explanatory information that should be included in the O&S 

narrative, including the specific assumptions underlying the cost 

estimate;

• the source to be used as the basis for reported O&S cost estimate 

information, especially when more than one source is available (such 

as a program office cost estimate, service cost estimate, and CAPE 

independent cost estimate);

• a consistent unit of measure for reporting average costs over time by 

commodity type—or other designated weapon system group—as 

agreed to by OSD and the services;

• criteria for identifying an antecedent system and reporting on the 

results of the cost comparison in the SAR; and

• reporting O&S costs for major modifications to existing weapon 

systems.

In revising the guidance, the Under Secretary of Defense should 

incorporate best practices for preparing and presenting cost estimates, 

including:

• a comparison of current-year to prior-year O&S cost estimates; the 

identification of cost drivers that resulted in changes in these 

estimates, if significant; and the level of detail that should be reported;

• a comparison of the reported cost estimate with the most recent 

independent cost estimate, along with an explanation of any 

significant differences between the two estimates; and

• The frequency with which O&S costs reported in the SAR should be 

updated, including guidance on what changes in the program’s status 

should trigger an update.

Second, we also recommend that the Secretary of Defense direct that the 

Under Secretary of Defense for Acquisition, Technology and Logistics, in 

conjunction with the Secretaries of the Army, the Air Force, and the Navy, 

evaluate the current review process, identify any weaknesses, and 

institute corrective actions as needed to provide greater assurance that 
Page 30 GAO-12-340 Defense Logistics

estimated life-cycle O&S costs included in the SAR reports submitted by 

program offices consistently follow the implementation guidance, 

including any revisions to the guidance as described above, and report 

reliable cost data. As part of this evaluation, DOD should consider 

whether additional steps are necessary for the department to enhance the 

emphasis placed on reporting estimated life-cycle O&S costs in the SAR.

DOD provided comments on a draft of this report. In its comments, DOD 

agreed with both of our recommendations. The department’s written 

comments are reprinted in appendix III. DOD also provided technical 

comments that we have incorporated into this report where appropriate.

In concurring with our first recommendation to revise DOD’s guidance for 

implementing statutory SAR requirements, DOD noted that the focus of 

the SAR has always been primarily on acquisition rather than 

sustainment. DOD further stated that Congress, in requiring DOD to add 

O&S costs to the SAR report, did not intend for DOD to develop O&S 

costs for each submission but to report the latest available estimate for 

the program. Our report recognizes that the development of new O&S 

cost estimates is not required for each annual SAR submission. However, 

these costs represent a significant proportion of a system’s total costs 

over its life cycle. Moreover, we found that the timing of updates to the 

O&S costs reported in the SAR varied widely, as DOD has not identified 

what changes in a program's status—other than established acquisition 

milestones, which can be many years apart—should trigger such 

updates. We also continue to believe that DOD needs to clearly identify 

the source and date of the O&S cost estimate data reported in the SAR. 

Our recommendations reflect these and other weaknesses in the current 

reporting of O&S costs.

DOD’s comments identified actions it plans to take to implement our 

recommendations. DOD stated that it will expand and update its current 

guidance for the O&S cost section of the SAR, as contained in the 

Defense Acquisition Guidebook. DOD plans to make revisions specifically 

with regard to assumptions and ground rules (e.g., the source and date of 

the estimate reported); a consistent unit of measure for reporting O&S 

costs for each type of commodity; identifying, and reporting on, 

antecedent systems; and reporting O&S costs for major modifications. 

These planned revisions to the guidance are positive steps. We plan to 

monitor DOD’s actions as part of our recommendation follow-up process.

Agency Comments 

and Our Evaluation
Page 31 GAO-12-340 Defense Logistics

Regarding other revisions to the guidance that we recommend to 

incorporate best practices for O&S cost reporting, DOD stated that the 

department is not yet in a position to add a credible O&S cost variance 

analysis. Although DOD does not define what it means by "cost variance 

analysis," it is reasonable to expect that such analysis would involve 

comparing changes from a previous cost estimate and identifying any 

significant cost drivers. DOD noted that it is implementing new O&Srelated requirements from the National Defense Authorization Act for 

Fiscal Year 2012, as well as previous requirements from the Weapon 

Systems Acquisition Reform Act of 2009, including requirements that deal 

with cost variance analysis. DOD stated that it is premature to determine 

to what extent DOD's implementation of these requirements will affect the 

reporting of O&S costs in the SAR. With these and other ongoing 

activities related to the management and control of O&S costs, DOD 

would prefer to defer these additional reporting requirements for the SAR 

for now. 

We are aware that DOD has a number of ongoing activities to improve 

the management and control of O&S costs and must respond to several 

new requirements, as stated in DOD's comments. For example, the O&Srelated guidance required by the National Defense Authorization Act for 

Fiscal Year 2012 must be issued within 180 days from the date the Act 

was enacted, which was December 31, 2011. If such activities result in 

improved visibility of O&S costs within the department, and DOD 

coordinates these activities with efforts to improve O&S cost reporting in 

the SAR, then we agree that it may be preferable to delay implementation 

of the best practices we recommend in our report. However, we continue 

to believe that these best practices, when implemented, will provide better 

information on the current status and direction of long-term O&S costs

and thus can improve congressional oversight of weapon system costs. 

Therefore, these elements of our recommendation remain valid.

DOD also concurred with our second recommendation to evaluate and 

make any changes needed to strengthen its current process for reviewing 

O&S cost reporting prior to submission of SARs to Congress. In its 

comments, DOD cited actions it would take in the short term to improve 

the review of O&S costs prior to submission of SAR reports at the end of 

March 2012. DOD stated that the O&S cost section will be given 

additional emphasis during this reporting period. Subsequently, DOD will 

convene a joint OSD/DOD component working group that will evaluate 

the current SAR review process, identify any weaknesses, and institute 

corrective actions as needed to improve the data quality for the estimated 
Page 32 GAO-12-340 Defense Logistics

life-cycle O&S costs reported in the SAR. We believe these actions, when 

implemented, will meet the intent of our recommendation.

We are sending copies of this report to interested congressional 

committees; the Secretary of Defense; the Secretaries of the Army, the 

Navy, and the Air Force; the Acting Under Secretary of Defense for 

Acquisition, Technology and Logistics; and the Director, Office of 

Management and Budget. In addition, the report will be available at no 

charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions concerning this report, please 

contact me at (404) 679-1808 or russellc@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. Key contributors are listed in appendix IV.

Cary B. Russell

Acting Director, Defense Capabilities and Management
Appendix I: Scope and Methodology

Page 33 GAO-12-340 Defense Logistics

To determine the extent to which the selected acquisition reports (SAR) 

provide consistent and reliable operating and support (O&S) cost 

estimate information that enables effective oversight of major weapon 

system costs, we reviewed statutory requirements in 10 U.S.C. § 2432 for 

reporting weapon system life-cycle costs in the SARs, as well as 

Department of Defense (DOD) implementation guidance for the SAR. We 

also reviewed DOD guidance for preparing weapon system O&S costs 

and GAO-identified cost-estimating best practices to identify the scope 

and nature of cost estimate information needed for effective program 

management and oversight.

We interviewed and obtained documentation from DOD and military 

service officials responsible for weapon system acquisition, logistics, and 

cost analysis to understand DOD’s approach and process for reporting 

O&S cost estimates in the SARs. Offices we contacted included the 

following:

• Office of the Under Secretary of Defense for Acquisition, Technology 

and Logistics

• Office of the Director, Acquisition Resources and Analysis

• Office of the Deputy Assistant Secretary of Defense for Materiel 

Readiness

• Office of the Director, Cost Assessment and Program Evaluation

• Office of the Deputy Assistant Secretary of the Army, Cost and 

Economics

• Naval Center for Cost Analysis

• Air Force Cost Analysis Agency

We obtained SARs for all 95 weapon systems that reported a December 

2010 SAR.1

 1 Although a total of 96 programs submitted a SAR in 2010, the Ballistic Missile Defense 

Program had not yet reached milestone B and thus was not required to report O&S costs. 

For this reason, we did not include this program in our analyses.

These reports were contained in the Defense Acquisition 

Management Information Retrieval system, which is a web-based system 

used within DOD to collect and maintain SAR information submitted by 

program offices. We determined that the data in this system accurately 

reflected information submitted by weapon system program offices and 

therefore were sufficiently reliable for the purposes of our analysis. After 

determining that a total of 84 of the 95 weapon systems included O&S 

costs in their December 2010 SARs, we analyzed the annual SARs that 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 34 GAO-12-340 Defense Logistics

were submitted for these systems between 2005 through 2010.2

From the population of 84 weapon systems that included O&S cost 

estimates in the 2010 SARs, we selected a sample of 15 weapon 

systems for further analysis.

Specifically, we analyzed the SARs to determine the types and scope of 

explanatory information included in the O&S narrative accompanying the 

cost estimate data; the source of the O&S cost estimate cited as the basis 

for the reported costs; the units of measure used to present O&S costs;

the frequency that O&S costs were updated from year to year; and the 

extent to which O&S costs for antecedent systems were reported. We 

compared the SARs across each of these categories to determine the 

extent to which information was reported consistently across all 84 

weapon systems.

3 We designed the sample to ensure that a 

range of weapon systems were represented based on commodity type 

and service responsible for managing the program. We selected three or 

four weapon systems per service and at least one commodity type within 

each service for a total sample size of 15.4 We also examined the 

distribution of weapon systems’ total costs across our sample selection in 

terms of both dollars and the upper and lower 50 percent of weapon 

systems that reported O&S costs in the 2010 SAR. We determined that 

the sample contained an adequate mix of high- and low-dollar weapon 

systems for our purposes. The results from this nonprobability sample 

cannot be used to make inferences about all major weapon systems 

because the sample may not reflect all characteristics of the population. 

The 15 programs in our sample are shown in table 3.

 2 Annual SARs are submitted to Congress within 60 days after the date on which the 

President’s Budget is submitted to Congress for the following fiscal year. We analyzed the 

December SARs for the years 2005, 2006, 2007, 2009, and 2010. Annual SARs were not 

submitted in 2008.

3 Our original sample included 16 weapon systems. However, one system, the Army’s 

Increment 1 Early-Infantry Brigade Combat Team program, was subsequently canceled. 

4 We categorized systems as aircraft, ship, ground, or “other” (e.g., missile programs and 

command and control systems).
Appendix I: Scope and Methodology

Page 35 GAO-12-340 Defense Logistics

Table 3: Major Weapon Systems in GAO’s Nonprobability Sample

Service Major weapon system Commodity type

Army 1. Force XXI Battle Command Brigade and Below Other

2. High Mobility Artillery Rocket System Other

3. MQ-1C Unmanned Aircraft System Gray Eagle Aircraft

Navy 4. Joint Mine Resistant Ambush Protected Land

5. LHA 6 America Class Ship

6. Navy Multiband Terminal Other

7. V-22 Joint Services Advanced Vertical Lift Aircraft (Osprey) Aircraft

Air Force 8. F-22 Raptor Aircraft

9. Joint Primary Aircraft Training System Aircraft

10. Navstar Global Positioning System Other

11. National Polar-orbiting Operational Environmental Satellite System Other

DOD 12. Airborne and Maritime/Fixed Station Joint Tactical Radio System Other

13. F-35 Joint Strike Fighter Aircraft

14. Joint Tactical Radio System Ground Mobile Radios Other

15. Joint Tactical Radio System Handheld, Manpack, and Small Form Fit Other

Source: GAO analysis of 2010 SAR data.

Through a data collection instrument, interviews, and other contacts, we 

obtained information from the 15 program offices on the O&S costs they 

had reported in the SAR, including the cost estimates, where available, 

that formed the basis for their reported costs. We compared the cost 

estimates used to develop SAR O&S costs, as well as any additional cost 

estimates that had been developed for the weapon systems, to the O&S 

costs reported in the SARs. We interviewed program officials about the 

reasons for any discrepancies we identified between the SAR O&S costs 

and the cost estimates. For those weapon systems that did not include 

O&S cost estimates in the 2010 SARs, we contacted the individual 

program offices to obtain information about the reasons why these costs 

were not included. These programs are listed in table 2 of the report.

We conducted this performance audit from February 2011 to February 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: DOD’s Guidance Implementing the 

Statutory SAR Requirements

Page 36 GAO-12-340 Defense Logistics

This appendix provides additional information on DOD’s guidance that 

implements the statutory SAR requirements in 10 U.S.C. § 2432.

DOD has issued various guidance documents that implement the 

statutory SAR requirements. DOD Instruction 5000.02,1

Another source of guidance on SAR reporting is the Defense Acquisition 

Guidebook,

which addresses 

the operation of the defense acquisition system, includes guidance on 

SARs that is similar to the basic statutory requirements in 10 U.S.C. § 

2432. The guidance, for example, states that SARs should be submitted 

at program initiation (normally milestone B except for some ship 

programs) or at the time that the program is designated as a major 

defense acquisition program. It reiterates that programs shall report 

annually, with the exception of quarterly reports that are required when 

acquisition costs increase or schedules slip. Further, the instruction 

requires the submission of quarterly SARs after the program rebaselining 

that occurs after a major milestone decision (i.e., milestone C or 

milestones B and C for some ship programs).

2

DOD’s SAR policy,

which describes discretionary best practices for acquisition 

professionals to consider while meeting various reporting requirements 

throughout the acquisition process. The guidebook contains a section 

summarizing the statutory requirements for SAR content and submission 

and reiterates that a full life-cycle analysis of costs should be reported for 

programs, including each evolutionary increment, as available, and for 

antecedent programs, if applicable.

3

 1 DOD Instruction 5000.02, Operation of the Defense Acquisition System (Dec. 8, 2008).

issued in draft in 2006 and never finalized, further 

identifies information that should be included in the O&S cost section of 

the SAR. According to the draft policy, programs that have reached 

milestone B should report the most recent estimate of O&S costs, such as 

those developed for service cost reviews and acquisition milestone 

decisions, and should include both the source and date of this estimate in 

the SAR. Average annual O&S costs should be reported in constant, 

base-year dollars in a unit of measure (for example, cost per aircraft, 

squadron, or wing) determined by the service. The draft policy further 

2 DOD, Defense Acquisition Guidebook (2011).

3 OSD, Selected Acquisition Report (draft) (2006). Although issued in draft, the policy was 

never issued in final form

Appendix II: DOD’s Guidance Implementing 

the Statutory SAR Requirements
Appendix II: DOD’s Guidance Implementing the 

Statutory SAR Requirements

Page 37 GAO-12-340 Defense Logistics

states that assumptions underlying the estimate should be included. 

Operating tempo, expected reliability and maintainability of the system, 

maintenance concept, and manning and logistics policies are provided as 

examples of the estimate assumptions that should be included in the 

SAR. Finally, the draft policy states that programs should report the total 

estimated O&S costs, and estimate assumptions, for an antecedent 

system if one has been identified and these costs were previously 

developed for that system.

Each year the Under Secretary of Defense for Acquisition, Technology 

and Logistics issues a memorandum to the military services that provides 

guidance for preparing the annual SARs, including instructions for 

programs that have reached milestone B and are required to report O&S 

costs.4

Finally, DOD has developed instructions

For fiscal years 2007, 2009, and 2010, this annual guidance 

states that programs should report total estimated O&S costs in both 

constant and then-year dollars, and that the assumptions that formed the 

basis of the estimate and the date of the estimate should be included. 

Further, programs should report an average unit of measure (e.g., 

average annual cost per squadron, average annual cost per system) for 

the O&S costs of both the current weapon system and the antecedent 

system in constant dollars. If there is no antecedent system, this should 

be stated in the narrative of the O&S cost section. If there is an 

antecedent system but the data are not currently available, the 

antecedent system should be identified in the narrative, along with a 

statement that the required data are not available (e.g., “the O&S costs 

for the antecedent system are not currently available, but will be provided 

in the next SAR”). Finally, programs should explain in the narrative how 

the average annual costs were calculated using the estimated O&S cost 

total.

5

 4 At the time we conducted our review, the most recent annual guidance was issued in 

January 2011. Under Secretary of Defense for Acquisition, Technology and Logistics, 

Memorandum for Assistant Secretaries of the Military Services, December 2010 Selected 

Acquisition Reports (SARs) Guidance (Jan. 14, 2011).

and training for entering SAR 

data into the Defense Acquisition Management Information Retrieval 

system. DOD instructions for entering SAR data into the system generally 

align with the 2006 draft policy. The Defense Acquisition University offers 

5 Under Secretary of Defense for Acquisition, Technology and Logistics, SAR Data Entry 

Instructions (draft) (Nov. 5, 2010).
Appendix II: DOD’s Guidance Implementing the 

Statutory SAR Requirements

Page 38 GAO-12-340 Defense Logistics

SAR training on using this system. According to Office of the Secretary of 

Defense (OSD) officials, the primary class, Acquisition Reporting for 

Major Defense Acquisition Programs and Major Automated Information 

Systems, is usually offered in January and October. During the 4-day 

class, participants receive step-by-step instruction on report preparation 

using the system’s web application. The training materials include basic 

SAR O&S cost reporting information. For example, estimate assumptions 

should be reported, calculation of average costs from total O&S costs 

should be provided, and costs should always be updated at major 

acquisition milestones. The training materials reiterate that costs should 

include both direct and indirect costs, regardless of funding source or 

management control.
Appendix III: Comments from the Department 

of Defense

Page 39 GAO-12-340 Defense Logistics

Appendix III: Comments from the 

Department of Defense
Appendix III: Comments from the Department 

of Defense

Page 40 GAO-12-340 Defense Logistics
Appendix III: Comments from the Department 

of Defense

Page 41 GAO-12-340 Defense Logistics
Appendix III: Comments from the Department 

of Defense

Page 42 GAO-12-340 Defense Logistics
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 43 GAO-12-340 Defense Logistics

Cary B. Russell, (404) 679-1808 or russellc@gao.gov

In addition to the contact name above, the following staff members made 

key contributions to this report: Tom Gosling, Assistant Director; Kristine 

Hassinger; Susannah Hawthorne; Charles Perdue; Janine Prybyla; 

William M. Solis; and Erik Wilkins-McKee.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(351582)
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