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. 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. 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. 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. This stage of acquisition is now called engineering and manufacturing development. DOD has issued various guidance documents that implement the statutory SAR requirements. This guidance is contained in an acquisition instruction, a guidebook on defense acquisition best practices, a draft SAR policy, and an annual memorandum on preparing SARs. DOD also has developed instructions and training for entering SAR data into the Defense Acquisition Management Information Retrieval system. 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. 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. 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. 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). DOD’s guidance states that if a program has an antecedent system,assumptions should be submitted for the antecedent system. then O&S costs and 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. 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 method and process for estimating each cost element; and comparing the program-developed cost estimate to an independent cost estimate. 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. 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, 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. 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 life- cycle 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 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.