Deloitte study: Cost overruns persist in major defense programs
Cost growth expected to rise to 51 percent by 2020
New York, Oct. 24, 2016—Major weapons acquisition programs have continued their trend of cost growth and schedule delays, according to Deloitte’s report, “Program management in Aerospace & Defense: Sector programs are still over budget and late.”
The study looks at the progress that has been made in the aerospace and defense (A&D) sector, explores the root causes associated with the continued trends of cost and schedule growth, and provides recommendations for a sustainable and long-term improvement.
The combined cost overrun for Major Defense Acquisition Program (MDAP) portfolio programs in 2015 was $468 billion, up from $295 billion in 2008. The total cost of the US Department of Defense’s 2015 MDAP portfolio grew at 48.3 percent with an average schedule delay of 29.5 months.
“Our research indicates that over the past seven years, the problem has persisted, albeit at a decreasing rate of growth,” said Robin Lineberger, principal, Deloitte Consulting LLP, US Aerospace and Defense. “When looking at defense programs with the largest growth or largest declines, we find that those with the largest growth result from quantity increases, but also process inefficiencies, design and technical modifications, and major restructuring such as combining programs and changing the mix of items in a manner that delayed schedules or created cost overruns.”
Improving program management processes that minimize schedule delays and costly overruns entails identifying requirements early on. Maintaining stable, baseline requirements from the start of a project keeps costs down and offers a more realistic estimate of how long a project may take to complete. Organizations should provide proper incentives and empower program managers, while also hold them accountable to solve problems and reduce risks by effectively addressing issues early, according to the study.
About the Study
Deloitte conducted interviews with multiple senior program managers from both government and commercial A&D organizations, performed extensive research from publicly available information of commercial A&D programs, and also analyzed MDAP sources using the cost and schedule data published in the Department of Defense’s “Selected Acquisition Reports.”
Figures cited in the press release are based on Deloitte’s analysis of “Defense Acquisitions: Assessments of Selected Weapon Programs,” Government Accountability Office (GAO) Report to Congressional Committees, March 2016, and GAO’s “Assessments of Selected Weapon Programs” and “Selected Acquisition Reports.”
About Deloitte’s Aerospace and Defense group
Deloitte's aerospace and defense sector focuses on the top issues facing the industry. Deloitte A&D practitioners have deep industry experience and are actively involved in various segments of the industry, including: M&A, advanced technology programs, airplane program launches, and acquisition reform and economic assistance packages. For more information about Deloitte’s aerospace and defense group, please visit: www.deloitte.com/us/a&d.
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