CRS On Nunn-McCurdy

A new Congressional Research Service report looks at the 1982 Nunn-McCurdy Act, the law that requires the Defense Department "to report to Congress whenever a major defense acquisition program experiences cost overruns that exceed certain thresholds."

The Jan. 31 report lists three issues for Congress to consider: the law as a reporting and management tool; shortening the statute's time line; and applying Nunn-McCurdy-type reporting requirements to operations and sustainment costs. (Note: The 2011 date on the first page of the report is a typo.)

On the first issue, CRS notes:

Congress appears to view Nunn-McCurdy as both a reporting and a management tool. To enhance the effectiveness of the act as a reporting tool, Congress has amended it over the last 25 years to increase visibility into MDAP cost growth and improve the reliability of the data reported. For example, as discussed above, in the FY2006 National Defense Authorization Act, Congress added an additional threshold against which to measure cost growth to improve visibility into the cost growth experienced by a program from its inception.

At the same time, Congress has taken actions which imply that Nunn-McCurdy is also a management tool. For example, in the Weapon System Acquisition Reform Act of 2009, Congress mandated that a program that has a critical breach must be restructured to address the root causes of cost growth and have its most recent milestone approval revoked.

Clarifying what role Nunn-McCurdy should play in helping Congress exercise its oversight role could help Congress determine how best to amend the act in the future.

. . . As for shortening the Nunn-McCurdy time line, CRS states:

Some analysts have argued that under the current statute, too much time elapses from when a critical breach is first identified to when DOD certifies the program to Congress. According to these analysts, the Nunn-McCurdy timelines often span two budget cycles, and in some cases can exceed 300 days from when a program manager accurately suspects that a critical Nunn-McCurdy breach has taken place. One option for Congress could be to consider shortening some of the Nunn-McCurdy timeframes. Condensing the timeframes could give Congress more of an opportunity to consider budgeting options for troubled programs.

Some analysts have gone further, arguing that the time it takes to report a breach to Congress could be shortened by notifying Congress when a Unit Cost Report or when a Contract Performance Report (which is used in Earned Value Management) indicates that a program has breached a Nunn-McCurdy threshold.

However, according to DOD, "The timing of breach determinations is one of the most difficult parts of Nunn-McCurdy." Within the department, there is a great deal of discussion and deliberation at all levels prior to the formal breach determination and notification to Congress.

Initial breach indications from the contractor or program manager could be premature. For example, even if the program manager has reasonable cause to believe there is a Nunn-McCurdy breach, senior leadership could initiate cost reductions or descope the program. Using the Unit Cost Reports or Contractor Performance Reports to determine a Nunn-McCurdy breach could deprive DOD of the opportunity to manage programs and take steps to rein in cost growth.

. . . And on applying Nunn-McCurdy-type reporting requirements to O&S costs, the report states:

Given the costs associated with operations and support, Congress may want to consider applying Nunn-McCurdy-type reporting requirements to O&S costs. Applying a reporting requirement to O&S costs might help Congress set its budgetary priorities, as well as gather and track cost data for future analysis. Another option for Congress could be to require the Cost Assessment and Program Evaluation office to include in its annual report to Congress a comparison of original O&S cost estimates to current actual costs (adjusted for inflation) for ongoing programs. The extent to which these options may be viable depends on the reliability of the data available.