Two Navy programs have significant and critical Nunn-McCurdy cost breaches, the Defense Department said in its annual Selected Acquisition Reports (SAR) covering 2017.
The SAR, released late Tuesday, reported the Littoral Combat Ship (LCS) Mission Modules (MM) program had a significant program acquisition unit cost breach against the acquisition program baseline (APB) of 16.6 percent because the Navy cut the procurement number from 64 to 48 Mission Packages (MP).
This reduction of 16 units increased the average MP cost.
The 48 MPs will consist of 44 deployable and four non-deployable engineering development models.
The LCS consists of the Freedom-variant made by Lockheed Martin [LMT] and the Independence-variant made by Austal USA. Both have modular hulls that can be reconfigured to host one of three mission modules: mine countermeasures, surface warfare, or anti-submarine warfare. Each module includes weapons, aircraft, unmanned vehicles, and other material needed to support the mission.
The report clarified the under secretary of defense for acquisition and sustainment certified this reduced mission package number for the FY 2019 budget request based on the LCS MM program of record. It highlighted program costs decreased by $1.35 billion to $6.5 billion, mostly due to the decreased MPs.
Nunn-McCurdy requires the DoD to report to Congress whenever a major defense acquisition program experiences cost overruns that exceed specific thresholds. A significant breach is when program acquisition unit cost (PAUC) (the total cost of development, procurement, and construction divided by the number of items procured) or average procurement unit cost (APUC) (total procurement cost divided by the number of items to be procured) increases 15 percent over the current baseline estimate or 30 percent over the original baseline estimate.
In contrast, a critical breach is when the unit costs increase to 25 percent or more over the current APB or 50 percent or more over the original baseline estimate.
The SAR reported the Navy’s Integrated Defense Electronic Countermeasures (IDECM) Blocks 2/3 had a critical breach because of quantity reductions in the BLOCK 3 program, while Block 2 has already been fully delivered/expended.
The IDECM detects, identifies, and manages electronic countermeasure response to surface-to-air and air-to-air radar threats for F/A-18 aircraft. The primary contractor is a joint venture between Britain’s BAE Systems and ITT [ITT]. Block 2 is a Harris Corp. [HRS] AN/ALQ-214 with the Raytheon [RTN] AN/ALE-50 Towed Array. The ALE-50 acts as preferred target for enemy missiles with a larger radar cross section than the defending aircraft. Block 3 is the same AN/ALQ-214 and the AN/ALE-55 Fiber Optic Towed Decoy (FOTD).
IDECM Blocks 2/3 breached the current baseline program acquisition unit cost by 132.5 percent and the average procurement unit cost by 92.6 percent as well as the original baseline’s PAUC by 147.3 percent and APUC by 108 percent.
The report underscored that “threat changes have led to the selection of a different material solution to counter future [threats]” and as a result the Navy reduced quantity projections for the ALE-55 Expendable Fiber Optic Towed Decoy by 69 percent or 8,875 units relative to the baseline.
The Defense Department also noted IDECM’s Blocks 2/3 program costs decreased by $937.5 million, or 47.5 percent, from almost $2 billion to $1.03 billion. The report said the FY 2019 budget request includes the requirement for a different material solution to counter future threats, which will not be part of the IDECM Block 2/3 or Block 4.