Digging Out the Root Cause: Nunn-McCurdy Breaches in Major Defense Acquisition Programs
Irv Blickstein, Charles Nemfakos, and Jerry M. Sollinger
Continuing concern over defense acquisition has led Congress to direct the establishment of an office in the Department of Defense to oversee the conduct of root cause analyses on programs that have incurred NunnMcCurdy breaches. Analyses of six programs that have incurred such breaches reveal that many of the causes of the breaches are common to several programs. However, each program is different, and those differences suggest that policymakers should be wary of applying policies that assume all program cost increases stem from common causes.
Reusing DoD Legacy Systems: Making the Right Choice
Meredith Eiband, Timothy J. Eveleigh, Thomas H. Holzer, and Shahryar Sarkani
Department of Defense (DoD) programs often experience cost overruns and technical difficulties due to reuse of legacy systems. With today’s fiscal climate of resource-constrained DoD budgets, reuse of legacy systems is frequently touted as the solution to cost, efficiency, and time-to-delivery problems; however, cost overruns and technical difficulties can significantly diminish any perceived benefits. Through evaluation of eight diverse DoD programs, this research shows that the state of a legacy system’s documentation, availability of subject matter expertise, and complexity/feasibility of integration are key factors that must be analyzed. Based on these three key factors, the authors propose a framework to aid both the DoD and defense contractors in the evaluation of legacy systems for potential efficient and effective reuse.
Valuing the Cost of an Economic Price Adjustment Clause to the Government
Scot Arnold, Bruce Harmon, Susan Rose, and John Whitley
An Economic Price Adjustment (EPA) clause in a contract allows for adjustment of contract price if certain conditions are met. The Department of Defense (DoD) often uses an EPA clause in contracts where there is an increased risk that the costs of inputs used by the contractor will diverge from the forecasts used in the original pricing of the contract. EPA clauses transfer risk from the contractor to the government; thus, they are of economic value to the contractor. This article reviews EPA clauses, analyzes the value of risk transfer, and discusses how DoD could account for this value in negotiating fees for contracts that contain EPA clauses. Other government costs and risks associated with EPA clauses are also discussed.