DOD has problems estimating operating costs

I've said numerous times that the budget cutters should read GAO reports, as these reports list numerous areas where we are wasting money. One of the primary areas is the Department of Defense. Here is an example of what goes on in DOD.  DOD acknowledges that its financial statements cannot be audited. It also appears that its statements do not help them manage either. Take the issue of the operating costs of DOD's multi-billion dollar systems. These costs tend to run to 70% of a system's lifetime costs.

Surprisingly, Congress expects DOD to report on these operating costs via something called a selected acquisition report (SAR); there are even standards as to what should be included in a SAR.

When GAO reviewed the SAR data for 84 major systems, it found "a number of inconsistent practices in how program offices were reporting life-cycle O&S cost estimates in the SAR. 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 costs for an antecedent system being replaced by the new weapon system. For example, 35 (42 percent) of the 84 programs that reported O&S costs in the 2010 SAR did not cite a source of these data, contrary to DOD’s guidance, and 57 (68 percent) of the programs did not report O&S costs for an antecedent system. Also, O&S cost submissions in the SAR did not always 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 OS cost estimates in the 2010 SAR."

DOD is supposed to have a SAR reviewed by many departments before being submitted to Congress. Clearly, there is a management problem here.