Spencer Ackerman / DangerRoom, WIRED Magazine – 2013-04-06 01:08:49

http://www.wired.com/dangerroom/2013/04/military-cost-increases/

(April 4, 2013) — Here’s an example of what Defense Secretary Chuck Hagel was talking about in his Wednesday speech on reforming the way the Pentagon buys gear. If you look at just the increases in how much defense gear costs, the bloat dwarfs what nearly every other nation on earth spends on defense annually.

I mentioned this yesterday during an appearance on MSNBC’s All In With Chris Hayes. Since some of you emailed seeking a linkable explanation, here goes.

In March 2012, the Government Accountability Office, Congress’ investigative agency, took a look at the 96 highest-priority defense programs in the Pentagon acquisitions system. The watchdog organization found that the acquisition programs represented an estimated total cost of $1.58 trillion, and had actually “grown by over $74 billion or 5 percent in the past year.” (.PDF)

The sources of that increase were everything from changes in the per-unit costs of all the planes, guns, trucks and ships; upticks in R&D expenses; or plain “production inefficiencies.”

$74 billion is a lot of money. To put it in context, if all that hardware cost growth were a sovereign nation, it would spend more money on its defense sector in a year than Russia does. ($64 billion in 2012, although in Putin’s Russia, defense money spends you.) It would laugh at India’s $44 billion effort in 2012 at becoming a rising military power. It would pen op-eds in British newspapers about the paltry $57.8 billion that once-imperial London spent on defense last year. The only countries’ defense sectors that would eclipse it are China and the US itself.

And remember, $74 billion is not the cost of the gear itself. It’s just the growth in the cost of the hardware. In Washington, the rising prices of defense programs happens so routinely that it seems normal, like a natural cost of doing business, rather than an indicator of money being mismanaged.

On a much smaller scale, Jonathan Rue and Caitlin Fitz Gerald recently contextualized what it meant for the Army to suddenly discover $900 million in parts for Stryker armored vehicles sitting unused in storage. The US could have bought 600 Tomahawk missiles for that money, or two entire Littoral Combat Ships, or outspent Serbia’s defense sector. It could have funded the Office of Civil Rights at the Department of Health and Human Services for 23 years.

It turns out there’s a happy coda to this story — somewhat.

I discovered today that the GAO recently updated its assessment. Its 2013 look into the previous year’s defense acquisitions tells a sunnier story. Hardware costs dropped by $44 billion (.PDF), since ten of those 96 programs came out of the acquisition pipeline. Those included big-ticket items like the F-22 Raptor stealth jet, the Marines’ canceled Expeditionary Fighting Vehicle, and the C-27J transport plane.

But it turns out there’s a caveat to the coda! “When assessed against first full estimates,” the GAO found, “the total cost of the portfolio has increased by over $400 billion, including more than $90 billion in development cost growth and nearly $290 billion in procurement cost growth, with an average delay of 27 months in the delivery of initial operating capability.”

Laura Peterson, a defense analyst with Taxpayers for Common Sense, translates that from the bureaucratese. “It means the first time in the development cycle of the program that they were able to get a full cost estimate,”

Peterson explains. “Since that would come at various times for the 86 different programs in the portfolio, they’re wrapping all the cost increases together in one big package to remind us that these things are way over budget even if costs went down over the past year.”

Many a defense secretary has tried and failed to impose basic financial management on the Pentagon. The job now falls to Hagel. By the numbers, it’s actually a heftier problem than the annual defense capabilities of adversaries and allies alike.

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