From the U.S. Government Accountability Office, www.gao.gov Transcript for: Annual Quick Look at DOD's Portfolio of Major Weapon Programs Description: Audio interview by GAO staff with Mike Sullivan, Director, Acquisition and Sourcing Management Related GAO Work: GAO-14-340SP: Defense Acquisitions: Assessments of Selected Weapon Programs Released: March 2014 [ Background Music ] [Narrator:] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. It's March, 2014. Each year, GAO reviews the Department of Defense's portfolio of major weapon system acquisitions, an area that has been on GAO's High Risk List for more than 20 years. A team led by Mike Sullivan, a director in GAO's Acquisition and Sourcing Management team, recently completed this year's review. GAO's Sarah Kaczmarek sat down with Mike to talk about what they found. [Sarah Kaczmarek:] Why does GAO assess DOD's weapon system acquisition each year? [Mike Sullivan:] These are huge capital investments and they're very high-risk. So, it's a lot of money. I think this year the request was about $154 billion from the department to develop and procure these weapon systems, and half of that $154 billion I talked about go to the programs that we talk about in this report. Also, the portfolio of these programs, when you add up all of the costs of the portfolio, it's one and a half trillion dollars of the taxpayers' money and there's significant cost growth and schedule delays on these, so it's very important, I think, to our national security and, and really to our budget, to be able to focus on this on an annual basis. [Sarah Kaczmarek:] In this most recent version of the Quick Look, you looked at DOD's portfolio as it currently stands. Can you talk about that portfolio and what some of the biggest projects are? [Mike Sullivan:] Sure. The portfolio currently stands at 80 programs. It was actually down from a high of 97 a few years ago, so the portfolio has actually shrunk. As I said a little bit earlier, it's $1.5 trillion. Some of the biggest programs in the portfolio are programs such as the F-35 Joint Strike Fighter, which is the new fighter program. It's a joint program, so all of the services are buying that, and that's a huge program, it's $335 billion. It actually takes up almost a quarter of this entire portfolio. And then some of the other programs, there's a lot of ship-building programs on here. There's a new aircraft carrier, there's a destroyer program that's one of the bigger programs, and a new submarine program as well. [Sarah Kaczmarek:] Your team also looked at how these programs are being managed, including the knowledge that's gained in the acquisition process. What did you find there? [Mike Sullivan:] Yes, so we looked at how they were managed in terms of cost and schedule, and then we looked at how they were gaining knowledge on the programs to, of course, reduce risk. So this year, the portfolio actually increased in cost by about $13 billion, so on a $1.5-trillion-dollar program, that's not a lot of cost growth, but nonetheless, it was cost growth. When we went in and looked at it, and looked at the 80 programs separately, we found some interesting things. For example, on 50 of the 80 programs, there was no cost increase, in fact, a lot of those had cost decreases to the tune of about $30.9 billion. And so what we found is the other 30 programs is where the cost growth was and, in fact, one of those programs, the expendable launch vehicle, accounted for most of that. I think that cost increase was about 28 billion of an overall increase of programs where it went up of 43 billion. [Sarah Kaczmarek:] What are some of the reform initiatives that are being taken on? [Mike Sullivan:] Okay, well the department has its own reforms that it's doing under what it calls the Better Buying Power Initiative, and then there are some reforms that were introduced through congressional acquisition reform legislation. The Better Buying Power Initiatives, the department has two that we focused on. One is Should-Cost Management, and that program actually has saved about $24 billion now across the 80 programs that we looked at. So that's been a very good initiative, and essentially what that's doing is trying to get program managers to focus more on finding savings in their programs. The other one is an initiative called Affordability Requirement, and that is to make actual affordability, or the cost of the weapons system, one of the main requirements on the program, so it would have equal weight to, say, capability requirements, which means, you know, how fast something can go or how much weapons it can carry, things like that. So that's important, but they, they have just implemented that and that one I think is a little harder to implement. We didn't get a lot of data on it, but it has been going slowly. [Sarah Kaczmarek:] Clearly defense spending on these major weapons acquisition programs is a very large piece of the federal budget. For taxpayers interested in this area of government spending, what do you see as the bottom line here? [Mike Sullivan:] I think the bottom line is exactly that, it's a huge part of what the taxpayers give to the government to spend every year. And, as I said earlier, about a third of that is spent on these major capital investments, and they have not had great records in the past, so taxpayers, bottom line is that there's money here that needs to be spent in better ways. 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