Cost and Schedule Overruns . Figure 2 is an updated version of the same figure that appeared in the original research report. It shows cost and schedule overruns in the form of the ratio of actual cost or schedule to planned cost or schedule. A program that completed EMD essentially on cost and on schedule would have a ratio of 1:1 for both cost and schedule. Hence the smaller dotted line square in Figure 2 is the loci of all programs that came in on cost and on schedule. Data points inside this square indicate programs that under ran cost and schedule. The larger dotted line square is the loci of all programs with a ratio of 2:1; that is, programs that completed EMD with exactly a 100 percent overrun in cost and in schedule. To convert a ratio reading from Figure 2 into the applicable overrun, subtract 1, and multiply by 100. For the 33 programs contained in Figure 2 , the average cost overrun was 40 percent and the average schedule overrun was 62 percent for the entire period from 1980 to 1996.

     As indicated earlier, some valuable insight into trends and the dynamics of the DoD acquisition system can be obtained by recording this data in three separate-year groups, and to a lesser degree, by individual Service. Figure 3 shows the cost and schedule overrun averages for the three-year groups used in this report. An initial observation is that cost overruns were the greatest, and schedule overruns the least during the Cold War years ending in 1989. Since then, cost overruns have been less than schedule overruns. This cost overrun trend agrees with Rich and Dews' findings for programs in the 1960s, although our schedule overrun figure is higher. Figure 4 shows that U. S. Army programs had less cost and schedule overruns than the other Services. A superficial possible reason for this is the general perception that Army equipment is less complex than the other Services.

 

     DoD average cost and schedule overruns of 40 percent and 62 percent at first glance may not appear to be good. However, when you factor in complexity of the development, and schedule pressures this in fact may not be too bad. In fact, when compared to other major projects, DoD acquisition cost management is among the best. Figure 5 shows DoD major weapon systems to have a cost overrun of approximately 38 percent, close to our 40 percent figure.

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     Lastly, if cost and schedule overruns are looked at in Total Quality Management (TQM) terms, and if 100 percent overruns are considered the statistical process control acceptable limits of a DoD acquisition system under control, the average cost overrun is halved to 19 percent and the average schedule overrun drops to 34 percent. That is, we eliminate the nine programs that had cost or schedule overruns of over 100 percent. Programs over the acceptable process control limits could be handled by some other extraordinary process. Our research methodology allows the control limits to be set at any acceptable level and the resultant average cost and schedule overruns can be obtained.