The Nunn-McCurdy Act: Background,
Analysis, and Issues for Congress
Moshe Schwartz
Specialist in Defense Acquisition
January 19, 2011
Congressional Research Service
7-5700
www.crs.gov
R41293
CRS Report for Congress
P
repared for Members and Committees of Congress

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The Nunn-McCurdy Act: Background, Analysis, and Issues for Congress

Summary
On September 8, 1982, President Ronald Reagan signed into law the Department of Defense
(DOD) Authorization Act, 1983 (P.L. 97-252), which included what has come to be known as the
Nunn-McCurdy Act (10 U.S.C. § 2433). The Nunn-McCurdy Act requires DOD to report to
Congress whenever a major defense acquisition program experiences cost overruns that exceed
certain thresholds. The purpose of the act was to help control cost growth in major defense
systems by holding the appropriate Pentagon officials and defense contractors publicly
accountable and responsible for managing costs.
A program that experiences cost growth exceeding any of the established thresholds is said to
have a Nunn-McCurdy breach. There are two types of breaches: significant breaches and critical
breaches. A “significant” breach is when the Program Acquisition Unit Cost (the total cost of
development, procurement, and construction divided by the number of units procured) or the
Procurement Unit Cost (the total procurement cost divided by the number of units to be procured)
increases 15% or more over the current baseline estimate or 30% or more over the original
baseline estimate. A “critical” breach occurs when the program acquisition or the procurement
unit cost increases 25% or more over the current baseline estimate or 50% or more over the
original baseline estimate.
The Nunn-McCurdy Act has been statutorily amended a number of times over the years. One of
the most significant changes to the reporting requirements occurred in the FY2006 National
Defense Authorization Act (P.L. 109-163), when Congress added the original baseline estimate as
a threshold against which to measure cost growth. The new standard prevents DOD from
avoiding a Nunn-McCurdy breach by simply re-baselining a program. Another significant change
occurred in the FY2009 Weapon Systems Acquisition Reform Act (P.L. 111-23), when Congress
enacted a requirement that programs with critical breaches should be presumed terminated unless
the Secretary of Defense certifies the program. For programs that are certified, DOD must (1)
revoke the prior milestone approval, (2) restructure the program, and (3) provide Congress a
written explanation of the root cause of the cost growth. These changes were fueled in part over
congressional concern that programs with chronic cost growth and schedule delays were not
being terminated and Congress was not being provided specific information explaining what
caused the cost growth.
Some analysts believe that the Nunn-McCurdy Act has been effective as a reporting mechanism
for informing Congress of cost overruns in major acquisition programs. As a result of the Nunn-
McCurdy process, Congress has increased its visibility into the cost performance of the
acquisition stage of Major Defense Acquisition Programs (MDAPs). However, some analysts
suggest that Nunn-McCurdy is not a sufficiently comprehensive reporting mechanism because
program managers can sometimes take steps to avoid a breach and because Nunn-McCurdy does
not apply to all elements of a weapon system’s life-cycle costs, such as its operations, support, or
disposal costs.

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The Nunn-McCurdy Act: Background, Analysis, and Issues for Congress


Contents
Introduction ................................................................................................................................ 1
Background ................................................................................................................................ 1
What is a Nunn-McCurdy Breach? ........................................................................................ 2
Nunn-McCurdy Thresholds ............................................................................................. 2
Nunn-McCurdy Timelines............................................................................................... 3
Consequences of a Critical Nunn-McCurdy Breach ......................................................... 6
How the Nunn-McCurdy Act Has Evolved ............................................................................ 8
Effectiveness of the Nunn-McCurdy Act ............................................................................. 11
Nunn-McCurdy as a Reporting Mechanism ................................................................... 12
Nunn-McCurdy as a Mechanism for Controlling Cost Growth....................................... 15
Applying Nunn-McCurdy to Other Agencies................................................................. 17
Issues for Congress ................................................................................................................... 17
Nunn-McCurdy as a Reporting and Management Tool......................................................... 17
Shortening the Nunn-McCurdy Timeline............................................................................. 18
Managing Administrative Breaches ..................................................................................... 18
Applying Nunn-McCurdy-Type Reporting Requirements to O&S Costs.............................. 19

Figures
Figure 1. Nunn-McCurdy Timeline based on End-of-Quarter Report ........................................... 4
Figure 2. Nunn-McCurdy Timeline based on Mid-Quarter Report ............................................... 5
Figure 3. Timeline for Critical Nunn-McCurdy Breach................................................................ 8
Figure 4. Evolution of the Nunn-McCurdy Act .......................................................................... 10
Figure 5. Evolution of Nunn-McCurdy Reporting Timelines...................................................... 11

Tables
Table 1. Nunn-McCurdy Breach Thresholds ................................................................................ 2
Table A-1. FY1982 Authorization Act Breach Thresholds.......................................................... 21
Table A-2. FY1983 Authorization Act Breach Thresholds.......................................................... 23

Appendixes
Appendix. Legislative History................................................................................................... 20

Contacts
Author Contact Information ...................................................................................................... 29

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The Nunn-McCurdy Act: Background, Analysis, and Issues for Congress


Introduction
For almost 30 years, the Nunn-McCurdy Act (10 U.S.C. § 2433) has served as one of the
principal mechanisms for notifying Congress of cost overruns in Major Defense Acquisition
Programs (MDAPs).1 Nunn-McCurdy establishes different thresholds to determine if an MDAP
or designated major subprogram of an MDAP experiences a cost overrun (for purposes of this
report, the term program will refer to MDAPs as well as designated major subprograms).2 These
thresholds are based on a comparison between a program’s actual costs and the current baseline
estimate or the original baseline estimate (defined below). A program that has cost growth that
exceeds any of these thresholds is said to have a Nunn-McCurdy breach and must notify
Congress of the breach.
Background
In the early days of the Reagan Administration, a number of high-profile weapon systems,
including the Black Hawk helicopter and the Patriot missile system, experienced substantial cost
overruns. Responding to public concern over escalating cost growth, Senator Sam Nunn and
Representative David McCurdy spearheaded the passage of the Nunn-McCurdy Act, which was
intended to create a reporting requirement for programs experiencing cost overruns.3 It was
believed that publicly exposing cost overruns would force the Department of Defense (DOD) to
rein in cost growth. According to Representative McCurdy,
The assumption behind the Nunn-McCurdy provision of the fiscal 1983 defense
authorization bill was that the prospect of an adverse reaction from the Office of
Management and Budget, Congress, or the public would force senior Pentagon officials to
address the question of whether the program in question—at their newly reported, higher
costs—were worth continuing.4
Nunn-McCurdy was not intended to create a mechanism for managing programs or allocating
funds. The rationale for an after-the-fact report was a matter of some debate. During floor debate
on the original amendment in 1981, former Senator John Tower, then chairman of the Senate
Armed Services Committee, said that the reporting requirements were like “closing the gate after
the horse has galloped off into the boondocks.”5

1 A Major Defense Acquisition Program is defined as a program estimated to require research, development, test, and
evaluation (RDT&E) costs of more than $365 million or procurement costs of more than $2.190 billion (in FY2000
constant dollars). In 1982, when the Nunn-McCurdy Act was enacted, the procurement cost of a program had to be $1
billion (in FY1980 constant dollars) to be considered an MDAP.
2 If an MDAP has two or more major items that are significantly different from each other in form or function, DOD
may designate the items as “major subprogram” for purposes of acquisition reporting requirements. This authority was
established in Sec. 81 of The Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (P.L. 110-417).
3 Dave McCurdy , "Reassert Cost Controls," DefenseNews, April 24, 2006, p. 21.
4 Ibid.
5 Congressional Record, May 14, 1981, p. S5012.
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What is a Nunn-McCurdy Breach?
Nunn-McCurdy Thresholds
There are two categories of breaches: significant breaches and critical breaches. As shown in
Table 1, a “significant” Nunn-McCurdy breach occurs when the Program Acquisition Unit Cost
(PAUC—defined as the total cost of development, procurement, and construction divided by the
number of units) or the Procurement Unit Cost (PUC—defined as the total procurement cost
divided by the number of units to be procured) increases 15% or more over the current baseline
estimate or 30% or more over the original baseline estimate.6 A “critical” breach occurs when the
PAUC or PUC increases 25% or more over the current baseline estimate or 50% or more over the
original baseline estimate.
Table 1. Nunn-McCurdy Breach Thresholds
Significant
Breach
Critical
Breach
Current Baseline Estimate
≥15%
≥25%
Original Baseline Estimate
≥30%
≥50%
Source: 10 U.S.C. § 2433.
What is a Current Baseline Estimate and an Original Baseline Estimate?
According to Title X of the U.S. Code, DOD is required to establish a baseline description of all
major defense acquisition programs when the program is officially started. This baseline
description includes information on the program’s planned cost, schedule, and performance.7 The
cost information is referred to as the “baseline estimate.” The baseline description (including the
cost estimate) is contained in the Acquisition Program Baseline (APB).8
APBs are required to initiate a program, and can only be revised
1. at the milestone reviews or when full rate production begins,9
2. if there is a major program restructuring that is fully funded, or
3. as a result of a program breach if the breach is primarily the result of external
causes beyond the control of the program manager.10

6 Title X of the U.S. Code codifies the laws establishing and regulating the Department of Defense. Program
acquisition unit cost and procurement unit cost are defined in 10 U.S.C. § 2432(a). DOD often uses the term Average
Procurement Unit Cost (APUC) instead of Program Unit Cost (PUC), which is the term used in the statute.
7 10 U.S.C. § 2435(a).
8 The APB contains the key cost, schedule, and performance parameters (both objectives and thresholds). According to
the Defense Acquisition Guidebook, the program, as described by the APB, “should represent the program as it is
expected to be developed, produced and/or deployed, sustained and funded.” See Department of Defense, Defense
Acquisition Guidebook, pp. Chapter 2, 2.1.1.
9 For a discussion on the defense acquisition system and milestones, see CRS Report RL34026, Defense Acquisitions:
How DOD Acquires Weapon Systems and Recent Efforts to Reform the Process, by Moshe Schwartz.
10 In all three cases, the APB can only be revised with the approval of the Milestone Decision Authority. See
Department of Defense, Defense Acquisition Guidebook, , pp. Chapter 2, 2.1.1. The Defense Acquisition Guidebook is
(continued...)
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Under current DOD policy, current APBs cannot be revised to avoid a Nunn-McCurdy breach.11
An original baseline estimate is the cost estimate included in the original (first) APB that is
prepared prior to the program entering “engineering and manufacturing development” (also
knows as “Milestone B”), or at program initiation, whichever occurs later.12 An original baseline
estimate can only be revised if the program has a critical Nunn-McCurdy breach (see Table 1).13
A current baseline estimate is the baseline estimate that is included in the most recently revised
APB. If the original baseline estimate has not been revised, the original baseline estimate is also
the current baseline estimate.
Nunn-McCurdy Timelines
Program managers are required to submit quarterly unit cost reports to the service’s acquisition
executive within 30 days of the end of the quarter.14 If a program manager has reasonable cause to
believe that a program has a significant Nunn-McCurdy breach, he must immediately submit a
unit cost report.15 This report is generally the first official indication that a program may have a
Nunn-McCurdy breach.16
When a service acquisition executive receives a unit cost report, he must determine whether a
Nunn-McCurdy breach has occurred. If there is no breach, no notification to Congress is required.
If the service acquisition executive determines that there is in fact a Nunn-McCurdy breach, the
service is required to notify Congress, in writing, of the breach.
If the service acquisition executive’s determination is based on a quarterly unit cost report, the
notification to Congress must be submitted within 45 days of the end of the quarter (see Figure
1).17 If the determination in based on a unit cost report submitted in the middle of a quarter, then
the written notification to Congress must be submitted within 45 days of when the program
manager submitted the unit cost report to the service acquisition executive (see Figure 2).

(...continued)
in revision to reflect the new DoDI 5000.02 that was issued December 8, 2008. See also Kenneth J. Krieg,
Memorandum: Acquisition Program Baselines (APBs) for Major Defense Acquisition Programs (MDAPs), Under
Secretary of Defense, Acquisition, Technology, and Logistics, July 17, 2007.
11 Kenneth J. Krieg, Memorandum: Acquisition Program Baselines (APBs) for Major Defense Acquisition Programs
(MDAPs), Under Secretary of Defense, Acquisition, Technology, and Logistics, p. 2, July 17, 2007.
12 10 U.S.C. § 2435(d). For programs with an acquisition unit cost or procurement unit cost that exceeded the original
baseline estimate by more than 50 percent as of January 6, 2006, the original baseline estimate for the program for
purposes of Nunn-McCurdy is defined as the current baseline estimate that existed as of January 6, 2006.
13 10 U.S.C. § 2435(d).
14 10 U.S.C. § 2435(b).
15 10 U.S.C. § 2433(c). The unit cost report includes program acquisition unit cost, procurement unit cost (if
appropriate), and cost or schedule variance. See 10 U.S.C. § 2433(b).
16 Under certain circumstances, a program manager does not need to submit a mid-quarter unit cost report. For
example, if a mid-quarter report had previously been filed indicating an equal or greater level of cost growth, then the
program manager is not required to submit another mid-quarter report.
17 10 U.S.C. 2433(d).
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The Nunn-McCurdy Act: Background, Analysis, and Issues for Congress


Figure 1. Nunn-McCurdy Timeline based on End-of-Quarter Report

Source: CRS analysis of 10 U.S.C. § 2433.
Notes:
(1) Assumes that a Nunn-McCurdy breach does not occur within the first 30 days of the quarter, when the prior
quarter’s unit cost report has not yet been filed.
(2) A SAR must be submitted within 45 days from the end of a quarter except for the first fiscal quarter, when
the SAR must be submitted within 60 days from the time when the President submits the budget to Congress
(10 U.S.C. § 2432(f)). The President’s budget is general y submitted the first week of February. For purposes of
this figure, it is assumed that the President’s budget is submitted 30 days after the end of the quarter.
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Figure 2. Nunn-McCurdy Timeline based on Mid-Quarter Report

Source: CRS analysis of 10 U.S.C. § 2433.
Notes:
(1) Assumes that a Nunn-McCurdy breach does not occur within the first 30 days of the quarter, when the prior
quarter’s unit cost report has not yet been filed.
(2) A SAR must be submitted within 45 days from the end of a quarter except for the first fiscal quarter, when
the SAR must be submitted within 60 days from the time when the President submits the budget to Congress
(10 U.S.C. § 2432(f)). The President’s budget is general y submitted the first week of February. For purposes of
this figure, it is assumed that the President’s budget is submitted 30 days after the end of the quarter.
The notification to Congress must include 17 different data elements, including
1. an explanation of the reasons for the cost increase,
2. the completion status of the program and designated major subprograms,
3. changes in the projected cost of the program,
4. names of the military and civilian personnel responsible for program
management and cost control,
5. any changes in performance or schedule that contributed to cost growth,
6. action taken and proposed to be taken to control cost growth,
7. changes in the performance or schedule milestones and how such changes have
affected the cost of the program, and
8. prior cost estimating information.
In addition to the notification, DOD must also submit to Congress a Selected Acquisition Report
(SAR) for the fiscal quarter in which the breach occurred or in the quarter in which it was
determined that a breach occurred.18 For a significant breach, no further action is required.

18 10 U.S.C. § 2433. A Selected Acquisition Report includes the (1) quantity of items to be purchased, (2) program
acquisition cost, (3) program acquisition unit cost, (4) current procurement cost, (5) current procurement unit cost, and
(continued...)
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However, if a program experiences a critical breach, DOD is required to take a number of
additional steps.
Consequences of a Critical Nunn-McCurdy Breach
In the event of a critical breach, the Secretary of Defense is required to conduct a root-cause
analysis to determine what factors caused the cost growth that led to a critical breach, and, in
consultation with the Director of Cost Assessment and Program Evaluation, assess
1. the estimated cost of the program if no changes are made to the current
requirements,
2. the estimated cost of the program if requirements are modified,
3. the estimated cost of reasonable alternatives to the program, and
4. the extent to which funding from other programs will need to be cut to cover the
cost growth of this program.19
After the reassessment, the program must be terminated unless the Secretary of Defense certifies
in writing no later than 60 days after a SAR is provided to Congress that the program will not be
terminated because it meets certain requirements.20 A certification, which uses the exact wording
as found in 10 U.S.C. § 2433a(b), essentially certifies that
1. the program is essential to national security,
2. there is no viable cost-effective alternative to the program that meets the joint
military requirements,
3. the new cost estimates have been determined by the Director of Cost Assessment
and Program Evaluation to be reasonable,
4. the program is a higher priority than programs whose funding will be reduced to
cover the increased cost of this program, and
5. the management structure is sufficient to control additional cost growth.21
A certification must be accompanied by a copy of the root-cause analysis report.22 In addition to
submitting a certification and the root-cause analysis to Congress, a program that is not
terminated must

(...continued)
(6) the reasons for changes in any of these costs. See 10 U.S.C. § 2432(b),(e). Originally, DOD was required to submit
a SAR for the quarter in which the determination was made that a breach occurred. In some circumstances, a breach
will occur in one quarter but the formal determination that the breach occurred takes place in the following quarter. To
address this issue, Congress gave DOD the flexibility to submit a SAR for the quarter immediately preceding the
quarter in which the determination is made—which would be the quarter in which the breach actually occurred.
19 10 U.S.C. § 2433a(a).
20 The requirement that a program be terminated if it is not certified was enacted is a recent change to the Nunn-
McCurdy Act on May 22, 2009 as part of the Weapon Systems Acquisition Reform Act of 2009. According to the
amended act, if a program is terminated, the Secretary of Defense must submit a written report explaining (1) why the
program was terminated, (2) the alternatives that were considered to fix the program, and (3) how DOD intends to meet
the requirement that the program was intended to fill (10 U.S.C. § 2433a(d)).
21 10 U.S.C. § 2433a(b).
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1. be restructured in a manner that addresses the root cause of the cost growth,
2. have its prior milestone approval rescinded, and
3. receive a new milestone approval before taking any contract action—including
signing new contracts or exercising options—without approval from the
Milestone Decision Authority.
DOD must also (1) notify Congress of all funding changes made to other programs to cover the
cost growth of the program in question and (2) hold regular reviews of the program.23
As reflected in Figure 3, from the time a program manager reasonably believes that a critical
Nunn-McCurdy breach occurs to the time the Secretary of Defense certifies the program to
Congress could be as long as 255 days (and as long as 300 days if the SAR is filed 60 days after
the President’s budget).24

(...continued)
22 10 U.S.C. § 2433a(b)(3).
23 10 U.S.C. § 2433A(c).
24 A SAR must be submitted within 45 days from the end of a quarter except for the first fiscal quarter, when the SAR
must be submitted within 60 days from the time when the President submits the budget to Congress (10 U.S.C. §
2432(f)). The President’s budget is generally submitted the fist week of February, which is some 30 days after the end
of the quarter (which is December 31, 2010). Granting of an extra 15 days to submit a SAR after the budget is
submitted (60 days vs. 45 days) and the 30 day delay between the end of the quarter and when the budget is submitted
in the first week in February, combines to add at least 45 days to the SAR filing deadline.

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Figure 3. Timeline for Critical Nunn-McCurdy Breach
Based on Unit Cost Report Submitted at the end of a quarter

Source: CRS analysis of 10 U.S.C. § 2433.
Note:
(1) Assumes that a Nunn-McCurdy breach does not occur within the first 30 days of the quarter, when the prior
quarter’s unit cost report has not yet been filed.
(2) A SAR must be submitted within 45 days from the end of a quarter except for the first fiscal quarter, when
the SAR must be submitted within 60 days from the time when the President submits the budget to Congress
(10 U.S.C. § 2432(f)). The President’s budget is general y submitted the first week of February. For purposes of
this figure, it is assumed that the President’s budget is submitted 30 days after the end of the quarter.
How the Nunn-McCurdy Act Has Evolved
The Nunn-McCurdy Act has been statutorily amended a number of times over the years (see
Figure 4). One of the most significant changes to the reporting requirements occurred in the
FY2006 National Defense Authorization Act (P.L. 109-163), when an additional threshold was
added against which to measure cost growth—an original baseline. The new standard, which
prevents DOD from avoiding a Nunn-McCurdy breach by simply re-baselining a program, has
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increased the number of programs breaching Nunn-McCurdy.25 According to DOD, 11 programs
that did not have a Nunn-McCurdy breach prior to the new FY2006 requirements were re-
categorized as having significant breaches as a result of the legislation’s new original baseline.26
Congress also believed that the FY2006 changes to Nunn-McCurdy would help “encourage the
Department of Defense both to establish more realistic and achievable cost and performance
estimates at the outset of MDAPs and to more aggressively manage MDAPs to avoid undesirable
cost growth on these programs.”27
Another significant change occurred in the FY2009 Weapon Systems Acquisition Reform (P.L.
111-23), when Congress enacted a requirement that programs with critical breaches be presumed
terminated unless the Secretary of Defense certifies the program. For programs that are certified,
DOD must (1) revoke the prior milestone approval, (2) restructure the program, and (3) provide
Congress a written explanation of the root-cause of the cost growth. These changes were fueled in
part over congressional concerns that programs with chronic cost growth and schedule delays
were not being terminated and Congress was not being provided specific information on what
was causing the cost growth. For an expanded discussion on the legislative evolution of Nunn-
McCurdy, see Appendix.

25 For an analysis of how some DOD MDAPs were frequently rebaselined, thereby avoiding the Nunn-McCurdy
requirements, see U.S. Government Accountability Office, Defense Acquisitions: Information for Congress on
Performance on Major Programs Can Be More Complete, Timely, and Accessible, GAO-05-182, March 28, 2005.
26Based on documentation provided by DOD. See also : Larry Axtell and Wendell Irby, “APB, SAR, and Nunn-
McCurdy Status,” Damir Conference, October 30, 2007, p. 29, http://www.acq.osd.mil/damir/ConferenceDocs/
Axtell.ppt.
27 U.S. Congress, House of Representatives, National Defense Authorization Act for Fiscal Year 2006, Conference
Report to Accompany H.R. 1815, 109th Cong., 1st sess., Dec. 18, 2005, H.Rept. 109-360 (Washington: GPO, 2005), p.
755.
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Figure 4. Evolution of the Nunn-McCurdy Act
1982 - Present

Source: CRS analysis of Legislative History. See Appendix for ful citations.
Notes:
1 Baseline SAR—First SAR containing program information or comprehensive annual SAR for prior fiscal year.
2 PUC—total procurement funds appropriated in a fiscal year minus advanced procurement appropriated for
future years, plus advanced procurement appropriated in prior years for use in the current fiscal year divided by
number of units procured with such funds in the same fiscal year; PAUC—total cost of development,
procurement, and construction divided by the number of units.
3 Major Contract—each prime contract and the six largest associate contracts measured by dol ar value.
4 PUC (1984 definition)—total funds programmed to be available for obligation for procurement for a fiscal year,
minus funds programmed to be available in current fiscal year for obligation for advanced procurement in future
years, plus advanced procurement appropriated in prior years for use in the current fiscal year, divided by
number of units procured with such funds in the same fiscal year.
5 P.L. 99-500 and P.L. 99-591 Sec. 101(c).
6 If DOD subsequently submits the SAR report, prohibition ends 30 days after continuous session of Congress.
7 Baseline Estimate—DOD required to develop a baseline description for MDAPs that includes a cost estimate.
The description must be prepared before major milestones.
8 PUC (1994 definition)—total funds programmed to be available for obligation for procurement for the program
divided by number of units procured.
The timeline for when DOD must notify Congress of a breach and certify a program has changed
since the Nunn-McCurdy Act was first enacted in 1983. In 1983, no more than 97 days could
elapse from the end of the quarter in which a critical breach occurred to when the Secretary of
Defense certified the program to Congress. Today, it could take as long as 195 days (6.5 months),
or 240 days in a quarter when the SAR is filed following the submission of the President’s budget
(see Figure 5).
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Figure 5. Evolution of Nunn-McCurdy Reporting Timelines
Comparison of FY1983 requirements vs. current requirements

Source: CRS analysis of 10 USC § 2433.
Notes:
(1) Assumes that a Nunn-McCurdy breach does not occur within the first 30 days of the quarter, when the prior
quarter’s unit cost report has not yet been filed.
(2) A SAR must be submitted within 45 days from the end of a quarter except for the first fiscal quarter, when
the SAR must be submitted within 60 days from the time when the President submits the budget to Congress
(10 U.S.C. § 2432(f)). The President’s budget is general y submitted the fist week of February. For purposes of
this figure, it is assumed that the President’s budget is submitted 30 days after the end of the quarter.
Effectiveness of the Nunn-McCurdy Act
Many MDAPs continue to suffer from the cost growth that led to the passage of the Nunn-
McCurdy Act.28 GAO reported that 42% of programs in the FY2008 portfolio experienced

28 According to a RAND study that looked at a 50 year time horizon, annual cost escalation rates for amphibious ships,
(continued...)
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acquisition unit cost growth of at least 25%, compared with 37% of programs experiencing such
cost growth in the FY2000 portfolio.29 GAO also reported that the total acquisition costs for
MDAPs in the FY2007 portfolio increased 25% from first cost estimates, compared with a 6%
increase in 2000.30 In addition, the percentage of programs with a 25% or more increase in PAUC
has increased from 37% in FY2000 to 42% in FY2008.31
Nunn-McCurdy as a Reporting Mechanism
Some analysts believe that Nunn-McCurdy has been effective as a reporting mechanism for
informing Congress of cost overruns in Major Defense Acquisition Programs. As discussed
above, Congress is (1) notified when the cost of a program increases beyond established
thresholds and (2) provided with additional information on such programs (i.e., Selected
Acquisition Reports). As a result of the Nunn-McCurdy process, Congress has substantial
visibility into the cost performance of the acquisition stage of MDAPs. According to DOD, from
early 2001 through April 2009, 21 programs had critical Nunn-McCurdy thresholds.32 In the
December 2009 reporting period, seven programs had Nunn-McCurdy breaches.33
Other analysts suggest that Nunn-McCurdy is not a sufficiently comprehensive reporting
mechanism because program managers can sometimes take steps to avoid a Nunn-McCurdy
breach when Congress might want to be notified of cost growth. For example, according to a
media report, the Marine Corps AH-1Z attack helicopter program reduced the number of
helicopters it planned to buy in order to lower the overall program cost and avoid a breach.34 The
program manager reportedly stated that the program reduced its planned purchase from 105 to 58
helicopters “to avoid a critical Nunn-McCurdy breach.”35 Reducing the planned purchase to avoid
reporting cost growth to Congress could deprive Congress of information that it needs to make
budgetary decisions. Some analysts point out that while Nunn-McCurdy might be effective in
notifying Congress of incurred cost growth, it does not provide Congress insight into why the

(...continued)
surface combatants, attack submarines, and nuclear aircraft carriers have ranged from 7% to 11%, and the annual cost
escalation rate for U.S. fighter aircraft was about 10%. See Mark V. Arena, Irv Blickstein, and Obaid Younossi, et al.,
Why Has the Cost of Navy Ships Risen? A Macroscopic Examination of the Trends in U.S. Naval Ship Costs Over the
Past Several Decades, RAND Corporation, 2006, p. xiv. Another analysis found that “cost overruns are increasing by
an average of 1.86 percentage points per year. If this trend is allowed to continue, the analysis suggests that in 10 years
the average overrun will exceed 56 percent....” See Deloitte Consulting LLP, Can We Afford Our Own Future? Why
A&D Programs are Late and Over-budget—and What Can Be Done to Fix the Problem, 2008, p. 2.
29 Government Accountability Office. Defense Acquisitions: Assessments of Selected Weapons Programs. GAO-09-
326SP. March 30, 2009. In comparing cost growth of different fiscal years, the GAO assessments quantify total
portfolio cost growth in a given year and do not adjust data to account for changes in the mix of acquisition programs
from year to year.
30 FY2000 figures, see Government Accountability Office. Defense Acquisitions: Assessments of Selected Weapons
Programs. GAO-08-467SP. March 31, 2008. Highlights Page. For FY2008 figures, see Government Accountability
Office. Defense Acquisitions: Assessments of Selected Weapons Programs. GAO-09-326SP. March 30, 2009.
Highlights Page.
31 Ibid.
32 Based on documentation provided by DOD.
33 Department of Defense, Summary Explanation of Significant SAR Cost Changes, Nunn-McCurdy Breaches, as of
December 31, 2009.
34 Dan Taylor, “New-build AH-1Z Helos Cut in Half to Avoid Nunn-McCurdy Breach,” Inside the Navy, October 27,
2008, Vol. 21, No. 43.
35 Ibid.
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cost growth occurred. To help address this issue, Congress amended the Nunn-McCurdy Act in
2009 to require DOD to provide a root-cause analysis report whenever a program that has a
critical breach is certified.
Programs That Have Administrative Nunn-McCurdy Breaches
Some analysts argue that the Nunn-McCurdy Act does not distinguish between programs that
have a breach because of poor program management (e.g., unrealistic cost estimates, changes to
requirements) and programs that are performing well but experience a breach for administrative
reasons, such as a change in the number of units being acquired.36 These analysts argue that
without such a distinction, programs that have an administrative breach can be unduly penalized,
potentially costing DOD millions of dollars and adding unnecessary delay. Other analysts argue
that the real cause of many of these administrative breaches, such as cutting the number of units,
is earlier poor program management. These analysts argue that allowing some programs to avoid
Nunn-McCurdy reporting requirements for administrative reasons could prevent Congress from
making its own determination as to the reason for a program’s cost growth.
Well managed programs can have a Nunn-McCurdy breach for reasons that are not related to
program management, such as a strategic change in the needs of the military. For example, in an
effort to provide additional airlift capability to commanders in Iraq and Afghanistan, DOD
earmarked an additional $2.5 billion through FY2015 to buy 56 additional new Apache
helicopters. These funds were assigned to the Apache AD-64D Block III program.37 Adding the
additional money to acquire new helicopters caused a Nunn-McCurdy unit cost breach because
the new helicopters are substantially more expensive than the other helicopters already in the
program. As one DOD official reportedly explained, “these new-build aircraft, approximately
three times the cost of a remanufactured aircraft, have skewed the average unit cost to the point
that we’ve encountered a breach.”38 As a result, according to DOD the program was required to
go through the Nunn-McCurdy process even though the program itself was performing well.
Cutting the number of units can also trigger a breach even when the cost of buying a single unit
actually decreases. For example, DOD originally planned on buying 24,000 Small Diameter
Bomb Increment I units but cut the order almost in half to 12,600. According to DOD officials,
the reduction was based on “updated inventory assessment and usage projection for this weapon.”
The actual per unit cost of buying each small diameter bomb decreased from $24,000 to $23,000.
However, in calculating program acquisition unit costs, Nunn-McCurdy includes fixed
development, production, and military construction costs that have already been committed to the
program. Cutting the number of units means that these sunk costs are amortized, or spread out,

36 The term administrative breach is not found in law. For purposes of this report, the term administrative breach is used
to clarify the argument that some analysts make in differentiating between programs that have cost growth due to poor
program management and programs that have cost growth due to other factors. DOD uses the term “technical” breach
to describe these programs.
37 The Apache AD-64D Block III program, which began in 2006, aims to upgrade over 600 Apaches with the Longbow
radar.
38 “New Apache Orders ‘Skew” Unit Cost, Cause ‘Critical’ Nunn-McCurdy Breach,” Inside the Pentagon, April 1,
2010. See also “Apache Block III On/Ahead of Schedule, Officials Say,” Helicopter News, vol. 36, no. 9 (April 27,
2010).
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over fewer units, which increases the program acquisition unit cost by 17%, triggering a
significant breach.39
Because programs that suffer critical administrative breaches are required to adhere to all of the
statutory requirements of Nunn-McCurdy (including performing a root-cause analysis,
restructuring the program, and having its most recent milestone approval revoked), some analysts
argue that Nunn-McCurdy requirements should be waived for programs with administrative
breaches.
Other analysts argue that exceptions to the Nunn-McCurdy Act should not be made for
administrative breaches. These analysts argue the real cause of many of these administrative
breaches, such as cutting the number of units, is a result of earlier poor program management and
that exempting such programs from reporting requirements could mask poor program
performance. These analysts also argue that administrative reasons could be invoked to hide other
cost issues. These analysts could point to the Apache AD-64D Block III program, arguing that
even though the declared critical breach was a result of adding new helicopter purchases to the
existing program, according to DOD’s Cost Assessment and Program Evaluation Office (CAPE),
even if all the new helicopters are excluded from a cost growth analysis, the program would still
have had a critical Nunn-McCurdy Breach.40 Analysts could further argue that the cost and
schedule delay associated with the Nunn-McCurdy requirements is not onerous when considered
within the context of expensive weapon acquisition programs.
Nunn-McCurdy Does Not Require Reporting on Operations & Support Costs
Some analysts suggest that Nunn-McCurdy is not a sufficiently comprehensive reporting
mechanism because it does not apply to all elements of a weapon system’s life-cycle costs, such
as operations, support, or disposal.41 Analysts have estimated that operations and support (O&S)
costs account for two-thirds or more of a system’s total life-cycle cost.42 Unbudgeted cost growth
in O&S costs can reduce the funds available to acquire new or upgrade existing weapon systems.
Many of the decisions that determine O&S costs are made early in the acquisition process, prior
to significant O&S costs being incurred. Because O&S costs are not incurred until much later in
the life-cycle, these costs may not always receive the same attention as acquisition costs at
Milestone B (the engineering and manufacturing development and demonstration phase) and
Milestone C (the production and deployment phase). Decisions made at these key decision points

39 In this case, Ashton Carter downgraded the program, thereby exempting it from Nunn-McCurdy. See Letter form
Ashton Carter, Under Secretary of Defense for Acquisition, Technology & Logistics, to Joseph Biden, President of the
Senate, March 11, 2010. See also, “Small Diameter Bomb Program Dodges ‘Significant’ Nunn-McCurdy Breach.”
Inside the Pentagon, March 25, 2010.
40 According to a CAPE analysis, for remanufactured aircraft alone, program acquisition unit costs would have
increased 43% from the original August 2006 APB estimate and 37% from the current APB estimate set in June 2007.
The result of such cost growth would be a significant breach based on the original baseline and a critical breach based
on the current baseline. Data provided by the CAPE to CRS, June 9, 2010.
41 Operations and support costs are funded from Military Personnel, Operations and Maintenance, Procurement, and
occasionally RDT&E appropriations.
42 Walt Cooper, O&S Trends and Current Issues, Office of the Secretary of Defense, Cost Analysis Improvement
Group, Washington, D.C., May 2007. See also, Office of the Under Secretary of Defense For Acquisition, Technology,
and Logistics, Report of the Defense Science Board on Developmental Test & Evaluation, Washington, D.C., May
2008, p. 22.
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could result in lower acquisition costs at the expense of higher long term O&S costs—and
ultimately higher overall life-cycle costs.
Without good cost data on O&S costs, DOD and Congress may not have important information
upon which to make budget decisions. While gathering O&S data may not help manage costs for
deployed systems, the data can be used to gauge the reliability of DOD O&S cost estimates for
future programs. Such data can also give Congress insight into the impact of trade-offs that are
being made during the acquisition process that affect both short-term and long-term cost.
Nunn-McCurdy as a Mechanism for Controlling Cost Growth
Most analysts argue that the Nunn-McCurdy Act has not succeeded in controlling cost growth in
MDAPs. Some of these analysts have called for strengthening Nunn-McCurdy as a vehicle to
manage MDAPs, with one analyst reportedly arguing for a “Nunn-McCurdy on steroids that
really punishes programs that have failed.”43
Others have argued that while Nunn-McCurdy is a good reporting mechanism, it is not set up to
be an effective program management tool. Under Secretary of Defense Ashton Carter reportedly
stated that DOD needs a mechanism that is similar to Nunn-McCurdy but that comes into effect
before a program has already experienced significant cost growth, a mechanism “that gives the
managerial tip-off earlier than Nunn-McCurdy.”44 Setting up such mechanisms, might get to the
root causes of cost growth and improve program management more effectively than Nunn-
McCurdy.
Have Critical Nunn-McCurdy Breaches Led to Program Cancellations?
Generally, a Nunn-McCurdy breach does not result in a program being cancelled. However, there
have been some exceptions. In December 2001, the Navy Area Defense (NAD) program was
cancelled.45 According to DOD, “the cancellation came, in part, as a result of a Nunn-McCurdy
Selected Acquisition Report breach of the existing program.”46 This was the first acquisition
program that analysts and officials recalled having been cancelled as a result of a Nunn-McCurdy
breach.47
Most recently, in July 2008, Congress was notified that the Armed Reconnaissance Helicopter
(ARH) program had suffered a critical Nunn-McCurdy breach. Shortly thereafter, John Young,
then Under Secretary of Defense for Acquisition, Technology, and Logistics, in consultation with
senior Army officials, cancelled the ARH program. Secretary of the Army Pete Geren justified the
cancellation, stating that “The cost and schedule that were the focus of the decision to award the
contract to Bell Helicopter are no longer valid. We have a duty to the Army and the taxpayer to

43 Christopher J. Castelli, “DEFENSE: Acquisition Shop Prepares for Shift in Administrations,” Inside Missile Defense,
November 5, 2008, Vol. 14, No. 23.
44 Marina Malenic, “Pentagon Pledges Support for Bomber Industrial Base,” Defense Daily, March 30, 2010, p. 1.
45 NAD was intended to track, detect, and engage tactical ballistic missiles in the terminal phase of flight using the
AEGIS Weapon System platform.
46 “Navy Area Missile Defense Program Cancelled,” Department of Defense News Release No. 637-01, December 14,
2001.
47 Archived version of CRS Report RL33745, Navy Aegis Ballistic Missile Defense (BMD) Program: Background and
Issues for Congress, by Ronald O'Rourke.
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move ahead with an alternative course of action to meet this critical capability for our soldiers at
the best price and as soon as possible.”48
In the Weapon Systems Acquisition Reform Act of 2009, Congress amended the Nunn-McCurdy
Act, stating that there is a “presumption of termination” for programs that experience a critical
breach.49 According to the statute, “the Secretary shall terminate the program unless the
Secretary” submits a certification to Congress.
Case Study: Unrealistic Cost Estimates as a Root Cause of Cost Growth that
Leads to Nunn-McCurdy Breaches
While there are a number of factors that lead to cost growth in MDAPs, for some 30 years,
various DOD officials, analysts, and industry officials have argued that a primary cause of cost
growth is unrealistically low cost estimates at the inception of programs.50 Unrealistically
optimistic cost estimates can make future cost growth almost inevitable, setting the stage for
future Nunn-McCurdy breaches.51 In 2006, Gary Payton, Air Force Deputy Under Secretary for
Space Programs, made a direct link between unrealistically optimistic estimates and Nunn-
McCurdy breaches. In a presentation entitled Nunn-McCurdys Aren’t Fun, he argued that
“Unbridled optimism regarding cost, schedule, performance, and risks is a recipe for failure.”52
As set forth in the presentation,
Understated costs leads to lower budget → leads to industry bidding price less than budget
→ leads to lower award price → leads to government repeatedly changing scope, schedule,
budget profile → leads to five to ten years later recognition “real” cost multiple of bid →
leads to Nunn-McCurdy Breach.
Given the connection between unrealistic cost estimates and Nunn-McCurdy breaches, one
question that can be asked is whether Nunn-McCurdy can be used as a mechanism for forcing
more realistic cost estimates.

48 Department of Defense, “DoD Announces Non-Certification Of Armed Reconnaissance Helicopter Program,” press
release, October 16, 2008, http://www.defenselink.mil/releases/release.aspx?releaseid=12288.
49 P.L. 111-23, Sec. 206.
50 Poor cost estimating was a recurring theme during the McCurdy hearings. For example, then Director of the Program
Analysis and Evaluation Office, Maj. Gen. Patrick M. Roddy stated that there are three fundamental cost growth
drivers: inflation, poor cost estimating, and scheduling. GAO stated “Cost estimating is probably the key ingredient in
reducing cost growth.... As far back as the early 1970’s, GAO has reported that both planning and development cost
estimates on Federal acquisitions in many cases are quite optimistic ... unrealistically low contractor and agency
estimates on the front end aggravates cost growth. What is needed is more candor up front in presenting programs to
the Congress and not promising more than can be realistically delivered.” Former Deputy Secretary of Defense Frank
C. Carlucci, in a written statement to Congress, stated that “early cost, schedule, and performance estimates are overly
optimistic.” See House Armed Services Hearings, 97th Cong., 1st Sess., Volume 11, 1981. Op. Cit. P. 74, 1009, and
1085, respectively. Michael Gilmore, then of the Congressional Budget Office, stated when discussing overly
optimistic cost estimates, that “no program manager in the world is going to be able to manage the program in such a
way that the costs will not grow... it’s not really so much cost growth as cost realism setting in.” See U.S. Congress,
House Committee on the Budget, Long-Term Sustainability of Current Defense Plans, 111th Cong., 1st sess., February
4, 2009.
51 Michael Gilmore, Long-Term Sustainability of Current Defense Plans.
52 See http://www.dtic.mil/ndia/2006systems/Wednesday/payton.pdf, p. 10. Last visited December 23, 2008.
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Applying Nunn-McCurdy to Other Agencies
Because of the perceived effectiveness of Nunn-McCurdy, there have been proposals to apply the
Nunn-McCurdy approach to earlier phases in the acquisition process or to other types of
acquisitions.53 While most of these efforts have failed,54 the Intelligence Authorization Act for
FY2010 (P.L. 111-259) includes provisions that are substantially similar to the Nunn-McCurdy
Act. Sections 323 (Reports on the Acquisition of Major Systems) and 324 (Critical Cost Growth
in Major Systems) outline the reporting requirements for programs whose that total acquisition
cost experience cost growth of 15% or 25% above the baseline estimate. According to a Senate
report, “Section 324 is intended to mirror the Nunn-McCurdy provision in Title 10 of the United
States Code that applies to major defense acquisition programs.”55
Issues for Congress
Nunn-McCurdy as a Reporting and Management Tool
One issue for Congress is to determine whether Nunn-McCurdy should be used as
1. only a reporting mechanism to measure the extent to which DOD is effectively
managing its weapon system acquisitions or
2. both a reporting and management tool.
Congress appears to view Nunn-McCurdy as both a reporting and a management tool. To enhance
the effectiveness of the act as a reporting tool, Congress has amended it over the last 25 years to
increase visibility into MDAP cost growth and improve the reliability of the data reported. For
example, as discussed above, in the FY2006 National Defense Authorization Act, Congress added
an additional threshold against which to measure cost growth to improve visibility into the cost
growth experienced by a program from its inception.
At the same time, Congress has taken actions which imply that Nunn-McCurdy is also a
management tool. For example, in the Weapon System Acquisition Reform Act of 2009, Congress
mandated that a program that has a critical breach must be restructured to address the root causes
of cost growth and have its most recent milestone approval revoked.
Clarifying what role Nunn-McCurdy should play in helping Congress exercise its oversight role
could help Congress determine how best to amend the act in the future.

53 As discussed in the next section, Ashton Carter reportedly called for a mechanism similar to Nunn-McCurdy to be
applied earlier in the acquisition lifecycle of an MDAP.
54 In 2008, the Information Technology Investment Oversight Enhancement and Waste Prevention Act of 2008 (S.
3384) sought to apply a Nunn-McCurdy-type approach to information technology acquisitions. The bill included
notifications to Congress if an information technology program breached 20 or 40 percent cost thresholds. According to
media reports, industry representatives supported this effort. See: Staff article, " ITAA Lining Up Behind Nunn-
McCurdy Notices Over IT," Aerospace Daily & Defense Report, September 22, 2008, Volume 227, Issue 58.
55 U.S. Congress, Senate Select Committee on Intelligence, Intelligence Authorization Act for Fiscal Year 2010, To
accompany S. 1494, 111th Cong., 1st sess., July 22, 2009, S.Rept. 111-55 (Washington: GPO, 2009), p. Sec. 324.
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Shortening the Nunn-McCurdy Timeline
Some analysts have argued that under the current statute, too much time elapses from when a
critical breach is first identified to when DOD certifies the program to Congress. According to
these analysts, the Nunn-McCurdy timelines often span two budget cycles, and in some cases can
exceed 300 days from when a program manager accurately suspects that a critical Nunn-
McCurdy breach has taken place. One option for Congress could be to consider shortening some
of the Nunn-McCurdy timeframes. Condensing the timeframes could give Congress more of an
opportunity to consider budgeting options for troubled programs.
Some analysts have gone further, arguing that the time it takes to report a breach to Congress
could be shortened by notifying Congress when a Unit Cost Report or when a Contract
Performance Report (which is used in Earned Value Management) indicates that a program has
breached a Nunn-McCurdy threshold.56
However, according to DOD, “The timing of breach determinations is one of the most difficult
parts of Nunn-McCurdy.” Within the department, there is a great deal of discussion and
deliberation at all levels prior to the formal breach determination and notification to Congress.
Initial breach indications from the contractor or program manager could be premature. For
example, even if the program manager has reasonable cause to believe there is a Nunn-McCurdy
breach, senior leadership could initiate cost reductions or descope the program.57 Using the Unit
Cost Reports or Contractor Performance Reports to determine a Nunn-McCurdy breach could
deprive DOD of the opportunity to manage programs and take steps to rein in cost growth.
Managing Administrative Breaches
Some analysts argue that requiring programs with administrative breaches to go through all of the
Nunn-McCurdy requirements adds undue cost and time to programs that are working well. These
analysts could argue that Nunn-McCurdy should be amended to allow programs that experience
an administrative critical breach to avoid some of the statutory requirements, such as having to
restructure the program, revoke the prior milestone approval, and conduct a root-cause analysis.
Other analysts argue that the real cause of many of these administrative breaches, such as cutting
the number of units, is earlier poor program management and that only through adhering to all of
the Nunn-McCurdy requirements can Congress determine for itself the true cause of cost growth.
These analysts could further argue that the cost and schedule delay associated with the Nunn-
McCurdy requirements is not too onerous when considered within the context of expensive
weapon acquisition programs.
One option for Congress could be to authorize the Secretary of Defense to categorize a breach as
an administrative breach and submit to Congress an explanation as to why the program should be
categorized as an administrative breach. For programs that are designated as administrative

56 A Contractor Performance Report (CPR) is intended to provide “timely, reliable summary-level data with which to
assess current and projected contract performance.” A CPR is a management tool whose value is in its “ability to reflect
current contract status and reasonably project future program performance.” See OUSD(AT&L)ARA/AM(SO), Date
Item Description: Contract Performance Report (CPR), DI-MGMT-81466A, March 30, 2005, p. 1,
http://www.acq.osd.mil/pm/currentpolicy/cpr_cfsr/CPR%20Final%203-30-05.pdf.
57 Based on written answers provided to CRS by DOD on April 1, 2009.
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breaches, the statutory requirements for a critical breach could be automatically waived unless
one of the Armed Services Committees requests DOD to adhere to all of the statutory
requirements.
Another option for Congress could be to authorize the statutory requirements for a critical breach
to be waived only by consent of the House and Senate Armed Services Committees.58 Such an
approach would allow Congress to waive the statutory requirements only in those instances where
it agrees that the cost growth was not caused by poor program management.
Applying Nunn-McCurdy-Type Reporting Requirements to O&S
Costs
Given the costs associated with operations and support, Congress may want to consider applying
Nunn-McCurdy-type reporting requirements to O&S costs. Applying a reporting requirement to
O&S costs might help Congress set its budgetary priorities, as well as gather and track cost data
for future analysis. Another option for Congress could be to require the Cost Assessment and
Program Evaluation office to include in its annual report to Congress a comparison of original
O&S cost estimates to current actual costs (adjusted for inflation) for ongoing programs. The
extent to which these options may be viable depends on the reliability of the data available.

58 A similar approach was used in the original Nunn-McCurdy Act, which allowed the funding prohibition to be waived
by consent of the House and Senate Armed Services Committees.

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Appendix. Legislative History
On September 8, 1982, President Ronald Reagan signed into law the Department of Defense
Authorization Act for Fiscal Year 1983 (P.L. 97-252), which included what has come to be known
as the Nunn-McCurdy Act.59 This Appendix traces the most significant change to the Nunn-
McCurdy Act and the legislative intent behind these changes.
Department of Defense Authorization Act, 1982 (P.L. 97-86)
Antecedents of the Nunn-McCurdy Act
On May 14, 1981, Senator Sam Nunn offered a floor amendment to the Department of Defense
Authorization Act of 1982 requiring DOD to notify Congress if the cost growth of an MDAP
(referred to in the amendment as a major defense system) exceeded certain thresholds.60 The
purpose of the measure was to “help control the increasing costs of major defense systems.”61 In
arguing for the amendment, Senator Nunn raised a number of issues, including the need to ensure
that DOD’s “spending priorities are being established within the context of a coherent national
strategy.” He argued that “the unit costs of major defense weapon systems are increasing at rates
far beyond the rate of inflation, adding billions to the budget just to buy the same quantities of
weapons that were planned before.”62 Senator Nunn believed that the amendment “holds the
appropriate Pentagon officials and defense contractors publicly accountable and responsible for
managing costs.”63 But ultimately, the amendment was intended to inform Congress whether
DOD’s acquisition process is working effectively. In arguing in support of the amendment,
Senator Nunn concluded
If the system works, if the cost estimates and the inflation estimates are anywhere near
accurate, giving a 15-percent margin on R. & D., a 10-percent margin on inflation in the
procurement accounts, then the reports will not be necessary. If the system does not work,
then, of course, we should know and we should be alerted.
Despite initial opposition by Senator John Tower,64 then chairman of the Senate Armed Services
Committee, the amendment passed by a vote of 94-0 and was included in the Department of
Defense Authorization Act of 1982.65
As shown in Table A-1, the thresholds set forth in the 1982 act were similar to the significant and
critical breach levels that exist in the Nunn-McCurdy Act today (the original statute did not use
the terms significant or critical breach; these terms are used below for comparison with the

59 10 U.S.C. § 2433.
60 Congressional Record May 14th, 1981 pg. S5010.
61 Ibid.
62 Congressional Record May 14th, 1981 pg. S5011.
63 Congressional Record May 14th, 1981 pg. S5011.
64 Sen. Tower opposed the amendment, in part because he believed that “in some respects it [the threshold] is closing
the gate after the horse has galloped off into the boondocks.” However, he acknowledge “this amendment is going to be
adopted, because it is like motherhood. You cannot vote against motherhood or apple pie or all these other fine things.”
See Congressional Record May 14th, 1981 pg. S5012.
65 P.L. 97-86 sec. 917; 95 Stat. 1129.
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current statute). According to the act, a significant breach occurred when the Program Acquisition
Unit Cost (PAUC—total cost of development, procurement, and construction divided by the
number of units) or the Procurement Unit Cost (PUC—total procurement funds appropriated in a
fiscal year divided by the number of end units to be procured with such funds in the same fiscal
year) for an MDAP increased by more than 15%. A “critical” breach occurs when the PAUC or
PUC increased by more than 25%. Inflation costs were included in the cost growth analysis.
Table A-1. FY1982 Authorization Act Breach Thresholds
Significant
Breach
Critical
Breach
UAC or PAUC
> 15%
>25%



Source: P.L. 97-86 sec. 917.
Under the act, a program manager was required to submit a quarterly unit cost reports to the
appropriate secretary within seven days of the end of the quarter. However if a program manager
had “reasonable cause” to believe that a program had a breach, the program manager was
required to immediately submit a report to the service secretary concerned. If the secretary
concerned determined that a breach had occurred, he had to “promptly” notify Congress of the
breach in writing and submit a written report to Congress within 30 days that included
1. an explanation of the reasons for the cost increase,
2. the names of the military and civilian personnel responsible for program
management and cost control,
3. action taken and proposed to control future cost increases,
4. any changes in performance or schedule that contributed to cost growth,
5. the identities of the principal contractors, and
6. an index of all testimony and documents previously provided to Congress on the
program’s estimated costs.
If the secretary concerned determined that a critical breach had occurred, in addition to the above
requirements, the secretary had to certify to Congress in writing within 60 days of the
determination that
1. the program was essential to national security,
2. there was no viable cost effective alternative to the program,
3. the new cost estimate was reasonable, and
4. the management structure was sufficient to control additional cost growth.
If the secretary did not submit the 30 or 60 day reports in a timely manner, than no additional
funds were allowed to be obligated for the program. The statute only applied to programs with
cost overruns that occurred in FY1982.
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Department of Defense Authorization Act, 1983 (P.L. 97-86)
Passage of the Nunn-McCurdy Act
In 1981, Representative Dave McCurdy, then chairman of the House Armed Services Committee
Special Panel on Defense Procurement Procedures, held a series of hearings examining weapon
system cost growth.66 According to Representative McCurdy, the intent of the panel was “to
identify and recommend a method which will allow the Congress to more effectively review and
evaluate cost categories for major weapons systems.”67
Subsequently, Senator Nunn and Representative McCurdy led an effort to permanently enact the
reporting requirements established in the FY1982 Defense Authorization Act. In the Department
of Defense Authorization Act of 1983 (96 Stat. 718), Congress passed a modified version of the
FY1982 reporting requirements. On September 8, 1982, President Ronald Reagan signed into law
the Department of Defense Authorization Act, 1983 (P.L. 97-252), which included what has come
to be known as the Nunn-McCurdy Act.
Statutory Structure of the FY1983 Nunn-McCurdy Act
The Nunn-McCurdy Act made a number of modification to the reporting requirements that were
included in the FY1982 act.
Definition of Program Acquisition Unit Cost and Procurement Unit Cost
The Nunn-McCurdy Act changed the definition of PUC to mean (changes in italics) total
procurement funds appropriated in a fiscal year minus advanced procurement funds appropriated
that year for use in future fiscal years, plus advanced procurement funds appropriated in prior
years for use in the current fiscal year divided by the number of end units to be procured with
such funds in the same fiscal year.68 PAUC continued to be defined as the total cost of
development, procurement, and construction divided by the number of units.
Thresholds
The Nunn-McCurdy Act established the baseline for measuring cost growth as the “baseline
selected acquisition report,” defined as the Selected Acquisition Report in which information on
the program is first included or the comprehensive annual Selected Acquisition Report for the
prior fiscal year, whichever is later.69
The thresholds remained unchanged from the original Nunn Amendment of the FY1982
authorization act (the terms “significant” and “critical” breach were not included in the statute but

66 U.S. Congress, House Armed Services Committee, Special Panel on Defense Procurement Procedures, House Armed
Services Hearings, Vol. 11, 97th Cong., 1st sess. (Washington: GPO, 1981), p. 1.
67 U.S. Congress, House Armed Services Committee, Special Panel on Defense Procurement Procedures, House Armed
Services Hearings, Vol. 11, 97th Cong., 1st sess. (Washington: GPO, 1981), p. 1.
68 P.L. 97-252 sec. 139a; 96 Stat. 740.
69 P.L. 97-252 sec. 139b(a)(2).
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are used below for comparison with the current statute). Unlike the current Nunn-McCurdy
statute, the original act included inflation in determining if a breach had occurred.70
Table A-2. FY1983 Authorization Act Breach Thresholds
Significant
Breach
Critical
Breach
UAC or PAUC
> 15%
>25%



Source: 10 U.S.C. § 139b(d)(1),(2), 1982.
Reporting
Under the act, a program manager was required to submit a written quarterly unit cost reports to
the appropriate secretary within seven days of the end of the quarter.71 However if a program
manager had “reasonable cause” to believe that a program had a breach, the program manager
was required to immediately submit a report to the secretary concerned.72 The program manager
was also required to submit a unit cost report if a cost or schedule variance of a major contract
under the program resulted in more than 15% cost growth compared to the date the contract was
signed.73 After a breach occurred, if the program subsequently experienced additional cost growth
of more than 5% in PUC or APUC, or additional cost growth of a major contract of at least 5%
(due to cost or schedule variance), then the program manager was required to submit an
additional unit cost report.74
The FY1983 NDAA changed some of the information required for the 30-day report to Congress,
removing the requirement to provide an index of all testimony and documents previously
provided to Congress on the program’s estimated costs and adding a number of other
requirements, including
1. cost and schedule variance information,
2. changes to the performance or schedule milestones of the program that have
contributed to cost growth, and
3. prior cost estimating information.
Timelines
The service secretary was required to review the unit cost reports and determine whether there
was a breach. If the secretary determined that a breach occurred, he was required to notify
Congress of the breach in writing and submit a written report to Congress within 30 days of the

70 P.L. 97-252 sec. 139b(f); 96 Stat. 744.
71 P.L. 97-252 sec. 139b(b); 96 Stat. 742.
72 P.L. 97-252 sec. 139b(c)(1); 96 Stat. 742.
73 Defined as the prime contract or one of the six largest associate contracts (including for government furnished
equipment), by dollar value. P.L. 97-252 sec. 139a(a)(4).
74 P.L. 97-252 sec. 139b(c)(2); 96 Stat. 742, 743.
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unit cost report being submitted to him (the FY1982 act required the secretary to “promptly”
notify Congress of the determination).75
If the secretary did not submit the 30- or 60-day report in a timely manner, then additional funds
could not be obligated for the program. The funding prohibition could be waived by consent of
the House and Senate Armed Services Committees.
FY1985 Department of Defense Authorization Act (P.L. 98-525)
Definition of Procurement Unit Cost and Major Contract
The FY1985 Department of Defense Authorization Act changed the meaning of procurement unit
cost to mean total funds programmed to be available for obligation for procurement for a fiscal
year, minus funds programmed to be available in the current fiscal year for obligation for
advanced procurement in future years, plus advanced procurement appropriated in prior years for
use in the current fiscal, divided by number of units procured with such funds in the same fiscal
year.76
The authorization act also changed the definition of a major contract (changes in italics) to mean
each prime contract and each of the six largest associate contracts (including for government-
furnished equipment) that is in excess of $2,000,000.77 In 1986 the threshold was changed to $40
million.78
Reporting Requirements
Prior to the FY1985 Authorization Act, SARs did not need to include a status report for an MDAP
for the second, third, and fourth fiscal quarters if such a report was included in a previous SAR
for that fiscal year and there were no changes in program cost, performance, or schedule. The
FY1985 act changed the standard, stating that a SAR did not need to include a status report if
there was less than a 5% change in the total program cost and less than a three-month delay in the
milestone schedule as shown in a previous SAR for the same fiscal year.79
The act also added that reporting requirements under Nunn-McCurdy do not apply to a program
that has delivered 90% of the end units or expended 90% of planned expenditures.80
The baseline against which to measure a breach was amended slightly (changes in italics) to be
the baseline SAR submitted in the previous fiscal year, or if there was a breach in the previous
fiscal year, the unit cost report that reported the breach.81

75 P.L. 97-252 sec. 139b(d)(2); 96 Stat. 743.
76 P.L. 98-525 sec 1242 (a)(1); 98 Stat. 2606, 2607.
77 P.L. 98-525 sec 1242 (a)(2); 98 Stat. 2607.
78 P.L. 99-500 and P.L. 99-591 Sec. 101(c).
79 P.L. 98-525 sec 1242 (a)(3); 98 Stat. 2607.
80 P.L. 98-525 sec 1242 (a)(5); 98 Stat. 2607.
81 P.L. 98-525 sec 1242 (b)(1); 98 Stat. 2607.
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Timeline Changes
The FY1985 act changed the timeline for requiring the submission of a SAR to Congress.
Previously, SARs had to be submitted to Congress within 30 days of when the President
submitted the budget to Congress and within 30 days after the end of the quarter for all other
quarters. The FY1985 extended the SAR submission date to within 60 days after the President
sends the budget to Congress and 45 after the end of all other quarters.82 The act also changed the
deadline by which a program manager must submit a unit for the first quarter of a fiscal year from
within seven days of the end of the quarter to within seven days of the submission of the
President’s budget.83
FY1990 and 1991 National Defense Authorization Act (P.L. 101-189)
The FY1990 and 1991 NDAA added the role of the Service Acquisition Executive to the Nunn-
McCurdy Act. Under Title X, as amended, the program manager submits unit cost reports to the
Service Acquisition Executive, who then determines whether a Nunn-McCurdy breach has taken
place. A determination of a breach by the service acquisition executive is sent to the secretary
concerned for a further determination.84
Reporting Requirements
The FY1990 and 1991 act amended Section 2432 of Title X to state that a SAR did not need to
include a status report if there was less than a 15% increase in program acquisition unit cost and
current acquisition unit cost as shown in a previous SAR for the same fiscal year.85 Previously, a
SAR had to include a status report if there was a 5% change in the total program cost.
The baseline against which to measure a breach was amended slightly (changes in italics) to be
the baseline SAR submitted in the previous fiscal year, or if there was a breach in the previous
fiscal year, the SAR submitted to Congress in connection with the breach.86
The other significant change to Nunn-McCurdy in the act is the consequence of DOD failing to
submit a SAR for a 15% breach or a certification for a 25% breach. Previously, if DOD failed to
provide the required reports in a timely manner, no funds could be obligated for the program
unless the House and Senate Armed Services Committees waived the funding prohibition. The act
changed the penalty, stating that if the required reports are not filed in a timely manner,
appropriated funds could not be obligated for construction, RDT&E, and procurement for a major
contract under the program. However, once DOD submits the required reports, the prohibition
ends at the end of 30 days of continuous session of Congress.87

82 P.L. 98-525 sec 1242 (a)(4); 98 Stat. 2607.
83 P.L. 98-525 sec 1242 (b)(2); 98 Stat. 2607
84 P.L. 101-189 sec. 811(a); 103 Stat. 1490.
85 P.L. 101-189 sec. 811(c); 103 Stat. 1493.
86 P.L. 101-189 sec. 811(a); 103 Stat. 1490.
87 P.L. 101-189 sec. 811(a); 103 Stat. 1492.
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Timeline Changes
The act changed the deadline by which a program manager must submit a unit cost report for the
first quarter of a fiscal year from within seven days of the submission of the President’s budget to
within seven days of the end of the quarter.88 The act also changed the timeline for the secretary
to submit notifications and certifications to Congress. Specifically, the Secretary must submit a
notification of a breach to Congress within 30 days of the service acquisition executive
submitting his determination report to the Secretary.89 For a 25% breach, DOD must submit the
written certification to Congress within 30 days of the deadline for submitting the SAR.90
FY1993 National Defense Authorization Act (P.L. 102-484)
Threshold Changes
In the FY1993 NDAA, Congress slightly modified the Nunn-McCurdy thresholds from more than
15% and 25% to at least 15% and at least 25%.91
Reporting Requirements
When a program breaches the Nunn-McCurdy thresholds, DOD is required to submit a SAR to
Congress. The FY1993 NDAA provided some flexibility to this requirement (changes in italics),
stating that a SAR shall be submitted to Congress for the quarter in which the determination is
made that a breach occurred, or for the quarter which immediately precedes the quarter in which
the determination is made.92 This added flexibility means that if a program has a breach in one
quarter but the determination that a breach occurred does not happen until the next quarter, the
Secretary can submit a SAR for either quarter.
Timeline Changes
The FY1993 NDAA changed the deadline for the program manager submitting a quarterly unit
cost report to the service acquisition executive from seven business days to 30 calendar days after
the end of the quarter.93 In addition, the act changed the timeline for notifying Congress of a
breach if the breach was determined based on a quarterly unit cost report. Previously, the
Secretary had to notify Congress of a breach within 30 days of the service acquisition executive
reporting his determination to the secretary. Under the amended statute, the secretary must notify
Congress within 45 days of the end of the quarter in which the breach took place.94

88 P.L. 101-189 sec. 811(a); 103 Stat. 1490.
89 P.L. 101-189 sec. 811(a)(4)(C); 103 Stat. 1491.
90 P.L. 101-189 sec. 811(a)(5)(A); 103 Stat. 1492.
91 P.L. 102-484 sec 817(d)(3) and (4); 106 Stat. 2457. The threshold for requiring the program manager to submit an
additional unit cost report to the SAE for a program that breached Nunn-McCurdy and has since experienced further
cost growth was modified from more than 5% to at least 5% over the most recent cost report.
92 P.L. 102-484 sec 817(d)(5)(A); 106 Stat. 2457.
93 P.L. 102-484 sec 817(d)(2); 106 Stat. 2456.
94 P.L. 102-484 sec 817(d)(3); 106 Stat. 2457.
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Federal Acquisition Streamlining Act of 1994 (P.L. 103-355)
Definition of Procurement Unit Cost and Baseline Estimate
The Federal Acquisition Streamlining Act of 1994 (FASA) changed the definition of Procurement
Unit Cost to mean total funds programmed to be available for obligation for procurement for the
program divided by number of units procured.95 FASA also changed the benchmark against which
cost growth is to be measured. FASA required the Secretary of the department managing an
MDAP to develop a baseline description for the program.96 The description must include a cost
estimate. The baseline description must be prepared prior to each major milestone.97
Threshold Changes
FASA changed the way cost growth is measured, stating that cost growth should be measured in
constant base year dollars, thereby excluding inflation as a factor for calculating cost growth.98
FY2006 National Defense Authorization Act (P.L. 109-163)
The FY2006 National Defense Authorization Act amended Nunn-McCurdy to include the original
baseline estimate as a standard against which to measure cost growth.99 The FY2006 NDAA also
introduced the terms significant and critical cost growth that are used in the current Nunn-
McCurdy Act. The new standard was intended to prevent DOD from avoiding a Nunn-McCurdy
breach by simply re-baselining a program. Congress believed that these changes to Nunn-
McCurdy would help “encourage the Department of Defense both to establish more realistic and
achievable cost and performance estimates at the outset of MDAPs and to more aggressively
manage MDAPs to avoid undesirable cost growth on these programs.”100
The introduction of the original baseline threshold increased the number of programs triggering a
reporting requirement to Congress. For example, according to DOD, 11 programs that did not
have a Nunn-McCurdy breach prior to the new FY2006 requirements were re-categorized as
having significant breaches as a result of the FY2006 legislation. The first SAR submitted by
DOD after enactment of the FY2006 NDAA contained 36 programs that were in breach of one of
the Nunn-McCurdy thresholds.101

95 P.L. 103-355 sec. 3002(a)(1); 108 Stat. 3328.
96 P.L. 103-355 sec. 3003(a); 108 Stat. 3329.
97 P.L. 103-355 sec. 3005(a); 108 Stat. 3330.
98 P.L. 103-355 sec. 3003(d); 108 Stat. 3329.
99 P.L. 109-163 sec. 802; 119 Stat. 3367.
100 U.S. Congress, House of Representatives, National Defense Authorization Act for Fiscal Year 2006, Conference
Report to Accompany H.R. 1815, 109th Cong., 1st sess., Dec. 18, 2005, H.Rept. 109-360 (Washington: GPO, 2005), p.
755.
101 U.S. Congress, House Committee on Armed Services, National Defense Authorization Act for Fiscal Year 2007,
report on H.R. 5122 , 109th Cong., 2nd sess., May 5, 2006, H.Rept. 109-452 (Washington: GPO, 2006), p. 352.
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FY2007 John Warner National Defense Authorization Act (P.L. 109-
364)
The FY2007 NDAA added to the definition of the baseline estimate, stating that the original
baseline estimate is the description established for the program prepared before it enters system
development and demonstration (Milestone B) or at program initiation, whichever is later,
without adjustment or revision.102
FY2009 Duncan Hunter National Defense Authorization Act (P.L.
110-417)
The FY2007 NDAA applied Nunn-McCurdy to all major subprograms of MDAPs designated by
the Secretary of Defense as major subprograms. To qualify as a major subprogram, an MDAP
must have “two or more categories of end items which differ significantly from each other in
form and function.”103
Weapon System Acquisition Reform Act of 2009 (P.L. 111-23)
This act introduced a number of changes to the Nunn-McCurdy Act, primarily by adding section
2433a to Title X.104 Pursuant to section 2433a, whenever a program suffers a critical breach, an
analysis must be conducted to determine the root cause of the critical cost growth, as well as an
assessment projecting the cost for
• completing the program as is,
• completing the program with modifications to the requirements, and
• alternative systems or capabilities.
The assessment must also include the extent to which funding for other programs needs to be
reduced to cover the increased cost of the breaching program.105
According to section 2433a, the program must be terminated unless the Secretary of Defense
submits the required certifications and the root-cause analysis to Congress, including a new
certification—that the program is a higher priority than those programs whose funding is reduced
to cover the cost increases of the breaching program.106 If the program is not terminated, the
program must
1. be restructured to address the root causes of cost growth,

102 P.L. 109-364 sec. 806; 120 Stat. 2315.
103 P.L. 110-417; 122 Stat. 4520.
104 10 U.S.C. 2433a, which became part of Title X through the Weapons System Acquisition Reform Act of 2009.
105 10 U.S.C. 2433a(a).
106 10 U.S.C. 2433a(b).
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2. have its most recent milestone approval revoked and have a new approval before
entering into a new contract or exercising a contract option (the milestone
decision authority can approve necessary contract actions),
3. include in the report all funding changes, including reductions in funding in other
programs, to cover the cost growth.107

Author Contact Information

Moshe Schwartz

Specialist in Defense Acquisition
mschwartz@crs.loc.gov, 7-1463



107 10 U.S.C. 2433a(c).
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