DOD Cost Overruns and The Nunn-McCurdy Act

June 12, 2025

DOD Cost Overruns and The Nunn-McCurdy Act

Since the U.S. Department of Defense’s (DOD)

establishment, Congress has expressed interest in ensuring

that DOD procures major weapons systems efficiently,

including that a program maintain the same projected costs

throughout its lifecycle. DOD requested a total of $168

billion for defense-wide procurement for fiscal year (FY)

2025. Controlling DOD procurement costs has typically

challenged DOD, which periodically has “cost overruns,”

or instances when a program surpasses its initial cost

estimate.

certifying and approving a program’s procession through

the different formal stages of acquisition.

Congressional efforts to maintain DOD program costs have

included defining programs in statute and creating reporting

requirements, including Selected Acquisition Reports

(SARs), in statute. SARs require DOD to notify Congress

about changes to baseline cost estimates of major defense

acquisition programs (MDAPs) and potential risk factors

and requirements originally outlined in the 1982 NunnMcCurdy Act. The Nunn-McCurdy Act (10 U.S.C. §§43714377) requires DOD to report to Congress if an MDAP

experiences a cost overrun that exceeds certain thresholds.

Depending on the size of the program and extent of the cost

overrun, DOD is legally required to take certain actions and

report its findings to Congress.

Selected Acquisition Reports (SARs)

DOD Acquisition Categories

The level of management and congressional oversight of an

acquisition program generally corresponds with the cost

and technical complexity of the program. All DOD

acquisition programs are designated by an acquisition

category (ACAT). The category is primarily based on the

program’s total cost.

ACAT I refers to the largest acquisition programs in terms

of dollar amounts, and are also known as MDAPs. An

MDAP is defined in statute as any program that is (1) not “a

highly sensitive classified program”, and (2) so designated

by the Secretary of Defense, or (3) has an “eventual total

expenditure” for procurement of more than $1.8 billion or,

for research and development (R&D), of more than $300

million (both in FY1990 constant dollars). According to

DOD estimates, these dollar amounts are adjusted to $3.065

billion for procurement and $525 million for R&D in

FY2020 constant dollars. ACAT I programs are also further

divided into sub-categories depending on their level of

decision authority, or which DOD office is designated to

determine whether or not the program should advance

throughout DOD’s acquisition process “milestones.”

ACAT I programs have three major milestones,

(Milestones, A, B, and C) requiring milestone decision

authority (MDA) approval. For the highest cost or most

technically complex ACAT I programs, the Undersecretary

of Defense for Acquisition and Sustainment (USD(A&S))

is typically the MDA, the DOD entity responsible for

Although there are three other acquisition program

categories, only ACAT I/MDAP programs are subject to

the statutory reporting and oversight requirements of NunnMcCurdy, including reporting requirements concerning the

program’s cost, and procedures DOD must follow should

an MDAP’s eventual cost exceed by a certain percentage its

original estimated cost.

Selected Acquisition Reports (SARs) consist of information

detailing an MDAP’s cost, schedule, and performance. Per

Title 10, SARS must be provided to Congress either

annually (within 30 days after the President’s budget is

transmitted to Congress) or quarterly (within 45 days after

the end of the fiscal year quarter). Quarterly SARs are

required if DOD finds that the program had a 15% or more

cost increase and/or a six-month or more delay of one of the

major program milestones in the last quarter.

Title 10 also requires that DOD establish a program’s

“baseline description,” including a program’s “baseline

estimate,” or a description of the program that must be

prepared early in the program’s acquisition lifecycle.

Should the program experience a cost overrun, the baseline

description is to be used as a point of reference concerning

DOD’s original intentions for the program. Baseline

descriptions may be revised or adjusted, including in the

event of a cost breach, but DOD is to report such an update

in the program’s next SAR.

The Nunn-McCurdy Act

The Nunn-McCurdy Act requires that DOD report to

Congress if an MDAP experiences a cost overrun that

exceeds certain tiers of percentages. Depending on the

threshold, DOD must take certain actions and report its

findings to Congress.

Two major types of cost growth threshold breaches (also

called a “Nunn-McCurdy breach” or a “Nunn-McCurdy,”

after the sponsors of the original legislation, in the DOD

acquisition community) exist:

1) Significant breach. A significant breach occurs

when a program’s cost increases either 15% from

its current baseline estimate, or 30% from its

original baseline estimate; and

2) Critical breach. A critical breach occurs when a

program’s cost increases either 25% from its

current baseline estimate or 50% from its original

baseline estimate.

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DOD Cost Overruns and The Nunn-McCurdy Act

DOD is statutorily required to report a cost growth breach

to Congress in two potential scenarios:

1. End-of-Quarter Notification. Every

quarter, each military branch’s Service

Acquisition Executive (SAE) is to submit

a unit cost report for its MDAPs. If the

Service Acquisition Executive (SAE)

determines a program cost breach, DOD

must notify Congress within 45 days after

the end of the quarter.

2. Mid-Quarter Notification. If a cost

growth threshold breach is determined or

anticipated out of the unit cost report

cycle, the respective program office must

immediately report this finding to the

SAE, who must then determine if there is

such a breach and notify Congress within

45 days of that first report.

If Congress is notified of a critical breach, DOD is to

submit a new SAR to Congress. For a critical breach, DOD

is also required to: (1) submit either a written certification

that the program’s continuation is essential to national

security and a root cause analysis of the program’s cost

growth, or (2) submit a notification of the program’s

termination within 60 days. Should the program continue,

DOD is to submit a new SAR in the calendar year

following the year during which the program was

restructured.

DOD Cost Overrun History

The core acquisition framework for major capabilities

includes many MDAPs, which DOD calls the Major

Capability Acquisition pathway. This pathway represents a

milestone-based acquisition approach, which includes three

major phases:

1. Technology Maturation & Risk

Reduction (Milestone A to Milestone B),

2. Engineering & Manufacturing

Development (EMD) (Milestone B to

Milestone C), and

3. Production & Deployment (PostMilestone C).

According to some analysts, historically, most DOD

program cost growth occurred during the EMD phase.

According to SARs from programs that experienced NunnMcCurdy breaches from the 2012-2021 timeframe, more

than half of identified DOD Nunn-McCurdy breaches

occurred in the production phase (post-Milestone C). An

identifiable, direct cause of some of these breaches was

DOD’s decision to decrease the total number of units

procured, driving up the per-unit cost.

The FY2009 Weapon Systems Acquisition Reform Act

(WSARA) (P.L. 111-23) included updates to portions of

Title 10 associated with the Nunn-McCurdy Act. WSARA

included a requirement, in the event of a critical breach, that

DOD submit to Congress a written certification that the

program’s continuation is essential to national security and

a root cause analysis of the program’s cost growth.

DOD Cost Overruns: 2014-2024

According to DOD, it experienced 24 total Nunn-McCurdy

breaches over ten years beginning in 2012: 12 significant

breaches and 12 critical breaches, or an average of 2.4

breaches per year. This number represents an average peryear decrease in Nunn-McCurdy breaches, compared to a

13-year period beginning in 1997, during which DOD

incurred an annual average of about 5.7 breaches, according

to GAO reporting.

Issues for Congress

Determining the Root Cause of Cost Overruns

Over the last ten years, analysts have posited different

potential causes of DOD program cost growth. A 2017

RAND study on Air Force MDAPs with “extreme cost

growth” and programs “that experienced the lowest cost

growth” found that programs that experienced “extreme

cost growth” typically had “premature approval of

Milestone B” and “suboptimal acquisition strategies and

program structure.” A 2022 study in DOD’s Acquisition

Research Journal (ARJ) proposes further research into “the

degree of unrealism in elements of the MS B baseline” and

“the interaction of two or more elements of the MS B

baseline,” while acknowledging that data availability makes

it difficult to study in full.

SARs of different programs from 2012 to 2022 indicate that

explanations for Nunn-McCurdy breaches lack uniformity

and appear to be program-dependent. Some program SARs

provide more technical details as an explanation, while

other SARs simply state that the program experienced a

breach due to cost growth. Congress may consider whether

or not to include additional reporting requirements for cost

overrun explanations to allow for identification of the root

causes of cost overruns.

Oversight of Next-Generation MDAPs

Although the frequency of Nunn-McCurdy breaches has

decreased post-WSARA, DOD is set to procure several new

MDAPs over the next ten years, including the nextgeneration bomber aircraft, the LGM-35A Sentinel

intercontinental ballistic missile (ICBM), and the Ohio‐

class nuclear powered submarine replacement program.

Congress may consider how it exercises oversight for these

programs, particularly if they experience cost overruns.

Oversight of Non-MDAP Programs

Although there are three other acquisition program

categories, ACAT I/MDAP programs are the only category

subject to statutory Nunn-McCurdy reporting requirements,

potentially due to their high cost. Any program that is not

designated as an MDAP may not be subject to the same

statutory reporting requirements, including the NunnMcCurdy process. Congress may consider whether or not to

include some kind of cost overrun reporting requirement for

smaller programs, such as middle tier of acquisition (MTA)

programs.

Alexandra G. Neenan, Analyst in U.S. Defense

Infrastructure Policy

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IF13027

DOD Cost Overruns and The Nunn-McCurdy Act

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