Cost Overrun Optimism: Fact of Fiction?

Abstract

Program managers are advocates by necessity. When taken to the extreme, program advocacy can result in the suppression of adverse information about the status of a program. Such was the case in the Navy’s A-12 program. In “A-12 Administrative Inquiry,” Beach (1990) speculates that such “abiding cultural problems” were not unique to the Navy. To test that assertion, this article examines cost overrun data on 64 completed acquisition contracts extracted from the Defense Acquisition Executive Summary database. Cost overruns at various contract completion points are compared with projected final cost overruns estimated by contractor and government personnel. The comparison shows that the overruns projected by the contractor and government were excessively optimistic throughout the lives of the contracts examined. These results were found insensitive to contract type (cost, price), contract phase (development, production), the type of weapon system (air, ground, sea), and the military service (Air Force, Army, Navy) that managed the contract.