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

The Nunn-McCurdy Act 10 U.S.C. 2433 requires the Department of Defense DOD to report to Congress whenever a Major Defense Acquisition Program MDAP experiences cost overruns that exceed certain thresholds. A program whose cost growth exceeds the statutory 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 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 amended nine times. 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 simply re-baselining a program to avoid a breach. Since 2007, there have been 37 Nunn-McCurdy breaches.