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Secretary of the Air Force Deborah James declared OCX in breach of Nunn-McCurdy law in June.

Nunn-McCurdy Terms May Complicate GPS OCX Money Fix

August 31, 2016
Inside GNSS, September/October 2016

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Already running out of money and facing a shut down, the program to develop a new GPS ground system could see its funding tied up for more than a month, perhaps closer to two months, due to wrinkles linked to the Nunn-McCurdy breach declared for the program at the end of June.

Nunn-McCurdy is a law designed to force an assessment and revamping of over-budget programs and give Congress a clearer window into why projects are struggling. Programs whose cost growth exceeds 25 percent of its current baseline, the level considered to be a critical breach under Nunn-McCurdy, are terminated automatically unless the secretary of defense reviews the program in detail, restructures the work to address the root cause(s) of the overruns, and certifies in writing to Congress that the benefits of the program will likely exceed the cost of proceeding.

Secretary of the Air Force Deborah Lee James declared a critical Nunn-McCurdy breach on the GPS Next-Generation Operational Control System or OCX on June 30. An Air Force press release said factors that led to the breach included inadequate systems engineering at program inception, Block 0 software with high defect rates, and Block 1 designs requiring significant rework.

The complexity of program's cybersecurity requirements and the effect of those requirements on development caused multiple delays, the Air Force wrote, while implementing corrective actions to fix the problems took much longer than expected.

With a breach declared, the program now faces a new type of money hurdle.

A source familiar with OCX said the Air Force was not allowed to put more money into the program while the certification review is underway.

"Because it's under Nunn-McCurdy they can't go ahead until the decision is made to continue. The Air Force is not authorized to give Raytheon the money," explained the source, who spoke on condition of anonymity to be able to discuss the matter.

Raytheon, the prime contractor for OCX, will likely will have to pay out of pocket to keep employees available until the money is finally sent over, said the source, "which in my mind probably won't be until November. They'll probably have at least a month in which they carry the weight."

There is no statutory requirement to freeze funding during a certification review, said Andrew Philip Hunter, director of the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies. However, in practice, he said, a hold on funding takes place while the Secretary Defense figures out what he or she wants to do.

A Senior Fellow at CSIS, Hunter worked on Nunn-McCurdy during his tenure as a staff member on the House Armed Services Committee where he served from 2005 to 2011, leading the committee’s policy staff. He also worked on acquisition matters from 2011 to November 2014 as a senior Defense Department executive. Among other assignments he served as chief of staff to Ashton Carter and Frank Kendall from 2011 to 2012, while each was under secretary of defense for acquisition, technology, and logistics. Kendall, who still holds that position, is the person examining the OCX program.

"From my experience," said Hunter, "programs that are in breach, usually when funding is needed beyond the baseline — which, if you are in breach, you do need funding beyond the baseline — they have had to go to the defense acquisition executive for approval to spend that money."

The reason for this step is to avoid precluding options during the review.

"It's a back-and-forth; it's a negotiation, "said Hunter. "Explain to me what this money's for. How does this not commit me to things I may have not decided yet to do?"

But that does not mean funding is completely frozen.

"Of course, not letting them spend the money would frequently shut the program down," said Hunter. "I have not seen a case where [the acquisition executive's] done that; where he's shut a program down prior to making a certification decision because that also sort of forecloses his own decision authority."

Fiscal Year Complications
In the case of OCX the funding situation is complicated further by the fact that the program is going to run out of money before the end of the fiscal year. Raytheon boosted its manpower on OCX by 25 percent in order to meet a two-year schedule set for it by Kendall. The two-year extension sprang from a Deep Dive review before Kendall in December, the first of a series of detailed quarterly reviews the program has been subject to since.

The increased personnel costs mean the 2016 budget request, which was prepared well ahead of the December Deep Dive, was inadequate even before it reached Congress. According to the Air Force, the program will run out of money on September 15, two weeks before the end of the fiscal year.

The Air Force said in it's reprogramming request that failure to shift $39 million to OCX, a move which requires the approval of key lawmakers, would result in an additional four-month delay in the program and another $90 million added to the total OCX bill.

Why a two-week break in the program would cost $90 million is unclear. The breach was already known to be a factor when the reprogramming was requested. Perhaps the $39 million is meant to help keep the doors open during the review.

Alternatively, the $39 million also might be needed for a time-critical purpose, suggested Katherine Blakeley, a research fellow at the Center for Strategic and Budgetary Assessments.

Although she was not familiar with the specifics of the OCX program, Blakeley said it was possible that getting the money in at the right time could make a difference in putting the program back on track in a way that could avoid longer delays.

Another possibility, she suggested, is that DoD is preparing for the very real possibility that Congress will not get its fiscal year 2017 appropriations bills done by the end of September and will pass a continuing resolution (CR) — as it has often done in years past.

"You could have the comptroller's office looking ahead to the impact of a potential CR," said Blakeley," particularly given that this reprogramming request was submitted right around the time the program was known to be entering into a Nunn-McCurdy breach. [DoD may] want to get the program funds to get its restructure squared away — kind of as a hedge against a potential CR that could be several months in duration."

Copyright © 2016 Gibbons Media & Research LLC, all rights reserved.

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