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Nunn-McCurdy cost breach thresholds are with respect two specific unit costs. They are Average Procurement Unit Cost (APUC) and Program Acquisition Unit Cost (PAUC) (see definitions below). Up until passage of the FY2006 National Defense Authorization Act (NDAA) the threshold was set at 15% above the current Acquisition Program Baseline (APB) baseline cost estimate for these two unit costs. The FY2006 NDAA changed that threshold to 15% above the CURRENT APB baseline OR 30% above the ORIGINAL APB baseline. Normally, the ORIGINAL baseline is that established at Milestone B. This change was made to prevent programs from avoiding reporting of Nunn-McCurdy breaches by simply re-baselining soon before hitting the 15% mark.
When the current estimate of the APUC or PAUC reaches 10% above the baseline nothing occurs as far a formal breaches go. However, in an APB you typically establish cost breach parameters for total RDT&E, total procurement, total military construction (if applicable), and total operations and maintenance (O&M) costs. The default or typical value for these breach parameters is 10% above the objective cost (otherwise known as the threshold cost). I say 10% is the default but your Milestone Decision Authority (MDA) may chose something other than 10%. Most likely, your thresholds are set at 10% above your objective. So, although you may not have a Nunn-McCurdy breach, when the Program Manager has reason to believe any of the ABP cost threshold values mentioned above will be exceeded this constitutes an expected APB breach which requires the PM to submit a Program Deviation Report to the MDA immediately.
Within 30 days of occurrence of the deviation (or breach) the PM must inform the MDA of the reason for the breach and what actions are being taken to bring the cost back within parameters. Within 90 days of occurrence of the breach one of the following should have occurred: (1) the program is back within APB parameters; (2) a new APB (changing only those parameters that were breached) has been approved; or (3) an OIPT-level program review had been conducted to review the PM's proposed baseline revisions and make recommendations to the MDA. If none of these three actions have occurred the MDA should hold a formal program review to determine program status. |