Law Proposal Targets Obsolete Regulation from the Past, Persisting in Halting Pentagon Budget Exceedings
In a bid to reinforce oversight and control escalating costs in major defence acquisition programs, a bipartisan group of lawmakers has proposed updates to the Nunn-McCurdy law. Known as the Nunn-McCurdy Reform Act of 2025, this legislative proposal seeks to address the issue head-on.
The Act aims to enhance certification requirements, mandate program restructuring, improve earned value management, and promote early detection and transparency enhancements. If a program exceeds its cost estimate by a certain percentage, the Secretary of Defense must certify the program's necessity and cost-effectiveness before it can proceed. Programs experiencing critical cost breaches must undergo restructuring and reassessment before receiving new milestone approvals.
To address previous issues where contract performance reports overstated progress, the reform proposes modifications to the Defense Federal Acquisition Regulation Supplement (DFARS) to require contractors to base earned value measurements not only on quantitative work completed but also on technical performance and quality metrics. The Act also aims to eliminate enablers of contractor deception in cost and schedule reporting, promoting earlier detection of troubled programs.
The role of the Under Secretary of Defense for Acquisition and Sustainment as the Milestone Decision Authority is emphasized to ensure that cost overruns trigger procedural reviews and corrective actions before programs proceed to costly development stages. The Act also mandates that the Nunn-McCurdy Reform Act will be included in the upcoming annual defense policy bill.
The bill requires the Defense secretary to make cost growth reports public on the Defense Department website and shortens the timeline for the Pentagon to report cost breaches. To create urgency around the issue, the bill requires programs to be canceled if they hit two critical breaches, and allows Congress to proactively reauthorize and reappropriate funds for continuation.
The Nunn-McCurdy Act, passed in 1982, requires the Defense department to alert Congress when a major acquisition program goes 15% or more over its baseline cost estimate. The new reform aims to accelerate reporting timelines, increase transparency, and restrict funding for chronically over-budget programs.
The full lifecycle cost often includes operations and support expenses, which often make up the bulk of a weapon system's total cost. The bill places caps on projects when costs spiral beyond their value. The contractor community, particularly major primes, may be less enthusiastic about the bill as it requires more accurate and realistic budgeting.
The Defense secretary currently has the unilateral authority to recertify a program and keep it moving without addressing the root causes, which the bill aims to change. The bill also requires the Pentagon to designate any major acquisition program comprising two or more end items, each projected to cost more than $500 million, as a separate sub-component.
Sponsored by Congressman John Garamendi, the Nunn-McCurdy Reform Act aims to rein in wasteful spending and ensure the American people get a real return on their hard-earned tax dollars. The bill is expected to be met with openness by the Defense Department due to its potential for cost-effective major defence programs. The Act is a significant step towards strengthening congressional oversight, enhancing accountability, and accelerating the reporting process for budget breaches.
The Nunn-McCurdy Reform Act, focusing on enhancing accountability, aims to address the financial management of major defense acquisition programs, which are intrinsically linked to business matters. The Act proposes modifications to promote earlier detection of cost overruns, enhance transparency, and restrict funding for chronically over-budget programs, thereby transforming the finance aspect of defense business.
