“In the year 2054, the entire defence budget will purchase just one aircraft. This aircraft will have to be shared by the Air Force and Navy, three and a half days each per week except for leap year, when it will be made available to the Marines for the extra day.”

- Norman Augustine1

Abstract: The geo-political landscape around us is dynamically evolving. Great Power competition seems to be ongoing in the Indo-Pacific, where several powers are trying to stake their claim in establishing a new world order. India is bracing to play a pivotal role in this world order. To bolster the nation’s economic aspirations, the Indian Navy is progressing towards the goal of being an Atmanirbhar Navy by 2047. In the past decade, induction of the state-of-the-art platforms and equipment, and commissioning of the first indigenously designed aircraft carrier in 2022, has enabled us to take massive strides towards this aim. Despite these achievements, several impediments need to be overcome, in driving India towards being an effective and powerful force in the region. This article explores avenues to shore up the Indian Navy’s capability and capacity enhancement by probing into our acquisition procedures with particular emphasis on ‘Cost Estimation’. It also discusses nuances associated with cost estimation, accentuates its importance and recommends suggestions for incorporation under the overarching realm of our planning and budgeting processes.

Historical Perspective

To successfully carry out the primary roles of the Indian Navy, ranging from Benign to Military in an expanding maritime space, one of the prime enablers is the availability of sufficient platforms. Contrary to the belief that the allocation of budget for military expenditure has increased over the years, in effect the percentage of defence expenditure compared to the GDP and defence expenditure as a percentage of total expenditure has steadily declined.2 Historical data reveals that delays in major capacity building naval projects have led to substantial gaps in capability development in addition to significant cost overruns and depletion of available budgets. The Standing Committee of Defence had highlighted instances of cost escalations for various projects of IN in the Parliament in 2018.3 Some of the examples are:

  • The original cost for the Indigenous Aircraft Carrier - INS Vikrant was revised from Rs. 3,261 C to Rs. 19,341 Cr.4

  • Delivery of three ships part of Project 15A destroyers was after considerable delays and the original cost of Rs. 3580 Cr was later revised more than threefold to Rs. 11,662 Cr.5

  • For the Kamorta class ASW corvettes of Project 28, the cost overrun was from Rs. 3,051.2 Cr to Rs. 7,852.39 Cr, and with the project ending four years later than planned.6 It is also a reality that after delivery, most platforms undergo comprehensive testing and trials, and it takes time for them to be operationally available.

  • It was similar for the submarines part of Project 75. Signed in 2005, six submarines were scheduled to be delivered between 2012 and 2016. However, the first boat, INS Kalvari, was commissioned in 2017, five years late.7 Costs ballooned from the contracted price of Rs 18,798 Cr to Rs 23,652 Cr by 2010. The cost was further increased to Rs 25,737.44 Cr in July 2017. Of course, submarines that should have been potentially hunting at sea were still being built.8

Cost overruns for major completed projects in the last decade are tabulated below:

Similar trends have also been observed in development of weapons and sensors slated for induction in IN. According to the Comptroller and Auditor General (CAG) report of 2022 about 67 % of the Defence Research and Development Organisation’s (DRDO’s) projects across the armed forces did not adhere to promulgated timelines, with time overruns ranging from 16 to 500 % with accompanying cost escalations.9 Further, DRDO had initiated 15 new projects, worth Rs 516 Cr, specifically to address objectives left unachieved by previously ‘successful’ projects.10 It was also noted that delays in completion of projects had a serious impact on acceptance of the product by end users due to obsolescence of technology or the services fulfilling their requirements via imports, again at a high cost. As an example, the weapon system mounted on the Advanced Light Helicopter (ALH), received approval by the Ministry of Defence (MoD) in 2008 for delivery with a December 2010 deadline. After repeated delays, it was finally available for induction in 2020 with an enormous increase in production costs.11 Similarly, the development of a sub system was sanctioned in October 2008 at a cost of Rs 45.50 Cr with a project completion date of October 2013. In January 2015, due to delays in development it had to be upgraded with an imported sub-system after incurring an additional cost of Rs 22.75 Cr.12 Another example is the case of P-75(I), which was first initiated in 2008; however, it remains to be contracted even as we approach the end of 2025. The project has experienced significant cost overruns, with the final cost likely to substantially exceed the initially budgeted amount. Taking of note of these, the CAG report highlighted premature closure of projects and insisted on rigorous monitoring, realistic planning and cost estimation by DRDO.

Cost and schedule overruns in defence contracts have also plagued several countries ranging from naval powerhouses to those with smaller navies. Time delays almost always become a driver for cost overruns. These could be inefficiencies, changing specifications and even corruption. A few of the many examples are flagged here:

  • Since its first major procurement of six frigates in 1794 the US Department of Defense (DoD) averages cost overruns more than 50%. Further analysis by the US Office of the Under Secretary of Defense for Acquisition for over 500 overrun contracts found that the chances of recovering from a cost overrun when a contract is already at least 15% to 20% complete is impossible.13 Schedule overruns of various ships under construction leading to cost overruns that were highlighted in a US Government Accountability Office report of 2025 are given here:

Fig 1: Cost and Schedule Overruns for Major Shipbuilding Projects in USA 14

  • In the Royal Navy, the two Queen Elizabeth-class aircraft carriers cost nearly double the original estimate of £3.9 billion. The first carrier which was due in 2012, came into service only in 2017, while the second was two years later. Another noted example is of the British Army’s Ajax programme for new armoured tanks. The British Army originally aimed to procure 589 vehicles for £3.5 billion by 2017. However, the tanks have been plagued by technical problems. 128 tanks are likely to be delivered by the end of 2025 but may still be undeployable due to noise and vibration problems. Similarly, the six Type 45 destroyers cost 30% more than planned and were two years late. The budget for the Royal Navy’s Astute class submarines also doubled.15

Although rare, cost underruns in defence projects have also been reported. A recent study of Norwegian defence projects found an average cost underrun of 5%. Within the same study, specific projects such as procurement of vehicles and weapons systems were associated with an average cost underrun of 1%.16 However, as an overwhelming majority of defence programmes are beset with cost overruns, the articles delve only on this issue.

While reasons that have contributed to cost and time overruns are varied and myriad, they can be broadly categorised into factors associated with shipbuilding as an industry and to modalities associated with cost escalations. In a nutshell, the key factors are:

  • Shipbuilding.

    • Inefficient shipbuilding practices, frequent mid-course changes and delays in finalisation of equipment and weapon packages.

    • Lack of adequate modern infrastructure for shipbuilding.

    • Inefficient management of shipyards.

    • Restrictive government policies, particularly for growth of private sector shipyards.17

    • Equipment and weapon procurement from foreign entities.

    • Changes in equipment and weapon systems at a later stage of construction due to issues of economic viability, arms export policy and non-availability of technology.

    • Technological challenges.

  • Cost Escalation.

    • Imprecise cost estimation and non - adherence to proper procedures for estimation by procurement agencies.

    • Underestimation (often deliberate) to secure contracts or obtain initial governmental approvals or inaccurate assessment of costs. To state an example, a 2013 report from the UK Auditor General found that project costs in the UK's 40 largest defence projects valued at £54 billion were significantly understated. The Auditor General found that project costs were understated by £5.2 billion (6.5 percent) when using the government’s more lenient guidelines, and by £12.5 billion (15.7 percent) when using more realistic costing guidelines. The report underscored the importance of accurate cost estimates on government procurement practices.18

    • Inaccurate benchmarking by concerned agencies leading to stifled budget allocation. In its January 2018 assessment of Ministry of Defence spending entitled ‘The Equipment Plan 2017 to 2027’, the UK National Audit Office concluded that the UK government allocated insufficient funds for future equipment purchase and maintenance needs. The report mentioned that unless the estimates were improved, spending on equipment could only be made possible by reducing the scope of projects, delaying them, or cancelling them altogether. These findings underscore the importance of proper budgetary planning as a prerequisite to the sustainable execution of longer-term procurement strategies.19

    • Changes in equipment packages for a slew of reasons due to inadequacies in estimates, or the unavailability of some equipment.

    • Increase in overhead costs due to delay in delivery of platforms.

    • Rigid cost estimates unable to adapt to changes in long drawn projects such as platform construction.

    • Increase in equipment cost and yard material over the years due to delays.

    • Acceptance of “cost and time creep” as fait accompli due to sunken costs in the project.

The consequences of all these factors are, of course, borne by the taxpayer: “In these increasingly uncertain times, as the UK faces major strategic threats and a land war on our continent, getting the most out of defence spending could not be more critical. Defence is costly and becoming costlier, raising the risk of losing capabilities as they become too expensive. Our national security depends on the Ministry of Defence pushing down costs and getting the best possible value for taxpayers” 20

Cost and time overrun due to factors above directly impact military readiness of a nation with the brunt of excess cost being borne by the taxpayer.21 Closer home, consider the example of the Multi-Role Fighter Aircraft (MFRA) project of the IAF. Initiated in 2007, the cost of the programme has increased from $10.4 billion for 126 aircraft to $24.5 billion for 114 aircraft by 2025, which is approximately equivalent to 2% of our GDP. This translates to significant economic burden for the Indian taxpayers at a time when there are competing needs in other sectors such as healthcare, education and infrastructure development.22 This, while leaving the IAF bereft of sufficient aircraft to counter adversaries.

There is also the example of the Next-Generation Offshore Patrol Vessel (NGOPV) project that has seen significant cost overruns since its initial estimates, primarily due to issues of procurement delays and underestimation. IN signed a contract for five OPVs with the former Pipavav Shipyard (later Reliance Defence and Engineering) for approximately ₹2,600 crore in 2010.23 However, due to major delays and shipyard's financial problems, this contract was cancelled in 2017. Thereafter, in 2018 the Defence Acquisition Council (DAC) approved the procurement of six new NGOPVs at an estimated cost of ₹4,941 crore (about ₹825 crore per vessel).24 In 2020, the number of ships was increased to 11 to make up for lost time.25 Finally, in 2023, the Ministry of Defence signed a new contract for 11 NGOPVs with Goa Shipyard (GSL) and Garden Reach Shipbuilders & Engineers (GRSE) for a total of ₹9,781 crore, a significant increase from the 2018 estimate.26

Changes to factors demarcated under shipbuilding need a whole-of-government approach and measures such as the recently passed Shipping bill for civilian shipbuilding is a landmark step. Notwithstanding, naval shipbuilding and defence procurement could benefit from better methods of efficient cost estimation and management as one of components that addresses the overall problem.

What is Cost Estimation?

How much does this (will this) cost? Is a question we probably ask or answer several times every day. We answer the question when we want to buy something quite ordinary from a grocery store or at times a big budget item such as a car or a house. These decisions vary from rudimentary analysis to meticulous comparative analyses depending on the complexity of resources available to us, need and utility and even life-time costs and related consequences. The process of determining the cost of something not yet available, or even fully designed (such as a new class of ship or aircraft or an advanced engine) is certainly more complex. Prices for such things are not readily available and thus we need to make estimates. Every entity, be it a single person or a big organisation, needs to rigorously practice cost estimation. The answer may not be accurate, but at least a reasonable approximation is available to plan for the expense within the available capital.

How is it Being Done Presently?

One of the main problems in defence procurement in India is the absence of a standardised methodology for cost estimation.27 Procurement processes in the Armed Forces are guided by the Defence Acquisition Procedure (DAP), last revised in 2020. It lays down the procedure to be followed for procurement of a product and associated services, under various acquisition categories. In the DAP, guidelines for arriving at initial costs are not explicit, resulting in variations in costing approaches across different procurement agencies.28 The concerned agencies have to rely on capsule courses, experience and on the job training for arriving at a benchmark price or cost estimate. This often leads to inconsistent and unrealistic estimates. Thus, we need to understand the nuances of arriving at a reasonably accurate cost estimate of a product.

Is it the Cost or the Price?

We could address a very basic question, “Is it the Cost or the Price?” While cost and price appear to be the same terms, there are a few distinctions which makes a difference in cost estimation. Cost is a quantitative value of the amount or resources required to produce an item. On the other hand, price is the amount you actually pay to procure the item from the market or manufacturer. Price incorporates profit which the manufacturer aims to make as well as market value of the product at that time, irrespective of its manufacturing cost.29 As the term cost estimation indicates, we need to focus on the cost of an item and not its price. This provides us the leeway for negotiations with the manufacturer to get the best suited price as per our financial blueprint.

A Cost Estimate

In a formal way, “Cost estimation is the process of collecting and analysing historical data and applying quantitative models, techniques, tools and databases to predict an estimate of the future cost of an item, product, program or task. Cost estimating is the application of the art and then technology of approximating the probable worth, extent, or character of something based on information available at the time.”30 Succinctly put, Cost Estimation is determining the likely future cost of a product based on analysis.31 It is, of course, difficult to “predict” the future. However, in a limited but quantitative way that is exactly what a cost estimate aims to do. The fundamental insights of cost estimation are discussed below.

Characteristics of a Cost Estimate

Key elements of a Cost Estimate are:

  • Historical Data. Data form the basis of any credible cost estimate. While our endeavour is to provide an estimate for a new product for which the cost is not available, historical data provide some basis of arriving at an estimate. For example, the cost associated with construction of IAC, will form the basis for estimating the future cost of IAC – 2; or the procurement of a new uncrewed aerial vehicle will have to be guided by the cost of similar vehicles bought earlier. Below is a plot depicting the cost of various aircraft in the US armed forces over the years. This data will act a basis for estimating the cost of future aircraft and thereby allocating budget for the same.

Fig 2: Plot - Price of US Combat Aircraft inducted over the years 32

  • Model. Cost estimation involves utilisation of quantitative means for arriving at the cost of an item. Therefore, use of simple quantitative models which can be configured in MS Excel aids the estimator in arriving at a transparent, balanced and mathematically sound estimate.

  • Available Information. The definition of cost estimation highlighted above stresses the use of information available at that time to estimate the cost of a product in the future. There are bound to be unforeseen exigencies such as Covid - 19, the Russia - Ukraine conflict or the insolvency of a manufacturer, all of which could make the initial estimate inaccurate. However, the estimate could still be reasonably correct in the present circumstances when the decision needs to be taken. Although the estimate may be absorbent of minor ups and downs and is open to revision within reason.

Riding on above characteristics, an important facet in this field is called ‘Learning Curve’. Learning Curve is a tool developed to account for recurring costs in a production process. It suggests that as we repeat a task multiple times, we get better at it. In a production or manufacturing process it has been found that over time the ability to do a task improves at a constant rate.33 This theory is also applicable to all walks of life. To elaborate, let us take a simple example of stripping and assembling of a pistol. Let us assume that an ab-initio trainee or a cadet takes four mins to strip and assemble a pistol at the first instance. The time then reduces to three mins after some training and two mins thereafter and so on and so forth. The graph below indicates the relationship between the times taken to the number of attempts. We can see that time reduces with number of attempts until the slope plains out indicating that the system has reached its peak performance.

Fig 3: Learning Curve depicting Reduction in Time with Increase in Attempts (Graphic by author)

This trend also holds true in the costs associated with production or manufacture of an item. The overall production costs decrease as we manufacture on a larger scale, thereby reducing the overall cost of an equipment. This must be demanded from a manufacturer, particularly in contracts which involve procurement of systems on a larger scale.

Life Cycle Cost

A cost estimate should cater for costs that will be incurred in the entire lifetime of a system or product i.e. the cost from ‘cradle to grave’ is its life cycle cost. Generic distribution of life cycle cost is depicted in the graph below and elaborated thereafter.

Fig 4: Distribution of Life Cycle Cost34

The distribution of a life cycle cost is:

  • Research and Development. This cost primarily comprises cost of research associated with the development of a new product and includes costs associated with demonstration of a Proof of Concept or prototype including its testing and evaluation.

  • Investment Costs. This is the cost required for acquisition of new equipment, including costs for setting up new facilities and operationalisation of the system. This includes costs required for spares and related support equipment, training, documentation and similar accompanying costs.

  • Operation and Support Costs. These are costs associated with operations and support of the equipment during its life cycle. This includes all direct and indirect costs involved in exploitation of the equipment including personnel, maintenance, replenishment spares, AMC, etc.

  • Disposal. This is the cost associated with disposal of an equipment after its life, such as decommissioning and disposal of a ship or aircraft or obsolescence of an equipment.

In a majority of cases, maximum cost is incurred during operations and support of an equipment. The procedures as per DAP 2020 and our budgetary estimates lay more emphasis on the investment cost or acquisition cost of a particular equipment through the lowest bid or L1 system.35 This may not be the right metric to compare costs of different equipment, particularly for long drawn projects such as a ship or submarine class or even weapon systems. In addition, the disposal costs of each equipment must also be explicitly included in our estimates. This will ensure that our fund outlay caters for this at the outset, rather than seeking separate funds at a later stage and biting a pie from the allocated budget.

Importance of Cost Estimation

Cost estimation forms the core of procedures such as planning, choosing between alternatives and budgeting. Most importantly it is used to do what is commonly known as cost-benefit analysis. To comprehend the implications of cost estimation, let us consider some examples that emphasise the repercussions of cost overruns, which could well be the critical impediment in a navy’s effectiveness.

A shipyard in the USA was awarded a contract for construction of three new US Navy ships. As the lead ship was being built, it was observed that a large cost growth began to affect progress of the project. Upon investigation, the primary reason for cost growth was found to be the inappropriate use of driving assumptions during formulation of the estimate, due to which the original cost estimate was inaccurate. Based on inputs from various sources it was assumed during formulation of the original estimate, that when the navy’s ship would be under construction at the shipyard, the shipyard would also be building a commercial ship.36 These two ships would thus share the shipyard’s overhead costs which are those related to money spent for operations and smooth functioning of the shipyard such as taxes, utilities, administrative support, electricity, etc. and are not related to direct labour or material costs.37 As a normal practice, the shipyard’s overhead cost is shared amongst the entities who presently have their ships under construction or repairs. In this case, however, after the naval ship’s construction had started, the commercial firm cancelled their order. As no other ship was being constructed at that time, the Navy had to cover the entire overhead costs of the shipyard. Consequently, the project ran into cost overruns and delays in construction. This example shows us that even though the original estimate was correct, it did not translate into an accurate execution on ground as assumptions used for formulating the estimate were no longer valid. Assumptions drive costs and assumptions are prone to change.38

The Zumwalt-class destroyer (DDG - 1000), incorporating several stealth features, was touted to be one of the most innovative ships ever built with state-of-the-art weapons and sensor systems. The destroyer cost $22 billion in research and development and was designed to provide artillery support with advanced 155-mm guns to replace the legendary battleships of the US Navy.39 They had planned to induct 32 such ships. However, due to cost overruns and overall inefficiency of the defence industrial base, they decided to build only three. The Zumwalt-class has faced numerous issues over the years in its design as well as operational efficiency.40 The ship’s designers failed to make the new gun system interoperable with the US Army and NATO’s standard 155-mm howitzer artillery shells. In turn, with only three ships envisaged, the costs of the artillery pieces that were compatible with the AGS were as high as $800,000 per round.41 Over the years, things further deteriorated with removal of ship’s 155-mm gun, the very purpose for which it was built. Now to justify the sunk cost into the Zumwalt-class destroyer the Navy is trying to fit hypersonic missiles on the ship, despite doubts about its reliability and effectiveness. Sunk costs are those which have occurred in the past and cannot be retrieved. They have no relevance to the new estimates and alternative courses of actions.42 Several experts in the US suggest that these ships are more of a liability than an asset and solutions like launching hypersonic weapons from submarines or unmanned underwater vehicles would be more beneficial.43 Failure of the ship to perform its basic mission with high-cost overruns, has made it a sore point for the US Navy.

Another example is of the Columbia-class nuclear submarines (SSBN) of the US Navy that are slated to replace the Ohio-class. The US Navy plans to induct 12 of them as a strategic sea-based deterrent.44 However, several reports suggest that procuring these boats has been a big challenge. Since 2018, the US Navy has spent billions of dollars to ensure that its industrial base is equipped to support the increased demand for these SSBNs. However, the GAO has assessed that the Navy’s investments were backed by inaccurate estimates which did not support their construction goals.45 The report was critical in pointing out that spending billions of dollars on programmes that will not deliver the results they promise, would lead to an overall decline in the US military’s readiness as the budget does not cater for cost and time overruns especially due to poor cost estimates.46

The Joint Strike Fighter (JSF) programme is yet another example in which the US plans to acquire around 2500 aircraft over a period of almost four decades. The contract for development of the aircraft was awarded to Lockheed Martin in 2001.47 It was after an intense competition with Boeing, in what is commonly referred to as the ‘Battle of the X-Planes’, where Lockheed Martin’s X - 35 became the basis for the F-35s. It remains the most expensive American weapon systems programme. However, it has been plagued by several delays and cost overruns largely due to unmethodical cost estimates. The cost per aircraft has risen from $50 million in 2002, to $69m in 2007, $74m in 2010 and it is estimated that it will now cost almost $2 trillion to buy, operate, and sustain these aircraft.48 The delays have caused the forces to make do with older aircraft. In one such effort to bridge these gaps, the US Marine Corps even decided to bring back aircraft from the ‘Boneyard’.49 As the F-35 programme fell years behind schedule, Marines were forced to keep their Hornets and Harriers in service long after most of them reached their expected service limits. Further, to remain combat ready, the US Marines contracted Boeing to recover and update 30 out-of-service F/A-18Cs until the new F-35s were inducted, amplifying the deep impact caused by a poorly executed project. 50 This example is like the case for Light Combat Aircraft (LCA) Mk1A for the Indian Air Force, where the contract worth Rs 43,000 crore, for 83 aircraft has faced prolonged delays with multiple timeline extensions, forcing the IAF to operate with reduced aircraft as well as look at other options such as Rafale’s at much higher cost.51

A Good Estimate

A good cost estimate needs to be complete, reasonable, credible and supported by prudent analysis to make it viable. While cost estimates also need to be precise, more than necessary emphasis on getting the value ‘correct to the penny’ may sometimes make us lose track of primary goals. Some characteristics which prove invaluable in formulation and validation of an estimate include the following: 52

  • As far as possible an estimate should be based on performance of a historical programme. By indicating this, a user of the estimate can derive confidence on usage of previous data. For example, if an external auditor has vetted the performance of a project, the cost estimates for those could be factored in the new estimate after ironing out the observations from audit.

  • It must reflect and provide leeway for current and future design improvements. This can be incorporated by using subject matter expert (SME) data adjustments and recommendations.

  • An estimate must be well understood by decision makers. Since decision makers will often be individuals with little time to read through and assimilate the entire document, estimates must be laid out in simple, easily interpretable terms.

  • It must always remain within bounds of assumptions that are made for arriving at the estimate. The estimate may also include sensitivity analysis to indicate differences due to various assumptions. For example, if we are preparing an estimate for procurement of a new missile system, the estimate must be able to substantiate differences in cost vis-à-vis the difference in warhead capacity, weight, range, etc. and other characteristics of different missiles under consideration.

  • Even though the estimated cost is a point estimate, it must cater for risks and uncertainties inherent in the program.

  • A cost estimate must be driven by primary requirements. Therefore, understanding requirements at the outset is critical. An estimate which leaves out the primary objective of the task is of little use, even though it may cater for all other requirements.

  • Since there are many uncertainties involved in the generation of cost estimates, an estimate must use quantitative models incorporating mathematical and statistical techniques to estimate cost using methods such as analogous, parametric and regression and risk analysis to have a technically sound estimate.

  • An estimate must maintain its integrity when validated by independent sources. The US GAO has a ‘GAO Cost Estimating and Assessment Guide’ as a reference document to validate cost estimates.53 A similar guide for incorporation in our procedures could be examined.

  • A good estimate must be transparent, traceable and auditable and easily referenced for subsequent cases.

Conclusion and Recommendations

The cost of an item is not a distinctive term and comprises several connotations which if applied incorrectly could have pronounced effects. For e.g. if we ask how much will a BrahMos missile cost, are we here referring to the 1st missile or the 100th one, as the learning curve indicates that unit cost of the item has reduced over time due to decrease in the recurring costs? Or are we referring to the average cost of all the missiles produced till date? Does the cost include costs for maintenance, transportation, explosives, etc. and for research and development? Do we need the cost today or for a future financial year? What is the life cycle cost? These are some of the many questions which come up once we talk about the procurement cost of an item. Therefore, a clear understanding of the essentials, aim and requirements is paramount to arrive at a credible and reliable estimate.

Key Takeaways. Having highlighted some of the key precepts of cost estimation, few salients recommended for incorporation in our procedures include:

  • Life Cycle Costs. Life cycle costs have proven to be fundamentally better for decision making and procurement than acquisition costs alone. They offer the advantages of affordability, source selection and evaluation, and logistics support analysis to name a few.54 Now that the Government policies are inclined towards enhanced indigenisation in all our acquisitions, there is a possibility to leverage designs in favour of reduced life cycle costs, rather than just the acquisition costs. In a nutshell, better acquisition decisions are likely to be taken with life cycle costs than without. Life cycle costs will also benefit from standardisation of equipment across platforms as they will make the projects sustainable and economically viable, an idea which has been well hoisted in IN and with adequate emphasis being accorded.

  • Institutional Change. The need to put costs required to operate and support an equipment ahead of acquisition costs requires an attitudinal and institutional change at all levels. This might not be a major hurdle as we have the directorates responsible for procuring and the ones responsible for its maintenance and support, functioning under the same umbrella.

  • Contractual Obligations. To arrive at an informed decision particularly for new inductions, life cycle costs may need to be included in the budgetary quote or Rough Order of Magnitude (ROM). Thus, the contractors and vendors will need explicit communication-- maybe in the Request for Proposals (RFP) itself-- that life cycle costs will be the primary driver during the procurement process, so that they align their equipment and proposals accordingly.

  • Procedural Guidelines. Guidelines for formulation of initial cost estimates are recommended to be unambiguously incorporated in the revised version of DAP 2020. To be a cost estimation and assessment guide could also be promulgated in IN to further streamline procedures. In addition, best practises of different countries or programmes which have reported cost underruns could be imbibed.

  • Use of Models and Analysis Tools. Quantitative models as decision making tools are recommended to be used to arrive at mathematically sound optimised solutions. More the capability of the model to map critical parameters, higher the probability of it being a credible decision-making tool.

  • Data. We cannot overstate the importance of data in any meaningful analysis. Therefore, it is imperative to collect and document data on performance, maintenance cycles, failure rates, etc. of equipment in a methodical manner. In case of new acquisitions, contractors could also be bound to supply data driven statistics on the operational utility and maintenance parameters of the system throughout its life cycle.

  • Best Practices. As was highlighted in the examples, an overall cost estimate needs to be grounded in the primary process of acquisition, and it must be able to absorb certain inherent risks and be amenable to change.

IN has several ships, aircraft and submarines including uncrewed assets at various stages of construction and procurement. Therefore, it is imperative that our planning, procurement and budgeting process are streamlined and made more robust to ensure that our projects are not stalled due to cost and schedule overruns and ‘we get what we want’ in the envisaged timelines.

Endnotes

  1. Norman R. Augustine, Augustine's Laws (Washington, D.C.: United Press International, 1984).

  2. “Unveiling India's Rs 6.21 lakh crore Defence budget with a dual focus on self-reliance and export boost,” The Economic Times, February 01, 2024, ISSN 0013-0389.

  3. P Sagar, “Repeated delays in naval projects led to huge cost escalation,” The Week, https://www.theweek.in/news/india/2018/03/15/repeated-delays-in-naval-projects-led-to-huge-cost-escalation, assessed 24 Jul 2024.

  4. Ibid.

  5. Ibid.

  6. Ajai Shukla, “INS Kavaratti: Why time, cost overruns are endemic to warship projects,” The Business Standard, https://www.business-standard.com/article/defence/ins-kavaratti-why-time-cost-overruns-are-endemic-to-warship-projects, assessed 24 Jul 2024.

  7. “Government clears construction of 7 stealth frigates, 6 nuclear-powered attack submarines,” Economic Times, https://m.economictimes.com/news/politics-and-nation/government-clears-construction-of-7-stealth-frigates-6-nuclear-powered-attack-submarines/, accessed 20 Aug 24.

  8. “India’s First Scorpene Submarine Is now In Water,” The Sunday Guardian, March 21, 2015, https://defense-aeroscape.com/articles-view/release/3/162047/india-floats-its-first-scorpene-sub.html.

  9. Yuthika Bhargava, “How DRDO’s massive project delays cost armed forces — CAG report cites ‘multiple extensions,” The Print, December 28, 2022, https://theprint.in/defence/how-drdos-massive-project-delays-cost-armed-forces-cag-report-cites-multiple-extensions/1286024/, accessed 20 Aug 25.

  10. Pawan Bali, “Defence Ministry Defends DRDO amid escalating Costs,” Deccan Chronicle, https://www.deccanchronicle.com/nation/defence-ministry-defends-drdo-amid-escalating-costs, accessed 25 Oct 25.

  11. Yuthika Bhargava, How DRDO’s massive project delays cost armed forces — CAG report cites ‘multiple extensions’.”

  12. Ibid.

  13. F.D. Allen, “Analysing Factors That Contribute to Cost Overruns on Department of Defence (DoD) Contractor Programs,” (Washington, D.C.: George Washington University, January 2025).

  14. 14 U.S. Government Accountability Office (GAO), “U.S. Navy Shipbuilding is Consistently Over Budget and Delayed Despite Billions Invested in Industry,” April 08, 2025, https://www.gao.gov/blog/u.s.-navy-shipbuilding-consistently-over-budget-and-delayed-despite-billions-invested-industry, accessed 30 Oct 25.

  15. Matthew Powell, “Big defence projects are usually late and over budget – Why?,” UK Defence Journal, https://ukdefencejournal.org.uk/big-defence-projects-are-usually-late-and-over-budget-why, accessed 26 Oct 25.

  16. H. Berg and P.F. Hemmes, “Cost Performance in Defense Projects – Empirical Evidence and Ways Ahead,” Science Direct, January 2025, https://www.researchgate.net/publication/ Costperformancein_defense_ projects_empirical_evidence_and_ways_ahead, accessed 12 Nov 25.

  17. Abhijit Singh and Manoj Joshi, “From Buyer to Builder: The Indian Navy’s Rocky Road to Self-Reliance,” ORF Occasional Paper 270, September 2020.

  18. Paul Emanuelli, “ Massive Underfunding in UK Military Procurement,” https://procurementoffice.com/massive-underfunding-in-uk-military-procurement, accessed 28 Oct 25.

  19. Ibid.

  20. K. Hartley, “Defence Outsourcing Could Save Taxpayer Money,” Institute of Economic Affairs, November 24, 2023 https://iea.org.uk/media/defence-outsourcing-could-save-taxpayer-money-says-new-iea-paper, accessed 12 Nov 25.

  21. J. Gledhill, “How the Defence Industry Price Gouges the Pentagon,” The National Interest, August 01, 2024 https://nationalinterest.org/feature/how-defense-industry-price-gouges-pentagon, accessed 12 Nov 25.

  22. “India’s MRFA Program: Escalating Costs and the Price of Indecision that Indian Taxpayers will pay,” Indian Defence Research Wing, September 15, 2025, https://idrw.org/indias-mrfa-program-escalating-costs-and-the-price-of-indecision-that-indian-taxpayers-will-pay , accessed 12 Nov 25.

  23. A Nair, “Pipavav bags Rs 2600-cr Navy Deal,” The Economic Times, June 07, 2010, https://economictimes.indiatimes.com/industry/transportation/shipping-/-transport/pipavav-bags-rs-2600-cr-navy-deal, accessed 28 Oct 25.

  24. Press Information Bureau, Government of India, Ministry of Defence, “DAC Approves Procurement of Six NGOPVs,” 13 Aug 2018.

  25. “Defence Min clears 11 advance warships for Navy, 6 surveillance planes for IAF,” The Mint, December, 17 2020, https://www.livemint.com/news/india/defence-min-clears-11-advance-warships-for-navy- 6-surveillance-planes-for-iaf, accessed 30 Oct 25.

  26. “Goa Shipyard Ltd Inks Rs 6200 crore deal with defence ministry,” The Times of India, March 31, 2023, https://timesofindia.indiatimes.com/city/goa/gsl-inks-rs-6-2k-cr-deal-with-defence-ministry, accessed 26 Oct 25.

  27. Wankhede R, “The Fog of Pricing: Why Defence Deal Costs are So Opaque,” Observer Research Foundation, October 07, 2025, https://www.orfonline.org/expert-speak/the-fog-of-pricing-why-defence-deal-costs-are-so-opaque, accessed 28 Oct 25.

  28. Ibid.

  29. Mislick, G.K., and D.A. Nussbaum. Cost Estimation: Methods and Tools. Germany: Wiley, 2015.

  30. Ibid, 11.

  31. Ibid, 11.

  32. Augustine's Law.svg, accessed October 30, 2025, https://en.wikipedia.org/wiki/ Augustine%27s_laws#/media/File:Augustine%27s_law.svg.

  33. G.K. Mislick and D.A. Nussbaum, Cost Estimation: Methods and Tools (Germany: Wiley, 2015), 180.

  34. Ibid, 18.

  35. R Wankhede, “The Fog of Pricing: Why Defence Deal Costs are So Opaque.”

  36. Ibid.

  37. Ibid.

  38. Ibid.

  39. B.J. Weichert, “$22 Billion Wasted: The Navy’s Zumwalt Class Destroyer is Embarrassing,” The National Interest, July 25, 2024, https://nationalinterest.org/blog/buzz/22-billions-wasted-navys-zumwalt-class-destroyer-embarrassing-211077, accessed 04 Oct 2024.

  40. Ibid.

  41. Ibid.

  42. Ibid.

  43. Ibid.

  44. B.J. Weichert, “The Navy's Columbia-Class Nuclear Submarine Dilemma,” The National Interest, October 01, 2024, https://nationalinterest.org/blog/buzz/navys-columbia-class-nuclear-submarine-dilemma-213033, accessed 07 Dec 24.

  45. Ibid.

  46. Ibid.

  47. U.S. Government Accountability Office (GAO), “F-35 Joint Strike Fighter: More Actions Needed to Explain Cost Growth and Support Engine Modernization Decision,” GAO-24-107177, December 12, 2023, https://www.gao.gov/products/, accessed 24 Dec 24.

  48. Ibid.

  49. Otto K, “Marines Taking 30 Hornets from Boneyard, Navy Inventory to Address Readiness Crisis,” USNI, June 23, 2016, https://news.usni.org/2016/06/23/marines-hornets-from-boneyard, accessed 25 Dec 24.

  50. Ibid.

  51. G. Lingana, “LCA Tejas Fighter Jet: When Will Delays and Quality Concerns End?” Mathrubhumi, July 02, 2024, https://english.mathrubhumi.com/news/india/lca-tejas-when-will-hal-delays-and-quality-concerns-end, accessed 28 Oct 25.

  52. G.K. Mislick and D.A. Nussbaum, Cost Estimation: Methods and Tools (Germany: Wiley, 2015), 13-15.

  53. Ibid, 14.

  54. Clarke, John D. Life Cycle Cost: An Examination of Its Application in the United States, and the Potential for Use in the Australian Defense Forces. Monterey, CA: Naval Postgraduate School, June 1990.