US President Barack Obama has signed the Weapons Systems Acquisition Reform Act aimed at reforming the Department of Defense's buying process.
At the White House signing ceremony, President Obama said that the act will increase government oversight, save taxpayer dollars and spend defence funding more efficiently.
"To put this in perspective, these cost overruns would have paid for our troops' salaries and provided benefits for their families for more than a year," Obama said.
"At a time when we're fighting two wars and facing a serious deficit, this is inexcusable and unconscionable."
Analysis of 95 major defence programmes last year showed cost overruns totalling $295bn.
Pentagon spokesman Bryan Whitman said that the legislation will enable improvements in the areas of systems engineering, development evaluation and pricing, and will also cut the number of no-bid contracts.