Search results1 – 2 of 2
The introduction of “should cost” in 2011 required all Major Defense Acquisition Programs (MDAP) to create efficiencies and improvements to reduce a program’s “will-cost”…
The introduction of “should cost” in 2011 required all Major Defense Acquisition Programs (MDAP) to create efficiencies and improvements to reduce a program’s “will-cost” estimate. Realistic “will-cost” estimates are a necessary condition for the “should cost” analysis to be effectively implemented. Owing to the inherent difficulties in establishing a program’s will-cost estimate, this paper aims to propose a new model to infuse realism into this estimate.
Using historical data from 73 Departments of Defense programs as recorded in the selected acquisition reports (SARs), the analysis uses mixed stepwise regression to predict a program’s cost from Milestone B (MS B) to initial operational capability (IOC).
The presented model explains 83 per cent of the variation in the program acquisition cost. Significant predictor variables include: projected duration (months from MS B to IOC); the amount of research development test and evaluation (RDT&E) funding spent at the start of MS B; whether the program is considered a fixed-wing aircraft; whether a program is considered an electronic system program; whether a program is considered ACAT I at MS B; and the program size relative to the total program’s projected acquisition costs at MS B.
The model supports the “will-cost and should-cost” requirement levied in 2011 by providing an objective and defensible cost for what a program should actually cost based on what has been achieved in the past. A quality will-cost estimate provides a starting point for program managers to examine processes and find efficiencies that lead to reduced program costs.