Modeling median will-cost estimates for defense acquisition programs

PurposeThe 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 imple...

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Bibliographic Details
Published in:	Journal of defense analytics and logistics Vol. 1; no. 1; pp. 19 - 33
Main Authors:	Trudelle, Ryan, White, Edward D, Ritschel, Dan, Koschnick, Clay, Lucas, Brandon
Format:	Journal Article
Language:	English
Published:	Bingley Emerald Group Publishing Limited 03-07-2017 Emerald Publishing
Subjects:	acquisition estimates Aircraft configurations Cost analysis Cost estimates Defense programs Electronic systems Fixed wings Regression analysis regression modeling should-cost will-cost
Online Access:	Get full text
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Summary:	PurposeThe 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.Design/methodology/approachUsing 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).FindingsThe 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.Originality/valueThe 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.
ISSN:	2399-6439 2399-6447
DOI:	10.1108/JDAL-04-2017-0004