A SURVEY OF TECHNIQUES FOR IMPROVING COST ESTIMATES OF FUTURE WEAPON SYSTEMS
Abstract
Actual cost of past and existing weapon systems have amounted to as much as seven times the original estimates, indicating a need for improved cost estimating techniques. This study examines the causes of cost overruns in weapon-system development and production and examines techniques which could improve the cost estimates of weapon systems expected to become operational 10 years in the future. A number of reasons for cost overruns are identified. Of these, technological uncertainty is a major cause. For example, the guidance system of an advanced ICBM may prove impossible to develop after a large amount of funds have been spent. The other major cause is requirements uncertainty. For example, an improvement in enemy defense capability may change the performance requirements of an ICBM midway in development. The techniques evaluated for their effectiveness in accounting for these uncertainties in cost estimating are: cost-estimating relations, adjustment factors, subjective probability distributions, and cost sensitivity analysis. Of the four, cost sensitivity analysis best accounts for technological and requirements uncertainties. Therefore, it is judged to be the best technique for estimating costs of future weapon systems. The study does recognize the value of combinations of the four techniques in some circumstances.
Document Details
- Document Type
- Technical Report
- Publication Date
- Mar 01, 1965
- Accession Number
- AD0465037
Entities
People
- R. D. Carter