Cost in Cost-Effectiveness

Abstract

This document is an annotated version of a presentation delivered at the third annual Life Cycle Costing in Defense Conference, held on 17-18 June 2002 in London, England. It describes the technique for determining the cost portion of cost-effectiveness analysis, a method for helping decision makers in the U.S. Department of Defense decide how best to perform defense missions under constrained budgets. The author contends that, although the logic of the analysis technique is sound, the role cost plays in the decision process creates incentives for industry and government estimators to low ball their estimates. That can lead to cost overruns, which, in turn, result in lost capability and disruptive programming and budgeting practices. He suggests that the adverse incentives created by the role of cost in cost-effectiveness analysis can be countered by policing the costs that flow through the system acquisition process with an independent, objective filter. That would result in a more orderly, efficient, and credible system that reduces the damaging effects of cost overruns.

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Document Details

Document Type
Technical Report
Publication Date
Jul 01, 2002
Accession Number
ADA407699

Entities

People

  • Stephen J. Balut

Organizations

  • Institute for Defense Analyses

Tags

Communities of Interest

  • Air Platforms
  • Human Systems
  • Weapons Technologies

DTIC Thesaurus Topics

  • Acquisition
  • Aircrafts
  • Budgets
  • Cargo Aircraft
  • Contractors
  • Contracts
  • Cost Analysis
  • Cost Effectiveness
  • Cost Estimates
  • Cost Overruns
  • Costs
  • Department Of Defense
  • Governments
  • Life Cycle Costs
  • Life Cycles
  • Probability Distributions
  • Weapon Systems

Readers

  • Academic Conference Management
  • Life Cycle Cost Analysis
  • Systems Analysis and Design