Date of Award
Master of Science in Cost Analysis
Department of Systems Engineering and Management
Michael J. Hicks, PhD
Cost overruns in weapon system purchases have plagued the Department of Defense (DoD) throughout its history and have resulted in schedule delays and potentially reduced combat capability. This thesis created an empirical model that begins to explain those cost overruns. The model describes how changes in defense budgets, consolidation of the defense industry, acquisition reform, war, and cost estimating error are related to cost overruns. The cost performance of 186 major weapon system programs managed by the Air Force, Army, and Navy from 1970 to 2002 was described using a panel regression model. This research found that funding instability resulting from changing levels of defense budgets accounted for an increase of over $13.3 billion in weapon system costs since 1970. This research also found that the defense industry consolidation of the 1990s did not result in significant savings to the DoD. Finally, this research found that contrary to past studies, several acquisition reforms are correlated with a decrease in weapon system cost overruns. In particular, reforms resulting from the Nunn-McCurdy Act of 1982, the Packard Commission Recommendations of 1986 and the Federal Acquisition Streamlining Act (FASA) of 1994 resulted in savings of almost $124 billion since 1982.
DTIC Accession Number
Smirnoff, James P., "The Impact of Economic Factors and Acquisition Reforms on the Cost of Defense Weapon Systems" (2006). Theses and Dissertations. 3379.