Date of Award
3-2024
Document Type
Thesis
Degree Name
Master of Science
Department
Department of Systems Engineering and Management
First Advisor
Clay M. Kosnich, PhD
Abstract
This research studies cost risk for Department of Defense (DoD) acquisition programs during development and has three overarching objectives: 1) analyze the degree of change in cost risk (quantified as risk dollars) as programs mature, 2) analyze the accuracy of cost risk estimates (quantified as risk error) as programs progress, and 3) adopt risk analysis techniques common in the commercial banking industry to analyze cost risk in DoD programs. For the first objective, some evidence of significant positive trends in relative risk dollars is found for ACAT 1, 2, and 3 programs. For the second objective, there is no strong evidence to suggest the accuracy of risk dollars has a trend for any ACAT level. For the third objective, distributions of risk error are created based on ACAT designation and analyzed close to the tails to assess inaccurate DoD cost risk estimates in the most extreme circumstances (termed tail risk exposure). The research finds that the tail risk exposure tends to decrease as ACAT 1 programs mature; however, the tail risk exposure tends to increase for ACAT 2 and 3 programs. Additionally, the tail risk exposure is highest for ACAT 1 programs until 25% work complete and highest for ACAT 3 programs after 50% work complete.
AFIT Designator
AFIT-ENV-MS-24-M-143
Recommended Citation
Millard, Todd L., "Analyzing Cost Risk in Department of Defense Program Office Estimates" (2024). Theses and Dissertations. 7761.
https://scholar.afit.edu/etd/7761
Comments
A 12-month embargo was observed for posting this work on AFIT Scholar.
Distribution Statement A, Approved for Public Release. PA case number on file.