Cost growth is a persistent adversary to efficient budgeting in the Department of Defense. Despite myriad studies to uncover causes of this cost growth, few of the proposed remedies have made a meaningful impact. A key reason may be that DoD cost estimates are formulated using the highly unrealistic assumption that a program’s current baseline characteristics will not change in the future. Using a weather forecasting analogy, the authors demonstrate how a statistical approach may be used to account for these inevitable baseline changes and identify related cost growth trends. These trends are then used to reduce the error in initial acquisition cost estimates by over one third for major defense acquisition programs, representing a more efficient allocation of $6 billion annually.
Defense Acquisition Research Journal
DeNeve, A. J., Ryan, E. T., Ritschel, J. D., & Schubert Kabban, C. M. (2015). Taming the Hurricane of Acquisition Cost Growth – Or At Least Predicting It. Defense Acquisition Research Journal, 22(1), 84–105.