Impossible Certainty
Cost Risk Analysis for Air Force Systems
Uncertainty and risk affect countless aspects of our everyday life: What investments should I make? Is eating this food good for my health? Cost analysts too must predict — sometimes very far — into the future how much money the military will spend on weapon systems. Similar to those making decisions about everyday life uncertainties, an analyst does not have perfect knowledge about tomorrow’s technology, economic conditions, or any other future event. Actual costs could be substantially higher or lower than originally anticipated. Based on literature reviews, numerous interviews, and analysis of historical cost data, the authors of this book look at how estimates for future weapon systems can be more realistic than in the past and how cost uncertainty analyses can be more comprehensive and informative. To help set the Air Force’s cost uncertainty analysis policy, the authors recommend that the Air Force flexibly use multiple methods for different cases; have consistent, uniform communications formats between analysts and decisionmakers; periodically track and update cost estimate records; and consider risk reserves to fund costs that arise from unforeseen circumstances.
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Document Details
- Copyright: RAND Corporation
- Availability: Available
- Format: Paperback
- Pages: 192
- List Price: $24.00
- Price: $19.20
- ISBN/EAN: 0-8330-3863-X
- Document Number: MG-415-AF
- Year: 2006
- Series: Monographs
Contents
Chapter One
Introduction
Chapter Two
History of Cost Growth
Chapter Three
History of Cost Growth
Chapter Four
Risk Analysis in Cost Estimation
Chapter Five
Decisionmaker Perspectives on Cost Risk Analysis
Chapter Six
Communicating Cost Risk to the Decisionmakers
Chapter Seven
Setting a Cost Risk Analysis Policy
Appendix A
Programs Included in the Cost Growth Analysis
Appendix B
List of Those Interviewed for the Project
Appendix C
Cost Risk Questions
The research described in this report was sponsored by the United States Air Force and conducted by RAND Project AIR FORCE.
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