Cost Considerations in Systems Analysis

by Gene Fisher


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Concepts and procedures of military cost analysis in a systems analysis context. The analyst attempts to assess probable consequences of alternatives in terms of their benefits, costs, and risks, and to compare these alternatives. Costs are the value of benefits forgone; cost estimates are relevant only when they reflect the consequences of an appropriately defined choice. They are obtained by enumerating required resources, by determining alternative uses of resources, or by estimating the value of these alternative uses. Cost models integrate inputs and relate them to output-oriented capabilities. Four types are important: resource-requirement submodels, individual-system cost models, mission force-mix cost models, and total-force cost models. Use of these models can facilitate cost-sensitivity testing that can help in determining hedges against future uncertainties. Time-phasing aids in specifying the desired pattern of effectiveness and seeking the least-cost alternative that meets the required capability. (Also published by American Elsevier Publishing Company, 1971).

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