To help the Air Force better anticipate cost and schedule challenges and manage programs, this study developed a methodology to evaluate the likelihood of cost growth and schedule slip for major defense acquisition projects (MDAPs). The authors apply this methodology to programs currently in the Air Force's MDAP portfolio to assess future risk of cost growth and schedule slip.
Quantifying Cost and Schedule Uncertainty for Major Defense Acquisition Programs (MDAPs)
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Research Questions
- How can the risk of future cost growth and schedule slip for major defense acquisition projects be assessed at inception?
- Which programs currently in the Air Force's MDAP portfolio would benefit from increased management attention?
- How do program characteristics influenced by acquisition policymakers relate to cost and schedule growth outcomes?
To help the Air Force better anticipate cost and schedule challenges and manage programs throughout their life cycles, this study developed a methodology that can be used to evaluate the likelihood of cost growth and schedule slip for major defense acquisition projects (MDAPs) based on program characteristics observable at milestone (MS) B. RAND Project AIR FORCE (PAF) has developed and maintains a comprehensive database of program cost and schedule information obtained by analyzing and summarizing the contents of Selected Acquisition Reports (SARs) from the inception of each program through the latest out-of-cycle and annual SARs submitted as part of each year's President's Budget. From this database, the authors calculate cost and schedule factors that serve as the outcome metrics for assessing MDAP performance from MS B to the final or FY14 President's Budget SAR. PAF's ongoing SAR analyses have led to the creation of models that can be used to assess at program inception the risk of future cost growth and schedule slip. This document describes the technical approach and findings of this work. It should be of interest to analysts concerned with MDAP cost and schedule growth issues.
Key Findings
The Degree of Unexplained Variation Allows for Only a Range of Cost and Schedule Growth Prediction
- It is not possible to accurately estimate an MDAP's level of future cost growth or schedule slip, because there is simply too much unexplained variation in program cost and schedule outcomes.
- This approach can provide decisionmakers with useful information, however, on the range of uncertainty in MDAP outcomes that they can expect.
- Findings from this methodology can help inform acquisition policy and direct senior leadership attention to those programs that pose the greatest risk of poor outcomes.
Recommendations
- The Air Force should carefully manage factors shown to contribute to cost and schedule growth as it shapes new programs, develops acquisition strategies, and implements new policies.
- As there is a considerable amount of cost and schedule growth risk facing all programs regardless of their characteristics, policymakers should view MS B estimates with some skepticism. The acquisition community should continue to develop capabilities to utilize historical program cost and schedule outcomes to benchmark and evaluate estimates put forward at MS B.
Table of Contents
Chapter One
Introduction
Chapter Two
Program Outcomes and Characteristics Considered in This Analysis
Chapter Three
Relating Cost and Schedule Growth to Program Characteristics
Chapter Four
Estimates of Cost and Schedule Risk for MDAPs in the Air Force's Current Portfolio
Chapter Five
Concluding Remarks
Appendix A
Plots of RDT&E Spending Versus Cost and Schedule Growth
Appendix B
Alternative Regression Specifications
Appendix C
Predictions of APUC, Development Cost, and Schedule Growth Confidence Intervals for Continuing and New Programs
Research conducted by
The research described in this report was prepared for the United States Air Force and conducted by the Resource Management Program within RAND Project AIR FORCE.
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