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Research Questions

  1. What is the envisioned goal of cost-per-effect analysis and can it be achieved?
  2. How do enduring challenges shape the current defense analytic problem?
  3. How can defense analysts and planners improve measures of cost-per-effect and implement an enterprise cost-effectiveness approach to support higher-level decisionmaking?

Cost-per-effect analysis aims to improve decisionmaking through an enterprise-wide approach to cost-effectiveness. Such an approach would allow decisionmakers to compare alternatives not just within a single mission area or facet but also across an entire enterprise.

Promising advancements in defense planning will most likely be realized through deliberate and incremental improvements in current cost-effectiveness techniques. Cost-per-effect is cost-effectiveness with a broader, or joint, focus that supports higher-level decisionmaking.

The authors show how the Department of the Air Force (DAF) can begin to implement cost-per-effect analysis by following the analytic framework for measuring cost-per-effect proposed in this report. This framework consists of five interrelated measurements: effects, costs, campaigns, trade-offs, and optimization. The authors also show how the DAF, with its joint partners, could follow the programmatic framework of processes, proposed in this report, for implementing enterprise cost-effectiveness analysis. These processes adopt the Plan-Do-Check-Act approach to incorporate continuous improvement.

Drawing from subject-matter expertise and findings from the literature analysis and a tabletop exercise, the authors highlight several key insights about the ongoing defense analytic problem and its enduring challenges, including the analytic complexity of defense planning, the analytic complexity of cost estimation, the analytic complexity of effectiveness estimation, and the limitations of modeling and analysis. They conclude by offering next steps to contribute to discussions about possibly implementing cost-per-effect analysis into defense planning and improving the defense planning process.

Key Findings

  • Key elements of a cost-per-effect measure that can meaningfully inform decisionmaking are being developed. This progress is being driven by rapid improvements in practical computational scale, data analytics, artificial intelligence, and machine learning, creating the capacity for potential new forms of analysis.
  • The analytic complexity of defense planning has posed recurring challenges to such progress. Some of the challenges are accounting for strategic interaction (of adversaries); resolving principal-agent problems (of large organizations); and defining effect, because victory can be achieved through a range of mechanisms, including destruction, annihilation, dislocation, exhaustion, disruption, disintegration, preemption, isolation, circumvention, forestallment, compellence, impellence, and deterrence.
  • To move from cost-effectiveness to cost-per-effect (or enterprise cost-effectiveness), it will be necessary to create an accurate joint warfighting model that can capture the interdependent effects of different weapon systems. Cost-per-effect analysis will require a joint perspective to be able to assess the effects at the campaign and strategic levels.
  • Cost-per-effect processes, methodologies, and findings must be intelligible and traceable. Accurate results alone may not be enough to influence decisionmakers without also providing a traceability that is readily understandable. Beyond correct answers, dashboards or other tools that provide clear and concise findings and traceable analyses to decisionmakers will be invaluable.
  • The envisioned goal of cost-per-effect analysis is aspirational yet achievable, because cost-per-effect analysis is—and will continue to be for a considerable time to come—a process rather than an end point.

Recommendations

  • The DAF should develop an analytic framework for measuring cost-per-effect. This framework would consist of five interrelated measurements: effects, costs, campaigns, trade-offs, and optimization.
  • DoD should develop a programmatic framework of processes for implementing cost-per-effect. The processes would need to be joint in nature and could include an executive steering committee (led by a DoD Deputy Secretary of Defense) and various working groups across the services and joint forces. The processes would follow the Plan-Do-Check-Act approach as described in this report.
  • The DAF should develop trade-off and optimization tools, including associated dashboards, based on cost-per-effect analysis.
  • The DAF should consider adopting the term enterprise cost-effectiveness because it emphasizes expanding current cost-effectiveness best practices to an enterprise or joint level rather than devising an entirely new approach.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    The Defense Analytic Problem and Enduring Challenges

  • Chapter Three

    Frameworks for Measuring and Implementing Enterprise Cost-Effectiveness

  • Chapter Four

    Enterprise Cost-Effectiveness Tabletop Exercise

  • Chapter Five

    Findings, Recommendations, and Next Steps

Research conducted by

This research was commissioned by Joseph M. McDade and conducted within the Strategy and Doctrine Program of RAND Project AIR FORCE.

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