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This report is one of a series from a RAND Project AIR FORCE project, “The Cost of Future Military Aircraft: Historical Cost Estimating Relationships and Cost Reduction Initiatives.” The purpose of the project is to improve the tools used to estimate the costs of future weapon systems. It focuses on how recent technical, management, and government policy changes affect cost. This report focuses on the accuracy of cost estimates. For our analysis, we used a very specific sample of Selected Acquisition Report (SAR) data, namely only programs that are complete or are nearly so. The analysis indicates a systematic bias toward underestimating the costs and substantial uncertainty in estimating the final cost of a weapon system. In contrast to the previous literature, the cost growth was higher than previously observed. We also found few correlations with cost growth, but observed that programs with longer duration had greater cost growth and electronics programs tended to have lower cost growth. Although there were some differences in the mean cost growth factors among the military departments, the differences were not statistically significant. While newer programs appear to have lower cost growth, this trend appears to be due to factors other than acquisition policies.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Literature Review of Cost Growth Analysis

  • Chapter Three

    Data for Analysis of Cost Growth in DoD Acquisition Programs

  • Chapter Four

    Cost Growth Analysis

  • Chapter Five

    Summary Observations

  • Appendix A

    Acquisition Programs Selected

  • Appendix B

    Designation of Selected Acquisition Report Milestones

  • Appendix C

    An Exploration of Different Quantity Normalization Baselines

Research conducted by

The research reported here was sponsored by the United States Air Force and conducted by RAND Project AIR FORCE.

This report is part of the RAND Corporation technical report series. RAND technical reports may include research findings on a specific topic that is limited in scope or intended for a narrow audience; present discussions of the methodology employed in research; provide literature reviews, survey instruments, modeling exercises, guidelines for practitioners and research professionals, and supporting documentation; or deliver preliminary findings. All RAND reports undergo rigorous peer review to ensure that they meet high standards for research quality and objectivity.

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