Naval Postgraduate SchoolApproved for public release; distribution is unlimited.Prepared for the Naval Postgraduate School, Monterey, CA 93943.
Report Documentation PageForm Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Life Cycle Cost (LCC) assessments are of interest during the design phase for new systems. These often involve costs that must be estimated from a variety of different sub-models, including cost models constructed from historical data, forecast models that attempt to predict future economic conditions, and economy-of-scale models that impact production schedules, and more. When these disparate models are put together to obtain an overall cost model, many of these individual sources of uncertainty end up being aggregated or ignored. Consequently, the cost estimates may not provide program managers with appropriate assessments of the risk and overall variability of the new systems. We propose a structured approach for obtaining robust LCC estimates by taking into account a broad set of environmental noise conditions. This will enable program managers to better understand the uncertainty in their overall estimates, and to identify any decision factor combinations that result in both low costs and low cost variability. This may provide guidance on which of the many potential uncertainty sources require close monitoring, and which can safely be disregarded. We illustrate this approach with a model the USMC is evaluating for use in cost/benefit analysis of alternative energy systems. The research presented in this report was supported by the Acquisition Research Program of the Graduate School of Business & Public Policy at the Naval Postgraduate School.To request defense acquisition research, to become a research sponsor, or to print additional copies of reports, please contact any of the staff listed on the Acquisition Research Program website (www.acquisitionresearch.net)
Acquisition Research Program Graduate School of Business & Public Policy-iNaval Postgraduate School
AbstractLife Cycle Cost (LCC) assessments are of interest during the design phase for new systems. These often involve costs that must be estimated from a variety of different sub-models, including cost models constructed from historical data, forecast models that attempt to predict future economic conditions, and economy-of-scale models that impact production schedules, and more. When these disparate models are put together to obtain an overall cost model, many of these individual sources of uncertainty end up being aggregated or ignored. Consequently, the cost estimates may not provide program managers with appropriate assessments of the risk and overall variability of the new systems. We propose a structured approach for obtaining robust LCC estimates by taking into account a broad set of enviro...