A Critique of Cost Analysis,
CENTER FOR NAVAL ANALYSES ARLINGTON VA
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Cost analysis as the term is used today in DoD, covers a broad range of activities from resource allocation for an entire service to detailed estimates of procurement and operating costs for individual weapon systems. These different estimates are used for a wide range of purposes from helping decision-makers decide upon broad choices of strategies, to justification of new purchases. The methods employed range from sophisticated statistical techniques to back-of-the-envelope calculations. All these things are properly included in cost analysis. However, the author describes some of the broader uses of cost analysis and to stay away from the specifics of individual weapon systems costing. The author concentrates on two broad areas of concern to todays cost analysts one is procurement costing, the other is force level costing. Both these types of cost analyses have been strengthened in recent years the latter because of the change in the way OSD manages the planning system - the introduction of Fiscal Guidance - and the former because of the change in the procurement system - the DSARC and the independent review system - plus a change in the attitudes of the people of the United States.
- Economics and Cost Analysis