Tapping Transaction Costs to Forecast Acquisition Cost Breaches
DEFENSE ACQUISITION UNIV FT BELVOIR VA FT BELVOIR United States
Pagination or Media Count:
This article uses transaction costs to predict the probability of incurring a cost breach in a major defense acquisition program MDAP. As transaction costs are not explicitly measured for MDAPs, the authors use estimates of systems engineering and program management SEPM costs as a share of overall program costs as a proxy for transaction costs. Using survival analysis, a new approach to predicting cost breaches, they also found that an increased share of SEPM costs in initial program estimates can help predict future cost breaches.