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A Monte Carlo Risk Analysis of Life Cycle Cost Prediction.
AIR FORCE INST OF TECH WRIGHT-PATTERSONAFB OH SCHOOL OF ENGINEERING
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This study is an investigation of the uncertainties involved in the prediction and measurement of Life Cycle Costs. The particular treatment here analyzes Logistic Support Costs, which are a subset of the Life Cycle Costs. The Logistics Supportability Incentives which are embodied in the current General Dynamics F-16 contract are analyzed in the light of the stochastic uncertainties of prediction and measurement of Logistic Support Cost. A Monte Carlo Simulation model is developed which will approximate the uncertainties involved in obtaining a sample measurement of Logistic Support Cost in a fixed length test. The model output is applied to the problems of determining appropriate contractor rewards or penalties, investigating the feasibility of contractor strategies, and investigating the effect of various test lengths.
APPROVED FOR PUBLIC RELEASE