Economic Escalation and the Military Program Manager.
Study project rept.,
DEFENSE SYSTEMS MANAGEMENT SCHOOL FORT BELVOIR VA
Pagination or Media Count:
This study investigates the severe impacts which inflation has had on the economic resources available to the Department of Defense and the resulting pressures on the program manager to improve the cost estimates for his program. A large portion of the cost estimating errors for weapon systems were found to be due to errors in the estimation of inflation rates. Recent policies attempt to alleviate this situation by 1 Emphasizing the importance of the program managers best estimate for near term predictions and 2 Using DOD-wide escalation rates to be applied to estimates for out-years. Changes have also been made in reporting formats to highlight the extent of escalation included in cost estimates and the rationale used in arriving at projected inflation rates. The report discusses methods which the program manager has available to predict inflation and some of the terms, concepts and mathematics which he must use. Inflation is likely to continue at high levels and, therefore, the program manager must remain familiar with inflation aspects of his program even though there is little or no specific guidance available to him for accurately predicting inflation rates for his program.
- Administration and Management
- Economics and Cost Analysis