A Commonsense Approach to Cost/Rate Analysis,
OFFICE OF THE SECRETARY OF DEFENSE WASHINGTON DC DIRECTOR PROGRAM ANALYSIS AND EVALUATION
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The premise of this paper is that costproduction rate analysis is an individualistic issue that demands a determinative, non-statistical treatment, and that costrate statistics are certainly not now, and may never be, appropriate to measure the costrate effect. Costrate analysis, one of the two basic analyses that constitute production cost estimating, is receiving more and more high-level attention. Unfortunately, there is widespread misinterpretation, misuse, and superficial treatment of costrate methodologies. Some of this arises from analysts selecting from the methodologies available without recognizing the limited range of applicability or the fact that some are underdeveloped or unverified theories. Realizing this and faced with his own specific need for a valid methodology, the author developed a new determinative, nonstatistical equation and approach to costrate analysis. The problem that obstructs and almost defies a valid methodology is that the production cost formula is a virtual Rubiks Cube of interdependent and unpredictable factors e.g., the degree of labor union resistance to labor force cutbacks, resulting from a falling production rate. In addition, the number of factors is perhaps limitless and the values of some seem indeterminable.
- Economics and Cost Analysis