Price Update Methodology for Use in Maintenance Expenditure Limits (MEL) for Secondary Items.
ARMY MATERIEL SYSTEMS ANALYSIS ACTIVITY ABERDEEN PROVING GROUND MD
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To prevent uneconomic repairs, the Army assigns a Maintenance Expenditure Limit MEL to each reparable item. The MEL is calculated by applying a percentage factor to the Current Replacement Price CURP of the item. Many reparable items have had no procurements in recent years, and thus a method is needed to estimate the CURP. Five different sets of historic inflation indexes were evaluated for their suitability in estimating the CURP. A 14-year history of procurement data of Army troop support and aviation items was used to measure the accuracy of these index sets. The analysis showed that the present procedure of using the latest available procurement price is substantially less accurate than using updated prices. However, each of the five index sets evaluated was approximately equally accurate in predicting current procurement prices. Thus, the Gross National Product index was chosen as most suitable since it was the simplest to apply and was most readily available.
- Economics and Cost Analysis
- Logistics, Military Facilities and Supplies