A Study of the Establishment of Cost and Schedule Variance Thresholds on Department of Defense Major Program Contracts
AIR FORCE INST OF TECH WRIGHT-PATTERSON AFB OH
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This thesis examined to what extent theoretical threshold models are used to establish cost and schedule variance thresholds on Department of Defense DoD major program contracts and identified how these thresholds are actually established. First, numerous theoretical methods for establishing variance threshold including the accounting approach, the statistical process control approach, and the Dyckman and Kaplan models were investigated and assessed. Interviews were then conducted with a sample of DoD and civilian defense contractor personnel who had first-hand knowledge of the establishment of cost and schedule variance thresholds. Findings indicated that none of these methods was being used. Repeatedly, interviewees related that threshold levels for new contracts were established by either management experience and judgment or by copying threshold levels from previous contracts. One possible explanation for this occurrence is the apparent lack of awareness of the many theoretical models available. This lack of knowledge could have been the result of inadequate supplemental training which could expose personnel to these additional methods. In addition, neither government nor defense contractor documents provided any specific methods or techniques to derive thresholds. This lack of specific guidance further contributes to the necessary reliance on personal experience and judgement to set the threshold levels.
- Administration and Management
- Statistics and Probability
- Military Forces and Organizations
- Logistics, Military Facilities and Supplies