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A Quantitative Analysis of Factors Affecting Weapon System Cost Growth
NAVAL POSTGRADUATE SCHOOL MONTEREY CA
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This thesis quantitatively analyzes the factors that affect weapon system cost growth after Milestone 2. The data from nine weapon systems was reconstructed by the Army and Navy from Selected Acquisition Reports SARs with the cost variances reclassified into a new categorization system to more readily determine the causes of cost growth. Each cost variance was classified as to whether it was attributable to a mistake in the cost estimating process or a post-Milestone 2 decision, with further classification into subcategories for a more detailed analysis. The cost variances were divided by the Milestone 2 Decision Estimate DE to form a cost growth ratio CGR. The findings reveal that the Department of Defense has about 10.8 cost growth in the procurement process. Cost growth due to decisions outweigh mistakes by a factor of 2.31. A majority of the mistake cost growth is due to errors in the estimation of production costs. A majority of the decision cost growth is due to schedule slippage. Low cost systems have 2.4 times as much mistake cost growth as high cost systems. Newer missile systems have significantly less mistake cost growth when compared to other systems. Lastly, the Army and Navy have approximately equal cost growth on their newer systems. Cost growth, Selected acquisition report, Cost variance.
APPROVED FOR PUBLIC RELEASE