Accession Number:

ADA493713

Title:

Managing Uncertainty and Risk in Public-sector Investments

Descriptive Note:

Conference paper

Corporate Author:

NAVAL POSTGRADUATE SCHOOL MONTEREY CA GRADUATE SCHOOL OF BUSINESS AND PUBLIC POLICY

Personal Author(s):

Report Date:

2007-04-30

Pagination or Media Count:

60.0

Abstract:

The Department of Defense DoD has an annual budget approaching a half-trillion dollars. A significant portion of that budget is either directly or indirectly affected by Information Technology IT Infrastructure modernization initiatives. Nationally, investment in IT infrastructure modernization is about 250 Billion a year, spanning approximately 175,000 projects. Unfortunately, various studies indicate that only 28 are completed on time and on budget-with the number dropping to around 9 for larger companies in 1994, including government programs. By 1998, these numbers had improved, with success rates for larger companies, for example, up to 24. But, only small organizations have managed to implement more than half of their applications into one integrated system Smith, 2000 Johnson, 1999, December Keller, 2006, May 29. The factors driving these numbers are myriad-and include the sheer scope and complexity of infrastructure modernization programs, unstableundefined requirements, unstable funding, moving target objectives, and evolving threats. As a result, the costs of integration complexity increase exponentially, but yet are almost invariably under estimated. These challenges notwithstanding, one Gartner study asserts that IT asset productivity will drive market capitalization Gartner, 2002, July. Given the scope, importance and complexity of these projects, reliable, cost- effective, early warning indicators of problems are essential. Yet, classical investment theory provides little guidance for dealing with public-sector investment. The result is a general absence of computationally efficient, predictive models applicable to the analysis of those investments.

Subject Categories:

  • Economics and Cost Analysis
  • Military Operations, Strategy and Tactics

Distribution Statement:

APPROVED FOR PUBLIC RELEASE