Value of Flexibility - Phase 1
Final technical rept.
STEVENS INST OF TECH HOBOKEN NJ
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This report provides findings from the research conducted under the Phase 1 of RT-18-Valuing Flexibility. The primary goal of this research project is to identify, develop and validate sound quantitative methods, processes, and tools that will enable DoD leadership and program managers to make a convincing case for investments in system flexibility when acquisition decisions are made. The research during this period focused on identifying current quantitative MPTs for valuing flexibility in DoD context, and delivering an initial capability to value investments that provide the flexibility to handle foreseeable sources of change, using easy-to-understand monetizable terms, such as the effect of the investments on total cost of ownership or return on investment. We conducted a critical evaluation of the theoretical foundations underlying current approaches, the dimensions of flexibility, measures of flexibility, value functions, and methods for incorporating flexibility both at the design phase and the operational phase, to identify strengths and weaknesses of each approach. During this period, we also explored the development of an analytical framework based on sound mathematical constructs. This report also presents our advances in defining and formalizing the value of flexibility and the underlying capability-need-value architecture that can be used by systems acquisition decision-makers.
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