Defense Acquisition Research Journal Issue 95

Use of Factors in Development Estimates: Improving the Cost Analyst Toolkit

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Cost growth in major defense acquisition programs is a well-docu mented concern (Ritschel et al., 2019; Younossi et al., 2007). This growth is problematic because it crowds out additional programs and leads to an inability to satisfy demands. As a result, cost analysts have conducted numerous studies to determine the causes behind defense program cost growth. Examples of identified causes include decisions by managers to change requirements, externally imposed funding changes, schedule per turbations, and errors in estimating or planning (Bolten et al., 2008). This article focuses on refining the cost analyst toolkit in an effort to reduce errors in estimating and thereby improve defense cost estimates and mit igate cost growth. More specifically, this article refines and expands the available set of cost factors for estimators to employ in Engineering and Manufacturing Development (EMD) cost estimates.

Defense cost analysts have a range of models and techniques they utilize to estimate program resources. One of these tools is the application of standard cost factors. Factors are traditionally used as primary and/or as cross check methodologies when estimating major defense acquisition program (MDAP) “common” cost elements such as program management, systems engineering, training, site activation, and spare part costs. Given that factors are just one of several cost-estimating techniques and that cost-estimating errors account for only a portion of program cost growth, one may question the magnitude of the impact that improvements in cost factors can provide. Research by Miller (2020) illuminates the potential impacts. To ascertain the estimating techniques used by cost analysts, Miller examines a sample of 60 defense development programs from 2003–2018. He finds the factor technique mean value across the 60

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Defense ARJ, January 2021, Vol. 28 No. 1 : 40-70