An Appraisal of Models Used in Life Cycle Cost Estimation for USAF Aircraft Systems

132 Pages·2007·6.7 MB·English

by  Kenneth E. Marks

R-2287-AF
October 1978

An Appraisal of Models Used in Life Cycle
Cost Estimation for USAF Aircraft Systems

Kenneth E. Marks, H. Garrison Massey, Brent D. Bradley

A Project AIR FORCE report
prepared for the
United States Air Force
‘The rescarch reported here sas sponsored by the Directorate af Opermionsl
Requirements, Deputy Chief of Staff/Rercarch, Desvlopiaent, and Acquis
on, Ha USAF, under Contract F49620-71-G0023. The United Seater
Govatnment is authonted to reptoduce and distribute reprint for gavern-
mental purposes notwithstanding any eopright notation heneoa.

Reports of The Rand Corparition do not necesarly fet the opinlone oF
policies of the sponsors of Rend rerearch,

see “Eat settee ornate ao" niaabons

lense ue asset reagT

Publi! by The Rand Corporation
R-2287-AF
October 1978

An Appraisal of Models Used in Life Cycle
Cost Estimation for USAF Aircraft Systems

Kenneth E. Marks, H. Garrison Massey, Brent D. Bradley

A Project AIR FORCE report
prepared for the
United States Air Farce

PREFACE

As the request of the Depuly Chiet of Biaif fur Research and Development,
eodquar:ers United Svates Aiv Borce, Tae Rand Corporation har been studying
several arpect af th upplicalit of life eyelo anal the Air Fore. One objec:
tive bus beer to provide RED die slontiohera with "yurdtick"for assesing the
founéness of if upto cast emimiter—parterlany those generated as a conse
(quence of propoasd ene=gee ia the oonfquracion, capabilsy, or operstnns and
Ropport structure of Weaper.& apstam aequistin, Thoro ae few generalizable
‘means for evesunsng the soundness of the estimales; she estimates $e om &
Navety of problom settings, mast of whied ace auficiesUly diferent 10 require
luniqae orale tochaiqves Hence the rescursk henged oa indirect means of wstess
‘mal inthuding: (the praceduccs by which lif yc] oostastimatcs re generated,
Goeumentad, aod presented tn dacisioamukers: 2 the [ramewark. in whi coat
estimates are expressed; und (che eBeederuss and utility of the most widely
‘used coat estimating mode's

“A major part ofthe reseaerh reporced kurv a gn evalaulioy several airerat-
oriented Hfe cle soat odele nad goreralized cos exiting technicues, 1 was
fe practice Yo addhese evary antant mod: those inelcded here are w-dely used
Soe Ait Force and eve fully ceprassntative of he curren sth nf the art, These
models are cootunelyHeing modified, and they froqucat exit inversions ene yat
ocumented The evalvalions ave baaed an the aos current doeumentstcn avail
fable, oflen aupptementad by porsouslconeacte wit the developers upd maar users
‘of che mndela in questien.

Originally, rae eva‘ustion af if eve coat odele was 20 have been the princi
pel concern ofthe study. But ahordy after beginniay the evaustiors, the authors
Became avare of rapostanedefciersee in i Hf cycle cost earegovies in use boda
"Thus defining #0 appropriate vet of USAK ape os; categniou and Costelemence
‘becaras an importuns pact of tho reeeareh

"The fame of reference for the evalantion of ite ela cust (1.00 modes und
generalized esliiesing techniques deverven apecin note, Suel, models and tac
Bicues are applied ia mutny ersion contexts: design stulis, fee sizing eudien,
Source selotzion, system acyuielva reviews, and w forth. Fer some of theae des:
Sons it may be slfcient that LOC models and estimuling eachniques indizate the
Toloiva east diferenees éwiong the avellule choiees. This repere, however, is
primarily concerned with fe eye cox evelvas of proposed changes in the eoizu
Filion defined broudly—of aieratt alrwady m development or prniustivr, Toes
proposals suas invatve vsbsln(olineremontalinveranenta in R&D or procure
feet funds that ure though? tobe fund either fr operational reasonsor beesuse
‘hey sil aul n lower aperacing and aupport cnt. En euch esse, the aequisitne
Gecisventickey Head eatimntes of wil sat outear:#3 sted in absolute, abe rel
tive, terme, Heneo the evaluations are based on Bre enpabilityof the aclected LOC
moles om onarece nels eetinates af absolute tnerersental «ows

"Althouge intnde inally as guidelines snd relurence materials for use by
equaition managere an others concern with veviewog ana interpreng Bie
(ysle cost cnalgaae, the mntorivix presented in Ube report sould be useful az well
med with yoeparing und reviewing ie

to-anstyst, aff offers, and ates
cytle eas alias.

‘Ghia research wus condusied under the Projet AIR TORCH study project
“Methods and Anslienians of Like Cyele Analysis for Air Fovee Seton"
SUMMARY

“Lfs oyle pnatysis—the examination of nequicon costs, operations and aup-
port 1ORS! cos. and.aystem capabilites over chef lit ofa wespon system —has
become an increas gi imporeant and widely applied technique many diferent
acer of te Air Farge ayslut scyuisition process. Despite ita widespread use,
considerable unertaintyexinsabnut she fic oflfescle a-ahsiv ava sesrage
tment too, particulary uv unui in evaluating econarcie traseot acquisition ost
Serene O88 cost} and in making funding and qcher recouree lection decisions
Uae deraand rable and ineraadly consstan: escumalrt bate cot

"The main objective of the seorasch raported heres help system acquisiion
rmaagers cope with this unoertainly und vo Formsh thom with means uf osessing
the completeness aed snundness of individu) ie oye east estinaes, The means
provided ran evaluation of i must widely used lifecycle com LCC models: AFH
173-10 mode's (BACE and CACEr tke Logistics Support Gusl mndel (LSC% the
Logistics Composite Model 0080; the MOD-METRIC randel; AFM 284 Manno
cer Siondnds: Air Poree Logista Coram (AFT.C3 Depot Maincenanee Cast Ecuse
‘Gans the DAPCA medel (evelopment anc Prodsut nr Cost of Aircraft and che
PRICE medel (RCS madel for avionics éuvelopment ead poeorement coat Most
life epee analysis siugies make uae of auzh models, amc hence the elvenzthe and
imitations of the modal! usod are important io assoesing 0 propsas] that is jus
fed ox the buss of a lfeeyslesmalysi,

"The enttenr of thin research wus Ube use of hfe eyule analysia iu supper. of
proposes for mejor medifrations tn a previousl: appraved busclin configuration
Tor tiverattaystama already in developmes or production. Suet proposals ofter
involve explicit tmdeots between sequisiien eos: and downstream (hvurel G&S
costs al they ee: the dernding requirement chat the estimates of ine=eme™ral
tS cost be absolute 0 that ty eat be eazared with acquiaton coi estimates.
“The need for eetimates of abwolte cost arices in ottor applications of life evele
analyaié a2 well and hence the requls wea ovycluions arcived at it the mode!
feenluations are applialte ‘a many prablams outsice she imunediae context of
moilfivalion proposal

‘The modele wore evolcared within & framework ireorporaticg {1 set of Te
gle cnt elonionte which serve usa syetemati breakdown 0° he diferent -ypes of
oot ourred gvet the life of an aircraft wyviom and (2 9 set of cout dviring factors
‘whieh provide e goacrllzed meana of desling wilh vovinussirerant exuroctevistis
‘ond operstvtal and eupport coneopts that infuence rast. Thr life eye cost ele
ments were dofcel ic evninaf the USAF program ané budget ctoueuure within the
{geueral outline atthe" Aicrafl Gust Element Bauc-arc™ established bythe Depurt:
tent of Defense, The cag driving fuvtors incluied polices such ae mission typ0,
ddeplogmest mode, wad tenance concept, as we. 38 76:ebhiu;'ma'oaioubiley
tnd physical characterirdee of airerafl systems, The models were evslualad by
‘sxarbining each driving factarastelemarc comabinacion and aawesing the ability
‘bf the cles to peediet the effe if une) on the soet element ofa charge in the
Sriving factar, Figure 8.1 summarizes the ross of the evaluations. Tee coor
tavded atinga inthe ells of the matric indieats. for corh driving factor/oose ele
. &

ES SS \
WN a ‘yw *

SS OS
RW E

wg

~ NgS

GREEN YELLOW
mene combinalion, the quality of overage provid hy the model chat dove the best
oof predicting the wnt inplictiv fy chat eorehiaation.

‘The cost mindele reviewed havu wubstacti’difeveners ia thes inended use.
coverage of cost element ana tae strengths unl weakeesses oftheir eiroating
Uechninues, The evaluations show thst there are few areas where che models—
‘pdivicually or in combination—ere capable of producing seiableestiestes of the
ibsolute, meremental cols of @ proposal. Ane there are many areas where the
‘rodele provide no use coe: etimeting espabilty. The parceulor driving factor?
font element combicitionsIhot ave mast importa wil arg fram one psilem
fdcuther. Mure than half of tha rmcvantvominatiors are either not dealt with ut
libs the madelx ur are landled ina mauner that appears ta be comploly uneelat
fd to the ren cause andes reluioustips. Hence, a most caaes the models eanrot
serve asa fmt bags fo Efe eye roa estimales without aclitional soppenting dace
fn@ ane.yoes, O&S vost esimares produoed hy the Tiodels ater serve only a
relaive eos inisatorm resembung "Ggures of werit” rather the preicdions of
Sellar cosa thet sun be observed an measured in the fut. Phage figutes ot meric
Iu bo use! for enamining relative vomparizana of tke ORS costs af alternatives
‘nvcome eppicesions, but size their relatonship tv ral O2S east ie obscuce, they
tary rare helpful ic determining whether an ipereroatul investment is axonon
tally cuslied by futave “savings” in operating cost

"The principal mosuge Unit emerges is chat carzeal 1400 modal howe many
shertecmnes that imis their urefusnee fer life cycleans'sseso naive innetfcation
proposals er other applicainns where estimates of absele,ineremeatsl roet Te
Toquired. Specie seas ae vlentfied where drivieg factor/2ost element combine
Hons are addhovwed peasy for aot at all) iy the models. Az uwermeas of these
eScienciee sould (1) aid decisionmekere in undureanding the degree of uncer
‘ainry in wn entimata: 2} help analysts vo decide where eslimates provided by the
fredele neee to be sapgerted by aditional analyavt or empirical evince: and (8)
{beicate the prinapal araux where ixanrovercente in cost data bases sndfor re
earch and daveloptent of improcec cos estiwating methodologies tre needed,

‘itbnugh estimating dilGoulies exist for bot> ueyuisbion aud O&S cos, the
latter are paviclaty crublesome ia most life seis analyses. In devetoping im
‘roved estimating techniques, the Snet priority «}owld he giver ta more realistic
representation of OBS costs.

“Hisrrien! daw im support of LCC sotimales have been dial! enn angels
‘becavee the cost etegorics usta in LOO mndes are incompatible with he fhnetinn
sland wccounting cecepories used vo record mening and cost information. The fe
Cele cost element deLtuions developed for ts cewanck provide means ef sh:
Ievinting much of that difficulty, Acuplicn of cheee defnitione—or ofa sirior sat
based ou Air Force fnaneial and resanrce munagerient ealezores- should provide
w soicnder Basia for LOC estimates chac can be reais ally traced Lion icics]
feelmaie dhrqugh fil implementation of 4 propos)

Thadditon to the use oa aingle,wei-defined ot elemoal structive the athur
major general improvement that shucid he made io LOC modeling iv inviraved,
ensitivity to causeeffect celtionehipe, This requires both the identification of
‘seal causal relationships between cost driving ficwors and slements af esl. and
the revoxailion that ongen:zatienal, operstiana, and suppor. eancepes ere impor
fant cae driven in ation to lhe slrevat system's physieal chanveterities,
‘Allocation methds that simply ducrbuce oss in prepoetian to a conmeniet
fystam chortetenatic (und which have Lille or we estalvishes relafionety with
tine eal cost driving foccom) should he avoided, If LCC molellig is used etal
tusring alernasive hardware designs, blity at the wcbsystem and eonoponcn:
Ievel is rewired. Bue the eomprmentlevel wslbity thats aalible in existing
tmovels should be coutbined with 9 suare thorougl consideration ofthe organi
onal, opevatioral, and support potiies hat mak my @vatal Weapon syst