2013-PA04

Developing a Military Aircraft Cost Estimating Model in Korea

Parametrics Track

PA-4_Presentation_DevelopingAMilitaryAircraftCostEstimatingModelInKorea_Kang

Abstract:

A parametric cost estimating model is very useful for the weapon acquisition process. But it requires validated and normalized historic cost data to develop the Cost Estimating Relationships (CERs). Statisticians seek hundreds of data points to assure a good statistical fit between CERs and the supporting data points comprised of cost, technical, and program information.

The Republic of Korea (ROK) has been trying to develop its own cost model with Korea historical cost data since year 2009. However, a common challenge facing all organizations is a perceived lack of verifiable and pertinent cost data which defines development, production, and support costs.

Unfortunately, when developing a cost model, validated lifecycle cost and technical data were limited due to affordability issues or cultural constraints.

So, what can be done to quickly and economically compensate for this lack of data? One approach, developed over the past several years by an ongoing program between the Korea National Defense University (KNDU) and an international program management consulting company (MCR Technologies), has partly bridged this gap and supports the development of a national cost model with multiple operating platforms.

A specific example will be discussed wherein open-source (unrestricted) CERs were adapted (normalized) to the ROK environment considering more than just currency conversions. The example considered each nation’s relative productivity with respect to manufacturing process, economic factors, engineering legacy, and availability of materials.

This paper addresses the topic of developing military aircraft cost estimating model with Korea and U.S data. In order to develop CERs, nine data points were used. Seven data points were U.S data and two data point were Korea data since only trainer aircrafts were developed in Korea. A specific example will be discussed wherein open-source (unrestricted) CERs were adapted (normalized) to the ROK acquisition environment by considering more than just currency conversions. The example considered each nation’s relative productivity with respect to industrial capability, plant capacity, material availability, currency inflation, currency conversion, and relevant manufacturing experience.

Author(s):

Sung Jin Kang Ph.D.
Korea National Defense University
He obtained his ph. D(I.E) from the Texas A&M university in 1988 and his masters degree(OR/SA) from US Naval Postgraduate School in 1983.
He has been teaching OR/SA courses in KNDU since 1989. His teaching experience includes Linear statistical model, Cost estimation, Military O.R and war-game,
Cost and effective analysis, Stochastic models and queuing theory etc.
His research areas include system analysis, cost effective analysis, resource allocation, cost analysis methods and technique in weapon acquisition phases, EVMS (Earned Value Management System), CAIV (Cost As an Independent Variable) concept application in weapon system acquisition phases. He is a senior member of MORS-K(Military Operations Research Society of Korea), and a member of SCEA and ISPA. He has worked and participated in many cost estimating projects. Recently He has been developing “Korea Cost Model” since 2009 with supporting from DAPA.

Dong Kyu Kim
DAPA
He is a major on Republic of Korea Army. He graduated from the Korea Military Academy in 1999 and obtained masters degree from the Moscow National University in 2005, Ph. D (Operations Research) from KNDU(Korea National Defense University) in 2013.
He worked for 3 years as an army finance officer. At that time, he accumulated business experience related to cost and expense. And when he worked in DAPA(Defense Acquisition Program Administration) for 3 years, he was engaged in the defense acquisition policy, especially M&S(Modeling & Simulation), and achieved various studies on program management, cost-effectiveness analysis, and proposed several policies about this field.
Now, he is interested in developing the cost analysis methodology suitable for Korean defense acquisition environment.