Historical Trend Analysis Analysed

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Historical Trend Analysis Analysed

Journal of Cost Analysis and Parametrics

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This article describes three alternative approaches to historical trend analysis. First, the study con-siders the trend over time of the complexities of past systems. This results from the application of a parametric cost model (PRICE H) to the normalisation of historical projects’ costs and to the plot-ting of the complexity over time. Second, the trend over time of the equipment production cost, which has been observed as ‘the cost of successive generations of equipment to continue to rise at above the rate of inflation,’ commonly referred to as ‘Defence equipment cost growth.’ Finally, an analysis of technology over time through the application of multi-variable, forward step-wise regression (true concepts methodology)—one of the variables in the regression analysis being the cost residual versus time representing the cost of technology growth. The article describes the advantages and disad-vantages of each historical trends analysis method. The research study indicates when each method might be applicable and in what circumstances it is dangerous to consider their usage. A case study has been used to consider the effect and accuracy of each of the methods. This review has considered the historical trend for a particular system and predicted the future cost of a possible acquisition. The objective of the study is to stimulate discussion amongst the cost community as to the usage of historical trends analysis, a common term that has not matured in many ways. The historical trends analysis technique is transferable and equally applicable to commercial or government organisations wishing to predict their own costs.


Dale Shermon