Predicting the Likelihood of Cost Overruns: An Empirical Examination of Major Department of Defense Acquisition Programs
Journal of Cost Analysis and Parametrics
This article provides a method for predicting the cost of a major acquisition program five years after program development approval. The authors™ work extends the effort begun by Asher and Maggelet by adjusting for changes in median cost growth factors for each acquisition domain. Procurement average unit costs at program approval and five years afterwards were compared for 101 major United States Department of Defense acquisition programs. Individual program cost growth ratios were gathered into 28 sub-groups, based on the product and year of approval. The authors employed a least squares regression to obtain the equations coefficients. In 26 of the 28 groups of data, a comparison of predicted costs to actual costs resulted in very low p-values, leading to the conclusion that the revised formulation is a valid predictor of program cost at the five-year point in product development.
Alan K. Gideon is a lead systems engineer with The MITRE Corporation. His 20 years in the U.S. Navy included ship operation, design, repair, and construction. Mr. Gideon holds a B.Sc. in Mechanical Engineering from UNM, an SM. in Naval Architecture and Marine Engineering, and OCE from MIT. He is a Ph.D. candidate at The George Washington University; his chief area of research is risk management.
James S. Wasek is a Senior Enterprise Architect and the Regional Director of Operations at Stafford/Quantico, VA, with eScience & Technology Solutions, Inc. He provides technical, systems engineering and operational and systems architecture support for numerous U.S. Marine Corps Command and Control and Radar systems. Dr. Wasek has significant experience in the areas of systems engineering, enterprise architecture, test and evaluation, systems analysis, acquisitions, and program management. Dr. Wasek is also an Adjunct Professor with The George Washington University since 2006 where he instructs graduate students in the disciplines of systems engineering, engineering management and program management.