Extending an Econophysics Value Model for Early Developmental Program Performance Prediction and Assessment

Abstract

This study is focused on presenting the viability of an econophysics theory of value as a means for creating a quantitative value metric to estimate the future value of Department of Defense (DoD) technology acquisition programs. We will describe a simple value model and further definitize this model into a DoD acquisition framework to illustrate the utility for developmental programs within the DoD and defense industrial base. This paper will describe a method by which a metric for surrogate financial value can be allocated across a program, allowing program managers to assess the surrogate return on investment (s-ROI) of their programs and providing greater flexibility in managing program risk. Additionally, we introduce a new program performance index that reflects s-ROI which incorporates a risk-based measure that modifies and extends the traditional earned value management (EVM) cost and schedule indices and provides an earlier indication of program challenges. We refer to this index as the s-ROI Performance Index (RPI), which has the potential of being a leading program indicator on overall program value and performance. Recommendations for the use of this model in DoD acquisitions, in general, are provided at the conclusion of this study.