Please use this identifier to cite or link to this item: https://dair.nps.edu/handle/123456789/2616
Title: A Robust Design Approach to Cost Estimation:
Authors: Susan Sanchez
Matthew M. Morse
Stephen C. Upton
Mary L. McDonald
Daniel A. Nussbaum
Keywords: Life Cycle Cost (LCC)
Modeling
Cost Estimating
Issue Date: 14-Jul-2014
Publisher: Acquisition Research Program
Citation: Published--Unlimited Distribution
Series/Report no.: Life Cycle Cost
NPS-CE-14-177
Abstract: Life Cycle Cost (LCC) assessments are of interest during the design phase for new systems. These often involve costs that must be estimated from a variety of different sub-models, including cost models constructed from historical data, forecast models that attempt to predict future economic conditions, and economy-of-scale models that impact production schedules, and more. When these disparate models are put together to obtain an overall cost model, many of these individual sources of uncertainty end up being aggregated or ignored. Consequently, the cost estimates may not provide program managers with appropriate assessments of the risk and overall variability of the new systems. We propose a structured approach for obtaining robust LCC estimates by taking into account a broad set of environmental noise conditions. This will enable program managers to better understand the uncertainty in their overall estimates, and to identify any decision factor combinations that result in both low costs and low cost variability. This may provide guidance on which of the many potential uncertainty sources require close monitoring, and which can safely be disregarded. We illustrate this approach with a model the USMC is evaluating for use in cost/benefit analysis of alternative energy systems.
Description: Acquisition Management / NPS Faculty Research
URI: https://dair.nps.edu/handle/123456789/2616
Appears in Collections:Sponsored Acquisition Research & Technical Reports

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