The Theory and Feasibility of Implementing an Economic Input/Output Analysis of the Department of Defense to Support Acquisition Decision Analysis and Cost Estimation

Abstract

Acquisition decisions drive resource requirements that are spread widely across the Department of Defense (DoD). DoD policy and Federal statute call for using the Fully Burdened Cost of Fuel (FBCF) in cost estimates in Analyses of Alternatives (AoAs) that support acquisition decision making so that decisions reflect all of the costs throughout the DoD organization that will be incurred (or saved) by a given acquisition decision. An Economic Input/Output (EIO) model of the DoD organization could be used to estimate the unit-specific FBCF, capturing all higher-order effects as demand is propagated through a complex and nonlinear supply chain. The model would produce unit-specific estimates of the cost and DoD-wide fuel requirements associated with a marginal change in fuel requirements in any unit of the organization. This paper describes the feasibility and potential benefits of an EIO model of DoD fuel supply.