Daniel Shin, Dr. Enrique Campos-Náñez, Dr. Pavel Fomin, and Dr. James Wasek
The federal government acquisition of major defense systems has seen cost overruns in billions of dollars. Accurate cost estimation for these acquisitions is a necessary prerequisite for decision makers. However, the complexity behind major system acquisitions makes cost estimation very challenging. Evolving mission requirements is one of the main drivers affecting the complexity of the cost estimation. A proposed acquisition may change its requirements moving forward in its development life cycle requiring a recalculation of cost. Current cost estimation techniques do not take into account the complete effect of this driver when calculating the incremental change in cost.
System dynamics provides a framework for understanding complex system behavior by modeling the temporal effect of various sub-systems on each other. Using system dynamics techniques we model the dynamic change of cost throughout the duration of acquisition life cycle by characterizing the interplay between changing mission requirements and resulting changes to unit quantity that alter the cost of a DoD acquisition. The proposed approach improves cost estimation, and allows the dynamic revision of cost.