Problem Identification

Project Management

DoD Acquisition Life Cycle

Application Timeframe

Problem Reasoning & Motivation

Proposed Solution

What is the problem? Multiple acquisition programs have reported to have changed its requirements during its life cycle which ultimately resulted to cost growth [13]. Simultaneously, procurement quantity changes from acquisition baseline contributed as a significant source of cost growth [2]. It is widely presumed and accepted that changes of requirements and changes of quantity results to acquisition cost overrun.

[13]

• Since 1983, Department of Defense (DoD) project management has been reporting to Congress for their acquisition cost overrun [11]. The DoD project management has been dealing with a constant challenge of cost overrun due to mission requirements/capability changes and unit quantity changes in their acquisition programs.

• Systems Engineering plays a crucial role in early and continuing efforts on designing a system. Project management ensures systems engineering is applied properly in acquisition life cycles to meet requirements within available resources, technology, time and people [4; 13].

• DoD acquisition programs move forward through the established DoD acquisition life cycle framework as found in DoD Instruction 5000.02, Operation Acquisition System. Through this framework, acquisition goes through series of review and decision points [6].

[7]

There has been very little formal research conducted on how the relationship between constantly changing mission requirements and the resultant changes to unit quantity directly impacts cost within the DoD acquisition life cycle.

Dynamic Hypothesis: Approach: Understand the interplay effect of mission requirements/capabilities changes and unit quantity changes contributing to the cost of DoD program acquisition constructed by complex interactive effects with System Dynamics approach.

Year 03/2001 12/2002 03/2005 08/2012

Proc Cost $ 4,444.4 $ 2,904.6 $ 3,416.1 $ 5,914.2

Unit Quantity 63 51 51 45

APUC $ 70.5 $ 56.9 $ 67.0 $ 131.4

Source: Selected Acquisition Report and GAO

Program Examination: • In 2005, Nunn-McCurdy Cost Breach reported change of requirements of RQ-4 Global Hawk to have increased its acquisition cost [10].

[10]

[10]

Program Examination: • The original program baseline from January 1998 envisioned the program to deliver 32 ships. Change of capability requirements contributed to one of the sources that drove down the unit quantity [3].

[3]

To avoid Significant Breach

• Must be less than 15% (current baseline estimate) of capability in terms of unit cost • Must be less than 30% (original baseline estimate) of capability in terms of unit cost

To avoid Critical Breach

• Must be less than 25% (current baseline estimate) of capability in terms of unit cost • Must be less than 50% (original baseline estimate) of capability in terms of unit cost

To avoid Significant Breach

• Must be less than Original Unit Quantity – (Procurement Budget/(Current Baseline Unit Cost x 1.15)) • Must be less than Original Unit Quantity – (Procurement Budget/(Original Baseline Unit Cost x 1.30))

To avoid Critical Breach

• Must be less than Original Unit Quantity – (Procurement Budget/(Current Baseline Unit Cost x 1.25)) • Must be less than Original Unit Quantity – (Procurement Budget/(Original Baseline Unit Cost x 1.50))

• Using system dynamics approach, 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 provides a proactive decision opportunity for the project management with the understanding of tradeoffs between changing mission requirements and unit quantity to avoid cost overruns.

• [1] Assidmi L., Sarkani S., and Mazzuchi T. A Systems Thinking Approach to Cost Growth in DoD Weapon Systems.

IEEE Systems Journal, Vol. 6, No. 3, September 2012.

• [2] Bolten J. G., Leonard R. S., Arena M. V., Younossi O., and Sollinger J. M. Sources of Weapons System Cost Growth.

RAND Corporation, 2008.

• [3] Blickstein I. et al. Root Cause Analyses of Nunn-McCurdy Breaches. RAND Corporation, 2011.

• [4] Cantwell P. R., Sarkani S., and Mazzuchi T. Dynamic Consequences of Cost, Schedule, and Performance Within

DoD Project Management. Defense Acquisition Review Journal, April 2013.

• [5] Coyle J. M., Exelby D., and Holt J. System Dynamics in Defence Analysis: Some Case Studies. The Journal of the

Operational Research Society, Vol. 50, No. 4, April 1999.

• [6] Defense Acquisition Guidebook

• [7] Defense Acquisition University

• [8] Ford D. N., and Dillard J. Modeling the Performance and Risks of Evolutionary Acquisition. Defense Acquisition

Review Journal, July 2009.

• [9] Ford D. N., and Sterman J. D. Dynamic modeling of product development processes. System Dynamics Review,

1998.

• [10] Unmanned Aircraft Systems: Global Hawk Cost Increase Understated in Nunn-McCurdy Report. Government

Accountability Office, 2005.

• [11] Schwartz, M. The Nunn-McCurdy Act: Background, Analysis, and Issues for Congress. Congressional Research

Service, 2010.

• [12] Sterman J. D. Business Dynamics: Systems Thinking and Modeling for a Complex World. McGraw-Hill

Companies. Inc, 2000.

• [13] Sullivan M. J. DoD Cost Overruns: Trends in Nunn-McCurdy Breaches and Tools to Manage Weapon Systems

Acquisition Costs. Government Accountability Office, March 2011.

• [14] U.S. Government Accountability Office.

• Case Study: RQ-4 Global Hawk Results

• Case Study: DDG-1000 USS Zumwalt Results

• Dynamic Equation

• Modeling Process

• Related Works

Requirement /Capability

N/A Requirements constitute to the capability planned towards the delivery of a system. Initial requirements/capabilities may evolve throughout the life cycle of an acquisition.

Unit Cost ∑ Requirements/Capabilities Unit cost is the cost for a given unit of a system which encompasses the evolving requirements/capabilities.

Unit Budget UB = PB / UQ Unit budget is the intended expenditures for a given unit of a system. The unit budget may be calculated if there is an fixed procurement budget and fixed unit quantity on demand.

Unit Cost Overrun UCO = UC – UB Unit cost overrun is the amount of excess of unit cost over unit budget.

Unit Quantity N/A Unit quantity is the amount or number demanded for a given unit. Either the unit quantity becomes fixed throughout the life cycle of an acquisition disregarding the changing unit cost or the stakeholders may control the unit quantity demand based on the fixed procurement budget and evolving unit cost due to requirements/capabilities changes.

Procurement Cost PC = UC x UQ Procurement cost is the cost for a given procurement phase during an acquisition. The procurement cost may be calculated if there is an fixed unit cost and fixed unit quantity on demand.

Procurement Budget

N/A Procurement budget is the intended expenditures for a given procurement phase during an acquisition. The procurement budget is established by the stakeholders which may change throughout the life cycle of an acquisition.

Procurement Cost Overrun

PCO = PC – PB Procurement cost overrun is the amount of excess of procurement cost over procurement budget.

1. Problem Articulation • Theme selection & Problem identification • Key variables within problem • Dynamic problem definition (Reference modes)

2. Formulation of Dynamic Hypothesis • Initial hypothesis generation • Mapping from key variables

3. Formulation of a Simulation Model • Initial simulation model • Estimation of parameter, behavioral relationships, and initial conditions • Test for consistency

4. Testing • Comparison to reference modes • Sensitivity test

5. Policy Design and Evaluation • Policy design representation within model • What if…? analysis • Interaction of policies

• Assidmi L., Sarkani S., and Mazzuchi T. (2012)

• Cantwell P., Sarkani S., and Mazzuchi T. (2013)

• Coyle J. M., Exelby D., and Holt J. (1999)

• Ford D. N., and Dillard J. (2009)

• Ford D. N., and Sterman J. D. (1998)

WORK FLOW PROCESS SURROUNDING SYSTEM DESIGN/UNDERSTANDING

Cost Growth Estimation Model

Processes with Naval Command and Control

WORK BACKLOGS AND FLOWS THROUGH A DEVELOPMENT PHASE

Feedback Loops in a Single Development Phase for a Initial Completion Development Activity