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NATO Independent Cost Estimating and the Role of Life Cycle Cost Analysis in Managing the Defence Enterprise


Building upon the efforts of SAS-028, SAS-054 and SAS-069, the goal of SAS-076 was to prove the concepts of these earlier RTO SAS works on Life Cycle Cost Analysis by rigorously applying the guidelines to generate sound, reliable, Independent Cost Estimates (ICE) of major weapon system acquisition programs of current, international interest: HMS Rotterdam and HMS Johan de Witt Landing Platform Docks (LPD) of the Netherlands; and NATO’s Alliance Ground Surveillance System (AGS). Innovative, pioneering statistical techniques were employed in these efforts that pushed the state of the art in cost analysis to new frontiers: 1) Decision trees, regression models, and hierarchical clustering, based on scores of technical and performance characteristics, to estimate ship acquisition cost; and 2) Benchmark coefficients of variation coupled with a point estimate to generate a cumulative probability distribution of cost, or S-curve, for NATO AGS. SAS-076 also ventured into the mélange of defence planning, acquisition, and capability portfolio analysis. SAS-076 surveyed procedures and processes of several NATO and PfP Nations for establishing national security guidance and objectives; for identifying military needs; and for developing and procuring solutions. SAS-076 identified commonalities and differences amongst nations, and it recommended a set of best practices in the cost-analysis domain.

STOPublicationTypeTechnical Report RDP
ISBNISBN 978-92-837-0162-0
AccessOpen Access
STOKeywordsacquisition; cost; estimates; models; portfolios; ships; simulation; statistics

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$$TR-SAS-076-ALL.pdf$$TR-SAS-076-ALLNATO Independent Cost Estimating and the Role of Life Cycle Cost Analysis in Managing the Defence Enterprise 8/31/2012Open Access