1964-01-01

Cost-Effectiveness 640549

We are unlikely to achieve adequate operational system reliability until the cost-effectiveness analysis techniques are understood and put to work. A current example of opportunity to improve launch vehicle cost-effectiveness via reliability improvement is cited, and a quantitative cost-effectiveness definition proposed.
Six questions about past and potential use of these techniques are posed to representatives of DOD, U.S. Air Force, U.S. Navy, U.S. Army, NASA, Aerospace Corp., and Rand Corp. The DOD response is contained in Dr. Charles J. Hitch's banquet address on “Cost Considerations and System Effectiveness” and all others in the Proceedings and Panel discussions.
There is general agreement that cost-effectiveness must be a quantized comparison (usually the ratio) of operational system effectiveness with total program cost. Contract incentives, if used at all, should be related to cost-effectiveness instead of cost and/or reliability. All of the Services have long been using cost-effectiveness analysis for “operational” situations, to establish optimal system definition prior to design and production, but seldom accounting for reliability impact. Many such analyses have also been made for system design by contractors, but again only a few fully accounting for reliability impact. A great deal of such analysis has been applied to existing systems to improve the efficiency of their utilization, with remarkable payoff.
While cost-effectiveness models are thus being widely used for analysis of particular operations or systems, there is little evidence of their use for regular management audit and control of cost-effectiveness gain or loss throughout a program. If the latter can integrate or displace other needs, instead of just adding more paperwork, there should be a very substantial saving to taxpayers.

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