An error components model of cost overruns and schedule slip on army R&D programs

Abstract

What has been causing cost overruns and schedule slippages in Army major weapon‐system R&D programs during the past ten years? This article addresses this question with emphasis on the effectiveness of an Army acquisition strategy entitled Total Risk Assessing Cost Estimating (TRACE). An empirical study employed a questionnaire and interviews with key personnel from all of the major Army Program Management Offices involved with R&D. The major research question was the following: What explanatory variables have been affecting R&D cost overruns and development time? This includes an evaluation of TRACE as a potential explanatory variable. Data was collected and analyzed using an error components multiple regression model. The major explanatory variables that appeared to explain cost overruns were technological risk of the program, education and experience of key program management office personnel, and the degree of “buy in” by the prime contractor. Strong statistical results indicate that TRACE is having little or no effect on cost overruns. In the case of development time, the major explanatory variables were seen to be technological risk of the program, testing, TRACE, education, and length of the R&D contract.

The limited informativeness of resource discrepancy feedback to designers

“…It is probably true to say that the field has paid much less attention to how estimates influence the activities that are being estimated, how they are refined in the light of experience, and how people make inferences when they can compare the estimate with the final outcome. There is some literature that explains the systematic differences between estimates and outcomes in different contexts [19,20] but even this says little about the perceptions or actions of the organizations that were involved. The question of whether engineers generally, and design engineers in particular, get informative feedback on the discrepancy between expected and outcome values of project cost and product cost -and whether they make correct inferences from it at the time of estimating new projects -remains an open one.…”