New Approaches to Defense Inflation and Discounting

Department of Defense (DoD) cost analysts must have correct information to generate operations and maintenance (O&M) estimates to support effective decisionmaking. Uniquely positioned under the 2009 Weapon Systems Acquisition Reform Act (WSARA) to improve and support DoD cost analysis, the Offic...

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Bibliographic Details
Main Authors: Connor, Kathryn, Dryden, James
Format: Report
Language:English
Subjects:
ABRAMS TANK
ARMORED PERSONNEL CARRIERS
ARMY MASTER DATA FILE PRICE
BRADLEY ARMORED PERSONNEL CARRIER
Combat Vehicles
COST ESTIMATES
COST INFLATION
DEPARTMENT OF DEFENSE
DISCOUNT RATES
DISCOUNTING
Economics and Cost Analysis
EQUAL-WEIGHTED INDEX
GEOMETRIC-MEAN INFLATION INDEX
INFLATION INDICES
INFLATION(ECONOMICS)
Logistics, Military Facilities and Supplies
LONG RANGE(TIME)
MAINTENANCE
MARSHALL-EDGEWORTH INFLATION INDEX
MILITARY PROCUREMENT
OPERATION
OPERATIONS AND MAINTENANCE COSTS
POLICIES
SPARE PARTS
SUPPLY CHAIN SURCHARGES
TANKS(COMBAT VEHICLES)
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Summary:Department of Defense (DoD) cost analysts must have correct information to generate operations and maintenance (O&M) estimates to support effective decisionmaking. Uniquely positioned under the 2009 Weapon Systems Acquisition Reform Act (WSARA) to improve and support DoD cost analysis, the Office of Cost Assessment and Program Evaluation (CAPE) within the Office of the Secretary of Defense asked RAND to assess O&M costs associated with several ground vehicles. The RAND researchers perceived a related question that also needed to be addressed: How well are current inflation indices and discount rates serving DoD weapon-system program management today? Inflation indices and discount rates are necessary tools in DoD's acquisition process, as the final selection of a system is partially based on potential increases in sustainment costs (inflation) and the present value of future costs (discounting). This study assesses the accuracy of the inflation indices and the benefits of the policy guiding discounting and offers recommendations that may assist CAPE in supporting the work of weapon-system program cost analysts.