Contract Over Target Baseline (OTB) Effect on Earned Value Management's Cost Performance Index (CPI)
Abstract : Cost growth is a problem in U.S. Department of Defense (DoD) acquisitions. A particular component of cost growth is a cost overrun or Over Target Baseline (OTB). In 2009, Trahan found that the Gompertz growth curve better predicted program Estimates at Completion (EAC) for OTB contracts. In 2010, Thickstun studied "the relationships between overruns and a variety of factors," but found OTB occurrences "random" and questioned the benefit of the OTB process (Thickstun, 2010). In this research, we study OTB's ability to effect improved program cost performance; we examine OTB's effect on the cumulative Cost Performance Index (CPI) slope after an OTB intervention. We find there is no statistically significant change in cumulative CPI slope after OTB. For the data studied, an OTB investment does not significantly improve management's ability to earn cost value as reflected in the cumulative CPI slope.
The Impact of the Packard Commission's Recommendations on Reducing Cost Overruns on Defense Acquisition Contracts
Abstract : Using data from selected acquisition reports, Drezner et al. (1993) show that reform initiatives from 1960 to 1990 did not reduce cost growth on 197 defense programs. The average cost growth on these programs was 20 percent and did not change significantly for 30 years. Using data from the Defense Acquisition Executive Summary data base, we show a similar result. Initiatives based on the recommendations of the Packard Commission did not reduce the average cost overrun percent experienced on 269 completed defense acquisition contracts evaluated over an 8-year period (1988 through 1995). In fact, the cost performance experienced on development contracts and on contracts managed by the Air Force worsened significantly. Although many factors contribute to poor cost performance, estimation error is a casual factor identified in each study.
Acquisition Policy Effectiveness: Department of Defense Experience in the 1970s
Abstract : This report surveys acquisition of 32 major weapon systems that entered full scale development during the 1970s. Changes occurred in both acquisition practice and program outcomes in response to policy initiatives introduced at the beginning of the decade. The amount of test information available at major decision points (DSARC milestones) increased substantially; the program manager's position was strengthened through better training, longer tenure, and better promotion prospects; and competition has increased, especially in the early phases of development. A typical program experienced cost growth of roughly 20 percent, slipped its schedule by just over 10 percent, and generally met its performance goals. Programs surveyed here equalled or surpassed a similar set of 1960s programs in schedule and performance goals and came closer to cost goals. Several promising ways are recommended for strengthening the present acquisition process and improving the quality of information that managers need to track and control ongoing programs.