Posted by Weapon System Design Trade Offs: Using Life Cycle Cost (LCC)
Methods Track
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Abstract:
Cost Performance Trade-Off analysis is fundamental to the Systems Engineering process. A cost performance trade study, is a procedural search for a design solution that balances achieved systems performance, effectiveness and cost against the desired or required values for these features and the system. Life cycle cost (LCC) has become increasingly important as systems are designed with longer useful technological lives. Within this paper we will discuss the methodology and rational behind the methodology for using life cycle cost estimates within these weapon system design trade-offs.
A cost performance trade study is an engineering philosophy where in all these aspects of the system (performance, effectiveness, cost and often schedule) are considered during systems requirements definition and subsequently system design. Implementing state-of- the-art methods and tools for planning, information, management, design, cost trade-off analysis, and modeling and simulation significantly improve the effectiveness of system design process. As a contractor, it is incumbent on us to become knowledgeable of the capabilities of the tools, to integrate them into our internal tool sets, and to improve service to our customers.
Deferred modernization due to limited budgets is causing many aging weapon systems lives to be extended, thus incurring greater support costs. This paper will present a short overview of the process of life cycle cost analysis (LCCA). It will address the basic concepts and applications, along with a review of methodologies and some aspects of engineering economics. LCC is defined as the sum total of the direct, indirect, recurring, non-recurring, and other related costs estimated to be incurred in the design, research and
development (R&D), investment, operation, maintenance, and support of a system over its life cycle, i.e. its anticipated useful life span. It is normally organized into four phases: research, development, test, and evaluation (RDT&E); procurement (or acquisition), operations and support, and disposal.
Economic Decisions are often made solely on initial investment or RDT&E and procurement cost. But this is only the proverbial tip of the iceberg – a portion of the total cost of ownership. More and more customers (especially government) are emphasizing and requiring an LCC perspective. To make intelligent acquisition decisions to meet a specific need, it is necessary to look beyond acquisition. In defense systems O&S costs can encompass up to 80% of the total LCC. LCC allows the evaluation of competing system proposals on the basis of total ownership cost and allows more effective budgeting of future funds such as O&S costs and disposal costs. A LCC perspective maximizes the benefit of applying strategies such as Cost as an Independent Variable (CAIV) and Design to Cost (DTC). Most Life Cycle Cost Analysis (LCCAs) require a mix of estimating methodologies. The methods may be applied individually or in combination. Analogy and parametric tend to be most useful in the early stages of product development. As program and system design stabilizes parametric estimating becomes more useful. A detailed design facilitates engineering estimate and projection of actuals.
Author(s):
F. Quentin Redman
Systems Engineering laboratory of Raytheon Space and Airborne Systems in El Segundo California. He is responsible for Total Ownership Cost, Design and Life Cycle Cost, Risk Analysis, and Cost as an Independent Variable (CAIV) with 30 years of Economic experience. Quentin received his Bachelor of Science in Engineering Technology Electronics from California State University at Long Beach California in 1970 and his Masters of Science in Financial Economics from West Coast University Los Angeles in 1976. Quentin has been on the Board of Directors for the International Society Parametric Analysts and has also previously served as ISPA’s Treasurer. Quentin has over 26 years with the company. Quentin has presented a number of papers at prior years Systems Engineering Symposia and at ISPA, SCEA, INCOSE, and NDIA conferences/symposia.
George L. Stratton
George L. Stratton is an Engineer Fellow with Raytheon Missile Systems’ Cost Engineering Center in Tucson, Arizona. He has over 28 years with Raytheon. He currently leads many challenging assignments. He holds degrees (AS, Dixie College & BS, Utah State) in Physics, an MBA (Pepperdine), and has completed partial work toward a Ph.D. (Claremont Graduate School) in management science. He is trained on Parametric models and was selected for and completed the Hughes line managers training course. He is a past vice president of the Southern California Chapter of ISPA (International Society of Parametric Analysts) and is now serving on ISPA’s international Board of Directors.
Andrew T. Crepea
Andrew Crepea is a Principle Systems Engineer with Raytheon Missile Systems’ Cost Engineering Center in Tucson, Arizona. He holds a Bachelor’s degree in Bioengineering from the University of California, San Diego and a Master’s of Science in Operations Research from the Naval Postgraduate School. Areas of responsibility include parametric cost estimating, Life Cycle Cost (LCC), Design-to-Cost (DTC), and Cost as an Independent Variable (CAIV). Prior to joining Raytheon he was an Operations Research Analyst with the Naval Air Systems Command in Patuxent River, Maryland. Andy served 24 years in active and reserve components of the United States Navy primarily in P-3C Orion maritime patrol aircraft. He also served as an aircraft carrier Tactical Action Officer, an Operations Test Director with the Operational Test and Evaluation Force and as an Aerospace Engineering Duty Officer.