Posted on Mar 31, 2015
MSgt Group Superintendent
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F-35_cost
In a recent class we discussed Target Costing and other measures used to manage program and acquisition costs. Target Pricing a cost management tool for reducing the overall cost of a product over its entire life-cycle with the help of production, engineering, research and design. Target Costing doesn’t really apply to DoD so after some research I found out about a past cost savings program used by the DoD called Cost as an Independent Variable (CAIV). I read one of the original reports that talked about possible 15/30% decrease in costs under this program. It was used from 1996 until around 2002 when DoD finally determined that it wasn't effective.

One of the flagship CAIV programs was the Advance Warfighter Aircraft, now known as the F-35. CAIV proved to be unrealistic and the F-35 program has been plagued by cost overruns of >$150B at this time. The F-35 program has been restructured multiple times and finally seems to have stabilized just this year.

Is anyone involved in any DoD cost management programs similar to Target Pricing? If you aren't directly involved in these programs, what ideas do you have that you think might help the DoD improve in their recent efforts to reduce the cost of acquiring new equipment and managing total lifecycle costs? I think this is especially important in the current era of sequestration.

http://www.imanet.org/docs/default-source/thought_leadership/management_control_systems/implementing_target_costing.pdf?sfvrsn=2
http://www.dau.mil/pubscats/pubscats/AR%20Journal/arq97/rus.pdf
http://contraryperspective.com/2014/02/18/the-f-35-fighter-program-america-going-down-in-flames/
http://www.defensenews.com/story/defense/2015/03/19/f-35-pentagon-nunn-mccurdy-breach/25011291/

Picture Source: http://www.wand.org/2014/02/06/f-35-the-jet-that-ate-the-pentagon/
Edited >1 y ago
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