A General Analytic Approach To System Cost Uncertainty Analysis

Abstract

This paper presents the foundations of a recently developed analytic approach to system cost uncertainty analysis. The approach is referred to as the Analytic Cost Probability (ACOP) model; and its structure is sufficiently general to meet the characteristics of any program definition. The analytic nature of the ACOP model facilitates the identification of cost variance drivers and measures their overall impact on the system cost. The ACOP model offers several techniques for treating correlation between cost elements of a work breakdown structure; a technical issue that has not been widely discussed in the literature or accounted for in existing models. An illustrative analysis using the ACOP model on a hypothetical system is presented, and the mathematical foundations of the model are provided so that the cost analysis community may review, comment on, and expand upon the approach within their organizations.