ART - Regression Approach for Estimating Procurement Cost 2005

The article discusses the issue of cost growth in Department of Defense (DoD) weapon systems and the need for better and more realistic cost estimates. The authors investigate and expand on a two-step logistic and multiple regression methodology for estimating procurement costs in the Engineering and Manufacturing Development phase of DoD acquisition. They present two statistical models that cost estimators can use to mitigate cost growth in government acquisition programs. The article also discusses the concept of "realistic costing" and the importance of identifying and controlling the root causes of cost growth. The authors provide examples of current acquisition programs, such as the F/A-22, that have struggled with cost control. They emphasize the challenge of accurately assigning dollar values to risks related to potential cost growth and the importance of using objective methods, such as statistical regression techniques, to determine relationships and predictors of cost growth. The authors reference previous research on cost growth studies and highlight the usefulness of the two-step regression approach in predicting cost growth during the Engineering and Manufacturing Development phase. They suggest that this methodology could potentially be extended to other cost estimation scenarios, based on their research hinting at its applicability to other cost areas.