Real options in military system acquisition: the case study of technology development for the Javelin anti-tank weapon system
Loading...
Authors
Angelis, Diana
Ford, David N.
Dillard, John
Subjects
Real Options
Analysis of Alternatives
Technology Development
Javelin
Analysis of Alternatives
Technology Development
Javelin
Advisors
Date of Issue
2013-08-22
Date
August 22, 2013
Publisher
Monterey, California. Naval Postgraduate School
Language
Abstract
Three different technologies were considered in the technology development
phase of the Javelin anti-tank missile system: a laser-beam riding system, a fiberoptic
system, and a forward looking infrared system. The Army awarded three “Proof
of Principle” contracts to three competing contractor teams to develop and conduct a
“fly-off” technology competition. The current work analyzed the three alternatives
using measures of effectiveness (MOE) to combine performance across nine
acquisition objectives. These MOEs were compared with development and
procurement cost estimates. No alternative dominated. Marginal benefits analysis
was next used to define the trade–off space among the alternatives. Differences in
the likelihood of successful development of the alternatives were evaluated, resulting
in one technology appearing to dominate. However, the acquisition approach
created a real option for the best alternative that could differentially add value to the
alternatives. A real options model was used to analyze the value provided by
investing in this competitive option. Results indicate the Army paid less than the total
value of the three options, but could have increased net savings by paying different
amounts to test each alternative. The analysis method provides a logical and
defendable approach to the analysis of alternatives during technology development
uncertainty.
Type
Technical Report
Description
Acquisition Research Case Study
Series/Report No
Department
Acquisition Management
Identifiers
NPS Report Number
NPS-AM-13-013
NPS-AM-13-013
NPS-AM-13-013
Sponsors
Naval Postgraduate School Acquisition Research Program
Funder
Format
Citation
Distribution Statement
Approved for public release; distribution is unlimited.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.