Evaluation of the cost effectiveness model being developed for the component improvement programs of the Air Force and the Navy

Abstract

This thesis examines the Cost Effectiveness Analysis (CEA) model used by the Air Force to assist with the decision making process of their Component Improvement Program (CIP). The emphasis was on studying the model for its use in the Naval Component Improvement Program. With an example provided by General Electric, a sensitivity analysis was performed to determine the cost drivers of the model. For the example, the major cost drivers were found to be the Incorporation Style, Kit Hardware Cost, and the Spare Parts Factor. Next a simple simulation was conducted to determine how random component failures affect the life cycle cost variability of the CEA model. The author concluded that additional simulation studies should be conducted for other causes of variation. A detailed analysis of the model formulas and assumptions are needed as part of a users' manual