Analysis of the historical relationship between current Navy RDT&E and future investment in procurement

Abstract

In partial response to a memorandum for the Superintendent, Naval Postgraduate School, from the Director of the Fiscal Management Division, Office of the Chief of Naval Operations (Serial 922E21/587526 dated 24 April 1978) , this thesis attempts to analyze the historical relationship between the Navy's investment in current RDT&E and future investment in procurement. Utilizing data from fiscal years 1962 through 1979 and single equation econometric forecasting techniques, linear models predicting procurement one to four years in advance based on current RDT&E are developed. From time-series data, with the models adjusted for serial correlation of the error terms , ex post forecasts and confidence interval estimations are used to evaluate the extent and usefulness of the predictive relationships discovered . Eight separate models are developed, and analysis of results indicates the existence of a predictive relationship. However, there are also indications that the basic relationship may have changed during the period under study. The relative inaccuracy of forecasting methods when earlier data are ignored makes the usefulness of these procedures to those who shape future Navy budgets difficult to determine.