Valuation of capabilities and system architectural options to meet affordability requirement

Abstract

This research addresses the problem of how to (1) value architectural options that deliver capabilities to the warfighter not inherently measured in dollar values and (2) conduct a trade study of architectural options, the option’s cost, and the option’s risk to support the affordability mandate for a more effective and efficient acquisition decision-making process. The research models acquisition as a sequential decision process with an options framework but with two significant distinctions: First, it identifies and values system architectural options available in the system design, and not options on the project, and second, it measures capabilities in terms of mission effectiveness compatible with how defense managers think. Architectural options provide flexibility to deal with technical and operational uncertainty. The research contributes to the performance of trade studies in acquisition through the definition of architectural options in terms consistent with defense acquisition (capabilities and not cash flows) and a theory for how program managers can value the capabilities those options provide. The research is intended to support the evolutionary acquisition of system capabilities. As RADM Rowden (2014), the director of Surface Warfare stated, We cannot afford to build ships that are retired because they have been outpaced by the threat; rather, they will need to be retired because they have reached the end of their service life. Defined interfaces and modular designs will treat capability as a commodity, enabling continuous modernization to stay one step ahead of the threat. These “designed-in” features will dramatically lower the complexity of modernizing ships, reducing the time spent in overhauls, increasing operational availability, and reducing total ownership cost.

This research addresses the problem of how to (1) value architectural options that deliver capabilities to the warfighter not inherently measured in dollar values and (2) conduct a trade study of architectural options, the option’s cost, and the option’s risk to support the affordability mandate for a more effective and efficient acquisition decision-making process. The research models acquisition as a sequential decision process with an options framework but with two significant distinctions: First, it identifies and values system architectural options available in the system design, and not options on the project, and second, it measures capabilities in terms of mission effectiveness compatible with how defense managers think. Architectural options provide flexibility to deal with technical and operational uncertainty. The research contributes to the performance of trade studies in acquisition through the definition of architectural options in terms consistent with defense acquisition (capabilities and not cash flows) and a theory for how program managers can value the capabilities those options provide. The research is intended to support the evolutionary acquisition of system capabilities. As RADM Rowden (2014), the director of Surface Warfare stated, We cannot afford to build ships that are retired because they have been outpaced by the threat; rather, they will need to be retired because they have reached the end of their service life. Defined interfaces and modular designs will treat capability as a commodity, enabling continuous modernization to stay one step ahead of the threat. These “designed-in” features will dramatically lower the complexity of modernizing ships, reducing the time spent in overhauls, increasing operational availability, and reducing total ownership cost.