Proceedings of the Eleventh Annual Acquisition Research Symposium, Thursday Sessions Volume II. Acquisition Research: Promoting Affordability in Defense Acquisitions: A Multi-Period Portfolio Approach
Abstract
The implementation of Better Buying Power policies seeks to achieve affordability across the
spectrum of major defense acquisition programs. However, the technical and programmatic
challenges associated with sequential decision-making in the acquisition of large scale,
increasingly interdependent defense systems prompts a need for quantitative frameworks
that can better address the complexities of negotiating capability, schedule, and cost, while
fulfilling target objectives of affordability. Our proposed research extends prior funded work
and adopts innovations from financial engineering to enable quantitatively informed multistage
decision-making under uncertainty. The method provides a means of assessing
tradeoffs between capability, cost, and schedule risks, and the ability to objectively make
sequentially dependent acquisition decisions on a “portfolio” of systems, towards some
desired overarching capability. We adopt a dynamic programming approach using statistical
measures and optimization techniques that balance short term decisions against long term
implications on dimensions of cost, risk, and schedule. The method is demonstrated for the
concept case of multi-stage acquisitions in a naval acquisition scenario.
Description
Published April 30, 2014
The research presented in this report was supported by the Acquisition Research
Program of the Graduate School of Business & Public Policy at the Naval
Postgraduate School.
NPS Report Number
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