The economic evaluation of alternatives
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This study offers a comprehensive set of approaches for procurement officials to structure public investment decisions. Designed to improve acquisition outcomes, the Economic Evaluation of Alternatives (EEoA) addresses a significant weakness in most contemporary military applications of the current methodology--the Analysis of Alternatives (AoAs). While AoAs correctly focus on lifecycle costs and the operational effectiveness of alternatives, affordability is an after-thought--at best only implicitly addressed as a weight placed on cost in the final stages of the analysis. In sharp contrast, the EEoA encourages senior analysts and decision-makers to include affordability explicitly and up-front in structuring an AoA. This requires working with vendors to build alternatives based on a reasonable spectrum of possible funding (budget or affordability) scenarios. A key difference between traditional AoAs and the EEoA approach is that instead of modeling competing vendors as points in cost-effectiveness space, the EEoA solicits vendor proposals as functions of optimistic, pessimistic, and most-likely funding (budget) scenarios. The Decision Map offered in the concluding section of this study provides a comprehensive guide to EEoA for practitioners. This study also illustrates how, by embedding affordability directly into an AoA, the EEoA approach provides a unique opportunity for senior leadership to achieve a significant defense acquisition reform--to integrate Requirements Generation and Defense Acquisition with the Planning, Programming, and Budgeting System (PPBS), reducing future costs and improving performance and schedules.
NPS Report NumberNPS-GSBPP-10-002
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