Analysis of Missile Systems Cost Growth and Implementation of Acquisition Reform Initiatives Using a Hybrid Adjusted Cost Growth Model

This thesis examined cost growth in Department of Defense (DoD) missile systems from 1991 to 2001 using Selected Acquisition Report (SAR) data with a hybrid adjusted cost growth (ACG) model. In addition, an analysis of acquisition reform initiatives during the treatment period was conducted to determine if reform efforts impacted missile system cost growth. A "pre-reform" (1 January 1991 to 31 December 1996) period and "post reform" (1 January 1997 to 31 December 2001) period was subjectively developed to compare the mean annual ACG during each period for statistical differences. The hybrid ACG model outlined in this thesis may aid program managers and other interested parties in determining weapon systems cost growth, and the conclusion drawn from analyzing current acquisition initiatives may aid DoD leadership in assessing reform effectiveness on reducing cost growth. This research effort analyzed 135 SARs for 21 missile systems that reported a Milestone II baseline during the treatment period. ACG calculations revealed that missile systems from 1 January 1991 to 31 December 2001 averaged 28 percent cost growth annually. The acquisition reform analysis included 76 SARs from 20 programs during the pre-reform period and 59 SARs from 13 programs in the post-reform period. A small sample t-test and a significance level of 0.05 were used to compare the annual means of the two periods. The analysis revealed that the annual average ACG of the post reform period is significantly higher than the annual average ACG of the pre-reform period. The thesis methodology, results, and suggestions for future research are provided.