An appraisal of cost-effectiveneess (i.e. effectiveness) models used in the Air Force and Navy aircraft engine Component Improvement Programs.

104 Pages·1.6 MB·en_US

by  Davis, James D.;McMasters, Alan W.

NAVAL POSTGRADUATE SCHOOL
Monterey, California
THESIS
AN APPRAISAL OF COST-EFFECTIVENESS MODELS USED IN THE
AIR FORCE AND NAVY AIRCRAFT ENGINE COMPONENT
IMPROVEMENT PROGRAMS
by
James D. Davis
December 1991
Thesis Advisor: Alan W. McMasters
Approved for public release; distribution is unlimited
T260070

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11 TITLE (IncludeSecurityClassification)
ANAPPRAISALOFCOST EFFECTIVENESSMODELSUSEDINTHEAIRFORCEANDNAVYAIRCRAFTENGINECOMPONENT
IMPROVEMENTPROGRAMS
12 PERSONALAUTHOR(S) JamesD. Davis,USN
13a TYPE OF REPORT 13b TIMECOVERED 14 DATEOF REPORT(year,month,day) 15 PAGE COUNT
Master'sThesis From To December, 1991 94
16 SUPPLEMENTARY NOTATION
TheviewsexpressedinthisthesisarethoseoftheauthoranddonotreflecttheofficialpolicyorpositionoftheDepartmentofDefenseortheU.S.
Government.
17 COSATICODES 18 SUBJECTTERMS(continueonreverseifnecessaryandidentifybyblock number)
FIELD GROUP SUBGROUP ComponentImprovement Program(CIP)
LifeCycle Costs(LCC)
19 ABSTRACT(continueonreverseifnecessaryandidentifybyblocknumber)
Thisthesisexaminesthecost-effectivenessmodelsusedbytheAirForceand Navytoassistwiththedecision-makingprocessoftheirComponent
ImprovementPrograms(CIP). Thefocusisontheelementsofthetwomodelsandthereasonablenessofeachmodel'sresults. Asensitivity
analysiswasperformedonsignificant input parameterstodeterminewhateffecterrorsintheseparameterswouldhaveonthepredicted return
on-investment(ROl)results Theauthorconcludedthat,althoughthemodelsprovideinsightintothelifecyclecosts(LCC)ofaircraftengines,
theyareextremelysesitivetoerrorsincertaininputvariablesandshould notberelied uponforCIPbudgetjustification.
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AlanW MiMasters 408 64(1 2678 AS MG
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Approved for public release; distribution is unlimited.
AN APPRAISAL OF COST-EFFECTIVENEESS MODELS USED
IN THE AIR FORCE AND NAVY
AIRCRAFT ENGINE COMPONENT IMPROVEMENTPROGRAMS
by
James D. Davis
Lieutenant, United States Navy
B.S. State University ofNew York, College at Oswego
,
Submitted in partial fulfillment
ofthe requirements for the degree of
MASTER OF SCIENCE IN MANAGEMENT
from the
NAVAL POSTGRADUATE SCHOOL
December 1991
David R. Whipple, Chairman
Departmentof Administrative Scienc
11
ABSTRACT
This thesis examines the cost-effectiveness models used by the Air Force and Navy to assist
with the decision-making process of their Component Improvement Programs (CIP). The focus is
on the elements of the two models and the reasonableness of each model's results. A sensitivity
analysis was performed on significant input parameters to determine what effect errors in these
parameters would have on the predicted return-on-investment (ROI) results. The author concluded
that, although the models provide insight into the life-cycle costs (LCC) ofaircraftengines, they are
extremely sensitive to errorsin certain input variables and should not be relied upon for CIP budget
justification.
in
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TABLE OF CONTENTS
INTRODUCTION
I. 1
A. BACKGROUND 1
B. OBJECTIVES 2
C. LIMITATIONS 3
D. METHODOLOGY 3
E. ORGANIZATION OF THE THESIS 4
II. BACKGROUND 5
A. WHAT IS CIP 5
B. WHAT ARE THE OBJECTIVES OF CIP 6
C. WHO IS RESPONSIBLE FOR CIP 7
D. THE AIR FORCE COMPONENT IMPROVEMENT PROGRAM 9
. .
....
E. THE NAVY COMPONENT IMPROVEMENT PROGRAM 10
...
III. LITERATURE REVIEW AND THEORETICAL FRAMEWORK 15
A. LOGISTICS ENGINEERING CONCEPTS 15
1. Cost Effectiveness (C-E) 15
2. Reliability 16
3. Reliability Prediction 16
4. Maintainability 17
...
5. Mean Time Between Maintenances (MTBM) 17
6. Life Cycle Costs (LCC) 18
IV