development projects (cost)

 
[[ I don't know how this TEXT is related to cycles ]]
[[ this is in the wrong basket ]]
[[ this should have its own basket and categorical name ]]

p.40
Air Force innovation
estimates of the outcome of development projects
Cost increases on the order of 20 to 30 percent and extension of development time by 1/3 to 1/2 are not the exception, but the rule 
due to technological uncertainty and advances.128

source:
John Schutte, ‘Andrew W. Marshall and the Epistemic Community of the Cold War’, 2015, http://www.au.af.mil/au/aupress/digital/pdf/paper/dp_0016_schutte_casting_net_assessment.pdf

dp_0016_schutte_casting_net_assessment.pdf

Schutte, John M., 1976
  Casting net assessment : Andrew W. Marshall and the epistemic community of the cold war / John M. Schutte, Lieutenant Colonel, USAF.
1. Marshall, Andrew W., 1921─ 2. United States. department of defense. director of net assessment ── biography. 3. united states. department of defense ── officials and employees ── biography. 4. rand corporation ── biography. 5. united states ── forecasting. 6. military planning ── united states ── history ── 20th century. 7. military planning ── united states ── history ── 21st century. 8. united states ── military policy. 9. strategy. 10. cold war. 
title: Andrew W. Marshall and the epistemic community of the cold war. 

UA23.6.S43 2014
355.0092 -- dc23
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 • experience curve and cost behaviours 

George Stalk, Jr. (and) Thomas M. Hout., Competing against time, 2009  [ ]
p.5
experience curve strategies 
'experience curve and cost behaviours strategy'

1960s
An example of an early insight is experience-curve cost behaviour.  The theory of the experience curve is that the costs of complex products and services, when corrected for the effects of inflation and arbitrary accounting standards, typically decline about 20 to 30 percent with each doubling of accumulated experience.
   The fact that cost decline with accumulated volume has been recognized for a long time.  In 1925, officers in the U.S. Army observed that as accumulated production volume of airframes increased, per-unit costs declined.  In later investigations, the Army more specifically described the nature of this dynamic:  They calculated that the 4th plane assembled required only 80 percent as much direct labour as the 2nd, the 8th plane only 80 percent as much direct labour as the 4th, the 16th plane required only 80 percent as much direct labour as the 13th, and so on.
   During World War II, the understanding of this cost behaviour was critical for planning resource requirements in the aircraft industry.  After the war, the aircraft industry continued to plot learning curves.  For example, the learning phenomena for the Martin-Marietta-built Boeing B-29 and the Lockheed-built Boeing B-17, as decribed in a 1957 article, are shown in Exhibit 1-1.  Learning curves continue to be used to predict program costs, to set schedules, to evaluate management performance, and to justify contract pricings.  Moreover, the concept has been disseminated beyond the aircraft industry. 

   (Stalk, George, HD69.T54S73  1990, 658.5'6——dc20, copyright © 2009)
( Competing against time : how time-based competition is reshaping gloabl markets / George Stalk, Jr. (and) Thomas M. Hout., 1. time management., 2. delivery of goods., 3. competition, international., 4. comparative advantage (international trade)., p.5)

George Stalk, Jr. (and) Thomas M. Hout., Competing against time, 2009  [ ]
pp.6-8
experience cost behaviours
'experience curve and cost behaviours strategy'
   Being able to predict next year's prices is enormously important to management.  Being able to predict prices in five and ten years hence is a major strategic advantage.  The managements of certain aggressive companies have realized that well-documented cost behaviour could be factored into their pricing strategies.  They set pricing and investment strategies as a function of volume-driven costs.  At time, they reduced prices below current costs in anticipation of the decline in costs that they knew would result from expansion of volume.  Capacity was added ahead of demand.  The earliest companies to adopt experience-based strategies ran roughshod over their slower-adapting competitors.  They often pre-empted their competitors by claiming enough of a growing demand so that when their competitors attempted a response, little volume remained, and the leaders' cost could not be matched. 

   (Stalk, George, HD69.T54S73  1990, 658.5'6——dc20, copyright © 2009)
( Competing against time : how time-based competition is reshaping gloabl markets / George Stalk, Jr. (and) Thomas M. Hout., 1. time management., 2. delivery of goods., 3. competition, international., 4. comparative advantage (international trade)., pp.6-8)
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Ben R. Rich and Leo Janos., Skunk works: a personal memoir of my years at Lockheed, 1994

p.325
that final 10 per cent striving ... costs 40 per cent of the total expenditure on most projects. 

p.283
it's more important to listen than to talk.
decisive:  even a timely wrong decision is better than no decision.
don't half-heartedly wound problems ── kill them dead.

   (Skunk works: a personal memoir of my years at Lockheed / Ben R. Rich and Leo Janos., 1. lockheed advanced development company ─ history., 2. rich, ben r. ─ career in aeronautics., 3. aeronautics ─ research ─ united states ─ history., TL.565.R53  1994, 338.7'623746'0973, 338.7623  rich, 1994, )
   ____________________________________

Ben R. Rich and Leo Janos., Skunk works: a personal memoir of my years at Lockheed, 1994

 • “Avionics is the killer expense, costing about $7000 a pound in a new airplane.”,  Ben R. Rich and Leo Janos., Skunk works: a personal memoir of my years at Lockheed, 1994, p.322 [field / discipline: aircraft development]

p.321
development costs of fighters
unit procurement costs have risen 11 per cent every year since 1963!

p.322
we didn't start from scratch but adapted off-the-shelf avionics developed by others
Avionics is the killer expense, costing about $7000 a pound in a new airplane.

p.325
that final 10 per cent striving ... costs 40 per cent of the total expenditure on most projects. 
([ the first 90 per cent of the work ... costs 60 per cent of the total expenditure ]) 

   (Skunk works: a personal memoir of my years at Lockheed / Ben R. Rich and Leo Janos., 1. lockheed advanced development company ─ history., 2. rich, ben r. ─ career in aeronautics., 3. aeronautics ─ research ─ united states ─ history.,  
TL.565.R53  1994, 338.7'623746'0973, 338.7623  rich, 1994, )
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p.10
First, it is clear from Figure 1 that the immediate source of the modernization crisis is the eleven year gap in procurement between 1992 and 2002, during which almost no new aircraft enter the inventory. Consequently, the distribution of the ages of the individual aircraft making up the inventory will become progressively distorted over time, and a disproportionately large number of fighters will reach retirement age at the same time.

Two criteria are needed to answer this question--an age goal and a size goal. First, I will argue that the Air Force should set a goal of 10 years to be reached by 2002 for the average age of its inventory of fighter aircraft. While an average age of ten years would be very old by historical standards (see Figure 3), it is the same rule of thumb adopted by planners in the Air Force between the late 1970s and early 1990s. This rule of thumb was not pulled out of thin air. It was adopted by the Air Force after a long agonizing debate. Under this assumption, fighters would be retired at about twenty-two years of age, once the need to replace crashed aircraft is accounted for.

to begin two lower-cost, fast-paced, fly-before-you-buy, competitive prototype programs. Before describing these programs, let me explain why a fly-before-you-buy strategy is so important.

Competitive prototyping is a sequential, decision-making strategy for reducing technical and economic risks while preserving the decision maker's freedom of action. Its goal is to work the bugs out of a design before committing substantial resources to its factors of production (manufacturing engineering, specialized machine tools, unique factory facilities, a network of supplier relationships, and the hiring of production workers). Although prototypes are handmade by design engineers and skilled technicians using general purpose machine tools, production engineers should be deeply involved in a prototype's design to insure the ultimate product can be produced at a reasonable cost. 
    Moreover, as more detailed information flows out of the design and testing activities, they should prepare for an orderly transition to efficient production by continuously refining their plans for factory layouts, machine tools, worker skills, subcontractors, etc. 
    But under a competitive prototyping strategy, the decision to commit resources to production would be deferred until rigorous testing demonstrated which product best met the specifications. 
    Prototyping also reduces risk by reducing up-front costs. This gives decision makers the flexibility to simultaneously explore multiple design options, even during periods of declining budgets. (During the post-Viet Nam contraction in the early 1970s, for example, the Air Force successfully designed and flight tested six new designs in three competitive prototype programs--the YF-16/17, YA-9/10, and YC-14/15 aircraft).

In reality, the cost of fixing major design flaws on airplanes moving down an assembly line can escalate rapidly to prohibitive levels, particularly if assembly line tooling or factory layouts must be changed.
   Nevertheless, cancellation is usually impossible, because the early commitment to low rate production permits the contractor to build a powerful political base by hiring a large number of production workers and establishing a nation-wide network of subcontractors. 
   A second deterrent to cancellation stems from the high up-front cost of the EMD strategy--it forces decision makers to put all their eggs in one basket, and in contrast to a competitive prototyping strategy, they can not afford to explore other options. So, when a new weapon fails to meet its performance specifications or cost goals, the economic and political pressures of the real world force decision makers to reduce specifications, accept large cost increases as being inevitable, stretch out production schedules, and cut back total production quantities. 
   The routine practice of waiving specifications and goals is known among defense contractors as managing to a rubber baseline.

Competitive prototyping reduces the risk of being boxed in by rubber baselines. Risk reduction is particularly important when budgets are tight. To maximize risk reduction, each prototype should be as close to being a fully combat-capable replica of the eventual production item as possible.

Each airplane would be designed to operate as part of a truly integrated, air-ground, combined-arms team in expeditionary warfare against the likely threats in the post-cold war era.  Each must be easy to deploy from the continental United States to overseas operating locations and would be able to operate for extended periods of time from relatively primitive forward locations. 

While a vigorous prototype competition would increase the business risk to the contractors, the simulation of capitalistic market forces would also stimulate their creativity, efficiency, and enthusiasm, as it clearly did during the Lightweight Fighter competition in the early 1970s.

This explanation is particularly needed to counter the revelations that the CIA knowingly served as a conduit for KGB disinformation that may have inflated Soviet strengths in order to dupe U.S. decision makers into spending money on unneeded, high-cost weapons.

Fifth, the overwhelming majority of deep targets are fixed targets at known locations. If one accepts the promises of our technologists, these targets are particularly appropriate for unmanned, long-range, stand-off, precision-guided weapons, like cruise missiles.

Out-of-control political selection pressures, like those evident in the porkfest on Capital Hill last summer, evolving within a real world of cost overruns and budget cutbacks, could easily wreck our military forces in order to prop up the contractors who created the problem, with the active assistance of the bureaucrats in the Pentagon and the threat inflators at the CIA.


source:
        Defense time bomb :
        background : F-22/JSF case study :
        hypothestical escape option
        by Franklin C. Spinney
         March 6, 1996
        The views expressed in this paper do not represent the official position of the Department of defense
        16 page count  
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