4.3.18.2. Affordability – Systems Engineering Trade-Off Analyses
4.3.18.2. Affordability – Systems Engineering Trade-Off Analyses
Affordability is the degree to which the capability benefits are worth the system’s total life-cycle cost and support DoD strategic goals. Systems engineering (SE) trade-off analyses for affordability, a special application of the Decision Analysis process (see DAG section 4.3.3. Decision Analysis Process), supports the establishment of a realistic affordability target, serves as inputs for the will cost and should cost estimates, and enables continuous monitoring of affordability estimates across the system life cycle. SE trade-off analyses should always practice continuous improvement, value engineering and Lean Six Sigma.
Although not a mandated Key Performance Parameter (KPP), the affordability target is managed throughout the system life cycle as a system KPP and cannot be changed without Milestone Decision Authority (MDA) approval. The USD(AT&L) memorandum “Implementation Directive for Better Buying Power – Restoring Affordability and Productivity in Defense Spending” requires the program to establish an affordability target at Milestone A. This affordability target forms the basis for the SE trade-offs and sensitivity analyses that is conducted in support of Milestone B, and subsequent reviews. The affordability target is nominally the average unit acquisition cost and average annual operations and support cost per unit. For indefinite quantity of production units, the affordability target may be the total acquisition cost (see DAG Chapter 3 Affordability and Life-Cycle Resource Estimates for more information regarding the affordability target).
The independently generated will cost estimate is used to defend the system budget but does not account for potential efficiencies. The should cost estimate is based on efficient use of resources and effective implementation of processes, and is the focus of SE activities and program management decisions across the life cycle.
The SE trade-offs are conducted among cost, schedule, and performance objectives to ensure the program is affordable. The Program Manager should identify the design performance points that are the focus of trade-off analyses to establish cost and schedule trade space. The Program Manager presents the results of the trade-off analyses at program milestone/technical reviews, showing how the affordability target varies as design performance and schedules are varied (affordability drivers) and demonstrating how the cost-effective design point is established for the program.
The Program Manager and Systems Engineer use the results of SE trade-off analyses for affordability to inform system requirements and ensure that, when taken collectively, the requirements are compelling, affordable, and achievable within the time frame available to the program. These requirements are normally characterized by creative alternatives, reliable information and models, well-reasoned aggregation techniques, and a sound recommendation and action plan.
The trade-off analyses are executed by a resourced team that consists of a decision maker with full responsibility, authority, and accountability for the trade at hand, a trade-off analyst with a suite of reasoning tools, subject matter experts with performance models, and a representative set of end users and other stakeholders.
Throughout the system life cycle, the Systems Engineer continuously monitors affordability drivers, identifies opportunities to reduce life-cycle costs, and conducts trade-off analyses as needed to meet program cost, schedule, and performance requirements.
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