New approaches to defense inflation and discounting

New approaches to defense inflation and disco ...
Kathryn Connor, Kathryn Connor
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Last edited by MARC Bot
September 25, 2024 | History

New approaches to defense inflation and discounting

Inflation indices and discount rates are necessary tools in the Department of Defense⁰́₉s (DoD⁰́₉s) acquisition process, as the final selection of a system is partially based on potential increases in sustainment costs (inflation) and the present value of future costs (discounting). Inflation indices built for DoD use very broad categories that include operations and maintenance (O&M) as well as manpower, procurement, and research and development. This study addresses the question of how well current inflation indices and discount rates are serving DoD weapon-system program management. It investigates inflation rates for parts for the Abrams tank and the Bradley armored personnel carrier and shows that the two weapon systems, while both ground systems, experience inflation differently. Although government decisionmaking can benefit from discounting (taking into account the time value of money), choices made using discounted cash flows are not always the least expensive for DoD. Its O&M estimating strategies should be reviewed to reflect changing repair and other costs, since a range of reasonable courses of action exists for many DoD investment decisions. Recommendations for the Office of Cost Assessment and Program Evaluation to consider when evaluating the inflation and discounting policies that impact the long-term affordability of DoD programs include (1) revisiting O&M costs annually with a 5-year moving-average inflation, to reflect changing repair and other costs; (2) highlighting the role of supply chain surcharges in parts costs in cost estimates used to inform program financial analysis; (3) expanding analysis of investments to ensure consideration of least-cost outcomes.

Publish Date
Publisher
RAND
Language
English
Pages
42

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Edition Availability
Cover of: New approaches to defense inflation and discounting
New approaches to defense inflation and discounting
2013, RAND
in English

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Book Details


Edition Notes

"RAND National Defense Research Institute"

"RR-237-OSD"--Page 4 of cover.

Includes bibliographical references (pages 41-42).

Published in
Santa Monica, California

Classifications

Dewey Decimal Class
355.6/212
Library of Congress
UC263 .C636 2013, UC263.C636 2013

The Physical Object

Pagination
xix, 42 pages
Number of pages
42

ID Numbers

Open Library
OL31160670M
ISBN 13
9780833081339
LCCN
2013032025
OCLC/WorldCat
855362833

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History

Download catalog record: RDF / JSON / OPDS | Wikipedia citation
September 25, 2024 Edited by MARC Bot import existing book
September 17, 2021 Edited by ImportBot import existing book
November 14, 2020 Created by MARC Bot Imported from Library of Congress MARC record